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spk00: Thank you for standing by and welcome to the content side second quarter 2021 earnings call. Our lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. Please be advised that today's call is being recorded. I would now like to hand the conference over to your first speaker today, Mike Cavanaugh, leading investor relations. Thank you. Please go ahead.
spk03: Good afternoon, and thank you for joining us today. At the close of today's market, QSI released its financial results for the second quarter, which ended June 30, 2021, and provided a business update. The release is currently available on the investor section of the company's website at ir.quantum-si.com. John Stark, Quantum SI's Chief Executive Officer, and Claudia Drayton, chief financial officer will host this afternoon's call during today's call we will be making certain forward-looking statements this may include statements regarding among other things expectations with respect to financial results future performance development of products and services anticipated financial impacts and other effects of the business combination on our business the size and potential growth of current or future markets for our products and services and the potential impact of the COVID-19 pandemic on our business. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and evolve, and there are a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, and the company disclaims any obligation to update such statements. During this call, we will refer to non-GAAP financial measures, including adjusted EBITDA. These financial measures are not prepared in accordance with U.S. generally accepted accounting principles or GAAP. These non-GAAP financial measures are not intended to be considered in isolation or substitute the results prepared in accordance with GAAP. The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of why we present these non-GAAP financial measures are included in today's press release. As a reminder, this call is being webcast live and recorded. To access the webcast, please visit the events section in the investor section of the website. A replay of the event will be available following the call. I would now like to turn the call over to John Stark.
spk04: Thank you, Mike, and good afternoon, everyone. I'm excited to be hosting QuantumSI's first earnings call as a public company. This is a rewarding milestone for the company and the talented team who have dedicated the past eight years to our mission of transforming the field of single molecule detection and proteomics. We now have the resources from the completion of our business combination with High Cape Capital, to push forward on our mission to be a market leader in the emerging field of single-molecule protein sequencing. We aim to become the first company to commercialize a system that enables digital sequencing at amino acid resolution and are well-positioned to seize the enormous opportunity we believe this market presents for years to come. Our technology has the potential to have a profound impact on advancing general health and personalized medicine. On today's call, I will provide an overview of the progress we have made in the first half of 2021 and discuss the momentum we are building across all areas throughout the company. We continue to recruit industry-leading talent and are on pace to double the organization's size this year to over 150 employees. Our commercial momentum is building as we have started to install Platinum systems at external sites. I will further expand on these areas and provide specific details on the outlook and strategy for the company. Claudia Drayton will then review our Q2 2021 financial results. We will then conclude with a question and answer session. Before we move on to provide specifics on our progress, outlook, and strategy, I would like to discuss why advancement in the field of proteomics is critical. and why we believe our technology will drive market expansion similar to how DNA sequencing impacted genomics over the past two decades. DNA sequencing has advanced our understanding of the complex human diseases and the response to treatment on the molecular level. The scale of genomic information now available impacts the lives of nearly every single person, from routine prenatal diagnostics to insights about our heredity, how we treat cancer, Virtually all areas of life science and medical research have vastly benefited from a greater understanding of DNA. While DNA provides a blueprint for our molecular makeup, it only provides what could happen to us. Proteins, which represent the building blocks of life, tell us what is happening right now. While genomics platforms have delivered impactful insights through DNA sequencing, the same transformation and scale of proteomics has lagged. Current proteomic tools and standard immunoassays are powerful, but are based on legacy technologies developed decades ago. Most of these systems are too complex, too expensive, and have limited application in high-resolution biology. These constraints have hindered the ability to apply insights at the protein level for improvements in drug development and diagnostics. Deeper understanding and routine monitoring of the proteome holds the promise of early detection and insight into the recurrence of disease. This is why we expect the next area of exponential growth in life science is the field of proteomics. To put this opportunity into perspective, currently more than 90% of FDA-approved drugs target proteins, yet less than 15% of the human proteome has an associated drug therapy. Biopharma utilizes current proteomic tools to confirm if a target or protein is present. This is especially critical in the development efforts within immunotherapy programs. However, advanced tools are required to accelerate development and identify novel targets and pathways. FONMSI's protein sequencing solution measures low abundance changes at the single molecule level. Resolution at the variant level with absolute protein quantification provides a novel tool for assessing therapeutic impact, ultimately helping drug developers and practitioners choose the best treatment for a patient. Our platform has the power to potentially transform how we diagnose and treat conditions ranging from infection to cancer to neurological disorders such as Alzheimer's and Parkinson's disease. Recently, there has been an emergence of numerous new technologies in the field of proteomics. We believe this is a testament to the opportunity and impact that proteomics have on research and general health. We Stand Apart, in this rapidly evolving market, is the first company that has shipped a complete suite of tools that prepare, analyze, and interpret single-molecule protein sequence information. Additionally, we believe that our streamlined benchtop platform is at a cost of entry that nearly any lab can afford, with the potential to democratize access to both the scientific and clinical community. Finally, we have developed a portfolio of 87 issued patents and approximately 500 pending patent applications that creates a very extensive intellectual property position in the proteomics and single molecule fields. DNA digital sequencing companies were able to return tremendous shareholder value over the last decade. QuantumSI is focused on blazing a similar path by digitizing the analysis of proteins at unprecedented scale and resolution. This, coupled with industry advancements in semiconductor fabrication and single molecule insights, positions QuantumSI to capture significant market share in this field unlike any other company. We are now on the cusp of providing the scientific community the ability to unlock novel biological information and imply advanced understanding in proteomic applications in ways not previously available. DNA sequencing rapidly scaled in system placements globally from the enhanced ability to provide insight into the treatment of cancer. These platforms have become essential in disease monitoring and clinical trial enrollment. Driven by the need to understand the complexity of a patient's immune system provides an analogous adoption opportunity for quantum SI for potentially impacting advancements in immunotherapy. Let's now review first-up accomplishments and momentum. I would like to take a moment to highlight some of the progress we have made in the last few months. As you are aware, this past June, we completed our business combination with High Cape Capital, and now Quantum SI Class A common stock and warrants trade on the NASDAQ capital market. We believe we now have the capital, with over $500 million in cash, that enables us to expand and accelerate investments into product readiness and puts us on a solid path to near-term commercialization. As previously announced, there have been numerous additions to our senior leadership and executive team. With Claudia Drayton, we joined the team as chief financial officer, and Lindsey Thompson is our head of people. The company will continue to expand in 2022 as we build out the commercial organization. We've assembled a very experienced board of directors with the appointments of Dr. Mariam Deckers, former CEO of Bayer AG and Thermo Fisher Scientific, Dr. Michael Mina from the Harvard School of Public Health, and Bridget Makes, who brings decades of financial leadership experience and is chairman of our audit committee. Dr. Jonathan Rothberg remains a key member of the board as executive chairman. We also recently announced our expansion in San Diego, where we entered a lease agreement to develop a 25,000-square-foot, state-of-the-art facility. The new facility will be operational in Q3 2021 and is designed to scale production, commercial, and R&D efforts. We expect this site will play a key role in expanding the company's recruiting efforts in product and application development as we prepare for commercial readiness. As previously communicated, we intend to follow a systematic and phased approach to scale commercialization efforts heading into 2022. In the first quarter of 2021, we successfully delivered and installed our first two early access platinum systems to key thought leaders in the proteomics and single molecule community. Building off this momentum, we have now shipped three additional early access platinum systems with a total of five external placements to key sites like Northwestern University, the LAMS Institute of Biotechnology, BIB in Belgium, are providing extremely useful feedback to the QuantumSI product development and commercial support teams to validate system performance and initiate study designs to demonstrate the power of single molecule protein sequencing. We remain confident about our progress towards commercial readiness and remain on track with our internal development programs and ability to scale production. We will continue to update the investment community on our progress as we expand our external instrument footprint and demonstrate performance and utility. We are very enthusiastic about the progress and momentum we are building heading into the second half of this year. As I said, we have initiated pre-commercial access by providing limited release instruments to external users. We continue to attract key talent as we build out the team and remain on track within our product development efforts. However, there is still a lot to accomplish as we head into full commercialization efforts in 2022. We are focused on four foundational goals as we head into the second half of the year to accelerate our path to full commercialization. First, we are continuing to scale and expand the organization. These efforts are underway and facilities in Connecticut and California will be the cornerstone of our expansion in both product development and commercial efforts. Second is to ensure our supply chain and product inventory required before the end of the year to meet 2022 revenue projections and to ensure the ability to scale production levels over these next several years. Third, we will continue to provide instrumentation and support to external sites as part of our early access program to optimize system performance and demonstrate the utility of single molecule protein sequencing. Fourth, we plan to continue expanding our efforts through industry and academic collaborations, further cultivating the ecosystem around the platform. As we focus on becoming the industry leader in the single molecule protein sequencing market, we are exploring additional applications harnessing the power of single molecule detection that will help drive the accelerated adoption of the platform. In summary, we believe we are well capitalized in scaling all phases of the company, and are executing on our commercial launch plan. Thank you for your time. I will now turn the call over to Claudia to review our financial results. Claudia?
spk01: Thank you, John. I will now take you through the details of our Q2 financial performance and then end with a high-level spending outlook for the remainder of 2021. Total operating expenses in the second quarter of 2021 were $32.2 million, an increase of $24 million, or 292% from $8.2 million in the second quarter of 2020. Research and development expenses for the second quarter of 2021 were $13.1 million compared to $6.6 million in the same period of 2020. The increase in R&D expense was driven primarily by increased compensation costs related to hiring additional R&D personnel, as John described earlier, and one-time expenses related to the merger with High Cape. Selling general and administrative expenses for the second quarter of 2021 were $19.1 million compared to $1.6 million in the same period of 2020. The increase in SG&A expenses was primarily driven by transaction costs incurred to complete our SPAC business combination, increased compensation costs, and other expenses related to being a publicly traded company. Net loss for the second quarter of 2021 was $35.7 million compared to a net loss of $8.2 million during the same timeframe in 2020. Adjusted EBITDA was a loss of $14.6 million in the second quarter of 2021 compared to a loss of $7.5 million in the same period of 2020. Adjusted EBITDA reconciliation calculations to net loss can be found in today's press release. Moving to the balance sheets. As of June 30, 2021, cash and cash equivalents were $522 million. This balance reflects over $511 million of next cash proceeds we received upon the closing of the business combination with High Cape late last quarter. We believe the company is now well capitalized to support the next stage of development and is in a position to invest aggressively to expand quantum-sized market readiness. As we go for the remainder of 2021, we expect to continue to invest and scale the organization to advance our technology and to prepare the organization for commercial launch in 2022. Accordingly, we expect operational spending to continue to grow sequentially in the next few quarters. I will now like to turn the call back over to John for closing remarks.
spk04: QuantumSI is now entering a phase that brings us closer to achieving the mission established by the team's founding members over eight years ago to transform the field of single-molecule proteomics. We are well down the path to enable the scientific and eventual clinical communities with commercialized tools to sequence proteins at amino acid resolution. We are excited about the opportunity to take leadership in this field and advance the understanding of how we treat disease. We are fully committed to executing the company's near-term goals and building off the momentum of the first half of the year as we focus on executing our commercial roadmap. We will continue building a world-class team scaling production efforts, and reporting on progress with external partners and sites. Finally, we expect to continue to pursue new application areas to explore the power of our suite of products. I look forward to our next update, and I will now turn the call over for questions.
spk00: Certainly. We will now begin the QA session. If you would like to ask a question, please press star followed by 1 on your touch-tone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. We will pause here briefly to allow questions to generate in queue. The first question is from Kyle Mikeson with Canaccord Genuinity. Please proceed.
spk02: Thanks. Hi, everyone. Thanks for taking the questions. Congrats on the first quarter here as a public company. And congrats on the five places, I guess, in the quarter, too. And it sounds like most of those are for academic customers. But when you think about the rest of the early access program, I'm wondering where the rest of those shipments will go. Do you assume any commercial labs, things like that? And one other question about this program. Will any customers receive carbon? It sounded like platinum is going to be the main source.
spk04: instrument and then finally are any of these labs currently using um the instruments yet thanks hey thanks kyle good to hear from you and look forward to catching up with you later as well uh first let me answer the middle question about carbon uh so the initial placements are all the analysis system the platinum system we'll be shipping carbon um in early 2022. As far as the five, you're absolutely correct. The majority of these sites are early access systems, are KOLs, key opinion leaders in the single module space. They tend to be technologists. And that'll really round out the first 10. On the next phase of additional placements, really just expanding our commercial activity, there'll be two paths. One, we'll still have strategic placements. These will be with groups that we develop applications with. such as translational medicine centers, clinical research centers like pharma. And then we'll also have more of a transactional type of approach where traditional buying, where a purchase order is placed and we'll ship an instrument and the customer will use it on current capabilities. And just finally, I think there was a third question there, which asked about actually utilizing the systems. Ken confirmed, and we're very pleased to say that the first two systems were installed, trained, and we've actually had protein sequencing data ran on those systems. And we look forward to the results that we see out of the next three placements.
spk02: Okay, that was great, Sean. Thanks so much. And you talked about the higher end recently, and obviously that was reflected in the the expenses. Can you talk about maybe how many people have been hired for the sales organization yet and maybe kind of the plans there? How are you going to go to market exactly?
spk04: Absolutely, Kyle. First of all, we've started building the inception of the commercial team at the end of last year, bringing on key talent, not only in marketing. Obviously, I have a background, extensive background in commercialization as well. We're now in the process of hiring our first few dedicated sales and support individuals. We can support basically the first 50 systems with current capacity, but this will be really building out into the second half of the year. But the real momentum
spk02: uh will really start to occur in the first half of the year building out the commercial team okay that was great and then maybe just touch on some of the targets that were talked about in the past and i know it's you know recognizing um you know some some of what was discussed um you know in the past around the transaction might you know it's tough to meet all these all these goals right but just curious about the placement um targets that were set especially for maybe the first A couple of years, and as well as the number of protein targets, I think, you know, a number like 50 or so was kind of thrown around in the beginning. Is there a reason you can't get to like 3,000, 7,000, something like that over time, like competitors have said?
spk04: Yeah, absolutely. We'll continue to expand yield as we go forward in future versions of chip, right? That's one way to expand density. We're the first customers we'll be getting in the millions of available wells to isolate single molecules, and we'll be moving into the tens of millions. So you're absolutely correct on the scale of the technology. As far as – sorry, your second part of your question was about some of the targeted sites?
spk02: The protein target, yeah. Like the menu, basically. Oh, correct. The menu. Okay.
spk04: Yeah, I mean, take a look at this market as far as who will be adopting the technology early. And we've already talked about first 10 really controlled disease, looking at more technologists. You know, as we go forward strategically, again, it will be pharma and it will be more dedicated translational medicine groups. These are the ones that are going to be really looking at content. And why you work with pharma, especially in early clinical research phases, is to understand alignment of content to both targets and markers because those really build out Future assays that will be used in clinical testing labs. But for the most part, what I would say is you've got basically a 2,000 to 3,000 customer landscape in the academic sector, where really this is the first time they've been able to sequence proteins at amino acid resolution, look at variant frequency, as well as structural biology. So although content is going to be really important to our strategy, especially as we go down the path of working with pharma companies and immune characterization, you know, we have a tremendous opportunity in the basic research space as well, where it's going to be more or less looking at information biology that really has been basically uncharted, such as the phosphorylation of various responses and coupling that with multi-omic applications to what they're doing, you know, in their existing DNA efforts.
spk02: Right. Okay, that was great. And you kind of alluded to some of the PTM analysis stuff there, too. But I think you talked about in a pair of remarks something about, you know, generating data, maybe publications with some of these, you know, early users. Do you kind of, you know, obviously you have, you know, an outstanding IP portfolio, tons of issued patents and pending patents, but could there be maybe in the next year or two some papers submitted for publication or even like white papers with some, you know, some just tangible kind of I'm just wondering because it would maybe help accelerate the types of applications used as well as just the awareness too.
spk04: Absolutely, that's the goal. And again, when we partner with early access groups, we always talk about study designs and potential applications, resource them accordingly. Again, early access, the reason why we're now at five halfway through the year and we'll be accelerating into the back end of the year with a minimum of 10 placements is we feel very confident where the instrument is at. You know, we're now focused on providing product. We're focused on scaling the commercial organization. But you really hit it on the head of one of the key areas of focus, which is finalize the optimization of the system, but also show real meaningful published data that represents application. And we'll continue down that path here for the foreseeable future.
spk02: All right, great, John. Just one last question for me. Obviously, there's Some supply chain issues that we're hearing about recently, and you're so early in your development of the instruments and of the system. Is there any semiconductor supply chain issues? Do you see that affecting your business maybe next year when you start to really try to ramp, commercially speaking?
spk04: Currently right now, Kyle, we're very confident delivering product for the next couple of years. We're obviously very aware of the environment, monitor it closely, but we've secured strong relationships with our suppliers and feel good about as we go into the next couple of years. Okay, great. Thanks, Kyle. Thanks, Sean. I really appreciate it. Thank you, Kyle.
spk00: Thank you, Mike. Again, to ask a question, press star 1. There are no additional questions waiting at this time. I will now turn the conference over to management for any closing remarks. I will now turn the conference over to management for any closing remarks.
spk04: This is John Stark. I'd just like to thank everybody for joining the call today. If there are no more questions, we'll conclude the call.
spk00: That concludes the conference call. Enjoy the rest of your day.
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