Quanterix Corp (QTRX) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Quanterix Corporation Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded.

I'd now like to turn the call over to Mr. Joe Driscoll, Chief Financial Officer. Please, go ahead.

Good afternoon. Before we begin, I would like to remind you that 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 statement. The risks and uncertainties that we face are described in our most recent filings with the Securities and Exchange Commission.

This call will also include certain financial measures that were not prepared in accordance with U.S. GAAP. The information required by the SEC pursuant to Regulation G, including reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures, can be found in our earnings release issued previously today, which is on our website.

With that, I will turn the call over to Kevin Hrusovsky, our CEO, President and Chairman.

Thanks, Joe, really appreciate it. We really feel good about the fourth quarter of 2018 and also the overall progress made throughout the year. In the same framework that we've used in the past, I'm going to go through a series of slides that are online and on our website.

I'm going to start with the agenda, where I'm going to talk through the Q4 results and the 2018 highlights, but also going to lay out the 2019 goals and priorities. And then finally, we've made so much progress in the last few months in the area of neurology and the momentum is just continuing to build, I would like to take a few moments to give you some updates that I think are fairly material. Joe will then provide some commentary around the financial reports and then we will go into Q&A.

So starting with the slide that basically says, we've defined the technology that's got exquisite sensitivity on measuring protein biomarkers in blood and that sensitivity is approximately a thousandfold greater than the traditional ELISA technology that already was more sensitive than any other technologies. We've been around really since around 2013 with the technology being launched. And you can see that back about 4 years ago, we decided to go after research first where there's no regulatory reimbursement risk, and we really went from no revenue to $38 million this past year. So it's a very rapid ramp and about 40% of that is consumables, which is also a very high level of visibility with those type of businesses, which is also -- generates most of our margins as well. So we're pretty excited about just the ramp that we're having in the consumables of this business. But longer term, we are going to go back into diagnostics, and we do believe that the opportunity in diagnostics is about 10x the size of research. So we wanted to get the order right, and we wanted to minimize risks for investors. And so we think we're stepping through that as planned. We felt our execution was absolutely superb in '18. We actually started the year by acquiring Aushon for immaterial levels of money. I think we paid $4 million for a technology that probably had over $30 million of investment that had gone into it. And then in September, we actually regained all of the bioMerieux exclusive rights that we had licensed to them. We were able to get those back into our company. This was a fairly significant moment for us. That immediately caused our attention towards attracting some of the best talent. Sitting next to me is Jackson Streeter, who's a neurosurgeon and who was actually CEO of Banyan for many years, and he got the first 2 biomarker in blood for concussions approved by the FDA back in April. I think it was an accelerated approval, only took 4 months.

So we're real excited. He left there to join us, as well as we got Mary Ellen Cortizas, who actually ran a lot of the LDT labs coming out of Children's Hospitals. So we're continuing to bring in some of the top talent in the landscape of what we're going to be doing with our biomarkers.

We also, in 2018, had 2 FDA meetings where we actually presented on the Neurofilament light biomarker, which has really become over 10% of our revenue when you consider not just the sales of the NfL assay, but also the services that we're providing for NfL. It's a way to look in blood for neurodegeneration and looking at when the neurons break down across almost every disease state as well as physical injury, like from concussions. So pretty excited, could this become the cholesterol of the brain, as an example. We're pretty excited that this has shown a lot of promise; in the FDA, it was standing room only. And then we did launch another product in 2018, which is part of why for the first time we're seeing significant instrument growth. It's been 3 years we were pretty flat, and the second half of this past year, we've had really strong instrument growth.

And we also are launching, in the second quarter, a product for cancer called SP-X. And we had a really awesome participation in the Powering Precision Health Summit over in Amsterdam in December.

So on the right-hand side, you can see the growth has been continuing to step up and we -- this is the fourth quarter really of us being a public company of reporting. In the first quarter we reported, it was flat. Then we went up 41% in Q1, 66% in Q2. 61% if you eliminate the 1x and then this quarter, Q4, we're showing 65% growth. And we really want to thank the investors who have played a pretty big role, too, in helping us position our technologies with many of the pharmas and biotechs that they also own and benefit from our technologies in helping get drugs approved. So it's a pretty important piece of our overall evolution.

The next slide breaks down the growth that we had and looks at first Q4, and you can see that we had a 100% growth in our instruments. This is really the result of the SR-X launch and a lot of the work that we've been doing towards bringing instruments to bear that are much more user-friendly and democratizing this overall and scaling this overall technology out into the marketplace.

Obviously, we're not going to continue seeing that. That's a surge of new products in that first half of the new product launch, which really was the second half of 2018.

So we did have also nice margin movement. We ended up with 4 gross margin points of improvement -- 400 basis points of improvement, which if you remove the 1x, it was probably little over 2.5 or 250 basis points, but still very nice movement. A lot of that's due to mix and improving the consumable portion.

And then when you look at the full year, 60% growth, you can see that once again, when you weight average the growth in instruments, we still ended up for the full year of having 45% growth. And you can see that our consumables are at 83%. And the utility across the instruments is also pretty attractive. We were able to get to 40% of our list price in consumption per instrument, which is a pretty high hurdle that we were able to achieve. And it takes us normally 6 months, we believe, to get to 1/3 of the revenue, but we actually outpaced that. And a lot of it's because there's so much attraction to seeing biomarkers in blood. And that's a key for our future growth as well as having that strong installed base.

The next slide is what we've laid out as being our strategic roadmap, Slide 6. Where we really work on publications being the leading indicator. When third parties peer review based on some study, it can have a profound effect on researchers around the world then reading that study and then wanting to get the technology or applying the technology. And you can see that there's a really rapid ramp, we're up to 409 third-party peer-reviewed publications now, most of those or half of those are actually in neurology. And then that leads to the number of biomarkers in blood in the menu expansion. And we're now up to 259 markers have been run in our technology. And you can see the accelerators were our services business, we continue to grow that and do a lot of studies for customers. And we're now have run 45 drug trials Phase I, Phase II, Phase III in our labs, which when we acquired Aushon, it gave us a CLIA lab and that's allowed us to further expand our capability. And then you can see the instrument installed base continuing to rise pretty quickly, and you can see the overall growth that we talked about. And then on the right-hand side, you can see the consumables, which has been a very steady growth, and we're pretty excited the way that has been growing and really above 50% growth.

Next slide just shows you our overall demographics of the company right now. We're still running about 60% United States, and we're just beginning to move into Asia, a lot of distributors at this point, we see that being a stronger part of our growth in 2019. And most of our customers still are pharma biotech, but we're getting it a little bit better balanced now of academia. We think 50-50 is where we'll probably end up as time goes on. And you can also see that our growth over in neurology and oncology, which is our primary focus, because that's where you see disease at the latest stage. We just heard about Alex Trebek getting pancreatic cancer, stage 4. It's very hard when you get some of these cancers to see them early. And so there's already talk about blood testing for pancreatic cancer, et cetera. But the key here is when you can see disease earlier, it really can have a big effect on oncology and neurology, and we're starting out in neurology.

The next Slide 8 was -- what we walked into 2018 with was all the strategic priorities that we laid out in the goals. And in every one of the categories, financials, commercial, strategy and new products, we were able to overachieve. So we actually feel very confident that we were able to lay the foundation for 2019 and beyond by overachieving and getting the FDA rights back. The IVD rights was a major achievement that really took 4 years. And we're still very friendly with bioMerieux and they still utilize the technology. It's just that they're more infectious disease versus the oncology and the neurology that is the focus of our technology.

Slide 9 lays out, and you may have seen this in the JPMorgan presentation and the Leerink last week, lays out our goals for 2019. And we're going to continue growing the franchise in neurology where we still believe we're less than 10% penetrated. We're going to continue increasing the menu. In the second half of this year, we're going to roll out an advancement to the HD1, which we're going to -- we call the HD-X, we're expecting in Q4, we'll see that launch as a way to migrate customers to some new features that will allow a little bit greater sensitivity, temperature control, as well as what we consider better bead loading and that enables better efficiencies of the technology. We're going to continue scaling the company around the world, putting a lot into IT and facilities. We're moving into a new facility in the middle of May. And our headcount, half of it will go to commercial where we continue to grow very rapidly.

The second major category is oncology, and that's that SP-X comes right out of the Aushon acquisition, allows us to multiplex and move into cancer, which we think is 3x the size of neurology. So we've just begun that, and we hope that by the end of the second quarter, that'll all be launched and we'll be off and running.

And then the third category is entering diagnostics. We want to continue these drug trials, and we expect that we'll have at least 50 trials this coming year in neuro and oncology. And we want to land an LDT relationship. All of the major reference labs right now are working with us, they all have our instruments. And they would like to migrate from just CRO services, contract research for pharma into actual LDT testing. And many of the neuro drugs that are being approved are looking at disease progression markers like Neurofilament light as a way to monitor whether the drug is having the desired effect. And ultimately, for Alzheimer's, we'd like to have a blood test that could actually move patients into the Alzheimer's drug, and that's a new field of opportunity that we'll talk about in a moment.

And then in financials, we've kind of gone through those already. But across-the-board we feel and we want to continue evolving our gross margins and maintain our utilization. And we do believe that 40% growth, which we've talked about, stays intact. We feel -- still feel good that we should be able to get to that 40% in 2019.

We also -- we aren't guiding, but that's our overall goal that we're shooting towards. The next Slide 10 just shows that the disruption that we've laid out in what we call the third-generation immunoassay digital technology. But we did announce at the beginning of this year that we're going to go for another 100x in sensitivity. And this is important because as customers use our technology in the cerebral spinal fluid, they're learning that there are sub protein groups called protein translational modifications that are about, I'd say 1/50 of the concentration of the larger total protein level, and they're able to see it in the cerebral spinal fluid with our technology. And they're asking now, can we get to see those in blood, those protein translations. And we think that by going another 100x, we're going to open up a whole new frontier of science by enabling that, not just for neurology but also oncology.

The next slide just shows the competitive roadmap. We continue to focus on improving the multiplexing our menu and lowering our costs, and we feel like we've really honed in on 2 different platforms that's enabling us to be superior across, what we'll call the direct competition. But we also know we have competition coming to us from many different facets, particularly as we evolve that business into the imaging, it becomes somewhat competitive with us. But these are markets that we're moving into that makes those competitors that we're trying to disrupt.

You can see in slide -- the next Slide 12, the whole point of our basis here is, today it's very invasive to see cancer and neurological disorders, either a spinal tap or a biopsy, and it's pretty late in the disease. And so what we're really about is non-invasively, through blood, through saliva, being able to see much earlier the disease and allow it to be then treated much more productively with drugs. And if you can see these diseases very early with our biomarkers, it gives the drug companies a better chance of actually treating the disease, because it's earlier stage. And they can do it with less dosing which makes those drugs safer, and we know that the safety and toxicity of drugs is still one of the biggest issues in the industry.

The next slide just gives you an understanding of how this neurological pathway has occurred. It all started with the NIH, basically looking at post-traumatic stress disorders in soldiers and seeing concussions in blood. That led to us winning the NFL General Electric Head Health Challenge twice. At the same time the movie Concussion was coming out, we got put on Good Morning America and we taught the world that we could see these biomarkers in blood for neurology. That led then to a myriad of publications, third-party trials by neurologists around the world in all of these different disease categories Alzheimer's, TBI/concussion, multiple sclerosis and now we're seeing a lot of work in Parkinson's.

The next slide just shows how rapidly that has ramped up. And you might have seen recently, about 3 weeks ago, there was a major CNN interview where one of our scientists -- not of ours, but one of our collaborators from Europe, a neurologist was able to look at familial Alzheimer patients where they can predict when symptoms of dementia are going to hit. And they were able to see elevations of NfL 16 years before the dementia. And that got a lot of excitement in many of the neurological journals around the world. Because if you can see Alzheimer's that early and know that the disease cascade has started, and you have a biomarker that can look at disease progression, it's a way to help the drug industry to change into a much more objective model ways to get drugs approved. And we're pretty excited about that future opportunity.

So the next slide just says if you look at how our business has benefited from all these publications, you can see the pubs have had a compound annual growth rate of 139%. And that's led to our biomarkers growing at 67% and then our instruments growing at 67%. And as you know, we've had triple digit growth in many of the quarters for neurology for our consumables, which is basically like the K cup going across the Keurig coffee maker. And we have a -- 80 different K cups, different proteins that we're looking at across primarily oncology and neurology.

The next slide shows that the number of NfL publications itself had really skyrocketed, have somewhat gone [acetomic] on us. We've seen a major exponential growth and that has enabled some pretty big breakthroughs, particularly in MS, where we actually estimate right now that there's 62 drug trials underway for multiple sclerosis. And there's already $22 billion worth of approved drugs in the marketplace attempting to help multiple sclerosis patients from staying out of a wheelchair by slowing down the disease progression. And they typically look today at MRI as somewhat of a late stage endpoint to look at MS progression. It could take 2 to 2.5 years to see brain atrophy from the MS disease progression on the body. And there is a belief in a lot of these publications, you can see Neurofilament light in blood much earlier being an indicator of disease progression. And that's why it's now being used, we estimate in 10 different drug trials looking for -- to be a surrogate endpoint.

That led us to run a trial this past year where we went across 17 different sites that have our technology around the world, and we ran a study. And then on Slide 19, you can see that the NfL ended up being perfect and the CVs were less than 10%. That's the coefficient of variance. This is a very important analytical achievement on our technology for its repeatability. And it was really well done across all of our collaborators, and we're real excited, that's a key step in scaling this technology.

And the next slide basically not only describes the fact that we've done really well with the NfL, particularly for multiple sclerosis, but you can start to see that there are publications coming for Alzheimer's, in TBI, in ALS and Parkinson's. And those diseases are actually a lot bigger, particularly Alzheimer's, is a lot bigger than MS.

And so the next slide is our attempt to say someday, we're hopeful that there'll be a blood test that could play a role that will allow you to see Alzheimer's very early and then maybe move you into imaging where today there's actually beta amyloid PET scan already as an approved diagnostic for Alzheimer's. And they've now approved the cerebral spinal fluid test for Alzheimer's, looking at beta amyloid. And we have evidence, and I'm going to show you in a subsequent slide that we can already see the beta amyloids with very high levels of repeatability and accuracy. And we think that this is a game-changing opportunity that we're going to be working with most of the biopharmas that have interest in Alzheimer's pipelines to try to help use it to further advance our technology.

This next slide just goes through 3 of the big publications in the area of Alzheimer's and the progress we're making. We already mentioned the CNN, but there's also been this really nice publication on beta amyloid measuring AB42 and AB40, 2 of our markers that we measure in our Simoa. And that's where we got an area under the curve of 95% and that's without optimizing it. So we're really excited that this could be the beginnings of seeing in blood a much less invasive way than the cerebral spinal fluid spinal tap, the beginnings of Alzheimer's.

And this next slide is just the actual publication that showed the Alzheimer's 16 years before symptoms. And the slide after that is the actual data on the area under the curve. So I'm going to close by just showing this last slide, which if you go to our website, we've got several links that you can click on them and see videos of the recent Powering Precision Health Summit where many of the researchers from around the world are interviewed, and they describe how Neurofilament light, NfL, is going to transform many of this scientific landscape for seeing brain health in blood. And we also have had recent interviews on ABC and Bloomberg Radio that you can click on and see as well.

So that's all in our deck, to just give you more evidence of the progress we're making. And what I'd like to do now is turn it over to Joe for a financial report.

Thanks, Kevin. I'm going to provide some additional financial details now. As Kevin noted, revenue in Q4 of 2018 was $10.9 million compared to $6.6 million in Q4 2017, which represents 65% revenue growth. There was no collaboration revenue in Q4 '18. Year-to-date, total revenues are $37.6 million, a 65% increase over the $22.9 million for fiscal 2017. Adjusting for a one-time revenue item in Q3 related to the termination of the BMX agreement, year-to-date growth was 60%.

Gross margin percentage in Q4 was very strong at 48.2%. Prior year Q4 was 43.7%. The 450 basis point increase over prior year was due to a positive mix of consumables revenue, which had 67% growth in Q4, plus the leverage we are generating by the total company's revenue growth.

For full year 2018, gross margin percentage was 47.8% versus prior year of 43.7%. Excluding the impact of the one-time item in Q3, adjusted gross margin was 46.3% for full year 2018.

We believe we have a significant opportunity for gross margin expansion in the future as we scale our overall business, reduce product costs and continue to drive the mix to more consumables revenue.

Operating expenses totaled $14.2 million in Q4 2018 versus $10 million in Q4 2017. We are attempting to accelerate the growth trajectory of the business by making significant investments in the commercial team and the infrastructure required to support our growth. The main drivers of the Q4 2018 increase include increased headcount in sales and marketing, plus external strategic marketing investments; 2018 hires of new senior management personnel; payroll and other costs related to the Aushon transaction; noncash rent expense related to our new headquarters; and public company costs. Also stock comp expense, which is a noncash expense, was $1.4 million in Q4 2018 versus $800,000 in Q4 2017 due to new grants made in 2018.

We will look to continue to add to our commercial organization and other key areas of the business in 2019, including resources to support the development of a diagnostic strategy. Therefore, on a quarterly basis, we expect operating expenses to increase from the current baseline level of $14.2 million.

The balance sheet is in good shape as of 12/31/18 with approximately $45 million in cash. This gives us the financial resources to accelerate the growth in the business as well as look at potential acquisitions and the diagnostics development. There were 22.4 million common shares outstanding as of year-end. For 2019 earnings per share, we expect weighted average shares outstanding to be in the range of 23 million.

I will now turn it back over to Kevin.

Thanks very much, Joe. Basically, we have a market that we are using some major disruption to get defined. And that market, we think is somewhat category defining with our unrivaled sensitivity. And so the pace of us continuing to advance our sensitivity, we think is important now that we see a real market for additional sensitivity. And we are best-in-class, and we want to keep investing to stay best-in-class on the sensitivity front.

We also have had a methodological way of going at this market starting with research and then evolving into diagnostics as a secondary opportunity, which is where the size of the market opportunity we think could be significantly larger in diagnostics versus research. But it's a little bit riskier, and so we're being much more careful in the way we enter it.

Once you define the market, which we've done, it's then about the execution. I think that's what has a lot investors interested in us is that we've got a very disruptive aspirational opportunity for significant value creation, some serious promises coming out via the publications, but we are still executing in the research sector flawlessly so far. And that's our key is to continue to drive the installed base with the consumables going across it. And when we do that, it's actually creating publications. And those publications then further fuel the longer-term diagnostic opportunity.

So you can see we've got a built-in engine that we're trying to utilize research to actually further enhance our opportunities in diagnostics. And so it starts with validation. And we now have 19 of the top 20 pharmaceuticals using our technology. It's one of the fastest adoption cycles, and I've been running these businesses for 25 years in life sciences, this is the fastest I've seen of the adoption cycle.

We also have 800 actual drug trials have been completed already utilizing the Simoa technology. Again, further validation of the possibilities of using biomarkers, and there's a lot of guidance now from the FDA on using biomarkers for the purposes of getting drugs approved more efficiently and with less toxicity.

And then finally, the publications. Those are third-party peer-reviewed. They get critiqued before that science is allowed to be published. This is a key validation point that we really feel is imperative when you're disrupting is to have third parties validate it. And that publication pace has almost increased to a couple a week now of new publications. So we consider the validation to be the crossover point between an exciting market and the execution. And on the execution, the fact that we have a lot of consumable gives us a lot more visibility into this with a lot of utility going across the installed base. And for the first time, we actually may have a growth catalyst of instrument growth. We've been doing all of this significant growth over the last 3 years with really instruments being flat. And now we've got somewhat of an inflection point where our newer investments around new instruments has created some instrument growth, which we think is another risk-mitigating positive for our execution.

And then finally, the track record of the team that we've assembled and the people that we continue to bring into our company, we're able now to attract some of the best in the landscape. And we are -- we know this is all about people. We got some of the best people in the industry, in our company and they're very motivated. They're very much mission based around Alzheimer's, around neurodegenerative diseases, concussions, Parkinson's, MS, as well as cancer. And so we really have a shot of disrupting medicine. So that's key to us, is attracting the best people.

So with that, we're going to turn it, now open it up for questions around our Q4 and our 2018 performance as well as 2019 outlook.

(Operator Instructions) Our first question is from the line of Sung Ji Nam with BTIG.

Was wondering for the SP-X, sorry if I don't know this, but is it fully automated? And does it -- or is it like SR-X where it will require a sample test module as well? Just trying to get a sense of that. And also if you might be able to comment on the list price for that as well as what's the potential consumable pull through, whether that could be closer to the SR-X model?

Yes. Great question, Sung Ji. And basically, let me start with the consumable side of this. We expect that we're going to maintain this 1/3 and $75,000 is roughly the list price that we're targeting here. And roughly 1/3 of that is what we feel we are going to be able to drive. The first part of the question

Automation.

Was on automation. And on automation, there's 2 things that we've been describing for the marketplace. When we say automation, we actually mean that the SR-X is automated, because you can do most of the steps. But then we have this thing called integrated automation, which was what you were asking. And that's when sample prep like on the HD1 is also integrated.

The SP-X is just like the SR-X. It's automated, but not integrated automation. So we have what we would call the different steps for preparing the sample automated, but it's not integrated into the instrument. So for the moment it's automated, but not integrated automation. And we actually have found a lot of customers that actually prefer not having the integrated automation, because they have a lot of sample prep technologies already installed like the Tecans and the Hamiltons. And they want to utilize that installed-base technology. So we think it's actually good to start this way. Someday, though, we could end up with a fully-integrated automation for the SP-X, particularly if we utilize it in the area of diagnostics where many times you want that complete, we'll call bleed to read, the blood sample going in and the actual result coming out.

Great. That's very helpful. And then for the HD-X platform which you expect to -- you're targeting launch later this year. Was curious to what level plex capability that will have? And also we're starting to look at -- I'm not sure if I'm looking at this correctly, but some sort of a product line bifurcation here potentially with the HD-X and also with the SP-X. Was curious as to what the product positioning might be, or if that's not how we should think about that?

Yes. So HD-X has a couple dimensions to it. First, I would say we're looking at more like a Q4, like before the end of the year, we'd like to get this thing launched. And we've got a lot of prototyping going on right now and testing going on, and it's looking really encouraging. And anyone that buys an HD1 in the first half or third quarter of this year, we're going to really provide them some incentive. So we don't want to in any way impair our HD1 sales. We want to make sure that customers can get in right away with the HD1s, which by the way, we've made major advances on that technology over the last 24 months as well.

But the HD-X in general, we believe is going to provide temperature control, which today when people run the HD1, we tell them to manage their laboratory to a certain temperature. So they got to really condition the air in the laboratory where this will be self-contained conditioning so that you can actually run with a lot more precision without having to condition the actual total laboratory.

We also will increase, with magnetics, the bead loading, which will provide the ability for getting better economics as well as a little bit better sensitivity. And we think that those things will be pretty important advances on the HD-X. And we also feel that the HD-X is going to be the workhorse with the HD1s for many years to come. So we think it's -- there's a lot of interest in fully-automated technology. And so we'll continue to evolve this technology with those investments.

And it will do 6-plex. We do have also on the HD1 -- I'm sorry, the SR-X, we were able to get to, I think 1 assay on 6-plex. But it's primarily 4-plex and less. And the HD-X, we're feeling pretty good that it's going to be very similar to the SR-X. It'll be at least 4-plex, will have some 6-plex assays. But in general, if you go to 10-plex and above, we're thinking that the SP-X technology is going to be better suited in cancer research has a -- really needs, particularly for cytokines, where we're honing in on the immunotherapies and helping make sure those immunotherapies get greater response rates to help cancer patients. Because the immunotherapies have been very productive, but they only work 10% to 15% of the time. The 85% to 90% of the time, they don't work, a problem is, is that about 10% of the time, they actually become very lethal, and it can actually kill the patient. So it's not just that thy don't work 85% to 90% of the time, it's just that they also can be very lethal. And our whole platform in looking at cytokines, we're launching a 10-plex, which is looking at the immune system. Some of the top cytokines in the immune system is in our 10-plex. So you can see with exquisite sensitivity any movements from baseline of those cytokines. And that's a capability that we think is somewhat disruptive in that landscape. And so the SP-X will be primarily utilized for those 10-plexes and above, and that's why it's better suited for oncology.

Great. That's very helpful. And then just lastly, maybe one for Kevin. In terms of your gross margin target for next year, was curious as to how much of that do you expect to come from the product mix or volume versus manufacturing efficiencies and other production -- reduction in production costs?

Yes. And Joe might want to comment after me, but it seems that we've got the potential here for both of those, the mix because of consumables as well as the overall buildout of just leveraging our fixed costs, particularly in consumables where we have a real -- we produce them ourselves in our facilities, and we have a lot of leverage there. So I think we got an opportunity for both of those categories to be productive. I think we said 300 basis points. Joe, I don't know what you would say would be enough...

Yes. I'd say it'd be about half and half, that would be the genesis of the increase.

Our next question is from Tycho Peterson with JPMorgan.

This is [Julia] on for Tycho today. So first off on instrument, you're expecting 25% growth this year. Just wondering how much of SP-X contribution is embedded in there? And to the extent possible, could you give any color on sort of the preliminary order funnel, if you will, or customer interest in that one?

Yes, so we don't guide at a granular level instrument growth rates, and we don't even guide at a macro level our overall revenue. We have said over the last 24 months, though, that we think we can maintain a 40% growth overall. That's not guidance, it's just -- it's aspirationally what we feel we can still achieve with this disruption that we're managing. We haven't, again, provided any granularity to how instruments might play out inside of that. We have seen a major upturn in instrument growth in the second half of 2018, however, which does bode well for helping us pull through consumables. And it also is a great leading indicator that the products that we're designing and launching are getting good adoption and interest by our customers to see that kind of pickup. We would believe that SP-X -- last year when we launched the SR-X, we felt we could get 40 units out there throughout the year. And I think we ended up beating that for about 50% last year, getting I think more like maybe roughly a 50% uplift on what we originally set out to. I think that we're starting out launching this a little bit later in the year, but I'd be happy if we could get 10 instruments a quarter type of SP-X volumes starting in the second half of the year, maybe for sure in fourth quarter. But again, it's -- you just never know when you launch new products, how long it takes. That's why we think it would only potentially trip people up if we guided at this point.

Sure, and that makes sense. And then in terms of the mix of capital sale versus reagent rental, just curious if there's been any sort of change in the trends there or do you expect to see any change in the mix going forward?

Well, it is interesting, we've had a lot of investors as well as analysts say, geez, whatever you do, stay away from the reagent rental. It just complicates everyone's world. And interestingly, so far, we haven't had to use reagent rental at all. We're hopeful that we can kind of continue to sell our instruments and make gross margin on them while then later on, also selling the consumables across it. That's our goal and that's -- we've had a good track record over the last 15 years of -- and our management team, I think we have 65 people kind of in the company from the previous companies that are pretty experienced at doing that. So our hope would be that we can continue doing it. I would say interestingly, though, that the economics for the SP-X are somewhat off the charts compared to anything I've seen in a while. It's a much lower cost instrument than what most of the bead-based technologies are.

So we're able to get to a much lower COGS on that SP-X. And so if you ever were going to have a reagent rental opportunity, you probably -- I think I would probably know of some competitors that would aggressively start to use the reagent rentals to expand penetration very rapidly. But then they could get themselves caught later on in that. And so we're going to try to get good momentum without using, in a significant way, the reagent rental. And hopeful that, that's going to deliver. And we asked a couple test beds, by the way, where we're actually seeing consumption levels as much as 5 to 6x the COGS annually on the SP-X test beds. So when people get going on this type of test bed technology, we can actually see really interesting economics. And again, the gross margins there, we believe are more at the 80% level. So it starts to redefine the possibilities of taking our disruption into new economic models. We've been able to be very successful thus far with our technologies and delivering this kind of growth. Even though our prices are probably at -- higher than, let's say a Luminex or an MSD. In many cases, our pricing has actually been higher, but yet we've been able to command this installed base because of the differentiation. We're bringing something to the market that no one else can bring. So despite the fact that we are higher priced, we've been able to command that growth trajectory. What's also exciting is that as we move into multiplex, we're changing the economics so that we're going to now become more competitive with the competition, while still delivering the disruption.

So that's why multiplexing on the SP-X, coupled then with the lower instrument cost starts to change the possibilities of the economics of what we're trying to do with the disruption.

So pretty excited about the SP-X.

Great. Very helpful. And maybe if I can just squeeze in one last question. Regarding gross margin on the service side, could you give us an update on the current capacity utilization of your in-house CLIA lab? And like how do you expect gross margin on service side to ramp going forward? And how does that compare to the expected margin expansion on the product side?

Yes, it's interesting, I know you're asking the question for Tycho too, so I wanted to -- one of the things -- Tycho can see a lot of the aspirational opportunity we have in our business. And in many of the reports, he has seen that our service business is very different than what people traditionally think about. This is a -- almost a strategic Trojan horse for selling instruments later on and then selling consumables on top of instruments. Initially, it was a promotion. It was an expense item when we got started. And then we started saying, let's start charging for these trials. And we started to drive gross margins that I think are north of 50%, 60%, maybe as high as 65% in our services business. And so it's been exciting to see the Trojan horse of every third trial we run translate into selling an instrument to the people that started to run the trial and paid for it, and then later on they buy consumables on that instrument. So it's kind of an engine for us. But what's really more strategic is the fact that we're now running trials for drugs where those biomarkers that we're running could become complementary or they could become companion diagnostics. So it's actually a -- like a greenfield opportunity to actually start looking at relationships with pharma that could lead to diagnostic opportunities and help us start to move into that landscape now that we have a CLIA lab of our own. So again, there's so many levels of strategy going on in that services that we can talk about like the utilization levels, but I would encourage all the analysts to continue thinking about the strategic dimensions of what we're doing there. And don't get just wrapped up in the traditional service model and think that this isn't something that is that productive, because it's very productive. Now with that said, we can expand our capacity at any moment by just adding headcount. We're moving into a new building in the middle of this year that's going to house both Aushon's original building of people that we now have a lot of the Quanterix personnel in there, and then our original Quanterix building, which we've now moved a lot on the Aushon people into for our integration efforts. So we now today have 2 different buildings that we're going to be consolidating everything into one. And our accelerator lab has got plenty of, what I'll call fixed cost scaling opportunity in there. So I think we're going to be less than 50% utilized from a, what I'll call the fixed cost dimensions of the operation, which would be the building, the facilities. But we can simply, by adding people and adding instruments, we can scale that capacity, so it's a very efficient scaling. It's not major capital investment steps. These are pretty much variable steps, so I actually don't think it's going to be too burdensome for expansion.

Our next question is from Puneet Souda with SVB Leerink.

Kevin, great, congrats on the quarter and congrats on completing the first year as a public company. So my first question is around what you're calling about a 40% long-term growth. Should we -- how should we look at that for 2019? And just I'm trying to understand in terms of what consensus modeling you're ahead of that, maybe close to about $3 million or so ahead of that. Given the growth you're seeing here in instruments in the fourth quarter, SP-X adding on top of that and HD-X coming in the year, shouldn't we assume a bit more acceleration from the long-term guide and versus in 2019?

Yes, Puneet, you and I go back and forth on this all the time. I'll say a few things here. First, I would say that the way to look at our 2018 revenue performance is $36 million, meaning that we had some one-time stuff that went on there around the collaboration revenue and all that. So I think our run rate is running around 36%. And what I've been trying to inform everyone on is, is that we've got so much disruption and possibilities of significant aspirational value creation that the last thing you want to do is trip up over any models our short-term execution. Even though I think you've watched, we've been executing with a lot of visibility into what we're doing with a lot of track record.

So I personally think that there's a room for the models to say whatever they need to say. But I would not go beyond the 40% if I were an analyst, just because there's no need for that. We've got plenty of momentum, we believe, to be able to bring visibility and bring some level of performance. But hey, we got to remember, this is a disruptive company. At any moment, you could end up with something that gets tripped up. And so I want to make sure everyone understands, we don't want to compromise the possibilities of the future value creation by having a real short-term execution of having to push more revenue out. So you're right. Could we beat? I don't know. We've beat every quarter, I guess, if you look at the way that the models have been laid out. But I would be more wrapped up in what the possibilities are for going after an Alzheimer blood test or going after the possibility of an MS diagnostic, ultimately and looking at the neuro disruption that we are beginning to impair or beginning to create and impairing some of the traditional ways of doing business and try not to get too wrapped up in pushing us -- I mean, 40% growth is going to be very exciting for a lot of people, because our base continues to get bigger. So we've now said 40% since we were 1/3 our size. And so we're continuing to say we still believe we can achieve that. And I think it's a good place to kind of think about our future ambitions around growth.

Got it. And let me ask on oncology and cardiology, you grew quite strongly there. Just give us the -- what was the driver behind that? And if you could elaborate on overall pickup there? More importantly SP-X, the traditional similar instruments have been designed around sensitivity versus your getting a lot of samples already in oncology and cardiology. So I'm just trying to parse out what's driving the growth there. SP-X hasn't -- I mean SP-X is going to be more of a 2019 story. So just trying to understand what's driving the growth for oncology and cardiology?

Yes, one thing that was pretty exciting is once -- we've got one of the best sales groups. As you know, Mark Roskey heads this thing up. He's a post-doc from Harvard Medical School, and we got a lot of what we'll call application scientists, some of the best in the world. These are -- a lot of them Ph. Ds supporting our field. We've got a very hungry group. And then we've got investors that look at their pipelines of getting drugs approved at the pharma biotechs and they say to us, these drugs, if you can do something to increase the probability, which we know that using biomarkers can increase the probability of a drug getting approved from Phase I to Phase III by 300%. So we have a very strong commercial engine. And so when we bought Aushon, there was already the basis, historically, of what I'll call some oncology assets, because they were multiplexing. And so our team did do pretty well in placing some traditional Aushon technologies in 2018. And so we did create some oncology movement. But that wasn't what I would consider to be the kind of movement that we really are going for. We have to kind of restructure and launch an instrument that we now has all the scalability and all of the dimensions of longer-term financial performance to really get the results that we are used to getting. And that's what the SP-X is. We've taken it and we've Simoa-tized it. We've got greater sensitivity, which we think is a differentiator that's important to have. The old Aushon really didn't have a lot of differentiation from MSD and Luminex. Sensitivity brings great differentiation there. We also worked to automate, not integrated automation, but the automation of some of that liquid handling process before you actually read the plate. We also brought home brew onto it. That's a key thing that a lot of people don't believe in competitively. They like these closed systems. We actually liked open systems. NfL, Neurofilament light wasn't even a revenue element in our business 24 to maybe 30 months ago. And it was a home brew that really got NfL where it is today and several other of our key biomarkers today came via home brew. So even though you might look at locking down an instrument with, you've got to use our reagents in order to run it as being a good thing, we actually think that it might be a good thing in the short term, but it doesn't give you that longer-term growth engine that home brew gives you. And that's why we go after the home brew approach, because we're looking for longer-term growth as well as the short-term lockdown growth. And so oncology got a little bit of a bump because of the traditional Aushon technologies which weren't the scalable ones. SP-X has now got all of that stuff built into it, and we're hopeful that we can now get that technology placed. And that's going to then allow what we'll consider to be a much more productive longer-term sustainable revenue growth in oncology.

Okay. That -- and if I could squeeze another one on commercial organization. Where do we stand now currently in terms of the sales force, if you could give us a sense there and overall commercial organization? And clearly you're spending into 2019, OpEx is going up. Just help us give us a sense of overall commercial organization, where would you like that to be at a steady state?

Absolutely, Puneet. In general, we keep trying to increase our installed base or our number of sales -- or what I'll call card carrying, number carrying salespeople by about 25% to 30% each year. And I think we're probably up around 15 salespeople, 16. But then we have all of these other Ph. Ds and field application personnel and product management that support them. So it's probably more like 3x that when you end up adding up all those headcount. And what we would like to do is continue to expand that by about 25%, 30% and then drive through that revenue growth that's greater than that, right. So you'll have some productivity gains in your commercial investments. Now I would say that we've got some onetime things going on in 2019 that, again, if I'm an investor I'm excited about. The fact that we got our -- all of our IVD rights back for diagnostics, whether that be laboratory developed, point-of-care or IVD centralized or decentralized, we've got those rights back. And so we are investing in bringing in Jackson Streeter, bringing in Mary Ellen, some of the key industry leaders in diagnostics to help us sort out and build strategic pathways. We're not exactly sure yet how we're going at that. We've laid out a goal that we would like to at least form one LDT relationship in 2019, and we have a lot of interest already from those reference labs. And we've got great collaborative meetings, but we will have some OpEx, I believe, in 2019 to support that diagnostic build out and the thinking that we're putting into building the right roadmap for the future.

Our next question is from Doug Schenkel with Cowen.

Kevin, could you elaborate a bit more on some of your recent leadership hires? You just touched on it briefly there. But I'm particularly curious how the addition of Dr. Streeter furthers your aspiration in clinical diagnostics?

Yes. It's -- Jackson's here and I told him today I didn't want him, like spending too much time talking, because we're still trying to sort a lot of this out. He's running Corporate Development for us. So there's what we would call pathways between research and diagnostics, particularly in the area of CROs. We have a whole lot of these drug trials running and many of them can be used to help support disease progression validation markers with the FDA. So if you can get an approved drug that can modify the disease -- and by the way, there's none for Alzheimer's right now. They have a lot of them for MS. But if you can get an approved drug that can modify the disease and then you can look at retrospective samples and how your biomarker got moved by that disease modification of that approved drug, it can actually lead to you getting a clinically validated biomarker for drug approvals and for disease progression. And that's the pathways that Jackson himself did when he was at Banyan. They got UCH-L1 and GFAP were 2 biomarkers that they did a rule out on the CAT scan, that if you could see levels of these markers in blood, you wouldn't benefit from having a CAT scan. So it was a rule out. And in the area of MS and many of these diseases, you've got all these drugs today that might take 2.5 years using MRI, which is much more expensive. And I think on average, MS patients are going 2.5 MRIs per year to just try to monitor their disease progression. It's the only approved endpoint today. But we know brain atrophy could take 2.5 years before MS can bring that result to an MRI, where in blood many of these publications are suggesting that you can see pretty rapidly within 3 months the disease progression on the NfL, the Neurofilament light. And so you can see the cycle time of just patient monitoring and getting them onto the right drug could be the difference of a patient dying in a wheelchair versus dying standing up. And that's the kind of cycle time stuff that is being considered. And the whole concepts of rule out which Jackson did with the FDA, he got that done in fast track, 4-month period, that was -- if you look at Alzheimer's, that could be a pretty interesting opportunity. Because these PET scans today for beta amyloid, these things could be as much as $4,000 apiece. And I don't even think they're reimbursed yet. But it's the way you can diagnose and the whole Alzheimer's Associations now are saying, we want to get biological definition of Alzheimer's versus cognitive assessments, which are very subjective. They want to see biologically what's going on with amyloid beta or beta amyloids, what's going on with tau? They're wanting to see real biomarkers of what the disease is. And this is where rule outs, just like they did for the CAT scan in concussion, can play a role for rule outs of even the PET scan. Why do the PET scan if there's a very low probability that, that person has Alzheimer's? And could you use a blood screen to kind of really increase the fertility of the number of people that actually go into the $4,000 PET scan, and someday could you eliminate the PET scan completely with the blood test. These are all possibilities. These are only promise. We would not, at this point say buy our stock based on these things because there's enough value creation in the research world and that's where a lot of our focus has been, and that's where we're executing without the regulatory risk, without the reimbursement risk. But we want the Jacksons, the guys that have been through this with the FDA, we want them on our team to help us sort out how this disruption of these NfL, neurofilament, the disruption of the beta amyloid and test data that these publications are showing, how can we translate that into action with the FDA. So the meetings that I held last year standing room only where I presented on NfL, there's already a lot of excitement. So how do we bring that to bear given that we know there's 10 trials right now using NfL today for MS drugs that are trying to get approved. So that should give you a sense. So Jackson's one person. Mary Ellen, she ran LDT labs and she's running the CLIA lab that we actually acquired from Aushon, very low economics. We moved into this CLIA position and she's helping us continue to evolve our quality standards, hire the right people into that landscape to make sure that we can be much more predictable with our services as well as regulated. And as we do more of these Phase I, II, III trials, many of these drug companies want it to be in a [CAP] CLIA approved facility. So we're trying to accommodate that. We've had major audits in the last 3 months to 4 months. Some of the biggest in the world have come to audit us. And Mary Ellen is fronting on our behalf those audits, and they've been going very positively because that capability is now in-house.

We also brought Dawn Mattoon in earlier in the year last year. She ran all of product development for Cell Signaling, which is an antibody engineering company. This company can engineer some of the best quality antibodies in the world. Well, that's our raw materials, that's the kits that we make are antibody pairs. And so we want that capability in-house. NfL, there's 2 different antibodies that basically capture and then bring the light to it and are the digital ELISA technology.

So Dawn was a major add and just incredible capability, great leader. Julien Bradley is another person that was in the company. He left and he said, "My gosh, you guys are disrupting the world," and he came back, right. And so he's been doing a lot of the commercial buildout, working with Mark Brosky and others. So these are pretty important adds as we're trying to sort out the next steps of our growth trajectory. But again, I would buy us based on what we think we can do in research, it's a much lower risk proposition.

Kevin, that's all good to hear and that's a very helpful, thorough answer. Maybe just one quick follow-up. You held the first Powering Precision Health European summit in December. Given this is the first time you've done something like this in Europe, I'm just curious to hear, if you could give us a flavor of the customer response? And would you typically expect an event like this to impact sales or accelerate adoption rate after the event?

What I would like to say here is, let me say first, Doug, that the Powering Precision Health Summit is independent from Quanterix. That is a nonprofit that I founded independent from Quanterix. But it's got a greater purpose of going after disease-modifying capabilities for cancer and for neurodegeneration, those 2 broad categories. And it's looking at biomarkers, whether they be from Quanterix or be from other companies as a vehicle for the revolutionizing way of seeing these diseases earlier. And then later stage, getting treatments for those diseases. And then ultimately, can we look at biomarkers to prevent the disease through our annual physicals, knowing really early on that the way we're conducting our life and the environmental factors, the way we eat sugars, the way we eat growth hormones or the way we get subjected to concussions and things of that nature, are those environmental factors triggering disease, that you can actually prevent the disease cascade by looking at biomarkers.

So I want you to understand, that's independent from Quanterix. But Quanterix did participate, and they did a really nice job and they found a lot of customers very excited about biomarkers. And you can find on the Quanterix website a video that gives you direct feedback from many of those researchers that attended. And I would say Neurofilament light was showcased there by some of the leading neurologists in the world, and they talked about what they consider to be real significant disruption. And Neurofilament light has been around for a while. It's a -- it can be tested in cerebral spinal fluid, it's been something that's been -- the key here is the ability to see it non-invasively in blood. That's leading to a lot of new cohort studies, because patients don't mind giving blood. They don't like giving spinal fluid from a spinal tap. It's very invasive, very painful. And there's even drugs that can't even recruit patients for their drug trials when a spinal tap is needed.

So the less invasive ability to see the same thing you could have seen in cerebral spinal fluid, there are a lot of publications showing those correlations. And that was exciting to see that you can get the answer from blood. It's just that it's at a lower -- it's at a lot lower abundance level in blood, which means you need sensitivity to be able to see it. But the fact that it's correlated was what a lot of those scientists were presenting, and that was great body of evidence. Again, having a body of evidence of third-party, peer-reviewed science and seeing that published created a groundswell of excitement. There was a lot of excitement, and you'll see it in the summary video around PPH on our website.

So it was big and some of the key sponsors there was Novartis themselves sponsored, JPMorgan sponsored, Leerink sponsored, Cowen sponsored, Canaccord, so we had great sponsorships from a lot of customers as well as banks that are seeing the real importance of going after cancer and Alzheimer's the way biomarkers can achieve it.

Our next question is from Mark Massaro with Canaccord Genuity.

I guess just to maybe bridge Doug's question. One of the highlights I thought out of PPH was the presentation from Dr. Kuhle, University of Basel, and he said that he began offering blood-based NfL to some of his patients with informed consent. So I guess I'd be curious to hear your thoughts, Kevin, on how quickly other physicians and researchers may begin to offer blood NfL to patients and then more broadly clinically?

Yes, so our position here is that the test should only be being used for research use only. That's the research sector that we're selling this instrument into. But there are, like you say, a lot of trials that they do get patient consents and they are appropriately running those regulatory trials and there's more and more of that going on. And we have a lot of patients coming to us asking, not just in neurology, but also in cancer. You might remember the kind of game-changing PSA publication that came out 4, 5 years ago where we can see PSA at femtograms per ml and picograms per ml and that could be at John's Hopkins and NYU Langone showed that that could be a major for, especially people who had radical prostatectomies, it can be an incredibly important biomarker to determine whether the prostate is regrowing or not. And 0 is what you see in today's technologies, but when you take all those 0s, they show that you can stratify based on our sensitivity and see different disease progression markers.

And so not just in neurology, but in cancer we have patients coming to us. And we do not today, we cannot, we don't have any approvals to be doing that kind of testing. And so laboratory developed tests would be the first possibility we would see in-house. Certainly Quest and LabCorp and Myriad Genomics (sic) [Myriad Genetics] and Rules-Based Medicine, they all have our technologies and they all are incredibly great collaborators that have tremendous hope for what we're doing. And we see them to be really well statured around regulatory and reimbursement. And so we're going to be working those relationships in a more formal way with those types of companies in 2019. We, ourselves, are not suggesting that we will be running any kind of LDT tests in-house, but we will continue to run CRO tests in-house and that's the kind of workout of studying that we're doing.

I would call your attention, Mark, to Slide 16, where we show the NfL publications taking off. There was a publication, it just aired, I think yesterday, from the doctor that you mentioned, Jens Kuhle. And I just showed the quote from their abstract that says, Abstract Neurology 2019 Journal, "Blood NfL levels are associated with clinical and MRI-related measures of disease activity and neuroaxonal damage and have prognostic value. Our results support the utility of blood NfL as an easily-accessible biomarker of disease evolution and treatment response." And in the editorial it said Neurofilament light chain, an important step toward a disease biomarkers in multiple sclerosis. So those are the publications we have on our website, on the Quanterix website, where you can read from these third parties and those publications. And it would suggest that we get continued momentum towards achieving the ability to see disease progression. But again, there's nothing that's been approved yet and that approval process is necessary before it would be something that we would condone.

Understood. And then I also wanted to ask, the number of publications using your technology has doubled each in the last 3 years. So I'm wondering if a year from now, we'll be looking at 800 publications. And if that's the case, I was wondering, to what extent do you think your new SP-X launch could play a role in driving oncology? And then related to that, was wondering if you could give us a sense of what the multiplexing within the coreplex assays in oncology might look like? In which types of cancer do you think the SP-X will be used the most?

Yes, I was texting nonstop to a lot of my pancreatic, like MD Anderson, there's a guy named (inaudible) that presented at PPH. And there's a lot of pancreatic interest given Alex Trebek's situation of announcement. And so this -- I'm really excited about going after cancer. And the SP-X, it's a 10-plex. And it's looking at 10 different cytokines which are the proteins of the immune system. And we selected what we consider to be the most important ones. And the challenge in the immune system is these cytokines typically at baseline levels when you're healthy and the immune system hasn't been up-regulated, the challenge is you can't measure them with today's technologies. And so I think about 1/3 of those 10-plex's that we're launching, we're going to be able to see baseline levels, which is a game changer. Because you really want to see the first movement of those cytokines, particularly when you're looking at response to a treatment. Because the way these immunotherapies are working is that they're tricking the immune system to basically see the cancer. What's happened historically is the cancers are able to hide and the immune system doesn't see them, and so the immune system doesn't fight them. And so many of these new immunotherapies are being triggered to see the cancer and then fight the cancer. And so you want to up-regulate based on the treatment. But many times, it goes into what's called cytokine release or cytokine storm where the patient ends up basically dying through the toxicity of that elevation from that drug. And so the ability to see very early stage movements could lead to getting response understanding much earlier. And I think there's some evidence of some researchers that I've talked to that say, "Hey, today, if you lose imaging, it could be 6 months before you can see if a tumor has shrunk based on applying an immunotherapy." And some of these immunotherapies are a couple hundred thousand dollar per therapy. And in 6 months, you can have really over $2 million worth of therapy going into a cancer patient before you have what I would consider to be today's gold standard, the ability to see in a CAT scan or a PET scan whether that tumor has shrunk. There's some evidence, maybe, with our technologies, some promise and some hope that you could maybe get to that answer after one treatment or after 2 treatments. And so these are the types of things we want researchers using our technology for to see if they can get much earlier indications of whether the drug is going to have the desired effect on those cytokines or going to have the undesirable effect. And that is an area, I think, of tremendous possibility and tremendous interest, and we tried to build this thing to achieve that in using sensitivity to get there.

So those cytokines is what really our 10-plex is on the SP-X, and we're not that good at cancer yet. That's not what our channel to market has been. So we've brought in some really great people. [Daphne] came from the Stand Up To Cancer. She's a Ph. D that's working in our commercial organization. [Marta], another Ph. D that's had a lot of experience with -- so we're bringing some of those cancer specialists now into our company, into the commercial ranks under Mark Roskey's leadership to start to really teach the researchers out there how this instrument can be deployed. And there's some learning that's going to be required here. So we don't know how fast that'll be, so we don't want to guide. But we're pretty interested and excited that publications would be then a carry-on effect. How many publications will we have in 2019 was the question, you had -- can we double again? Can we get to 800 publications by year-end?

We didn't show that as a leading metric and say what our goal is there, but I'd like to think that if we can. I know we're going to have a profound effect on cancer, we're going to have a profound effect on Alzheimer's and MS and Parkinson's. And so we're going do everything we can utilizing PPH as a vehicle to market to excite different researchers through the publications that have already been done, to open their eyes up to those possibilities. So it's like a little bit of a cult affect to being able to get that information out there so people can see it, they can start writing grants and then they can get those going. So I would like to think we'll have at least 20 publications, at least in draft mode by year-end for SP-X, but it's hard to say, Mark.

Okay. And my last question, maybe for Joe. The number of instruments, I think you cited 278. Just wanted to ask a clarifying question. Are those orders or are those installed and generating consumable revenue? And then I also wanted to ask about the pull-through on the HD1. I think you had increased it to $60,000 per box per year at the end of Q3. Where are you now and where do you think that can go at the end of 2019?

Joe, you -- why don't you take the first and I'll talk to the second.

Yes, so the 278 is actually installed units out in the field that are generating consumables revenue.

And Mark, the way we've been saying it is that 6 months after an instrument is installed, we're going to be able to get 1/3 -- you should model 1/3 of the list price as being what we're going to be able to pull through it from that point forward.

So that's the way we've been trying to get everyone to model. Look at our total instrument revenue and then 1/3 of that is what you should see repeating 6 months later. And so I think that the HD1 did deliver pretty good numbers. We set out saying $50,000 for the year, and we were at $40,000 the previous year and we ended up, I think at $55,000 at some point, so we were approaching heading towards $60,000. And I think our list price on those are like $155,000. So that was a little bit above 1/3. And so I think that product's been out there longer and that's what you can expect. The HD-X, we're hopeful is going to even provide even more excitement, eventually to even drive that further. The SR-X, right now, I would say it's probably $25,000 is what we're trying to get to with that product line and we really haven't had much of the 6-month kick-in on those yet. And SP-X, again, it's the same price point as SR-X.

We have some test beds that are even significantly beyond the 1/3. But our hope would be that we can keep maintaining that. And so we feel pretty good that, that's a good place to model us.

I think we probably should cut it off. We're beyond time, but I can't thank everybody enough. Great call. And we'll follow up with you as any one of you have questions. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a great day.