10x Genomics, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the 10X Genomics Fourth Quarter 2020 Earnings Conference 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, press star 0. Thank you. I would now like to hand the call over to your speaker today, Ms. Cassie Carnot, Investor Relations and Strategic Finance. Please go ahead.

Thank you. Good afternoon, everyone. Earlier today, 10X Genomics released financial results for the fourth quarter and year-ended December 31, 2020. If you have not received this news release, or if you would like to be added to the company's distribution list, please send an email to investors at 10xgenomics.com. An archived webcast of this call will be available on the investor tab of the company's website, 10xgenomics.com, for at least 45 days following this call. 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, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties, and factors that could cause results to differ appears in the press release 10X Genomics issued today and in the documents and reports filed by 10X Genomics from time to time with the Securities and Exchange Commission. Kennex Genomics 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. Joining the call today are Serge Saksanov, our CEO and co-founder, and Justin McInerney, our Chief Financial Officer. In addition, Brad Crutchfield, our Chief Commercial Officer, will be available for Q&A. With that, I will now turn the call over to Serge.

Thanks, Cassie. Good afternoon, and thank you for joining our call to review our fourth quarter and 2020 results. During today's call, I will provide a brief summary of our fourth quarter and full year results. Next, I will discuss the opportunities that lay ahead and how we're focusing our efforts across our three technology platforms to build great products that deliver amazing insights for our customers. I will then turn the call over to Justin for a more detailed look at our financials, including our outlook for the year. I would like to start by thanking our employees for their hard work and dedication through an extraordinary difficult year. 2020 brought significant challenges, change, and sacrifice, but I continue to be impressed by and grateful for our team's resilience and commitment to our customers and to each other. Despite all the challenges, we made important progress across our business in 2020. To start, total revenue grew 22% over the prior year to $299 million. In the fourth quarter, revenue grew 49% over the prior year as our business continued to recover from the impact of COVID. We grew our installed bays by 45%, selling 746 additional instruments. We continue to expand our customer reach and our products have now been adopted by all the top 100 research institutions and top 20 pharmaceutical companies. Our customers published more than 1500 peer reviewed papers, bringing the total to over 2200, more than doubling the number of total publications over the course of the year. And We continue to invest in developing and defending our patent portfolio and added more than 300 new patents and patent applications, expanding our coverage of enabling technologies. We now have more than 1,000 patents and patents applications. We also reached important operational milestones. At the onset of the pandemic, we acted quickly to implement a number of protocols and safety measures to ensure the health and safety of our team members who needed to remain onsite to support essential operations. This included creating a program to provide recurring SARS-CoV-2 testing onsite for all employees at our headquarters. As an additional safeguard, we made use of special powered respirators, which filter out particles and aerosols with very high effectiveness. We supplied this equipment to our employees who needed to work onsite in close proximity to each other. These and other safety measures have facilitated the safe return to work of most of our research and development, manufacturing, and other operations personnel. With these measures in place, we're able to continue onboarding new customers, shipping products, building out infrastructure, including the implementation of a new ERP system, and executing on an incredibly ambitious product roadmap that we laid out at the beginning of the year. We launched four new products for our customers. This started with our targeted gene expression solution, which allows researchers to target the genes most relevant to their research, validate their hypotheses faster, and reduce sequencing costs. Second, our single-cell multi-ohm attack plus gene expression solution, which allows researchers to read both gene expression and epigenetic programming in the same cells across thousands to tens of thousands of cells in a single experiment. Third, our Vizium spatial gene expression solution with immunofluorescence, which allows whole transcriptome spatial analysis and protein detection in the same tissue section. And finally, a new version of our single-cell immune profiling solution offers increased sensitivity, reduced sequencing costs, and access to rare gene signatures. Reflective of the excitement for these new products, our single-cell multi-ome attack plus gene expression solution and our Vizium spatial gene expression solution were named as two of the top 10 life sciences innovations of 2020 by The Scientist magazine. We also significantly expanded our global operations. In the fourth quarter, we opened our Singapore manufacturing and distribution center, which was done completely virtually. We will use the center as a hub to support our growing sales in APAC through improvements in our global supply chain and our customer service across the region. We believe these investments will be critical to support our long-term plans to scale the company. We made two key acquisitions in Reedcore and Cartana, which together with our early stage initial research and development efforts are forming the foundation of our third product platform in the emerging in-situ field. Developing products in this field has been on our strategic roadmap for some time. These two acquisitions were made with that overarching strategy in mind and should help us deliver incredible new capabilities to our customers. With these acquisitions, we gained important technologies, enabling IP, and added amazingly talented people. Our team is the foundation of our company, and they are ultimately the source of all of our success. Throughout the year, we added more than 250 employees, the vast majority of which were onboarded virtually. Over 70 of these hires were in our commercial organization bringing our total to 290 commercial employees at year end. I'm so proud of the brilliant, passionate, and hardworking individuals who continue to be drawn to our mission at 10X. And as always, we're intensely motivated by our customers' work, by their discoveries, and by their progress. Last year, the COVID pandemic presented an unexpected and acute challenge to the scientific community. Many of our customers responded with great determination to understand this disease and to develop ways of fighting it. As an example, I'd like to highlight two major papers published in just the last few weeks. The first, published in Nature, came from the University of California, San Francisco, where researchers used single-cell sequencing to compare mild and severe COVID patients. They discovered that patients with mild disease display a specific pattern of gene expression that coordinates the immune system's fight against the virus. In contrast, in severe disease, the patients are producing rogue antibodies that interfere with that pattern and with proper functioning of the immune system. This points to targets for potential immunotherapies in severe patients to reengage viral defense. The second paper published in Cell came from the Single Cell Consortium for COVID-19 in China, made up of researchers from 36 institutes and hospitals. This group ran a massive study performing in-depth analysis on hundreds of samples from nearly 200 patients. They were able to link key changes across large numbers of different cell types to clinical features, including age, sex, severity, and disease stage. The study revealed multiple features of the immune response that were previously not appreciated. This data set provides a rich resource for understanding the pathogenesis of COVID-19 and for developing effective therapeutic strategies going forward. Now, while we're still navigating this pandemic, our customers have adapted to work within this new environment. We believe labs have reached a steady operating state, which will continue until the pandemic is brought under control. Demand for chromium instruments remained strong in the fourth quarter. Customer engagement drove pull-through back to pre-COVID levels, and usage in biosafety labs continues to drive incremental instrument placements. Importantly, during the quarter, we booked our first multinational correlative biomarker study involving clinical samples from 12 collection sites. We're excited about the opportunity for using the chromium platform to improve the yield of the drug development process. Turning to Visium, the platform continued to grow during the fourth quarter, and there have been more than 80 publications and preprints to date. We're highly encouraged by the pace of adoption and growing use cases. We believe these papers provide critical validation across a number of exciting areas of research and will accelerate market adoption in our existing markets, especially in translational settings. Previously, we have talked about Visium's applications in oncology and neuroscience. While these continue to be the major drivers of Visium adoption, we're also excited by the range of new use cases that our customers have been exploring. For example, Visium is being used in studies of heart biology to understand congenital heart conditions and atherosclerosis. There's a study to understand the progression of liver fibrosis to identify targetable pathways for antifibrotic therapies. And to better understand kidney disease, customers are using Visium to obtain spatial and temporal profiles of chronic kidney injury and compare them to those from the normal kidney. Now, even with our commercial success over the past several years, it is still very early days. Looking ahead to 2021, our investments are focused around four key priorities. First, building out our organizational and operational infrastructure. Second, driving broader chromium adoption. Third, establishing Visium as the standard for spatial genomics research. And finally, developing the in situ platform. Starting with our organization, we're strategically scaling our business to build ahead of demand and to drive future initiatives. As I mentioned earlier, we ended the year with close to 300 commercial employees and we plan to hire at least 100 more throughout 2021 to support global expansion and new product launches. We're also making investments across the company in our global IT infrastructure, operations, R&D, and G&A. As a part of these investments, we have acquired land nearby to bring our sophisticated manufacturing capabilities closer to our R&D to support the rapid pace of product development. We're also hiring top talent across our company to grow every part of our organization with plans to increase our employee base by approximately 50% over the course of the year. As we scale, we're focused on preserving and nurturing a mission-driven culture that drives us to achieve things that have never been done before. These core values have been and will continue to be a critical part of our long-term success. Turning to Chromium, we remain very early in its adoption cycle and in the impact of a single-celled revolution. Since its launch in 2016, the platform has quickly scaled to more than 2,400 instruments. And while impressive, it is still a very small fraction of our total opportunity. Our products are already starting to sweep away many of the conventional tools of standard biology. And they're doing this across all of the life sciences, across what are conventionally viewed as distinct market categories, whether it's molecular biology, cell biology, protein biology. And from the continuing interest we're seeing from new customers, it is clear that this is just the beginning. We expect that single-cell approaches will become the standard for many types of biological experiments, across tens of thousands of labs around the world. Our goal with Chromium is to keep driving broad adoption and expanding from early technologies and genomics leaders to the tens of thousands of biologists focused on answering specific biological questions. We're investing to remove barriers for those new to high content genomics and to keep increasing the utility for our more established users. We're accelerating customers along an adoption curve with new product configurations allowing the total cost of experiment to be optimized across a wide range of Chromium use cases. The following capability is coming to the market this year. A CellPlex kit launching in the first quarter that will enable cell multiplexing for large experiments, reducing the cost by as much as 60%. A low throughput kit also launching in the first quarter that will reduce startup costs for single cell experiments and enable efficient proof of concept studies before scaling. In the back half of 2021, we will launch a fixed RNA profiling kit to allow fixation at point of tissue collection, unlocking access to large sample cohorts. And ChromiumX, a new high throughput instrument that will enable routine experiments of one million cells. And finally, the 10X cloud is now live for North American users to enable streamlined data handling and computation. Moving on to Visium, this platform remains even earlier in its overall adoption and lifecycle compared to Chromium. Visium is incredibly powerful for elucidating spatial biology and is the highest-resolution spatial genomics product on the market. This platform has been on the market for less than five quarters but has already gained broad adoption. We are now focused on establishing it as the standard for spatial genomics research and expanding its core capabilities in response to market demands. We're very excited about future product launches starting with Visium FFPE, which we expect to begin shipping in the second quarter of this year. The single biggest request for translational customers, in fact, the necessary condition for most of their research, is the compatibility with FFPE samples. This is the predominant way that patient samples are collected and stored. It's the standard part of pathology workflows. We're launching a complete solution comprising all ready-to-use reagents and software It is the first technology to enable true discovery in FFP samples, delivering the full transcriptome across the entire tissue. What's especially remarkable is that the sensitivity of this product is on par with what we see with analyzing fresh tissues with standard Visium. This performance exceeds even our aggressive internal expectations and is very exciting to our customers. In addition to FFP capabilities, a key request we have received from our Visium customers is to help with sample handling and logistics. Most importantly, our customers would like to analyze archive samples that have already been mounted on conventional non-Visium slides. To answer this need, in the first half of 2022, we plan to launch a new instrument called Site Assist. We expect that SiteAssist will really simplify the workload for many of our customers and will significantly expand the number of samples that could then be run on Visium. And finally, we expect to launch Visium HD in the first half of 2022 to deliver single cell resolution. VisiumHD is based on big fundamental advances in the underlying microarray technology. It will come with a resolution that's 400 times higher than the current Visium and over 1,500 times higher than the original pre-Visium technology. We believe that this, together with all the other investments we're making, will establish Visium as the single best platform for scientific discovery and translational research. We're at the very beginning of the Visium story. The enthusiasm from our initial customers and the pace, variety, and breadth of early publications represent a significant opportunity for the Visium platform and spatial biology as a whole. To keep driving market adoption and help our translational customers make the most of the platform, we will expand our clinical translational network this year ahead of launching Visium FFP and highly multiplexed protein assays. And finally, with the addition of in situ capabilities, we have added the foundation for a new platform that we expect will help us address another long-term growth vector. The promise of in situ is the ability to measure large numbers of molecules directly in their native state in tissue at subcellular resolution. This is different from chromium, visium, or most current analytical techniques where molecules are removed from tissue before measurement. We expect to build an integrated system which can be viewed as analogous to IHC or FISH-based approaches commonly used in pathology but scaled to vastly greater multiplex levels and information content. These capabilities lay the foundation for an ideal clinical instrument for tissue-based analysis. And as more insights and translational work gets done with chromium and visium, in situ we'll provide the natural format for many of these applications to be adopted in the clinic. In the long run, we expect that just about every tissue will be analyzed using at least one of these three approaches, whether for basic science research or for medical applications. Moving beyond 2021, let me discuss a review on the market opportunity. We previously outlined our near-term opportunity within the research tools market as those areas where people are looking to do high-throughput research. This currently represents approximately $15 billion of the more than $60 billion global life science research tools market. As more research moves to the high resolution, large scale approaches, more of the total life science research tools market will become available to us over time. In addition, there will eventually be many powerful clinical applications based on single cell and spatial analysis of tissues. We expect our in situ platform will be well positioned to bring many of those applications to the clinic, If we make modest assumptions around the numbers of potential samples and pricing, we estimate the size of those opportunities around an additional $10 billion. Perhaps the greatest revelation in biology over the past several years is the pervasive cellular complexity that underlies just about every biological system. It turns out that every tissue harbors much greater diversity of cells and cell types than we had previously thought. all of them interacting with each other in a complex interplay of massive gene expression networks. Going forward, it is clear to us that in the future, the vast majority of biological tissue samples will need to be analyzed with single cell context at large scale and at high resolution. And we have been investing in three core platforms that together will enable precisely this future for our customers as they write their stories of the century of biology. And looking ahead in 2021 now, we expect our revenues to grow more than 60% over 2020. Overall, I could not be more proud of our team for their execution this past year. Their talent, expertise, and hard work has laid a strong foundation for long-term growth. With that, I will now turn the call over to Justin for more details on our financials.