Seer Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 8 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the SEER, Inc. 2nd Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Carrie Mendivil, Investor Relations. Carrie, please go ahead.

Speaker 1

Thank you. Earlier today, SEER released financial results for the quarter ended June 30, 2023. If you have not received this news release or if you'd like to be added to the company's distribution list, please send an email to investorseer.bio. Joining me today from SEER is Amit Farrokhzad, Chief Executive Officer, President and Chair and David Horn, Chief Financial Officer. 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.

Speaker 1

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 here issued today. For a more complete listing description, please see the Risk Factors section of the company's quarterly report on Form 10 Q for the quarter ended June 30, 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 This call contains time sensitive information and is accurate only as of the live broadcast, August 8, 2023. With that, I'd like to turn the call over to Amit.

Speaker 2

Thanks, Carrie, and thank you everyone for joining us this afternoon. We ended the 2nd quarter with $4,000,000 in revenue, increasing 11% year over year and in line with the prior quarter. Based on our first half results Taken together with our outlook for the remainder of the year, we now expect full year revenue to be in the range of $16,000,000 to $18,000,000 for 2023, representing 10% year over year growth at the midpoint of the range. While our top line growth this year will be slower Than our previous expectations, we firmly believe in the significant underlying market opportunity for our proteomics technology. Our technology has the potential to change the trajectory and status quo of proteomics.

Speaker 2

However, changing the status quo takes time. I continue to have full confidence in the strength of our vision and our differentiated product offering to capture the opportunity ahead of us And to push the boundaries of what is possible. Just 18 months after the launch of our flagship ProteaGraft assay kit, We have launched our second product, the Proteograph XT assay kit. We also recently expanded our collaboration with Thermo Fisher Scientific To enable population scale studies using the recently launched Orbitrap Astral mass spectrometer in combination with the Proteograph XT assay kit In our newly launched SEER Technology Access Center or SAC, I have never been more bullish about our opportunities that I am today. While much work remains, we're continuing to put the pieces in place to build the foundation for long term growth.

Speaker 2

On our call this afternoon, I will walk through the near term challenges to commercial adoption that we're experiencing and the actions we're taking to overcome them. Then I will share more detail about our new product as well as some exciting new data we're seeing from our partners and customers, which further validates my conviction for what becomes possible using the Protea Graph product suite. Finally, I will turn the call over to David To provide more details on our Q2 financial results and our recent actions to further reduce our cash burn to preserve our robust balance sheet, which includes approximately $396,000,000 in cash, cash equivalents and investments. As we have long said, we believe the ability to generate vast amounts of proteomic content, Leveraging our technology will open up a new frontier in proteomics discovery. Prior to the proteograph, Unbiased proteomic studies were very small and therefore underpowered versus large scale and adequately powered studies to fuel discovery.

Speaker 2

That said, we believe there is currently a disconnect between our differentiated and high performance product and the commercial adoption that we're experiencing. Similar to other new disruptive technologies preceding us, Our commercial progress will not always be linear. As we're developing the market, we're learning quickly and optimizing our approach to make sure our efforts and focus are going to result in the highest return over time. While we see many tailwinds in this market over the coming months years that would accelerate commercial adoption, In the current market, we also see some temporary headwinds. These headwinds are interrelated, and we're tackling them in a way that we can most directly and quickly impact them.

Speaker 2

Most notably, these are: 1st, The acquisition and use of mass spec instruments can be seen as a barrier to adoption for segment of customers that are new to mass spec, namely the biologists and the genomicists. 2nd, there is a need for more publicly available data and publications Demonstrating the biological value of decoding the complex of the pruritium in an unbiased manner at scale in order to shorten our sales cycle. And finally, a challenging macro environment has created additional barriers in terms of the availability of capital for new disruptive technology. We're taking steps to address these temporary headwinds and to work to lower the barriers to commercial adoption. So what are we doing?

Speaker 2

1st, we're making changes To enable easier access to mass spec proteomics data, this is especially important for biologists and genomicists. We've always said that the addressable market for our technology will be across both proteomics and genomics market. While this remains the case, there are some nuanced behavioral differences between genomics and proteomics customers that requires us to refine our approach to drive market development adoption. For Neomix Our mass spec expert customers previously had technological barriers that limited the scale of the deep unbiased studies. Consequently, they did not have a need to store or maintain large cores of samples.

Speaker 2

Additionally, prior to the protograph, The investments and operations involve large capital expenditures for the acquisition of the mass spectrometers and relatively small expenditures on consumables. As a result, we're finding that the traditional mass spec technologies However, on average, They're slower to ramp up large scale unbiased proteomic studies since they need to secure the funding and samples to pursue large scale studies. To remove the barrier of capital investment for the mass spec experts, we have introduced a Strategic Instrument Placement Program or SIPP, SIPP to allow them to begin using the Proteograph right away by utilizing available operating budgets. This will help them generate the data needed to secure funding and samples to conduct larger studies. Conversely, Biologists and Genomicists generally have access to biological sample, Are very familiar with consumable expenditures for generating omics data for their research and are better positioned to conduct large scale studies.

Speaker 2

These customers are almost universally recognized the value of unbiased approaches given their experience with the discovery potential of unbiased We're finding that many of these new to mass spec potential customers View the acquisition and use of a mass spec instrument as a barrier to adoption, yet they appreciate the discovery potential of the Protograph's Powerful and scalable unbiased approach. For these customers, we have now introduced the SEER Technology Access Center or STACK, STAC, which allows a proteograph user to run samples in their own lab and have SEER run the mass spec or alternatively provide end to end study services from sample to data. We believe that as these Important customers gain access to and validate and apply the biological insights provided by the ProtegeR product suite, They will over time add mass spec technologies to their labs. Importantly, As I mentioned at the top of the call, we have expanded our collaboration with Thermo Fisher Scientific to develop and optimize proteomics and proteogenomic workflows. As part of this program, STACK will provide mass spec services by primarily leveraging While it is still very early, we're already seeing positive traction in the initial stages of our STACK launch and believe that this STACK We'll increase the velocity at which customers can access unbiased proteomics data at depth and scale and improve The rate that customers can adopt and ramp the use of the Protegrav product suite.

Speaker 2

This will simulate publicly available data and publications, demonstrating the power of our technology. 2nd, we're taking initiatives to shorten the sales cycle. The sales cycle is generally inversely correlated with customers' comfort to adopt technology. In the absence of 3rd party publication, the sales cycle is protracted because proof of principle studies are needed and it takes time to establish credibility and build relationships with new accounts while the publication base is still growing. There are 4 customer papers currently under peer review and we're aware of several additional ones that will be submitted by the end of the year.

Speaker 2

We continue to see strong interest in the Protegraft product suite and a growing number of opportunities available to us. As we wait for more third party publications to enter the public domain, we're building market awareness of the Protegar product suite and educating potential customers on the breakthrough nature of our technology and its unique capabilities. We're doing this by doubling down on creating in person opportunities for customers to get to know us, our KOLs and our technology through Increasing meetings and seminars. In addition, we're continuing to support potential customers with proof of principle studies, Help them understand and analyze these robust datasets and support our existing customers with publishing papers and in development of new studies. We have also made recent changes to the commercial team, both in terms of leadership and regional business managers.

Speaker 2

While it's going to take some time to see the impact from these changes in aggregate, I'm confident in the team and the strategy we have in place to deliver on our commercial opportunity ahead. Finally, amidst this challenging macro environment, We're providing creative solutions for customers to obtain the Protegraft product suite. We're hearing from prospective customers That they're especially cautious purchasing a new disruptive technology whose value proposition is not yet widely demonstrated through peer review publications. To address this, we're offering creative solutions for customers to access the biological insights from the Protograph product suite, either through accelerating the utilization through SiP or accelerating the data acquisition through STACK. Through SIP, we loan an instrument to the customer for a period of time, typically less than a year, when coupled with an initial significant purchase of consumable kits.

Speaker 2

This program is also aided by the fact that many potential customers may have more readily available access to funds through operating budgets rather than capital budgets. We've already seen some good success with the SiP since its launch earlier this year. Reducing these barriers to adoption will also help us accelerate the generation of use cases and data sets to exemplify the power of the Protegrav product suite and unbiased proteomics at scale. These presentations and and its unique ability to provide insights at scale. As I mentioned at the top of the call, We make 2 important announcements at the American Society For Mass Spectrometry Conference in early June.

Speaker 2

First, the launch of the Protegraf XT assay kit and second, the launch of the stack and expansion of our collaboration with Thermo Fisher Scientific. The proteograft XT assay workflow allows customers To design large scale unbiased proteomic studies with an unprecedented combination of site, scope, speed and scale, The Proteograph XT assay uniquely provides high resolution insights into the proteome At the peptide level, enabling access to the diversity of species and sample types, more than doubling Sample throughput without compromising performance, all with less than 1 hour of mass spec time, further enabling studies to scale to power discovery. The Proteograph XT assay kit Makes the proteome even more accessible for both proteomics and genomics researchers as they deepen their biological insights And characterize genomic variance with function of proteomics information. And a single operator can access hundreds of samples per week. This is incredibly exciting since there is a vast amount of proteomic content yet to be discovered with enormous untapped potential to make an impact on our understanding of health and disease.

Speaker 2

At ASMS, Thermo Fisher Scientific highlighted The exceptional performance of the Orbitrap astral mass spectrometer in combination of the Protegraf XT for deep unbiased proteomics at an unprecedented scale and speed. The combination of the fully automated workflow of the Protegraaff XT And the Orbitrap ASTRAL produces over 6,000 protein IDs and over 54,000 peptide IDs Per plasma sample with a 1% false discovery rate, the demonstration of this unprecedented depth, scale and speed has paved the way for multiple discussions regarding population scale unbiased proteomic studies, which were impossible to contemplate Prior to the Protegraft Xcede. As prospective customers will readily access studies, we believe the unparalleled value The depth and breadth of this unbiased content will be demonstrated and the flywheel will begin to accelerate. The level of information we have today in the proteomic space is just at the tip of the iceberg compared to what we think will be possible 10, 5 or even 2 years from now. We're beginning to see signs of these customer studies starting to accelerate.

Speaker 2

The number of customer driven studies we saw in the first half of this year has doubled from what we saw in the same period last year. Importantly, we're seeing some incredible insights, including the impact of the expanded capabilities with the Protograph XT in early customer data. In June, we held a KOL panel meeting where investors Had the opportunity to hear from 4 researchers representing different customer types and applications under use of the protege graph. These customers included Steve Carr of the Broad Institute of MIT and Harvard Josh Kuhn of University of Wisconsin Philip Ma of Prognomic and Chris Nathan of Weill Cornell Medical. This event showcased strong enthusiasm For the power of unbiased proteomics and what the PortaGraft product suite and XT assay kit will uniquely enable, which was not possible before.

Speaker 2

Doctor. Chris Mason, who is a professor of physiology, biophysics, computational genomics and neuroscience Adweil Cornell Medicine has utilized the combination of the Protegraf XT and Orbitrap Astrol in its longitudinal Plasma samples of 7 astronauts pre flight and post flight and identified over 7,500 proteins In his study, in an unbiased way, this formed the basis for the identification of new biomarkers that are up and down regulated During spaceflight, these results demonstrate the step function change in performance of the combination of the Protegrav XT and the Orbitrap Astrol for unbiased proteomics. Doctor. Mason plans to publish these results as part of the broader multiomics study of the impact of space Slide on astronaut physiology. In June, another preprint was published In bioRxiv by researchers at Auburn University, this showcases the power of the ProtegeR product suite Beyond plasma or biofluid samples that was exemplified in our applications lab.

Speaker 2

This paper shows how the proteograft product suite Enables deep proteomic analysis of highly complex tissue such as skeletal muscle. This tissue type Has a wide dynamic range of protein expression levels similar to plasma and has been previously difficult to access. This paper provides yet another example of the flexibility and the power of the Protegraft product suite to analyze novel sample types and provide differentiated insights. And we're confident than ever In the long term opportunity ahead of us, that said, until we have more third party data in the public domain, We have some temporary headwinds impacting our commercial adoption, which are amplified by a challenging macro environment. We're confident that the actions we're taking will begin to accelerate the pace of data acquisition and customer publications.

Speaker 2

As we continue these market development efforts, we have taken action to reduce our headcount to streamline our organization across our business areas. While it is never easy to say goodbye to valued members of our team, The rightsizing of the organization will better match our cash burn with our revenue. With these changes, We're preserving our ability to execute against our commercial opportunities while pushing the boundaries of what's possible in proteomics. I want to thank all of our SCREA employees for their dedication and hard work every single day to help realize our vision of unlocking the Power of the proteome. I truly believe that we have the technology, the team and the strategy to bring the next phase in Omix to labs globally.

Speaker 2

With that, I will now turn the call over to David.

Speaker 3

Thanks, Hamid. Total revenue for the Q2 of 2023 was $4,000,000 representing an increase of 11% compared to $3,600,000 in the Q2 of 2022. The increase in Q2 revenue was primarily driven by increased consumable kit sales Related to the Protograph product suite, service and grant and other revenue offset by lower instrument revenue, which is partially a function of the rollout of our SIP, whereby we loan an instrument to a customer if coupled with an upfront purchase of consumable kits. Product related revenue for the Q2 of 2023 was $3,000,000 including related party revenue of $1,400,000 and consisted of sales of SP-one hundred instruments, consumable kits and platform evaluations. Service revenue was $467,000 in the Q2 of 2023 and was primarily derived from the completion of a customer service project.

Speaker 3

As Omid mentioned, we also announced the launch of Stack where we will run mass spec for our customers and in some cases provide a full workflow solution for customers We would like to access our technology. Grant and other revenue was $538,000 in the Q2 of 2023, largely related to our SBIR grant from the NIH. Our NIH grant expired in the Q2 and we do not expect material grant revenue for the balance of 2023. Total gross profit was $2,300,000 for the Q2 of 2023, representing a gross margin of 57% compared to $1,600,000 in the Q2 of 2022, representing a gross margin of 44%. Gross profit was driven by greater Product revenue from higher margin consumable kits, service and grant and other revenue.

Speaker 3

As we ramp commercial adoption, we continue to expect variability in our overall gross margin on a quarter by quarter basis as a proportion of instrument and consumable sales will fluctuate between any given quarter. Total operating expenses for the Q2 of 2023 were $30,200,000 including $9,800,000 of stock based compensation, an increase of 21% compared to $25,000,000 including 8,400,000 dollars of stock based compensation in the Q2 of 2022. Research and development expenses for the Q2 of 2023 were $14,100,000 an increase of 30% compared to $10,900,000 in the Q2 of 2022. The increase in R and D expenses was primarily due to an increase in product development efforts related to the Protograph product suite, including employee compensation costs and other related expenses due to growth in R and D personnel and expenses associated with our facility, professional services and depreciation of equipment. Selling, general and administrative expenses for the Q2 of 2023 were $16,100,000 an increase of 13% compared to $14,200,000 in the Q2 of 2022.

Speaker 3

The increase in SG and A expense was primarily driven by greater employee compensation expenses and stock based compensation. Net loss for the Q2 of 2023 was $23,400,000 compared to $22,800,000 in the Q2 of 2022. We ended the quarter with approximately $396,000,000 in cash, cash equivalents and investments. Turning to our outlook for the year. As Omid mentioned at the beginning of our call, we now expect revenue to be in the range of $16,000,000 to $18,000,000 for 2023, representing year over year growth of 10% at the midpoint of the range.

Speaker 3

We are committed to maintaining our strong financial position and are continuing to take a very disciplined approach with our spend. As Amit shared, we have implemented a reduction in force of approximately 12% of our workforce. We estimate that we will incur approximately $600,000 of costs consisting primarily of cash severance payments, which we expect to recognize in the Q3 of 2023. We have also taken measures to reduce our non personnel operating expenses for the second half of twenty twenty three to further reduce our expenses and cash burn. As a result of these actions, we estimate that our 2023 free cash flow burn will be less than our free cash flow burn in 2022.

Speaker 3

While it is always difficult to make these changes, we feel this is a necessary step for us to position the organization for success over the long term. At this point, I would like to turn the call back to Amit for closing comments.

Speaker 2

Thanks, David. While this quarter was As we navigate temporary headwinds and manage through the current environment, we're taking systematic steps to lower the barriers to commercial adoption of our technology. As I said earlier, the path to commercializing new innovative technology is not always linear. I firmly believe that as our publication base grows, We will see increasing adoption of our technology. In the meantime, we're focused on positioning ourselves for future success,

Operator

The first question comes from the line of Tejas Savant of Morgan Stanley. Tejas, please go ahead.

Speaker 4

Hey guys, good evening and thanks for the time here. Maybe, it's and David to start with the guidance cut here roughly about $7,000,000 at the midpoint. Can you just help us build a bridge from the old guide to the new guide? I know you highlighted, Omid, Some of the access to mass spec and budgets, etcetera, but any sort of additional color that you can share in that? And then David, If you could just elaborate on your assumptions for prognomic and services and the new outlook, that will be great.

Speaker 2

Thank you, Tejas. Look, as we had previously said, we had expected revenue To be more weighted toward the second half of the year, and we've been saying that since the beginning of the year. We had expected The velocity of conversion of opportunities to sales to pick up, and we're just not seeing it. And if the velocity doesn't pick up, then we expect the revenue to be in the range that we just updated today. At this point, given what we're seeing, we just don't want to be forecasting in terms of what we're not seeing.

Speaker 2

And what we're seeing is slower than expected movements for the three reasons that I highlighted Tejas in the prepared remarks. I still do see a path to more momentum. If things start to ramp up and if they do, Then we will update you. But I think given our visibility, I think it was prudent to lower guidance to what we stated.

Speaker 3

David, I don't know if

Speaker 2

you want to add more color.

Speaker 3

Yes. Just Tayo, just following up on your questions around Prognomic and the services component. I think we think Prognomic is going to stay pretty consistent as they have been. They will Ebb and flow a little bit. So it will kind of be plus or minus around what they have been doing, given that they've got A larger study underway.

Speaker 3

In terms of the services piece, We are having some assumptions around an increase in service with our STACK. But it's not a I would say A huge contributor, but it's certainly we certainly expect it to be to continue to grow over the course of the second half of the year.

Speaker 4

Got it. Okay. And Amit, on China specifically, I mean, can you just So give us some color on on the ground conditions there. Clearly, I mean that was cited as a major region in terms of the weakness. A lot of Other life science companies have experienced this quarter and into the back half.

Speaker 4

So just curious as to what you're seeing on the ground?

Speaker 2

Tejas, we're just not seeing China bounce back The way we had expected, we're just not seeing much activity at all. I mean, it was a factor In that context, and I don't really have visibility to when things are going to change, but I don't expect that Tejas to change meaningfully over the next Couple of quarters.

Speaker 4

Got it. Okay. And then final one for me on the Protegraaff XT launch. Any early feedback that you can share, particularly sort of evidence of customers interested Seeing the proteograph in combo with the Astral year. And for those users who have gotten their hands on both, Over what timeframe, Omid, do you expect sort of sample size of our experiments to go higher over here?

Speaker 2

Tejas, let me break that question up into 2. I'll tackle the first half. I'll give David the last part of it. The feedback on the XT has been just really great. We We're seeing depth and speed of coverage of unbiased proteomic with accuracy and precision That was simply just not possible.

Speaker 2

So this was not an incremental improvement to what was possible before. We're just generating data that was not possible before the XT and now it's possible after the XT. The performance of the XT and the Astral is what got highlighted at the AFMS by our colleagues at Thermo And the performance is just exceptional. I mean to get to a depth of 6,000 proteins with 54,000 plus peptides. And by the way, since then, we've seen customers generate data that even exceeds that.

Speaker 2

Chris Mason's study with the astronaut got to 7,500 proteins in his study that was Just on the 40 samples with those 7 astronauts. So the data is phenomenal. By the way, it paves the road To now begin to really think about doing population scale unbiased deep proteomics against something that you couldn't even contemplate before. To me, when I see data come that is exceptional, as a scientist, it excites me, but it's also I'm eagerly waiting for these data to begin to get published because I think the publications from customers is needed to get this flywheel going. Now to your question about the customers asking for both together, there's actually one of our customers Who have now taken an XT and they're now in discussion with Thermo.

Speaker 2

I think they've actually placed an order To also get an Astral at the same time. So they brought in XT already and they're now They have not placed an order to also get an asphalt to go with it, but that's an NUB one. But certainly, And it's larger in terms of customers expressing real interest in the kind of proteomic data that they're now seeing. So I'm cautiously optimistic, Tejas, but I really think what's needed really to kind of change the velocity It's just publications from customers. Let me hand it to David for a second half of your question.

Speaker 3

Yes. Around the sample sets, Hey, Josh. I mean to Amit's point, I do think given the throughput there now and given some of the excitement we're seeing around What the combination of the XT and the ASHRA can produce that people are talking about some of those larger studies, Which is great to see. Again, it will take time to secure the funding, secure the cohorts, But there is realization now that this is possible and people can go do these types of this type of work and studies.

Speaker 4

Got it. Appreciate the time guys. Thanks.

Speaker 3

Thanks, T. J.

Operator

One moment for your next question. The next question comes from the line of Derik to DeBlanc of Bank of America. Derek, please go ahead.

Speaker 5

Hi, good afternoon.

Speaker 4

Hi, Derek.

Speaker 5

Hey. So I'm just curious about what's your split right now between pharma and Academic and government and I assume you're still very heavily weighted towards the academic government segment, but then I have a follow on question on that.

Speaker 3

Yes, Derek. It stayed pretty consistent as we've said. If you look at our total opportunity set, Kind of what's in the pipeline, it is a fifty-fifty split. If you look at who's kind of moving funding faster and actually Writing checks and purchasing, it's actually the biopharma commercial folks. Simply, they just have access to budgets and things they can move around More quickly.

Speaker 3

Now that said, we implemented our strategic instrument placement program, our SIP program Essentially, if you commit upfront to some consumable purchase, we'll place the instrument loan the instrument to them. And so that has helped with some academic folks who may have the operating budgets that they can spend, but not necessarily capital budgets this year. And then just again overlaying the macro as Omidha talked about, we see it in both commercial and academic that just the decision making For a novel technology, again, without a lot of publications, it's just been elongated. So We're kind of playing in that dynamic. So again, the SIP and the STACK programs are meant to kind of mitigate some of that.

Speaker 3

But again, we still in terms of Who's purchased, it's still tilted towards the commercial side.

Speaker 5

Got it. And is part of the Academic and government hesitation besides publications, just that they're worried about budgets for next year. I mean, obviously, there's a lot of moving parts going on with NIH and People worried about that. How much of this is just people not wanting to commit to new programs?

Speaker 3

Yes. I mean, certainly that's a factor, Derek, in terms of it just it kind of weighs on people as they're looking at that decision, Especially from a capital purchase perspective to go out and purchase a new instrument. That said, we do have some Government entities that have purchased and are planning to purchase. And so again, the money is there. It's just The caution with which people and the time it takes them to kind of reach the decision point we see is elongated as Sameet talked about the velocity is just not again picking up the way we'd like to see it pick up.

Speaker 3

But the interest is there and it's just it's a matter of kind of grinding through things. But certainly it's weighing on factors that people are Worried about budgets and especially in this uncertain environment on the macro side.

Speaker 5

When you look at the STACK and the SIP programs, How should we think about those in terms of just margin impact versus an outright sale? How are you structuring those programs? Sir, I would assume the services just because you actually have to have people running it the business running the assays, it's going to be a little bit more expensive. Can you just talk about are those Cost more cost effective, less cost effective, just how you're thinking about it versus outright sale?

Speaker 2

Derek, Amit here. Let me just make a clarification on the STACK and then I'll hand it to David for the balance of your question. The reason for the STACK, the key reason of why we decided to do STACK was to accelerate Customers getting access to data, so there's a flood of data that becomes available. And so when you fill the top of the funnel, Then that's going to then trickle down to more and more papers getting published. That was the motivation.

Speaker 2

Now the stack is also Designed to really appeal to a customer base that historically does not have either access to mass spec or familiarity with the mass Thanks for comfort with the mass spec kind of data. The business model remains the same, which is we like to sell the proteograph instrument Because our business model, 100 percent is a distributed business model of selling instruments and associated consumables In the form of our assay kit. So a customer would may buy an instrument, may buy the consumable And then once they do that, send their peptides to SEER and we'll run the mass spec and then provide the data back to them. So that's The and by the way, we now have those customers already that have purchased that we have committed to running mass spec for them. In addition to that, the customers may choose to do end to end solutions in terms of a service.

Speaker 2

But again, the goal being that We just see a gap in the market in kind of getting customers access to the proteograph data so that they see the power of the insight that comes with that. Let me now hand it to David that's going to comment to you about the margins and how you should think about that.

Speaker 3

Yes. So on the STACK, Derek, again, you're right, It is service and Omid said there's 2 forms that customers can use the stack either I've got my instrument and I just I want to run I want you to run the mass spec for me because I'm a biologist or genomicist and I don't I'm not that familiar with mass spec and I just want my data. So that's really what we're trying to provide for those folks. And you're exactly right. It's Not as good as our consumable margins, but it's better than our instrument margins.

Speaker 3

So it kind of fits in between The instrument margins and the consumable margins as you would expect. In terms of the SIP, those deals are actually Since the way those are structured is again an upfront consumable purchase and then we'll loan the instrument. And so again, from just a pure revenue standpoint and a margin standpoint, that's pure consumable revenue, which is obviously great revenue. But the absolute dollars are obviously lower, in most cases because usually you'd have an initial consumable purchase Along with an instrument purchase as well. And so the customers do have the option to purchase the instrument over time.

Speaker 3

And but again, just from a pure margin perspective, the SIP deals are essentially consumable deals, if you will.

Speaker 5

Thank you.

Speaker 3

Thanks, Derek.

Operator

One moment for your next question. The next question comes from the line of Dan Brennan of TD Cowen. Dan, please go ahead.

Speaker 6

Hey, good afternoon. This is Kyle on for Dan. Thanks for taking the questions. Had a quick one on The instrument placement model here. So is this being offered directly To every prospective customer for Proteograph now or are you still being a little bit selective in who ultimately gets this model?

Speaker 3

Yes, Kyle, thanks for the question. We are being strategic about it, which is Why we call it the strategic instrument placement program in a sense is, is we really want customers who have projects and have things lined up where They really want access and also want to publish, right? Again, coming back to the overarching Objective of what we're trying to do is just get more data out there, so people can publish and validate What we're excited about with the technology. And so it's really about placing these instruments with some key accounts And again, making sure that they are going to generate the consumable pull through over time, Such that at a point in time, that they will go ahead and purchase the instrument. So we hope that it becomes almost a deferred Purchase in a sense that they will purchase them over time, but certainly going into it, there's no expectation of that.

Speaker 3

We certainly are expecting that they will Drive the consumable pull through. So we are being thoughtful about who we provide this to.

Speaker 6

Got it. And then is there anything baked into the guide on increased customer traction with new publications in the back half of this year? Is that sort of Pushed down to 24 perhaps.

Speaker 2

Kyle, we have Visibility to 4 customer manuscripts that are currently under review and probably another handful That are scheduled to be submitted. And the key thing to keep in mind is that It just takes time for these papers to go through the peer review process. And by the way, there's almost always an inverse correlation between the Quality of the journal and the speed of review where if you want to publish in a really, really high quality journal, it usually takes longer and lower quality journal is And so the visibility that I have to the papers that are On the review, at least 3 or 4 of them are sort of what I would consider The very, very top kind of journals. And again, these are customer papers. We sit there, we try to support them.

Speaker 2

But ultimately, they're the ones that are going through review process and we just sit there like expected parents Waiting for the childbirth to come. But I'm optimistic that we're going to begin to see these papers. And again, the data is great. The studies are great. These are great journals.

Speaker 2

And I think once customer publication comes, there's going to be And hopefully, a significant tailwind toward adoption for us.

Speaker 6

Got it. Thank you.

Operator

One moment for your last question. The last question comes from the line of Rachel VanSao of JPMorgan. Rachel, please go ahead.

Speaker 7

Hello. This is Marta Nazarabits on for Rachel I just wanted to follow-up on these alternative leases, And on the SIP and stock options that you provide, are you seeing an uptick in those versus capital purchases? Or would you say the ratio is still stable since it's Thank you.

Speaker 2

Yes. We're seeing I mean, look, these were just announced Well, the SAC was just announced at the ASMS in early June. So these are the early days, and I think I mean early, I would say months, and we just have to see what happens over the course of the coming months, but we're seeing good traction in terms of customers Requesting information and engaging with our sales and support folks, but I think too early for me to make a call on that. On the SIP, let me see if David can give you more color.

Speaker 3

Yes. On the SIP, we are seeing good traction there. And I think it speaks To the positive nature of which people view the option for them. And Again, I think we a good portion of our placements over the first half Have taken advantage of that. And so I think that's I think speaks to the to that it's resonating with folks While they secure the capital funding to purchase the instrument outright, it allows them to kind of get started And get moving with some of their studies that they'd like to do.

Speaker 3

So I think the SIP has gotten good traction and we're continuing to be optimistic about it.

Powered by Quartr
Earnings Conference Call
Seer Q2 2023
00:00 / 00:00