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spk05: Thank you for standing by, and welcome to this year's fourth quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Carrie Mandeville, Investor Relations.
spk01: Thank you. Earlier today, SEER released financial results for the quarter and year ended December 31st, 2023. If you've not received this news release, or if you'd like to be added to the company's distribution list, please send an email to investor at seer.bio. Joining me today from SEER is Omid Fariqzad, Chief Executive Officer and Chair, and David Horn, Chief Financial Officer and President. Before we begin, I'd like to remind you that management will make statements during this call, that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events materially different from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release to your issue today. For more complete list and description, please see the risk factors section of the company's quarterly report on form 10-K for the year ended December 31st, 2023 and in its other filings with the Securities and Exchange Commission. Except as required by law, SEER disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast February 29th, 2024. With that, I'd like to turn the call over to Omid.
spk06: Thanks, Carrie, and thank you, everyone, for joining us this afternoon. I will begin our call today by providing updates on our recent progress, including some exciting customer data. Looking ahead, we're laser focused on converting these incredible biological insights into accelerated commercial adoption, and I will share the actions we're taking to make this happen. I will then turn the call over to David to provide more detail on our financial results for 2023 and revenue outlook for 2024. In 2023, we grew revenue 8% to $16.7 million and ended the year with over $373 million in cash, cash equivalents, and investments. As the body of biological insights and data grows, I expect adoption and revenue will become more aligned with our expectations. Our mission at SEER is to bring the power of unbiased proteomics to researchers around the globe. To achieve this, we need to open up a new gateway to the proteome to enable the next frontier in biology to be explored. Changing the status quo in this way is an enormous undertaking. When we first introduced the ProteoGraph product suite for unbiased deep proteomics at scale, there was a huge mountain to climb in terms of market development and education. Over the course of this past year, we made important progress in climbing this mountain. I'm deeply proud of our team's work, and yet there's still much work to be done to translate the incredible performance we're seeing from the proteograph into widespread commercial adoption. Our customers have started to demonstrate the powerful biological insights from the proteograph, and this data is nothing short of incredible. Most recently, we saw our first customer study published in Nature Communications. Given the unique insights that ProteoGraph is enabling relative to other proteomics platforms, we expect several more publications in high impact journals throughout the year. This will be critical for us to reach an inflection point for widespread adoption and revenue growth. We remain laser focused on developing and enhancing our technology removing barriers to adoption, and expanding our commercial reach. Over the past year, we made a number of important advancements to our technology. In June, we launched our Proteograph XT Assay Kit, and the feedback has been fantastic. Since its launch, we have upgraded over half of our customer base to run the new assay kit. XT improves the throughput of our initial assay and reduces the mass spec time for sample by two and a half fold without sacrificing depth. The efficiency allows a single technician to handle hundreds of samples per week and approximately 10,000 samples annually with just one proteograph XT and a leading mass spec instrument. We also made important improvement to our Proteograph Analysis Suite, or PASS, to provide biologists access to an understanding of deep, unbiased proteomics readily and easily for any application they choose, including proteogenomics analysis. We made significant updates on the quality and quantity of protein and peptide identifications you can get from PASS and reengineered our mass spec analysis workflow to leverage cutting-edge analysis advancements at scale. And finally, last month, We made our protein discovery catalog available to our customers, prospective customers, and interested parties. With over 10,000 proteins in plasma across 1,900 pathways that can be detected and interrogated using the proteograph. This provides our first published index of the unprecedented depth of empirically observed proteins captured by our nanoparticle technology to date. includes proteins linked to over 150,000 peptides that can serve as data points for potential biomarkers, including proteins not yet associated with diseases, making it a rich source of biological insight. We look forward to expanding this library over time as more samples are interrogated by the ProteoGraph platform and more mass spec-based proteomic data becomes available. We also made important strides removing barriers to improve access. We launched the SEER Technology Access Center, or STAC, which allows the proteograph user to run samples in their own lab and have SEER run them mass-back or alternatively provide end-to-end study services from study to sample. We have seen strong demand for STAC with 48 organizations using this service as of year end, including large pharmaceutical companies. Revenue from STAC grew significantly quarter over quarter. In the fourth quarter, STAC revenue was the vast majority of services revenue. We also introduced the Strategic Instrument Placement Program, or SIP, to allow researchers to begin using the prototype right away by utilizing available operating budgets. This not only removes another barrier to access, but also facilitates data generation that will help secure the necessary funding and samples for more extensive and impactful studies in the future. And finally, last November, we expanded our Centers of Excellence programs with the addition of Panome Bio, a world-class metabolomics service provider with expertise in mass spec. By combining deep proteomic insights at the peptide level with the proprietary metabolomics workflow, PanOnBio will enable unique studies with robust pathways analysis to significantly advance research in biomarker discovery and drug development. As we have said, the combination of our novel technology, the paucity of peer-reviewed publication, as well as conservative budgeting continues to drive in elongated cell cycles for the proteograph. That said, we're seeing great interest in STAC with a robust pipeline of opportunities, indicating this was an important step in enabling access to the proteograph technology. STAC has helped us secure a foothold with several large pharma companies. We're starting to see momentum in usage of these large pharma customers with strong ordering and some outsourcing additional work due to internal demand. These customers have the funding, samples, and motivation to adopt our technology and advance their biological discovery. We expect this program to continue to be an important driver for adoption from these types of customers. As we continue to educate the market on the value of the prototype, we have started to see potential customers previously on the sidelines turning to strong advocates once they have seen the data and the insights that the photograph can provide. I remain convinced that once our technology becomes increasingly accessible to the broader research community, our market development efforts will pay off and we will see an inflection point in adoption, the size of studies, and ultimately revenue. Throughout the year, we made great progress validating our technology and expanding our commercial reach. We onboarded four new distributors and partners in Australia, Eastern Europe, Israel, and Japan. We obtained ISO 27001 certification, increasing our information security and cybersecurity standards, making us more effective with stack in our labs and collaborations, and forming a bridge for general data protection regulation, or GDPR, compliance for our European customers. We also received ISO 13,485 certification, establishing the processes, people, and systems for quality management and laying the groundwork for the creation of the highest quality, reliable solutions and enabling the utilization of our products in FDA submissions. We have also seen a growing validation of our technology, both from SEER and customer publication. Since the beginning of 2022, we have published several high-impact peer-reviewed papers on our differentiated proprietary engineered nanoparticle technology. These publications demonstrate how our ProteoGraph product suite workflow has superior performance in terms of precision, depth, and throughput compared to conventional workflows and can identify undiscovered links between health and disease apt peptide level resolution that can illuminate the role of protein variants. We've consistently said that one of the most important drivers of adoption would be the validation of our technology with third-party data. In addition to our publications, we're aware of 180 public presentations to date and 48 posters and presentations by customers. To date, we have eight preprints four peer-reviewed SEER publications, and one peer-reviewed customer publication, showcasing the value of SEER technology. We expect to see the number of peer-reviewed publications grow throughout the year. In January, Prognomic demonstrated the largest deep multi-omic study completed to date in their pre-print article in MedArchive. This study involved 2,513 individuals including patients with all stages of lung cancer, comorbid controls, and healthy subjects. Utilizing the proteograph for the proteomic portion of this study, they were able to measure over 8,300 proteins, which were then combined with over 200,000 RNA transcripts and 1,000 metabolite measurements to drive a multi-omics classifier. This classifier represents a potentially best-in-class performance by achieving a sensitivity of 80% for stage 1 and 89% for all stages of lung cancer at 89% specificity. Also in January, a second manuscript was made available on bioRxiv and will be submitted for peer-reviewed publication. This study was a collaboration between Alzheimer's disease luminaries from MGH and MassGen Institute for Neurodegenerative Diseases and investigators at SEER. This study looked at 1,800 plasma samples comprising both controls and individuals diagnosed with cognitive decline, including Alzheimer's disease. The researchers identified 138 proteins that were up or down regulated in AD individuals, and of these, 138 proteins, only 44 have been previously associated with AD. The remaining 94 represent putative biomarkers of AD, potentially unlocking new biological insights. Interestingly, 55% of these 138 proteins are not present on a commercially available HyPlex affinity-based panel, meaning researchers would not be able to see these proteins using that panel. The MGH investigators used this clinical information to identify the point of significant cognitive decline and determine which of the 138 proteins separated the population into fast and slow cognitive decliners. We identified eight such significant proteins and are now investigating how these results may be advanced to develop a clinical score indicating the likelihood of cognitive decline in a particular timeframe. While this study could not have been done using HyPLAX affinity-based approaches, it also could not have been done without the proteograph since there is no other practical way to do a deep unbiased proteomics study of 1,800 plasma samples other than leveraging the proteograph product suite. This represents the largest deep unbiased AD proteomic study completed to date with a highly differentiated and novel biological insight. With regards to the nature communication paper that I mentioned earlier, I'm very excited to share that this study was led by Professor Karsten Suri at Weill Cornell Medicine and demonstrated the identification of protein altering variants for population scale PQTL studies. The proteograph workflow was used upstream to a mass spec to analyze over 18,000 peptides from 3,000 proteins in more than 320 blood samples to detect and quantify blood circulating proteins in the presence of protein-altering variants. When affinity-based approaches are used for PQTL analysis, these ligands bind to a specific epitope of the protein, and variants of these proteins can alter the ligand binding. This altered binding is often falsely interpreted as a PQTL, which can result in incorrect biological insight. However, with the proteograph, Protein abundance is quantified at the peptide level resolution, accurately identifying PQTLs and allowing a better understanding of disease mechanism and more successful drug discovery efforts. This study illustrates the effectiveness of SEER's approach in unraveling intricate connections between genetic variations and proteins, which are vital for developing innovative therapeutic approaches for various diseases and we believe will have an enormous impact on human health. In addition, another paper from Professor Chris Mason's lab at Weill Cornell Medical demonstrating the value of the proteograph has been accepted in Nature Communications, and I look forward to sharing more information once this paper has been published. We have seen incredible interest in the field of proteomics and the value it provides over the last five years and the velocity has significantly picked up in the last 12 months. This is exemplified by several high-impact publications and an increase in both private and public funding for proteomic research, including a recent grant from the NIH of $50 million for over five years to establish a new consortium for multi-omics research on human health. With the ability to analyze larger and more complex datasets using emerging technologies, the goal of the consortium is to develop scalable and generalizable multiomic research strategies to advance our understanding of disease onset and progression. We look forward to seeing more funding for these types of projects as researchers continue to advance their studies and enable novel biological insights. Genomic researchers are increasingly finding that proteomics data and subsequently multiomics data has greater power than genomic data alone. As I alluded earlier, the value of this is now shown by the largest, deepest multiomics study completed today by Prognomic, resulting in the best publicly available data for early detection of lung cancer. Beyond the value of proteomics in the research setting, We're also seeing the groundwork being laid to incorporate more protein markers for clinical use. Recently, Palmetto's Moldex proposed billing and coding guidelines to write coverage decisions for clinical proteomic diagnostic assays, where policy was previously only written for tests where DNA or RNA were the primary analytics. This unlocks a substantial clinical opportunity by increasing the chances the proteomics diagnostic assays has utility when launched into the market and is an important pathway to reimbursement for proteomics assays. Looking ahead in 2024, we will continue to execute against our core strategies of powering evidence and publications with the ProteoGraph product suite, continuing to enhance access, innovate with our products, and expand our applications. While much work remains, we're excited and inspired by the opportunity that lays in front of us. With that, I will now turn the call over to David.
spk08: Thanks, Hamid. Total revenue for the fourth quarter of 2023 was $4.4 million, representing a decrease of 4% compared to $4.6 million in the fourth quarter of 2022. The decrease was primarily due to a decrease in lease revenue related to SP100 instruments and partially offset by an increase in service revenue. Product revenue for the fourth quarter of 2023 was $3 million, including $366,000 of related party revenue, and consisted of sales of SP100 instruments and consumable kits. Service revenue was $1.1 million in the fourth quarter of 2023, including $201,000 of related party revenue, and primarily consisted of revenue related to STAC. As Omid mentioned, we are seeing good customer interest in our STAC program, where we will run mass spec for our customers and, in some cases, provide a full workflow solution for customers who would like to access our technology. Grant and other revenue was $258,000 in the fourth quarter of 2023, largely related to our SBIR grant from the NIH. In the fourth quarter, we utilized the remaining funds available under the SBIR grant and do not anticipate booking any more revenue under this grant in 2024. Total gross profit was $2 million for the fourth quarter of 2023, representing a gross margin of 45.1%, compared to $2.3 million in the fourth quarter of 2022, representing a gross margin of 49.8%. We continue to expect variability in our overall gross margin on a quarter-by-quarter basis, as the proportion of instrument, consumable, and service revenue will fluctuate for any given quarter. Looking ahead to the full year 2024, we expect gross margins to be in the range of the mid-40s to 50%. Total operating expenses for the fourth quarter of 2023 were $24.2 million, including $7.6 million of stock-based compensation, a decrease of 11 percent compared to $27.2 million, including $8.2 million of stock-based compensation in the fourth quarter of 2022. Research and development expenses for the fourth quarter of 2023 were $11.2 million, a decrease of 12 percent compared to $12.6 million in the fourth quarter of 2022. The decrease in R&D expenses was primarily due to a decrease in employee and stock-based compensation as well as laboratory expenses. Selling general and administrative expenses for the fourth quarter of 2023 were $13.1 million, a decrease of 11 percent compared to $14.6 million in the fourth quarter of 2022. The decrease in SG&A expenses was primarily driven by a decrease in professional services costs as well as employee and stock-based compensation. Net loss for the fourth quarter of 2023 was $17.8 million compared to $22.5 million in the fourth quarter of 2022. Turning to the full year, total revenue for the full year of 2023 was $16.7 million compared to $15.5 million in 2022, representing an increase of 8% year over year. The increase was primarily driven by service revenue related to STAC. Product revenue was $12.9 million including $4.4 million of related party revenue compared to $13.8 million in 2022, including $5.2 million of related party revenue. Service revenue was $2.3 million for the full year 2023, including $241,000 of related party revenue compared to $913,000 for the full year 2022, which did not include any related party revenue. Grant and other revenue was $1.5 million for the full year 2023 compared to $800,000 for the full year 2022. We shipped 23 SP-100 instruments in 2023, bringing our cumulative instrument shipments to 62 instruments as of December 31, 2023. We continue to see a mix of orders from commercial and academic customers, with a slight majority of placements continuing to be with commercial customers at this stage. Total gross profit was $8.5 million for the full year 2023, representing a gross margin of 51.1% compared to $7.1 million for the full year 2022, representing a gross margin of 45.8%. Total operating expenses for 2023 were $112 million inclusive of $34.4 million in stock-based compensation compared to $104.3 million inclusive of $33.7 million in stock-based compensation in 2022. Research and development expenses for 2023 were $53 million compared to $45.8 million in 2022. Selling general and administrative expenses for 2023 were $59 million compared to $58.5 million in 2022. Net loss for 2023 was $86.3 million compared to $93 million in 2022. We ended the year with approximately $373.1 million in cash, cash equivalents, and investments. With our extremely strong balance sheet and disciplined deployment of capital, We believe we are well-funded to execute our strategic plan for many years to come. Turning to our outlook for the year, we expect revenue to be in the range of $18 to $20 million for 2024, representing growth of 14% year over year at the midpoint. Similar to 2023, we expect revenue to be more weighted to the second half of the year. As we work to develop this market, we are focused on driving evidence and publication, enhancing access, and driving product innovation and applications in 2024. We continue to see strong interest in the prototype and its value proposition for customers. We remain confident in our ability to capitalize on the massive opportunity ahead. As Amit shared, we are laser focused on connecting the incredible biological insights from our customers to accelerated commercial adoption. We're committed to maintaining a strong financial position and are taking a very disciplined approach with our spend. Free cash flow was approximately negative 66 million for the full year 2023, And we estimate that our 2024 free cash burn will be less than our free cash burn in 2023. At this point, I would like to turn the call back to Amit for closing comments.
spk06: Thanks, David. I firmly believe that we have the technology that will transform our understanding of the proteome. Looking forward in 2024, we will continue to drive execution against our core strategies of driving evidence and publications continuing to enhance access, innovating our products, and expanding applications. I'm confident in the substantial long-term opportunity ahead, and I look forward to continuing to update you on our progress throughout the year. With that, we will now open it up to questions.
spk05: Certainly. One moment for our first question. And our first question comes from the line of Dan Brennan from TD Cowen. Your question, please.
spk03: Hey guys, congrats. Thanks for the questions. Maybe first one, just on the revenue in the fourth quarter, ex-prognomic was actually better than we expected. Obviously, prognomics is a critical customer, but it's nice to see some diversification. Just wondering how we think about implicit in the 24 outlook. Are you seeing more traction ex-prognomic? Can you just give us any color, like what we're thinking prognomic versus your other customers for 24?
spk08: Thanks, Dan. David, appreciate the question. Yeah, so Prognomic, just to update you on where they are, you know, they completed their 3,000 sample study, and so they're moving, and very successfully, I might add, and they published their data or posted it on MedArchive. They are moving to the development phase, so they're still using the product, but they're doing less discovery work now. So we do, which is why you saw a little bit lower revenue in the fourth quarter. And looking to the 2024, we also expect them to be a significantly lower percentage of our overall revenue in 2024 as a result of that. And again, we continue to see good interest from other parties. So, you know, again, that's kind of how we're viewing 2024 from a Prognoma perspective.
spk03: And then obviously you talked a lot about some of the exciting publications and clinical evidence or kind of research evidence building. Just wondering, could you spell out a little bit, like as we, you know, we sit here today and end of February, if we're sitting here, I don't know, September, how many of these, I know you can't really, you know, kind of guess the exact timing, but you kind of see the funnel of these third-party publications, which have been viewed to be an important driver for update. So kind of where do you think we are in six months from now? And, you know, how do you think about, again, the confidence level, like, is, David, you talked about this being a second half-waited year. Could you actually see some real traction as two or three or four of these hit? And customers who you believe have been waiting can kind of see what the evidence in customer hands look like. You really see an uptick by the end of the year? Just any color on that would be helpful.
spk06: Great. This is Omid, and thank you for the question. So we're aware of approximately 180 public presentations, and that includes just around 50 posters presentation by customers. In total, there have been nine preprints, five peer-reviewed publications, four of it were ours. The first customer peer-reviewed paper came out. That was the Carson-Sorey Nature communication paper. I know at least two more papers that are forthcoming this quarter that will be published. I expect another nature communication paper, which has been accepted and that should be published. And then one more coming in nature. So the quality of the papers that are coming are quite high. But on the back of that, we also have visibility to several more papers that are either being submitted on bioRxiv or some of the bioRxiv papers moving through the peer review process. and coming as peer review publications. Again, the exciting part of it is that these initial, if you would, cohort of publications that are coming are all coming in great journals, and I think it's in part because they represent a data package that was previously not possible to achieve without using the proteograph, meaning the kinds of body of data that is being seen the proteins that are being identified that may be important in health or disease are either not entirely present on the high-flex panels, so if you use those as an option, you would not see them, or alternatively, if you went down an unbiased approach without the proteograph, you could never get to the depth of the study to see some of those proteins, and you certainly couldn't scale them to the degree where the study was powered enough to see some of those differences. Consequently, these initial cohort of papers are all coming out in great journals, and it's really exciting to see. I do expect that this is going to help with traction, but I really want to temper the enthusiasm in that I'm not expecting a hockey stick. I mean, this is literally a brick by brick building, but what's coming is very exciting, and the data is very compelling.
spk02: Great. Okay. Thanks, Omid. Thanks, David.
spk04: Thanks, Dan. Thank you. One moment for our next question.
spk05: And our next question comes from the line of TJ Savant from Morgan Stanley. Your question, please.
spk09: Hey, guys. Good afternoon. Omid, David, maybe just to kick things off, can you share a little bit of color on just the the length of the sales cycle as you see it today for the CapEx sales versus what it was last year. And on a related note, David, could you help parse out those 23 placements this year or I guess instrument shipments this year between SIP versus outright purchases? I think in the past you talked about a 50-50 split. Is that what we should be expecting for 24 as well?
spk06: Hey there, Omid here. Look, I think there is a... There are a number of factors playing into the whole cell cycle. I mean, I think the macroeconomic environment is certainly playing a role. We have seen a slowdown in China, and that is continuing. And the bi-format spending in terms of the CapEx budget is constrained specifically for these new technology platforms like SEER, but that certainly isn't because of a a lack of desire to acquire. It's just cautiousness that goes into getting over a threshold before they bring it in. Now, that's the case with bringing the platform in-house. It's almost an entirely different world, Tejas, if you look at the stack, where we have seen a robust pipeline, a lot of interest, repeat business, and quarter-over-quarter very significant growth in terms of the stack demand and the stack pipeline. In fact, we have a backlog in that. Now, that said, don't expect for that quarter-over-quarter revenue doubling in the case of stack to continue because for better or for worse, Tejas, it's a business decision. I am capping capacity for stack and I don't want to build capacity because I'm not interested in becoming a service business. We want to keep capacity as is, but there's a lot of demand in stack. As customers come into the stack, they get data, they generate some exciting data. If they want to remain on a service model, then I'd rather if they work with our center of excellence, our COEs, with the COEs buy consumable from us. And again, we're in the business of selling consumable. We've obviously sold the platform to the COEs already. I'd rather if that continues versus SEER building an infrastructure to progressively grow and expand our service model. I don't want to do that. And my expectation, by the way, Tejas, is that with the data that comes from the stack, together with the growing body of evidence in terms of the publication, that that is going to help us in terms of decreasing the cell cycle time for the platforms and the consumables. David, do you want to tackle the second half?
spk08: Yeah, on your question on the CIP program, Tejas. So of the 23, about a third were loaners. So it was actually a little bit less than the 50. And that's kind of, I think, where we may sit a lot. I mean, the good news is we shipped, you know, a high single-digit number of instruments in the fourth quarter. You know, the majority of those were actually purchased, which is great. But we continue to see interest in that program. So overall for the year, we landed at about a third. And it's kind of what we're anticipating we'll see in 2024 as well.
spk06: Got it. And Tejas, let me just add to the stack comment. I mean, as you can imagine, you know, we have customers globally. We have customers in Europe. We have customers in the U.S., And because of GDPR rules, the SAC is largely servicing our U.S. customer base. You can imagine that while I'm not interested in the service business, I do want to have a similar kind of business model outside of U.S. So we are considering options to be able to offer SAC-like services outside of U.S. And so I don't consider that really an expansion of the business model in terms of services. It's just how do we capitalize on a broader geography in what is arguably a very, very successful strategy in terms of providing access to the photographs. And as I know more about that, I will share that with you.
spk09: Got it. Super helpful. So changing gears a little bit, Amit, I think in the past you talked about upgrading your Just wanted to confirm that Office 62 instruments out there have most of them now essentially been upgraded. And then on a related note, there's been a lot of buzz around the Orbitrap Astral from Thermo and how that launch has gone for them. Can you just remind us how many Astrals out there are now paired with the Proteograph? Or perhaps if it's too early to ask that question, what does the funnel look like for the combination and how do you see that sort of driving placements in 24?
spk06: Tejas, so the first part is an easy one because I follow that almost daily, which is approximately 75% of our installed base has now been upgraded to the Protograph XC asset. And your comment about the astral performance being very well received by the market, I share that with you. And as exemplified by the combination of the XC astral, really demonstrating unprecedented performance in complex matrices like plasma, for example, or other complex matrices where the dynamic range is quite wide. I don't have a sense, Tejas, the number of astrals out there and in terms of either exceed upstream to them or in discussions with that. I will have clarity to that Tejas more I would say over the next quarter or two and we can have those discussions. But the combination of the two is quite powerful. I would also say that we're seeing also extremely good results with the Bruker HD and that too is an exceptional instrument. and that you can get really, really great data. Of course, the astral provides a level of data that exceeds the other available options.
spk09: Got it. Very helpful, Amit. Last question for me. You talked about, I think, 10,000 samples per year on XT plus some of these next-gen mass specs. Can you sort of translate those numbers in terms of what they mean on a price-per-sample basis? And is the combination now essentially in your mind starting to be viewed as competitive by some of these larger population scale projects where any work that's happened at that scale so far has been more on a targeted approach?
spk06: I think we are moving in the direction, because remember, the unique thing about the prototype is when you think about the cost, it's not only the consumable cost that you need to pay SEER, but there's also the cost the depreciation and the instrument and the FDE cost that they need to pay to run that mass spec, right? So what DXC did was it materially decreased the use of the mass spec, therefore decreasing both the portion that you would assign the depreciation for that assay and also the FDE cost. We are absolutely, Tejas, approaching price points where population-skilled deep unbath proteomics You know, are doable and look, I put myself, I think, on the hot seat when I said my prediction is that sometime in 2024, such large studies will get initiated. Now, we've been in discussion by a number of parties to do that. I was actually really, really hoping that the UKBB project would have kicked off. We wanted to participate in that project. I would have expected the data to really have catalyzed a very, very large-scale study at UKBB level in terms of Amaias proteomics. Of course, as you know, they pulled the plug on that. But I do think, Tejas, we're now in the zip code where for the OMIC, not only is it feasible in terms of throughput, but it's also feasible in terms of cost and very comparable, if you would, to doing it in a targeted way.
spk10: That's great, Kalaramit. Thanks. Appreciate the time.
spk04: Thanks, Tejas. Thank you. One moment for our next question.
spk05: And our next question comes from the line of Rachel Vatsenzal from JP Morgan Chase. Your question, please. Hello.
spk13: Thank you for taking the question. This is Marta Nazarovitz on for Rachel. I just wanted to follow up on your prior questions for guidance. So what are your assumptions for China and macro for 24? Are you pretty much assuming no improvement? And then if you think about the guidance, what do you think are the biggest potential swing factors?
spk08: Thank you. Sorry, the last part of your question was biggest swing factors. Is that correct?
spk12: Yeah, to your guidance, like upside, downside.
spk08: Thank you. Got it. Sure. So on the China macro, we still don't have a lot of visibility in terms of an improvement there. And so as we look at 24, we're essentially assuming flat, kind of as is. We're not assuming any real improvement relative to what we're already doing there. So it's something where Just given the lack of visibility and given the continued challenges that we see in terms of adopting a new technology, we certainly just wanted to be mindful of that as we look forward to this year. There have been some great developments. The Chinese government's obviously putting a lot of money into proteomics, into building kind of a large proteomics database. So we're certainly hopeful, but it's really too early to to have any visibility to that. So I think that's something that we are being mindful of. In terms of the swing factors for this year, I think one is certainly the impact of the publications. We certainly feel like there's a nice, robust pipeline of publications coming, and we hope that that will certainly help to drive things. But again, we've tried to be mindful of the timing of those. And as Omid said, the ultimate impact of those, I think it's the larger body of clinical evidence that needs to be more robust and to grow to really drive that adoption. But again, we're hopeful of that. And again, the other areas that we see good potential obviously stack. We've got a backlog there, which is great, but as Omid also said, we're going to have a finite capacity there. So at some point we'll reach that and kind of stay there. But the good news is we do want to work with our centers of excellence and push any recurrent service business to them and allow them to take that, and that will certainly result in some kit sales to us. And then finally, prognomic, again, They will be a smaller portion of revenue for this year. But the good news is that they're moving into their discovery phase for their LDT test. And they're using the Protograph platform to do some of that development work. And they'll also continue their discovery work on some of their other programs. So again, we're trying to be mindful there. But again, they've been a great partner and they're having great success with the data they're generating. So I would highlight those as the areas.
spk13: Thank you. That was helpful. Actually, a good segue to my next question. So can you discuss your overall visibility for the business as you move into 2024? You already touched on China, so I guess ex-China. And then can you also touch on pricing expectations? Thanks.
spk08: Yeah. So in terms of visibility, again, I think we've got a healthy pipeline in North America. It's certainly an area where You know, we do have pretty good visibility on that. I will say, you know, there is a strong interest. People are excited about the technology, and so we feel good about it. It's really a function of, you know, having the budget dollars to go ahead and acquire the technology or to participate in the STAC program. Europe also feels pretty good, but again, I'd be a little bit more cautious on Europe, relatively speaking. Again, we have pretty good visibility, but again, they are much more price and budget conscious there in terms of what they see or what we see. So again, I think the visibility is a little bit less. And then as I discussed, China is probably we have the least visibility there. But again, remain hopeful. In terms of pricing, again, I think we continue to... to see the solution as price competitive and something where people can certainly access the technology, whether that's buying an instrument or participating in our SIP program where you get a loaner and you make some upfront kit purchases or consuming through stack in terms of just the price per sample for either the mass spec work or for the full workflow. So, again, we feel pretty good about it. Obviously, people always want a lower price. There's no doubt about that. But, again, I think we're, as Omid mentioned, I think we're getting to the right zip code, certainly comparable to where some of the targeted technologies are, even though we offer a very different value proposition and you're answering fundamentally different biological questions. Again, I think we're certainly cost-competitive such that you can do a large-scale study on a timeframe and with a price point that makes sense.
spk11: Great. Thank you for your time.
spk04: Thank you.
spk05: Thank you. And this does conclude the question and answer session, as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect.
spk04: Good day. Music. Bye. Thank you. Thank you. Thank you. Bye. Thank you.
spk05: Thank you for standing by, and welcome to this year's fourth quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Carrie Mandeville, Investor Relations.
spk01: Thank you. Earlier today, SEER released financial results for the quarter and year ended December 31st, 2023. If you've not received this news release, or if you'd like to be added to the company's distribution list, please send an email to investor at seer.bio. Joining me today from SEER is Omid Fariqzad, Chief Executive Officer and Chair of and David Horn, Chief Financial Officer and President. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements in the press release to your issue today. For more complete list and description, please see the risk factors section of the company's quarterly report on Form 10-K for the year ended December 31st, 2023, and in its other filings with the Securities and Exchange Commission. Except as required by law, SEER disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, though because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast February 29th, 2024. With that, I'd like to turn the call over to Omid.
spk06: Thanks, Carrie, and thank you everyone for joining us this afternoon. I will begin our call today by providing updates on our recent progress, including some exciting customer data. Looking ahead, we're laser focused on converting these incredible biological insights into accelerated commercial adoption and I will share the actions we're taking to make this happen. I will then turn the call over to David to provide more detail on our financial results for 2023 and revenue outlook for 2024. In 2023, we grew revenue 8% to $16.7 million and ended the year with over $373 million in cash, cash equivalents, and investments. As the body of biological insights and data grows, I expect adoption and revenue will become more aligned with our expectations. Our mission at SEER is to bring the power of unbiased proteomics to researchers around the globe. To achieve this, we need to open up a new gateway to the proteome to enable the next frontier in biology to be explored. Changing the status quo in this way is an enormous undertaking. When we first introduced the Proteograph product suite for unbiased deep proteomics at scale, there was a huge mountain to climb in terms of market development and education. Over the course of this past year, we made important progress in climbing this mountain. I'm deeply proud of our team's work and yet there is still much work to be done to translate the incredible performance we're seeing from the proteograph into widespread commercial adoption. Our customers have started to demonstrate the powerful biological insights from the proteograph, and this data is nothing short of incredible. Most recently, we saw our first customer study published in Nature Communications. Given the unique insights the proteograph is enabling relative to other proteomics platform, we expect several more publications in high impact journals throughout the year. This will be critical for us to reach an inflection point for widespread adoption and revenue growth. We remain laser focused on developing and enhancing our technology, removing barriers to adoption and expanding our commercial reach. Over the past year, we made a number of important advancements to our technology. In June, we launched our Proteograph XT assay kit and the feedback has been fantastic. Since its launch, we have upgraded over half of our customer base to run the new assay kit. XT improves the throughput of our initial assay and reduces the mass spec time for sample by two and a half fold without sacrificing depth. The efficiency allows a single technician to handle hundreds of samples per week and approximately 10,000 samples annually with just one proteograph XT and a leading mass spec instrument. We also made important improvement to our Proteograph Analysis Suite, or PASS, to provide biologists access to an understanding of deep, unbiased proteomics readily and easily for any application they choose, including proteogenomics analysis. We made significant updates on the quality and quantity of protein and peptide identifications you can get from PASS and reengineered our mass spec analysis workflow to leverage cutting-edge analysis advancements at scale. And finally, last month, we made our protein discovery catalog available to our customers, prospective customers, and interested parties. With over 10,000 proteins in plasma across 1,900 pathways that can be detected and interrogated using the proteograph. This provides our first published index of the unprecedented depth of empirically observed proteins captured by our nanoparticle technology to date. includes proteins linked to over 150,000 peptides that can serve as data points for potential biomarkers, including proteins not yet associated with diseases, making it a rich source of biological insight. We look forward to expanding this library over time as more samples are interrogated by the ProteoGraph platform and more mass spec-based proteomic data becomes available. We also made important strides removing barriers to improve access. We launched the SEER Technology Access Center, or STAC, which allows the proteograph user to run samples in their own lab and have SEER run them mass-back or alternatively provide end-to-end study services from study to sample. We have seen strong demand for STAC with 48 organizations using the service as of year end, including large pharmaceutical companies. Revenue from STAC grew significantly quarter over quarter. In the fourth quarter, STAC revenue was the vast majority of services revenue. We also introduced the Strategic Instrument Placement Program, or SIP, to allow researchers to begin using the product graph right away by utilizing available operating budgets. This not only removes another barrier to access, but also facilitates data generation that will help secure the necessary funding and samples for more extensive and impactful studies in the future. And finally, last November, we expanded our Centers of Excellence programs with the addition of Panome Bio, a world-class metabolomics service provider with expertise in mass spec. By combining deep proteomic insights at the peptide level with the proprietary metabolomics workflow, PanOnBio will enable unique studies with robust pathways analysis to significantly advance research in biomarker discovery and drug development. As we have said, the combination of our novel technology, the paucity of peer-reviewed publication, as well as conservative budgeting continues to drive in elongated cell cycles for the proteograph. That said, we're seeing great interest in STAC with a robust pipeline of opportunities, indicating this was an important step in enabling access to the proteograph technology. STAC has helped us secure a foothold with several large pharma companies. We're starting to see momentum in usage of these large pharma customers with strong ordering and some outsourcing additional work due to internal demand. These customers have the funding, samples, and motivation to adopt our technology and advance their biological discovery. We expect this program to continue to be an important driver for adoption from these types of customers. As we continue to educate the market on the value of the prototype, we have started to see potential customers previously on the sidelines turning to strong advocates once they have seen the data and the insights that the photograph can provide. I remain convinced that once our technology becomes increasingly accessible to the broader research community, our market development efforts will pay off and we will see an inflection point in adoption, the size of studies, and ultimately revenue. Throughout the year, we made great progress validating our technology and expanding our commercial reach. We onboarded four new distributors and partners in Australia, Eastern Europe, Israel, and Japan. We obtained ISO 27001 certification, increasing our information security and cybersecurity standards, making us more effective with stack in our labs and collaborations, and forming a bridge for general data protection regulation, or GDPR, compliance for our European customers. We also received ISO 13485 certification, establishing the processes, people, and systems for quality management and laying the groundwork for the creation of the highest quality, reliable solutions and enabling the utilization of our products in FDA submissions. We have also seen a growing validation of our technology, both from SEER and customer publication. Since the beginning of 2022, we have published several high-impact peer-reviewed papers on our differentiated proprietary engineered nanoparticle technology. These publications demonstrate how our Protegra product suite workflow has superior performance in terms of precision, depth, and throughput compared to conventional workflows and can identify undiscovered links between health and disease at peptide level resolution that can illuminate the role of protein variants. We've consistently said that one of the most important drivers of adoption would be the validation of our technology with third-party data. In addition to our publications, we're aware of 180 public presentations to date and 48 posters and presentations by customers. To date, we have eight preprints, four peer-reviewed SEER publications, and one peer-reviewed customer publication showcasing the value of SEER technology. We expect to see the number of peer-reviewed publications grow throughout the year. In January, Prognomic demonstrated the largest deep multi-omic study completed to date in their preprint article in MedArchive. This study involved 2,513 individuals, including patients with all stages of lung cancer, comorbid controls, and healthy subjects. Utilizing the proteograph for the proteomic portion of this study, they were able to measure over 8,300 proteins, which were then combined with over 200,000 RNA transcripts and 1,000 metabolite measurements to drive a multi-omics classifier. This classifier represents a potentially best-in-class performance by achieving a sensitivity of 80% for stage 1 and 89% for all stages of lung cancer at 89% specificity. Also in January, a second manuscript was made available on BioRxiv, and will be submitted for peer-reviewed publication. This study was a collaboration between Alzheimer's disease luminaries from MGH and MassGen Institute for Neurodegenerative Diseases and investigators at SEER. This study looked at 1,800 plasma samples comprising both controls and individuals diagnosed with cognitive decline, including Alzheimer disease. The researchers identified 138 proteins that were up or down regulated in AD individuals, and of these 138 proteins, only 44 have been previously associated with AD. The remaining 94 represent putative biomarkers of AD, potentially unlocking new biological insights. Interestingly, 55% of these 138 proteins are not present on a commercially available HyPlex affinity-based panel, meaning researchers would not be able to see these proteins using that panel. The MGH investigators used this clinical information to identify the point of significant cognitive decline and determine which of the 138 proteins separated the population into fast and slow cognitive decliners. We identified eight such significant proteins and are now investigating how these results may be advanced to develop a clinical score indicating the likelihood of cognitive decline in a particular timeframe. While this study could not have been done using HyPlex affinity-based approaches, it also could not have been done without the proteograph since there is no other practical way to do a deep unbiased proteomics study of 1,800 plasma samples other than leveraging the Protograph product suite. This represents the largest deep unbiased AD proteomics study completed to date with a highly differentiated and novel biological insight. With regards to the nature communication paper that I mentioned earlier, I'm very excited to share that this study was led by Professor Karsten Suri at Weill Cornell Medicine and demonstrated the identification of protein altering variants for population scale PQTL studies. The proteograph workflow was used upstream to a mass spec to analyze over 18,000 peptides. from 3,000 proteins in more than 320 blood samples to detect and quantify blood circulating proteins in the presence of protein altering variants. When affinity-based approaches are used for PQTL analysis, these ligands bind to a specific epitope of the protein, and variants of these proteins can alter the ligand binding. This altered binding is often falsely interpreted as a PQTL, which can result in incorrect biological insight. However, with the proteograph, protein abundance is quantified at the peptide level resolution, accurately identifying PQTLs and allowing a better understanding of disease mechanism and more successful drug discovery efforts. This study illustrates the effectiveness of SEER's approach in unraveling intricate connections between genetic variations and proteins, which are vital for developing innovative therapeutic approaches for various diseases, and we believe will have an enormous impact on human health. In addition, another paper from Professor Chris Mason's lab at Weill Cornell Medical demonstrating the value of the proteograph has been accepted in Nature Communications, and I look forward to sharing more information once this paper has been published. We have seen incredible interest in the field of proteomics and the value it provides over the last five years, and the velocity has significantly picked up in the last 12 months. This is exemplified by several high impact publications and an increase in both private and public funding for proteomic research, including a recent grant from the NIH of $50 million for over five years to establish a new consortium for multi-omics research on human health. With the ability to analyze larger and more complex datasets using emerging technologies, the goal of the consortium is to develop scalable and generalizable multi-omic research strategies to advance our understanding of disease onset and progression. We look forward to seeing more funding for these types of projects as researchers continue to advance their studies and enable novel biological insights. Genomic researchers are increasingly finding that proteomics data and subsequently multiomics data has greater power than genomic data alone. As I alluded earlier, the value of this is now shown by the largest, deepest multiomics study completed to date by Prognomic resulting in the best publicly available data for early detection of lung cancer. Beyond the value of proteomics in the research setting, we're also seeing the groundwork being laid to incorporate more protein markers for clinical use. Recently, Palmetto's MALDEX proposed billing and coding guidelines to write coverage decisions for clinical proteomic diagnostic assays where policy was previously only written for tests where DNA or RNA were the primary analytics. This unlocks a substantial clinical opportunity by increasing the chances the proteomics diagnostic assays has utility when launched into the market and is an important pathway to reimbursement for proteomics assays. Looking ahead in 2024, We will continue to execute against our core strategies of powering evidence and publications with the Portograph product suite, continuing to enhance access, innovate with our products, and expand our applications. While much work remains, we're excited and inspired by the opportunity that lays in front of us. With that, I will now turn the call over to David.
spk08: Thanks, Hamid. Total revenue for the fourth quarter of 2023 was $4.4 million, representing a decrease of 4% compared to $4.6 million in the fourth quarter of 2022. The decrease was primarily due to a decrease in lease revenue related to SP-100 instruments and partially offset by an increase in service revenue. Product revenue for the fourth quarter of 2023 was $3 million, including $366,000 of related party revenue and consisted of sales of SP-100 instruments and consumable kits. Service revenue was $1.1 million in the fourth quarter of 2023, including $201,000 of related party revenue, and primarily consisted of revenue related to STAC. As Omid mentioned, we are seeing good customer interest in our STAC program, where we will run mass spec for our customers, and in some cases, provide a full workflow solution for customers who would like to access our technology. Grant and other revenue was $258,000 in the fourth quarter of 2023, largely related to our SBIR grant from the NIH. In the fourth quarter, we utilized the remaining funds available under the SBIR grant and do not anticipate booking any more revenue under this grant in 2024. Total gross profit was $2 million for the fourth quarter of 2023, representing a gross margin of 45.1%, compared to $2.3 million in the fourth quarter of 2022, representing a gross margin of 49.8%. We continue to expect variability in our overall gross margin on a quarter-by-quarter basis, as the proportion of instrument, consumable, and service revenue will fluctuate for any given quarter. Looking ahead to the full year 2024, we expect gross margins to be in the range of the mid-40s to 50%. Total operating expenses for the fourth quarter of 2023 were $24.2 million, including $7.6 million of stock-based compensation. a decrease of 11 percent compared to $27.2 million, including $8.2 million of stock-based compensation in the fourth quarter of 2022. Research and development expenses for the fourth quarter of 2023 were $11.2 million, a decrease of 12 percent compared to $12.6 million in the fourth quarter of 2022. The decrease in R&D expenses was primarily due to a decrease in employee and stock-based compensation, as well as laboratory expenses. Selling general and administrative expenses for the fourth quarter of 2023 were $13.1 million, a decrease of 11% compared to $14.6 million in the fourth quarter of 2022. The decrease in SG&A expenses was primarily driven by a decrease in professional services costs as well as employee and stock-based compensation. Net loss for the fourth quarter of 2023 was $17.8 million compared to $22.5 million in the fourth quarter of 2022. Turning to the full year, total revenue for the full year 2023 was $16.7 million compared to $15.5 million in 2022, representing an increase of 8% year over year. The increase was primarily driven by service revenue related to STAC. Product revenue was $12.9 million, including $4.4 million of related party revenue compared to $13.8 million in 2022, including $5.2 million of related party revenue. Service revenue was $2.3 million for the full year 2023, including $241,000 of related party revenue, compared to $913,000 for the full year 2022, which did not include any related party revenue. Grant and other revenue was $1.5 million for the full year 2023, compared to $800,000 for the full year 2022. We shipped 23 SP-100 instruments in 2023, bringing our cumulative instrument shipments to 62 instruments as of December 31st, 2023. We continue to see a mix of orders from commercial and academic customers, with a slight majority of placements continuing to be with commercial customers at this stage. Total gross profit was $8.5 million for the full year 2023, representing a gross margin of 51.1% compared to $7.1 million for the full year 2022, representing a gross margin of 45.8%. Total operating expenses for 2023 were $112 million inclusive of $34.4 million in stock-based compensation compared to $104.3 million inclusive of $33.7 million in stock-based compensation in 2022. Research and development expenses for 2023 were $53 million compared to $45.8 million in 2022. Selling general and administrative expenses for 2023 were $59 million compared to $58.5 million in 2022. Net loss for 2023 was $86.3 million compared to $93 million in 2022. We ended the year with approximately $373.1 million in cash, cash equivalents, and investments. With our extremely strong balance sheet and disciplined deployment of capital, we believe we are well-funded to execute our strategic plan for many years to come. Turning to our outlook for the year, we expect revenue to be in the range of $18 to $20 million for 2024, representing growth of 14% year-over-year at the midpoint. Similar to 2023, we expect revenue to be more weighted to the second half of the year. As we work to develop this market, we are focused on driving evidence and publication, enhancing access, and driving product innovation and applications in 2024. We continue to see strong interest in the prototype and its value proposition for customers. We remain confident in our ability to capitalize on the massive opportunity ahead. credible biological insights from our customers, and to accelerated commercial adoption. We're committed to maintaining a strong financial position and are taking a very disciplined approach with our spend. Free cash flow was approximately negative 66 million for the full year 2023, and we estimate that our 2024 free cash burn will be less than our free cash burn in 2023. At this point, I would like to turn the call back to Amit for closing comments.
spk06: Thanks, David. I firmly believe that we have the technology that will transform our understanding of the proteome. Looking forward in 2024, we will continue to drive execution against our core strategies of driving evidence and publications, continuing to enhance access, innovating our products, and expanding applications. I'm confident in the substantial long-term opportunity ahead, and I look forward to continuing to update you on our progress throughout the year. With that, we will now open it up to questions.
spk05: Certainly one moment for our first question. And our first question comes from the line of Dan Brennan from TD Cowen. Your question, please.
spk03: Hey, guys. Congrats. Thanks for the questions. Maybe first one, just on the revenue in the fourth quarter, ex-prognomic was actually better than we expected. Obviously, prognomics is a critical customer, but it's nice to see some diversification. Just wondering how we think about implicit in the 24 outlook Are you seeing more traction ex-prognomic? Can you just give us any color, like what we're thinking prognomic versus your other customers for 24?
spk08: Thanks, Dan. It's David. Appreciate the question. Yeah, so prognomic, just to update you on where they are, you know, they completed their 3,000 sample study, and so they're moving, and very successfully, I might add, and they published their data or posted it on MedArchive. they are moving to the development phase. So they're still using the product, but they're doing less discovery work now. So we do, which is why you saw a little bit lower revenue in the fourth quarter. And looking to the 2024, we also expect them to be a significantly lower percentage of our overall revenue in 2024 as a result of that. And again, we we continue to see good interest from other parties. So, you know, again, that's kind of how we're viewing 2024 from a prognoma perspective.
spk03: And then obviously you talked a lot about some of the exciting publications and clinical evidence or kind of research evidence building. Just wondering, could you spell out a little bit, like as we, you know, we sit here today and end of February, if we're sitting here, I don't know, September, how many of these, I know you can't really you know, kind of guessing exact timing, but you kind of see the funnel of these third-party publications, which have been viewed to be an important driver for uptake. So kind of where do you think we are in six months from now? And, you know, how do you think about, again, the confidence level? Like is, David, you talked about this being a second half-weighted year. Could you actually see some real traction as two or three or four of these hit? And customers who you, you know, believe have been waiting can kind of, you know, see what, you know, the evidence in customer hands look like. You really, see an uptick by the end of the year, just any color on that would be helpful.
spk06: Great. This is Omid, and thank you for the question. So we're aware of approximately 180 public presentations, and that includes just around 50 posters presentation by customers. In total, there have been nine preprints, five peer-reviewed publications, four of it were ours, The first customer peer-reviewed paper came out. That was the Carson-Sorey Nature Communication paper. I know at least two more papers that are forthcoming this quarter that will be published. I expect another Nature Communication paper, which has been accepted, and that should be published. And then one more coming in Nature. So the quality of the papers that are coming are quite high. But on the back of that, we also have visibility to several more papers that are either being submitted on BioRxiv or some of the BioRxiv papers moving through the peer review process and coming as peer review publications. Again, the exciting part of it is that these initial, if you would, cohort of publications that are coming are all coming in great journals, and I think it's in part because they represent a data package that was previously not possible to achieve without using the proteograph, meaning the kinds of body of data that is being seen, the proteins that are being identified that may be important in health or disease, are either not entirely present on the HyPlex panels, so if you use those as an option, you would not see them, or alternatively, if you went down an unbiased approach without the proteograph, you could never get to the depth of the study to see some of those proteins, and you certainly couldn't scale them to the degree where the study was powered enough to see some of those differences. Consequently, these initial cohort of papers are all coming out in great journals, and it's really exciting to see. I do expect that this is going to help with traction, but I really want to temper the enthusiasm in that I'm not expecting a hockey stick. I mean, this is literally a brick-by-brick building, but what's coming is very exciting, and the data is very compelling.
spk02: Great. Okay. Thanks, Amin. Thanks, David.
spk04: Thanks, Dan. Thank you. One moment for our next question.
spk05: And our next question comes from the line of TJ Savant from Morgan Stanley. Your question, please.
spk09: Hey guys, good afternoon. Omid, David, maybe just to kick things off, can you share a little bit of color on just the length of the sales cycle as you see it today for the CapEx sales versus what it was last year? And on a related note, David, could you help parse out those 23 placements this year, or I guess instrument shipments this year? between SIP versus outright purchases? I think in the past you talked about a 50-50 split. Is that what we should be expecting for 24 as well?
spk06: Hey, Josh. Hey there. Omid here. Look, I think there are a number of factors playing into the whole sell cycle. I mean, I think the macroeconomic environment is certainly playing a role. We have seen a slowdown in China, and that is continuing today. And the bi-format spending in terms of the CapEx budget is constrained specifically for these new technology platforms like SEER, but that certainly isn't because of a lack of desire to acquire. It's just cautiousness that goes into getting over a threshold before they bring it in. Now, that's the case with bringing the platform in-house. It's almost an entirely different world, Tejas, if you look at the stack, where we have seen a robust pipeline, a lot of interest, repeat business, and quarter-to-quarter very significant growth in terms of the stack demand and the stack pipeline. In fact, we have a backlog in that. Now, that said, don't expect for that quarter-over-quarter revenue doubling in the case of Stack to continue because for better or for worse, Tejas, it's a business decision. I am capping capacity for Stack, and I don't want to build capacity because I'm not interested in becoming a service business. We want to keep capacity as is, but there's a lot of demand in Stack. As customers come into the stack, they get data, they generate some exciting data. If they want to remain on a service model, then I'd rather if they work with our center of excellence, our COEs, where the COEs buy consumable from us. And again, we're in the business of selling consumable. We've obviously sold the platform to the COEs already. I'd rather if that continues versus SEER building and infrastructure to progressively grow and expand our service model. I don't want to do that. And my expectation, by the way, Tejas, is that with the data that comes from the stack, together with the growing body of evidence in terms of the publication, that that is going to help us in terms of decreasing the cell cycle time for the platforms. David, do you want to tackle the second half?
spk08: Yeah. On your question on the SIF program, Tejas, so of the 23, about a third were loaners. So it was actually a little bit less than the 50. And that's kind of, I think, where we may sit a lot. I mean, the good news is we shipped a high single-digit number of instruments in the fourth quarter. The majority of those were actually purchased, which is great. But we continue to see interest in that program. Overall, for the year, we landed at about a third, and it's kind of what we're anticipating we'll see in 2024 as well.
spk06: Got it. And, Tejas, let me just add to the stack comment. I mean, as you can imagine, we have customers globally. We have customers in Europe. We have customers in the U.S., And because of GDPR rules, the stack is largely servicing our U.S. customer base. You can imagine that while I'm not interested in the service business, I do want to have a similar kind of business model outside of U.S. So we are considering options to be able to offer stack-like services outside of U.S. And so I don't consider that really an expansion of the business model in terms of services. It's just how do we capitalize on a broader geography in what is arguably a very, very successful strategy in terms of providing access to the photographs. And as I know more about that, I will share that with you.
spk09: Got it. Super helpful. So changing gears a little bit, Amit, I think in the past you talked about upgrading your Just wanted to confirm that, you know, off the 62 instruments out there, have most of them now essentially been upgraded? And then on a related note, you know, there's been a lot of buzz around the Orbitrap Astral from Thermo and how that launch has gone for them. Can you just remind us, you know, how many Astrals out there are now paired with the Proteograph? Or perhaps if it's too early to ask that question, what does the funnel look like for the combination? And how do you see that sort of driving placements in 24?
spk06: Tejas, so the first part is an easy one because I follow that almost daily, which is approximately 75% of our installed base has now been upgraded to the Protograph XC asset. And your comment about the astral performance being very well received by the market, I share that with you. and as exemplified by the combination of the XC astral, really demonstrating unprecedented performance in complex matrices like plasma, for example, or other complex matrices where the dynamic range is quite wide. I don't have a sense, Tejas, the number of astrals out there and in terms of either exceed upstream to them or in discussions with that. I will have clarity to that, Tejas, more I would say over the next quarter or two, and we can have those discussions. But the combination of the two is quite powerful. I would also say that we're seeing also extremely good results with the Bruker HD, and that too is an exceptional instrument. and that you can get really, really great data. Of course, the astral provides a level of data that exceeds the other available options.
spk09: Got it. Very helpful, Amit. Last question for me. You talked about, I think, 10,000 samples per year on XT plus some of these next-gen mass specs. Can you sort of translate those numbers in terms of what they mean on a price-per-sample basis? And is the combination now essentially in your mind starting to be viewed as competitive by some of these larger population scale projects where any work that's happened at that scale so far has been more on a targeted approach?
spk06: I think we are moving in the direction. Because remember, the unique thing about the prototype is when you think about the cost, it's not only the consumable cost that you need to pay SEER, but there's also the... the depreciation and the instrument and the FTE cost that you need to pay to run that mass spec, right? So what DXC did was it materially decreased the use of the mass spec, therefore decreasing both the portion that you would assign the depreciation for that assay and also the FTE cost. We are absolutely, Tejas, approaching price points where population-scale deep unbathed proteomics You know, are doable and look, I put myself, I think, on the hot seat when I said my prediction is that sometime in 2024, such large studies will get initiated. Now, we've been in discussion by a number of parties to do that. I was actually really, really hoping that the UKDB project would have kicked off. We wanted to participate in that project. I would have expected the data to really have catalyzed a very, very large-scale study at UKDB level in terms of amide proteomics. Of course, as you know, they pulled the plug on that. But I do think, Tejas, we're now in the zip code where deep combat proteomics, not only is feasible in terms of throughput, but it's also feasible in terms of cost and very comparable, if you would, to doing it in a targeted way.
spk10: That's great, Kalarami. Thanks. Appreciate the time.
spk04: Thanks, Tejas. Thank you. One moment for our next question.
spk05: And our next question comes from the line of Rachel Avatsenzal from JPMorgan Chase. Your question, please. Hello.
spk13: Thank you for taking the question. This is Marta Nazarovitz on for Rachel. I just wanted to follow up on your prior questions for guidance. So what are your assumptions for China and macro for 24? Are you pretty much assuming no improvement? And then if you think about the guidance, what do you think are the biggest potential swing factors? Thank you.
spk08: Sorry, the last part of your question was biggest swing factors. Is that correct?
spk12: Yeah, to your guidance, like upside, downside.
spk08: Got it. Sure. So on the China macro, we still don't have a lot of visibility in terms of an improvement there. And so as we look at 24, we're essentially assuming flat, kind of as is. We're not assuming any real improvement relative to what we're already doing there. So it's something where just given the lack of visibility and given the continued challenges that we see in terms of adopting a new technology, we certainly just wanted to be mindful of that as we look forward to this year. There have been some great developments. The Chinese government's obviously putting a lot of money into proteomics, into building kind of a a large proteomics database. So we're certainly hopeful, but it's really too early to have any visibility to that. So I think that's something that we are being mindful of. In terms of the swing factors for this year, I think one is certainly the impact of the publications. We certainly feel like there's a nice, robust pipeline of publications coming. And we hope that that will certainly help to drive things. And so, but again, we've tried to be mindful of the timing of those. And as Omid said, you know, the ultimate impact of those, I think it's the larger body of clinical evidence that needs to be more robust and to grow to really drive that adoption. But again, we're hopeful of that. And again, the other areas that we see good potential obviously stack. We've got a backlog there, which is great. But as Omid also said, we're going to have a finite capacity there. So at some point, we'll reach that and kind of stay there. And the good news is we do want to work with our centers of excellence and push any recurrent service business to them and allow them to take that. And that will certainly result in some kit sales to us. And then finally, Prognomic, again, they will be a smaller portion of revenue for this year. But the good news is that they're moving into their discovery phase for their LDT test. And they're using the Protograph platform to do some of that development work. And they'll also continue their discovery work on some of their other programs. So again, we're trying to be mindful there. But again, they've been a great partner and they're having great success with the data they're generating. So I would highlight those as the areas.
spk13: Thank you. That was helpful. Actually, a good segue to my next question. So can you discuss the overall visibility for the business as you move into 2024? You already touched on China, so I guess ex-China. And then can you also touch on pricing expectations? Thanks.
spk08: Yeah, so in terms of visibility, You know, again, I think we've got a healthy pipeline in North America. It's certainly an area where, you know, we do have pretty good visibility on that. I will say, you know, there is a strong interest. People are excited about the technology, and so we feel good about it. It's really a function of, you know, having the budget dollars to go ahead and acquire the technology or or to participate in the STAC program. Europe also feels pretty good. But again, I'd be a little bit more cautious on Europe, relatively speaking. Again, we have pretty good visibility. But again, they are much more price and budget conscious there in terms of what they see or what we see. So again, I think the visibility is a little bit less. And then as I discussed, China is probably we have the least visibility there. But again, remain hopeful. In terms of pricing, again, I think we continue to see the solution as price competitive and something where people can certainly access the technology, whether that's buying an instrument or participating in our SIP program where you get a loaner and you make some upfront kit purchases or consuming through STAC. in terms of just the price per sample for either the mass spec work or for the full workflow. So again, we feel pretty good about it. Obviously, people always want a lower price. There's no doubt about that. But again, I think we're, as Omid mentioned, I think we're getting to the right zip code, certainly comparable to where some of the targeted technologies are, even though we offer a very different value proposition and you're answering fundamentally different biological questions, again, I think we're certainly cost competitive such that you can do a large-scale study on a time frame and with a price point that makes sense.
spk11: Great. Thank you for your time.
spk04: Thank you. Thank you.
spk05: And this does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.
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