Quantum-Si Incorporated

Hello and welcome to the QuantumSci Q3 2021 earnings call. My name is Robin and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I will now hand you over to your host, Juan Evadano from QuantumSci Investor Relations. Juan, please go.

Hello and thank you for joining us today. Yesterday, after market close, Quantum SI released financial results for the third quarter ended September 30th, 2021, and provided a business update. The release is available in the investors section of the company's website. Joining me today are Quantum SI's Chief Executive Officer, John Starr, and Chief Financial Officer, Claudia Trayton. During today's call, we'll be making forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward Looking Statements of the Earnings Risk Release. For a more complete list and description of risk factors, please see the company's filings made with the Securities and Exchange Commission. The company disclaims any obligation to update any forward-looking statements. During this call, we'll discuss certain financial measures that are not prepared in accordance with U.S. generally accepted accounting principles or GAAP. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the earnings press release. As a reminder, this call is being webcast live and recorded. A replay of the event will be available on the company's website following the call. I would now like to turn the call over to John.

Thank you, Juan, and good morning, everyone. Thank you for joining Quantum SI's third quarter earnings call. The team and I are very pleased by the progress we are making on execution across all aspects of the company as we continue to expand customer access to our platinum system at key institutions representing high-growth segments within the proteomics market. Claudia and I look forward to discussing our third quarter performance, which marks our second time reporting results in first full quarter as a public company. We will begin with prepared remarks detailing our third quarter performance and progress related to the foundational goals we laid out in our last earnings call, and then we'll open for questions. During the quarter, we have continued to build momentum and deliver on our mission of transforming the field of single molecule analysis and proteomics. We are the first company to commercialize a system that enables digital sequencing at amino acid resolution through our differentiated time domain sequencing detection method. As we discussed on our previous call, single-molecule protein sequencing expands the resolution of the proteome by providing visibility into protein variants and measuring specific changes at the individual amino acid level. Other established and emerging technologies look to measure or confirm the existence of the 20,000 known proteins. Our technology, however, has the ability to sequence the entire structure at each individual peptide chain, making up the backbone of a protein to provide insight into the estimated millions of structural forms that exist in the cell. These modified structures potentially represent key biomarkers that will be foundational for the future development of therapies and how we detect disease. In parallel, we are commercializing a streamlined end-to-end benchtop system that simplifies the workflow enabling ease of use and better access to the general research and eventual clinical community. As a testament to the enhanced capabilities that single molecule sequencing enables, we have continued to make significant progress in expanding placements with external users. As we announced a few weeks ago, our early access program efforts have accelerated where we now have 10 external partners at premier institutions and industry partners. In that announcement, we laid out an early release strategy to accelerate the development of applications across high growth disciplines, including biological discovery and research, diagnostic and therapeutic biomarker development, and single molecule multi-omic approaches. We are very encouraged by the enthusiasm we're witnessing from the community at this stage of our system performance. As we presented in September, external sites are generating single molecule protein sequencing data for the first time. and are eager to apply it to address critical unmet needs in areas such as neurological function, immunocompromised conditions, and potential use cases for the detection of early onset of cancer. This is only the beginning of what this technology can enable and the impact that single molecule sequencing can provide to novel understanding and eventual clinical assessment. Later in this call, I will provide greater detail on the early access efforts and strategy on a path to our full commercial release. I would now like to discuss progress across the foundational goals that we laid out last quarter. The four key areas for the company to execute as we accelerate towards commercialization in the meet 2022 and future revenue projections are, first, attract industry-leading talent to expand all areas of the organization, including product development and commercial operations. Second, solidify our supply chain to secure product inventory and manufacturing scale and profitability over the next several years. Third, accelerate early access placements to finalize platform configuration, performance, and application. And finally, expand utilization of our platform ecosystem through industry and academic collaboration. I would now like to expand on our progress in each of these areas. Starting with our first objective on organizational expansion, in the quarter, we made strong progress in expanding the team, attracting top talent across the industry. The company now has over 150 employees across established operations in Connecticut and our facility in San Diego, which opened in Q3. During the quarter, we made critical hires to accelerate commercial readiness within product development and operations. We are proud to have a number of seasoned individuals join our team, including Gray Williams, Vice President of Global Operations, Matt Ansett, Head of Clinical and Farmer Market Development, and Juan Evandano, Vice President of Investor Relations, all bringing knowledge and expertise in the Lifeline tool space. In San Diego, we started staffing the facility in September. with key leadership joining the team, such as Dr. Handong Li, leading product development, and key staff members with biomarker development, single molecule, and application development expertise. We plan to expand the San Diego facility to over 50 individuals as we head into 2022. I would also like to thank the Fort Catalyzer Leadership and Support Organization for allowing QuantumSI to grow and expand on campus since 2013. In the first half of 2022, We plan to relocate our headquarters to a nearby state-of-the-art campus in New Haven that will allow us to expand and accelerate company-wide efforts. The combined campuses in California and Connecticut will be the cornerstone of growth for both research and development and commercial operations. Our second objective is to secure our supply chain and product inventory. In relation to this, our operations team has placed advanced orders to secure components for more than 500 platinum systems. Working with our contract manufacturer, we have purchased materials to support our internal needs and anticipated commercial demand heading into 2023. Pilot manufacturing is complete and commercial builds are in progress. We are confident in our ability to manage instrument inventory demand for the foreseeable future. Taking into account increased production lead times by some of our vendors, we've also ensured capacity for all chip production phases for internal and commercial demand heading into 2023. As a result, we have secured the ability to increase our chip production volumes by 50% to over 1,000 units per month heading into 2022 to ensure supply chain requirements are met. In addition, we are pleased to announce that QuantumSI has acquired all assets of Magellic Technologies, a provider of semiconductor packaging and integrated circuit assembly services located in Garnet Valley, Pennsylvania. This was a strategic move by QuantumSI to not only secure assembly and packaging capabilities, but also to accelerate our ability to scale up operations for future chip designs. We've worked directly with the Magilek team for several years and have always admired their high quality and speed at meeting supply demands for the company. Michael Quinn, CEO of Magilek, will be joining QuantumSI and continue working to scale production capacity in excess of 100,000 packaged chips in years to come. We are pleased to welcome the entire Magilek team who are joining QuantumSI to continue in their previous roles. As it relates to kitted reagents, we feel confident about our supply chain and ability to scale. Many of the components in the protein sequencing kits are proprietary to a large degree, and we have de-risked our production efforts by working with multiple vendors providing chemical synthesis and protein purification capacity. While Quantum SI is equipped to assemble and manufacture kits internally, we will be transferring kit packaging externally to a global contract manufacturer in Q1 2022 in order to allocate internal capacity to accelerate development programs. Our third objective is to expand instrument placement to accelerate commercial readiness. As we announced a few weeks back, the company has now expanded its early access program to 10 external sites. This is a key milestone for the company and critical for expansion and development of applications and workflows for protein analysis. Over the last several decades, the scientific community has been limited to viewing the proteome at the known protein levels. Similar to how genomics advance from the tens of thousands of known genes, to greater than 3 billion bases, single-molecule protein sequencing can enable advanced understanding beyond the estimated 20,000 proteoforms, but potentially millions of variants and modifications that play a role in the cause and treatment of disease. QuantumSI specifically has engaged key thought leaders across target markets and application areas that represent tremendous growth in future utilization. As outlined, our key target disciplines are biological discovery and research, clinical and therapeutic biomarker development in multi-omic applications. Early access participants quoted in our recent announcement highlight the areas of application of our platinum system and the problem they are looking to solve or expand understanding. The goal of QuantumSI's commercial strategy over the next several years is to enable these groups to explore new dimensions of biology and partner with us to expand the capabilities of the system. This approach further enables the tens of thousands of users that utilize both traditional proteomic tools and next-generation DNA sequencing platforms. In parallel to the open platform approach, we are on a path to enable instrumentation, kitted content, and analysis tools that allow investigators to routinely monitor essential mechanisms in cell behavior that indicate early onset or reoccurrence of disease. Millions of individuals annually are diagnosed with cancer or immunocompromised stage for which we currently have limited ability to assess at early stages. Over the next decade, key advancements in detection and therapy are expected to improve general health. We are committed to working with our partners and end users to provide the tools to advance these efforts. The commercial team has visibility to thousands of potential placements spanning across users of central proteomics cores, next generation sequencing DNA benchtop users, drug development organizations, and future clinical testing labs. The key capabilities that will drive system placement begins with the accessibility to a benchtop instrument that streamlines both sample workflow and analysis. This coupled with the power of time domain sequencing, QuantumSI delivers unprecedented resolution and sensitivity by sequencing single molecules of protein to analyze peptide and direct amino acid changes. As stated, this increases the visibility of the biology that occurs in a cell, which is currently limited to less than 2% of true activity. Our fourth objective is to expand utilization of the ecosystem enabled by the platform. Our initial focus will be on two areas. The first, to develop clinically relevant assays focused on identification and measurement of post-translational modifications. And second, to optimize content to drive high volume applications in single molecule detection assays. The goal of these efforts will be to partner with drug development and clinical research groups to eventually drive the implementation of routine monitoring. Key external partners have voiced that there is a huge demand for technologies that can deliver enhanced accuracy sensitivity and time to result in many cases such as in the treatment of lung cancer patients are put on kinase inhibitors that can result in successful treatment initially however nutrient modifications and protein structure can cause the activation of alternative key signaling pathways resulting in the reoccurrence of disease the ability to recognize post-translational modifications at low frequency is a potential method for identifying these activated pathways at early onset by routine monitoring post-treatment. Similar to what drove the routine adoption of next-generation DNA sequencing, we believe that focused content can lead to high-volume routine utilization. Moving from simple protein identification to individual amino acid sequencing can unlock advanced content insights, much like targeted panels have done with genomics in the areas of cancer and in terrible disease. Given this, we are elated to be working with key opinion leaders to define and prioritize actionable content and performance specifications in areas such as immunocompromised states. In parallel to our internal development programs, we are also accelerating our efforts to create an application ecosystem around our platform through external partnerships. A few specific examples I would like to highlight are ESPCI in Paris was recently able to self-install a platinum instrument and quickly generate data validating our protein sequencing technology. Our development teams have been working closely with ESPCI and the University of Wollongong to create new proprietary and scalable barcoding approaches. Similar to the barcodes utilized in sample multiplexing or single-cell tagging, this novel barcoding approach utilizes kinetics as opposed to biologically attached oligo strands and has the potential to enable applications such as single-cell proteomics. In September, we announced a development partnership with Protein Evolution Inc., a private company utilizing proprietary technology in the field of proteomics. In this collaboration, we intend to create new classes of affinity reagents for use on the platform to support the development of focused content in assays. Much like an antibody, these affinity reagents will serve as the front end to our sample preparation workflow to enrich key proteins of interest. Our ultimate goal is to enable customers to develop custom panels for their own targets and to commercialize high-throughput content for immune monitoring and characterization. QuantumSI will continue to drive novel applications targeting high-growth markets and leveraging our unique time-domain sequencing approach in collaboration with our partners. We are very grateful for the active engagement of our early access program thus far and look forward to updating you on progress over the next quarter. I will now turn the call over to Claudia to review our financial results. Claudia.