10x Genomics, Inc.

Good day, everyone, and welcome to the 10X Genomics first quarter 2024 earnings call. Today's call is being recorded, and I would like to turn the call over to Cassie Corno, Director-Head of Investor Relations and Strategic Finance. Please go ahead.

Thank you, and good afternoon, everyone. Earlier today, 10X Genomics released financial results for the first quarter ended March 31, 2024. 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 Tenex Genomics issued today and in the documents and reports filed by Tenex Genomics from time to time with the Securities and Exchange Commission. 10X Genomics, this claims 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 Saxenoff, our CEO and co-founder, and Justin McInerney, our chief financial officer. We will host a question and answer session after our prepared remarks. We ask analysts to please keep to one question so that we may accommodate everyone in the queue. With that, I will now turn the call over to Serge.

Thanks, Cassie, and good afternoon, everyone. During today's call, I'll start with an overview of our first quarter progress and performance, highlighted by the launch of four major new products that we believe set a new standard for single-cell and spatial biology. Next, I will discuss the exciting opportunities we have ahead across our three platforms and the steps we're taking to deliver on this future. Then I'll turn the call over to Justin for a more detailed look at our financials, business trends, and outlook for the rest of the year. For the first quarter, total revenue grew 5% to $141 million. We continue to drive strong growth in Spatial, led by our Visium franchise and the highly anticipated launch of Visium HD. We also saw strong interest in our new Chromium GemX technologies. which delivers substantially higher performance at a lower price. A significant number of customers trialed the new architecture, contributing to lower-than-expected quarter-end orders for Chromium overall. Despite the near-term sales impact, we believe GemX will invigorate Chromium growth over the long term and ultimately enable wider single-cell adoption. And while we're working to deliver on the vast opportunity ahead in Chromium, Our strategy has always been focused on the strength of the entire portfolio and on providing the full breadth of our capabilities to customers. With our three complementary platforms in single cell and spatial, we're committed to innovation that enables the scale and resolution necessary for researchers to better understand biology and disease. We believe that we're still early in this opportunity and in adoption of these tools. This year, we're introducing franchise-defining products in each platform to enhance our performance, leadership, and accelerate long-term growth. These products are a testament to the enduring strength and velocity of our innovation engine and its value for customers around the world. These launches also reflect how we listen closely to customers' feedback and build products that are most responsive to their needs. Let me highlight a few of our latest advances and how we expect them to extend our technology leadership. First, we were thrilled to officially start shipping Visium HD at the end of March. For our team, there's really no better feeling than seeing new products in the hands of researchers. That's especially true here. Visium HD has not only been the most requested product in our history, but also one of the most ambitious development projects we've ever taken on. It is precisely the kind of challenge 10X was built for. It is yet another example of our ability to tackle hard problems and arrive at the best solution possible for our customers and their research. Visium-HD enables whole transcriptome spatial analysis at single-cell scale resolution. It runs on existing site-assist instruments, leverages the same robust and easy-to-use workflow as standard Visium, and brings the field of spatial discovery to a whole new level. While it's still very early, we're really pleased with the strong initial demand and tremendous enthusiasm we're seeing from our customers. The positive momentum further fuels our ambition to establish VisingHD as the platform for transformational discovery. This quarter, we also continue to deliver on our robust Xenium R&D pipeline. We began shipping both our multimodal cell segmentation product and our new immune oncology gene panel in March. Cell segmentation includes an add-on kit compatible with existing Xenium assays. It leverages advances in assay chemistry and sophisticated machine learning algorithms to significantly improve the determination of cell bond rates using multiple morphological features and modalities. While Xenium launched with a robust nuclear-based segmentation approach, many researchers have been waiting for this new solution to enable the most accurate biological interpretation for their Xenium runs. Xenium is already well-recognized as the in-situ performance leader, and there is still much more to come. We are planning to launch our 5,000 Plex capability mid-year, scaling up Plex by an order of magnitude while still delivering high-quality sensitivity, specificity, and throughput. We're also developing panels of 1,000 to 2,000 genes to give customers even more options and flexibility. We're moving forward with integrated protein profiling, which will significantly expand Xenium's existing protein capabilities. And longer term, we have architected Xenium to allow for tremendous technological headroom and enable more applications, higher throughput, and lower cost. With the long-awaited launch of VisMHD, the performance of Visenium in the field, and the interest and buzz around the Xenium pipeline, it's clear we're in the forefront of the spatial biology revolution. We're seeing some cutting-edge researchers and technologists start to reprioritize their team's resources and mindshare from single-cell approaches to explore how spatial methods can push their research forwards. We're also seeing spatial resonate with new researchers who have never done single-cell or other genomics work before. Take this year's annual meeting of the American Association of Cancer Research, or AACR, for example. There was resounding energy and conviction in spatial, which emerged as a huge theme of the conference. In fact, the majority of the plenary sessions featured or referenced 10x spatial data. This burgeoning interest in Spatial is drawing the attention of both new and existing customers. And we have work to do to ensure we can satisfy that interest and drive growth across the portfolio. Turning to single-cell and the launch of our new GemX technology, the first major overhaul to our Chromium architecture since 2019. With its completely re-engineered market-fluided chip design, GEM-X delivers superior performance at larger scale and lower cost. In March, we began shipping the first two products on GEM-X, our highest volume chromium assays, 3' gene expression and 5' immune profiling. These assays take single cell analysis to the next level, giving researchers meaningful performance advantages across the board, from increased sensitivity and capture efficiency to improved robustness and scalability, all at a lower cost. In fact, the new technology provides researchers a more than two-fold reduction in cost per cell. We believe GemX raises the bar for the field and sets a new standard for single-cell analysis. Our customers have been eager to see and validate this for themselves. In Q1, more customers than expected trialed GemX to see firsthand the power of this technology on their own samples. And more recently, customers, including the Fred Hutch Innovation Lab, have started to share their own independent comparisons of Gemex and their NextGem technology, verifying our performance claims. We're encouraged by the early enthusiasm, adoption, and feedback on Gemex, despite the near-term headwinds, as we help customers navigate this product transition. Gemex delivers great value to customers now. and opens up meaningful possibilities to expand the field long-term. As we have said before, we believe there is significant price elasticity in single-cell, which presents a significant long-term opportunity for a broader adoption. GemEx is one of several steps we have planned to take advantage of the elasticity. By delivering superior performance of superior economics, we believe GemEx will help us enable larger projects reach new customers, and encourage more routine use among existing researchers. We fully intend to expand the single cell opportunity through a robust chromium roadmap and other efforts to drive better awareness and broader adoption at large scale. Put simply, our goal is to make single cell analysis the standard for most biological research. While we believe there's huge untapped potential for single cell, Our conviction is not just in Chromium. It's in the combined performance, leadership, and differentiation of all three platforms together. Our strategy has always been about the power of the full portfolio and the choice it enables for customers. Our goal is to ensure that researchers and ultimately clinicians have access to a comprehensive suite of the best performing products to resolve biology in the way that's best for their work. We intentionally designed distinct yet complementary platforms to support a broad spectrum of customers' use cases and how their research and research questions may evolve over time. The strength of our execution in R&D and operations has enabled us to deliver a full portfolio of groundbreaking products. And as we continue to evolve our commercial execution, it will better position us to maximize and deliver on the incredible potential ahead. We believe there are clear opportunities to drive growth, utilization, and scale with existing customers to bring new researchers into the 10X ecosystem and to accelerate translational and biopharma opportunities. Alken's mosaic study, which we first announced in November, is a powerful example of the progress we're making in translational applications. This large-scale project is on track to complete spatial profiles on thousands of tumor samples across seven different cancer indications. by the end of the year. The team is looking to discover biomarkers and to build predictive models that could transform how we diagnose, treat, and ultimately cure cancer. In addition, we firmly believe there's a long runway ahead for single-cell methods in biopharma. Importantly, we're not the only ones who share this conviction. Some of our pharma customers recently published on the value and impact of our products in therapeutic development. Sanofi reported that 90% of the company's disease targets are credentialed using single-cell genomics. A recent preprint in MedArchive helps shed light on why. The study analyzed single-cell data across 30 diseases and 13 tissues to examine associations between genes, cell types, and diseases. They found that support from single-cell analysis significantly increased the odds of clinical success for a given gene to be a viable drug target. In fact, the authors estimate that their approach could approximately triple the chances of a drug target reaching a phase three clinical trial. So while we have established strong B-chats in translational and biopharma, it's still very early relative to the expected large potential. With all of the advances in our portfolio, we're in a better position than we've ever been to deliver. As one customer at ACR told me, FFP changes everything. Our FFP capabilities, available in all three platforms, open up vast archives of biobank samples, along with exciting possibilities for new biological discoveries. These capabilities reflect, yet again, how we listen to our customers, think deeply about their research, and build innovative products to accelerate and advance their work. We believe the long-term potential for single-cell and spatial is boundless. While we're focused on delivering in 2024, we will remain steadfast in maintaining the long-term orientation that has always guided us. I have every confidence when I say we're still just getting started.