Singular Genomics Systems Inc (OMIC) 2021 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Singular Genomics Fourth Quarter Results and Business Update Conference Call. (Operator Instructions) Please be advised that today's conference may be recorded. (Operator Instructions) I would now like to hand the conference over to your host today, Philip Taylor. Please go ahead.

Thank you, operator. Presenting today are Singular Genomics Founder and Chief Executive Officer, Drew Spaventa; and Head of Finance, Dalen Meeter. Earlier today, Singular Genomics released financial results for the 3 months and full year ended December 31, 2021. A copy of the press release is available on the company's website.

Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's view as of today, March 2, 2022, only and will include forward-looking statements and opinion statements including predictions, estimates, plans, expectations and other information.

Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission.

Our SEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements. Please note that this conference call will be available for audio replay on our website at singulargenomics.com on the Events page of the News and Events section on our Investors page.

With that, I'll turn the call over to CEO, Drew Spaventa.

Thank you, [Trip], and welcome, everyone, to Singular Genomics Fourth Quarter 2021 Conference Call. I'm excited to share our recent accomplishments, business updates and commercial progress of the G4 launch.

My prepared remarks will touch on a few key areas, our G4 production system and its differentiated value proposition, the latest results from our early access program and an update on the commercial progress as we near our first G4 customer shipments.

I'll provide some additional color on our product road map and how we are positioned to serve our customers' needs, deliver cost benefits and tap deeper into the significant opportunity in front of us.

Lastly, I'll provide more detail on pricing and value. In addition to the value proposition inherent in the G4s core tenets of power, speed, flexibility and accuracy, we will share our goal to lower our customers' costs by delivering high throughput level pricing on a benchtop instrument for the first time.

Genomics-based research, biological discovery and medical advancements continue to progress largely powered by NGS. Clinical adoption is ramping, NGS is driving the adoption of precision medicine as a standard of care and multiomics is emerging as the next frontier of biological discovery.

The life sciences tools and diagnostics space has experienced its most active market cycle on record with over $30 billion of capital raised in public markets between 2020 and 2021. With this, we are seeing increased investment in biological tools, strong company creation and record utilization of sequencing technologies, further substantiating the large NGS and multiomics opportunities in front of us.

Here at Singular Genomics, we are seizing the opportunity to enable and accelerate discovery in this ecosystem. We are in a strong position to develop, manufacture and commercialize transformative life sciences tools that will empower research and clinical work in genomics and multiomics.

We continue to execute on our road map and timelines, and we are confident in our position for both near- and long-term success. Our first product, the G4 benchtop sequencer sets a new benchmark in power, speed, flexibility, accuracy and cost. In December of 2021, we announced the commercial launch of the G4 system.

Today, we are happy to announce that we have taken initial customer orders and remain on track to ship the first production G4 system in the second quarter, along with F2 flow cells supporting 100, 200 and 300 cycle kits.

We also remain on track to launch the F3 flow cell in the fourth quarter of 2022 for higher throughput applications. With 4 F3 flow cells running in parallel, a single G4 can produce approximately 1.2 billion to 1.3 billion reads and up to 400 gigabits of data in less than 19 hours, establishing itself as the world's most powerful benchtop sequencer.

As we have outlined previously, the G4 was purpose built based on direct feedback from the field to meet customer needs. Over the past year, we have improved all 4 of the key performance metrics, including: number one, faster run times, we are currently achieving 2.5-minute cycle times our commercial target.

Number two, accuracy, we are achieving accuracy on the high end of our published target range of 99.6% to 99.9% single-pass accuracy and above -- and at or above Q30 scores for 75% to 90% of base calls.

Number three, number of reads, we are achieving read counts above our target specs of 150 million peered reads for F2 flow cells. Number four, relength, we are now achieving our accuracy and Q-Score targets for novel 150 base paired read sequencing runs.

To demonstrate and optimize these capabilities, we initiated the early access program, or EAP, where partners ran G4 systems in their labs. The EAP has validated our technology in a wide range of customer lab settings and applications.

On our last conference call, we reported results from our first 3 EAP partner sites including labs running applications such as spatial transcriptomics, targeted sequencing and liquid biopsy, reporting results of up to 170 million reads per flow cell and greater than 80% of bases at or above Q30.

Site 1 was previously revealed as Harvard's Beth Israel Deaconess Medical Center. Today, we are pleased to share the identities of sites 2 and 3 as Adaptive Biotechnologies and Exact Sciences. We have received orders from both adaptive and exact and look forward to delivering value for these early access partners as key members of our initial customer group.

We are pleased with the early support of the program and that the companies of this caliber have elected to take the next step and what we hope will be a growing and mutually beneficial relationships.

In addition, today, we are excited to provide an update on EAP sites 4 and 5. Site 4, a government core lab performed microbial genome sequencing and achieved average read counts of 169 million per flow cell, greater than 80% of bases at or above Q30 accuracy, using 2x150 base paired read sequencing on 300 cycle kits.

Site 5, a commercial CRO, performed liquid biopsy sequencing. They achieved average rig counts of greater than 200 million per flow cell greater than 80% of basis at or above Q30 accuracy using 200 cycle kits.

We are pleased to have achieved our target performance specifications at these 2 additional EAP partner sites further validating the G4 performance specs across various applications and lab settings that represent some of our target early customers and markets.

In summary, between our beta test and early access program we have installed and validated instruments at 7 independent sequencing labs. The successful execution of these programs over the last year provides the necessary foundation for broad commercialization.

In addition to the information shared in our G4 production system update, we would like to highlight the technical report published in connection with our commercial launch. This report is intended to demonstrate system performance for one of the most technical and common applications, whole human genome sequencing.

The report contained a transparent and comprehensive overview of our performance and data quality. The G4-produced sequencing data on par with current state-of-the-art NGS performance with single-pass accuracy of approximately 99.8% and uniform coverage of the high-confidence regions in the reference genome evaluated at 20x, 30x and 40x coverage.

This was an important milestone for us. It has stimulated interest and facilitated discussions with many target customers across the industry, we anticipate sharing additional information related to our sequencing performance as we continue to improve.

In addition to the G4's outstanding performance specifications, there are other aspects of the systems value proposition that are resonating with potential customers. These include workflow integration, rational advantages associated with our core tenets of power, speed and flexibility and direct cost savings.

Each of these are considerations and a customer's evaluation of a new sequencing technology. The G4 provides a compelling value proposition in each of these areas. I'll talk about each of these now.

Workflow integration. We developed the G4 to plug seamlessly into existing customer workflows. As such, we are excited to announce that we have entered into 3 new partnerships with library prep solution providers, Roche, Agilent and Qiagen.

With Roche, we are validating its KAPA EvoPlus and HyperPrep library prep kits. With Agilent, we are validating its highly sensitive SureSelect Target Enrichment Products for both custom and catalog kits. With Qiagen, we are validating its QIAseq kits, a product line for both DNA and RNA sample prep.

These are in addition to the previously announced library prep partnerships with Twist Bioscience, New England Biolabs, Lexigen, Watchmaker Genomics and Dovetail Genomics as well as the informatics partnership with the Broad Institute to integrate the G4 with its Terra data platform.

Across all 9 of these partners, we plan to optimize compatibility and performance and provide our customers the ability to seamlessly integrate these market-leading solutions with the G4.

Operational advantages. The G4 is the most powerful benchtop sequencer on the market. The G4 will produce more data per day than any other benchtop sequencer, up to 400 gig basis or approximately 1.2 billion to 1.3 billion reads for a single run in less than 19 hours.

In addition, the G4 offers unparalleled sample flexibility in the form of 4 flow cells with individually addressable lanes. The combination of speed and flexibility allows the customer to optimize sequencing run capacity, fill flow sells more efficiently and run more frequently. This translates to lower cost for experiment and faster results.

Direct cost savings. The operational advantages and related savings that I just mentioned already established a highly differentiated value proposition, yet we intend to further build upon this value proposition by offering additional direct cost savings, especially for high-volume customers or customers that need to scale.

These direct cost savings take 2 forms: list price and volume discounting. First, on the G4, we plan to offer kit-based pricing that results in savings on a dollars per gigabase or dollars per read basis versus existing comparable kit offerings.

Second, we plan to offer significant volume-based discounting, providing a cost-effective way for customers to scale their sequencing within the benchtop segment, all customer types, low, mid and high volume will see cost savings with the G4 and in some cases, up to 50% or more over current benchtop offerings.

We are also excited to share some information about the upcoming G4x4 system. The G4x4 is a configuration of 4 G4 instruments on a single custom benchtop with integrated compute and data storage intended for higher-volume customers. The G4x4 will offer a scalable, cost-efficient solution with near random access capabilities rapid turnaround times and significant cost savings at scale.

The G4x4 will offer high throughput level pricing on a benchtop instrument for the first time at sub-$10 per gigabase, providing an unmatched combination of power speed, flexibility, accuracy and cost.

With the G4 and the G4x4, Singular offer customers cost-effective choices to meet their current needs and their needs as they scale. This has the potential to redefine which applications are suitable on a benchtop system and expand the benchtop sequencing market as a segment.

We are actively scaling our commercial team, hiring sales and customer service and support personnel to engage with and support our early customers. We expect to ramp our sales, customer service and support and marketing headcount to approximately 40 people by the end of the year.

In connection with the buildup of our commercial team and infrastructure, we are setting up an internal customer care lab to help validate customer applications via simple optimization and testing.

This will be a courtesy service offered to prospective new customers who are interested in seeing data prior to purchasing a system and designed to streamline their adoption of a new technology. This will also serve as an opportunity to work with customers on specialized kits such as HD-Seq and XR-Seq.

As a reminder, our G4 and core F2 and F3 consumable kits will be applicable to all sequencing applications in compatible with existing library prep and informatics workflows as validated through our EAP program.

In addition to the F2 and F3 kits, we are progressing development of 2 unique specialized application kits, HD-Seq and XR-Seq. HD-Seq is an integrated sample prep and sequencing kit that can generate Q50 accuracy for rare variant detection.

Sequencing accuracy is a critical aspect of rare variant detection applications in oncology, especially in the detection of somatic mutation in tissue and liquid biopsy. We continue to advance the development of HD-Seq and are now demonstrating 99.996% accuracy for 100 base reads and anticipate target specs of 99.999% accuracy, or Q50 quality scores for greater than 100 base read at commercial launch, which is on track for the fourth quarter of 2022.

Extended rate sequencing, or XR-Seq, is a specialized application kit for targeted sequencing of up to 3,000 base pairs that we believe can fill unmet needs in areas such as immunology for the diagnosing and monitoring of blood cancers, therapeutic antibody, and T-cell discovery and vaccines for infectious disease.

We continue to advance the development of this kit internally and are on track for commercial launch in the fourth quarter of 2022. We look forward to sharing more about these specialized applications and anticipate publications being issued on these techniques towards the middle of the year.

Looking beyond the G4 launch, we are excited about the products under development in our pipeline. We continue to believe that our R&D capabilities and team are unmatched for a company of our size and age, our ability to integrate and leverage the broad range of scientific and engineering disciplines is a core competency that distinguishes Singular from the competition.

We are continuing to make progress on the development of the PX system, expanding the number of in situ RNA and protein targets and demonstrating concurrent protein detection and RNA sequencing in the same cells. We are assembling our first beta instruments now and expect to have a handful of working beta systems in the second quarter of 2022.

We are planning to open a technology access program, or TAP, for our early PX collaborators later this year, offering early customers and thought leaders the ability to work with Singular to develop assays and application solutions in advance of the planned commercial launch in 2023.

In addition to all the operational and business progress, we made some important updates to our team. We added Elaine Mardis to our Board. Elaine is a pioneering researcher internationally recognized in cancer genomics.

Her focus has been in the application of genomic technologies to improve the understanding of human disease and the precision of medical diagnosis, prognosis and treatment. Dr. Mardis serves as Co-Executive Director of the Institute of Genomics Medicine at Nationwide Children's Hospital.

Additionally, we launched our Scientific Advisory Board. This group is comprised of distinguished academic and industry experts who advise in the company's product and service offerings and R&D pipeline. We look forward to their contributions as we deliver the next generation of NGS to the scientific and medical community.

With that, I will now turn the call over to Dalen to go over the details of our fourth quarter financial results.

Thank you. I'll start by covering the Q4 2021 financials followed by a few comments on 2022, including brief remarks on initial orders and expected revenue recognition timing. Then I'll conclude with an update on our operational infrastructure build-out to support future growth.

Operating expenses for the fourth quarter of 2021 totaled $19.7 million compared to $7.6 million for the fourth quarter of 2020. These totals included noncash stock-based compensation expense of $2.9 million in Q4 2021 and $0.3 million in Q4 2020.

The year-over-year increase in total operating expenses was driven primarily by our headcount growth, investments to support the G4 launch, continued investment in our product pipeline and R&D roadmap and the costs associated with being a public company.

Net loss for the fourth quarter of 2021 was $19.8 million or $0.27 per share compared to $7.9 million or $0.73 per share in the fourth quarter of 2020. Ending cash, cash equivalents and short-term investments, excluding restricted cash, totaled $339.2 million as of December 31, 2021. Our weighted average share count for the quarter used to calculate net loss per share was approximately 72.2 million.

Looking ahead through 2022, we expect total operating expenses, including stock-based compensation to continue to increase as we invest to support the scale-up of manufacturing, add headcount in sales, marketing and customer service and support, and progress future innovations in R&D. We expect our Q1 weighted average share count used to calculate net loss per share to be approximately $71 million.

Turning to orders. We have begun to take initial orders and are encouraged by the positive reception from our early customers. It is still early in our launch cycle, and we will plan to share more information on orders after we have begun to ship and have better visibility into how the sales funnel is transitioning to orders through midyear.

As a reminder, we do not expect to recognize any revenue until after we commenced shipping instruments and consumables. Revenue recognition on our initial system placements will be contingent upon the completion of a customary acceptance or validation process. This could result in revenue being recognized in subsequent periods for units shipped in Q2.

We will plan to deliver more information on unit shift and associated revenue recognition timing as we gain better visibility into the shipment schedule. Longer term, we expect to structure our terms and conditions to enable revenue recognition upon shipment.

I will provide a brief update on our operational infrastructure build-out to support initial instrument shipments and future growth. Our dedicated 20,000 square foot manufacturing facility in San Diego is up and running, and we are assembling production instruments as we speak. Additionally, we are on track to move into our new 80,000 square foot headquarters in the second quarter of 2022.

We executed a new lease for an additional 200,000 square feet in the life sciences hub of Torrey Pines in San Diego. The addition of this space, starting in 2024, will support additional demand and meet our capacity needs for the next several years.

In summary, we remain well capitalized to support the G4 launch activities. We are investing to achieve our commercial goals and scale the business. We are making progress on our product pipeline initiatives and are confident in the commercial plan that our team has in place to capture the large market opportunities in front of us.

Thank you, and back to Drew for closing remarks.

Thank you, Dalen. I'm incredibly proud of our team and the progress made over the last few months. We have commercially launched the G4. We have demonstrated leading performance specs at 2 additional EAP partner sites. We progressed development of the system and achieved targeted commercial specs in key areas.

We stood up our dedicated manufacturing site, assembled initial production units and we are continuing to build out a world-class team with industry expertise. In addition, we have taken multiple orders from customers and are on track to ship the first instruments in the second quarter.

Lastly, our product pipeline is robust. With F3 flow cells and our specialized application kits expected to launch in the fourth quarter of 2022, we are committed to driving value for all customers through the core features of the G4 system as well as direct cost savings. With the G4 and even more so with the G4x4 later this year, we will enable high throughput level pricing on a benchtop sequencer for the first time.

Our value proposition is clear. Industry-leading power, speed, flexibility, accuracy and cost on a sequencer that spans the mid- to high throughput market. With the G4, there are no trade-offs. We are excited to bring our first products to market and take a major step on our mission to accelerate genomics for the advancement of science and medicine.

Joining me for Q&A, we have Eli Glezer, Founder and CSO; Dalen Meeter, Head of Finance; and Dave Daly, President and COO. Now let's open it up for questions. Operator?

(Operator Instructions) Our first question comes from the line of Tycho Peterson with JPMorgan.

I appreciate all the color around the G4 launch. Curious, can you talk on the path to improving accuracy? I know you're launching the HD kit later this year, which will get you to Q50. Can you maybe just talk about how you think about that opportunity and how important is accuracy in some of these early discussions?

Yes, absolutely. Tycho, this is Drew. I'll probably have Eli talk a little bit more in detail about HD-Seq specifically. But I think accuracy is a term that really matters in the context of what type of sequencing you're talking about, meaning that accuracy for counting applications or RNA-Seq is very different than accuracy for whole genome or an exome.

And then when we think about liquid biopsy specifically, it's really a very unique accuracy profile that's required there that most people are turning to library prep techniques such as UMI's or du UMI's to really drive the accuracy needed to get to rare variants.

And that's specifically kind of what HD-Seq is designed for. And I'll let Eli talk more about kind of HD-Seq specifically and current status of where it is.

Yes. I think that's a good summary. On the basic sequencing, as you heard in our updates from the last 2 sites that we presented, we're hitting more than 80% of the base calls both for Q30, so kind of industry standard, industry-leading type of performance there.

And then in the report we published on the whole human genome sequencing that takes it up to the next level of looking across the entire human genome and looking at our ability to call variance and we think that, that's on par with kind of the state of the art today. And then we've continuously improved the sequencing quality over time. We will continue to do that on the basic raw accuracy.

And then in terms of HD-Seq, as Drew mentioned, that's really intended for rare variant detection for liquid biopsy or thematic mutations in tissue samples, for example. So there, we are now hitting Q50 accuracy, so 99.9959% and we intend to put out some results on that around the middle of this year.

Okay. That's helpful. I know we're all going to get the question about orders, and I appreciate it's early, but I guess you're committing to giving orders next quarter. I mean when will we kind of get a sense of the magnitude and some of the newer customers you've announced here like Adaptive and Exact, are they putting the G4 into production mode? Or is it really for kind of R&D at this point?

Yes. I think, Tycho, we probably won't provide specifics on backlog until we've really gotten out in the market for a few quarters and feel like we can provide information that's credible and predictable that you guys can count on.

In terms of the early adopters and the orders we've taken so far, I mean, I think in general, it's a crawl-walk-run type of adoption for sequencing. We've had questions before about the barriers to adoption. And we're committed to partnering with these companies to make sure that they're not only seeing good sequencing quality, but they're also seeing a path to value and cost savings.

So I think in general, what we can say is you would expect people would stepwise the new technology into large clinical sequencing operations. I think it makes sense, just in general, that there is a stepwise approach there.

That being said, we think the profile of the G4, the cost savings matched with the speed and flexibility really do provide a nice glide path to larger engagements and bigger relationships in terms of customer vendor down the road.

Okay. And then just last one before I hop off on PX. Are you able to give us any details on resolution, throughput, panel breadth, any metrics there you can talk about ahead of the launch?

Yes. I'll turn that one over to you, Eli.

Yes. So I would say in terms of resolution, it will be in the same ballpark as state-of-the-art pathology or when applied to tissue, sub-micron resolution there. And I just want to say that there's a number of unique features about the PX.

It's a system that is designed for both single cell analysis and also for tissue in one platform. And within each of those categories, it's able to read out gene transcription of panels of RNA and then also panels of protein, either just RNA and just proteins or the 2 combined.

And since we use the sequencing readout, we also have a unique capability to look at the specific sequence in cells, for example, the variable regions in antibody producing cells.

And then lastly is just the scale. So we use a 96-well plate format, and we can run up to about 100,000 cells per well. So that's across 96 samples in parallel. And I think that's unprecedented today. And the same thing can be done with tissue sections in those wells. So those are some of the unique attributes of that.

And our next question comes from the line of Matt Sykes with Goldman Sachs.

Maybe just a question on sort of customer type. Your EAP was pretty well diversified across a number of different customer types. As you've kind of gone through that process and gotten a lot of additional customer feedback, is there any type of customer, whether it's government, CRO, pharma, diagnostics that you feel like some of the demand is gravitating towards?

Or is it still pretty well spread across those different customer type groups and that we should expect a fairly diverse potential customer base going forward?

Yes, Matt, this is Dave Daly. You've hit it. We've got a very robust engagement across all the customer segments. So whether it's academic cores, whether it's fundamental research, clinical biotech start-ups. We're very, very excited about the breadth.

I think as Drew outlined, when you look at the attributes of cost, speed, accuracy, workflow integration, that versatility to G4 really does give us the opportunity to hit all of those customer segments and meet their needs, specifically with the G4 or the G4x4. So it continues to be very broad and very diverse, and we're excited about that.

Great. And then, Dalen, maybe one for you just on the OpEx. Have you had to readjust your budget at all for supply chain constraints, inflation, et cetera? Or are you still relatively on track to what you kind of had originally kind of budgeted out in the original plan or subsequent plans?

Yes. Yes, absolutely. I'd say how to think about we're definitely in an investment phase. We're expecting OpEx to increase here in 2022. Specific to inflation or any of the other factors that you've laid out, I wouldn't say that it's anything material that's caused us to reset.

I think in general, we've seen some manageable headwinds like a lot of companies are seeing, but the team is managing through that. We've got a little bit of increase in labor expenses with a higher job market or a more competitive job market. But the team is managing through that. If we think about kind of pace of expense into 2022, we could see operating expenses be about double, 2021.

Just depending on how we kind of phase in the investment to support the growth. But I'd just say we've always been really capital efficient. You can look at our history, $450 million raise, $110 million-or-so spent to date. We're going to continue that philosophy in investments here over the course of the next couple of years.

Great. And then maybe just last one, just related to that, just on the PX. Does that OpEx spend bake in some spend on PX and will we see that kind of increase this year? Is that sort of a little bit more of a '23 type of spend plan?

No. We're actively working on that here in development. We're bringing up beta units kind of right now, we'll be moving into kind of the technology access program phase here, last part of this year. So that OpEx spend includes PX as well.

And our next question comes from the line of John Sourbeer with UBS.

Appreciate all the color you provided there. Maybe just on the early access customers, any additional feedback or impressions you can provide in maybe the customers that haven't yet converted to orders, has there been any feedback there on areas maybe for focus or improvements?

Yes. I'd say, holistically, the EAP has been really helpful in a number of ways, both from a learning about the system perspective, but also learning about customers and one part of that is understanding kind of the buying cycle. It's much different if you're looking at a private company versus a core lab or an academic or some type of a public institution.

So there's definitely differences in buying cycles and budgeting and the way that happens, and we're learning through that. No additional color at this point in terms of customer vendor relationships, although I think we're hopeful that we can convert most of these, if not all these, EAPs to customers at some point in time.

Got it. And the company has announced several partnerships since the beginning of the year, a few more this week. Any additional details there or areas that you think of focus maybe for an addition holes to fill?

I don't think there's more color on the names involved. I think maybe the higher takeaway is that we are very focused on making sure that the practical adoption of the sequencing is as seamless as possible.

So the theme that's running through these partnerships, whether they're on the back end of data informatics for the front and the library prep is understanding that there are hurdles to get new adopters and there are nuances and differences with the different sequencing platform.

And the partnership holistically are kind of a very focused intended set of activities that we plan to really spend time on this quarter to make sure that when we're shipping systems and they're reaching customer labs and they're using third-party library prep solutions that they've used before, that the compatibility of the protocols, all that's already been essentially figured out for them that we don't have any aha! moments or any confusion when a system drops in.

So I would say these are really all in kind of the same direction of how do we make sure adoption is seamless and that users have positive experiences with the sequencer and existing kits that they're already accustomed to using.

And our next question comes from the line of Michael Ryskin with Bank of America.

This is [Peter] on for Mike. So on the PX, definitely appreciate, it's still early days here. I believe you had previously commented that we could expect the launch in the second half of '23.

I guess, A, is that timeline still intact? And then B, is there any more detail you can give on the EAP plan? I think you had touched on it differing from the G4. Just wondering if there's anything new there you can share?

Yes, absolutely. So I guess I'll cover the first part of the PX and then I'll let Eli talk a little bit more about the TAP program. We do still have it on schedule for kind of the second half of next year.

We are, again, launching our first product, and that is not a trivial pursuit, so to speak. So we are very aware that the success of the G4 and this organization needs to be focused on making sure our first platform is successful, make no mistake on that.

We are trying to make sure that we have a group continuing to push the PX forward and assuming we're successful with the G4 and things go according to plan as they are right now, we should be able to continue that investment and stay on that timeline. But we will be very transparent on the timeline of the second system, and it largely has to do with the success of the first system, which is our priority.

In terms of the Technology Access Program, I'll turn that over to Eli to talk a little bit more about what he has in mind there.

Yes. Thanks for the question. It is going to be a little bit different than our early access program for the G4. In that program, we're really just trying to validate the operation of the sequencers in customers' hands and the applications, we're very clear that we're targeting.

For the PX, there's such a broad range of possibilities, as I mentioned a little bit earlier, single cell analysis tissue, reading out RNA panels, proteins, direct sequencing. Then what we hope to do through the technology access program is work with some thought leaders and potentially large customers in this area to help guide us in the most promising directions there.

And so that's part of the technology access program. We'll work with people closely on those applications, maybe develop custom panels specific to those needs and then that will guide our further development as we head towards commercialization.

Great. And then is there anything you can speak to how discussions with potential customers have evolved specifically within the past couple of months here, given an announcement by a major competitor in January and then there's another pending platform expected to roll out. How are you kind of thinking about this impacting your launch?

[Peter], this is Dave. As I mentioned previously, the customer engagement has been very robust. And in fact, it's accelerating. The number of engagements, the funnel itself, across all of the various segments continues to be very, very strong. And again, I think as we're demonstrating the value proposition of the G4, it's real.

I think 1 thing that we haven't mentioned that I think has helped that is the early access program actually shipping systems to these third parties and having them be run in their laboratories has given us a lot of insight that you don't get when you just send samples into their -- providers' laboratory for processing. So we can talk specifically to these target customers about how the G4 can actually plug and play.

I think secondly, as Drew indicated, with the upfront library partnerships with the back-end analytics partnerships we can, likewise, talk about real-world utilization of the G4 at these various customer prospect locations.

So we're not talking conceptual. We're really talking about actual capabilities of the system. And the ability to do that has again accelerated those customer engagements. So feeling really good about not only the number, but the acceleration of the number in the fund.

And I guess I'll just add on, on the competition there's going to be competition in this space. I think what we're focused on is what's within our control and largely that has to do with making sure that we meet or exceed the specs that are very aggressive that we've put out and making sure that we're engaging and listening to customers.

I think one thing that's worth mentioning, the profile of the G4 and G4x4 is really unique in that it kind of spans both the mid-throughput and the high throughput. And what I mean by that is if you look at essentially how -- on a simple way, how pricing works on a per gigabits basis, right now, the mid-throughput market is kind of in the high teens to maybe $40-or-so.

And the higher throughput market is probably kind of $4 to $5, mid-single digits up to about $20. What we're really talking about here is a system where the power and the speed and the output and now with pricing kind of ranging from high single digits up to $40, we're kind of spanning the gap between those 2 systems.

So it's really a unique offering. And when we say no trade-offs, I mean, that we really mean it, that the speed of the system, the flexibility of the system, the fact that we'll be offering something that spans this gap, we think provides a very unique value proposition and a very unique system that will be differentiated for quite some time.

And our next question comes from the line of Dan Brennan with Cowen.

Maybe the first one would be in terms of the flexibility of the G4, the ability to run one flow cell to 4 flow cells all the way up and get that same pricing per gig. Like amongst the early beta users and the customers so far, how often are they like wanting to run 1 flow cell or 2 flow cells since that's a pretty big differentiator in terms of your viewpoint on the funnel, is that going to be like a big driver for customers?

Yes. I think it's going to be a very big driver. And I think it really just depends on the profile of the customer. There are certain profiles of customers that they're running fleets of next seqs, those are customers that are thinking about this system that's selling that bridges them in terms of throughput and lowers their cost.

And those are the types of customers that are probably going to be using 4 flow cells in parallel, doing multiple runs per week. There's another subset of customers that are really, for example, in academic core lab, where they're serving all different types of sequencing.

And for those, the flexibility is really something that allows them to cater to their PIs or upgrade their lab in a more efficient, faster turnaround type fashion, where a sample type or a set of samples can come in, you have minimal batch requirements, you can load up a single flow cell run, the system is ready to go the next day.

You don't have to wait all week to batch to run 300-gig flow-sell. So the question, I think, really can be best answered and it depends on the customer and if it's both of those needs very well.

Great. In terms of learnings that you've had so far, have there been -- I assume there's been a bunch of like smaller things that we won't say. It sounds like things are going well. But have there been any kind of key learnings as you've gone through this beta where you've been able to tweak things, fix certain things, such that -- like does the G4 work kind of out of the box, if you will, right now?

There's been a ton of learnings. I guess, -- on the commercial side, Dave and I were just talking about that, there's definitely been a lot of learnings in terms of the way people think about their own validation.

And there are also learnings and again, what does the purchase look like, and it's very different for a small private company versus a large private company versus a government entity. In terms of the actual technical learnings, they'll probably turn that 1 over to Eli. I don't know how much detail you want to go into here, but feel free to be candid.

I would say it's been valuable for us to work with real customers, real samples, real library preparation method. So maybe give you 1 example, in 1 case their libraries are particularly small inserts, and so we wound up adjusting some things in the way we process the data to make it suitable to that.

So things of that sort, nothing sort of deeply fundamental, but important to be able to be prepared to meet all those various types of applications as we roll out the commercial systems.

And I would say also overlayered on that has just been our own internal progression in the output and sequencing quality and all that. And that's just sort of happened in parallel during this year as we've done the EAP program.

Great. In terms of like the funnel, obviously, you're not giving any backlog numbers now, but Dave, obviously, you talked about the funnel, really feel good about it. I mean we have -- I think we're around where the Street is. We have like 30 placements this year.

Obviously, I'm not going to comment directly. But as you look at what you're seeing in the funnel qualitatively and you look at where the Street is. Can you comment at all on the funnel expected conversion? Just any thoughts on how we might translate that funnel kind of as we look ahead for the full year.

Dan, this is Dalen. I'll take that, and anybody else can chime in here. But yes, just as a reminder, we haven't provided any formal guidance on units of revenue as a public company, but yes, we're absolutely aware of the consensus model that's out there. And it's about 40 units back-end loaded in Q3 and Q4. There's no change to our perspective on the commercial opportunity at all, right?

From a manufacturing ops perspective, we're building units to achieve this. I would say that 40 units isn't a layup by any means. We're bringing in new technology, a new product to market for the first time, but it's definitely an achievable challenge, right?

We're out there learning every day, filling the sales funnel and customer conversations are going well. So I'd say that's has a little bit of an overview. And I don't know, Dave, if you have anything else to add?

Yes. I think, Dan, what you also have to take into account, Drew touched on this a little bit, when you look at the funnel is there are a variety of sales cycles. An academic core lab is a 6- to 9-month cycle. A clinical lab is a 2- to 3-month or more cycle. A biotech startup can move a bit more quickly.

So while you've got a full funnel and there's a lot of robustness, then you now have to bake in the various sales cycles to get to the numbers that Dalen outlined.

Got it. Great. And then maybe final one, just on the 4x4. Who's the target customer there? Is it just interested to kind of see who you're going to be marketing that product to.

Yes. I think the 4x4 was something that we have been consistently talking about it since we kind of filed our S-1. So this has always been something that, as we were talking with customers, we found and continue to feel that there is a strong opportunity allowing people an alternative and scaling into a super high throughput sequencer.

If you think about why people scale, it usually comes down to -- they have a lot of volume and they're seeking lower cost. But there's a big step into a high throughput system. It's usually a $1 million price tag, which is a lot of CapEx. And that's a big deal.

So the thought process with the 4x4 is trying to provide an alternative and a more attractive cost and value proposition to those customers that essentially when we talk with them and we say it's a mid-throughput instrument at a certain price point and a certain capacity, they said, that's great, but I'm just going to need more.

And a lot of those customers would be customers running large central labs. They could be research labs, but a lot of times, it's going to be a clear environment, a clinical lab running LDTs. And we just want to make sure that we're able to capture that market.

Again, if you think about a grid and on that grid, you have high throughput system, you have an SP and S1 and S2 and S4 flow cell, the people running the SPs, the S1, the S2s, those are a large percentage of the total customers that are stepping into that system.

And first, a lot of those customers having something that's faster, more flexible at a similar cost point or a better cost point is a really attractive value proposition. So it's really very simple.

If you look at the grid, you have your low throughput and your mid throughput by doing the 4x4, it allows us to extend directly into that higher throughput grid and really provide an attractive alternative from a cost and throughput standpoint for those customers.

And Dan, one other additional point, I think, to complement what Drew just articulated is you're looking at higher volumes and higher throughput. Keep in mind that the 4x4 is taking 4 independent G4s and harmonizing them.

So now not only do you have the ability to run greater volume, but now you have the opportunity to run simultaneously more types of experiments at the same time. Or if you've got something, a large experiment running and you happen to get something that needs to be processed relatively quickly, you have access to your system.

So I think that really provides a different workflow scenario in a higher volume setting than you're getting with something that's a bit more static, you load it, you got to wait for it to finish before you can then reload it. The 4x4 gives you a lot of workflow flexibility that you don't get in most high-throughput systems today.

And this does conclude today's question-and-answer session. Ladies and gentlemen, this also does conclude today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.