Quanterix Corp (QTRX) 2021 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Quanterix Corporation Q4 2021 Earnings Call. (Operator Instructions)

I would now like to hand the conference over to your speaker for today, Mike Doyle. Please go ahead.

Thanks very much. Good morning, everyone, and thanks for joining us today. With me on today's call is Kevin Hrusovsky, our Chairman and CEO; and Masoud Toloue, our President.

Before we begin, I'd like to remind you about a few things. This call will be recorded and will be available on the Investor Resources section of our website. Today's call will contain forward-looking statements that are based on management's beliefs and assumptions and on information available as of the date of this call. We may not actually achieve the plans intentions or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. The risks and uncertainties that we face are described in our most recent filings with the Securities and Exchange Commission.

During today's conference call, we will discuss some financial measures that are not presented in accordance with U.S. Generally Accepted Accounting Principles or non-GAAP financial measures. In the Q4 earnings release and in the appendix of our presentation, which are available on our website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to comparative GAAP measures. We believe that these non-GAAP financial measures provide investors with relevant period-to-period comparison of our operations. These financial measures are not recognized under GAAP and should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP.

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

Thank you very much, Mike. Looking forward to today's call. We have a very full agenda. We're going to start by describing a really exciting opportunity where we're going to be further expanding our leadership with Masoud going to be taking the CEO role for me starting on April 25th. So this is just an announcement to let you know that this is a very orderly plan that we're going to be rolling out over the next 1.5 month. But with that, after we talk through the transition, I'd like to go through our very significantly positive full year results and Q4 results for 2021; the major announcement this morning on our collaboration with Eli Lilly, which I think is a seminal announcement that has been a major focus for our company for the last several years; also like to describe the neurodiagnostic therapy evolution. It's a concept that we laid out and rolled out about a year ago, and it's moving very productively along; and close off with just the precision health proteomics, the role that we're playing and the role that we think we're going to be able to play over the next several years; and then, Mike, I was going to ask you to do financial results; and then I'll close with just finalizing some of the compelling dimensions of our current equity.

So Masoud, really excited to have you evolve. You and I met each other a couple years ago, and I just really believe that you have all the capability, and you and I have been together non-stop for the last year. It's really exciting for you to evolve into the CEO role and give me a chance to continue evolving strategically at a pretty important moment for our company as the Executive Chairman of the Board and focusing and obviously advising and working closely with you, Masoud, but also working on some of the more important strategic initiatives that we see coming over the next year or so.

Now with that, Masoud, would you like to make some comments?

Thanks, Kevin, for the kind words. I want to thank you and the Board for this incredible opportunity to lead Quanterix in this next phase of growth. Kevin and I have been discussing this moment since he recruited me and I joined last year. I've had the privilege to be mentored by a pioneer in the field of proteomics and be part of such an incredible group of people here at Quanterix where the precision health mission continues to be a guiding principle. I look forward to continuing to work with Kevin as Executive Chair, our Board, and I'm looking forward to speaking further with our employees, customers, and investors to provide updates on our success and growth on the future calls.

So with that, I'll hand it back to you, Kevin, to discuss the earnings results.

Excellent. Thanks so much, Masoud, and this is going to be a really great next chapter. Hey, but just in way of summary, looking back at 2021 on Slide 5, we did say we would have this 30% to 40% CAGR based on a strong 2019, and we continue to progress very productively. You'll see that our product growth actually in 2021 was 84% year on year. Getting the Breakthrough Device Designation is really key for Alzheimer's for diagnostic and triaging with the pTau-181 that occurred several months ago and really is a way for future differentiation of our technology. The number of publications is truly amazing. We're getting more than 1 a day, 465 of them in 2021, and now we're close to 1,600 publications third-party giving us a lot of validation. Our instrument growth is a key leading indicator, and we were able to grow at 32%. More importantly, got a lot of the HD-Xs into the installed base which has a greater pull-through and throughput and then the traditional HD-1. Both what we've done with Lilly is obviously game-changing, but also there's advances with other pharmas, including Biogen who's now presented data showing our pTau-181 and its correlation to many dimensions of Alzheimer's, even a for cognitive score. So we're pretty excited about a very low-cost scalable blood-based technology being able to provide this correlation.

We did raise $287 million also in '21 with a balance sheet of nearly $400 million at the end of Q4, and we looked at a crossover for our RUO business fourth quarter '23. So we've really been improving our growth much faster than our OpEx percentage allowing us to really start shifting towards a value opportunity longer term. We've been talking a lot about 100x sensitivity, and we do believe that it was demonstrated in the field in 2021 over with Henrik Zetterberg, one of the pioneers in the neuro research landscape. He's a neurologist, got a very strong team over there. And we do plan to have that in our offering and Accelerator by year end.

In summary, if you look at the next slide, our 84% growth for product revenue, our overall RUO growth was 50-plus percent. Our gross margins went up another 600 basis points from 49% to 55%, and our productivity, as we mentioned, continuing to improve on our OpEx. Since the IPO, I should tell you, it's been 4 years now, and since that time we've been growing our product at an annual rate of 55% and our RUO revenue growth this 4-year period was about 47%. Margin expansion has been averaging about 300 basis points a year. We've increased it from up 1,200 basis points, 44% to 56%, over that time period. And productivity has improved, as we've pointed out, on OpEx from 157% down to 111% for RUO. That's the percent of revenue. So that's a really good sign that we're continuing to create the leverage that the business needs to demonstrate.

The next slide just shows the Q4 results. You can see the 36% growth overall. We also believe that the record consumable growth was quite amazing at 100%, and we also did put 211 instruments into the field this past year, which again is an incredible achievement. On an overall level, Q4 at 36% growth also represents a 2-year CAGR of 36%. But most importantly, when you look over at the components, we knew going into the year that this was going to be a product year in 2021. Accelerator had grown very rapidly the previous year, but we now know that in 2021 it stayed pretty flat, which we expected after that strong growth in '20. And we do think going forward, we're going to start to see stronger growth in Accelerator, at least for the next year, versus products just because of some of the catch-up, some of the COVID dimensions through the business, and what we think is a really game-changing deal with Lilly that does bring a lot of revenue into the 2022 Accelerator.

We'd also like to just say that overall growth has been about 48% since the IPO, and this is something that we do feel with this higher base we're going to continue to grow. And Mike will give more dimensions on our strong Q4 as well as our 2021 in a few minutes. When you look at the overall distribution, our geography, we still have a very strong North America presence. Our growth was actually strongest in North America this past year, probably with all the Breakthrough Designation, a lot of the COVID work that also then led into us getting EUAs for COVID that then led into the Alzheimer opportunity. Once ADUHELM was approved earlier in the year, it created a lot of interest from our other pharma customers looking at Alzheimer drugs. Our customers today continue to be 50%-50% between pharma and academic, and we do think that that's a pretty good place. We get a lot of pull through for publications from academia.

And then when we look at the overall growth in the disease categories, we continue to have a very strong position in neuro, and we also, as we pointed out, had a very strong consumables growth in 2021. This next slide basically illustrates that a lot of our focus is taking what we're doing in the powering precision health ecosystem that has all the top thought leaders, includes investors who are actually helping us sell a lot of our technologies to pharmas that have neuro pipelines. And they're trying to get those drugs approved for their valuations on those stocks. They help us by calling those neuro customers up, and I'll show a letter that we recently sent to the 80 companies that are running 300 different drug trials in Alzheimer's and the role we can play for them. But we're also linking together not just the pharma relationship but also the payers, and we mentioned in 2021 UnitedHealth Group has used our technology and then the FDA and the NIH are very strong partners now, given the EUA advances and now the Alzheimer Breakthrough Designation for 181. And getting samples and publications from the ecosystem has been a big piece of us being able to evolve very efficiently at a low cost, and we think this will continue to serve us very well moving forward.

And now summarizing what we think is one of the most important advances, because what we've achieved with Lilly, we think will also further spur on and catalyze the similar relationships with other pharma customers. But we were able to license the marquee antibody pair 217 -- P-tau217 from Lilly that we'll initially put into our RUO in the near term and longer term have the ability to move it into IVD. They're also going to fund $11 million in 2022 of Accelerator services, not only for neuro, but the overall framework of the collaboration expands and extends into broader categories. And you can see at the top of the Slide 12, there's a lot of advances this past year in the Alzheimer landscape between Lilly and the AAIC many customers presenting and then our Breakthrough Designation and then now the advances that we're having with 217. And the data that Lilly has continues to have a lot of correlation between slowing down disease progression with the P-tau217. So we're all interested to continue that collaboration.

Slide 13 now just shifts back to what we've been showing for quite a while. We know that Abbott, Roche, and Siemens are 3 companies that are measuring about 200-plus proteins and collecting about $25 billion annually. Most of what they measure using immunoassays are based on patients that already have symptoms. And a lot of our advance here is looking at sensitivities that are 1,000, or potentially 100,000x greater, expands the field we believe of proteins that are highly relevant, but allows you to see disease, we believe, earlier less invasively. And that is an overall opportunity that we show on Slide 15, it significantly increases the TAM of this overall landscape. By seeing disease before symptoms, we believe we could significantly improve outcomes. And the sensitivity not only allows in case of neuro to see it before symptoms but also to see it less invasively in blood. And that allows the scalability of a low-cost opportunity for the payers to be able to track the progress of the drug. And so we believe that COVID has further expanded the interest and homecare sampling, and so the lesser invasive sampling that can see disease before symptoms longer-term we think will play a role in diagnostics as well as in the strong RUO opportunity. And the more we do in diagnostics, symbiotically the more we think it'll create interest in pharma for drug trials using our technology.

Slide 17 just basically shows the 3 categories: discovery, where many of the new entrants in proteomics has been playing, SomaLogic, Olink, Seer, very good companies, creating a lot of interest around large multiplex panels. And then Quanterix is playing in the translation more in what we would call the 10-plex and less and then translating that ultimately into diagnostics is the overall goal that we see. And again, we think 10-plex and less is going to yield a lot of value because today that 25 billion that's being collected from Abbott, Roche, and Siemens on running immunoassays, they're all singleplex, to give you a sense of how valuable those proteins are in that category.

The next slide just shows you our rapid ascent over the last several years, starting in neuro and research. We started there and then we advanced into doing the antigen and serology tests for COVID as part of our pivot in research, and then that allowed us to cross over into diagnostics and getting the 2 EUAs for both antigen and serology and some label claim expansions, taking that infrastructural build, the NIH's $20 million of investment to try to further build out our diagnostics capability, hiring Masoud who had a lot of diagnostic experience, building the team with Dawn Mattoon dedicated to Alzheimer's work as well as diagnostics. And filling out a team, this is now our focus of an ability to do both RUO and diagnostics with a focus on Alzheimer's. And the pTaus are the primary area of this interest. And interestingly, we started off thinking that NfL and MS would be our primary focus for diagnostics, but with the COVID that did shift the priority of the FDA. We still believe that this is a very important area. In fact, in 2020, 2 drugs from Novartis and Roche were approved using our NfL as an endpoint. So we do believe that MS and NfL still has a great role, and we're planning to use LDT entry for not only Alzheimer's but also MS. And so this is a key to our future focus.

And slide 25 just shows the publications, the biomarkers and the number of instruments that we've placed and then Slide 26 shows just overall menu that we now have for neurology across Alzheimer's, Parkinson's, ALS, MS, and even concussion. And most of these customers in the industry are now utilizing our technology. And the neuro field continues to expand very rapidly with a lot of investment. The number of trials in all phases that have been initiated interventional trials and neurodegeneration has gone from less than 100 in 2016 to over 1,500 in 2021. And even the amount of spending by the NIH has significantly increased from about 6% of their spend up to nearly 10%. And that overall spend has gone up as well. So we do see worldwide a very strong focus on the neuro landscape. And many of the pharma and diagnostic companies have great antibody technology, as evidenced by Lilly and what's just occurred and many of these companies are playing in both pharmaceutical and diagnostics. And a lot of the focus we're having on the brain with many of these new biomarkers is this neurodiagnostic therapy where you have to apply the therapy early in the disease cascade, many times before symptoms, to create the potential for greater outcomes. And those greater outcomes we think increases the probability of drug approvals and potentially even allows you to use less toxic dosing levels because you're getting to the disease when it's still very early in its pathology. And in the area of Alzheimer's, we look at the size of the TAM for research being less than a $0.5 billion, but the TAM, if you could break across into diagnostics, could be 20x that size at $11 billion. And so we're looking at if we could just get 10% share of each of those 2 markets, it's $50 million for the research side, it's $1 billion of revenue for a 10% position of the larger TAM for doing what we would call drug screens and diagnostics for Alzheimer's has been a significant global opportunity.

And so this Slide 35 is just us showing a letter that we sent to the top 80 customers that are running 300 pharma trials right now on Alzheimer's, and we tried to lay out what we can do for them. With the Breakthrough Designation, we can do clinical discrimination better. We can actually with 181 stratify out Lewy bodies and frontal temporal dementia increasing and enhancing the cohort fertility for approvals and that increase in fertility improves the probability of a drug being approved significantly and it significantly can reduce the recruiting trials for patients by using blood versus PET scans or spinal taps. So overall what we did with MS with Roche and Novartis with NfL is now looking like it's got real potential for Alzheimer's using these pTaus and also NfL and GFAP. And so we're working very closely any investors that have positions in companies have neuro and Alzheimer pipeline trials going on, we would encourage you to help us further educate those pharmas to utilizing our technology because we do see, as we talked earlier, a very significant opportunity to be symbiotically both in RUO and diagnostics in the neuro field with these TAMS being the size they are.

I'm going to close by just saying we laid out last time -- the last few times we've talked about 3 steps that we're taking to move into diagnostics. The first is LDT, the second is single-site IVD based on the Breakthrough Designation, and then the third could be at some point distributed IVD. We either go direct and we show investment levels, or we partner. And this is a key to the future of our strategy is trying to go direct keeping the value in our company, but there's a lot of partnerships that have been established already with Abbott and Siemens on the distributed IVD, but also we believe that some of the CROs could play a role with us in LDT labs, reference labs in the earlier stages if we can't get sufficient worldwide capacity to support the opportunity we see in these different neurodegenerative disease areas.

And so with that, I'm going to close by just finalizing our objectives for 2022, starting with something that we have never done before in Quanterix. We're going to provide guidance. And we know this is the first time we're providing guidance, and so we do want to make sure we stay very conservative. And as you know, I have a track record and our company has a track record for many, many years in different companies of trying to stay conservative on our guidance. And given that the geopolitical forces that are out there right now plus COVID, who knows if there'll be any kind of relapse. There's concerns potentially around inflation and supply chain. We want to make sure we stay conservative so our midpoint does show 22%, which is above consensus. And so we wanted to make sure we laid out a guidance that's above consensus but stayed conservative and significantly we believe the Lilly deal derisks this guidance in a very formidable way, and that's a lot of what we wanted to deliver in 2022 is we're also going through the leadership transitions.

We also believe the neuro LDT validation for pTau and for NfL, for MS will occur this year. We also are going to start an Alzheimer clinical trial for pTau-181 and other AD markers potentially in a panel. We want to scale and grow our RUO business as diagnostic entry increases our differentiation, as we mentioned, and consider these pTaus even in panels that we now have got the license to the 217 from Lilly. We want to expand our pharma partnerships, similarly find other Lilly like deals that we think we're very well poised and positioned for over the next several years, and we do want to continue to expand the [plexity] with our sensitivity. So we are looking by 2024 of getting to 20-plex with various technology expansions, keeping the sensitivity or even further improving it, and then to utilize this greater plex primarily in our EUO to land other markers in LDT and single-site IVD penetration. The 100x that we've talked a lot about that we've demonstrated in the field, we will by year end put that into the Accelerator.

Mike Doyle, we'd like to now turn it over to you for financial discussion.

Thanks very much, Kevin. I'm going to provide some additional financial details about our fourth quarter 2021 performance. And for your reference, for those following on the calls, I'll be on Slide 39.

As Kevin noted, our GAAP revenue in the fourth quarter of 2021 was $30.3 million and included $1 million of revenue from our RADx awards. RADx award revenue is now complete as of 12/31/21. Excluding this non-recurring item, our non-GAAP fourth quarter 2021 revenue was $29.3 million, a 36% increase versus the prior year fourth quarter non-GAAP revenue. Once again, we had record product revenue in the fourth quarter of $23.5 million, an increase of 49% versus fourth quarter of 2020. Within product revenue, consumables revenue grew 66% in the fourth quarter versus the prior year fourth quarter to a record of $16.8 million driven by strong demand for pTau-181, P-tau217, and our neuro multiplex assays.

Like Q3, our services revenue performance in Q4 may include some recovery of previously deferred demand due to the pandemic as customers returned to more normal operations. Fourth quarter of 2021 service revenue increased 3% versus the prior year fourth quarter to $5.7 million. 2020 was a strong year for services revenue as one-time COVID-related activities, lab closures, and drove increased activity to our Accelerator Lab. Full year 2021 company revenues were $110.6 million. Excluding revenue from our non-recurring RADx awards, non-GAAP total revenues were $105.3 million, a 53% increase from 2020 non-GAAP revenue. Customer activity has returned to pre-COVID levels. However, potential spread of new variants could force renewed lockdowns. In addition, global uncertainty with rising inflation and the war in Ukraine could potentially impact our 2021 performance -- 2022 performance, I'm sorry. On a GAAP basis our Q4 gross margin was 53.7% compared to 57.6% in the fourth quarter of 2020.

During the fourth quarter we scrapped COVID-related inventory we had built in the beginning of '21 based on anticipated need as well as writing off older Array equipment. Our fourth quarter 2020 GAAP gross margin was positively impacted by revenue from our RADx awards of $4.5 million as compared to $1 million of revenue from RADx awards during Q4 2021 as the project finished up. Our non-GAAP gross margin was 53.5% in the fourth quarter of '21 which is an approximate 270-basis-point improvement compared to non-GAAP gross margin of 50.8% in the same quarter of last year. Non-GAAP gross margin was 55.4% for the full year 2021 period and is an approximate 620-basis-point improvement from non-GAAP gross margin in the same period of 2020. Our non-GAAP gross margin excludes the impact of our RADx awards, a 2020 onetime license fee from Abbott, and non-cash acquisition-related purchase accounting adjustments relating to our 2019 acquisition of Uman. We believe this provides investors with a relevant period-to-period comparison for our operations. Gross margin expansions have been driven by volume, particularly in consumables, productivity gains, and pricing.

GAAP operating expenses totaled $36.2 million in the fourth quarter of 2021. Non-GAAP operating expenses, which primarily exclude non-recurring expenses associated with RADx grant revenues, totaled $36.1 million for the fourth quarter of 2021, an increase of $13.5 million versus non-GAAP operating expenses in the fourth quarter of 2020. Major expense drivers were volume-related activity, personnel increases, outside services, and laboratory expansion as we scale the organization and invest in process improvements. During the fourth quarter of 2021, our cash balance decreased by $13.4 million, ending unrestricted cash balances of $396.5 million at December 31, 2021, and basic weighted average shares outstanding for EPS totaled 36.7 million for the fourth quarter 2021 period. Overall, we're pleased with our fourth quarter and full year 2021 performance and the progress made on our strategic priorities, and remain committed to delivering solid 2022 results in line with expectations.

With that, I'll turn it back to Kevin.

Thanks a lot, Mike. And I'd like to close by just summarizing that we do believe there's a very strong 2 to 3x value-creation opportunity and in the low-risk RUO side of our business, but we also believe there's a 10 to 15x value creation opportunity as we traverse and symbiotically move into diagnostics. And so we don't believe that the diagnostics is something that you should be buying our company based on, however. We think that there's plenty of value opportunity, and the more we do in diagnostics, the more we're going to be able to do in RUO with differentiation. Because the RUO opportunity with pharma, when they see us in diagnostics and having a way to the clinic and to try to get to payers to help support drug reimbursement, this further causes them to want to standardize on our technology.

And so having the unrivaled sensitivity has been key and having this very methodical market penetration strategy in RUO, we believe, has been key. And we know -- we believe that proteomics brings so much more value than only DNA and RNA alone. And so the validation of having 22 of the top 25 pharmas using our technology, over a 1,000 drug trials, and having that PPH ecosystem with over 1,500 peer-reviewed pubs gives strong validation. And so continuing to penetrate with a razor-razorblade approach, we mentioned the consumables grew nearly 100% in 2021, we do think that this is a low-risk opportunity for good solid returns. And there's an incredible track record with the management team with Masoud now coming in with his great track record and experience coupled with an highly experienced Board, we feel really well positioned for the future value creation for investors.

With that, we'd like to use the second half of this call, the remaining 30 minutes, to discuss questions.

(Operator Instructions) Our first question comes from the line of Kyle Mikson of Canaccord.

Obviously, congratulations to Masoud and Kevin. Sorry to see you go, but looking forward to the future. So congratulations on that. I just wanted to start on the guidance. Great that you're going to be providing that now. Maybe you could just talk about like the mix between instruments and consumables for the year for the RUO business. And then I also wanted to understand if this includes the $11 million in Accelerator revenue and I guess pharma trial revenue from Lilly. And I wanted to just mention that without Lilly, though, it's only 11% growth year over year, so would just want to get a clarification.

And then finally, are you expecting any incremental revenue from diagnostics in '22? Obviously, you have LDT validation possibly, but that's not going to be included in this revenue guide. But I just want to walk through those factors if you could.

And I'll start off by saying you said, I'm sorry to see you go. Appreciate your comment. But I'm not going. I'm just evolving into a different capacity role. So I do want to just reinforce that. Masoud and I've been working very closely together for quite a while here. And so it's a tag-team approach. It's just that we're -- I call this an additive approach to governance so that we can continue to evolve the ecosystem, the PPH ecosystem as well as the strategic opportunities while Masoud takes over complete operational control. And we know that that's something that will allow us to continue to really ascend in our growth.

And you're right, on the guidance. First time we've guided, so we definitely wanted to guide conservatively, but we definitely also wanted to show that we're higher than consensus. So we definitely wanted to guide it in a way that says we're growing -- we believe we're going to grow faster than the current consensus. But to your point, yes, the Lilly revenue of $11 million in 2022, the way to look at that, Kyle, we have a track record for really delivering but not over-promising. And so given that this is our first guidance, we have a little bit larger range, plus we are very conservative, and we know there's a lot of geopolitical forces out there as well as COVID still has some uncertainties. And so we wanted to guide in a way that would suggest conservatism, but at the same time, we want to make sure that you see that there is an upper end to the range and opportunities for us to outperform. And as time goes on throughout the year, if we outperform, we certainly will -- or if we see the future outperformance opportunity, we're going to be changing the guidance accordingly.

So RUO does have the Lilly and it significantly derisks obviously our current guide. And when you look at the different types of categories, whether it be instruments and consumables being our product categories or Accelerator. As I mentioned earlier, we think Accelerator did not really grow in 2021. It grew 80-plus percent I believe in 2020. So we had a very strong comp here. Due to COVID and a lot of lab shutdowns, people used our Accelerator. We do think our growth will be greatest likely in Accelerator this year based on what we would call an attractive comp plus a lot of work. We brought Masoud in initially to focus on the Accelerator. We brought some very talented peoples and individuals and leaders into the Accelerator group, continued to invest in LIMS and a lot of the infrastructure for growing that part of our business because it also plays a strategic role as an LDT lab. So we're looking at the Accelerator as a key part of the future investment and growth. So I would not be surprised it'll grow the quickest, and I would think that you'll still see good, strong instrument and consumable growth. But I would predict the Accelerator will be the fastest in 2022. Hopefully that gives you the answer to your question.

Yes, that was great. Just moving on pivoting a little bit. So you have obviously $400 million in cash. I'm just wondering you have this dry powder. How are you thinking about investing strategically versus organically? And you have these partnerships with Lilly, Abbott, Siemens. It sounds like you're not done there yet, though. Could you -- are you thinking about taking a pause on those new collaborations, or are you still interested in partnering with some of the pharma companies or maybe leading IVD companies as well?

Yes. There's no question that our balance sheet is strong, and we've had I think -- we've raised over $700 million from the time I joined, and each of them have been very strong up rounds. And we continue to feel like that war chest of a balance sheet is going to be very carefully deployed because you could also see a lot of focus on our OpEx productivity to make sure we're not one of these companies that's growing up X faster than revenue. There's a lot of companies in our sector, by the way, that have been growing OpEx much quicker than revenue. And for the last 4 or 5 years, we've grown our revenue significantly faster than our OpEx. And so we're going to be very careful with that war chest, and I would say that we see crossover in late 2023 for the RUO business on cash flow basis. So we don't really need the level of cash for our operations that we have, but we will continue to look strategically. We have acquired 2 companies. They were low investment. One of them was the NfL company, UmanDiagnostics. And I do think that our focus right now is building out the laboratory capability for LDT and potentially single-site IVD. And so will some of our funds be utilized with creative, innovative acquisitions in that landscape? Potentially, but I would say that acquisitions is not something we see in the short term, and we'll be very judicious with that like we've done in the past.

So I do think you will see us continuing to partner. We do feel Siemens and Abbott are great partners. We think there's other partnership opportunities. We do think that that's more for distributed IVD. And so our first ways of penetrating diagnostics will be LDT and single-site IVD. So there are partnership possibilities there, too, with Abbott -- I'm sorry, with LabCorp, Quest, and Mayo Clinic. There's a lot of installed based capability already in place. So we'll be looking obviously to see if we can evolve in our Accelerator Lab, but partnerships will also continue to play a role for us.

All right, that was great. If I could just ask one really quick follow-up and a confirmation. Will the analyzer with the 100x sensitivity, is that eventually going to have the 20-plex capability after 2024, or is it going to have the current multiplexing capability of I guess 10-plex or so? And then also, Kevin, I just wanted to ask you if do you think the 20-plex is enough for discovery applications?

Yes. Hopefully, you can still hear me here. I want to say first the plex initially for 100x will not be greater than our current plex. But we never rule out the potential that whatever we do with 20-plex could ultimately have advances in sensitivity similar to what we're planning for our base technology today. Do we need greater than 20-plex for RUO? We don't think that we do right now. Our view is that there's a lot of good, a lot strong players in Olink and SomaLogic and others upstream. We do think that this is an important area for discovery that these companies identify proteins that we then wanted to go seamlessly into our technology. And antibodies and the correlation with antibodies is also key and core. Some of our antibodies that we utilize are utilized by these discovery partners upstream. So we think 20-plex will be more than enough for translational purposes as well as diagnostics. We'll probably not even require 20-plex. We think that most of today's is singleplex, and so we probably will see some level of plexity. We think an area of Alzheimer's a 4-5 plex could significantly increase the area under the curve both for those that can see dementia today as well as those that are pre-dementia in the future. And Masoud, you might want to make some comments here, too, if you're by a phone around the concepts of diagnostic and increasing the area under the curve by bringing in more than a singleplex.

Yes. Thanks, Kevin, and thanks for the words, Kyle. When I think of the diagnostics opportunity, as Kevin mentioned, when you look at singleplex, there's a large obviously screening opportunity, when you look at 1 or 2 biomarkers. And then when you begin to start to put a few biomarkers together, 2, 3, 4, 5, you begin to improve area under the curve and ability to create something that could eventually what we believe replace imaging in the future as a true diagnostic test. So do we have the plex to be able to do that? Yes. Is this a great discovery tool as well? Absolutely. But we think we're well prepared both on the single and then the multiplex.

Next question comes from the line of Tycho Peterson of JPMorgan.

This is Noah on for Tycho. I just want to dig in a little bit into the central changes in the neurology landscape. Have you seen any potential changes in regards to research interest after the changes in the reimbursement landscape for Alzheimer's drugs?

Yes, absolutely. I would say that this is something that we've talked a lot about in previous webcasts, and we've had some podcasts, too, with some of the leaders in the field. And I think that the concern around getting reimbursement for ADUHELM has further enlightened the fact that PET scans and spinal taps are an incredibly costly and invasive way to diagnose Alzheimer's. And if you're a payer and you want to ensure that the drug is having the appropriate effect, it's hard to have a longitudinal, efficient approach using PET scans, MRIs, or spinal taps. And so having a blood-based approach is something that CMS has actually already commented on, and we believe is going to be a very important part of the future of not just neuro but all fields is to track whether a drug is having appropriate efficacy using biomarkers so that if a patient is not benefiting from the drug, you can get them off of that drug very quickly because there's normally a lot of lethal side effects to many of these drugs.

And so it's not only a benefit of cost improvement, but it could even be patient life extension by getting someone off a drug that's not working. And many times in oncology, these drugs only work 10% of the time, and so there's a lot of pain going on today for inefficient and even potentially lethal immunotherapies that could trigger cytokine storm. And then there's questions, too, in the cardiac field even around things like cholesterol and the statins, paying $1 trillion for cholesterol reduction, what role is it really playing in heart health and that correlative benefit. So I do think that there's a lot of new questions that's been raised. And the more we can link our blood biomarkers to actual clinical benefit to the patient in delaying dementia or reducing it, we think that this is a key to the future of how reimbursement is going to work. So I do think the field has been awakened by ADUHELM not getting initial approval for reimbursement.

Awesome. And just in relation to the $11 million, just digging into that a little bit more from Lilly, how do you think about potential for recurrence for multiple years there? And how do you think about possibly projecting any possible revenue from that?

Yes. In general, Noah, I think that it's really important to establish that we see Lilly as a leader in the field that really started using biomarkers with us 7 years ago. So they've really spent a lot of time investing. As we mentioned previously, they bought a lot of more HD-Xs. So they're doing a lot in-house. But then there's also a role for services. And so we actually think it's a model relationship where we do believe other pharmas will benefit by having a very strong relationship both with installed base instruments as well as Accelerator services to find biomarkers that are linked to their drugs to either help with endpoints or help with recruitment. And we could significantly improve efficiency of drug trials with those 2 categories, and then ultimately, we think the pharma benefits if the payers like the UnitedHealth Group and others utilize the technology and can see there are benefits for screening, early access to patients with the pathology utilizing the drug and then using the biomarkers and the test to monitor whether the drug is working. So we see a very powerful vision here that will evolve over the next several years. And $11 million is an example of what's possible in the Accelerator when you have a very strategic customer like a Lilly. And we do think that there's absolutely potential for that to continue in future years because the new collaborative agreement is a framework that allows for all the disease categories. And as you know, Lilly is very prominent not only in neuro but also in oncology and other categories so we're very excited about the framework of this type of agreement and then the license that we got from them for the pTau-217, we know there's a lot of pharmas that are very interested in 217. And so what's really encouraging about that relationship is we're going to be able to deploy that 217 once it's an RUO product that we launched to other pharmas and to help the overall field of Alzheimer's. And I give Lilly a lot of credit for giving us that access and giving us the potential to move the field, the whole field, forward in the area of Alzheimer's.

Next question comes from the line of Puneet Souda of SVB Leerink.

So first of all, Kevin, really appreciate your leadership here over the years and all the work you've done in neurology, proteomics, and Quanterix, and driving Quanterix to what it is today. And congratulations, Masoud. I really look forward to working with you being in the seat now. So thanks again guys for that update. Maybe if I could touch on -- if you could take a step back here and maybe paint a picture of the business going forward, how should we think about the portfolio of Quanterix and its operating profile? You're obviously strong in biopharma, academics, and now diagnostic customers that are emerging on the horizon. So I believe the question from investors that we frequently get is how do you plan to balance the core instrumentation and consumables growth and focusing on that part of the business while driving the diagnostics and the Alzheimer's and the neurology opportunity that you have because the company has traditionally not focused on diagnostic product launches per se, and traditionally we have seen that research tools companies that are emerging into diagnostic it takes some time for that to work and find success. So wanted to maybe get your thoughts on how should we imagine Quanterix a few years from now? Maybe if you can talk about that vision going forward.

Absolutely. And Masoud, I'm going to make a few comments and it'd be great for you to follow up. And Puneet, you've been an incredible partner over the last 6 years or so, and I want to thank you for all that you do for our company and our overall understanding out there in the marketplace. But you hit it right on the head. We are moving strategically and evolving strategically, and that's actually a lot of what this move is intended to do between Masoud and I is that we do see incredible opportunity for a higher-level strategic approach here. And we've been articulating that vision for quite a while and you saw moves in 2021 to bring Masoud in who had a diagnostic experience and dedicate some of our top leadership in our company to diagnostics because of what we see is the future opportunity. We've continued to stay very conservative however and say you don't need to buy us for what you think we're going to be able to do in diagnostics. Buy us for what we know we have a very strong position to achieve an RUO. There's plenty of value creation there. And what we're going to do in diagnostics is we're going to be very conservative, but we believe that pharma relationships could play a big role in helping us capital-efficiently get into diagnostics, particularly by going into neuro where many of these drugs couldn't get approved without some level of our approach and technological approach, which we're starting to see play out now. And in the area of Alzheimer's, there hasn't been any approved drugs, and so pharma really wanted to invite us in and they benefit by having payers have tools that are scalable, low-cost like blood biomarker testing.

So we look at our product sale as being primarily RUO in 2022 and '23. We look at Accelerator being the area where the strategy is going to play out. We're going to continue RUO relationships like we have at Lilly, but we're going to also be devising some of that investment in Accelerator into LDT and single site IVD even with the pharmas who can benefit, particularly in neuro, by having us equipped to play a role in LDT and a single-site IVD to help them get support for payers for their drugs. And so in the end, our payer relationships we think are the ones that are creating the most value opportunity because the pharmas really want to get reimbursement for their drugs and they need to have an efficient way to interact with the payers to achieve that.

So we believe that the pharma companies have a mutually-aligned motivation with us to advance this field with CMS and others, the biomarker field. So I would expect that 3 years from now you'll start to see the beginnings of diagnostic revenue, either from LDT or single-site IVD, and we laid out those timelines and stayed very conservative with them, with the levels of investment that we also think are not quite that high given the level of relationship we have with pharma. But you should continue to see the RUO growth with product sales and with what we do in Accelerator for the next 3 years as well. So I do think you'll start to see both revenue streams in those outbound years, but it's going to take time to get there, and we're being very careful. And I would think you'll start to see us continue to hire some of the best in the world in the diagnostics landscape because of that opportunity, like we've done with Masoud and some of the dedicated leadership that we now have in diagnostics. Masoud, did you have any additional color.

Yes. Thanks, Kevin. And thanks for the kind words, Puneet. So I think first I would say that, Puneet, Kevin has been instrumental from both vision and execution and getting us to what you described as a excellent position both in pharma, RUO, academia, and now in this new front of diagnostics. And again, echoing what Kevin said, I think the way you look at that transition is through the transition from RUO into getting into diagnostics is exactly through our CLIA lab, our Accelerator Lab, and as Kevin mentioned, LDT and single-site IVD which will be our first foray into diagnostics-based testing. But we continue to focus and have a strong position in the research space with pharma because that's frankly what's happening in the neuro field. A lot of work and research is being done in this new emerging area. Hope that answered the question.

Got it. Yes, that's super-helpful. And then just a brief follow-up, Masoud. On neurology, when you look at the overall landscape, specifically maybe with Alzheimer's diagnostics, we're seeing a number of questions being raised about CMS and the payers and what value do they ascribe to some of these drugs. When you step back and look at the broader landscape, obviously, great to see the Lilly agreement that you have here. But maybe tell us about the pipeline there for interest for pTau-181, 217, [a data] and other overall from the biopharma and the drug developers that are looking at this Alzheimer's -- growing that Alzheimer's landscape?

Sure, absolutely. Yes, I think when you look -- as I said a little earlier with Kyle on the phone, I think you look at some of these single biomarkers in neurology and you see this large screening opportunity and this whole approach of decentralized testing as opposed to having to go to a clinic and do imaging. So fundamentally we think the principle of doing this with a blood test makes a lot of sense. And then when you look at the overall neuro market where we are, you see Biogen what they've done with ADUHELM and then Lilly coming here, I think a lot of this is going to be on the clinical trials and a lot of the work that we're doing, this announcement with Lilly, obviously, we're going to be closely working with them through the Accelerator Laboratory and identifying key aspects of the biomarker. And then from there it's going to become, hey, is this a screening opportunity in an LDT lab? So you can't just have one without the other. You have to have the 3 steps that I described. And we're very fortunate to be positioned to have all 3.

Hey, Puneet, I would also add something to Masoud's comment here. And that is that we see different roles for these phosphorylated taus. Like the 217 has we think potential for a greater dynamic range and more specificity where the 181 where we have already Breakthrough Designation, there's some comorbidity challenges where it isn't quite as specific potentially as what a 217 can be. We also see evidence that potentially 217 and work we're doing with J&J as well, and you've seen some publications on 217 using even the J&J antibody pair, it's showing a lot of potential even earlier opportunity to see greater specificity. And now there's a 231 that's coming as well. There's a lot of new publication work from Henry that has many of our Simoas, Henrik Zetterberg, that it might even allow you to see the pathology even earlier.

So there are these different types of biomarkers that when you put them into a plex, give you different shots on goal of seeing Alzheimer's in different levels and different time horizons in the overall pathology. And I think this is where our sensitivity gives us the versatility to get at all those markers. And in the end, we think that sensitivity is key to being able to get to the panel. And so that's why I would say that keep an eye out on our RUO product development because it could inform around what ultimately might play out in the diagnostic landscape.

Next question comes from the line of Sung Ji Nam of BTIG.

Congratulations on many fronts. Just have 2 quick ones. First of all, for the Accelerator, do you have sufficient capacity currently to accommodate all the growth opportunities over the next year or over the next couple of years?

Yes. I think this has been an area that Masoud has focused on when he's come in and overall we absolutely believe this is a very scalable area of our company. I would say in 2021, it was probably challenged, we had so much product growth that we didn't have the bandwidth to really accommodate the level of Accelerator growth without Masoud's leadership. So that was a key hire for us. And Masoud, you might want to comment looking forward on how you view the Accelerator capacity.

Thanks, Kevin. And yes, Sung Ji, the way we look at it in '21, there was an opportunity for us to grow that capacity. And then with that capacity, obviously, we're going to be interested in taking more incoming opportunities. And we want to be able to scale that with the growth that we have. And I think we're going to continue and try to not let capacity be an inhibitor for us.

Got you. And then, obviously, realizing that you have significant opportunities still for your RUO products as well as for single-site IVD and LDT programs. For the current partnership with Abbott and Siemens as well as with UnitedHealth Group. Just curious if there are certain interim milestones that we should -- we could look forward to or we should be paying attention to over the next few years?

Yes. I actually would say that those relationships, particularly with Abbott and Siemens, Siemens is around NfL, and they are clearly advancing our NfL opportunity from an IVD perspective. And that ultimately could play a very valuable role for us even in a panel where NfL's included for ailments beyond MS. And I think initially Siemens was focused primarily on MS NfL. And then Abbott has a non-exclusive license to use the Simoa technology. And so I think their interest is how do they take their installed base and could they do any an upgrade to give the sensitivity that a Simoa brings, but keep the distribution opportunity that they have with the large installed base. And I would say that there's nothing immediate there that you should look to as a milestone, but it is a very productive relationship and gives us more validation that the Simoa does bring value to -- and Simoa sensitivity brings value to the traditional singleplex distributed IVD market that ultimately I don't see Abbott becoming multiplex in the short term. I see them primarily singleplex. But the sensitivity of singleplex is something that could be very valuable to them, particularly around troponin and some of the markers that they have strong positions in.

Next question comes from the line of Max Masucci of Cowen and Company.

Want to first congratulate Kevin on what's just been a fantastic transformation for Quanterix under your leadership and also congrats to Masoud for taking the reins. So kicking off, I'll keep these brief, other than the $11 million in Accelerator revenues, can you just share with whether the remaining structure of the agreement with Lilly is more milestone base or are there any revenue or cost-sharing components?

Yes. We aren't disclosing but I would say it's minor from the standpoint that we license from them their antibody pair. And that antibody pair is highly sought after as many commented, it was on the front -- it was in Wall Street Journal, in USA Today, and Bloomberg back about 18 months ago seeing dementia 15 years before Alzheimer's -- seeing Alzheimer's 15 years before dementia. So we know that antibody pair is highly sought after. We licensed it from them. It's a minor level of investment from us to them, primarily because our relationship is so strong, and they are very much advocates to try to move the industry. So they see what we did with NfL in creating a global standard where you have 1 NfL test that now is used comparatively across all publications. Their interest would be for us to work with them to do something similar for the pTau 217. Because there are different antibody approaches today, and we would like to work with them and create the quality standards that they have incredible levels of commitment to jointly launch at some point here an RUO product that jointly utilizes their quality insights and know-how. It would be our product, but they would allow that to be sold to other pharma.

So I do think that this is an important advance that gives a lot of interest to the way Lilly is approaching this. So there's minor financial implications, other than the $11 million, and that is something that can be ongoing as well. And I do think that they have bought a lot of instruments, probably will continue buying instruments as well as products. So this $11 million doesn't include any of those additional sales that they've been very robust with us over the last year or 2, and we expect that to continue as well.

Yes, makes sense. And maybe can you just give us a bit more detail around the demand you're seeing from the CROs, how the Quests and LabCorps of the world fit into the longer-term strategy and whether you see the Accelerator Lab or your relationship with CROs as being a bigger driver of participating in a wider range of neuro trials during 2022?

Yes. Absolutely, Max. And thanks again for your comments. You've also been incredibly helpful as all of the analysts that have been on this call, Sung Ji and Tycho. All of you've been -- and Kyle -- very supportive of us over the years, and really, we're going to continue this. It's going to be the next chapter of Quanterix. But in general, we're going to continue to evolve the productive output. Max, could you just re-comment on that question?

Yes, definitely. Just curious how the Quest, LabCorps of the world sort of fit in...

Hey, Max. So the LabCorp and Quest very significant. They both got large installed base with us. Frontage is another CRO. Interestingly, Quest through their CRO arm bought Rules Based Medicine and Ralph McDade, who is actually the founder of Luminex and was their Chief Technology Officer for many years was the CEO of Rules Based Medicine when they spun it out. He's to this day been one of our largest customers, and so we do think that the CROs is a very strong cooperation with them. Now the question I think becomes how does the CRO evolve into an LDT. We've not granted any LDT licenses, as we speak, to allow that to evolve, and we also think that Mayo Clinic and there's many places where there's opportunities for us to team up and build a larger infrastructure sooner, if needed, for the overall opportunity in Alzheimer's on an LDT front. And even single-site LDT or single-site IVD, there are opportunities to have multiple sites in a single-site IVD with the FDA. And what that does for us is it gives us -- if we get this approval, would give us dual coverage of the regulatory approval plus the national coverage. And that gives some reimbursement opportunities.

So we will absolutely continue to look at those companies as potential partners. And what we do in our Accelerator today, we actually sometimes get business from them where they need us to be a swing capacity to support trials because there's a lot of demand right now on them for trials using the Simoa technology. So we see those cooperative relationships only increasing as time goes on. This is to take down Alzheimer's, which is our big goal to help do that as well as cancers and cardiac, we feel like it does take a village and that's why the ecosystem of PPH allows us to cooperate and collaborate across all of these different boundaries to enable partnerships to expand and accelerate the potential of scaling this worldwide. And we think that scaling the ability to see disease before symptoms non-invasively is probably one of the biggest ideas to transform medicine that has come around for quite a while. So our founder is David Walt, one of the premier luminaries who also founded Illumina, having him as well on our Board and given us a lot of perspective and insights around how to disrupt medicine really sits very well with all of the cooperations and LabCorp and Quest are very central to that.

Great. Well, congrats on 4 consecutive fantastic years in the public arena, and looking forward to the next chapter.

Our next question comes from the line of David Delahunt of Goldman Sachs.

Congrats on the succession in the quarter. I just wanted to ask about the decision point for pharma companies, with Lilly doing in-house and Accelerator. As you continue these partnerships and grow on the pharma side, do you expect it to be split between in-house buying their own -- your instruments and Accelerator, or do you expect them to go into one area or the other? Just would love to get your thoughts on that.

Absolutely. We mentioned there's been a lot of top talent recruited. We just brought in also a new Chief Commercial Officer, Darrin. We actually think that a lot of the secret sauce here is selling to the senior levels of pharma which the investors themselves have helped us with, and we shared the letter today in our call that we're asking investors to reach out to anyone that you have ownership positions in neuro that you're trying to get those drugs approved for your value creation, you can help us educate those pharmas to utilize our technology. And we do think that there's a role for both in-house and Accelerator. Sometimes we have customers, pharmas that will buy several units in-house and they'll rely on us for assay development. And so relationships around expanding the biomarkers that they utilize in drug trials, either for efficient recruitment of more enhanced cohorts or for the actual endpoints as we've seen in MS for NfL. Either one of those categories plays a big role with pharma. And many times they will want to run those trials in-house.

I remember one year Novartis bought Genoptix and turned it into Navigate, and we had 3 years ago significant NfL sales where they bought and used their in-house systems by buying a diagnostics company to evolve that. We actually see Lilly being incredibly capable in diagnostic. Some of the personnel that we've met with over there has been just really insightful and advanced and experienced. And I think the more that pharma has some diagnostics presence in-house, it further can increase the pace of their approvals, but longer term, the key here is getting payment and reimbursement. And the more they can link biomarkers with the payers, the better chance I think they're going to get for reimbursement. So I do think you'll see both in-house as well as pharma navigating our Accelerator relationship opportunities.

Great. That's really helpful, Kevin. And then just similar to Max's question on CROs. I thought it was really interesting the United Healthcare (sic) [UnitedHealth Group] relationship you have. Could you just talk about where you see the market opportunity for payers and working with payers going forward?

I think that the payers are at the top of the value chain in many respects. Their goal is to improve life expectancy but do it efficiently. So better outcomes, more efficient outcomes is their goal. And so we started to really form our UnitedHealth Group relationship over COVID where they were intrigued by the fact that we could see COVID before symptoms, which is when COVID was most contagious. And that then led them discovering us and utilizing us for some of their COVID work with actual dry blood spot type testing. That evolved them -- the NIH into discovering us and RADx program and given us the $20 million to further evolve this. So I think that -- I had a slide in previous decks that shows the relationship with payers, some of it is already I think actionable today for areas like MS where we know that there's biomarkers that can reveal MS earlier and can reveal whether a drug is being efficacious earlier than an MRI. It's key. And it can be done much less expensive. And getting an MS patient on the right drug is the difference between them dying standing up versus dying in a wheelchair.

So they know that there's some actionable biomarkers today, COVID would be another one. But then there's another category where there's the opportunity where we might have a disease that they know is very lethal and expensive like pancreatic cancer or breast cancer that there's not sufficient biomarkers to reveal it early enough for there to be good therapies. And so that is an area where biomarker research with the payers is important. And then finally, we think that the payers themselves are getting creative with pharma and running trials like in Alzheimer's if they can use their membership to participate in a trial before dementia occurs that could further create efficiency in the drug trials. And so we see all 3 of those categories being an important area of focus. And I think Aetna as well as even CMS is an area that Masoud and the execution side of our company is really building out, planning to utilize moving forward.

There are no further questions at this time, and I would like to turn the call over to Kevin for closing remarks.

Thank you very much. And I would say our last slide is basically the visionary slide that we think that the concept of biomarkers, non-invasive ways to measure chemistries and blood, coupled then with wearable devices is the long-term opportunity to not only create better therapy and intercept disease early, but some day to even prevent the disease by better managing your environmental factors. So we see biomarkers and wearables someday being the longer-term opportunity. Masoud and I are very linked in on the longer-term prospects for how to create value in a company like this that we think has tremendous potential. We feel like we're sitting in a platform type of position right now for future expansion. And with Masoud's very capable leadership and me working very closely with him across all the constituencies, we're really very optimistic about the future. And we want to thank everybody for your support and help.

And I want to close by just thanking the employees of Quanterix. People is what makes these companies tick and culture and making sure that the people that make -- that get the job done and move the needle feel great about what they do and the impact they can make on the world is a lot of what the people of Quanterix represents. And that passion is a lot of what leads to the progress points that we have. So that's the secret sauce of any great company is its people. And I would just want to end by congratulating, thanking our team for all that they do to take down Alzheimer's and someday cancers and heart disease. So thank you very much, and we'll talk to you in our next conference call.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.