Standard BioTools Inc (LAB) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Fluidigm fourth-quarter and fiscal full-year 2011 financial results conference call. Currently all participants will be in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions).

As a reminder, today's conference is being recorded and now I will turn the program over to Howard High. Sir, the floor is yours.

Thank you. Good afternoon everyone and welcome to the Fluidigm Q4 and full-year 2011 earnings conference call. After the close of market today, Fluidigm released financial results for the fourth-quarter and full-year of 2011. During this call, we will review our results and provide commentary on recent commercial activity and market trends. Following these comments, we will host a Q&A session.

Presenting for Fluidigm today will be Gajus Worthington, our President and CEO and Vikram Jog, our Chief Financial Officer. The call is being recorded and the audio portion will be archived in the investor section of our website.

During the call and subsequent Q&A session, we will be discussing plans and projections for our business, future financial results, market trends and opportunities. These statements are forward-looking statements and are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from currently anticipated events or results.

To better understand risks affecting our business, please review the risk factors in our most recently filed 10-Q and our 10-K for the year ended December 31, 2011 to be filed with the SEC. Fluidigm disclaims any obligation to update these forward-looking statements.

During the call, we will present certain financial information on a non-GAAP basis. Reconciliation between GAAP and non-GAAP results are presented in a table accompanying our earnings release which can be found on our investors website.

With that, I will turn the call over to Gajus.

Thanks, Howard. Hello, everyone, and thank you for joining our 2011 fourth-quarter and full-year earnings call. I also want to add that we really appreciate everyone joining towards the end of the day here on Valentine's Day and we will endeavor to get this done expeditiously so you can all get to your dinners and dates.

Just this past Friday, we completed our first year as a public company. I want to take a moment to thank all of you on the call for your interest in and support of Fluidigm. As you can see from the press release we just issued, our first year as FLDM was a good one. I would like to do a quick review of some highlights from 2011 and then talk about our goals for 2012.

Fluidigm grew nicely in the fourth quarter of 2011. Product revenue increased 28% year on year against a very strong comparable quarter in 2010. Growth in terms of dollars was evenly spread between our three main application areas that is gene expression which is primarily single cell; productions genotyping; and targeted resequencing sample preparation.

But the mix of revenues and growth rates were different by application. Revenues for single cell gene expression grew essentially evenly between BioMark HD Systems and chips. Approximately half of our BioMark HD sales in the quarter were designated for use in single cell research.

Chip growth dominated the increase in sales for productions genotyping including Ag-Bio and human genetics applications. As a result, we had an outstanding quarter for chip sales. We passed through our first $4 million quarter and nearly hit $5 million.

The chip sales growth indicates that the instruments that we are placing in the field are being put to use. Our Access Array System for NGS sample preparation posted on another strong quarter of instrument growth against a particularly tough comp in 2010. In the fourth quarter of 2011, a majority of our Access Array System sales in the US were linked to Illumina platforms. Of the remainder, nearly 15% of new Access Array sales were for Ion Torrent machines. This is a good start.

2011 was a great growth year for Fluidigm with product revenues up 33%. We found the market conditions and selling environment were no different from what we have experienced for several years now. We are well prepared to compete and know how to battle for every sale.

Interest in sales of our new assays DELTAgene and SNPtype enjoyed a solid first six months. While we are still early in the development of the market for our assays, the indications are that this will become a meaningful part of our consumable revenue stream perhaps as early as the second half of 2012.

Our total consumable revenue in the fourth quarter of 2011 grew an impressive 70% in 2011 when compared with the prior year. For the full year, our 2011 product mix was 62% instruments and 38% consumables. Our consumables revenue, chips, reagents and assays grew significantly achieving 58% growth in 2011 when compared with the prior year. This is faster growth than we experienced in 2010. We are very pleased with our product margins which remain solid at 67% for the quarter and for the full year.

When we were going public, we told investors that in order to seize the opportunities that were available to us in 2011 we had to improve our commercial execution. Accordingly, we realigned our focus, instituted substantial and new sales discipline, brought in very high quality regional leadership and minimized distractions. I am happy to report that as a Company, I really feel we nailed this objective and I'm going to take this opportunity to give a shout out to any Fluidigmers out there that may be listening in. Well done, folks. I am so proud of you.

The improvement in our commercial execution on top of another year of stellar performance from our manufacturing group allowed Fluidigm to consistently deliver on our commitments throughout the year.

We had several significant achievements during the year that I would like to highlight. We had an oversubscribed upsized IPO wherein we raised over $70 million in cash. We launched the new BioMark HD System, our flagship product. It had the best first-year sales of any new product we have ever delivered.

We achieved our long-term product margin profile several quarters earlier than we were expecting. We completed major settlement and patent licensing agreements with Life Technologies and Caliper. Our new SNPtype and DELTAgene offerings enjoyed a very warm acceptance by our customers and most of all, Fluidigm executed remarkably well against our commitments that allowed the Company to enjoy strong growth throughout the year.

So what should you expect from Fluidigm in 2012? First, more growth. We are guiding to product revenue growth of 25% to 30% in 2012 from our first full year -- from our full-year 2011 product revenue of $40.6 million. Our emphasis on promoting and enabling single cell research will intensify. So we are seeing interest in single cell genomics rising across geographies and beginning to permeate large and small research labs across broad fields of biology from oncology to immunology from neurology to developmental biology.

Our conviction has cemented that single cell genomics is an important emerging field of research and that it will be a big commercial opportunity. We are committed to maintaining our leadership position in this area.

Our customers tell us that we are the clear market leader and technology leader in single cell genomics. In 2012, you can expect to see new products from Fluidigm to address some of the bottlenecks in the workflow of single cell research.

For single cell researchers, they must be able to find, isolate and capture their particular individual cells of interest no matter how rare. They must be able to take the very small quantities of DNA material available from a single cell and use that to run hundreds of tests. They must be able to study hundreds if not thousands of individual cells quickly, accurately and at low cost. They need to be able to rapidly analyze the data they collect.

Fluidigm will be working to help our customers streamline and simplify this workflow so that important discoveries can be made and published almost routinely.

In sequencing, we expect researchers to continue their transition to targeted resequencing and that unit growth in the sequencing space will be driven by the personal genomic sequencers such as Ion Torrent's PGM and Illumina's MiSeq.

As you know, the Fluidigm Access Array System were designed from the ground up to meet the sample preparation needs of targeted resequencing. To date the Access Array System has been our fastest ramping product ever from a unit volume standpoint but to date we have only captured placements in approximately 10% of the installed base of instruments that we believe are conducting targeted sequencing today.

In 2012, you should expect Fluidigm to capture more market share and therefore continue to penetrate the existing customer base as well as earn a fair share of placements in front of new sequencers being placed during the year. We know there will be increasing competition in this sample preparation segment of the market. We continue to have substantially lower cost per sample than any other solution as well as a superior and fully integrated workflow and we are the only solution that works across all NGS platforms.

In 2012, you will see us continue to broaden our Access Array protocols and we will begin some directed marketing efforts to ensure we seize opportunities that are created by these new sequencers being introduced into the market place. For example just this afternoon, we announced the availability of a new primer kit that increases our available coverage per chip by tenfold.

We are intrigued by new applications and production genotyping. Uses in human genetics grew substantially in the second half of 2011 and we now believe some of these will spread. For example, several of our customers are genetically fingerprinting samples prior to sequencing our microarray analysis. This methodology provides a superior means of sample tracking and QC in large studies. But whether our customers are concentrating on plants, animals, fish or humans, they are all enjoying the high quality data easy workflow and low cost of Fluidigm's high throughput SNP genotyping technology.

In general the markets seem to be moving towards our areas of focus, single cell genomics, sample preparation for targeted resequencing, and production genotyping are three of the stronger growth areas in the life science business today. We are well positioned to compete and win in each of these fields in 2012 and beyond.

We continue to look for complementary commercial and technological assets so we can provide more of the workflows in which we participate. There is no imminent deal on this front but we have told you we are actively searching.

Now I would like to turn it over to Vikram and he will give you a more and thorough understanding of the quarters' and the full-year's financial results.

Let me add my welcome to everyone on the call today. I hope you have all had a chance to review our 2011 Q4 and full-year earnings release. I will first walk you through the operating results and then provide an update for our 2012 full-year guidance.

In the fourth quarter of 2011, our product revenue grew 28% to $12.3 million. Our total revenue in the quarter was $13 million, 26% higher than the prior year fourth quarter.

For the full year, product revenue reached $40.6 million, 33% higher than the prior year's number and total revenue grew to $42.9 million, 28% higher than 2010.

We experienced strong consumables revenue growth in the fourth quarter and throughout the year. We achieved a new high watermark in chip sales for the quarter surpassing the $4 million level for the first time in Fluidigm history. Our total consumable product revenue, both chips and assays was $4.9 million during the fourth quarter, a gain of 70% over the prior year's quarter.

Our instrument consumables mix was 62% to 38% respectively for the full year and was within the range of our historical mix. Analytical systems were roughly 54% of unit sales of instruments and Access Array Systems were roughly 46% of unit sales of instruments for the year.

Our installed base of instruments was just over 480 systems by the end of 2011 of which roughly three-fourths were analytical systems and the remainder was preparatory systems. ASPs were up across all instrument systems compared to the prior year.

Geographic revenues as a percentage of full-year revenues were as follows -- United States 53%; Europe 26%; Japan 10%; Asia-Pacific 9%; and 2% other.

When looking across our geographies, we anticipate balanced growth across all three of our major application focus areas, single cell genomics, high throughput SNP genotyping and targeted resequencing sample preparation. We will continue a strong focus on maintaining our market-leading position in single cell genomics and we expect to continue to have limited visibility in Japan during 2012.

Net loss for the quarter was $3.5 million compared to a net loss of $3.1 million in the prior year fourth quarter. Non-GAAP net loss for the fourth quarter of 2011 was $1.9 million as compared to $1.2 million for the fourth quarter of 2010.

For the full year, net loss was $22.5 million compared to a net loss of $16.9 million in 2010. Non-GAAP net loss for the full year of 2011 was $11.6 million as compared to $11.2 million for 2010.

Cost of product revenue was $4 million in Q4 of 2011 compared to $3.6 million in Q4 of 2010. Product margin in Q4 2011 and for the full year was 67%.

On a year-on-year basis, our product margin increased by 5 percentage points while both instruments and consumables experienced good margin growth, continued reduction in the materials cost of our instruments was the primary driver of our product margin increase.

Turning now to OpEx, research and development expenses in the fourth quarter were $4 million compared to $2.9 million in the fourth quarter of 2010. For the year, R&D expenses were $13.9 million compared to $13 million in 2010. SG&A expenses rose to $8 million in the fourth quarter of 2011 compared to $5.9 million in the year-ago period.

For the 2011 full year, SG&A expenses were $31.3 million excluding the $3 million settlement with Life Technologies compared to $23.5 million in 2010 representing a 33% increase year over year.

We have been executing on our plan to increase sales and marketing expenses to support our projected growth trajectory and we expect to continue that effort in 2012.

For the year, stock compensation expense rose to $2.8 million compared to $1.6 million in the prior year and interest expense was $3.1 million in 2011 compared to $2.2 million in the prior year.

Moving onto the balance sheet, total cash, cash equivalents and available for sale securities totaled $55 million at the end of 2011. Our DSO in 2011 was just under 70 days and this is the third consecutive year that DSO has demonstrated significant improvement at year end.

Inventory was up just over $1 million compared to the end of 2010. Capital expenditures were $2 million compared to $1.5 million in 2010 and principal payments on our long-term debt amounted to $1.5 million in the fourth quarter and $4.7 million for the 2011 year.

We expect full-year 2012 product revenue to grow 25% to 30% from full-year 2011 product revenue of $40.6 million. We expect 2012 collaboration and grant revenue to be at least $600,000. This could be higher depending on the progress of our ongoing collaboration with our partner.

Historically, Fluidigm's product revenues have tended to be lowest in the first quarter, down from the prior year's fourth quarter reflecting numerous factors including among others, seasonal variations in customer operations and customer budget and capital spending cycles. In recent years, product revenue experienced its largest sequential growth in the second and fourth quarters of the year and we expect that trend to continue this year. We expect each quarter in 2012 to show year-on-year growth.

Product margins are expected to be similar to 2011. Operating expenses in 2012 are projected to be between $51 million and $54 million. Stock compensation expense is projected to be between $3.4 million and $4 million. Capital spending is expected to be between $5 million and $6 million, up significantly from 2011.

We plan to invest in R&D equipment to continue our improvements in manufacturing productivity, additional demonstration units to support our sales efforts and loaner equipment to support our service business.

Repayment of long-term debt is projected to be approximately $9 million including a balloon payment of $2.3 million in March 2012.

And with that, I will now turn the call over to the operator to open it up for questions.

(Operator Instructions). Dan Leonard, Leerink Swann.

Great, thank you. Gajus or Vikram, could you give me a sense for how sensitive your 2012 forecast is to product launches that you haven't done yet as opposed to continued growth of your existing product line?

Dan, this is Gajus. It is not that sensitive to new product launches. We have learned over the years that it's pretty risky to depend heavily on new product revenues. We are anticipating that there will be some contribution from new products but as you are suggesting really the growth is primarily from existing products.

Okay, thank you. And then my follow-up. The consumables run rate in the fourth quarter, obviously a big step up from where you were previously. Is that what we should be thinking about as a new run rate for your consumables business or was there may be some stocking by your customers in the fourth quarter that wouldn't necessarily be sustainable?

Yes, I wouldn't recommend you change your assumptions about pullthrough at this point in time. We won't really know whether or not there was stocking going on in the fourth quarter until we get through the first quarter. And we have seen quarters before; you may remember the first quarter of 2011 was like this where we saw a spike. So really before we would advise you to change anything in your model, we'd like to see several repeatable quarters of this kind of run rate.

Dan, this is Vikram. And having said that, the consumables run rate in Q4 was within the range of pullthrough that we have talked to you about in the past $40,000 to $50,000 for analytical instruments per instrument per year. Albeit at the high end of that range but certainly within the range that we have discussed previously.

Okay. Thank you both.

Ross Muken, Deutsche Bank.

This is [Vijay] in for Ross and thank you for taking my question. My first one was on Access Array. That was an interesting comment that you made, Gajus. And noting that half of your new instrument placements for Ion Torrent and as you know, some of these Benchtop boxes, the placements are far significantly higher than the larger (inaudible). So what is the thought process here? Is the thought that given the larger installed base of Benchtop Sequencing, can we continue to see this similar sort of growth trends in Access Array for next year?

First, thank you for asking the question because I may not have stated things clearly enough to make sure there wasn't confusion. So let me repeat where the growth came from for Access Array. It wasn't that half of the new systems were attached to Ion Torrents. Rather, the majority of new systems were attached to Illumina boxes and of the remainder, about half of that, half of the remainder which was about 15% of our new placements were on the front end of the Ion Torrent machines.

So again to be clear, the majority of the growth actually came from selling into the existing installed base of very high throughput, what we call [big iron] and the opportunity to sell in the front-end of the personal genome sequencers whether they be Ion Torrents or MiSeqs is really just emerging right now.

So the way we look at it, we think that the majority of the unit placements of sequencers, the vast majority really in 2012 will be these Benchtop boxes and that represents a growth opportunity. However, the existing installed base of what has got to be pretty close to 3000 big iron machines right now also represents a growth opportunity as those machines move from whole genome sequencing to targeted resequencing. Is that clear?

Thanks for the clarification, Gajus. On the consumables pullthrough for the Access Array sort when you look at the runs on a MiSeq versus a -- and a Benchtop and given the faster cycle times, I would think that if the mix were to shift toward some of the smaller Benchtop boxes that the pulled to on the Access record could sort of potentially increase?

Similar to what I said to Dan, I certainly wouldn't advise you to start thinking that way until we see proof of it and multiple quarters in a row. What I will say is that in theory, the faster cycle time of these machines could generate more runs. However, the actual runs themselves are not a function of the availability of them on the machine, they are a function of the application. So it really depends on the application first and i.e., an application that requires more constant running of the machines than what has been utilized thus far. And if that transpires, then you will see this happening. But it isn't the capability that drives the behavior, it is the application which drives the behavior. And we wouldn't project a change in pullthrough on the Access Array until we see those applications firmly and squarely adopted by the PGM and MiSeq customers.

Sure. Maybe if I could just squeeze one last one in. You sort of mentioned a geographic breakdown of revenues and when you look at single cell analysis, the bulk of the scientists doing that kind of work --where are they just from? Are they from just largely the states or is it brought across Europe and emerging markets?

It is everywhere. It is in the US, it is in Europe, it's very strong in Japan. It is in China. It is in Australia so it is really a worldwide phenomenon, Singapore. This is one of the things that gives us confidence that this is a major new area forming up. It isn't geographically isolated nor is it application-specific. You see it across many different areas of biology and in every major geography that we are selling into.

Thank you. I will step back in the queue.

Bill Quirk, Piper Jaffray.

First question, Gajus. Thanks for the color on DELTAgene. Glad to hear that that is starting to be embraced by the customers. I think I heard you say that you expect that that could be a bigger contributor in the second half of the year. Can you help us think a little bit about the pacing of this not only in '12 maybe beyond that?

Going beyond that I really can't go beyond '12. What I can tell you is that the initial strategy behind the release of our own assays was to remove an impediment to new instrument placements where customers would add up the amount of money they would have to spend on reagents or to start using the chips and that would be an argument against adopting the platform.

Obviously we were getting lots of sales of the platform despite that objection but nevertheless, we wanted it to go away. So that was the original intent. And what we have been I think pleasantly surprised by is that there is a significant portion of the existing installed base that had already made a choice of chemistry that is interested in evaluating and switching. And some of those customers have indeed switched now over to DELTAgene or SNPtype.

So what we are indicating is that in previous calls we said that we really weren't sure when this would become a meaningful part of our consumable stream. Now we are saying that come this call for Q3 or perhaps Q4, that we may be breaking out exactly how we are doing on the assay side because at that point, it could be significant enough to really start to put into a model.

Very good. Then just thinking about AGBT here later on this week, I know you guys are going to be talking a little bit about the single cell side of the business. Any preview of that for us here today?

Sorry, Bill, but do stay tuned. You probably already saw some important announcements that came out today around the Access Array. The one I alluded to in the prepared remarks that is we increased the available reach of the system that is the number basis that it can sequence per chip by a factor of 10. And the other thing that we announced was a barcode library kit for the Ion Torrent. So do come by our suite because we will be making some important -- not announcements per se -- but we will be unveiling some new technology for customers that are there.

Very good and then if I can sneak one last one in here. The comment around development expenses from Novartis, I think and forgive me -- I don't have the release in front of me -- but it seems like it is off a little bit vis-a-vis what you booked in '12. Should we read anything into that or is that simply timing?

I know you want to talk to Vikram, but I am going to answer that anyway. So.

We will talk later.

So where we are is that we completed all of our milestones as part of this arrangement in 2011 and we are now in the process of negotiating another phase and the negotiations have inherent uncertainty in them and so we just don't know at this point in time where that is going to come out.

When we are finished, we will let you know one way or another what that looks like but we are in this period right now where we haven't finished those discussions and until we do, we really can't make a projection really other than what we know which is the grants that we have today that are independent of this relationship. That is where the guidance on the research and grant revenue comes from.

We will of course be updating you all when we finish the discussions with our partner and what that means for research and grant revenue in 2012.

Got it. Thanks a lot, Gajus. Nice quarter.

Thank you.

Doug Schenkel, Cowen & Co.

Good afternoon. The NIH Common Fund Single Cell Analysis Program issued RFAs last quarter and applications were due last month. You would seem very well positioned to benefit from these and similar programs which actually seem to be increasing in number.

Maybe first specifically on the Common Fund Single Cell Analysis Program, any thoughts on how big an opportunity that might be for you and the timing for when that might begin to be seen as a contributor for Fluidigm?

And I guess the second part would be can you talk about broader indications that you might be able to point to that suggests we might be entering a period where single cell analysis becomes even more common in terms of funding RFA, biopharma interests, publications, things along those lines?

I completely agree with your assessment on these new funding that is available. It is really extremely well suited for the kind of research that the BioMark System enables and some of those grants will be awarded in the first half of this year and I think some of them will be awarded in the second half of this year. And then for those that are in the second half, once a researcher gets grant money, they don't necessarily spend it immediately so we expect to see some impact of this in 2012 as customers have submitted multiple grant proposals for the use of our equipment.

The overall program according to the NIH is a five-year program and they haven't really disclosed how much funding is available behind this initial wave of grants. What we do know though is that these initial sets of grants are designed to stimulate the market and the field and then to assess what kind of things that the field needs to do and that presumably would inform new grant monies available for research.

So I would expect to see -- we expect to see that you will see more of this type of thing towards the tail end of this year and then again in 2013.

The other thing that we think is coming here pretty soon are the formation of the first centers that focus on single cell genomics and that is another thing to really watch out for. That will drive more research interests, that will drive competition, could potentially even drive competition across the oceans as countries jockey for position in an emerging and certainly very important field.

But I also agree with your comment, Doug, every sign that we see is pointing in the right direction for the evolution of this market into an important one.

Okay, that is helpful. Thanks. Actually maybe another somewhat big picture but I think important question specific to the new custom Amplicon resequencing offering. This seems to be low hanging fruit for migration of next generation sequencing into clinical labs as it is a technique those labs are familiar with on CE sequencers.

Can you talk about whether what you're seeing in the field supports this? Are clinical labs viewing this application as maybe a catalyst or a starting point to use next generation sequencing more broadly? Does the increased throughput in Multiplex range of up to I think it is 480 Amplicons per sample address the needs for clinical users or do you still view this as more of a research tool right now?

Well, I think that your assessment that there is familiarity in the clinical field with Amplicon sequencing is true for sure because there is a large number of CE-based systems that are out there now that are in use for a variety of different applications.

That said, our sales are still centered in what I will call translational medicine and in research -- that is folks that are looking at some point to apply discovery towards some clinical aim that is off in the future or pure research.

I think that there is a lot of interest in NGS and clinical applications. There is not a lot of application of it quite yet and I think a lot of that will depend on cost points and workflows and we hear a lot of that as well as content. You need to have a really substantially differentiated value proposition for a clinical lab to switch its gear from one production platform to another. And a more natural thing to do is to switch if there is new content that comes along with that platform.

So I guess in summary what I would say is that there is definitely interest in that area but at the moment really are sales, are research and translational medicine.

Okay. Maybe if I could sneak in one more. Clearly it was a good close to the year really strong fourth quarter. The instrument to consumable mix was skewed a bit more to the consumable side than I expected. I am just curious, did instruments come in at a level consistent with your internal expectations? And if by chance they were maybe a little bit light, I am just wondering if maybe that suggests that Q1 instrument sales may have a little bit more momentum than normal?

Yes, I have to say that we were really pleased with the corridor all around. I think -- and we are constantly asking ourselves a question about what do we see in the market and what are our placements and such telling us? I think that it is fair to say that if there any difference in behavior between 2011 and 2010 which was also a really strong quarter, there was less what I will call budget flush in the fourth quarter in the US and probably incrementally less budget flush in Europe as well.

Okay. I guess sort of along those lines, one of the reasons I'm asking this question is some of your -- I don't know if you would call them -- some other companies in the tool space spoke about the fact that there was a little bit of momentum that builds toward the end of the quarter on the capital side. And again, you usually expect that because of the budget flush. But relative to what they saw say in October and November, it was even more back loaded so the reason I ask is just whether you guys had more momentum coming into the year on the instrument side than you would typically expect but it doesn't sound like there is anything abnormal there.

No. Our instrument quarters are always heavily back-end loaded and that was true in the fourth quarter as well.

Okay. Thanks for taking the questions.

(Operator Instructions). David Ferreiro, Oppenheimer.

This is Josh in for David. Just one question. You guys mentioned operating expenses looking forward at about 51% to 54% and mentioned investment in R&D. I was kind of just looking for a little color on that and kind of how you are planning to ramp and how that plays with SG&A as well?

So, Josh, it is $51 million to $54 million, right?

Sorry.

Not a problem. So as we had mentioned, we have been increasing SG&A expenses and within that other than the necessary expenses of being a public company, most of the additional spend in 2011 was in the sales and marketing arena and we expect that to continue in 2012 as well.

So our expenditures in SG&A are primarily related or the increase in expenditures in SG&A projected for 2012 are primarily geared toward sales and marketing. Your second question was relative to capital expenditures I believe.

R&D and just how it ramps with time whether it is going to continue to increase or if it is going to hold flat or even come down by the end of the year?

R&D, we do expect to continue to increase. I would anticipate the rate of increase in R&D will be less than that of sales and marketing. I would expect that to be in the low double-digit area. That is talking about R&D expenses.

Great. Okay, thank you.

(Operator Instructions). Presenters, I am showing no additional questioners in the queue. I would like to turn the program back over to Howard High for any closing remarks.

We would like to thank everyone for attending our call. I want to give you a heads up that Fluidigm will be participating at AGBT in Florida starting tomorrow and ending this Saturday and we will also be at the Cowen & Co. 32nd Annual Healthcare Conference March 5 through 7 in Boston at the Copely Marriott.

Thank you very much and have a happy Valentine's Day.

Thank you, gentlemen. Ladies and gentlemen, this does conclude today's program. Thank you for your participation and have a wonderful day. Attendees, you may disconnect at this time.