Standard Biotools Inc. Q1 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by. And welcome to the Fluidigm First Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Ms. Agnes Lee, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone. Welcome to Fluidigm's First Quarter 2020 Earnings Conference Call. At the close of the market today, Fluidigm released its financial results for the quarter ended March 31, 2020. During this call, we will review our results and provide commentary on our financial and operational performance, market trends, strategic initiatives, and our response to the COVID-19 pandemic. Presenting for Fluidigm today will be Chris Linthwaite, our President and Chief Executive Officer, and Vikram Jog, our Chief Financial Officer. During the call and subsequent Q&A session, we will make forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results, and market trends and opportunities. Examples include statements about expected financial performance, the anticipated positive impact of various strategic and operational initiatives, prospects for our products and technologies, potential customers and collaborators, and trends in competition, markets, research funding, and customer demand. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations. Information about these risks and uncertainties and other information affecting our business and operating results is contained in our annual report on Form 10-K for the year ended December 31, 2019, as well as our other filings with the SEC. The forward-looking statements in this call are based on information currently available to us, and Fluidigm disclaims any obligation to update these forward-looking statements, except as may be required by law. During the call, we will also present some financial information on a non-GAAP basis. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of the company's operating results as reported under U.S. GAAP. We encourage you to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations. Reconciliations between GAAP and non-GAAP operating results are presented in a table accompanying our earnings release, which can be found in the Investors section of our website. I will now turn the call over to Chris, our President and CEO.

Thank you, Agnes. Good afternoon. We find ourselves in a starkly different world than the one we knew a few short months ago. It is one of extraordinary challenge on the broadest possible scale, but also a moment of great opportunity for the life sciences tools industry and the overall healthcare sector. I believe we will rise to the challenge and accomplish incredible things much faster than we imagined possible. For healthcare, diagnostics, and life sciences companies alike, this pandemic is the public health equivalent of 9/11. Even as we rush to manage the current crisis, a new paradigm is emerging, and with it, there is a dawning realization that we need to make a huge step forward in biotechnology investment, development, and deployment of new tools on a global scale for the benefit of all mankind. We have a strong point of view that genomic and proteomic tools are essential in all facets of the fight and that an understanding of the immune system and immune response is foundational to long-term safety. Working together with a global research community, we believe we can do amazing things to support pathogen surveillance, immune system monitoring, and therapeutic as well as vaccine development. Furthermore, as we rapidly deploy tools to address the current crisis, we believe that governments and public health bodies will be resolute in preparing for future pandemics and that Fluidigm will play an important role, both in the near-term and longer-term horizon, as governments deploy new tools that demand higher throughput, flexibility, integrated data monitoring, and a public-private partnership of national stockpiles and new collaboration networks that will enable faster response to future threats. Our products, technologies, and expertise enable important research on multiple frontiers of human health. And starting in Q1, we pivoted to support the global scientific community in the fight against the unprecedented COVID-19 pandemic. A growing number of governments and medical institutions are engaging with Fluidigm for immune profiling and virus detection and testing. Given the powerful capabilities of our two technology platforms, mass cytometry and microfluidics, it is no surprise that we are at the forefront of this extraordinary global effort. We remain committed to serving research needs across scores of diseases. However, for the near term, we are reconfiguring our core products in a cohesive manner to address COVID-19 needs. Our innovative technology powering biomarker discovery and deployment puts us in the right place at the right time, focused on the right opportunities. Shifting to Q1, we began the year in a good position with a strong pipeline and backlog. As the first COVID-19 cases emerged in Asia, we moved swiftly to organize a sustained response, holding daily executive meetings aligned around three simple themes. First and foremost, we focused on employee safety. We sent masks to our Chinese employees, built stockpiles of supplies in our Singaporean facility, and moved to a protective posture, locking down our manufacturing facility from outsiders, implementing temperature checks of employees, wipe down procedures, and social distancing for all staff, moving more than half of our team into remote work environments for safety. Later, we cascaded this general model around the world in San Francisco, Toronto, Paris, Tokyo, and the U.K. I'm pleased to report we have had no confirmed infections of our employees, and the organization is performing at a high level. Second, we organized customer-facing activities in a new way. As our customers quickly shut down their operations first in Asia around the Chinese New Year, Europe in late February, early March, followed by North America in mid-March, we refocused our business along two vectors: pathogen testing and immune monitoring. We selectively sent our field service engineers into operational facilities with enhanced PPE. Internally, our R&D and marketing teams constructed COVID-related value propositions, reconfiguring our existing tools with customized solutions for additional needs. For pathogen testing, our microfluidics platform is uniquely well-suited. As the U.S. FDA issued guidance for emergency use authorization, we began deploying Biomark and Juno systems into testing centers, new customer segments for us. One single Biomark-Juno combination utilizing our 192.24 IFC can process as many as 6,000 bulk RNA detection tests per day, or more than two million tests per year. Our miniaturization technology requires 1,000 times less reagent than the 96-well format of other platforms. And we have an automated approach that reduces the need for human interaction. We worked with labs to configure extraction procedures and complete workflows. In Q1, the revenue impact from these microfluidic instrument placements was incremental to our historic placement numbers. Given our lack of brand awareness and channel in this customer segment, we've been pleased with this early success. Our value proposition, assay flexibility, high sample throughput, and conservation of reagents compelled numerous labs to purchase systems. We collaborated with these early adopters to submit lab-specific EUA submissions. Many of these collaborations have been shared on our website, social feeds, or in press releases. I'm particularly proud of our work with the University of Oklahoma Healthcare System in deploying a statewide testing program at a record pace. To increase our competitiveness and reduce the burden on customers, we are working on a Biomark-based EUA this quarter. We believe that this submission will help close more opportunities in our growing pipeline and partially mitigate the impact on lab shutdowns in other customer segments. We have a pipeline of additional assays in development that will leverage this initial EUA system submission and address testing needs in the second half of the year and beyond. For immune monitoring, our mass cytometry platform is an excellent tool for COVID-related programs. On the suspension side, we combine flexibility of panel design with robust reproducibility that allows large consortia to develop databases, integrating samples from geographically diverse cohorts. Working from our base panels, researchers have rapidly built custom panels linked to COVID-related questions. We've added new antibodies to our catalog, and our recently released new metals enabled deployment of large investigational biomarker panels. Most impactful, our Maxpar Direct Immune Profiling assay, the 2019 best new product in cell biology, provides an amazing backbone for the large multi-site studies required to assess immune system response in the COVID-infected population, providing common reagent kits in a simple format. This same assay provides a useful tool for supporting vaccine and therapy strategies by providing immune profiling data. Other groups are using our imaging mass cytometry in new ways. For instance, COVID researchers at the Yale School of Medicine are analyzing lung tissue to understand the impact of the virus on the immune response in critical organs. Programs and consortia have formed around the world at an incredible pace, and there are already five papers detailing COVID-related insights gleaned from mass cytometry. We are sharing these stories with customers in our social feeds as fast as they emerge, so everyone can benefit as we mobilize as a single community against this common threat. Everything I've described ties to our immediate response. However, we have additional products in development, including a potential game changer called the ECHO program being funded by DARPA. The ECHO program will create a rapid detection platform powered by microfluidics that could process thousands of samples a day per system while measuring host cell infection, potentially giving evidence of post-exposure infection much sooner than conventional real-time PCR RNA test or serological or antibody-based solutions. The ECHO program is a collaboration with Mount Sinai's Icahn School of Medicine and the Department of Defense. We will give updates as they become available, including dates on EUA submission and commercial availability. Our partners will make the final decision on deployment timelines, and we all recognize the importance of balancing speed with robust scientific validation of this novel approach. The third area of daily discussion has been oriented on cash management. Vikram will provide ample color in his section. In short, we're leaving no stones unturned as we preserve cash during the sharp industry downturn. However, I cannot overemphasize that our core business thesis is intact, and we believe we will emerge an even stronger organization as the research community gets back to work in the coming quarters. We discuss cash management activities every single day. We have made business trade-offs to preserve near-term health without fundamentally compromising our longer-term trajectory, and we are benefiting from legal settlements and sponsored research funding from groups such as the DARPA-related COVID work. As I transition to a discussion of our views on Q1 results and potential impacts in 2020, I want to reinforce one last point. The immunome market, our term for the comprehensive analysis of the immune system and the tools related to these endeavors, is more viable than ever. Over the last few years, most of our focus has been on immunome questions linked to oncology and immune system related disorders. But infectious disease was part of our business before and is accelerating today. Roughly 10% of our mass cytometry publications are related to infectious disease. For Fluidigm, the COVID pandemic provided a unique catalyst for tying our portfolio together into a menu of infectious disease-oriented offerings. We remain committed to oncology and other therapeutic areas, but we believe that infectious disease work is going to expand rapidly, and we can support this additional market vertical with modest impact on our prior endeavors. In essence, they are symbiotic or complementary to most of our core programs. We anticipate that the microfluidics business could accelerate upward on the heels of the COVID response. Rounding out the commentary, we saw a pronounced negative impact on our business, as most customer segments shut down operations by the middle of March. We entered Q2 with approximately 60% to 70% of our global academic research community either closed or working at a slower pace. Basic research projects have been put on hold but not canceled. Customer activities will depend on when the community returns to a new normal and what budgets will be available. Our instrument funnel remains strong, and we built backlog due to facility closures or delays in facility renovations that have been gating items for putting systems online. We anticipate a sharp near-term deceleration in unit placements, not related to COVID work. And we have heard similar commentary from other analytical instrument companies. We've adapted selling and marketing motions to reach customers who are working from home offices. We believe that budgets are intact, and orders will flow once organizations get back on their feet later in the year. For consumables, we know that many of our core labs have major backlogs of samples to run, and they are anxious to return to normal operations. As part of our comprehensive COVID-19 response, we accelerated another important program on our strategy roadmap that merits additional commentary. Today, Fluidigm announced the broad commercial launch of a professional services lab, which we call Therapeutic Insights, or TIS. We incubated the program in Q1. The TIS menu includes a range of imaging and suspension-based mass cytometry services from experimental panel design, custom antibody sourcing, conjugation and verification, staining, data acquisition, and data analysis. There are many elements to this offering. We are seeing immediate demand to run samples from labs that are not operational or cannot access their core facilities. In addition, we provide surge or backup capacity for CROs who are selling mass cytometry-related services, allowing them to market services without concerns for testing capacity constraints. The Fluidigm TIS lab provides access to newly developed but not commercially released mass cytometry innovations and provides a collaboration vehicle for partner institutions developing new panels that could become part of our standard kit business portfolio. For accounts waiting on instrument funding, they can generate data or conduct important studies. The fee-for-service lab is staffed and running projects. We believe it will open up new market segments for our technology and accelerate the pace of innovation, especially in light of near-term disruption by the pandemic. In summary, COVID-19 has brought short-term challenges to our business, but we are incredibly excited about the role we are playing in pandemic response and preparation as well as the new opportunities we see on the horizon. I'll now turn the call over to Vikram, our CFO, for a complete review of our financial results.

Thanks, Chris, and good afternoon, everyone. Total revenue was $27.6 million in Q1 2020, an 8% decline compared to Q1 2019. Changes in foreign exchange rates had minimal impact on revenues for the first quarter of 2020. Excluding license revenue of $3.1 million, revenue was $24.5 million, an 18% decline compared to Q1 2019. We observed a significant slowdown in customer activity during the quarter, beginning in China and spreading to all regions of the world as the quarter progressed. Widespread adoption of work-from-home policies caused many of our customers to reduce or suspend their activities, which adversely affected our revenue in the first quarter. Our revenue exposure to academic customers represents approximately two-thirds of our revenue, and we estimate that approximately 60% to 70% of our customers' labs are currently shut down. With that context, I will move into details of our first quarter financial update. Mass cytometry revenue of $15 million in the first quarter decreased 20% year-over-year, primarily due to lower instrument revenues. Consumables revenues were flat year-over-year. Mass cytometry instrument sales were affected by delays in orders, as core labs and academic research centers closed. We built instrument backlog during the quarter. Consumable sales were also affected by the slowdown in customer activity outside of COVID-19-related work. Microfluidics revenue of $12.6 million increased 11% year-over-year, primarily driven by license revenue and higher instrument revenue associated with new products, partially offset by lower sales of consumables. Excluding license revenue, microfluidics revenue declined 17% year-over-year. The lower sales of consumables were primarily related to a slowdown in key account activity, partially related to the COVID-19 pandemic. Turning now to a regional perspective for Q1 2020 compared to the prior year period, Asia Pacific revenue declined 48% to $4.7 million, primarily driven by lower mass cytometry instrument revenues and, to a lesser extent, lower microfluidics revenue. Americas revenue grew 14% to $14.8 million, primarily driven by license revenue and higher microfluidics instruments revenue, offset by lower sales of mass cytometry instruments. Without the license revenue, America's revenue declined by 10%. EMEA revenue declined by 1% to $8.1 million, primarily driven by lower microfluidics revenues, almost completely offset by higher mass cytometry revenue. Foreign exchange rates had an approximately 2% negative impact on 2020 revenues. Moving now to operating performance. Product and service margin was 53.8% in the first quarter of 2020 compared to 56.4% in the year-ago period and 54.7% in the fourth quarter of 2019. Non-GAAP product and service margin was 67.3% in the first quarter of 2020 compared to 67.7% in the year-ago period and 64.9% in Q4 2019. The year-over-year decrease in non-GAAP product and service margin was primarily due to lower ASPs and an unfavorable product mix, partially offset by lower service costs and improved manufacturing efficiencies. Sequentially, the increase in non-GAAP product and service margin was primarily due to lower service costs, favorable product mix, and lower inventory reserves. In the case of GAAP product and service margin, the year-over-year decrease in non-GAAP margin was coupled with fixed amortization over lower revenue. The decrease in sequential product and service margin was a result of fixed amortization over lower revenue, more than offsetting the lower costs and reserves noted earlier. Operating expenses on a GAAP basis in the 2020 first quarter increased slightly by 1% year-over-year to $31.4 million and operating expenses on a non-GAAP basis of $28.2 million was in line with the year-ago period. The increase in GAAP and non-GAAP operating expenses was due to higher facilities, compensation, and litigation expenses, partially offset by lower business development expenses. GAAP operating loss for the 2020 first quarter was $14.9 million compared to $14.2 million for the same period last year. The year-over-year increase in GAAP operating loss was primarily due to slightly higher operating expenses and lower product and service margin, offset by license and grant revenue in the first quarter of 2020. The non-GAAP operating loss for the first quarter was $8.5 million compared to $7.9 million for the year-ago period. Please note that the reconciliation tables between our GAAP and non-GAAP measures are provided at the end of our earnings press release that was issued earlier today. Moving on now to the balance sheet and cash flow. Cash and cash equivalents, short-term investments, and restricted cash at the end of the first quarter of 2020 totaled $49.6 million compared to $60.7 million at the end of the fourth quarter of 2019, reflecting a net decrease of $11.1 million in the first quarter of 2020. Cash flows in Q1 2020 included $5.2 million of cash consideration paid for the acquisition of InstruNor AS and $3.5 million of cash received pursuant to a licensing and legal settlement. In addition, days sales outstanding were 47 days at the end of the first quarter compared to 53 days at the end of the fourth quarter. At year-end, the borrowing base under our asset-based revolving credit facility was $8.6 million, none of which was utilized. In April 2020, we extended the maturity date of this credit facility by two years to August 2022. As Chris has mentioned in his remarks, we are focused on preserving our liquidity. We have taken several steps in evaluating expenses beyond the obvious areas like travel and have started implementing reductions in our operating expense structure, including salary reductions and constrained hiring, until the business returns to more normal volumes. We have withdrawn our annual guidance in light of the uncertainty surrounding the ongoing and evolving COVID-19 pandemic. We expect to update our outlook at such time as the effects of the pandemic on our business become clearer. To help guide investors on revenue, we can provide a little color on our thinking, which is dependent on many factors that are unpredictable, including the timing and cadence of when our customers go back to work, impact from a second wave of infections, if any, and timing of therapeutics and vaccines to address the pandemic. We believe that the second quarter will reflect a further decline in revenue as the first quarter did not reflect the full impact of customer shutdowns in all the regions of the world. We are assuming for now that labs and research facilities begin reopening in the third quarter, with customers picking their projects back up and resetting their work priorities for the rest of the year. We currently do not expect customers to be able to recapture the time that has been lost, so there will be limited consumables catch-up. In addition, it should be expected that due to the length of the selling cycle, some capital purchases that were expected to have been placed in 2020 would move to 2021. As customers start to fully execute on their pipeline of research projects, we would expect sequential revenue growth in the fourth quarter. This all assumes that there isn't a second wave that necessitates another global lockdown on the scale of this first phase of the pandemic or even on a greater scale. As a potential offsetting item, we are also seeing demand for our COVID-19 testing and research solutions, but revenue growth would depend on the number of testing centers that employ our technology and the ramp of customers using mass cytometry and imaging mass cytometry for clinical research work and immune profiling. This adoption has already begun, mainly in the Americas and in Europe, but we do not yet have enough visibility to fully forecast the potential impact of this opportunity. As a result, we expect 2020 product and service revenue to be lower than 2019, not including any revenue from COVID-19 opportunities. Based on these assumptions, 2021 should be a stronger year as our customers come back to a more normal state with their current projects, assuming vaccines and patient treatments are in place. And with that, I will turn the call back to Chris for closing remarks.

Thank you, Vikram. This pandemic has completely transformed our world in a very short amount of time with an unprecedented scale of lab shutdowns. However, it has also created an opportunity for us to showcase the power of Fluidigm's technologies, products, and solutions. Similar to the new market opportunities created after 9/11, we believe that there will be a durable response from governments and public health agencies to prevent future outbreaks, and Fluidigm will be well positioned to play a role for years to come. We are unwavering in our fundamental business thesis. Understanding and unlocking the power of the immune system is critical to improving life. Fluidigm is uniquely positioned to measure genomic and proteomic information across biological systems and for integrating these insights into new healthcare paradigms. From an investor perspective, we are prudently managing our cash and have implemented cost savings initiatives to see us through this pandemic. I'm confident in our ability to pivot our technologies to serve our customers in the fight against COVID-19, providing a new vertical of growth in infectious disease, along with the longer-term need for biomarker discovery in diseases like cancer. We believe that our activities around COVID-19 will strengthen our portfolio and provide new innovation for the future. As always, I thank our over 500 employees for their contributions this past quarter. I'm so proud of how quickly the team moved to support customer demand for COVID solutions while many of our employees transitioned to working from home. We're in awe of our customers who are moving mountains to develop tests in short time frames and shifting their immunology research to advance clinical studies that support the development of vaccines and therapeutics, as well as research to understand this novel virus. We are humbled by our role in this critical work. On a final note, I want to share some changes in our Board of Directors. After more than 20 years of incredible service, Sam Colella, our Board Chairman, has elected to retire from Fluidigm effective at the end of June. Sam has been a tireless advocate for shareholders and a trusted advisor to me and my colleagues. I deeply thank him for his many insights, stewardship, and thousands of hours of time invested in Fluidigm. I wish him well with his future endeavors. Dr. Carlos Paya, a trained immunologist, infectious disease expert and physician, has been elected as our new Chairman. Carlos brings a unique talent to the chairmanship, and he combines scientific and medical knowledge with operating experience as a CEO and executive in drug development. In addition, Pat Jones, our current Audit Committee Chairman, is retiring from the Fluidigm Board effective at the upcoming annual meeting. For more than 9 years, Pat has played a critical governance role, including overseeing a very successful IPO. Pat has been a valuable mentor and colleague who'll be missed. Laura Clague will become our new Audit Committee Chairwoman, and she brings the right level of financial acumen and operating experience as a seasoned public company CFO to ensure we build on the legacy Pat established. Please join me in thanking Sam and Pat for their service and welcoming Carlos and Laura to the new roles. With that, I'll open the line for questions.

Our first question today will come from Sung Ji Nam with BTIG.

I was curious if you could discuss the potential cost structure for the epigenetic test for COVID-19 in comparison to PCR-based testing. I'm trying to understand if these tests will complement each other or if they might compete. Additionally, do you think epigenetic testing will primarily be used for surveillance purposes, or are there also opportunities for actual detection testing?

Thanks for the question, Sung Ji. It's a challenging one to answer at this moment because we have an agreement with Mount Sinai and the Department of Defense. The Department of Defense is funding this project, while Mount Sinai serves as the primary contractor and manages the overall program. Once the final product configuration is established, we will have more freedom to discuss the intended use and details regarding the cost structure. However, I can share that it utilizes the same microfluidics architecture as our other products, such as our bulk RNA offering. This provides a good indication of potential cost points. Still, the final configuration, commercial availability, and intended use are all decisions made by the primary contractor.

Okay, that's fair. As a follow-up, the InstruNor acquisition sounds very interesting. Could you discuss how much sample prep is a bottleneck for mass cytometry adoption? I believe you mentioned a sizable addressable market in the near term, and I was curious how quickly you think you can capture that. What kind of growth potential do you foresee for that business over the next few years?

Great question. The InstruNor acquisition is indeed very exciting, and we will announce the trade name shortly. This acquisition presents a significant market opportunity for us, especially in the mass cytometry workflow, where it aligns well with the Helios platform's throughput and our leading MD-IPA product from 2019 in cell biology. It helps automate the workflow and minimizes manual preparation steps in both mass and flow cytometry. Initially, we are targeting our installed base of over 292 units, with plans to address the clinical market and other flow segments later. Our initial focus will be on mass cytometry, but we expect to uncover opportunities in other markets as well. Given the current environment, it's challenging to predict the product adoption curve, but since it integrates well with our existing products, we will prioritize that. As it starts contributing to our revenue in the upcoming quarters, we will be in a better position to estimate our penetration into this large market.

And our next question will come from Dan Brennan with UBS.

Chris, I was hoping to go back to the epigenetic opportunity, while you discussed how, obviously, DARPA and Mount Sinai, a lot of it's in their hands in terms of the development, I guess, speed or control of the news source. I was wondering if you could help us think about the Biomark itself and the technology. I think an important aspect is the ability for Biomark maybe to be differentiated from traditional PCR in terms of whether it be through epigenetic markers or other these earlier detection opportunities. So, whatever you can provide that would help us think about what is differentiated about the Biomark and is it something that would be unique in terms of this earlier detection capability.

Thank you for your question, Dan. There are several aspects to discuss. Firstly, the foundational strength of our microfluidics technology is something we've been emphasizing for several quarters, as it's been a key factor impacting the company's overall performance. Our goal is to ensure sustainable growth in the microfluidics area. We've made significant investments here, particularly relating to RNA-Seq and supporting Olink applications. This technology centers on the microfluidic chip and architecture, which allows for high throughput, flexible processing of various samples simultaneously. For instance, in a 96-96 format, you can simultaneously answer 96 questions while processing 96 samples, or in COVID-19 bulk RNA testing, the 192.24 format enables screening for 24 different pathogens from 192 samples at once. Furthermore, we are utilizing smaller reaction volumes measured in nanoliters rather than microliters, resulting in a thousand-fold reduction in required reagents. There’s also an automated process for loading and processing samples. This technology has wide-ranging applications, spanning from biomarker discovery to RNA sequencing preparation and COVID testing, exemplifying the power of our microfluidics architecture. There’s substantial opportunity here, particularly in bulk RNA testing, and the same advantages translate to epigenetics, including analyzing methylation patterns and gene expression changes. The throughput, flexibility, miniaturization, and cost-effectiveness of the Biomark architecture showcase the significant potential of microfluidics, as evidenced by the real-time examples we are currently observing.

Great. Some news articles indicate that once the work is completed, the researchers plan to share their insights and allow other labs to benefit from them. Could you provide any comments on whether they are planning to file an EUA soon, and if so, will it be utilized on the Biomark? Additionally, are there plans to enable other labs to develop this capability on their own platforms?

Yes, I believe the best way to discuss this is to say that the Department of Defense and DARPA have a wide-ranging mission focused on pandemic preparedness. They are investing in next-generation technologies and ensuring that these innovations are accessible for the benefit of the entire country and its international collaboration partners. The microfluidics architecture offers unique advantages in terms of throughput, flexibility, miniaturization, and cost. Ultimately, it will be their decision, but I expect they will make their signature highly visible. However, capturing the required throughput and other benefits will likely be challenging with other platforms.

I apologize for pressing this point, but is the throughput and processing capacity connected to the level of sensitivity or detection limitations you need to achieve? Can it influence the ability to identify signals sooner than would be possible with a system that can't assess multiple targets simultaneously? I am still uncertain if the Biomark truly stands out in terms of throughput, flexibility, functionality, speed, and cost. Does the potential for one-day detection compared to five-day detection with real-time PCR represent a unique advantage of the Biomark?

The basic mechanism of PCR, which ultimately detects the signature, is common across other PCR platforms. So, PCR is PCR. What we have is a blood extraction that converts it into a format readable and amplifiable on a PCR or thermocycler platform. However, there are many other advantages to our architecture and support, and it's difficult to speculate on how easily it can be adapted to other technologies. The assay is likely to measure changes in methylation patterns and gene expression. The key benefit is not speed. Currently, there are only two main methods for viral detection: one involves analyzing viral load and looking for shedding and signatures. It takes time for the virus to shed enough RNA or DNA to be detected by most technologies, which is why there is often a delay of several days from infection to when we can measure or detect it, whether in saliva, blood, or a pharyngeal swab. The second method is antibody detection, which relies on the body's immune response generating enough antibodies to be detected in the blood. This process also typically takes several days depending on the robustness of the immune system. Host cell detection is different because the cell shows signs of stress when attacked by a virus, sending out signals during that initial stress. This is the signature and the speed we are discussing. It’s potentially transformative because it offers a third way to measure an infectious disease or agent attacking the cell. This is the fundamental difference; it's not just about the PCR itself.

Got it. All that information is very helpful. If you don't mind, I have one more question on that aspect, and then I can pass it over and come back later. Regarding the potential filing and subsequent approval, could you provide any insights on how the rollout might occur? I understand it's not entirely within your control, but is there a chance this could be managed by DARPA? Might it be widely distributed? Or could it be handled at Mount Sinai? Any comments on how we might anticipate the rollout, assuming it is successful and receives the necessary approval?

Yes, I would be speculating, but there will need to be a kitted solution for this. I believe the government's goal is to ensure it is widely available. Therefore, it will have to be kitted and made available in central testing labs across various locations. This is part of the government's overall pandemic response strategy. Mount Sinai is the research partner, so they will need an industrial partner, and I think Fluidigm is well-positioned to be a leading industry partner.

Our next question will come from Paul Knight with Janney Montgomery.

Chris, you mentioned earlier the Biomark network. What's the installed base? What's the pushback on getting more of these out in the field? And then the second part of the question is on the testing market, is this pricing going to be below $10 per testing? Can you talk about where you think pricing will be on the test?

Thank you for the question, Paul. It's nice to hear from you. There are two parts to consider. Similar to my response to Sung Ji, I prefer not to speculate on the final costs. I've provided some details about the configuration of potential end products, and you can do the calculations from there. However, nothing is finalized until the configuration is fully prepared and approved by the relevant regulatory agencies. As for the Biomark installed base, I don’t have the exact figure readily available and would need to look it up, but I don’t believe we provide specific breakdowns for Biomark. We track it, and in our most recent investor presentation, we plan to share an updated figure for the Biomark and EP1 installed base, which I recall is around 500, but please verify that on the website.

Yes, that's correct, Chris. It's about 500.

Thank you. I keep forgetting. Thanks, Vikram.

And with the mass cytometry technology, my understanding is that they are working with the defined library set on the detection element. Where do you think customers are obtaining the correct libraries for the antibodies needed to detect this COVID virus?

Yes. If I understand your question correctly, Paul, you're inquiring about what the mass cytometry suspension is doing in terms of identifying the COVID signature and the standard questions that might arise in its configuration. Currently, it seems like the researchers are primarily utilizing our broad MDIPA signature, which serves as a strong foundation. Our investor deck provides examples of different configurations of the MDIPA assay, illustrating how we maintain open channels. The advantage of this assay is that it addresses some of the most common immune signature types. Researchers can then combine this with additional metals we released in the fourth quarter and the existing channels, allowing them to create nearly 50 marker panels starting with the MDIPA backbone. They can purchase our conjugation kits or metal kits, and we are also rapidly providing additional antibodies for COVID-19 related queries. I anticipate that we will have a COVID configuration available soon, potentially a consensus COVID panel. It seems that most of the research community is beginning with our derivative backbone since it provides an excellent starting point.

And our next question will come from Steven with Piper Sandler.

So I just have one question with regards to your new Therapeutic Insight services. How should we think about in terms of long-term strategy of the business? Is this something that's going to be a big focus? And second, how big do you think the opportunity is, if this is a long-term strategy change?

Great question, Steve. Therapeutic Insights is a significant focus on our strategic roadmap and priorities. We began programs in the first quarter as we were prototyping and ensuring we could scale that business, which is why we moved to a broad commercial release alongside this earnings announcement. I believe this represents a substantial opportunity. Reflecting on our mass cytometry strategy, our core business model initially focused on placing instruments and then enhancing the workflow with toolkits. We frequently launch additional metals, antibodies, and pre-configured panels for common questions, making them easy to use by putting them into lyophilized format. We also integrated the InstruNor acquisition for upfront staining in our workflow and layered in software solutions to further complete that process. In terms of our business model, we developed the capability to open new customer segments through contract research organizations, expanding beyond core labs and academic centers to reach the pharmaceutical and biotech markets. We have also established partnerships with various organizations, such as the collaboration with Georgetown announced in the previous quarter, to develop novel content targeting specific biological or therapeutic inquiries. We recognize a segment of the market that may not be ready or able to purchase an instrument outright and requires quick support programs for their existing samples. These customers often face long wait times to access larger core centers or CROs. We see this as a significant opportunity to tap into another market segment, driven by the demand from our customer base. I believe a healthy business will feature a balanced mix of programs and projects managed through our Therapeutic Insights labs while we continue to place instruments and launch complementary technologies. This initiative also offers a space for customers to access our ongoing improvements and for us to test and refine technologies with real-life samples before deciding whether to launch them widely. This is truly a collaborative product offering and service line extension that aligns with our instruments, software solutions, kits, and individual antibodies and labeling kits. I hope this information is helpful.

Yes, that's very helpful. And you're going to run the services out of your existing San Francisco facility?

Yes. In this particular case, we do run it out of San Francisco. But as you know, the majority of our mass cytometry business is in Canada. So we have a backup facility also there, so they can work together as a team.

And we do have a follow-up from Dan Brennan with UBS.

Chris, you mentioned during your prepared remarks that you plan to submit your own EUA on that real-time PCR test, as opposed to just relying on some of your customers. Can you just describe what the process is, their timing and how that would impact the opportunity?

Yes. With the bulk RNA test, we felt that having our own EUA submission would be a significant step forward. It's actually part of a long-term plan for enhancing the utility and access to COVID-related testing. Securing an EUA for our own platform and product configuration seems like a logical next step, presenting a great opportunity. The reason we didn’t rush to do it immediately was because it allowed us to collaborate with early adopters to determine what an EUA configuration would entail for our product. This collaboration has given us a strong foundation for preparing our filing submission. Therefore, this is a top priority for us, and you can expect to hear about it from us soon. Ultimately, the final decision regarding timing lies with the FDA, but we have a clear plan for our next steps.

And your boxes, like do you need to get them monitor how it's working in local? I'm saying a lot of your Biomarks are probably RUO. So if you get the EUA, like does it enable any customer who wants to run the test on their box to do it? Just maybe help us think about the opportunity, I guess. A lot of other companies have helped us frame this real-time PCR testing opportunity. You've got 500 placements. I don't know which one of those are really applicable for running a real-time PCR test for COVID detection. Maybe just give us a little color on how we think about the opportunity.

I can provide some straightforward calculations. Considering the throughput we've discussed, the current national goal in the United States is to conduct 1 million tests daily. With 160 Biomarks, it's feasible to achieve that level. Even with our current installed base, merely utilizing what we have could yield over three million tests daily. There is significant capacity and potential within our equipment, which is why the government has been very supportive of our progress. We've seen organizations like Mount Sinai adopt this technology, and Oklahoma has recognized its potential, along with many others.

Got it. And then maybe one last question for Vikram or Chris. Can you provide any insight on what the Q2 range could be? You've already shared some qualitative information on consumables and instruments. Is there a way to establish a reasonable guidepost for that? Additionally, you mentioned that the sales funnel is in good shape. Have you experienced any cancellations related to instruments? How should we consider any quantitative information on the backlog and the potential for converting that backlog into instrument growth after we navigate through the challenges of Q2?

Yes, Dan, this is Vikram. In the tools industry, a significant portion of business activity typically occurs in the final month or the last two weeks of the quarter, making it inherently difficult to provide specifics. However, I can share that we are not operating in a typical environment. We have been monitoring our business, including bookings and revenues for April, and while this is not meant to serve as a forecast for Q2 due to the current circumstances, we are tracking at approximately 70% of what we saw a year ago. Comparatively, our bookings and revenues are reflecting about 70% of April 2019's figures. Additionally, we are focused on how quickly our customers can resume operations. At the start of Q2, we estimate that 60% to 70% of our customers were either fully shut down, in suspension, or only able to conduct very limited work due to COVID-19. That said, I must emphasize that you cannot draw definitive conclusions from the performance in the first month of the quarter. Regarding your second question, we currently do not have any indications of order cancellations. We believe that consumable orders are unlikely to be recouped, but we assume that instrument orders might be delayed. We haven't seen any cancellation of orders, though these delays could possibly extend into next year. I hope this provides you with some insight into our current situation as we move through the first week of May.

And thank you, speakers. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Ms. Agnes Lee, for any further remarks.

We'd like to thank everyone for attending our call today. A replay of this call will be available on the Investors site of our website. This concludes the call. We look forward to the next update following the close of the second quarter 2020. Please reach out to us if you have further questions. Good afternoon, everyone. Sherine, you may now close the call.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.