NanoString Technologies Inc (NSTG) 2021 Q4 法說會逐字稿

Hello and welcome to today's NanoString Fourth Quarter 2021 Operating Results. My name is Elliott, and I'll be coordinating your call today (Operator Instructions)

I would now like to hand over to our host, Doug Farrell Vice President of Investor Relations. Please go ahead.

Thank you very much, operator. On the call with me today is Brad Gray, our President and CEO; and Tom Bailey, our CFO. Earlier today, we released our results -- financial results for the fourth quarter and fiscal year 2021. During this call we may make statements that are forward-looking, including statements about financial projections, the impact of COVID-19 pandemic future business growth trends and related factors prospects for expanding and penetrating our addressable markets, our strategic focus and objectives and the development status anticipated success of recent and planned product offerings.

Forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, including risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected, and we undertake no obligation to update any forward-looking statements.

Later in this call, Tom will be discussing our financial results and 2022 guidance we have prepared as a supplement to GAAP financial measures, selected non-GAAP adjusted measures, the calculation of which are described in detail in our press release. Throughout this call, all financial measures will be GAAP, unless otherwise noted. You could find reconciliations of GAAP to non-GAAP measures, as well as the description, the limitations and rationale for using each such measure in this afternoon's press release.

To aid analysts and investors in building their models, we've posted exhibits under the Financial Information tab of our Investor Relations page, that include presentation of our non-GAAP or adjusted measures, and other selected financial data for the fourth quarter and fiscal year 2021, and for each quarter for the full year 2022. I'd like to remind everyone, we'll be participating in the Cowen Conference next week. We look forward to having the opportunity to speak with many of you there.

Now I'd like to turn the call over to Brad.

Thanks Doug. Good afternoon and thank you for joining us today. NanoString exited 2021 on a high note, as interest in our spatial biology platforms during the fourth quarter generated more than 70 instrument orders across our GeoMx Digital Spatial Profiler and our CosMx Spatial Molecular Imager. This robust demand is a testament to the appeal of our unique product portfolio, which addresses scientific questions at any scale of spatial biology and makes NanoString a one-stop-shop researchers in the field.

2022 is already shaping up to be another exciting year, as we've just completed our fourth Annual Spatial Genomics Summit, which was hosted jointly with Illumina. More than 1,200 researchers joined on the online event to learn about the cutting-edge science being conducted by our spatial biology customers and to preview the CosMx Spatial Molecular Imager and the powerful informatic solutions we will release later this year.

During the call today, I'd like to provide a brief review of our 2021 performance, before outlining our goals for 2022. During the fourth quarter, we posted record GeoMx revenue of $18 million, which put us $2 million above the top end of our guided range. This was driven by more than 50 GeoMx instrument orders, an annualized consumable pull-through of approximately $109,000 per installed system. At year-end, we had established an installed base of approximately 255 GeoMx systems.

We also achieved several important CosMx milestones. We published a manuscript in the Journal of bioRxiv, describing CosMx's technology and performance. We also released a data set, mapping nearly 1,000 RNAs in situ at single cell resolution. This data was generated using formalin fixed curve embedded or FFPE samples and is the largest publicly released data set of its kind. Together, these releases have created quite a buzz around CosMx, as evidenced by the nearly 6,000 downloads of the manuscript and 400 downloads of our grant application package for CosMx.

No statistics provide stronger evidence of customer interest in CosMx than instrument orders. We generated orders for 20 CosMx systems in 2021, the start of an order book that we plan to build out over the course of this year. The first 20 orders demonstrated the highly complementary nature of our 2 spatial biology platforms, as 95% of the CosMx systems ordered, were either bundled with a new GeoMx or sold to an existing GeoMx customer.

Meanwhile, nCounter instrument sales were strong in Q4 and returned to pre-pandemic levels for the full year. This demonstrates the healthy demand for this platform, even as consumable pull-through remained suppressed, relative to prepandemic levels.

Turning now to 2022, I'd like to outline our 4 strategic objectives for the year. Our first objective is to drive GeoMx-DSP further into mainstream research, broadening adoption across multiple areas of discovery and translational research. When GeoMx launched, it was initially embraced by early adopters, with a strong interest in new technologies. Many of these early adopters were focused on translational research within oncology and have been NanoString nCounter customers for years. In 2021, the introduction of the GeoMx Whole Transcriptome Atlas, or WTA, provided a universal assay, that (inaudible) the vast installed base of Illumina sequencers. This is allowing GeoMx to reach scientists studying the fundamentals of biology, in areas outside of oncology.

During 2022, we will push adoption into these groups even further with a 3-pronged approach. First, we are providing RNA assays that cover virtually every area of biology. The centerpiece of the GeoMx portfolio are the whole transcriptome assays, which serve the needs of the 2 most common model systems. When our human WTA was launched last year, it quickly became the most successful launch of any consumable product we've ever offered. We followed with the launch of the Mouse WTA, accelerating GeoMx uptake as the mouse is a primary model system for Discovery Research. For 2022, we're expanding our offering to cover the longtail of Discovery Research by launching fully customizable RNA assays.

Second, we are enhancing the GeoMx workflow. Last week, we announced the expansion of our partnership with Leica, enabling full automation of the GeoMx RNA assay workflow. This will reduce the hands-on time of our RNA assay protocol to less than 4 minutes per slide and allow customers to prepare up to 30 samples at a time using the Leica Bond RX AutoStainer systems. In addition, we've introduced a protocol for the co-detection of both RNA and protein from a single FFPE section. We have demonstrated the co-detection of over 145 proteins alongside of our human WTA from a single colorectal cancer tissue section. And finally, we've expanded our customer experience team to accelerate GeoMx installation, customer training and site activation.

Third, we will publicize data sets and publications that illustrate the power of GeoMx. In Q4, we released the first installment of the spatial organ atlas, containing data from 6 organs, for which key structures have been profiled with the Whole Transcriptome Atlas. These data have generated interest from researchers across diverse fields of applications, who've downloaded the data sets more than 1,700 times.

During 2022, we plan to expand the spatial atlases, to include additional organs, and we expect these to become popular reference data sets that customers can access to quickly discover how organs function in both healthy and diseased states. In addition, we recently saw the publication of the 100th peer-reviewed paper that leveraged spatial biology using GeoMx, and we're tracking many more papers being prepared for submission. Finally, we're looking forward to an action-packed AGBT meeting in June, that will feature 3 oral presentations and 9 abstracts using GeoMx.

Our second goal for 2022 is to launch CosMx as the industry-leading molecular imaging platforms. CosMx provides single cell and subcellular resolution that perfectly complements GeoMx, enabling a wide variety of experiments. The CosMx launch will double the size of the spatial biology market that we serve, covering virtually all of the $6 billion TAM for spatial research. In a noisy imager market, CosMx stands above the competition. CosMx provides the highest plex assays of any imager available, already covering up to 1,000 RNAs.

CosMx is the only platform to demonstrate the ability to image both RNA and protein. CosMx has demonstrated compatibility with the most important sample type in medical research, which is FFPE tissue.

CosMx will come with a dual run mode capability that allows the system to be tuned to the specific needs of a particular experiment, regardless of whether it is for discovery or translational applications. With tunable run modes, CosMx enables discovery research by providing high plex and unbiased whole slide analysis, as well as translational research with low plex high throughput and biology-driven analysis. CosMx will also benefit from NanoString's brand, reputation, established commercial channel, and leading portfolio of spatial solutions that spans the entire continuum of applications. When we put all these attributes together, we believe that CosMx is poised to become the market-leading imager.

The CosMx launch will be supported by a steady cadence of data presentations and releases throughout the year. Yesterday, our 4th Annual Spatial Biology Summit featuring several leading researchers who are applying the CosMx system to solve important biological questions. Jodi Carter from the Mayo Clinic presented a study that verifies the high fidelity of CosMx's cell segmentation and cell typing, as well as the strong correlation between CosMx data and the PDL1 clinical assays she had applied in triple negative breast cancer.

Jacob Estes of Oregon Health & Science University, presented a study that use the sub-cellular resolution of CosMx to distinguish those cells with viral infection, from those with virus, simply bound to the cell surface, and then he studied the gene expression differences between these cells.

We are now actively promoting CosMx and we expect to accumulate dozens of orders ahead of the commercial shipments in the fourth quarter. We plan to ship our first beta systems to customers during Q2, allowing us to get feedback on installation, training, and workflow. Around the same time, we will use beta system to expand the capacity for our CosMx Technology Access Program, or TAP, which is currently fully subscribed. Overall, the CosMx launch strategy follows the same playbook that we used successfully with GeoMx, so we are confident in its success.

Our third strategic objective in the year, is to launch our cloud-based spatial biology portal. With this launch, we are aiming to provide a seamless informatics solution, for both GeoMx and CosMx users, allowing them to access the massive computing and storage capabilities that are required for spatial genomics. Spatial research typically involves a team approach, integrating the lab technician, pathologist, biostatistician, and principal investigator. Migrating to the cloud will allow this team to collaborate and share data in real-time, within an institution or across a broad network of researchers. This portal will include a suite of state-of-the-art tools for data analysis and visualization, will integrate with industry standard platforms, such as Illumina's BaseSpace, as well as the growing universe of open source software.

During our Spatial Genomic Summit, a panel of experts from Weill Cornell Medical College, Boston University, and Illumina identified benefits of migrating spatial biology data to the cloud, including scalable compute and storage capabilities that can leverage the power of AI for complex spatial datasets. We believe that this powerful cloud-based informatics solution will be another important competitive advantage for us, completing our portfolio of spatial capabilities. Our spatial biology portal is expected to progress into beta testing in Q2 and we plan to launch this offering in the fourth quarter.

Our fourth objective for 2022, is to sustain the growth of our nCounter franchise. Our nCounter analysis system provides rapid, highly multiplex [all] gene expression. The nCounter franchise provides a solid foundation on which we are building our spatial business and funds our global commercial channel.

Our Instrument business has returned to pre-pandemic levels, and we expect this healthy pace of instrument placements to continue in 2022. Consumable pull-through has decreased during the pandemic, especially among biopharma customers. We have a number of initiatives in place to help revitalize this customer segment over the year ahead.

We also have a roadmap to expand our nCounter consumable portfolio into new applications that are important in biopharma. We recently introduced a new T-Cell repertoire or TCR diversity panel that allows researchers to measure the usage of TCR variable regions and shifts in TCR diversity with a simple assay that can deliver results in less than 24 hours. During 2022, we also plan to target cellular and gene therapy applications with new features and assays tuned to that application. In addition, we have recently expanded our biopharma sales team to ensure that these important customers are being well-served.

Now, I'd like to turn the call over to Tom to review the details of our operating results and to provide our financial outlook for 2022.

Thanks Brad and thanks all for joining us today. For the fourth quarter of 2021, products and service revenue was $42 million at the upper end of our Q4 guidance range, representing year-over-year growth of 18%. Q4 GeoMx revenue was $18 million, 48% growth as compared to Q4 '20 and above the upper end of our guidance range, $11.9 million was from approximately 50 instruments shipped and $6.1 million was from consumable sales. Annualized Q4 GeoMx consumables pull-through was about $109,000 per installed system.

nCounter and service revenue was $24 million in Q4. nCounter instrument revenue was $5.7 million, approximately in line with the Q4 of last year. Q4 nCounter consumables revenue was $13.8 million, about flat year-over-year reflecting lower pandemic-impacted utilization trends we detailed in previous quarterly calls. Annualized nCounter consumable pull-through was about $53,000 in Q4, but the same as we recorded in Q3. Service revenue was about $4.6 million for the quarter, representing 20% year-over-year growth, driven by GeoMx DSP TAP and increased service contract revenue for our growing installed base of systems.

Turning to margins and expenses, I'll provide results on non-GAAP or adjusted basis, which removes the impact of stock-based compensation, depreciation, and certain one-time items. Please refer to our press release as well as the exhibits we have posted to our Investor Relations web page for detailed information on how our non-GAAP or adjusted measures are prepared.

Q4 adjusted gross margin was 54% or about flat as compared to Q4 of last year. Margins were positively impacted by the growth in GeoMx DSP, with that impact offset by investments, we continue to make to manufacturing capacity, to support GeoMx growth and the expected 2022 launch of CosMx. Adjusted R&D expense was $15.7 million, an increase of 28% year-over-year. R&D growth was primarily driven by increased personnel and product development costs related to GeoMx and CosMx development activities, including investments we are making in software and technology to support data storage and analysis across our spatial biology platforms.

Adjusted SG&A expense was $26.6 million, an increase of 40% year-over-year. Our Q4 SG&A expense increase was due primarily to investments made in our spatial biology-related commercial initiatives, including investments to expand our salesforce, service, and customer support groups, as well as costs related to licensing and implementation of new information technology solutions to support our commercial, operations, and finance functions. Our adjusted EBITDA loss was $19.6 million in Q4.

Turning into full year 2021; product and service revenue was $144 million, representing year-over-year growth of 29%, and in line with the upper end of our updated guidance range. Our GeoMx results landed above the upper end of our updated guidance range and represented 49% annual growth and nCounter results landed near the middle of our updated guidance range and represented 20% annual growth as compared to a pandemic impact in 2020.

For the full year 2021, adjusted gross margin was 54%, in line with our updated guidance range. 2021 adjusted R&D expense was $59.3 million, representing year-over-year increase of 11% and adjusted SG&A expense was $93 million, representing year-over-year increase of 24%.

Total adjusted operating expense growth in 2021 was about 18% as compared to our 29% revenue growth. Adjusted EBITDA loss was $73.8 million and we exited the quarter with approximately $349 million of cash, cash equivalents, and short-term investments. We expect that our current cash resources will be sufficient to achieve cash flow breakeven, while sustaining the key investments in our business.

Transitioning now to our 2022 outlook. We expect 2022 product and service revenue of $170 million to $180 million, representing annual growth of 18% to 25% For GeoMx, we expect revenue of $73 million to $78 million, representing annual growth of 41% to 50% or similar to the GeoMx revenue growth we achieved in 2021. We expect GeoMx instrument revenue growth of about 25% to 30% year-over-year, and we expect GeoMx consumables pull-through to be between $95,000 and $100,000 on an annualized basis.

For GeoMx overall, we expect to see a quarterly and seasonal revenue pattern that is substantially similar to what we experienced in 2021, with roughly 40% of GeoMx revenue to be recorded in the first half of the year and about 60% in the second half, with pull-through similar to last year being seasonally lower than the first quarter and then ramping through the course of the year.

For nCounter, which includes all service revenue, we expect $97 million to $102 million, or about 5% to 11% year-over-year growth. In 2022. We expect the nCounter instrument revenue to remain approximately flat as compared to 2021. Our guidance assumes nCounter consumable pull-through of approximately $50,000 to $55,000 per installed system for the full year and makes no assumptions as to the timing of any recovery in nCounter consumables pull-through to pre-pandemic levels. We expect to see quarterly and seasonal revenue pattern for nCounter, that is substantially similar to what we experienced in 2021.

Lastly, to be clear, we expect to record our first CosMx revenue in 2023 and therefore, our 2022 guidance does not include CosMx revenue. We expect adjusted gross margin to be in the 56% to 58% range in 2022 with our revenue mix in 2022 continuing to be instrument-heavy, given the growth of GeoMx.

In 2022, we expect operating expenses to grow more modestly as compared to 2021, as we begin to harvest the benefits of the substantial investments we made in R&D and our commercial organization.

For adjusted research and development expenses, we expect to record approximately $60 million to $65 million, a 5% year-over-year increase at the midpoint, reflecting sustained investments in our spatial biology platforms. For adjusted selling, general, and administrative expenses, we expect to record $95 million to $100 million, a 5% year-over-year increase at the midpoint, reflective of full year impact of investments we made in 2021 to expand our spatial biology, commercial and customer support efforts. Adjusted EBITDA loss in 2022 is expected to be about $55 million to $65 million.

For the first quarter, we expect revenue to be in the range of $34 million to $38 million, reflecting typical sequential and seasonal patterns. This range includes $12 million to $14 million of GeoMx revenue, and $22 million to $24 million of nCounter revenue.

Now, I'll turn the call back over to Brad for our closing comments.

Thanks, Tom. In closing, 2022 will be the year that NanoString moves from pioneering the spatial biology revolution to establishing ourselves as a clear market leader. The momentum provided by GeoMx gives us a strong growth outlook, while our CosMx and spatial biology portal launches provide additional catalysts, as the year progresses. We believe that our brand recognition, more than a decade of serving the market, and our global commercial channel for sales and support, make NanoString the natural choice for researchers, who are investing in new spatial biology capabilities. And with our compelling product portfolio and healthy balance sheet, we're poised to lead the spatial biology revolution over the next decade.

With that, we'd now like to open the line for your questions.

(Operator Instructions) Our first question today comes from Tycho Peterson from JPMorgan.

I'm going to start out on GeoMx and acknowledging here the guide is pretty good and above consensus. On ASP, so for the fourth quarter, it looks like you recognized revenue on 50 instruments, but you almost shipped -- only shipped 30. So, can you maybe touch on that dynamic? And then as we kind of think about the roadmap here with WTA in the mouse assays, how much of this do you think goes to Greenfield customers versus kind of existing? And then lastly, on the Leica automation workflow, how do you think about kind of what the take rate there might look like, once you roll that out?

I'll take the ASP question first, real quickly, Tycho and then I'll hand it over to Brad for the other. So, on ASP, you're correct, we did ship viewer systems, then we rev rec-ed in the fourth quarter. And so when you do the math on ASP, our Q4 ASP was a little bit -- just below 240. So, it's pretty consistent with what we've experienced in previous quarters in terms of overall ASP. It was a little bit lower, but not significantly below what we've achieved for GeoMx ASP in previous quarters.

I'll take the next 2 questions. First, we're really excited about what the mouse Whole Transcriptome Atlas can do in terms of expanding into greenfield customer segments for us. We estimated that about 30% of the total addressable market for spatial biology is mouse, and that is not a customer set that NanoString has served substantially in the past. Most of our customers use human tissue on human experiments. We've already begun to see a big impact of introducing the mouse assays in the fourth -- between the third and fourth quarter, mouse assay revenue almost doubled on GeoMx and mouse assays are becoming a meaningful part of our Technology Access Program test driving for GeoMx. So we're excited about being able to reach those new customers in 2022.

The Leica autostaining protocol is exciting for the power users of spatial biology. What it really enables, is large-scale processing that takes full advantage of GeoMx's superior throughput as a spatial biology platform. And where we see it being adopted, are in places like biopharma companies and academic medical centers, who are working with large numbers of samples, and we obviously want to encourage those customers to run large numbers of samples to drive the consumable pull-through on our business. So we look forward to seeing that be adopted more broadly now that it's fully automated.

Okay. And then on CosMx. -- just curious, what are you hearing from customers as there are reasons for choosing the platform? And then with 10x pulling forward Xenium, how do you think about competitive dynamics, and are you willing to comment all on the litigation as well?

Sure. Well, I'm not in a position to comment on the litigation other than to reiterate what we've already said. We have studied the claims and are confident that we do not infringe. In terms of why people are choosing CosMx, I think it's the combination of product features and trust in our overall brand and portfolio that I highlighted in my prepared remarks. Remember, 95% of those who bought a CosMx in 2021, were also buying in or had already bought into NanoString spatial ecosystem through GeoMx. So they know our products. They know they work well. They see the complementary nature of multicellular resolution at the whole transcriptome with GeoMx and single and subcell resolution with CosMx and they're excited to kind of increase the overall amount of biology they're doing on our system.

In terms of the competitive dynamics, I do think the imager field is going to be highly contested with a number of offerings. We feel that we are the natural leaders by virtue of both product specification and corporate capabilities and the power of the portfolio, and we look forward to demonstrating that with continued growth in demand, in the quarters ahead.

Okay. And then just before I hop off, a quick one on the special cloud solution you're launching in the third quarter. Is that a revenue opportunity, or will that be complementary?

Yes. The spatial biology portal will ultimately provide a revenue opportunity. So we're still working out, what the pricing of that capability will be. Obviously, our first objective is to enable our customers to do great science, so that they will adopt our instrumentation and run large amounts of consumables. But there will be an incremental revenue opportunity related to infomatics. It's probably more of a -- it's not a 2022 revenue opportunity, it's a 2023 and beyond revenue opportunity.

Our next question comes from Dan Arias from Stifel.

Brad, during the Spatial Summit yesterday, the woman from the Mayo Clinic talked about wanting single cell resolution for her gene expression work and then wanting the subcellular resolution for her protein work. Is that a preference or a set of preferences that you're seeing, or do you think you might see when it comes to specs and applications for CosMx? I'm just wondering, where the breakpoints might come, when we start thinking about protein versus RNA and who's looking for different features on the boxes?

Yes. Thanks for the question, Dan. I think time is going to tell what the relative demand for single cell and subcell resolution will be. Clearly, RNA profiling at the single cell level has demonstrated utility of single cell genomics has been a very productive line of inquiry for the last several years. And being able to do that in space is very natural. I don't think there are yet any strong demonstrations of the power of subcellular resolution in RNA, that are broadly recognized.

We had one yesterday that was mentioned related to viral RNAs and sort of being able to tell whether the virus is inside the cell and therefore, productively infected or whether it's stuck on the surface, but it's still really early days on the value of subcellular resolution for RNA. In contrast, protein staining has been around for a very long time and microscopy has enabled subcellular resolution for protein staining in the past. So I think pathologists like Jody Carter are accustomed to looking at subcellular resolution for protein, and I think that's going to be something that people naturally want to see, because they're used to seeing that with conventional platforms.

Yes. Okay. Helpful comments. And then maybe just on CosMx expectations for the year. I mean, obviously, you have some orders pretty early in the year here. So is the reason that you don't anticipate revenue in the back half, because the installations will just be coming later in the year or because you don't think payment and recognition will be worked out as quickly? I mean I think you had made the comment that -- GeoMx playbook -- there and GeoMx had some revenues in 2019 in the back half of the year? So just curious.

Yes. I think we have a lot of confidence that we're going to continue to accumulate orders for CosMx instruments over the course of 2022. And I'd point you back to the trajectory that we had with GeoMx, where we were doing 10 and 12 and 15 or so per quarter. That kind of trajectory is what we would expect for CosMx orders. But the revenue recognition rules for when will be able to recognize a new platform, [are may] yet worked out with our auditors. So we'll be shipping those first systems in the fourth quarter. It wouldn't be surprising, if the accounting rules required us to have installed and trained and activated all the systems before rev rec. We just don't know, and therefore, we've kept it completely out of guidance.

Okay. Just last one on that. I mean just the guys that have placed the orders early in the year, is it fair to assume that they might have boxes earlier in 3Q and could therefore be generating data by 4Q?

No, I think we will not ship commercial instruments until the fourth quarter, Dan. We will have beta instruments in the field beginning in the second quarter. And certainly, we're generating data through those, as well as our technology access program. But no, we don't expect the first wave of instruments to be shipped commercially in Q3. That will happen in Q4.

We now turn to Dan Brennan from Cowen.

Maybe first one, just starting with GeoMx pull-through in the guidance. So I would have thought maybe we can go a bit higher on that with WTA and the omicron impact behind us. So just walk through a little bit of the math on the '22 pull-through guidance for GeoMx?

Yes, I'll take that, Dan. So I'll remind you, the impact of the Whole Transcriptome Atlas has already been felt in our pull-through guidance. We raised in the wake of our successful launch last year, up to the $95,000 to $100,000 range that we sort of ended 2021 with. So we're initiating in 2022 in that same range, recognizing that it's customary for pull-through to drop sequentially from the fourth quarter to the first quarter, and that you were still in the early days of seeing what customer behavior on the use of the WTA is over time. I remain hopeful that over time, we're going to see great uptake of WTA and all sorts of science and that the workflow improvements that are a part of our initiative this year, will drive pull-through even higher. But for now, we're guiding based on the customer behavior that we have line of sight to.

Got it. And then I think during the prepared remarks, you mentioned something along the lines of 400 NIH grants or something along those lines. Can you just put that in context, did I hear that correctly? And what is that -- how are we supposed to think about that, in terms of what that could mean for orders?

Yes. I think the remarks you're referring to, Dan, is that we have seen already 400 downloads of our grant support package for CosMx. So this would be the kind of information that would be needed to be included in grant application to the NIH, or otherwise that describes what the platform is and helps a researcher justify getting a grant to purchase it. So I think it's a really great leading indicator of demand. Grant cycles are long, and those types of grant applications that would be going in now, could be yielded later this year or in 2023 and drive future demand. So seeing that many researchers express serious interest in applying for grant funding, is a nice leading indicator.

Great. And I know at the time of your Investor Day, I think you sized CosMx and you sized GeoMx. I believe you did, I know you sized the different market. But I'm wondering, now that you're here and you just held a spatial summit yesterday, you've got the data downloads and you've got some early -- the bioarchive publication, and you've probably got a lot of feedback from customers. How are you thinking about the relative size of this opportunity versus GeoMx? Do you think they're comparable? Do you think CosMx is going to be bigger? Just trying to get a sense of, while it's still early, probably add some more insight into this?

Yes, Dan, we initially sized them as equal opportunities of $3 billion each together for GeoMx and CosMx together making a $6 billion research TAM. We said at the time of our Investor Day, that we believe those TAMs were overlapping with respect to the institutions and researchers. And I think the first 20 orders of CosMx have really strongly validated that the same labs will adopt both systems. So it's all playing out very well. Do we have any signals at this point, that suggest CosMx could be bigger? I'm not sure, but I will share that the CosMx funnel has been -- sales funnel has been growing at twice the rate that the GeoMx sales funnel was growing, at the same point in the GeoMx launch. So we're adding twice as many opportunities per week into the CosMx funnel. That may reflect, of course, the expansion of our own commercial channel, the maturing of -- and the broad recognition that spatial biology is important. But it's a very good early sign, that CosMx is going to be an important platform for us.

Got it. And maybe just a final one, just on omicron and biopharma. Just obviously, you preannounced the quarter and then you come out today with details on the guide and whatnot. But just where are we there? Like there are some rattlings about some emerging biopharma demand being weak due to macro concerns, and we're obviously getting to omicron now. But just how are those 2 kind of factors figuring into either your 1Q guide or as you look ahead to 2022?

Yes. I mean, first, just to remind where biopharma -- small biopharma, small private or recently public biopharma sits on our customer base. For GeoMx, 25% of overall placements go to biopharma. Broadly speaking, most of those go to big pharma companies, who are not subject to the ebbs and flows of the capital markets to the same extent that the smaller companies do. I do think that those smaller companies, who represent a small fraction of our overall demand, are taking longer to make capital allocation decisions, and it's easy to understand why. That could be a small part of the story behind a slow January. But overall, most of our demand comes from the academic markets and academic funding is poised to be very good in 2022, and so it doesn't change any of our full year outlook.

Got it. And the slow January that was your slow January, or are you referring to my leading question about what some other players have mentioned?

So we experienced -- January is always slow relative to the rush that happens in December. I'd say this year's January for NanoString was marginally slower than it has been in years past. I think you see this impact of that slower January reflected in the broader than usual range that we have on our Q1 guidance, where the low end of that range takes into account a slow start to the year and the high end of the range takes into account the recovery that we've begun to see in February, continuing and strengthening in March.

Our next question comes from Catherine Schulte from Baird.

I guess, first, any other feedback from the spatial summit yesterday. We saw a number of questions in the chat around using CosMx with brain tissue. Do you have any sense from the interest you've seen so far, how the mix will be between oncology versus neurology versus other areas, and how that might differ from nCounter and/or GeoMx?

Yes. I think -- so 2 things. The feedback from yesterday's summit was very strong, having so many, 1,700 people dialed in live to the event, and that even excludes China, which we haven't broadcast in yet, was a really great outcome. It's larger than any spatial biology summit we've ever held. I think the engagement was extremely high in terms of people answering our polls and asking questions -- and we look forward to processing all of those participants as leads, that get follow-up calls and eventually hopefully get engagement about real instrument purchase. So we're very pleased with the outcome.

I do think that the CosMx customer base is likely to have a broader set of scientific interests that NanoString has historically served. We've been very oncology focused in the past. But a lot of the CosMx interest is going to come from people who are more traditional single cell biologists, they're probably doing a single cell RNA sequencing today on more basic discovery questions, rather than translational ones. And we saw that in the mix of the first 20 orders that we received for CosMx in 2021. While oncology was the #1 reason that people wanted CosMx, areas like neurology were higher in terms of the ranking of applications than we are accustomed to seeing. And that's great, that means CosMx is really going to help pull NanoString from our traditional strength in translational oncology, into all the other many productive areas of science, where our technology can be used.

All right. Got it. And then you mentioned you recently expanded your biopharma sales team. Can you give a bit more color there? How big was that team previously and where is it now? And any other commercial team expansion needs ahead of the CosMx launch?

Yes. I won't get quantitative in terms of the exact numbers of people we have addressed in biopharma. But I will say that the expansion represents probably a 50% increase in the total number of people we have focused on, an important customer segment. We also have a new leader of that team, who has performed very well in some other regions that person's led. So we're excited about revitalizing that important part of our customer base.

In terms of other investments in the channel, I don't -- we will continue to hire this year in our commercial team, not at the same pace that we did in 2021, where we had a very substantial expansion in the sales force. But filling out some of the areas like consumable sales reps, who can help us now manage our very rapidly growing installed base of GeoMx systems and, of course, our customer experience team, who can help us accelerate the pace at which those GeoMx systems are installed, the customers are trained and the sites are activated.

Our final question comes from Tejas Savant from Morgan Stanley.

So maybe I'll start with one on nCounter, Brad. I know you're holding off from baking in a recovery here on the consumable front. But are you seeing anything from your biopharma customers in terms of sample collection rates beginning to normalize, or not quite yet?

Tejas, it's very hard for us to have visibility into the rate at which pharmas are accumulating the samples. Yes, I do expect that eventually, the slowdown in patient accrual that occurred in the past and is now kind of running through the process of sample testing for [correlative] science will play itself out, but I don't have a lot of visibility into what the pace of that playing out is.

Got it. Fair enough. And then on the CosMx beta launch in the second quarter, Brad, is there anything that's going to be different, as far as those units go versus the final commercial instrument, and what you're using in the TAP program. And what's left in terms of the informatics related work on the instrument side, does the commercial launch essentially hinge on the launch of that spatial biology portal that you highlighted yesterday at the Summit?

Yes. So what -- let me start with the last question first, which is really about what's remaining to be done with CosMx. So the CosMx chemistry was the first thing we locked at and we've generated the data that you've seen publicly presented and released on prototype instruments, that are -- work in our hands here in Seattle, but which would not be appropriate to box up and ship to a customer. In order to do that, we need to improve the overall robustness of the system, finalizing its layout and importantly, its software interface, so that it's easy to use. And that's what represents the predominant amount of engineering, between now and launch. We hope that the beta systems will be nearly physically identical to the final production systems. But with software, that will still not be quite 100% locked on the system, and that's where we'll be getting some feedback and have a final chance to incorporate that for commercial launch.

The spatial biology portal is certainly an important part of the CosMx launch, but I would not call it the rate-limiting factor in the launch. The rate limiting factor are the traditional engineering of instrumentation and software.

Got it. That's helpful. And then in terms of the protein detection capabilities, Brad, I think one of the points that Joe mentioned that stood out to us, was the cyclic and coated protein approach. How does that sort of like translate into the roadmap in terms of flex on the protein side? I think you guys are launching with 100, but hope to increase that over time. So any kind of timelines and numbers you can share on that?

Yes. So we are launching with 100-plex protein expression on CosMx. Certainly, the chemistry could allow us to go a lot higher than that, if we saw demand for it. I think at some point, the limiting factor on protein flex will naturally become kind of steric crowding of antibodies on epitope sites in the tissue rather than the actual chemistry. So that's a good place for us to be. It's not the CosMx chemistry that's going to naturally limit plex, it's going to be other factors. So we'll stay tuned. We'll have probably more to say about that over time.

Got it. And one final one on the GeoMx side for me. You've had a few quarters now with human and mouse whole transcriptome here. Can you share some color on how you're seeing customers transition to larger scale experiments there? I think this came up earlier in the call in terms of that $95,000 to $100,000 pull-through in -- embedded into your '22 guide versus where you exited in the fourth quarter? So just any color on that? And what gives you then the confidence around that number steadily increasing, as we head to '23 and '24?

Yes. I think it's still relatively early days for the Whole Transcriptome Atlas assay. I mean, many of our customers began experimenting with that in the second quarter and the third quarter and the fourth quarter. But even 3 quarters is not enough for a new assay to be fully implemented as a workhorse for customer use. So I don't think we've seen the steady state or upper limit of what people may apply that assay with yet. And of course, we're placing instruments that are very high clip now, especially in the fourth quarter, many of which are not yet activated, and we haven't seen what the nature of their demand is.

In terms of the outlook for further increases in pull-through, I mean, time will tell. I don't want to give the impression that we have multiyear line of sight on GeoMx pull-through. I believe there is more upside to our GeoMx pull-through than there is downside. But we're not at this point giving a long-term guide, with respect to where that number is going to go.

We've come to the end of our Q&A. I will now hand back to Doug Farrell, Vice President of Investor Relations.

Excellent. Thank you. If you did miss any portion of the call today, there'll be a replay that should be up in the next 2 hours or so. To access that, please dial 866-813-9403. The conference ID number is 709416. For international callers, please use the dial-in 929-458-6194. Again, conference ID the same. So thank you very much for your time. Thanks for joining us today.

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