Singular Genomics Systems, Inc. (NASDAQ:OMIC) Q4 2023 Earnings Call Transcript
Singular Genomics Systems, Inc. (NASDAQ:OMIC) Q4 2023 Earnings Call Transcript March 18, 2024
Singular Genomics Systems, Inc. beats earnings expectations. Reported EPS is $-0.32, expectations were $-0.34. OMIC isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon, everyone, and welcome to Singular Genomics Fourth Quarter and Full Year 2023 Earnings Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Philip Taylor. Sir, the floor is yours.
Philip Taylor: Thank you, operator. Presenting today are Singular Genomics Founder, Chair, and Chief Executive Officer, Drew Spaventa; and the Company's Chief Financial Officer, Dalen Meeter. Earlier today, Singular Genomics released financial results for the three months ended December 31, 2023. A copy of the press release is available on the company's website. Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's views as of today, Monday March 18th, 2024 only, and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other information related to our financial and operating results, plans, and strategies.
Actual results may differ materially from those expressed or implied by these statements as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission, including our most recent Form 10-K filings and the Form 8-K filed with today's press release. Our SEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements. Please note that this conference call will be available for audio replay on our website at investor.singulargenomics.com in the Presentations and Events section.
With that, I will turn the call over to CEO, Drew Spaventa.
Drew Spaventa: Good afternoon, and welcome to Singular Genomics' fourth quarter 2023 earnings call. It was a productive quarter to finish off an important year for the company and I am pleased to update you on our progress. We will focus our call on the following areas: one, business highlights and key accomplishments from 2023; two, new data and product announcements; and three, strategic focus for 2024. Let’s start with our fourth quarter results. We shipped eight G4 instruments during the quarter and generated $1.1 million in revenue, our highest quarterly total again. Of these shipments, three were to academic core labs and five were to commercial labs. The shipments comprised an equal split between traditional capital purchases and non-capital arrangements, bringing our total G4 shipments to 24 as of December 31st.
In addition to our Q4 revenue performance, we had several other key accomplishments and activities for the year to note. We commercially launched and transitioned the majority of our customers to our F3 flow cells allowing users to get up to 450 million reads per flow cell or 1.8 billion reads per run for some of the most widely run applications. We commercially launched Max Read flow cell kits to customers for single cell sequencing increasing the output of the G4 to 800 million reads per flow cell or 3.2 billion reads per run for specific single cell in spatial sequencing applications We improved sequencing quality on the G4, recently increasing the specifications to 85% bases greater than or equal to Q30. Lastly, we narrowed our priorities across the R&D roadmap to focus resources on the highest impact activities and projects for new innovations, while reducing our cash burn and extending runway.
Turning to new data and products announcements, we recently showcased our near-term product pipeline at the AGBT Conference in Orlando, Florida. At the conference, we unveiled the G4X Spatial Sequencer, a high throughput in situ spatial sequencing platform. The G4X is designed to offer novel capabilities, stackable data streams and unprecedented throughput for spatial profile filing of tissue. Its novel capabilities will include Direct-Seq, which is the sequencing of RNA in situ and has the potential to open new areas of scientific discovery. In addition, the G4X will offer readouts of targeted transcripts, targeted proteins and a fluorescent H&E stains, all in the same tissue section. This combination of readout modalities will be offered at an unprecedented scale with 40 square centimeters of flexible imaging area and single-day run times, the G4X system will enable labs to process 20 times more samples per week than existing technologies.
At the conference, our CSO and Co-Founder, Eli Glezer, presented to a standing room-only audience sharing the performance data and technical specifications of the G4X system. In addition, we hosted a successful customer and KOL event, including lab directors and scientific leaders in the spatial community. The event provided an opportunity to develop relationships, solicit feedback on the system and discuss opportunities for collaborating and working together to bring the G4X forward. We presented internal and external data at the conference. Internal data included transcripts, proteins and direct sequencing of RNA, external data came from two technology access programs or TAP partners. Early collaborators included Catherine Wu from the Dana-Farber Cancer Institute, who noted the high sample throughput and excellent data quality that’s been generated on the G4X with our bone marrow samples, that tours via very difficult tissue types have been impressive and have allowed us to envision much larger studies that have not been previously possible.
The scale provided by the G4X promises to have tremendous impact on expanding our understanding of the tumor micro environment in acute myelogenous leukemia, AML and beyond. In addition, Ioannis Vlachos from Harvard’s Beth Israel Deaconess Medical Center noted as the spatial value field matures, high throughput spatial platforms such as the G4X will empower more researchers to incorporate spatial tissue profiling into their work, as well as enable us to answer bigger questions and to perform increasingly larger studies. We are encouraged by the feedback from early collaborators and interest from potential users coming out of AGBT. The conference generated more than 200 qualified marketing leads and now we have a growing pipeline of near-term service projects on the G4X and a funnel of potential sales opportunities for early adopters of the platform.
We intend to initially offer kits in the G4X that will support transcripts, proteins, and offer fluorescent H&E stain. The system is designed to accommodate a large number of samples and will have the capability to readout hundreds of gene targets and dozens of proteins in the same tissue section. Content will be available in fixed panels, or customizable for the customer. Future kits in the G4X will also support Direct-Seq, which is designed to directly read regions of RNA such as cancer hotspot mutations, guide RNAs and CRISPR screens, or B and T cell receptor sequences. The capability to perform direct sequencing of RNA within cells and tissues is expected to bring a powerful new readout modality for in situ molecular pathology. Direct-Seq will be initially available as a service with plans for broader release shortly thereafter.
The G4X upgrades are expected to be available to G4 customers by the end of this year as part of a G4X early access program. Initially available will be an immune oncology panel of approximately 300 gene transcripts, 10 to 15 proteins and the ability to customize content. Direct-Seq and additional panels are expected to be released at a later date. We also plan to provide G4X technology access services starting in the second quarter. Turning to our views and strategic focus in 2024. We are encouraged by the level of interest and engagement around the G4X. We are seeing strong interest from early collaborators, especially as it relates to our technology access services offering. Based on early feedback and interest in the G4X, we intend to focus more heavily on spatial sequencing and multiomics moving forward.
We believe this is an area where we can offer novel and differentiated solutions with compelling business economics. The setup for the G4X has multiple compelling aspects driving this shift in focus. First, strength of the value proposition. The g4x value proposition is expected to provide unique capabilities that customers are asking for. This can be categorized into novel data output modalities and high throughput. The G4X is designed to be highly differentiated from any other current offering, while directly addressing customer paintpoints. Second, the business economics are attractive. ASPs on both the G4X instruments and consumables are expected to be higher than the current G4 business. The ability to offer high throughput in the form of 10 to 40 tissue samples on a single flow cell translates to expected ASPs and margin dollars to be materially higher than current kits and significantly higher potential for consumable pullthrough for a G4X instrument.
Third, market dynamics and growth. The spatial profiling in multiomic spaces in the early stages and is expected to grow rapidly. The current market is largely comprised of academic labs, CROs and reference labs. These labs need higher throughput and lower cost per sample. Current tools are limited. We believe the G4S will be uniquely able to serve these customers and accelerate growth within this space. We see a strong setup for the G4X to be a highly successful product and we are making the necessary trade-offs and decisions to invest and bring this product to market as fast as possible. We also recognize the need to manage our cash and resources preudently and have continued to identify and implement actions to drive additional cost savings.
To this end, we recently made the difficult decision to reduce our headcount by approximately 20% and we reduce our spending plans to decrease cash burn and focus resource more heavily on our spatial sequencing product roadmap. This reduction was incremental to the cost savings taken in October of 2023 and discussed in our last earnings call. We believe these actions will extend our cash runway into late 2026, while still supporting our current G4 customers and focusing our development work to bring the G4X to market as fast as possible. We will provide additional color and updates on our outlook for 2024 on our Q1 earnings call. Now, I'll turn it over to Dalen to go to the details of our fourth quarter financial results.
Dalen Meeter : Thank you, Drew. I'll start with financial results for Q4 2023 and talk briefly about 2024. As previously discussed, we shipped eight G4 instruments in the fourth quarter of 2023. Revenue for the fourth quarter was $1.1 million, predominantly made up of $0.9 million from revenue recognized on four capital purchased instrument placements and consumables pullthrough of $0.2 million. We expect revenue from the remaining four instrument shipments to be recognized over time as these customers purchase consumables. Gross profit was negative $0.5 million in the fourth quarter of 2023, compared to approximately flat in the fourth quarter of 2022. Our gross margin was negative because of both additional discounts we provided to certain customers, as well as higher costs associated with the installation, training, and support of our system placements.
Operating expenses in the fourth quarter of 2023 totaled $24.8 million, compared to $22.5 million in the fourth quarter of 2022. These totals included non-cash stock-based compensation expenses of $2.7 million in Q4 2023 and $3.1 million in Q4 2022. The year-over-year increase was primarily driven by the timing of expenses related to certain compensation and benefits and severance costs. Net loss in the fourth quarter of 2023 was $23.2 million or $0.32 per share, compared to $21.1 million or $0.29 per share in the fourth quarter of 2022. The weighted average share count for the fourth quarter of 2023 used to calculate net loss per share was approximately $73.6 million. Ending cash, cash equivalents and short-term investments, excluding restricted cash totaled $173.9 million.
Turning to 2024, as Drew discussed, we recently implemented a reduction force of approximately 20% of our workforce. We have also taken actions to reduce our non-personnel related operating expenses in 2024 to further decreased our cash burn. These actions were incremental to the cost savings initiatives implemented in October of 2023 and discussed on our last earnings call. In total, we estimate the combined savings from these actions will reduce annualized operating expenses by approximately $20 million and extend our cash runway to late 2026. While these actions were not easy we believed right-sizing the cost base of the organization was a necessary step to position us for success in the long term. Back to you, Drew.
Drew Spaventa: Thank you, Dalen. I'm excited as we look ahead to 2024. This will be a pivotal phase for Singular Genomics. Singular has spent the last seven years developing incredible technology. We have invested approximately $300 million and in doing so created a powerful sequencing platform with significant modes around our system, our chemistries and methods, our IP and our products. Over the last few years, we have increasingly focused on leveraging our NGS Technology and Foundation to address the spatial and multiomics markets. Our NGS Foundation and continued innovation has resulted in a unique and powerful on ramp to spatial sequencing. Our many years of investment in both NGS and spatial sequencing now positions Singular to enter these high growth markets with a highly differentiated product.
The recent restructuring of our business will provide extended runway, give us time to get this product to market and scale commercially. The synergies and footprint of our current NGS business and customer base will allow us to onboard existing customers and leverage our current commercial operations. Now, let's open it up to questions. Operator.
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