Quotient Limited

Greetings. Welcome to Quotient Limited's fourth quarter and full year fiscal year 2022 financial results conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Mr. Ali Kabaro, Chief Financial Officer of Quotient Limited. Please go ahead.

Thank you, Rob. Good morning, everyone, and welcome to Quotient's fourth quarter and full year 2022 financial results, as well as business update. Joining me today is Manuel Mendez, our Chief Executive Officer. Today's conference call is being broadcast live through an audio webcast, and a replay of the conference call will be available later today at www.quotientbd.com. During this call, Quotient will be making forward-looking statements including guidance and projections as to future operating results and expected development and commercialization timelines. Because such statements deal with future events, actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in quotient filings with the U.S. Securities and Exchange Commission, as well as in this morning's relief. The forward-looking statements, including guidance and projections provided during this call, are valid only as of today's date, June 24, 2022, and Quotient assumes no obligation to publicly update these forward-looking statements. With that, I would like to turn the call over to Quotient's CEO, Manuel Mendez.

Thanks, Ali, and good morning, everyone. Thank you for joining us today for the fourth quarter fiscal 2022 results and business update. During today's call, my comments will cover our strategic financing transaction we recently announced, the exciting progress we have made around Mosaic menu expansion and the distribution footprint, and our pipeline activities in clinical diagnostics. Then, Ali will review our financial results and outlook for fiscal year 2023, followed by my summary comments before we open it up for a Q&A session. Today, we announced two actions to improve our liquidity runway, and provide greater financial flexibility in our balance sheet. First, we amended our senior secured notes, reducing our amortization payments by a net $93 million over the next 36 months. Second, we raised $20 million in gross proceeds through an equity deal. The proceeds from the deal will fund our major growth initiatives, which I will cover next. Let me now provide you with a quick update on our commercial execution. Following the extended immunohematology commercial launch, our efforts this quarter have secured 1.4 million of Mosaic orders in the first quarter of fiscal year 2023. We are focused on expanding our distribution footprint across the major international geographies. The commercial team has made significant progress this quarter and have signed nine international agreements with distributors. Overall, I am very pleased with the momentum we have generated in expanding our commercial distribution footprint and our pipeline opportunities to grow. In conjunction with the geographical expansion activities, we're highly focused on the large volume of immunohematology tenders we are tracking in Europe and other eligible CE mark territories. We anticipate these tenders will come into play within the next 18 months. This is an important part of our strategy to drive increased awareness and market share gains with existing and potential customers who may be attracted by the Mosaic solution economic and clinical value. We look forward to updating you on our progress on the tender opportunities throughout the year. Turning to our Mosaic solution for the transfusion diagnostics channel, this past March we were thrilled to receive CE mark of the Mosaic extended immunohematology microarray. The receipt of the CE mark was a significant company milestone as it enabled Quotient to commercialize the immunohematology microarray for use with our Mosaic instrument across the European Union and other CE mark-recognizing geographies. As a reminder for our listeners who are newer to our story, Mosaic offers our transfusion and clinical lab customers an all-in-one, fully automated, high-performance, multimodal, multiplexing solution. More specifically, the immunohematology microarray allows the user to perform extended phenotyping, antibody screening, antigen typing, including ABO forward and reverse groupings. Laboratories and clinicians may use the solution to generate comprehensive characterization of blood donor samples through a single test procedure. Our strategy is to continue to expand the Mosaic menu to drive increased value for our customers and economies of scale for our business. We have been working with the FDA in the U.S. during our pre-submission meetings as we're making important advancements in the extended immunohematology trials. Our progress includes performance and manufacturability advances and exciting development work which yielded an expansion of the specificities in this product. Next, I want to share the progress we continue to make on our serological disease screening microassay. Throughout our clinical development work, we are advancing the sensitivity of our lead infectious disease immunoassay multiplex panel. The company continues to be on track to submit an application to the EU for CE microapproval in the second half of calendar year 2022. Next, I'd like to provide an update on our clinical diagnostics. We are very pleased about the clinical diagnostic activity this past quarter, namely our partnership announcement with Theradiag. Our two companies bring together complementary solutions to jointly develop autoimmune mosaic microarray reagents and multiconstituent quality controls. First, with a collective solution for collective tissue diseases, connective tissue diseases, or CTD. Testing involves a complex diagnostic pathway, in order to identify the exact autoimmune disease and to distinguish from other conditions with similar clinical signs and symptoms. The integration of several autoantibody diseases and tests into a single multiplex assay is thought to simplify testing and ultimately provide a faster and more reliable path to patients and clinicians to diagnosis and adequate therapy. Autoimmune diagnostics provides an additional estimated $2 billion addressable market opportunity for Quotient's Mosaic platform. An autoimmune microarray would have a faster path to market at a lower cost when compared to blood diagnostics due to different regulatory requirements. Now on to our scientific and medical activities. We held our first KOL event this past quarter with Dr. Christophe Martineau, where he shared his expert insight on the current landscape and unmet needs within blood grouping and donor's disease screening. During the session, he stated, Mosaic is easy to use and is a game-changing system in diagnostics as it has direct impact on patient safety through extended phenotyping. We look forward to organizing more KOL sessions into the year. Additionally, we are very pleased with the development of a Mosaic Innovator Circle initiative, which we first launched in March. The goal of the Innovative Circle is to create a community of experts from laboratories across the world who focus on transfusion medicine and clinical diagnostics. Our member partners with Quotient to create innovation and evidence generation to improve patient care and laboratory efficiencies. We're up to eight members with a goal of expanding our network of experts in the next few months. We signed an international partnership with Centre Pasteur in Cameroon as part of our investigator initiative research program. The partnership will provide Quotient's R&D team access to rare HIV samples and will also sponsor young scientists studying infectious diseases. This program is open to all healthcare professionals who wish to study the clinical and economic impact of the Mosaic system. Currently, two Mosaic workflow efficiency studies are in progress, one in Europe and one in the U.S., and we look forward to giving you the results in the near future. I would like to conclude this section with two recent wins. I am pleased to announce that our headquarters, and particularly our microarray manufacturing facility in Essen, Switzerland, passed the ISO 14001 certification, which sets out the requirements for an environmental management system. This certification exists to help organizations minimize how operations negatively affect the environment. To qualify, Quotient went through a series of external audits and is now officially ISO 14001. 14001 certification. Thank you Esteban Uriarte, our Chief Manufacturing Operations Officer, and his team for leading this important project. Lastly, I'm pleased to announce that as of today, we have shipped multiple Mosaic instruments to customers. This is an exciting time of quotient, and I'm very proud of Mohamed Elkhoury, our Chief Commercial Officer, and the commercial team for making excellent progress and delivering a major commercial win for the whole company. It was certainly a team effort across the board. Well done, everyone. Now, let me turn the call to Ali for more details on our financial results. Ali.

Thank you, Manuel. Fiscal fourth quarter sales were 9.8 million, an increase of 1.5% from last year's fourth quarter. Alba by question sales increased by 4.8% year over year. There were no mosaic COVID-19 antibody testing revenues in the fourth quarter of 2022, while there was 0.2 million of COVID testing revenues in the prior year. Within the ALBA by Quotient business, OEM sales of 6.7 million represented 68% of all product sales. Year over year, OEM sales increased by 0.2 million, or 2.8% versus the prior year. Direct and distributor sales of 3.1 million increased 9.1% year over year and represented 32% of product sales. Fourth quarter, gross margins and product sales were at 39% compared to gross margins of 46% reported in the fourth quarter of the prior year. For the year, total product sales of $38.3 million increased by 7% versus prior year, with Alba by Quotient sales increasing by 10.7%. Gross margin on product sales for the fiscal year 2022 was $14.7 million, or 38%, compared to $15.7 million, 44% for the prior year-to-date comparison. The difference is mainly due to the third quarter write-down of certain Mosaic inventory. Excluding the write-down, gross margins would have increased by $2.7 million to 45%. In the fourth quarter, we recorded an operating loss of $26.9 million compared to $28.5 million last year. Operating expenses were $30.7 million in the fourth quarter of fiscal year 2022, a decrease of $2.2 million over the prior year. Research and development expenses were $16.1 million, a $0.9 million increase year over year. General and administrative expenses were $11.5 million, a decrease of $3.1 million compared to the prior year. The decrease in total G&A costs is mainly driven by a reduction in executive management transition costs compared to the prior year. Included in G&A is stock-based compensation expenses of $1.4 million, which decreased by $0.1 million versus the prior year. Sales and marketing expenses were $3 million in the fourth quarter, representing a $0.1 million decrease compared to the prior year's fourth quarter. Net other expenses was $0.9 million gain compared to a $10.6 million loss in the fourth quarter of last year. And net other expenses consisted of interest expense of $10 million and a $15.6 million gain related to the change in fair value associated with our derivative liabilities. A $1 million loss on the impairment of Credit Suisse and a $3.7 million loss in FX losses arising on monetary assets and liabilities denominated in foreign currencies. This compares to interest expense of $7.2 million, a $2.3 million loss in the impairment of Credit Suisse supply chain funds, and a foreign exchange loss of $1.1 million in last year's fourth quarter. Our net loss for the quarter was $25.9 million, or $0.25 per ordinary share, compared with $39.3 million, or $0.40 per ordinary share in the prior year's fourth quarter. Net losses for the fiscal year ended 2022 or $125 million or $1.23 per share compared to $111 million or $1.21 per share in the prior fiscal year. Net cash used in operating activities totaled $119 million for the fiscal year 2022 compared with $78 million in the prior fiscal year. The increase of cash used in operations was driven by a number of factors, mainly the increased levels of R&D, G&A, and movement in working capital. In addition, last year's cash flow was positively impacted by the ortho upfront payment of $7.5 million. For fiscal year 2022, capital expenditures totaled $2.9 million and primarily related to the purchase of manufacturing equipment and information technology. Moving to the balance sheet, Available cash, cash equivalents and investments at the 31st of March 2022 was $83.2 million compared to $111.7 million at the start of fiscal year 2022. In addition, we held $8.7 million restricted cash reserves related to our senior secured loan and rent deposit for our Swiss facility. Our short-term and long-term investments include investments in the Credit Suisse supply chain finance funds. As previously discussed, Credit Suisse suspended redemption and announced liquidation of those funds in March 2021. During the fourth quarter of the fiscal year, Credit Suisse provided additional information to investors regarding plans to withhold litigation fees from investor recoveries. Due to this information, we took a further impairment of $1 million on our outstanding investments. This is in addition to the $2.3 million impairment we took in March 2021. In addition, Credit Suisse informed the company that recovery on one of our funds could take longer than a year to recover, and we have therefore reclassified that amount as a long-term investment. The total remaining investment as of March 31, 2022, was $18.1 million net of the impairment. These funds continue to be subject to valuation uncertainties, and the company has therefore maintained an impairment of $3.3 million on the outstanding amount. As disclosed earlier today, we have amended our senior secure notes with the support of our senior note holders. The amendment has some significant financial advantages to the company, primarily through lowering principal amortization payments and removing the requirement for $8 million of restricted cash. The underwritten equity offering allows us to continue to fund our business, as Manuel described earlier. Now turning to guidance. For fiscal year 2023, we're introducing a total revenue forecast in the range of $39 million to $42 million. Capital expenditures for fiscal year 2023 are expected to be in the range of $5 million to $10 million. We estimate that cash used for operations will be in the range of $6.5 million to $7.5 million per month, excluding debt service costs and capital expenditures. We are not providing guidance on the size of the operating loss that we expect to report for the current fiscal year. And with that, let me now turn the call back to Manuel.

Thank you, Ali. Let me frame our upcoming priorities and activities for our company for fiscal 2023. Our most important priority is the continued commercialization of the Mosaic solution following the recent CE mark of the extended immunohematology microarray. We're actively expanding our geographical distribution and look forward to participating in tenders across those regions over the next few quarters. We expect to submit extended immunohematology BLA filing in the second half of calendar 2022. We're confident in our serological disease screening microarray profile. We aim to submit an application for CE mark in the second half of calendar 2022 and BLA in the U.S. in the first half of calendar 2023. We have added depth and breadth to our scientific medical affairs strategy through the creation of our innovator circle and new partnerships agreements with global transfusion leaders. We have built an experienced and talented executive management team who have the desire and vision to take this company forward during an exciting time of platform and menu expansion. We're on track to expand our distribution partners from nine to an expected greater than 20 by the end of the year. This will include the addition of other geographies which are leading global markets that account for, you know, greater percentage of the white blood donations and growing, you know, in double digits, you know, in the other regions. We'll also expect the distributor presence in the major countries like in Latin America and Asia Pacific, which represent material opportunities for us to grow. Following our recent financing, we have the balance sheet to enable us to make the necessary investments to drive profitable growth, extend our cash runway, and value creation for this company going forward. As you can probably tell, I'm extremely enthusiastic by our future at Quotient, and now I invite for an open Q&A. Rob?

Thank you. If you'd like to ask a question at this time, please press star 1 from your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions, and then that's star one.

Thank you. Our first question is from the line of Brandon Couillard with Jefferies.

Please proceed with your question.

Hey, thanks. Good morning, guys. I just want to confirm that guidance does include or does not include some commercial mosaic revenues. What are the main KPIs? What are the main metrics against which we should measure the success of the launch in the first year externally? What are the main numbers we should focus on, whether it's installed base, number of customers, distributor build-out? What's, in your view, the most important?

Thanks, Brendan. So the number does include mosaic sales. We do not include the tender business there in any material fashion because it's hard to predict, but it does include placement of instruments as well as our distributor channel in that number that we've just communicated. What we've said as you look through our press release and our comments here today is really to look at bookings. And the number of distributors that we have, because we do have greater visibility to that, as opposed to the tender channel that we're not baking into this number at this point, given it's only been 90 days since we launched. So really the guidance we're giving is to what we have visibility to, which is the distributor channel as well as our core ALBA business.

And then we're also going to be communicating. So I think in terms of – yeah, so you should expect that we're going to communicate the expansion of distribution because that should have a direct link into revenue, and it's more predictable. And then as we participate in tenders, we'll communicate our participation and the success there, which will then drive revenue from that standpoint. On the tender business, maybe we'll start communicating – You know, bookings, because that's very – it's different from go live. As you know, sometimes it takes a little longer by the time you get awarded and you go live, depending on the needs of the customer, and it varies by region. But that probably will be some of the things that we should be looking at in terms of metrics.

Okay, so the $1 million of initial orders, were those with distributors or were those on a direct basis? And, you know, have there been any tenders involved? that you've participated in yet that have kind of been decided or won yet?

We've participated in tenders that have not been awarded. The initial number is through the agreements through distribution, and then there's others. So it doesn't fully comprehend all the agreements we have in place. Like I mentioned, we have already nine. So some of them, there are others that are in conversations as to what those requirements are from a revenue and commitments on minimums. So those will be giving updates in the weeks and months to come.

Okay. And then in terms of the manufacturing of the microarrays, can you just update us again on the current capacity, where yields are right now, and remind us how much of that is it's actually allocated to R&D as opposed to commercial sales of that capacity?

Yeah, thanks for the question. Look, I think yields, it's ongoing. We're making great progress and ready for commercialization and the needs that we expect from a commercial standpoint. A little bit different what we've done. I know in the past we've talked about allocations of R&D. To address that, we have implemented R&D lines that are going to improve prototyping and speed of development, which is not then taking the yield time from our main lines that are more for commercial focus now. So we've implemented those in the R&D areas, both here and in Edinburgh, to facilitate fast development. We're doing some sort of fast prototyping and sprints, as we call it internally. So it's not necessarily an issue at this point. And, again, we're ready for, you know, process. And, you know, with the addition of Esteban to our team, I think he's done – he's brought a lot of good maturity, very focused on metrics, which, you know, really give us a great level of confidence, you know, in being able to deliver the market demands.

Gotcha. I'll hop back in the queue.

Thanks.

Thank you.

Our next question is from the line of Josh Jennings with Cowan. Please proceed with your questions.

Hi. Good morning, Manuel and Ali. Thanks for taking the questions. Good morning. I wanted to follow up on the orders that you received already for Mosaic and just how we should be thinking about these distributor agreements. Are you generating revenue for Mosaic system sales as well as microarray sales through these distributor channels?

Yes. And that is the agreement. And it's not just, again, these are distributors that then go into customers. So it's active. So it's not generating inventory. It's actually going to customers.

Excellent. Thanks, Omer.

Just Omer.

Yes.

Josh, just to make sure I add on that. Yes. So the you would have the three pieces of it, the instrument itself, the consumables, and the service piece of it. That's correct. That is what the agreement with the distributors is going to cover.

Yeah.

Excellent. Thank you. And just thinking about the tenders and the 20 submissions over the next 18 months, any way to just help us think about the tenders that are coming up within six months versus 12 months versus 18 months? Are most of these submissions going to occur in the second half of this 18-month window, or Should we think about it kind of every six months, a third, a third, a third? Just wanted to get a better handle on timing of these tender processes.

Yeah, look, what I can say, it varies. There are some that are coming now in the month of June, even before it's finished. Then there are some coming up in July. And then the assumption that we have is on what they've communicated to us when they are going to open and they're going to be posted, which varies. Sometimes they say, well, we're going to post in June, and then it goes into July. So it's hard to predict, and I would hate to give you a number that, you know, then it's, you know, it may change. But our expectation is that in the next, you know, six months, we'll have, you know, seven or eight, you know, of those, you know, that are going to be available. They're going to vary in range. So there's some smaller, there's some larger. And then, you know, the rest in, you know, within the 12 months, you know, similar number. So at the end of the day, you know, we're working through those and, you know, ensuring that, again, we're working with, the customers and the different institutions as soon as they get published and we will participate. So it's a little vague answer, I'm sorry, but it's difficult to know when they are actually gonna be published or not.

Understood that, thank you. And wanted to check in on your comments around BLA submission. to the FDA in the second half of calendar 2022. Just what's left in front of that submission? Just any update on the U.S. field trial, when they will start, and just any other kind of next steps before that submission can be made?

Yeah, so we had conversations in the pre-trial you know, pre-submission, you know, we, we, what you do there is you get guidance, hey, this is what we're planning to do. This is what, you know, where we are now. Good, good, you know, good feedback and on track on that. You know, at the end, what we should expect is then, you know, trials to start, you know, in the next couple weeks. And then, you know, with that, you know, we, you know, we again prepare the submission and, you know, submit, you know, in the second half. What I would say that what's really interesting and nice on this submission is that the team has done a really nice job in, you know, taking, you know, improving the performance, even what we had, you know, previously. It's going to include, you know, more specificities than what we have already gotten a proven CE mark. So, We're very excited about this product. And on top of that, what we've done is also added some elements to manufacturability with the communication between both teams from the operations perspective, the tech transfer, and then the R&D team that improved also manufacturability. So we're super excited about this product. And then the good news about that is that we submit to the clinical trials, and once we submit, we can use that data to then come back and even enhance even further our CE marking product, which then that's going to be amazing for customers in Europe because it adds some nice specificities on top of what we already have.

Great. And just to follow up on this BLA process and just how you'll communicate with the investment community on those improved sensitivities and also potentially a bigger menu that's going to be introduced in the U.S. field trial. Will you guys share verification validation results or should we be thinking we'll just see results at the end of the U.S. field trial? Wanted to just better understand when we'll see the results.

Yeah. Yeah, Josh, I think that's a fair question. I think, look, I think it's better for them, you know, we will, you know, share, you know, through papers and publications, you know, Dr. Ginocchio is going to address that through scientific and medical affairs, and so you may see some things associated with that. As part of the clinical trial process, and particularly with the FDA, you don't want to be, you know, you know, sharing data in between. So I think what's been sort of a custom in the past, you know, we'll probably move away from that and then more, hey, once we submit whatever is allowable for us to submit as part of, you know, those agreements and in conjunction without risking the approval, we'll do those and, you know, communicate those. But I think, again, the important thing is to focus on completing the trials, submitting the data, and then getting approval as soon as possible. That's our focus

Thank you. And last question, just on the collaboration with Theradag for the autoimmune microarray, you're talking about entry into the U.S. and international markets in calendar 23. It seems like a nice accelerated timeline. So any help just thinking about where internal development program stands today and just a roadmap to get to those entry points next year, next calendar year? Thanks for taking the time.

Look, we're super excited. Now the teams have met, you know, multiple times. As a matter of fact, they were here this week making progress and advancing that. So look, we're extremely excited. Theradiag is well known for their autoimmune portfolio. They're CE marked. They have expertise in this area. When you compare it to the menu and skill and capabilities from an organization perspective, they are equal to or better than other products that are in the market. So we're extremely excited with not only the fact that now we streamline our development process and timeline, but the fact that we are partnering with them. It's just lower cost, right, because then we can go to market faster. We don't have to – a lot in development, a lot of the trial and error is around, you know, antigens, antibody selection up front, and, you know, those raw materials and how they work. You know, so having the expertise on something that is already validated and works, You know, that's a huge, huge factor in being able to come to market much more quickly. Plus, also, they have access to samples and rare samples that really help us characterize the performance of the product. And so it's an overall win, win for them, win for us. And that's why, again, the key message is faster to market and lower cost of development, which is, as you know, one of the key things that we have to do, you know, in this process. So we're very excited about the partnership, and again, super collaborative.

Great. Thanks again. Next question comes from the line of Mark Massaro with BTIG. Please share your questions.

Hey, guys. This is Vivian on for Mars. Thanks for taking the questions. So on these 20 tenders, could you just remind us how much of the overall market those account for how to think about that opportunity, and what the geographic mix looks like. And just given that you secured that 1.4 million in orders, are you in any conversations about expanding to SDS potentially as well? Thanks.

Yeah, so look, the way to look at, you know, the current immunohematology and the tenders that we've outlined, look, if we look at immunohematology overall, it's about 300 million, you know, market without including the U.S. because, as you know, that's not accessible at this point as we were waiting for FDA approval. So it's about $300 million that's at play. And then through that, some of the tenders that we have probably represent about 60% of that market. that is accessible. If we look at the EU, it's about 100 million, and 60% of that is the tenders that we're discussing. So if we look at about, it's probably about $60 million of opportunity that potentially can be in play. And so our goal is to look at some of those figures and then have access to that as part of that process. And what was your second question, I'm sorry?

Yeah, just conversations about expanding to SDS.

Yeah, well, look, I think, you know, SDS is a huge opportunity for us. We expect to get approval in the first half of next year. It gives us access, you know, and the full market globally is about $1.3 billion. And, you know, from that, you know, it would be accessible. You know, again, 75% of that market is in Europe. And the rest of the world, so 25% is in the US. So that gives us another access to 900 million. If we look at the opportunity then between STS and IH, so it would be greater than a billion dollars in terms of access opportunity. If we look at every time we have an immunohematology account, whatever we win on an immunohematology account, the idea is that we just add then the STS that becomes as an opportunity because it can be used on the same platform. So look, it just represents a big opportunity for us to leverage any placements and any wins that we have on the Mosaic platform. You know, with now, once we launch, you know, in the SDS, we'll just leverage that installed base and those opportunities. And in the meantime, we actually already know, you know, the tenders that would be available, that are available, that are in play. Our teams are already not only identifying those and also influencing those tenders, you know, with the ability that all of a sudden now a customer will have the opportunity to have both modalities. immunohematology and SDS on the same platforms. So, you know, this is, again, a big game changer with respect to what they have ability to be able to engage today. So, you know, they're very excited about that. We're already doing also, you know, some workflow analysis with some partners on, you know, the impact of having IH and SDS on the same instrument in the same account. So we're looking then to have some papers to be published around that in anticipation of, you know, the launch of next year. So we expect some of those things to come out in the next month.

Perfect. Thanks so much. And just a quick follow-up. As far as allergy and autoimmune products in the pipeline, any updates there from an R&D perspective and progress towards approval? Thanks.

Yeah, like I mentioned before, look, we're making great progress. Both Sarah Diag and our companies are working very closely together. We have project plans advancing. So yeah, we're very excited with the expertise of Sarah Diag and the expertise that we have on microarrays. It just represents a significant opportunity, again, to leverage the capabilities of assay development, control development of TheraDiag, which, you know, again, it's just basically giving us access to, you know, this $2 billion opportunity for autoimmune. And then also, of course, you know, that is just a platform to start the autoimmune and then give us access to, you know, other clinical applications like allergy that we'd identified that also becomes significant opportunity for us. So, and then it applies the same way. Once we get into an account you know, with an autoimmune solution, microarray, once we develop an allergy, you know, that could be something that could be add-on to that system, which, you know, creates and helps build, you know, steady revenue razor blade model for us. And then for the account, it's just they don't need incremental instrumentation to be able to add those capabilities into that site. So it's just a win-win for everyone.

Got it. Thanks so much for taking the questions.

Thank you.

Our next question is from the line of Matt Sykes with Goldman Sachs. Please receive your questions.

Hi, good morning, Manuel and Ali. Thanks for taking my questions. Hey, Matt. Hey, how are you? Good. Maybe just following up on the last question regarding SDS, I see that you guys outlined an EU commercial launch in the first half of next year. Would there be an expectation for an acceleration in terms of the momentum from Mosaic given the availability of SDS? Yes. Kind of similar to the last question, are you having conversations with folks who might be waiting for that SDS capability prior to purchasing instrument or is it first IH and then when SDS comes you add that on?

Yeah, no, that's a great question. So, look, what we're seeing is great activity, you know, for many customers to, you know, get into the IH right now. Why? Because when you look at the immunohematology instruments that are available today from other competitors, they are extremely cumbersome, very manual. You know, they have potential of risk, you know, from, you know, user intervention. They also cannot consolidate with the multiplexing capabilities that we have on the mosaic. They cannot offer all the specificities integrated into every single sample, so that's very appealing, and they want to be able to adopt now. That's, again, the feedback we received on the immunohematology. Now, on top of that, when you add then the serological disease screening opportunity and that being available, that is just, you know, going to be an incremental opportunity for them to, once they have the mosaic with the IH, then it's simply just adding that SDS microarray onto the platform, you know, which is, you know, a huge benefit from a user interface space, you know, and other value that we can certainly, you know, that they have articulated to us, you know, from a staffing perspective and tube splitting. So there's so many other things, you know, that they value on that. So, yeah, I think IEH stands on its own, you know, as an opportunities creation now. And then, you know, we're anticipating discussions with other customers, as I mentioned before, where we are doing, you know, workflow evaluations now to be able to demonstrate, you not only for the immunohematology, but immunohematology and STS together. And then, you know, that's becoming extremely appealing. Oh, so I can get this benefit on IH, and then on top of that, when I get on STS, I'll get even further value. So they're eager to be able to address that. As you know, there's a lot of challenges from a customer perspective on workflow today. There's challenges on staffing, not enough people. There's challenges on budget. So, you know, the fact that we can help address all these challenges is extremely valuable. valuable for them now.

Great. Thanks for the color. And then just in terms of the EU tenders, I know you gave a lot of color in previous questions, but I'm just wondering, is there a kind of templated duration of submission to award for these tenders, or is it more case by case? I'm just trying to think about not just the cadence of how they lay out, which you answered but more about the timing between submission to award and if that varies between tenders or if there's a standard time that we should be thinking about.

That's a good question. So, look, it varies. So there's no standard at all. You've seen one, you've seen one. But what I can tell you is our expectation, at least, you know, as we participate in the tenders, normally, as you know, is a technical and a financial. We normally would expect that. Within 60 days, you know, that you would get some kind of indication or response. Sometimes it takes longer. What we've seen, it takes longer. What we've seen today. And then from that, it could take up to 90 days, maybe longer. But normally, a normal situation, it should be, you know, between 45 days to 90 days, right? Then from that, what I would say is that you would expect to go live anywhere between three, you know, three months. you know, to five months, in some cases, you know, depending on where they are in their contract, where they are in the year. But, you know, at the end, you know, what we're confirming with customers is we're ready to go. We submit, you know, we're ready when we submit the application. We're ready to go with a team that is focused on the implementation process. Our teams are ready to, you know, to go on that. So, again, we understand the process very clearly. We've seen it. We've done it. And we've augmented with people that have a lot of experience in this area. But, yes, we are ensuring that we understand, you know, the timings and how then we can, of course, accelerate the ones awarded to go live.

Got it. And then just last question, Ali, for you. Just given the – the amendment to the senior secured notes, the equity financing last night, and then kind of what you outlined in terms of CapEx and cash usage for next year. Like what is kind of your expected duration of cash runway at this point, given all the things that you've done?

So based on the things we've done as well as the things that we're working on, we have runway into next year, and we'll continue to work on all the other things that we are continuing to work on beyond these. We think it was great that we were able to restructure our senior secured note, given how important it has been for the company, knowing that our senior secured note holders had previously pushed out the amortization. This time we were able to push it out all the way into 2025. So we thought that was very helpful because it gives us a lot of flexibility in terms of funding the business without having to consider the fact that there were principal payments for amortization coming up. So we thought that was really excellent. All the other different factors that we're looking at in terms of funding the business, whether it's grants for R&D or looking to do things like partnerships, royalty rights, distribution rights, similar to what we've done with partners like Ortho, those now become much, much easier to do and much more helpful given that You know, we've been able to come to this amendment that really reduces the near-term use of proceeds to pay for principal. So pushing that out three years out and pushing almost $93 million into 2025 really does give us flexibility and runway. So we're excited about that.

And I would like to add one thing. You know, frankly, I have to say that our senior secured note partners have been extremely helpful. and extremely cooperative to the process, which is great to be able to have that as a company. Again, I don't know that many companies can say that in this day and age with this macroeconomic environment that we're facing. But the fact that we have that support and that we can say today that we have signed this amendment, it really is a testimony to the partnership that they've shown us and what we expect going forward. I think, again, we're We have a great executive team. You know, we have great partners, you know, both on the credit side, on the investor side, you know, a very supportive board. Again, I think, again, the momentum is great and we look forward to, you know, driving that home.

Great. Thanks very much, guys.

Thank you.

Thank you. We have reached the end of the question and answer session. I'll now turn the call over to Manuel Mendez for closing remarks.

Well, thank you for all your questions, guys. I would just like to reiterate what a What I mentioned before, I'm so proud of what we've made as a team in terms of progress. We will continue to drive the next fiscal year very laser-focused on empowerment our customers and transforming patient care. Thank you very much, and enjoy the rest of the day. This concludes today's conference. You may disconnect your lines at this time.

Thank you for your participation.