Quanterix Corporation

Good day and thank you for standing by. Welcome to the Quantirix Corporation Q2 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Mike Doyle, CFO, please go ahead.

Thanks very much, May. Good afternoon, everyone, and thanks for joining us today. With me on today's call is Kevin Rosovsky, our chairman and CEO. Before we begin, I would like to remind you about a few things. Today's call will be recorded and will be available on the investor resources section of our website. Today's call will contain forward-looking statements that are based on management's beliefs, and assumptions and on information available as of the date of this call. We may not actually achieve the plan, intentions, or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. The risks and the uncertainties that we face are described in our most recent followings with the Securities and Exchange Commission. During today's conference call, we will discuss some financial measures that are not presented in accordance with U.S. generally accepted accounting principles or non-GAAP financial measures. In the Q2 earnings released and in the appendix of our presentation, which are available on our website, you'll find the additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to comparative GAAP measures. We believe that these non-GAAP financial measures provide investors with relevant period-to-period comparisons of our operations. These financial measures are not recognized under GAAP and should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP. With that, I'll turn the call over to Kevin.

Thank you very much, Mike, and hey, welcome on board. It's Mike's first call with me. Very excited to have Mike Doyle with us as our new CFO. Hey, today we're going to go through three major agenda items. First, the major advances that we've had in Q2 and really the first half of this year that's accelerating our growth as well as enabling a new term, not just therapeutic drug discovery and development, but diagnostic therapeutics, which we think is a new category that's pretty exciting for neuro. Mike will then talk us through the financial results, and I will then end up with the objectives and we'll open up for questions and answers. So I'd like to just start on slide four with some press that you're starting to see out there. This is what we've been describing for really the last six, seven years, and it's been a big component of our hiring precision health ecosystem and foundation. It's about blood-based biomarkers, fast becoming the gold standard, for surrogates for traditional tau and albeta PET imaging. So transforming drug discovery in neuro primarily from spinal taps and imaging into blood-based is a key opportunity area that we're very focused on and making a lot of progress within. And the other quote here coming from Fierce Biotech, Lilly adds on to biomarker bombardment and Alzheimer's with two new ranadamab analyses. And it's really ever since the FDA approved Biogen and Eastside's Alzheimer's disease treatment, Aduhelm, the buzzword among competing companies has become the biomarker. And that's just what Eli Lilly has to offer with two new analyses on their candidate, Denatumab. And we will describe in more detail these opportunities. But let me now turn to slide five, where we really have some pretty important news to convey. We did have record growth, record adoption, and we continued to evolve what we would consider to be the momentum for plasma biomarkers. And surprisingly, many of us were very much excited to learn that there was a new Alzheimer disease modulating therapy approved And what's also interesting is we launched PTAL-181 and also a NeuroPlex, which has had very strong growth, and it's continuing to accelerate. We consider it to be an important catalyst. You may have also read from Lilly and also heard from their presentation last week at AAIC that Simola Plasma PTAL-217 correlates with the Denazumab efficacy reported by Lilly, and Interestingly, our NFL, which we at one time called an engine check light on the brain, and we do think someday everyone should know their NFL number in case they ever come in harm's way with neurodegeneration or concussions. There's a lot of momentum continuing to advance the breadth of that biomarker as well. From the business update standpoint, strategy updates, payer adoption continues to be an area that we focus on because in the end, getting these drugs done paid for and approved we think diagnosis can play an important role there for monitoring drug performance and making sure there's real coverage with evidence we also as you know there was some of our technology air freighted down to bethesda maryland to anthony fauci's labs and in those labs and looking at using our tests measuring um the antigen for new drugs and current drugs to better arrest the COVID virus. And there's also a lot of long haulers that are continuing to be plagued with symptoms. And those that have lost taste and smell and have brain fog, there's been a lot of publications now linking, using our NFL neurofilm and light, showing neuronal death. And there's growing concern there could be linkages in a lot of publications recently published between COVID and early Alzheimer's. So that's further fueling both of those categories. We also are almost a 50% of our HD fleet because of a lot of sales of HDX primarily linked to Alzheimer's and this revitalized landscape for Alzheimer trials and growth. We also, as I mentioned, Mike's joined us, but so has Masoud Talu, who joined us from Perkin Elmer, running our Quanterix Diagnostics Division, plus Dr. He's our overall president of Quantex. We have nearly a half a billion dollars of cash on our balance sheet, which we were successful in raising a couple times in the last year. Both of them were up rounds. I mentioned that we had a lot of advances in NFL, but just in general, we had record publications on our biomarkers and our disruptive technologies and new biomarkers. We also hired Will Geist to further advance and accelerate the scaling of our company to catch up to the demand that we're creating. And that has been going very well. He and his team, he's recruited a lot of top guns into our company to help us scale and catch up to the demand. We do have some stock outs just stemming from the increased demand that none of us probably expected this level of Alzheimer's enthusiasm. and that's continuing to create a lot of opportunity for us in the future. So our timing of bringing Wilt and his team in was really quite good now that we look back, given this advance in the Alzheimer landscape. We also are expanding our laboratory. Masoud is taking over control of the accelerator lab, helping us to further expand that because we do see linkages ultimately to diagnostics. And we are continuing to progress our 100X, and have had success, 100x increase in sensitivity, which will allow us to see disease even earlier, even sooner than we can today with many of the biomarkers, and enable certain biomarkers that you can't even see today in the non-invasive samples like blood or saliva or breath condensate or nasal swabs. On slide six, we just wanted to let you know we had a pretty strong Q2. We had 86%, we'll call it, Non-GAAP growth, the actual GAAP growth was 93%. We took a little bit of the RADx revenue out of that because that was a one-time event with the NIH around bringing our COVID solutions to the market. We now have two EUAs, one for serology semi-quantitation, working for advancing that with the Delta virus as well, working towards a label claim for it, and also the antigen test. And that is a growth. Primarily, a lot of that was due to Q2 last year being pretty flat with the previous year, maybe even a little bit lower. But still, when you look at our CAGRs, you can see that we're staying within the 30% to 40%. From the 2019 base year, we're still advancing very productively, and we continue to de-risk that with all this new momentum in NURLOE. And on the right-hand side, you can see that our strength here was, in fact, instruments. I do believe Lilly purchased five HDXs in Q2, just as an example of that scaling up that they're planning for a lot of what they've got coming in their neuro franchise as well as their Alzheimer franchise. And consumables for filling a lot of these trials is also up. We expected lab services to be flat at best in Q2, That's even more true now that many of our customers are buying new HDXs and trying to run their trials out in pharma. And so we know that for the next year or so, we're going to have just a lot of stronger growth probably in consumables than we've had historically. And some of that may be at the expense of our accelerator, which doubled in growth last year because many of those labs from that were shut down for COVID utilized us, given us a lot of growth last year. And so we'll be able to at least achieve last year's level and maybe even beyond that, but the consumables will be the big story here. And you can see that our overall growth really also helped us with our gross margins on a non-GAAP-adjusted basis, which, again, taking out the RADx revenue, we're up $1,100. fifths, which is a very significant advance. This next slide just shows you the same exact approach just looking at first half. And our overall non-gap growth, which was slower than gap growth because we removed the RADx, was 71% for the first half. And on the right-hand side, you can see a very similar story. We're pretty flat in accelerator, but triple-digit growth in the consumables and instruments. And very strong taggers in those categories. This just shows you on slide eight the distribution, and you can see we continue to evolve our position in Europe and Asia. We also are seeing a 50-50 between academia, where a lot of publications are coming from that fuel then ultimately pharma and CROs with a lot of those new biomarkers. And neurology is now 80% of our focus and our achievement, and you can see the consumables now represent almost half of our company. Slide nine is key because it's the fuel of our business, and the publications just continue to roll in. We're now up to nearly 1,400 third-party peer-reviewed publications validating across 432 different biomarkers, and our instrument placements, you can see we're now up to 621 worldwide, and we continue to run trials inside the accelerator, phase 1, 2, 3 trials. There's been over 1,000 phase 1, 2, 3 trials run, and that's the fastest adoption cycle we've ever seen in pharma biotech over the last five years, further a testament to how these biomarkers allowing you to see disease noninvasively before symptoms is a transformative value proposition and strategic approach for pharma. This next slide just summarizes that, you know, we've been saying that we've got both execution and then aspiration. The execution is primarily around research and development where we don't see regulatory reimbursement of risk. And you can see now we've got three major growth catalysts. These phosphorylated towels that we mentioned, the neuroplexes where we combine multiple biomarkers for Alzheimer's as well as many of the other neurodegenerative diseases. And this new term that we're coining today, the diagnostic therapies, we believe that by deploying therapies before symptoms, you're actually bringing a level of value that we think is unprecedented for patient treatments and outcomes. And in a way, we think this actually brings a lot more value to diagnostics than we've ever seen before as it plays a role now, a complementary role with the therapy. And revitalizing this whole Alzheimer landscape is what happens when COVID starts to trigger the concern around early Alzheimer's, as well as having a drug actually get its first approval, it stimulated a lot of excitement. And then you can see our third growth catalyst is the ability to catch up to demand by just expanding the capacity with our scaling of quantarics with that program we mentioned. These HDXs having high throughput, 1,000 data points a day, fully automated, and then expanding our laboratory, longer-term looking towards diagnostics, and then bringing on the 100X. Then on the right-hand side, where we know we've unlocked a much bigger TAM by cutting across into the diagnostic landscape, and the $20 million we got from the NIH for COVID, bringing two EUAs, Emergency Use Authorization, diagnostics to the market, allowed us to build our infrastructure and to attract people like Masoud and We've even got Dawn Mattoon now who had been running a lot of the research side of the business. She is now with Mark Roski, both of them working with the strategic accounts across both research and diagnostics. And so we're building out this right-hand side, and it's getting accelerated because of the bridge that was built from COVID from the left. And so we do think that as we continue to build, there's some long-term, very interesting catalysts around Alzheimer's health screen diagnostics and monitoring whether these, you know, Alzheimer diagnostic therapies are, in fact, bringing down plaque levels and bringing clinical benefit. And the recent data from Lilly says bringing down plaque, as evidenced by measuring our PTALs, is also correlated to clinical benefit. And that's a pretty important breakthrough that we're all striving to achieve for helping Alzheimer patients. We're also, as we mentioned, increasing our accelerator footprint for LDT and working hard with the payers to understand these health screens. And UnitedHealth Group now has our technology in their R&D labs. We think this is an important testament to the advances. So historically, we've shown this next couple slides where by just bringing sensitivity to protein measurements, where there had been about 200 IBD proteins being measured by primarily Abbott, Siemens, and Roche, collecting $25 billion of revenue on diagnostics of proteins that pretty much are measuring disease after symptoms. Our key is by going down in sensitivity on slide 11, seeing it non-invasive and before symptoms, and we think there's 1,000 proteins of REACH and this translation going from research on the left to diagnostics on the right. More like taking the analog phone of the yesteryear and moving it into the iPhone today, which we're actually recording this conference on. This next slide just shows you on the right-hand side that there's about 100 to 110 billion in value and revenue on CAM that we think by seeing disease before symptoms you increase the size of these markets. Even for Alzheimer's, if you look at Alzheimer's being defined at the moment you start having severe dementia, but if you can see it five years before, and as you know, several researchers and third-party peer-reviewed publications have shown that you can see Alzheimer's as much as 15 years before dementia using our biomarkers in non-invasive blood. You can significantly expand the size of that market by not only treating patients that haven't presented yet with dementia, but also increasing your chances that you're going to be able to arrest that disease progression by getting to the disease when it's still much more treatable. And that's the new mantra that this slide 14 has always tried to showcase, and that is that many neuro patients don't even know they've got neurodegeneration until they see the symptoms of dementia. And you can see in this click 15, three slides coming from Lilly, where you can actually see the tau and the amyloid plaques growing. And many times, the amyloid plaque is there before dementia. And that's what they call the Goldilocks location. They're trying to find patients that have the amyloid beta, but before they have mild cognitive impairment or when they only have mild cognitive impairment. And then slide 16 is our goal to go with our new detection sensitivity to move this into monitoring patients so you can see the beginnings of Alzheimer's and then treat very early. This next slide is a new slide that I think is trying to establish a new category. On the left-hand side, you see there's been over the years much investment in protein and antibody discovery. And it's the pharmas and the diagnostic companies that are the best in the world at doing that. They feed their learnings into two primary categories. One of them is a diagnostics industry, and the other one is a drug industry. And in the center here, I'm showing the brain with all these biomarkers now that we have in our menu that are basically proteins that are being released from the brain, and you can see them noninvasively in blood with our technology. And it's interesting that Roche is the one pharma that has a diagnostics position. And interesting also is Lilly has some really strong diagnostic capabilities that we've been able to team up with over the last five years, which makes them pretty impressive to work with on this new category that we're coining, the neurodiagnostic therapies. And going for coverage with evidence and getting better outcomes more efficiently is what we think can happen when you start to commercialize these drugs and deploy them before symptoms. This next slide is the overall engine that we've used to build our company. We start with a biomarker being discovered by a researcher, and then pharma is adopted based on that research and those third-party peer-reviewed publications where they may come to powering precision health summit learn about it, then they start to apply it. That's the first phase of adoption. And that's where you saw on the front page of New York Times and USA Today the ability to see Alzheimer's 16 years before symptoms using NFL and also PTALS 217. And then it moves into step two, which is demonstrated clinically with high validity and utility. And that's the phase we're in right now around these phosphorylated TALs linking it as you've seen evidence from Lilly, to specific disease pathology that can actually also be linked to the clinical benefit through cognitive impairment scores. And historically, they've used CSF spinal taps, cerebral spinal fluid spinal taps, or PET scans to get that data. And this is, our disruption is this incredible correlation, and CNN, a very low-cost, non-invasive blood test, even earlier, than what you can see it in many of these more invasive techniques. And so while you move from that number two category to actually then evolving it into a diagnostic and a health screen, that TAM goes from a half a billion back in the research level to 20 times that, so 11 billion once it becomes a true diagnostic. And by all along, you're increasing the odds of that drug getting approval by 300% based on pharma's own data. So that's why we think we've got an engine here, a value creation that is unprecedented. This next slide says that it's the jigsaw puzzle connecting the pharmas with the payers, with the FDA NIH, where we've had a lot of advances because of the money that NIH gave us in the RADx program with COVID. That infrastructure and them learning about Samoa and Quanterix has been key. We've got all these CROs and pharma partners, too, down in the bottom right corner, Quanterix does, And we've seen major progress in every one of these puzzle pieces over the last eight to nine months. And that's creating the opportunity, we think, for disrupting this whole approach of bringing a diagnostic into a therapeutic realm of benefit by moving these therapies earlier and allowing that with disruptive technology. And at 100X, we'd like to form partnerships now with pharma to with our accelerator lab looking for biomarkers using our 100X, using our antibody and our assay capabilities with these KOLs around the world, and tapping into the samples from pharma to let them advance in every disease category. So it's not limited to neuro, but our initial focus and priorities are around neuro. I did want to point out that there's a lot of evolution that's occurred with Aduhelm and a lot of controversy on whether reducing plaque is ultimately going to lead to a new drug. There is some great history in looking at HIV where biomarkers got started as maybe cell counts, and then they moved them into viral loads. Once those biomarkers got established, it led to some pretty significant advances going from CD4 cell count to viral load. You end up 20 years later with 29 therapies. you really now see HIV being somewhat chronic. Well, I'd like to draw the parallel to the cholesterol market for the brain or for the heart, where there's still a lot of questions regarding the long-term qualitative linkage between cholesterol management and heart health and life expectancy, but yet there's a trillion-dollar fat market. In the cancer world, There's a lot of evidence to accelerated drug approvals. You can reduce the size of the tumor, but it doesn't necessarily mean you're going to live longer. But yet these are ways to get the drug industry going down these paths. And I think the top right corner, you're starting to see that in this landscape of Alzheimer's where there hasn't been any drug modulating therapies approved. We're getting it started now with some biomarkers that might be game changing and make them less invasive with our technologies. I don't want to forget, though, that NFL continues to be, I think, a long-term incredible opportunity. There were some publications that came out this quarter looking across 40 different sites, 13 different neurodegenerative types of diseases ranging from Parkinson's, ADS, ALS, Down, psychiatric disorders, frontal temporal dementia. All of these showed that the NFL levels elevated as the disease progressed. And we even found evidence that A elevates faster if there's psychological issues with the disease neurodegeneration. So these correlations are beginning to build a body of evidence around NFL that makes it a real long-term, we think, check the engine light for your brain health that everyone should someday know their NFL level. This next slide shows now there's three drugs that used NFL, our NFL, to get themselves approved as a secondary or primary endpoint. And this is important because we also think if you can see in blood very rapidly MS disease progression, you can actually use it to get patients on the right drug sooner and allow them to get the benefit of the drug quicker. And this slide 24 just shows that we bought the Umon company where we have just about every publication is either in our Samoa and or that antibody pair. from uman which i think has led to a lot of advantage for us overall this slide just illustrates on 25 that there's a lot of neurodegenerative diseases if you just look at the point when you have symptoms there's six million uh patients worldwide but if you again can move it forward five years that could double And our last slide here around these biomarkers just show how we're populating in blood these various biomarkers for these different diseases, allowing us to become the neurodegeneration leader and trying to help pharma bring them to bear. And I'll close by just saying that this phosphorylated tau-217 remains in our minds really interesting. We launched the 181, and there's now evidence that you can even see the disease sooner with the 217 with greater dynamic range, which makes it even a better possibility for becoming a diagnostic. With that, Mike, I would like to turn it over to you for some financial summary, and then we'll come back to close it off with our strategic objectives.

That's great. Thanks very much, Kevin. I'm now going to provide some additional financial details about our second quarter 2021 performance. And for your reference, I'll be referring to slide 28. As Kevin noted, GAAP revenue in the second quarter of 2021 was $25.4 million and included $900,000 of revenue from our RADx awards. Excluding this non-recurring item, our non-GAAP second quarter 2021 revenue was $24.4 million, an 86% increase versus the prior year. We had record product revenue in the second quarter of 2021 with $18.7 million in revenue, an increase of 175%, versus prior year. Within product revenue, consumables revenue grew 219% in the second quarter of 2021 compared to the second quarter prior year to a record 12.8 million, driven by extraordinary demand for PTAL 181 and neuromultiflex assays. Like first quarter, our revenue performance in the second quarter may include some recovery of previously deferred demand due to pandemic as customers return to more normal operations. Service revenue decreased 11% in the second quarter to $5.6 million and was somewhat limited as compared to the second quarter of 2020 due to customer labs opening back up from COVID-related shutdowns. Resources and supply diverged to support our strong consumable demand. Year-to-date total revenues are $52.6 million. Excluding revenue from our non-recurring RADx awards, Non-GAAP year-to-date total revenues are $49.3 million, a 71 percent increase from year-to-date 2020. On a GAAP basis, our second quarter gross margin was 54.7 percent and was favorably impacted by our RADx grant revenue versus prior year gross margin of 39.7 percent. Our non-GAAP gross margin was 55.1 percent in the second quarter, which is an approximate 1,100 basis point improvement compared to 44.1% in the same quarter of 2020. Non-GAAP gross margin was 56.8% for the year-to-date period of 2021, an approximate 1,000 basis point improvement from the same period in 2020. Our non-GAAP gross margin excludes the impact of our RADx awards, as well as non-cash acquisition-related purchase accounting adjustments relating to our 2019 acquisition of UMON, thus providing investors with the relevant period-to-period comparisons of our operations. Gross margin expansion was driven by volume, productivity gains, and price, demonstrating a significant opportunity for gross margin expansion in the future as we evolve the mix towards higher margin consumables and scale our overall business and reduce product costs. Our GAAP operating expenses totaled $27.5 million in the second quarter of 2021. Non-GAAP operating expenses would primarily exclude non-recurring expenses associated with RADx grant revenue, totaled $26.4 million for the second quarter of 2021. During the second quarter of 2021, our cash balance decreased by $11.9 million, driven by our scaling efforts. Ending unrestricted cash balance was $430.8 million as of June 30th, 2021. Basic weighted average shares outstanding for EPS totaled $36.3 million for the second quarter of 2021. Overall, we're pleased with our second quarter 2021 performance and progress made on strategic priorities and remain committed to delivering solid 2021 results in line with expectations. With that, I'll turn it back to Kevin.

Thanks a lot, Mike. And before opening up for questions, I wanted to go through slide 29 just to say that Our neurology franchise is faster and more furious than we expected going into the year. So we're going to be outpacing a lot of what we had proposed and projected. Immunology, as a result, we've not made as much of a priority on it in order to make sure we catch this incredible wave in the neuro field. And COVID continues to be an area that is allowing us to grow up in diagnostics. As you heard, our financial performance is very solid and outlooks continue to be quite productive and de-risking the future of our growth. And we're continuing to evolve our platforms with the 100X sensitivity. With that, I'd like to open up for questions.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Kyle Mixon of Canaccord Genentee. Your line is open.

Great, thanks. Hi, everyone. Thank you for the questions. Congrats on the quarter. So, Kevin, we're hearing from a number of companies talking about, like, an uptick in protein-based research. One company today actually said, you know, protein-based research applications are actually, like, on fire. I was wondering if you're seeing anything similar in your customer base. Like, basically, broadly speaking, are there – Or the number of proteomics research projects accelerating faster than projects based on, you know, genomics and nucleic acids? Thank you.

Yeah, you know, in general, in previous calls, Kyle, I've actually shown slides describing DNA and RNA and the pipeline and the evolution of how that evolved versus proteomics and the way we see this pipeline evolving. One of the things that we've shown in those illustrations is if you can find a protein and you can find one that's got good clinical validity, you can substantially increase the value of that protein. And also we show on that same slide that the proteome is probably only 5% discovered. So what you have, Kyle, is two forces at play. You've got the value of a specific protein evolving very rapidly as you increase the utility and can see things in blood that you used to be able to only see in images or in spinal taps. And then you also have this incredible long-term opportunity to find the other 95% that are more relevant to disease cascades as well as more phenotypic. And so both accesses in our minds are very much, I don't know if I'd use the word on fire, but I would say that it's an opportunity that's been untapped and these new tools that are coming into the landscape are absolutely allowing a more relevant and a more impactful phenotypic biologic to be measured in a way that you couldn't see before. And that historically was where the markets had started was in protein. And then it went to DNA and RNA. There's still a lot of excitement there, but that's more the recipe. Finding out what the actual meal is that was made is more important to the disease cascade. And there's more interest to catch disease early than to have an understanding about the predisposition of disease, which may or may not actually manifest into disease. So that's why I do think protein is the future. We've been at this for a large number of years now. trying to really put on the what we'll call precision health eyeglasses and looking at this proteomics landscape and to invest where we think the value. And we actually see 90% of the TAM downstream once you can bring the utility into the diagnostic. And that's why we think that playing in the drug, I'll call it drug development landscape with our pharma customers and translating the value of these things protein solutions and seeing them disease much earlier is probably going to in the long run showcase where the value creation is going to be greatest. And so we're very excited about the upstream discovery work that's going on and making sure that when a protein of interest is discovered, we then hone in and bring its utility across translation with pharma on their drugs into the diagnostic landscape where the combination diagnostic and therapy can be deployed.

Okay, perfect. That was fantastic, Kevin. Thanks a lot. I also was wondering about, obviously, the COVID testing opportunity, I guess, and if that's going to be a material contributor in the second half of the year, I guess. And so we would imagine that with all this discussion around antibodies losing their antipathogenic properties or maybe, like, fading, maybe you thought there could be an uptick in demand for your serology test. And if you think it would be material, Um, how should we just think about that contribution in terms of magnitude and pacing in the second half of the year?

Yeah, we, we believe very much in serology and we also believe that every person seems to have unique ways of combating COVID and or combating the vaccine, which sometimes creates its own side effects. And so what is that serology and each individual we think does spawn a lot of opportunity for serology testing. While it's an area that we've invested in because of the need for the country, we believe we've got the ability to quantitate many aspects of antibodies, which will be important. We don't look at it as our number one priority from a business perspective. We're trying to do everything we can to to build out those assets. And we feel very good that we'll have some revenue in the second half, but we don't at this moment see it being explosive or plan on it being explosive because we don't want to divert our attention away from the Alzheimer landscape where we know right now that there will absolutely be just a lot of growth. And so I think the antigen, we actually rather play in COVID in the research landscape that's got sustainability and beyond the current epidemic. And there's many COVIDs coming in the future. And so having our technology, for instance, at the laboratories of Anthony Fauci's and looking at how drugs are working against COVID, either as an acute patient or as a long hauler patient, we think those are the areas of opportunity, as well as our cytokines. I think there's going to be a major webinar coming up in the next few weeks showcasing how our cytokines can really play a role around a lot of the long hauler assessments as well as acute management. So we do think that research might be overlooked because everyone's so focused on trying to create short-term revenue from COVID. Our view is more of a long-term view and we feel very, very good about that long-term opportunity in infectious disease.

All right, perfect. If I could just ask one more, it's nice to see that consumables was strong recently, right? And so I was wondering if utilization trended up, you know, throughout the quarter, maybe most recently in June or July, if it was at a pretty high rate. Basically, if customers are, you know, running their projects at, you know, full scale, basically, or maybe above.

Yeah. So, Kyle, thanks for your questions, and they were all good and appreciated. You know, the consumable utilization – is way off the map from where we originally set our estimates. When we started three, four years ago with these drug trials, we thought 33% of our equipment revenue would be where we would end up, but we're north of 50% of our total dollars of installed base now being consumables and of it. So we've definitely advanced the utilization and will continue to advance it And the more we move into larger trials, that's where you can actually, at a given single account, you could actually drive above 100% utilization on some instruments. In the CRO landscape, you could actually find yourself, you know, 150% to 200%. Great.

Okay. Thanks very much.

Sure.

Your next question comes from the line of Max Masucci of Calvin and Capital. Your company, your line is open.

Hi. Good afternoon. Congrats on another great quarter. So, clearly, there's been major focus on the neuro drug landscape lately for reasons discussed on this call. Can you just give us a sense for how the recent breakthroughs in neuro have impacted your customers' desire to expand Samoa to be used in additional programs internally? and then separately if it's led to any change in your pace of new customer wins.

Yeah, so first of all, congratulations, Max, on your new position. We're all excited for you. You've been one of the more impressive analysts over the years, so excited for your new opportunity. I would say also over the years, you've gotten to know us incredibly well. And as you know, we had a slide back about a year ago that said, if an Alzheimer's drug ever gets approved, there'll be a tipping point. But we never really expected it to happen in 2021. Our view was that this was likely going to be 2022 at best. And the reason it's a tipping point is it creates a significant halo effect for all of those customers out there that have hopes and have what I would consider to be impressive agents to try to combat Alzheimer's. And What we're learning is that if you can get to the disease pathology before symptoms, you've got a significant opportunity that you never really had before. So drugs could actually be rescued that historically failed. So I think what you have is the beginnings of a drug rescue opportunity as well as new drugs that are focusing on some of these biomarkers and new unique ways. And having a biomarker that's noninvasive, high throughput, low cost, creates an opportunity to design your programs around those biomarkers. So we see excitement for recruiting, using biomarkers to enhance the cohort for a better chance of a higher probability approval. Two ways we see that occurring, getting to the disease earlier when they think the disease is more vulnerable to a drug treatment, and then secondly, stratifying out of those cohorts, confusing types of pathology that historically were lumped into the cohort because there was no biomarker to separate them out. And we have evidence with our PTAL 181, for example, that Lewy bodies dementia and frontal temporal dementia were both types of dementia that were being invaded into many of the cohorts for Alzheimer's, but those agents for Alzheimer's will not work for Lewy bodies and for frontal temporal dementia. They weren't designed for that. So, getting a more pristine, pure Alzheimer cohort coupled with it being earlier, that represents disruption. And that disruption in research also then finds its way and feeds its way into the landscape of getting approval and then commercializing that drug and having payers feel really good about coverage with evidence and bringing better outcomes with much less investment. So we think that This whole diagnostic opportunity that we're starting out in research evolves into the clinic. And once our technologies can play a role in helping pharma companies get payment with much lower cost ways to monitor disease, minimum residual disease, as well as try to screen people into the drug, The more progress we make on that front with payers, we think the more excitement it's going to create on the research side for other biomarkers. So we do think that there's a halo effect on both research and diagnostics in neuro, and we are seeing evidence. And I think the best evidence is the mix. We went into the year saying that at best we would sell 60% of our new HDXs as new placements, and that 40% would be what we call trade-ins. taking the HD1 and trading it in for an HDX. But once this wave started to hit around enthusiasm, many of our customers wanted new HDXs, and many of them couldn't even shut down their HD1 because they needed the capacity. And that has shifted the percent of our HDXs that are new purchases versus trade-ins. I think right now we're running year-to-date about 70%. of our new HDX sales versus trade-ins. And originally, again, we thought at best it would be 60%. So I think that is some of the evidence, and I think we're also seeing some stock out of some of these biomarkers that we just recently launched as we see people shifting their priorities towards drug trials that they hadn't originally planned on running. And that then creates new demand in areas that none of us predicted. So I think all of it's been voting very well for de-risking our 30% to 40% five-year CAGR from 2019 for research products.

Absolutely. It makes sense. Those are some great data points. I also want to extend a congrats to Michael on his appointment as CFO. But in the same vein, just, you know, given the recent breakthroughs, have your conversations with partners around the use of companion diagnostics become, I guess, more increasingly productive in terms of how quickly CDX tests can become the standard for neuro-focused drugs?

I think that every time I've watched payers, they can get very conservative, particularly when you have a medical industry that's primarily has doctors at the top of the ecosystem. In our precision health, powering precision health conferences, we're learning more and more about how do you disrupt using next generation technologies, some of the traditional practices, and I'll call them diagnosing practices as well as prescribing practices of doctors. And I think that I'm starting to see more and more evidence that the payers will probably be the force that creates what we'll call coverage with evidence. We will cover you, but we want some proof that there's performance. And the UnitedHealth Group buying their first HDX this year we think is evidence of us reaching into that payer group and trying to instill this concept of how our biomarkers can play an incredible role of seeing disease earlier for the payers when the disease is much more treatable, but then secondarily deploying therapies that you can monitor whether or not they are being effective. That combination, we think, is something that the payers should be diving on, and so we're trying to educate them to the possibilities of what early detection with proteins, with quantitative understanding of how the proteins of the body then get benefited by the therapy, And if it isn't benefiting you, it gets you off of it. MS is a great example. There's 16 or 17 approved drugs for $16 billion. We know that today using MRI, it takes two years to figure out if they're on the right drug. A lot of evidence that just with the blood test, within months after deploying a drug, you can determine whether the NFL level is coming down or not. And if it's not, you move them to the next drug. So we think the cycle time of getting patients onto the right drug is going to create much better outcomes more efficiently for payers. And payers, in the end, we think will bring a pretty important force of transformation to the traditional healthcare field.

Great. Thanks for taking the questions, and congrats on the continued momentum. Thank you, Max.

Your next question comes from the line of Matt Sykes of Goldman Sachs. Your line is open.

Hey, Kevin and Mike. Thanks for taking my questions. Appreciate it.

Absolutely, Matt. How are you doing?

Doing well. I wanted to start on the 100X sensitivity pilot. This looks like it was a success, so congrats on that. And in kind of one of your last slides, you talked about the potential pathway for that. Is there any way you can kind of help us understand the potential timeline and pathway for getting that through to commercial, just given the kind of the advantage they would obviously have in the market and where you are on that?

Yeah, it's interesting. We've deployed it in a pilot in our SRX technology, which is truly a pilot. It's an alpha slash pilot. And we've deployed it with one of our leading KOLs over in Sweden that has actually been somewhat the inventor of our biomarker for NFL and the homebrew. He's also been a major pioneer in our phosphorylated towel 181s and is evolving across all of the phosphorylated towels right now. His early indications are very productive. And what we're learning in this pilot is that every antibody pair for different proteins behaves differently as we use magnetics to basically increase the filling of our arrays by using a magnet to pull the magnetic beads in that have the antibodies on them that are attaching to the proteins. We're increasing the bead loading with magnetics And every assay is different. So we see some of them getting better than 100X, some of them getting 100X, some of them getting less than 100X. And so now we're trying to learn through antibody technologies which ones are benefiting, which ones aren't, and why. And so I think that the reality is that innovating 100X across all of these assays is not just an instrumentation challenge, it's also an assay development challenge. We did bring Will Geist and Massoud in. Dawn Mattoon, as you know, she was head of all of R&D and product development at Cell Signaling, which was one of the best antibody houses in the world, as obviously Technia is too, and Avcam are some really great houses out there. Having that capability in our company, coupled in with the instrumentation advance, we think will give us the opportunity to innovate. I'm thinking that what we said was by the end of 2022, the concepts that we currently have will be evolved into actual instruments. And I think that that timeline still feels right for me. And, you know, I think we're at a pace of innovation here that, you know, what we're finding now is many of the pharmas want to deploy the 100X right now on certain markers because of this explosion in what we're calling diagnostic therapeutics, where you're combining the therapy with earlier intervention. And so that 100X may get deployed in our accelerator lab as we take on larger deals to basically fulfill an opportunity to do biomarker research. And so we've got several farmers now wanting to negotiate with us larger accelerator deals that might even play into the 100X earlier, given an earlier access from an alpha standpoint to see if we can help them advance biomarkers for key therapies they're trying to get approval for. So Again, you know, if you look at a product launch global, earliest I see it would be the end of 2022. Deployment in our accelerator, I could see it happening even later this year, depending on how things evolve for specific types of biomarkers.

Got it. That's really helpful, Kevin. And it actually leads to my second question, which is about the accelerator. An obvious impact from folks switching, you know, in a post-COVID environment to their own instrumentation. and consumables, and, you know, as the consumables grow, it's great high-margin business. But the accelerator is, you know, a pretty powerful service for clients, either during COVID or post-COVID. You mentioned the folks that are potentially using it for the 100X at some point. But how are you thinking about investing in the accelerator? Obviously, you're committing Sued's time to it, but how do you think about it as a priority for Quanterex moving forward?

Yeah, you know, it's interesting. We had a board meeting earlier this week, and I got one of the best boards, you know, in the landscape. These guys and men and women, we put Laurie Olson on recently, who ran a lot of strategy work for Pfizer for many years under Ian Reed. And so we got some real talented board members, and they themselves also see the real significant opportunity in the accelerator. And so bringing Masood in, we wanted to make sure that we looked at the accelerator with a pair of eyes from the diagnostic industry, because if you look at what exact sciences, Guardian, Matera, Foundation Medicine, you know, there's numerous companies that have used LDT labs to get a quick entry into the diagnostic landscape with Max, and then they would evolve that, and Vitae's another, they would evolve that with potentially national coverage by making it a single-site LDT. And so because of the advances with COVID, we actually see the opportunity to run COVID tests in an LDT framework even before the end of this year by bringing Massoud and his team in. And Massoud's already hired four or five key individuals in the accelerator to help us really expand not only the ability to do CRO work, phase two, three trials using CLIA, but also this advance over onto the diagnostic side. And while that's all strategic, as you point out, Matt, it also, each time we run a trial, it leads to someone buying an instrument because they love to see the data and they come to our facility, which is also amazing, and they get a chance to see this biomarker innovation. It's almost magical when they see it firsthand and then they want to have it in their lab, right? And that leads them to the fueling, instrument, and consumable sales. So we actually feel like this is an area that we're putting a lot of investment in. The benefits, though, I think you start to really see them in 2022 because we had nearly 100% growth last year in the accelerator because of those one-time events. We think we can maintain that this year, but most of the growth this year will probably come in consumables and instruments And I think maybe by fourth quarter, you might start seeing Accelerator picking up again based on the impact. And I say Masoud, it's the team of people, and Masoud's one of those cultural leaders that we are very focused on. Our people have been amazing through this whole COVID crisis, pivoting, never missing work, trying to find ways to help the nation and the world. And now what we have is a team focused on this Accelerator to bring what we'll call neuro-trials advance them very quickly, and then advance potentially across into some, you know, regional LDT. So we'll see how that goes, but I feel real good that this is an area of our top priority and focus.

Great. Thanks, Kevin. Thanks, Mike. Really helpful. Appreciate it. Our pleasure.

There are no further questions at this time. I will now turn the call over to Kevin Russovsky for closing remarks.

Thank you very much. Hey, Mike's literally been with us for two weeks, And Masoud's been with us for two weeks. And I really want to thank our employees who have just weathered so much progress over the last 18 months. And it really is all about people. And more so than any time in my career, I'm surrounded by the quality people that have a chance to truly impact the world and bringing Alzheimer's diagnostics into the world with therapies. And so this is a big moment, I think, for the world and for the United States, not only because of COVID, but because of the research going on in neurology. So I want to thank the investors who've taught us so much over the last five, seven years since I've been involved for all of your keen insights, and we'll continue to give you updates. And thank you very much for listening today.

This concludes today's conference call. Thank you for participating. You may now disconnect.