Seer, Inc. (NASDAQ:SEER) Q4 2023 Earnings Call Transcript
Seer, Inc. (NASDAQ:SEER) Q4 2023 Earnings Call Transcript March 1, 2024
Seer, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by, and welcome to the Seer Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Carrie Mendivil, Investor Relations.
Carrie Mendivil: Thank you. Earlier today, Seer released financial results for the quarter and year ended December 31, 2023. If you've not received this news release or if you'd like to be added to the company's distribution list, please send an e-mail to investor@seer.bio. Joining me today from Seer is, Omid Farokhzad, Chief Executive Officer and Chair; and David Horn, Chief Financial Officer and President. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release Seer issued today.
For a more complete list and description, please see the Risk Factors section of the company's quarterly report on Form 10-K for the year ended December 31, 2023, and its other filings with the Securities and Exchange Commission. Except as required by law, Seer disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time sensitive information and is accurate only as of the live broadcast February 29, 2024. With that, I'd like to turn the call over to Omid.
Omid Farokhzad: Thanks, Carrie, and thank you, everyone, for joining us this afternoon. I will begin our call today by providing updates on our recent progress, including some exciting customer data. Looking ahead, we are laser focused on converting these incredible biological insights into accelerated commercial adoption. And I will share the actions were taking to make this happen. I will then turn the call over to David to provide more detail on our financial results for 2023 and the revenue outlook for 2024. In 2023, we grew revenue 8%, to $16.7 million and ended the year with over $373 million in cash, cash equivalents and investments. As the body of biological insights and data grows, I expect adoption and revenue will become more aligned with our expectations.
Our mission at Seer is to bring the power of unbiased proteomics to researchers around the globe. To achieve this, we need to open up a new gateway to the proteome to enable the next frontier in biology to be explored. Changing the status quo in this way is an enormous undertaking. When we first introduced the Proteograph Product Suite for unbiased, deep proteomics at scale, there was a huge mountain to climb in terms of market development and education. Over the course of this past year, we made important progress in climbing this mountain. I'm deeply proud of our team's work, and yet there is still much work to be done to translate the incredible performance we're seeing from the Proteograph into widespread commercial adoption. Our customers have started to demonstrate the powerful biological insights from the Proteograph and this data is nothing short of incredible.
Most recently, we saw our first customer study published in Nature Communications. Given the unique insights that Proteograph is enabling relative to other proteomics platform, we expect several more publications in high impact journals throughout the year. This will be critical for us to reach an inflection point for widespread adoption and revenue growth. We remain laser focused on developing and enhancing our technology, removing barriers to adoption and expanding our commercial reach. Over the past year, we made a number of important advancements to our technology. In June, we launched our Proteograph XT Assay Kit and the feedback has been fantastic. Since its launch, we have upgraded over half of our customer base to run the new Assay Kit.
XT improve the throughput of our initial Assay and reduces the mass-spec time for sample by two and a half fold without sacrificing depth. The efficiency allows a single technician to handle hundreds of samples per week and approximately 10,000 samples annually with just one Proteograph XT as a leading mass-spec instrument. We also made important improvements to our Proteograph Analysis Suite or path to provide biologists access to an understanding of deep, unbiased proteomics, readily and easily for any application they choose, including proteogenomics analysis. We made significant updates on the quality and quantity of protein and peptide identifications you can get from path and re-engineered our mass-spec analysis workflow to leverage cutting edge analysis advancements at scale.
And finally, last month, we made our Protein Discovery Catalog available to our customers, prospective customers and interested parties. With over 10,000 proteins in plasma across 1,900 pathways, that can be detected and interrogated using the Proteograph. This provides our first published index of the unprecedented depth of empirically observed proteins captured by our nanoparticle technology to date. The catalog includes proteins linked to over 150,000 peptides that can serve as data points for potential biomarkers, including proteins not been associated with diseases, making it a rich source of biological insights. We look forward to expanding this library over time as more samples are interrogated by the Proteograph platform and more mass-spec based proteomic data becomes available.
We also made important strides removing barriers to improve access. We launched a Seer Technology Access Center or STAC, which allows the Proteograph user to run samples in their own lab and have Seer run the mass-spec alternatively, provide end-to-end study services from study to sample. We are seeing strong demand for STAC with 48 organizations using this service as of year-end, including large pharmaceutical companies. Revenue from STAC grew significantly quarter-over-quarter. In the fourth quarter, STAC revenue was the vast majority of services revenue. We also introduced the Strategic Instrument Placement Program or SIP to allow researchers to begin using the Proteograph right away by utilizing available operating budgets. This not only removes another barrier to access, but also facilitates data generation that will help secure the necessary funding and samples for more extensive and impactful studies in the future.
And finally, last November, we expanded our Centers of Excellence programs with the addition of Panome Bio, a world-class metabolomics service provider with expertise in mass-spec by combining deep proteomic insights at the peptide level with their proprietary Metabolomic's workflow. Panome Bio will enable unique studies with robust pathways analysis to significantly advance research in biomarker discovery and drug development. As we have said, the combination of our novel technology, depositi (ph) of a peer reviewed publication as well as conservative budgeting, continues to drive an elongated sales cycles for the Proteograph. That said, we're seeing great interest in STAC with a robust pipeline of opportunities indicating this was an important step in enabling access to the Proteograph technology, STAC has helped us secure a foothold with several large pharma companies.
We're starting to see momentum in usage of these large pharma customers with strong ordering and some outsourcing additional work due to internal demand. These customers have the funding samples and motivation to adopt our technology and advance the biological discovery. We expect this program to continue to be an important driver for adoption from these types of customers. As we continue to educate the market on the value of the Proteograph. We have started to see potential customers previously on the sidelines turning to strong advocates once they have seen the data and the insights that the Proteograph can provide. I remain convinced that once our technology becomes increasingly accessible to the broader research community, our market development efforts will pay-off.
And we will see an inflection point in adoption, the size of studies and ultimately revenues. Throughout the year, we made great progress validating our technology and expanding our commercial reach. We onboarded four new distributors and partners in Australia, Eastern Europe, Israel and Japan. We obtained ISO 27001 certification, increasing our information security and cybersecurity standards, making us more effective with STAC in our labs and collaborations, and forming a bridge for general data protection regulation or GDPR compliance for our European customers. We also received ISO 13485 certification establishing the processes people and systems for quality management and laying the groundwork for the creation of the highest quality, reliable solutions and enabling the utilization of our products in FDA submissions.
We have also seen a growing validation of our technology, both from Seer and customer publication. Since the beginning of 2022, we have published several high impact peer reviewed papers on our differentiated proprietary engineered nanoparticle technology. These publications demonstrate how our Proteograph Product Suite workflow has superior performance in terms of precision, depth and throughput compared to conventional workflows, and can identify undiscovered links between health and disease, -- peptide level resolution that can illuminate the role of protein variance. We have consistently said that one of the most important drivers of adoption would be the validation of our technology with third party data. In addition to our publications, where there are 180 public presentations to date and 48 posters and presentations by customers.
Today we have eight preprints, four peer reviewed Seer publications and one peer reviewed positive publication showcasing the value of Seer technology. We expect to see the number of peer-reviewed publications grow throughout the year. In January, PrognomIQ demonstrated the largest deep multi-omic study completed to date in the preprint article in medRxiv. This study involved 2,513 individuals, including patients with all stages of lung cancer, co-morbid controls and the healthy subjects, utilizing the Proteograph for the proteomic portion of this study, they were able to measure over 8,300 proteins which were then combined with over 200,000 RNA transcripts and 1,000 metabolite measurements to drive a multi-omics classifier. This classifier represents a potentially best-in-class performance by achieving a sensitivity of 80% for Stage 1 and 89% for all stages of lung cancer at 89% specificity.
Also in January, a second manuscript was made available on bioRxiv and will be submitted for peer-reviewed publication. This study was a collaboration between Alzheimer's disease in luminaries from NGH and MassGeneral Institute for Neurodegenerative Disease and investigators at Seer. This study looked at 1,800 plasma samples comprising both controls and individuals diagnosed with cognitive decline, including Alzheimer disease. The researchers identified 138 proteins that were up or downregulated in AD individuals. And of these 138 proteins, only 44 have been previously associated with AD. The remaining 94 represent putative biomarkers of AD potentially unlocking new biological insights. Interestingly, 55% of these 138 proteins are not present on a commercially available high-plex affinity based Panome, meaning researchers would not be able to see these proteins using that Panome.
The NGH investigators used this clinical information to identify the point of significant cognitive decline and determine which of the 138 proteins separated the population into fast and slow cognitive decliners. We identified eight sub significant proteins and are now investigating how these results may be advanced to develop a clinical score indicating the likelihood of cognitive decline in the particular timeframe. While this study could not have been done using high-plex affinity-based approaches, it also could not have been done without the Proteograph. Since there is no other practical way to do a deep, unbiased proteomics study of 1,800 plasma samples, other than leveraging the Proteograph Product Suite. This represents the largest deep, unbiased AD proteomics study complete to date with a highly differentiated and novel biological insight.
With regards to the major communication paper that I mentioned earlier, I'm very excited to share that this study was led by Professor Karsten Suhre at Weill Cornell Medicine and demonstrated that the identification of protein altering variance for population scale pQTLs studies. The Proteograph workflow was used upstream to a mass-spec to analyze over 18,000 peptides from 3,000 proteins in more than 320 blood samples to detect and quantify blood circulating proteins in the presence of protein altering variance. When affinity based approaches are used for pQTL analysis. These ligands bind to a specific epitope of the protein and variance of these proteins can alter the ligand binding. This altered binding is often falsely interpreted as a pQTL which can result in incorrect biological insight.
However, with the Proteograph protein abundance is quantified at the peptide level resolution accurately identify pQTLs and allowing a better understanding of disease mechanism and more successful drug discovery efforts. This study illustrates the effectiveness of Seer's approach in unraveling intricate connections between genetic variations and proteins, which are vital for developing innovative therapeutic approaches for various diseases and we believe will have an enormous impact on human health. In addition, another paper from Professor Chris Mason's lab at Weill Cornell Medical demonstrating the value of the Proteograph has been accepted in nature communications and I look forward to sharing more information once this paper has been published.
We have seen incredible interest in the field of proteomics and the value it provides. Over the last five years and the velocity has significantly picked up in the last 12-months. This is exemplified by several high impact publications and an increase in both private and public funding for proteomic research, including a recent grant from the NIH of $50 million for over five years to establish a new consortium for multi-omic research on human health, with the ability to analyze larger and more complex datasets using emerging technologies. The goal of the consortium is to develop a scalable and generalizable multi-omic research strategy to advance understanding of disease and progression. We look forward to seeing more funding for these types of projects as researchers continue to advance their studies and enable novel biological insights.
Genomic researchers are increasingly finding that proteomics data and subsequently multi-omics data has greater power than genomic data alone. As I alluded earlier, the value of this is now shown by the largest, deepest multi-omic study completed to date by PrognomIQ resulting in the best publicly available data for early detection of lung cancer. Beyond the value of proteomics in the research setting, we're also seeing the groundwork being laid to incorporate more protein markers for clinical use. Recently, Palmetto's MolDX proposed billing and coding guidelines to write coverage decisions for clinical proteomic diagnostic assays where policy was previously only written for tests where DNA or RNA were the primary analysis. This allows us substantial clinical opportunity by increasing the chances the proteomics diagnostic assays have utility when launched into the market and is an important pathway to reimbursement for proteomics assays.
Looking ahead in 2024, we will continue to execute against our core strategies of powering evidence and publications with the Proteograph Product Suite, continuing to enhance access, innovate with our products and expand our applications. While much work remains, we're excited and inspired by the opportunity that lies in front of us. With that, I will now turn the call over to David.
David Horn: Thanks, Omid. Total revenue for the fourth quarter of 2023 was $4.4 million, representing a decrease of 4% compared to $4.6 million in the fourth quarter of 2022. The decrease is primarily due to a decrease in lease revenue related to SP100 instruments and partially offset by an increase in service revenue. Product revenue for the fourth quarter of 2023 was $3 million, including $366,000 of related party revenue and consisted of sales of SP100 instruments and consumable kits. Service revenue was $1.1 million in the fourth quarter of 2023, including $201,000 of related party revenue and primarily consisted of revenue related to STAC. As Omid mentioned, we are seeing good customer interest in our STAC program where we will run mass-spec for our customers and in some cases provide a full workflow solution for customers who would like to access our technology.
Grant and other revenue was $258,000 in the fourth quarter of 2023, largely related to our SBIR grant from the NIH. In the fourth quarter, we utilized the remaining funds available under the SBIR grant and do not anticipate booking any more revenue under this grant in 2024. Total gross profit was $2 million for the fourth quarter of 2023, representing a gross margin of 45.1%, compared to $2.3 million in the fourth quarter of 2022, representing a gross margin of 49.8%. We continue to expect variability in our overall gross margin on a quarter-by-quarter basis as a proportion of instrument, consumable and service revenue will fluctuate for any given quarter. Looking ahead to the full year 2024, we expect gross margins to be in the range of the mid-40s to 50%.
Total operating expenses for the fourth quarter of 2023 were $24.2 million, including $7.6 million of stock-based compensation, a decrease of 11% compared to $27.2 million, including $8.2 million of stock-based compensation in the fourth quarter of 2022. Research and development expenses for the fourth quarter of 2023 were $11.2 million, a decrease of 12% compared to $12.6 million in the fourth quarter of 2022. The decrease in R&D expenses was primarily due to a decrease in employee and stock-based compensation as well as laboratory expenses. Selling general and administrative expenses for the fourth quarter of 2023 were $13.1 million, a decrease of 11% compared to $14.6 million in the fourth quarter of 2022. The decrease in SG&A expenses was primarily driven by a decrease in professional services costs, as well as employee and stock-based compensation.
Net loss for the fourth quarter of 2023 was $17.8 million, compared to $22.5 million in the fourth quarter of 2022. Turning to the full year total revenue for the full year 2023 was $16.7 million, compared to $15.5 million in 2022, representing an increase of 8% year-over-year. The increase was primarily driven by service revenue related to STAC. Product revenue was $12.9 million, including $4.4 million of related party revenue, compared to $13.8 million in 2022, including $5.2 million of related party revenue. Service revenue was $2.3 million for the full year 2023, including $241,000 of related party revenue compared to $913,000 for the full year 2022, which did not include any related party revenue. Grant and other revenue was $1.5 million for the full year 2023, compared to $800,000 for the full year 2022.
We shipped 23 SP100 instruments in 2023, bringing our cumulative instrument shipments to 62 instruments as of December 31, 2023. We continue to see a mix of orders from commercial and academic customers with a slight majority of placements continuing to be with commercial customers at this stage. Total gross profit was $8.5 million for the full year 2023, representing a gross margin of 51.1% compared to $7.1 million for the full year 2022, representing a gross margin of 45.8%. Total operating expenses for 2023 were $112 million, inclusive of $34.4 million in stock-based compensation, compared to $104.3 million inclusive of $33.7 million in stock-based compensation in 2022. Research and development expenses for 2023 were $53 million, compared to $45.8 million in 2022.
Selling general and administrative expenses for 2023 were $59 million, compared to $58.5 million in 2022. Net loss for 2023 was $86.3 million, compared to $93 million in 2022. We ended the year with approximately $373.1 million in cash, cash equivalents and investments. With our extremely strong balance sheet and disciplined deployment of capital, we believe we are well funded to execute our strategic plan for many years to come. Turning to our outlook for the year, we expect revenue to be in the range of $18 million to $20 million for 2024, representing growth of 14% year-over-year at the midpoint. Similar to 2023, we expect revenue to be more weighted to the second half of the year. As we work to develop this market, we are focused on driving evidence and publication enhancing access and driving product innovation and applications in 2024.
We continue to see strong interest in the Proteograph and its value proposition for customers. We remain confident in our ability to capitalize on the massive opportunity ahead. As Omid shared, we are laser focused on connecting credible biological insights from our customers to accelerated commercial adoption. We're committed to maintaining a strong financial position and are taking a very disciplined approach with our spend. Free cash flow was approximately negative $66 million for the full year 2023, and we estimate that our 2024 free cash burn will be less than our free cash burn in 2023. At this point, I would like to turn the call back to Omid, for closing comments.
Omid Farokhzad: Thanks, David. I firmly believe that we have the technology that will transform our understanding of the proteome. Looking forward in 2024, we will continue to drive execution against our core strategies of driving evidence and publications, continuing to enhance access, innovating our products and expanding applications. I'm confident in the substantial long-term opportunity ahead, and I look forward to continuing to update you on our progress throughout the year. With that, we will now open it up to questions.
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