Akoya Biosciences Inc (AKYA) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by.

Welcome to Akoya Biosciences Second Quarter 2021 Earnings Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker, David Deuchler.

Good afternoon, everyone. Thank you for participating in today's conference call. On the call from Akoya, we have Brian McKelligon, Chief Executive Officer; and Joe Driscoll, Chief Financial Officer.

Earlier today, Akoya released financial results for the second quarter ended June 30, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of this. For a list and description of the risks and uncertainties associated with Akoya's business, please refer to the Risk Factors section of our Form S-1 filed with the Securities and Exchange Commission on April 15, 2021.

We urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 10, 2021. Akoya disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise.

And with that, I will turn the call over to Brian.

Thank you, David, and good afternoon, everyone, and thank you for joining Akoya's second quarter earnings call. Joe and I will start with prepared remarks, and then we'll take questions. I'm very excited to discuss our second quarter 2021 performance with you this morning. This marks our second time reporting results as a public company following the IPO in April.

During the quarter, we continued to deliver on our plan to be The Spatial Biology Company and work towards our mission of delivering revolutionary class of new spatially dried biomarkers, empowering life sciences' researchers to better understand disease and helping clinicians improve patient outcomes. We're pleased to report strong second quarter financial results with reported total revenue of $13.1 million, representing growth of 53% compared to the second quarter of 2020. This is ahead of our expectations of at least 45% growth provided on the last call.

We had a strong quarter of reagent revenue indicating our customers are back to work and using the Akoya platforms in a significant way. Joe will review our financial performance in detail shortly.

As we discussed in the prior call, spatial biology solutions enable researchers to map the distribution of cell types and biomarkers across whole tissue samples at single cell resolution. While established technologies like next-generation sequencing, single-cell analysis and flow cytometry destroy the tissue sample while analyzing it, Akoya's spatial biology platform keeps the tissue sample intact, preserving the underlying tissue structure and enabling the detection and measurement of cells and biomarkers within their tissue context.

The output is a detailed computable map of the tissue sample, enabling much deeper understanding of the underlying biology, cellular dynamics and interactions between key biomarkers. Spatial biology is the next evolution in tissue analysis, and it is happening today across more than 600 Akoya instruments already installed at leading academic institutions, biopharmaceutical companies and contract research organizations.

Akoya has the largest installed base of any spatial biology platforms in the industry. This is a true competitive advantage and one that we intend to fully leverage. Most new technologies in the life sciences market begin in the discovery market with the goal of eventually making their way to the clinic to truly impact patient care. What's unique and powerful about the spatial biology market and Akoya's CODEX and Phenoptics platform specifically is that we are today simultaneously impacting science across this entire continuum from discovery to translational and clinical research.

Price at under $100,000 and able to integrate with our customers' existing microscopes, our CODEX platform is the industry's most cost-effective and complete spatial biology platform for the discovery market. It is an end-to-end automated solution that makes ultra-high multiplexing spatial biology accessible to all researchers. Our Phenoptics platform is designed to sit downstream of CODEX serving the translational and clinical research markets, where sample throughput requirements are at order of magnitude higher.

For example, our Phenoptics customers using this platform for clinical trial studies are routinely performing spatial analysis on 30 or more samples per day. Phenoptics stands alone in the marketplace delivering unparalleled throughput and is a fully automated and complete end-to-end spatial biology solution. With CODEX and Phenoptics, Akoya is uniquely positioned to capture the full market opportunity for spatial biology to revolutionize not just discovery, but also clinical and translational research, and ultimately, patient care.

We are encouraged by the continued commercial success of our established on-market solutions, rapidly growing installed base, strong financial performance and accelerating publication rate. Following the IPO and as discussed on the prior call, we're making investments to build on and maintain our leadership position in the spatial biology market. These investments include the ongoing and rapid expansion of our commercial organization and expanded investment in research and development.

In the near future, Akoya will deliver new and improved spatial biology solutions, including significant workflow improvements for our new and existing customers. These new products and capabilities will be enabled by leveraging our full technology suites across CODEX and Phenoptics, by internally developing new groundbreaking spatial biology solutions and by partnering with industry and academic thought leaders.

Our R&D team's focus is on delivering expanded multiplexing and throughput, new applications for single-cell whole flight analysis, and the continued advancement of our data analysis and visualization solutions. The result will be a powerful continuum of products that drive expanded market access, increased system placements and growing platform utilization and reagent pull-through. In the coming months, we'll begin to highlight some of these advancements, so please stay tuned.

To continue to advance CODEX as the most accessible and powerful spatial biology platform on market, we recently announced partnerships with leading microscopy companies, including ZEISS, Nikon, CrestOptics and Andor. These partnerships enable robust technical integration between CODEX and our partner's microscopes. It also enables ongoing workflow improvements, application expansion and co-promotional activities to drive further adoption of CODEX.

These partners are also important enablers of a recently announced imaging innovators network called the iSquare network. With the iSquare network, Akoya is partnering with academic thought leaders to drive innovation and application development on CODEX keeping us on the leading edge of new spatial biology solutions.

So let's now pivot to our translational and clinical research efforts. As we discussed, Phenoptics is the only spatial biology platform capable of meeting the high standards of translation on clinical research studies on the path to true clinical use. Now this is particularly true when considering the requirements to support clinical trials.

These core requirements include the following: First, a platform must be high throughput and automated, capable of analyzing 20 to 50 samples per day; second, the platform must have a fully demonstrated reproducibility and robustness; and third, the platform must deliver single-cell resolution across the entire slide. Single-cell whole slide resolution across the entire tissue is fundamental. Phenoptics is the only platform on the market that can meet these throughput, robustness and sample resolution requirements.

A seminal publication released last month in the Journal for ImmunoTherapy of Cancer highlights that our Phenoptics platform meets these high-performance standards called the MITRE Study. This publication was the result of a partnership with Johns Hopkins University, Yale; Hurley Child's Research Institute; and D Anderson in Bristol-Myers Squibb. It concluded that the Phenoptics platform delivers the throughput and analytical robustness needed for clinical trial and eventual clinical use. This publication is central and among an accelerating body of peer review publications that are evidence of our growing success in the translational and clinical markets.

In Q2, we also announced the launch of our Advanced Biopharma Solutions service lab out of our Marlborough facility. This team is focused on serving our growing clinical trial partnerships with leading biopharmaceutical companies. We are working closely with biopharma companies to implement Phenoptics in their clinical trials to help them better understand and predict response to their novel therapies.

Our recently announced partnership with AstraZeneca is a signature example of the value that Phenoptics and the Advanced Biopharma Solutions group delivers. AstraZeneca's immuno-oncology division has partnered with Akoya to leverage the Phenoptics platform and these services to discover predictive signatures of response to therapy to inform their clinical trial design.

Because of the established throughput and robustness and resolution of Phenoptics, similar partnerships are ongoing with a number of other leading biopharma companies. A key driver of the continued success of Phenoptics is the discovery and publication of transformative spatial phenotyping signatures. A standout publication in the June 11 issue of science featured powerful discoveries from the team at Johns Hopkins University as part of our partnership with their AstroPath initiative. AstroPath is a cutting edge in a disciplinary partnership within Johns Hopkins between their astrophysics department and their cancer center with our Phenoptics platform at the core.

In this paper, the team at Johns Hopkins discovered a powerful biomarker signature to predict with a high degree of confidence, response to immunotherapy in advanced melanoma patients. Together, we now aim to leverage this and future groundbreaking discoveries with the AstroPath team to provide even more powerful clinical trial solutions to our shared biopharmaceutical partners.

In addition to the AstroPath publication, the accelerating rate of peer-reviewed publications on our platform continues. There were 109 peer-reviewed publications on our platform in 2020. This is a near fourfold increase over 2019. And now in the first half of 2021, there are already 138 publications more than all of last year. That's nearly 250 publications in the last 18 months. Our customers are clearly uncovering high-value scientific discoveries through their use of Akoya's platform.

As we outlined, we remain focused on driving revenue growth by investing in the business to expand our commercial infrastructure and accelerate research and development. As of June 30, we have approximately 225 employees worldwide, a significant increase from the December 31 total of about 170. We are continuing our aggressive investment to add more talent in all parts of the business and are excited about the prospects ahead.

We recently announced the appointment of Mr. Scott Mendel to our Board of Directors. Scott brings 25 years of experience as one of the most accomplished executives in the diagnostic industry and a proven track record of transforming innovative technologies into clinical testing solutions. We are confident that Scott will bring tremendous insights to Akoya as we continue to advance the company.

In summary, we're pleased with our second quarter performance, achieving great progress across a range of important metrics, and we look forward to executing on our financial and strategic plans as we move forward through 2021 and beyond.

I will now turn the call over to Joe to discuss our financial results. Joe?

Thanks, Brian. Hello, everyone.

As Brian mentioned earlier, total revenue for the second quarter of 2021 was $13.1 million as compared to $8.6 million in the second quarter of 2020, which represents 53% growth. The prior year quarter was impacted by COVID-related disruptions at many of our customers. Product revenue was $10.7 million for the second quarter of 2021 compared to $6.2 million in the prior year quarter. Services and other revenue totaled $2.4 million in the second quarter of 2021 as compared to $2.4 million in the prior year quarter.

Within product revenue, instrument revenue was $6.3 million in the second quarter of 2021 compared to $4.5 million in the prior year. Reagent revenue was $4.3 million in the second quarter of 2021 versus $1.5 million in the prior year. Increased reagent revenue was due to higher instrument count, return to work in labs and greater pull-through per instrument than previously experienced.

Our annualized pull-through on a year-to-date basis exceeds $30,000 per instrument for both CODEX and Polaris. The Polaris pull-through is in line with our expectations. The CODEX pull-through is significantly higher than our historical performance, which has been in the low $20,000 range. Reagent revenue is expected to be solid in the third quarter but likely will be below the second quarter due to seasonality.

We monitor instruments sold in the installed base as key performance indicators for our business, which Brian discussed earlier. To reiterate, we had another strong quarter with 31 total instruments sold, highlighted by 18 Phenoptics installations, of which, the majority are Polaris instruments. The total installed base is now 618 instruments as of June 30, 2021. We did close several additional CODEX units near the end of the quarter, which will ship in Q3.

Additionally, there were some COVID-related disruptions in Japan, which resulted in several potential instrument purchases being pushed out of the second quarter. Gross profit was $8.1 million in the second quarter of 2021 compared to $5.3 million in the prior year. This resulted in gross profit margin of 62.2%, an increase from the 61.6% in the prior year period. The increase in gross margin was primarily driven by the positive mix of reagent revenue in the quarter.

Total operating expenses were $14.5 million in the second quarter of 2021 as compared to $9.1 million in the prior year quarter. In line with our strategic plan, the increase was part of our plan to significantly invest in the business following our IPO. We are aggressively hiring in all aspects of the business, including increasing our commercial spend to continue to drive market share growth. Looking forward, we project OpEx should be at least $16.5 million in the third quarter.

Net loss for the second quarter of 2021 was $5.6 million compared to net loss of $4.6 million in the second quarter of 2020 due to the increased investment in operating expenses. Our year-to-date revenue is $25.3 million, a 29% increase over the first 6 months of 2020. This puts us right on track to achieve our targets for fiscal 2021.

We have $135.5 million of cash as of June 30, 2021. Common shares outstanding are 37.1 million as of June 30. As highlighted earlier, we remain confident in our ability to deliver strong growth in 2021 and are anticipating third quarter revenue growth of approximately 28% to 30% over the prior year quarter. We are refining our guidance for the full year 2021 from at least $52 million to between $52.5 million and $53 million.

The second quarter results exceeded our guidance, and we are focused on delivering consistently strong results each quarter.

Now I'll turn it back over to Brian.

Thank you, Joe.

In summary, we remain excited about the impact of spatial biology on the discovery, translational and clinical research markets and continue to see robust adoption of our CODEX and Phenoptics platforms. We're pleased to report strong results in our second quarter as a public company. We are thankful for the hard work of our fellow dedicated Akoyans and for the support of our customers and shareholders. Akoya remains well positioned for growth, and we're excited about the opportunities ahead.

Now at this point, we will open up the call for questions. Operator?

(Operator Instructions)

Our first question is from Tejas Savant with Morgan Stanley.

My name -- this is Edmund on for Tejas. Just to start off, I wanted a clarification. The quarter-over-quarter step-down in instrument placements was driven by the COVID headwinds that were seen in Japan. Is that correct?

Yes, versus Q1, you're talking about?

Yes.

Yes. So we closed a couple of additional CODEX units right near the end of the quarter that are going to ship in Q3. And then there were several more units in -- basically in Japan that got pushed out of Q2 due to COVID-related issues.

Got it. So I guess on that note, aside from Japan over the last couple of weeks, have you seen any pockets of weakness developed in certain regions as the resurgence of COVID starts looming? What are you seeing in terms of like...

Yes, Edmund. I appreciate your questions. Sorry, go ahead.

No, it's okay. I was just asking what you're seeing in terms of ordering trends for instruments and reagents?

Yes, it's pretty dynamic, as you've likely heard. There's ongoing challenges in Asia Pacific continuing. Customer access in areas like U.K. has been an ongoing problem. And in the U.S., again, it's pretty dynamic in terms of the access to customers. At this point though, as we look forward, we're still confident that the opportunities on the instruments and reagent side are in line with our expectations, but it is pretty volatile.

Got it. That's very helpful. And then turning to your iSquare network. On your is ZEISS collaboration, can you provide any incremental updates there? I'm assuming there's not much you can say in terms of the technical product side. But in terms of mapping up the co-marketing agreement, have you guys made any progress? And then for the 3 new collaborations that were mentioned, would they be similar types of collaborations or deal agreements?

Yes. Maybe in reverse order, the all 4 arrangements are structurally similar where the benefits really are ensuring tight technical integration, just to continue to streamline the user experience and adopt new workflow, to increase acquisition speed, drive for deeper resolution. So structurally, they're the same, both technically and the co-marketing side. I would say, to your first question, the co-marketing activities are really just beginning to be put in place now. So nothing more details off or on size or any of the other 3 specifically at this point.

Got it. And then one final one from me. In terms of launching your Advanced Biopharma Solutions as you roll out of your strategic clinical research program initiative, can you remind us if you've highlighted any other that might be coming up in this clinical research program initiative?

So we announced the Advanced BioPharma Solutions group to reiterate as part of our partnership with key biopharma like AstraZeneca to work in the clinical trial space. In terms of partnerships, a similar partnership with UCSF, UC San Francisco, working on their I-SPY 2 trial, which is focused on breast cancer. That's another partnership within the Phenoptics portfolio that we announced on top of the publications that we talked about in the opening remarks.

Our next question comes from Steven Mah with Piper Sandler.

Congratulations.

Sure.

Thanks, Steve.

Yes. So maybe just to stay on the Advanced Biopharma Solutions. I know you -- the Marlborough lab is undergoing CLIA certification to help out your partners do a clinical trial patient stratification. Can we get an update on that timing? And should we expect once you guys get CLIA lab certification that's going to accelerate the signing on of new partners?

Yes. So the timing, there's a little bit of reliance on the regulatory bodies giving us the final stamp. So we expect it to likely be within this quarter. And that's, I think, similar to what we have discussed before. And to your question about kind of the ABS business flow, to answer to your question, yes, with that CLIA certification, that opens up additional business with existing and new partners, for example, to contemplate the use of our services for actual enrollment studies.

Okay. Great. That's helpful color. And then I had a question on the publication side. So can you give us a sense of what proportion of those 135 new publications were for translational, clinical studies versus maybe like discovery work?

Yes, that's a good question. I would say that the majority of those are on the Phenoptics portfolio. Of the 135, I would guess the overwhelming majority is Phenoptics just because of its -- it's longer standing in the market since the launch of Phenoptics 2.0 at the end of 2018. And with CODEX coming out throughout 2019, those are starting to roll in. And within the Phenoptics portfolio, the overwhelming majority of those are really translational studies. Like we talked about earlier on the AstroPath science publication.

That said, some of these publications are really foundational in establishing analytical robustness. Now one could argue that those are translational, but those are really the predicate platform requirements that you need to establish the robustness as we talked about earlier for a clinical study. So some of them are translational. And even within some of those, they're really not platform assessments like the MITRE Study we talked about, Steven.

Yes. No, that's helpful. And yes, maybe just -- yes, I mean, yes, I appreciate that. A lot of the publications were Phenoptics and translational. How do you square that away with the CODEX pull-through being higher than Phenoptics in the quarter?

It's just -- well, the publications usually take like 1.5 years to come out. So CODEX kind of launching throughout 2019, the wet blanket for CODEX 2020. We're starting to see a lot more CODEX publications. I guess probably, I'm going to say, of the 135, and this is a complete estimate, it's probably 20 or so are on the CODEX front. And the pull-through is happening, I think, just because people are really starting to get value and accelerate the use of the platform. We just didn't have a lot of visibility, Steven, of the pull-through throughout 2020 just because it was such a unique year. I don't know, Joe, if you want to add any color to that.

Yes. I think CODEX is really just starting to hit its stride now. So we launched it in 2019. People were getting used to using it in 2019. Then 2020 came and that was kind of a strange year. And I think people are now back in their labs and really seeing the value of the CODEX instrument. So I think it's really just starting to hit its stride right now.

Okay. No, that's great color. And then, Joe, maybe question for you and also Brian. As you guys say you're going to continue to invest in the business aggressively hiring on the sales and marketing side, do you see any higher spend in any specific geographies? Or is it sort of balanced across the globe?

Yes. I mean I think generally, it's balanced. I think we're having an opportunity to get some really stellar talent just because of how far we advance, I think, we're just more broadly recognized. But I don't think there's any surprises in terms of the cost basis, but Joe, I'll let you add color.

Yes. We're adding commercial people throughout the world. So that's happening in every geography right now. We would be adding people in the U.S. just because of areas like research and development and some areas that are just purely U.S.-based functions. But on the commercial side, we're adding sales and marketing talent all over the world.

Our next question comes from Kyle Mikson with Canaccord Genuity.

Brian and Joe, congrats on a great quarter.

Thanks, Kyle.

I want to talk about the guidance as well. Yes, sure. So the fourth quarter implies 15% year-over-year growth and which is below The Street. I mean the third quarter is above The Street but I was just wondering what level of conservatism or maybe tempered expectations that you're kind of baking in there. And then kind of jumping off of that and also piggybacking on the prior question, I was wondering if the third quarter interim placements would be like abnormally higher just given the Japan delays, I guess, and some of the installations that went out of 2Q as well.

Yes. And I think we're dealing with, Kyle -- and I'll let Joe dig into the details. Obviously, what we're dealing with here in terms of the prior year's quarterly growth over the prior years is kind of an awkward like everybody is facing an awkward predicate in the prior year. So I think that the percentage of gross lumpiness will continue.

Yes, we do expect to be sort of in line with our expectations on instrument placements for Q3 and through the rest of the year. But Joe, I'll let you add a little bit more color.

Yes. I think Q3 is going to be a normal quarter. I don't think it's going to be a big pop from anything that carried over from Q2. So I think you're looking at probably a few more instruments being placed in Q3 than in Q2. And really, just our guidance for the year, we're trying to take a conservative posture right now, really just want to kind of deliver quarter after quarter. And if we have another solid Q3, we'll certainly take a look at updating our Q4 guidance. But right now, we're just trying to stay conservative, make sure we meet everyone's expectations. And like I said, we can easily update it after next quarter if things continue to trend in the right direction.

Okay. Yes. I appreciate that, guys. I was also wondering about the competitive landscape. Obviously, a competitor with a spatial transcriptomics for platform launching assay with FFPE capability recently. Obviously, there is differences between end lights multi-cell single-cell, whole slide, et cetera. I'm just wondering if you notice any change in the landscape with the entrant of that province. And do you think it's too early? Like what type of impact do you think it could have over time or BC2 platform, I guess? And honestly, in any event, I mean, you're going to accelerate any product development on your end just based on what's happening in the space?

Yes. I think the way we look at the competitive environment is that this market is still rapidly growing. And most of the system placements are really greenfield placements and not necessarily head-to-head. And I think what's unique about a lot of the spatial transcriptomics solutions that are coming out is they do have a high degree of complementarity to what we're doing on the CODEX side. There's a recent webinar that we did on doing some of these multielement comparisons and extracting a lot of value out of it. So I think you're going to see a lot of customers leverage platforms like that and ours to move their science forward. And as we look forward to the future, we'll look at our capabilities, as I alluded to earlier, to expand our application suite as well.

Okay. And then just turning to the iSquare network. I don't know if you disclosed this but how many partners have joined so far? And I guess, any like novel applications that have come out of that yet? And then also how is the utilization kind of trending, I guess? Or how does the acceleration kind of ramping up?

So I didn't hear the second part of your question, but the first part is we have not yet talked about the specific members and the number of memberships we have in those yet. We'll probably be talking about who those partners are and what their application focus is going to be in the coming quarters. And what was the second part of your question, Kyle?

No, I think, Brian, that kind of answers that. I think I'm good at kind of that kind of answers both sides of the question, so that's good. Just one last question on the AstraZeneca partnership around Phenoptics. I just was wondering if you could kind of tell us what lies ahead in that collaboration, any like time lines or important milestones. And in the context of the broader work with Biopharma, how meaningful could that be for efforts average to really align with product development in the future?

Yes. So no specifics on AstraZeneca that I can reveal. Obviously, a lot of that is confidential in terms of the underlying details. But what's important, not just with our partnership with them, but with other large biopharma partners, that these are multi-project partners -- partnerships.

And so I think you're correct. As we look forward, we're investing more and more in the Advanced Biopharma Solutions group because it is a really important vehicle to really embed ourselves within the clinical trial work of the of these key IO biopharma, immuno-oncology biopharma. And so that's an important avenue for us, the ABS group to leverage as part of these partnerships.

Congrates, again.

Thanks.

Thanks.

And our question is from Julia Qin with JPMorgan.

Maybe just following up on the consumables strength this quarter. I guess are there any timing factors or big partner projects such as iSquare that really contributed to strength? And as we think about the second half, how should we think about the pull-through going forward? And what are the chances that we can see consumable revenue above what you're guiding to?

Yes. So there was no single event that drove the consumables. I think it was generally a lot of unlocked demand for people that had not -- didn't have the ability to get in the lab and do a lot of work. I think that was one of the big drivers. We sort of have a standard seasonality that you see, particularly on the consumable side that goes sort of Q4, Q2, Q3, Q1 in descending order. So that's the general seasonality that we -- that one sees with the consumables. And I suspect that, that's going to continue. But that said, year-over-year, we're seeing pretty profound growth in aggregate year-to-date.

Got it. And as we think about kind of the clinical trial piece of your business, obviously, it's great to see that you now have KOL validation of the clinical trial readiness of the platform. How will you monetize this part of the business? Is it mostly through instant placements or through your own ABS service? Or perhaps does the answer depend on the time horizon? Just help us think through that a little bit.

Yes. So the way we monetize that is really through both. It is through both. So again, we'll use AstraZeneca because that's the one that's publicly disclosed. They have a number of systems internally as well that they bought over the last couple of years. So what we see is really both the acquisitions of the Phenoptics platform by our biopharma customers, by CROs, who is an important customer base of us as well as growing business through our ABS services. So it's really both. And then what also happens is the -- these projects are generally larger in size. So it does help drive our consumables as well.

Got it. And so how should we think about really the revenue contribution starting in the second half of this year and how it ramps from there? And how much kind of benefit from the CLIA certification is already embedded in your current guidance?

Yes. I mean I think most of what we've talked about today as part of our efforts in the translational and clinical research effort, we -- this has been part of our 2022 plan. So I think we have a lot of this already contemplated in the model with both the workout of ABS and the growing system placements in biopharma and CROs.

And this concludes our Q&A. I would like to turn the call back to Brian McKelligon for his final remarks.

Well, just to thank you to everyone for participating today. We really do appreciate your time and look forward to following up again soon. So thank you all.

And thank you for your participation in today's conference. You may now disconnect. Have a wonderful day.