Standard BioTools Inc (LAB) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Fluidigm second-quarter 2012 financial results conference call. At this time, all participants are 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, this program is being recorded.

I would now like to introduce your host for today's program, Mr. Howard High, Investor Relations. Please go ahead, sir.

Thank you. Good afternoon, everyone, and welcome to Fluidigm's second-quarter 2012 earnings conference call. At the close of market today, Fluidigm released financial results for the second quarter of 2012. 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 is Gajus Worthington, our President and CEO; Vikram Jog, our Chief Financial officer; and Fred Walder, our Chief Business Officer. This 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, 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 the risks affecting our business, please review the risk factors in our most recently filed 10-K; and our 10-Q forms for the quarter ended June 30, 2012, 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 in the Investor section of our website.

I will now turn the call over to Gajus.

Thank you, Howard. Q2 of 2012 was another strong growth quarter for Fluidigm, with 31% product revenue growth year on year. This included 79% growth in consumables and 7% growth in instrumentation. As they have in the past, single-cell genomics and production genotyping helped drive this strong performance. However, more generic high-throughput gene expression applications also contributed meaningfully. These, in combination, led to over 20% growth in revenues for our flagship BioMark instrumentation line. The mix of consumables and instrumentation, relatively stable ASPs at a lower chip production cost, lead to a solid 69% product margin.

In summary, we are very pleased with the quarter and are confident in our growth prospects. So, once again, we are reiterating our guidance for the year of 25% to 30% growth in product revenues.

During the quarter, we saw -- as we have in nearly every previous quarter in the last several years -- more important signs that we are really on the right track with our strategic focus on single-cell genomics. In particular, our collaboration with The Broad, the Single-Cell Genomics Initiative, kicked off publicly and received substantially more interest from the scientific community than we -- and I also suspect, The Broad --anticipated.

We believe that this initiative will, in the medium- and long-term, be a strong catalyst and stimulant for important science in this area, and for the single-cell genomics market generally. Another important sign was simply the growth we've experienced in the sales of our BioMark instrumentation line and related consumables. It is abundantly clear to us that single-cell genomics will have a broad impact across the life sciences; in research, diagnostics, and in the search for more and better therapeutics.

As I have said before, one of our primary strategic objectives is to maintain our market and technological leadership in this emerging area. An important part of this effort was the launch of our new C1 Single-Cell AutoPrep System at the ISSCR conference in Japan. I can tell you, categorically, that the C1 has received more attention and has generated more early enthusiasm than any other product launch in Fluidigm's history. It is really exciting for us; and, frankly, very rewarding that the sentiment is shared by scientists in the field that are eager to accelerate their single-cell experimentation, or engage in it for the first time.

We launched the Early Access Program at the ISSCR, and the interest and participation in the program is quite strong. We've allocated up to 25 systems to the Early Access Program, which seemed very aggressive to us just a few months ago. At the rate we are going, it is possible that all those slots will be filled by year's end. I must caution, however, that filling the Early Access Program slots does not imply revenue for all those systems during this fiscal year. We expect to commenced shipment for C1 systems for revenue in late Q3.

Our experience is that new products take a while to ramp. And it takes multiple fully commercial quarters to be capable of making realistic projections. So we're not prepared to provide a breakout of revenue guidance for the C1. And when we do update our product revenue forecast -- for example, early next year for 2013 -- we may not provide guidance on a product line basis, consistent with how we currently operate.

Notwithstanding all this, the C1 launch has proceeded better than we expected or planned. This is a strong indicator of the market, and also an example of superb execution by the team and Fluidigm. That has been a theme since before I began these conference calls over a year ago. Better commercial execution was something that we promised during our IPO in February of last year. This remains an area of focus for Fluidigm, and an exercise in and of itself that will deliver value to our shareholders and provide growth to Fluidigm.

To comment on commercial execution, and more generally in the trends we're seeing, Fred Walder, our Chief Business Officer, is here. Fred, welcome to the call.

Thanks, Gajus, and welcome. While technology innovation and our strategic focus on single-cell genomics continue to be important drivers of our success, I'm pleased to report that our consistent focus on commercial execution and excellence has ensured that our products and capabilities are far more visible to many more customers on a worldwide basis than ever before.

We ended the second quarter of 2012 with nearly 50 employees in our worldwide sales and support channels, including five in our newly created China subsidiary. We've hired new, experienced, commercial leaders for several of our geo-centers. And our growth in these markets has produced record-setting results in many areas of the globe.

In Q2, our business set a new record for revenue produced in the Asia-Pacific region, for example, including extremely strong growth in China. With the public announcement of our C1 product, we also raised our commercial execution to a new level, ensuring that all fulfillment materials, product capabilities descriptions, early customer feedback, and channel training was in place at the time of our product introduction.

Since our IPO, we have been committed to applying increased resources to our commercial organization. With the development of new processes; hiring of new channel leaders and product line leaders; and expansion of our worldwide commercial operations, we've definitely been seeing the benefit of those investments. As we continue to bring new innovations to the market, we expect our increased presence in the major markets we serve will help us to more quickly benefit from those product and service offerings as a business.

While the first and most obvious part of these investments is an increased resources selling our new products, we've additionally invested in application specialists that work side-by-side with our customers, helping them to get the most out of their investments and our technology, and helping them to do more work using our instrument platforms.

We have still a great deal of work to do in order to ensure that our current and prospective customers around the world see and use our products consistently. But our investments in our commercial organization, in terms of better process, execution and expanded channel presence, has been a major benefit for the Company, and was an important driver of Q2 performance.

Thank you, Fred. Before handing it off to Vikram, I'd like to provide a few more summary comments. There's been a lot of anxiety in the market over the potential impact of NIH sequestration. For a company of our size, the relative differentiation and impact of our applications is far more important for growth than the overall budget of the NIH.

Whatever happens to the NIH budget, researchers will continue to need to do good science. That will remain their jobs. They will also continue to need to publish, in order to secure their position for future funding. With that kind of pressure, we believe attention will focus on applications and tools that are highly differentiated.

We've all seen this before, when certain tools companies have grown substantially when NIH budgets were pressured. We ourselves were an example of this going back to 2008. We believe single-cell genomics will continue to garner a larger, disproportionate share of attention and budget going forward, because it is differentiated and because the science is sound. So as we look to our own strategic planning, we spend no time trying to assess the potential outcome of budget negotiations; and, instead, all of our time and efforts to understand how important and compelling our applications are, how to make the workflows more accessible, and how to spread the word.

Finally, I'd like to say, again, that I'm very pleased with the quarter, with our trajectory, and our velocity. Credit goes to the entire team at Fluidigm who, in my view, have done a remarkable job of rising to the challenge of being a successful public company.

Now I'll hand it off to Vikram.

Thanks, Gajus and Fred. Let me add my welcome to everyone on the call today. I hope you've all had a chance to review our second-quarter 2012 earnings release. I will walk you through the operating results and highlights.

In the second quarter of 2012, our product revenue grew 31% to $12.8 million. Our total revenue in the quarter was $12.9 million, 22% higher than the prior-year second quarter. We experienced strong consumables revenue in the second quarter. Chip pull-through for our analytical systems in the second quarter exceeded the top end of our historical pull-through range of $40,000 to $50,000 per system per year. We are pleased with this performance and we will continue to watch how chip pull-through for our installed base evolves over the next few quarters. However, we are not ready to call this a sustainable trend, or to change our pull-through range at this time.

Chip pull-through for our preparative systems remained within the historical range of $10,000 to $15,000 per system per year. Our total consumables revenue, both chips and assays, was $5.9 million during the second quarter, a gain of 79% over the prior year's quarter; driven both by the increase in analytical chip pull-through, and the increase in the installed base of instrument systems.

Instrument revenue grew 7% over the prior-year quarter. We saw a robust demand for our analytical systems and our aftermarket instruments, such as additional controllers and Thermal Cyclers. These represent the bulk of our instrument sales, and grew in excess of 20% when compared with the second quarter of 2011. However, the impact of our analytical system growth, and increased service revenue, was moderated by a continued decline in our Access Array system sales.

Our instruments consumable mix was 54% to 46%. Analytical instrument systems were roughly 75% of unit sales of instruments. And Access Array systems were roughly 25% of unit sales of instruments for the quarter. The installed base of our instruments climbed to 565 systems by the end of the quarter. The total mix continues to be roughly three-fourths analytical systems, with the remainder being preparatory systems.

Geographic revenues as a precise percentage of product revenues were as follows -- United States, 51%; Europe, 22%; Asia-Pacific, 16%; Japan, 8%; and 3% other. Net loss for the quarter was $4.6 million, compared to a net loss of $7.2 million in the prior-year second quarter, which included a $3 million charge related to a litigation settlement and IP licensing agreements.

Non-GAAP net loss for the second quarter of 2012 was $2.9 million, consistent with the $2.9 million non-GAAP net loss for the second quarter of 2011. Product margin in Q2 2012 was 69%, consistent with the product margin in Q2 of 2011; and up 2 percentage points from the first quarter of 2012, primarily driven by lower warranty and service costs.

Turning now to OpEx -- research and development expenses were $4 million in the second quarter of 2012, compared to $3.4 million in the second quarter of 2011, and $4.3 million in Q1 of 2012. SG&A expenses were $9.4 million in the second quarter of 2012, compared to $7.8 million in the year-ago period, and unchanged from the $9.4 million expense in Q1 2012.

Stock compensation expense rose to $1.1 million in the second quarter of 2012, compared to $0.5 million in the second quarter of 2011. And interest expense dropped to $200,000 during the quarter, compared to $500,000 in the second quarter of 2011, resulting from lower outstanding debt.

Moving onto the balance sheet -- total cash, cash equivalents and investments totaled $38.9 million at the end of Q2 2012, down from $44.9 million at the end of the first quarter of 2012. Cash used during the second quarter of 2012 was $6 million, including $1.7 million of debt repayment; compared to a cash use of $10.1 million, including $3.8 million of debt repayments, in the first quarter of 2012.

Inventory was $6.6 million compared to $6.4 million at the end of the first quarter of 2012. And capital expenditures during the quarter were $800,000. We are maintaining our 2012 annual product revenue guidance. We expect full-year 2012 product revenue to grow between 25% and 30% from full-year 2011 product revenue of $40.6 million. And we expect 2012 grant revenue to be approximately $600,000.

Operating expenses in 2012 are projected to be approximately $54 million to $54.5 million, slightly above the top end of the previously provided guidance. Stock compensation expense is projected to be between $4 million and $4.5 million. Capital expenditures are projected to be between $4 million and $5 million.

I will now turn the call over to the operator to open it up for questions.

(Operator Instructions). Doug Schenkel, Cowen and Company.

Okay, thank you, and thanks for taking the questions, guys. Maybe if I could start with -- thanks for the commentary on the strong Asia, outside of Japan, quarter. I wanted to ask a real quick question on that. Is the strength in China being directly impacted by the subsidiary set up in January? Has that been an important driver to really fortifying that business and actually growing the business aggressively?

Thanks for the question. Absolutely. Having direct folks on the ground, including technical support and sales staff, has caused us much better intimacy in front of the customers and prospects there. So the subsidiary has been invaluable to growing the business.

Okay, thanks for that. Gajus, I think most folks on the line understand the rationale for you not providing much in the way of guidance specific to C1 at this early stage of the rollout. That being said, in your prepared remarks, you talked about C1 exceeding your expectations. Can you provide maybe a little bit more color -- is this just timelines? Is it the interest are getting? Is there anything that you're hearing. in terms of folks ordering BioMarks for single-cell, and how closely that interest is being linked to C1?

Doug, I'd have to say it's all of the above, really. Again, it's early in the launch of this system. And I've said this a number of times, we've just learned the hard way that you have to be disciplined about letting a fair amount of road go under the tires before you start making projections about a brand-new platform, particularly one like the C1 that is a new category.

But it has exceeded -- the launch has exceeded our expectations in essentially every measurable way at this point in time, from -- as I said in the prepared remarks, the rate at which the Early Access Program is filling up; the sheer amount of interest and inquiry we're getting; even in territories where we haven't even done any substantial marketing of the platform. And also, just in terms of the amount of -- even things like -- there is tweets and the like that I used to not follow, but now find that I do. And a number of these are popping up about the C1.

So in any case, it's really the entire list of things that you described there. I think that we're pretty confident at this point in time also that one of the things we were looking to see, no pun intended, was that the C1 would also bring along some BioMark revenues with it. I think at this point in time, it seems clear to us that there are folks that were perhaps reluctant to jump into the field of single-cell genomics, absent a really strong sample preparation front end. And with that, we should see more people jump into the market and then become BioMark customers, too.

Okay. We appreciate your comments on how you guys are thinking about NIH sequestration. We're clearly seeing a lot out there, in terms of more and more programs being set up to fund single-cell. You're seeing a whole lot more in terms of papers being published in this area. Something that may put a little more meat on the bone -- and I apologize if I missed this in your prepared remarks -- is just maybe some data from you on, in this quarter, what percentage of BioMarks were placed for single-cell purposes? Do you have that number?

Yes, it's roughly half, which is a little bit different from the previous quarter. One of the comments that I made during the prepared remarks, we actually saw an uplift, also, in the number of systems that were used for more generic, high-throughput gene expression applications. And that was a bit of a pleasant surprise to us. But in any case, it was about half.

Okay. And last question, and I hate to ask it, in the context of what was really a solid quarter. But clearly one area where folks have been a bit concerned is Access Array. It continues to come up a lot in my conversations with investors. Could you talk about how Access Array fared relative to your expectations? Because you clearly knew about the competitive dynamics that you faced this quarter, last quarter; and I think you did build in some conservatism into your guidance.

And maybe while you're talking about this, could you put Access Array into perspective? And what I mean by that is, can you talk about the margin profile of that product line and the consumable pull-through associated with Access Array, relative to the analytical platforms?

Okay, so, let's see. To break this up a bit -- obviously, our product revenue performance in the quarter compares very nicely, relative to our projections for the year. And so, clearly, we had anticipated competitive dynamics, and had planned for that. Access Array is the best system on the market for doing high-throughput amplicon resequencing. And really what that means is, you want to run a lot of samples -- lots means many hundreds of thousands -- and you want to do a very targeted portion of the genome.

And it's the best system with respect to the workflow, which is completely automated. It's a sample to a sequence workflow, meaning that as soon as you're finished with the Access Array, it's ready to go into the sequencer. It's by far the lowest cost per sample. And it's highly reproducible. The flexibility of the architecture allows for both running it in a manner, let's say, in some kind of application where performance is paramount, where every reaction will work extremely well. Or you can run it in a manner in which you multi-plex and get greater coverage.

And then the final thing that is completely differentiated versus the other platforms, is the fact that the Access Array is the only platform out there that serves all of the next-generation sequencing analytical platforms that are out there today. So it remains with a strong competitive advantage versus other solutions that are out there. And I think that one of the things that we'll be doing is putting greater focus on applications that are truly high-throughput; both applications and platforms, so that's really where the platform sings.

This example that we referred to in our press release, that was done in the UK; really kind of a liquid biopsy using sequencing as a readout, I think is a very good example of the kind of thing that the Access Array does extremely well.

Great, thanks for taking all the questions.

Bill Quirk, Piper Jaffray.

Great. Thanks. Good afternoon, everybody. Nice quarter.

Thanks, Bill, appreciate it.

First question, guys -- obviously, great to see the consumables business continue to outperform your own expectations, and obviously the guidance's point; not quite ready to take the overall guidance for consumables for the analytic systems up. But can you talk a little bit about -- maybe tease out the array side of that versus, say, DELTAgene and SNPtype. Are we seeing the historic consumables continuing to tick up here? Or is this really layering on some of the reagents low? Thank you.

Sure. In point of fact, the single most popular item which drove the consumable growth was the 96.96 Dynamic Array, which had a very strong performance in both production genotyping applications and in gene expression applications. That was the single-largest contributor to growth dollars across the board. Our assays are growing rapidly, admittedly off of a relatively small base. SNPtype in particular enjoyed a really strong quarter. And I think that that makes sense, as SNPtype has a -- nearly a 7X advantage, versus other solutions, in terms of the cost per assay. And there's absolutely no performance compromise inherent in that.

So the assay business definitely has contributed. However, the line item which is the highest growth contributor in terms of dollars of all, was the 96.96 Dynamic Array, which we've had for a number of years. So I think that the inference from all of that, from a use model point of view, is that the installed base is very active and is making good use of our systems. All analytical platforms -- BioMarks, EP1s, combined.

Bill, this is Vikram. Just to clarify, when we speak to pull-through of $40,000 to $50,000 for the analytical systems, we only speak to chip pull-through.

Very good, that's crystal clear. Thank you, Vikram. Second question -- sorry for the airport and background noise here. Just thinking about the ongoing Becton, Dickinson co-marketing relationship that you guys have; I realize it's early on C1. But any update here on whether you might see this extended to the C1 line?

I honestly can't say. At this point, I really don't know if that's going to happen or not. I think that, as I've said in previous quarters, the relationship that we had with Becton and Dickinson was very fruitful, and it is continuing. It is dependent upon their schedules and their priorities and such. So at this point in time, I really can't say whether or not they'll be co-marketing around the C1 or not. I guess I think the way we look at it is that we're not planning for that, but if it does happen that'll be nice.

Got it. And then last question for me is, results continue to come in on the high end, the 25% to 30% product guidance. So I'm just kind of curious, Gajus, what are your thoughts here about it, as we look into the back half of the year? It certainly doesn't sound like we're expecting any slowdown. But, obviously, we're maintaining the guidance as is.

Yes, we are very pleased -- let me back up here for a minute. At the beginning of the year, when we set up our product revenue guidance at 25% to 30%, we thought we'd be very happy to deliver that to our shareholders. We will be very pleased to deliver that kind of growth to our shareholders, particularly in a market where it doesn't look like anybody else is growing at that rate.

Great. Thanks a lot, guys.

Dan Leonard, Leerink Swann.

Hi, thank you. I was hoping to get some clarification on the pacing of the Early Access versus the full commercial launch program for the C1. So it sounds like those programs will be occurring simultaneously. You'll have Early Access through the balance of the year, and the full commercial launch begins in late Q3. Did I hear that correctly?

Dan, this is Gajus. The Early Access Program is really -- the way to think of it is -- that it's the beginning of the commercial launch. And what we wanted to do was to identify a limited number of initial users that we work very closely with. And in return, part of the package for the Early Access Program, is that they get some additional support and service, and some start-up consumables free of charge. And that this would be of really high bandwidth communication channel between us and these early users. And that would help to guide the menu of applications for the C1.

As you may remember, the C1 is capable of doing a pretty wide range of things for single-cell genomic library preparation. The initial application is to prepare samples to run on the BioMark. Future applications will be to prepare samples, individual cell samples, prior to running them on sequencers. And that will be a variety of different things that you can do unless a sequencer, ranging from mRNA-Seq to targeted sequencing, to perhaps methylation and the like.

And so there are a lot of questions about how various technical nuances, how many tens of millions of reads it's going to take to do things, and what kind of coverage do you need, and so on and so forth. While this may sound like mundane details, they're really important to understand; or to make sure that the overall workflow and the data that you collect from that is really usable and economical.

So, in any case, the point is that we want to work really closely with this first set of customers in order to set the right sequence of menus. But for all intents and purposes, really they are the first commercial customers of ours. There is no plan for changing the platform at a later -- it's really just a question of what applications we layer on as time goes on. Does that make sense, Dan?

It does. But just to be clear, so the shipments you expect to begin in late Q3, those are shipments against the 25 potential Early Access user book that you'd expect to build. Is that correct?

Absolutely. They're getting the first systems that come out of the factory.

Okay. And then, did you have any order book, or otherwise, you'd be able to quantify on C1, beyond the Early Access Program?

No, no, not really. We generally don't share -- in fact we haven't shared -- bookings going forward; and so, really not prepared to do that.

Okay. And then my final question -- on the relationship with The Broad, can you give us an update there in terms of where you stand? Presumably your people are on the ground in Cambridge already, but just -- for milestones and deliverables, and what we can expect to see out of that, and when?

Well, I think what you should watch for, really it's about the science. More than anything else, that's what it's about, about doing good science. And the major milestones will be when the collaborators, which we now have in place, start to give talks, which they started to do; and then start to publish, and publish their results; and start to teach others about the field. Really, it is very focused on being a scientific collaboration. And so the major milestones that you should look to see from that -- and some of them have happened already. Our first outreach to the broader community -- the Broad community to educate, and then to publications; solid science being done, and coming across in important journals.

Okay, thank you.

Sung Ji Nam, Cantor.

Thanks for taking the questions. So, going back to the C1, could you maybe talk about the 20-plus customers that have signed on for Early Access, maybe the type of customers -- what type of customers they are? Any surprises there, in terms of these Early Access base?

First off, to be clear, we haven't -- I didn't say that we'd received 20 orders as part of that program yet. I said that we allocated 25 systems for it. And, at this point, there's a good chance that we'll fill the entire program by the end of the year -- just for clarity.

Now, with respect to the kinds of folks that are participating in it, are there any surprises there? There have been a couple. And I'd say that some of those have come from institutes that we had been trying to convince to move towards single-cell work for quite a while, and it didn't seem to be happening. And all of a sudden they want to be part of this program, which is, of course, really encouraging.

Also some very large enterprises, industrial enterprises that, in our experience -- insofar as single-cell genomics is concerned -- we maybe thought would be later adopters of this kind of technology; and, instead, really wanted to be at the front of the line. So I think our expectation was that the Early Access Program would be really, primarily comprised of academic enterprises. And if there is a surprise there, it's that there is a broader demand into the industrial, pharmaceutical, realm of things than we had anticipated.

Okay, great. And then maybe could you talk about beyond the Early Access Program? Or talk a little more about your go-to-market strategy for C1? Do you anticipate more of the large-scale type of programs like you have with Broad? Or do you think that the current Early Access is sufficient to really drive growth over the next several quarters?

Well, there is an awful lot of activity. What you've seen thus far, hopefully, is really the tip of the iceberg of what we need to do, and will do over the course of -- really, not just the next few months, but over the course of years to develop this market. So we expect that there will be other single-cell genomics centers around the world. We've actually heard of a few, now, that are looking to perhaps do that. So between now and the end of the year, I expect that there will be more groups like that. And when they do form up, I certainly hope that we'll be part of that. That will be an important piece of it.

There is also just a tremendous amount of outreach that Fred and his team are organizing. And this is really a worldwide effort. I can tell you that the quality and consistency of the material that the marketing team has put together is certainly the best I've ever seen out of Fluidigm. I'm really pleased with it. And, again, that's just the tip of the iceberg.

We've got a lot of activity planned to develop this market. So we're certainly not expecting that the Early Access Program is in any way, shape or form the end of it. It's just the beginning.

Okay, great. That's helpful. And then, final one for me, going back to the Access Array. Obviously it's in line with your expectations there. But in terms of the marketing strategy there, do you see that you may have -- are there any plans for any changes to how you compete against some of the bigger competitors in this space going forward?

Yes, I think -- and I was trying to get at this a little bit with a question that came earlier -- that the Access Array is the clear winner in a high-throughput applications, high sample throughput application. And, in particular, any application where the mistakes you can make from a complicated workflow or performance compromises that that might entail are problematic. So, really, anything that is production-oriented or high-throughput is a place where the Access Array is just the clear, best solution.

So we'll be focusing more of our commercial effort on those types of applications, and those types of platforms. And we expect that that will bear fruit.

Great, thank you.

David Ferreiro, Oppenheimer.

Thank you for fitting me in. I just had a couple quick questions on the C1. Can you, first, remind us of the timeframe you expect to add front-end capabilities to sequencing, and just with the C1?

Sure. Thanks for joining, Dave. The first application that we expect to do for sequencing will be mRNA sequencing. So that is transcript profiling at a pretty broad level, using the sequencer really as a counter or a readout to get a good sense for -- we'll call it global gene expression. That capability will likely be ready by the end of the year. And the Early Access customers will likely have a first whack at that.

We probably won't launch it formally to the market, and in terms of communication and making a big splash, until after the holidays have passed. Because it can be hard to compete with Santa Claus for attention. So the capability, we expect to be a year-end thing. And probably you won't be hearing about a more formal launch of that capability until after New Year's.

And then, subsequent to that, will be a capability for doing an on-chip, whole genome amplification as part of a targeted sequencing work flow.

Okay. And then, just the last little question here. You said in the past that you could add imaging capabilities or functionality to the C1. Has there been any interest there in that kind of functionality from the Early Access Program? And also, has there been any other additional capabilities that these early Access users have wanted that has surprised you, or have been different from what you were expecting?

I think we're at the very early stage of this, so I'd say no major surprises at this point in time from that. There have been some requests to be able to do similar types of prep, but on bacteria, which are substantially smaller cells. That wasn't a big surprise to us. The kinds of imaging that we've talked about are more or less the things that you oftentimes see in publications today.

But I think that the real, unique input that we may get will come after there is more use of the system. Because when it -- people have just started to -- the first users have really just started to do experimentation on the C1. And I'm pleased to report that that's gone really well. But there's a big difference between the conceptual capabilities and then when you actually use them; it has a way of opening up the imagination to new things. So there's really no surprises there at this point in time.

Frankly, well, we didn't expect that, because normally you'd expect to have more use under the belts of the folks that will be using the platform before you get that kind of nuanced input. So I think it will be a little while yet before we see more input on imaging and other types of cell biology that we might do on the front end. But it's been really fun, really exciting, to engage with this first set of customers. And been, frankly, really rewarding -- been a really rewarding experience to see how much interest this has stirred up.

Okay, thanks a lot, guys.

Tycho Peterson, JPMorgan.

Hey, good afternoon, guys. Surprise, surprise, I'm going to ask you something on C1. But as we think about the market opportunity here, between [Fax] and next-gen sequencing; I understand it's early days. But is there a big difference in your view, in terms of the utilization patterns, and maybe the ancillary products that would get pulled through for those two different groups? And any sense as to how you think about those two markets' ramp over the next 12 months?

Well, I'll tell you how we think about it, and then -- this may be a frustrating response, because I've used it a couple times here. But I'll just say that it's early to make any kind of projections here, because all of what I'm going to describe here is theory.

So, to look at both sides of this, the Fax user base, in some sense, is more accessible, because these are people who are already doing single-cell experimentation. They think about it. There's really an unmet need there. Because there's a latent demand to combine some of the surface markers cell biology measurements that are out there together with genomic measurements. So I certainly have heard about examples of applications in, say, HIV research, that would represent some pretty high-throughput, high pull-through applications on the C1.

So in some sense, that installed base is maybe more accessible initially. Now, on the other side of this, if you look at the number of, say, C1 arrays that you would need to run in order to collect on the front end of a next-generation sequencer, really good quality data, that number -- it may require of the order of 1000 cells per sample. That's a number that comes up a fair amount in discussions with thought leaders.

You run into an issue there of just the sheer cost associated with doing the sequencing. And so there's some protocol adjustments that we'll likely have to make in order to make sure that the overall cost of the experiment remains affordable. I think there is theory on one side, that is with respect to sequencing that might suggest a pretty substantial pull-through on that. On the other hand, there is some actual experiments that we've had the opportunity to walk through and talk through with our customer base on the cell sorting side, that you can see why that would take a large number of arrays.

All that said, we don't have any reason to change our back-of-the-envelope calculation of what the C1 might pull through, which we've bracketed around $30,000 to $45,000 per system per year. And that's really a derivation of, what if a C1 was prepping for a BioMark in approximately the same average pull-through that BioMarks currently enjoy?

(Multiple speakers) So that's the way we think about it, with really just some answers that are theoretical at this point in time. And we'll just have to see what actually happens.

And then, on the assay content strategy side, SNPtype and DELTAgene have been good products for you. Can you talk a little bit about how you think about the roadmap for additional content going forward? Are there a lot of other similar assays that you would look to potentially bring to market?

Maybe not so much in terms of assays; although panels are attractive for certain kinds of applications. Panels being, say, preconfigured panels for -- it could be for the BioMark. It could also be for the Access Array; we've certainly thought about that kind of thing.

The other thing that interests us, though, is the full set of reagents that have to go into the workflow in order to make a really high-performance, high-quality experience for our customers. And that includes a variety of different kinds of enzymes that go into the amplification, that go into the pre-amplification; that, in the future, will go into the C1 in order to do the whole transcriptome amplification. At present, those reagents are not part of our home-grown solution. And so, that's certainly something that we're looking at. We'd like to be able to provide those to our customers. And if we were to do it ourselves, as we did with the assays, we can optimize things in ways that work the best with our platform, as opposed to being optimized more generally for tubes.

Okay. And then, just a last one -- any update on Digital PCR chip? I think you had the question last quarter. And you weren't saying anything at the time. So, any difference in your thoughts?

No, not really. Our view of the market really hasn't changed. There is applications for Digital PCR in noninvasive prenatal diagnostics -- is potentially one of them, down the road. But our view of that market really hasn't changed any. And if we do decide to commercialize some more things there, we'll be sure to make a big ruckus about it.

Great, thank you.

This does conclude the question-and-answer session of today's program. I'd like to turn the program back to Howard High for further remarks.

Thank you. We'd like to thank everyone for attending Fluidigm's second-quarter 2012 earnings call. As a reminder, a replay of this call will be available on the Investor section of our website. This concludes the call, and we look forward to the next update, following the close of the third quarter. Again, thank you for joining us today. Good evening.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.