Good day everyone, and thank you for standing by and welcome to Nautilus Third Quarter 2024 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. Please be advised that today's conference is being recorded. Now, I will pass the call over to Ji-Yon Yi with Investor Relations. Please go ahead.

Thank you. Earlier today, Nautilus released financial results for the quarter ended September 30, 2024. If you haven't 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 Relations at nautilus.bio. Joining me today from Nautilus are Sujal Patel, Co-Founder and CEO; Parag Mallick, Co-Founder and Chief Scientist; and Anna Mowry, Chief Financial Officer. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking within the meaning of the 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 Nautilus issued today. Except as required by law, Nautilus disclaims any intention or obligation to update or revise any financial or product pipeline projections or other 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, October 29, 2024. With that, I'll turn the call over to Sujal.

Thanks, Ji-Yon, and welcome to everyone joining our Q3, 2024 earnings call. It is an exciting time to be innovating in the proteomics space. From the recent Nobel Prize announcements to advances in the relationship between proteomics and artificial intelligence, we are seeing an increasing recognition of the role that proteomic analysis will play in shaping the future of biomedical research in human health. Our team, energized by both that external momentum and the opportunity to impact one of the last great frontiers in biology, is performing at a very high level. I have been very pleased to see the team's execution, quality and output expand in an environment where all of Nautilus' resources are being managed very tightly. That ability to do more with less is a testament to the scrappiness and grit of our entire team. And I want to thank them for their efforts and for the significant progress we made in Q3. I'm excited about the expanding opportunity I see for proteomics, and I'm generally pleased with the progress we're making as a business. We continue to envision powerful research uses for our platform, and consistently receive positive feedback from those researchers around the world with whom we've engaged. They tell us their desire to explore the proteome more deeply and more broadly, and of the significant limitations of what's currently available. It's becoming ever more apparent that they understand how important single molecule intact protein analysis will be to their explorations of the proteome. To help educate the market and bring potential buyers along as part of the proteomics revolution, I'm excited to welcome Ken Suzuki to Nautilus as our first Chief Marketing Officer. Ken joins us after a 25-year career at Agilent Technologies, most recently serving as Vice President and General Manager of Agilent's Mass Spectrometry Division. Ken is a well-known and highly respected member of the mass spec community and is intimately familiar with the people and organizations we view as target customers. His insight into these audiences will be instrumental in shaping our product and the go-to-market plan that creates high value selling opportunities and drives revenue. We have a number of important updates for you this morning, but before we dive in, I want to take just a minute to provide a bit of context. We'll be discussing the status of our overall platform development initiatives and share details on our progress against each of the platform's modalities: broad scale discovery, which aims to comprehensively quantify the proteome, and targeted quantification, which is currently focused on proteoform detection. While both modalities share the same core platform, each has its own development path that we'll be updating you on today. To start, I'm pleased to report that our core platform development and readiness efforts continue to proceed well. In the first half of 2024, we demonstrated one, a scalable and reliable process for building flow cells and chips, consistent single molecule protein library preparation that can begin with as little as 150 nanograms of input material, and robust single molecule deposition. Two, we also demonstrated an instrumented assay capable of iteratively cycling affinity reagents over many cycles and observing affinity reagent binding events at the single molecule level. And three, we demonstrated software capable of processing instrument data and algorithmically turning that into biological insight. Direct evidence of our platform readiness is the new and very exciting proteoform data that Parag will present shortly. Its creation demonstrates that all aspects of the assay and platform have been integrated and are functioning as intended. While some work remains to optimize those proteoform related platform components ahead of any commercial availability, we remain confident in the progress we're making across these development activities. When you're at the frontier of scientific innovation and building an incredibly complex product, such as what Nautilus has undertaken, the path is windy and always different than what you initially imagined. As pleased as we are on the proteoform front, and with the core platform overall, we're behind on our internal milestones with respect to our next major broad scale goal: to be able to quantify a significant number of proteins—500, 1,000, or 2,000—from a complex sample like cell lysate on the road to measuring the comprehensive proteome. This is the last piece of the platform puzzle. You'll recall that our unique method of identifying proteins, known as protein identification by short epitope mapping or PrISM for short, involves the development and integration of hundreds of proprietary multi affinity probes, which interrogate single protein molecules. Over the last three years, we've spent substantial time and energy building and optimizing our affinity reagent pipeline and building thousands of probe candidates. In parallel, we've been doing the hard development work to optimize and increase the robustness of the fluorescent labels used within our platform, and the chemistry used to attach probes to these labels. Internally, we defined metrics for transitioning probe candidates to platform ready probes. We additionally examined how diverse label types and labeling approaches impacted these metrics on a probe-by-probe basis. As we entered 2024, many of these probe candidates did not meet the performance targets desired of platform ready probes. Armed with that information in Q2 and Q3, we embarked upon an initiative to examine these probe candidates in a very detailed way. We used multiple techniques including biolayer interferometry, ELISA, Western Blots, peptide arrays, and single molecule kinetic analysis to fully understand the binding properties of these probes. Through that very detailed analysis, we can confidently say that our affinity reagent pipeline does indeed produce probes with the characteristics necessary to implement PrISM. We always expected that there would be some fallout between probe candidates and platform ready probes, but currently that fallout rate is too high. Through Q3 and over the next few months, we'll continue to focus on a number of development work streams that we're confident will enable approximately a third of our probe candidates to become platform ready. From there we're working on a number of enhancements that have the potential to further improve that yield. While we're disappointed that we're behind on delivering our next major broad scale milestone of being able to decode proteins from a complex sample, we are tremendously encouraged by the fact that the probes we’ve been developing do successfully bind to short epitopes and are capable of successfully implementing PrISM to comprehensively unlock the proteome. We're fresh off significant participation in the World HUPO Congress in Dresden, Germany, which concluded just last week. As you'll hear from Parag in just a few moments, we continue to educate and build trust with the proteomics community, shared some new and very exciting proteoform data, and heard a number of high value use cases from researchers that have fueled our imaginations even further as to what may be possible when we reach our commercial rollout next year. For a more detailed update on HUPO and our R&D efforts in general, let me now turn the call over to Parag. Parag?

Thanks, and good morning all. As Sujal mentioned, World HUPO was a terrific event for us again this year, and provided a great opportunity to introduce a significant number of researchers to our platform. We used this opportunity to communicate how our single molecule proteome analysis platform is a unique and powerful tool that we believe will be a critical driver of biological insights. We also emphasized how our core platform is designed to enable two complementary and valuable use cases: high resolution targeted proteoform quantification using site specific and/or target specific probes. More on that in a moment, and broad scale discovery using our proprietary multi-affinity probes. By advancing biology across both of these dimensions, we aim to make the full scale and complexity of the proteome accessible to all researchers. Notably at this HUPO, we transitioned from primarily sharing aspects of how the platform works towards sharing early demonstrations of the platform being used to ask and answer important biological questions. This transition beyond platform development and towards platform application has been really exciting throughout the company and was clearly recognized by the community as an important marker of a transition towards commercial readiness. At HUPO, we briefed many hundreds of attendees at our booth, and dug into the scientific underpinnings of the platform, more fully through our three poster presentations, two seminar presentations, and a special luncheon seminar. In conversations throughout the event, we found that the community was most interested in hearing about and discussing our single molecule library preparation process, its ease of use, its applicability to diverse sample types, and its ability to access diverse components of the proteome without clear and obvious biases or limitations compared to existing approaches. The sensitivity and dynamic range of the platform and how the unique scale of measurement in the billions of protein molecules enable its projected dynamic range. The applicability of the platform to diverse biological questions, ranging from the analysis of cancer development and progression to neurological disorders and to questions in plant science and microbial biology. And the rigorous approach we have developed to correct for errors and estimate discovery rates in order to increase confidence in our single molecule protein identifications. At our luncheon seminar, I was excited to present the latest data from the team to a packed house of nearly 200 attendees. I shared continued advancements to our core platform and to our broad scale assay. In addition, I highlighted our recent demonstration of a new assay for the quantitative measurement of up to 2,048 proteoforms of the protein tau, a protein closely associated with Alzheimer's disease. Efforts towards developing this assay were initiated as part of our partnership with Genentech and represent a general template for what we envision will become a wide class of targeted proteoform analysis assays. Such assays enable the examination of proteins functional forms at a resolution and scale never previously possible with existing methods. Throughout HUPO, we discussed the first illustration of potential biological studies that investigate the interplay between proteoforms and the progression of Alzheimer's disease, interactions between proteoforms and mutations in tau or related proteins, and also how the tau proteoform landscape varies across model systems with higher resolution and scale than previously possible. These first of their kind pilot experiments are a step in examining how the proteoform landscapes of Alzheimer's and frontotemporal dementia may be impacted by exogenous perturbations or changes in the abundance of key molecules. In one demonstration, we used IPSC derived organoid models from patients containing normal and abnormal forms of tau from whom detailed neurological, neuroimaging, and neuro-pathological data are available. When looking at model systems, researchers most commonly look at phenotypic measures such as cell death or tau aggregation. Our studies enable going well beyond these gross measures to investigate the molecular details that impact the timing and process of progression. Organoids were treated with several doses of a beta-42, a fragment of beta at multiple time points, across millions of single molecule measurements. We observed biological variation in tau proteoforms potentially associated with AD progression. Such studies, when expanded to larger cohorts and more detailed time courses, may have significant implications in drug development. In addition, we also performed pilot studies to examine variation in the tau proteoform landscape across stem cell derived organoids, migraine organoids, and mouse models, and see extensive variation in the proteoform landscape. Both the organoid treatment and model system comparisons are relevant biological questions that we anticipate researchers wanting to ask. Our platform is designed to ask and answer those questions with an unprecedented resolution and scale that we believe will enable unique insight. In summary, these first ever high value data that leverage our platform's single molecule quantification using tau epitope specific detection antibodies are encouraging and reveal a complex landscape of proteoforms in model systems of neuro-degeneration. With the additional validation of larger study sizes matched to effect sizes, these data may result in greater insight for researchers seeking to better understand the progression of Alzheimer's and/or other neurologic diseases. As I conclude, I want to remind you that advances made to our core platform accrue value to both our targeted proteoform detection and broad scale discovery capabilities. Both modes of the platform rely upon a unique single molecule library preparation, nanopattern chips, iterative probing of individual molecules with fluorescently labeled affinity reagents, and machine learning software to infer protein identities and quantities. We remain focused on increasing scale, stability, and reproducibility across our consumables assay and platform, and continue to see meaningful gains along those and related areas. In particular, Q3 saw the successful execution of the largest scale of experimentation we performed to date. This progress is being made in conjunction with enhancing the reliability, quality and customer readiness of our instrument and software. I remain confident that our development activities are focused on the areas of the platform that will enable us to launch a product that will be a dramatic advancement in proteomic research. With that, I'll turn the call back to Sujal.

Thanks for the update, Parag. I share Parag's enthusiasm for our tremendous progress in detecting proteoforms and the substantial impact we could have initially with tau on biomarker discovery and drug development in Alzheimer's and other neurodegenerative diseases. This progress represents a perfect example of our platform's unique ability to enable both targeted protein analysis and broad scale discovery proteomics. That understanding of our platform's dual value is shared by others. Aside from the KOL feedback Parag just shared, recent preliminary partnership-related conversations with several large pharma companies indicate interest in targeted protein analysis for use in drug targeting and drug discovery efforts. We look forward to continuing and formalizing those relationships. With the significant progress we've experienced on the proteoform front, we envision the first half of 2025 being dedicated to proving out what we believe to be a massive proteoform business opportunity. As part of this, we will accelerate our engagements with large pharma partners and key academic collaborators using tau as our first biomarker. Aside from serving to get our platform into the hands of researchers, we expect that these engagements will also prove out the value of our unique single molecule methodology for more comprehensive proteoform analysis. They will also serve to harden our platform capabilities for both proteoform and broad scale applications. We believe this hardening of our platform will enable us to shorten the timeframe required to move from one, decoding a significant number of proteins from cell lysate, to two, the launch of our early access program, to three, the launch of our broad scale commercial product. Based on that thinking, we continue to anticipate a commercial launch of our broad scale product in late 2025. Pleased as I am with the progress we've made in our development efforts, and equally proud of the way that our entire team has recognized the importance of managing the business efficiently to maximize our cash runway. Each part of the organization has focused both headcount and expenditures in a way that has driven our scientific development forward while delivering an exceptional balance of progress and cash usage. For more on that, let me hand the call over to Anna.

Thanks, Sujal. Total operating expenses for the third quarter of 2024 were $19.1 million, roughly equal to the third quarter of 2023, and $1.7 million below last quarter. Research and development expenses in the third quarter of 2024 were $12.3 million, compared to $12.0 million in the prior year period. General and administrative expenses were $6.8 million in the third quarter of 2024, compared to $7.1 million in the prior year period, and $1.5 million below last quarter. Overall net loss for the third quarter of 2024 was $16.4 million, compared to $15.9 million in the prior year period. The flat year-over-year operating expenses and large decrease quarter-over-quarter were driven primarily by a one-time adjustment to our personnel cost as we updated our estimate of incentive compensation attainment for the year. Aside from the one-time adjustment, our Q3 results reflect tight spend management. We ended Q3 with 161 headcount, roughly flat compared to our 160 ending headcount in Q3 of last year. At the same time, the Nautilus team has significantly increased their experimental capacity and output across both broad scale and targeted applications. I'm extremely pleased with the team's ability to fund today's business needs through prioritization, cost optimization and innovation that allows the business to thrive without adding significant incremental spend. Turning to our balance sheet, we ended the quarter with approximately $221.2 million in cash, cash equivalents and investments, compared to $232.9 million at the end of last quarter. Our cash burn of $11.7 million benefited from a $1.3 million shift in unrealized losses last quarter to an unrealized gain position this quarter. While we work to finish our development, we remain committed to tightly managing our spend and expect that to continue into the quarters leading up to our commercial launch. We anticipate our total operating expense growth for the full year 2024 to land at roughly 10%, better than our previous guidance of 15% to 20%. As a result, we enter 2025 with a lower burn rate and a higher cash balance than previously anticipated, extending our cash runway into 2027. With that, I'll turn it back to Sujal.

Thanks, Anna. The entire team's commitment to tight financial management reflects our driven, scrappy mentality. That mentality is demonstrated by our ongoing ability to focus our people and our financial resources on the highest value initiatives that will drive us through these final stages of platform development. While it's no secret that getting a product to market is taking us longer than we'd initially anticipated, I'm confident that our efforts and spend are focused on the appropriate development areas, and that our short, medium, and long-term goals directly align with the best interests of our shareholders. To wrap things up, we continue to make solid progress against our development and business goals. And for that, I want to again thank the entire Nautilus team. We are excited about what's to come and we look forward to providing additional updates on our next call. With that, I'm happy to open the call up for questions. Operator?

Thank you. One moment for our first question, and it comes from the line of Yuko Oku with Morgan Stanley. Please proceed.

Hello, thank you for taking my questions. Sujal, could you elaborate on the reasons that you're seeing a higher than expected fallout rate for affinity probe candidates? And what are some of the ways you're addressing these issues to improve that rate?

Good morning Yuko. And thanks for the question. Maybe Parag, do you want to take a first stab at this, and then I'll add some color on top?

Sure. Happy to. So I think Yuko, it's a great question, and really comes down to the incredibly extensive amount of characterization that we do with every single probe. As Sujal noted, every single probe goes through a wide battery of tests examining the kinetic properties, the binding diversity, and also things like non-specific binding and manufacturability. And so, as we've been working through the development chain and characterizing each of these aspects, we've discovered the extent to which some probes are really amenable to being labeled, while other probes' kinetics are impacted. Some probes have fast kinetics and short kinetics. So, we anticipated a wide distribution and are observing a wide distribution. But at the same time, we're also observing some really fantastic things; we're observing that their diversity of what epitopes they're able to target is extensive and we're thrilled to see that result. That means that any given probe can touch a wide percentage of the proteome, but there's always a balance. With any given biomolecule, you're going to have a number of dimensions. And as we continue to advance, we expect that probes of varying kinetics will be applicable on the platform; it's just that some will be applicable earlier, and some will take a little bit more effort.

Got it. Thank you for that color.

Thank you. Yuko, I'm going to bring you back to the stage. You just continue with your second question, please.

While you just talked about falling behind on your broad scale discovery milestones, could you provide an update on how the progress of developmental proteoform capabilities are towards launch? And do you anticipate both of these capabilities to be available to early access customers?

Yes, Yuko, this is a great question, and let me try to expand a little bit on the remarks that I made during the prepared remarks. So, we've always envisioned that our platform would have two use cases. One use case is what we refer to as broad scale, which is to identify all proteins within a sample comprehensively. And the other mode is a more targeted mode, which we initially targeted towards proteoform analysis. As we've said on past calls, different parts of our platform have matured at different rates. Through some of the early work that we did with Genentech, over the last few years and continued work with other partners, what we realized is that customers have a significant interest in performing the types of proteoform studies that our platform is capable of. Because there are no other methods to map the proteoform landscape in as much detail as our platform can do at the single molecule level. So, over the course of Q3 and also a bit from Q2 as well, we've spent time significantly maturing our proteoform capabilities, and in particular decided on an initial focus on tau as an important biomarker in neurodegenerative diseases. We've started to discuss the capabilities of tau proteoform analysis with a number of potential pharma customers, and a number of key academic and non-profit research types of organizations and KOLs. When we jump into next year, we envision using the first half of that year to really prove out the proteoform opportunity using tau as a litmus test for the market and for the capabilities of our platform. We intend to use those engagements in the first half to demonstrate what's possible with our platform but as well inform us on our future roadmap and pricing strategies with respect to that offering. Then in the second half of the year, we expect to launch our early access program. That early access program is really focused on the broad scale proteomics analysis. We expect that to look very similar to what we've described earlier but we probably will compress that program a little bit, because of the fact that the proteoform work that we'll start in the first half of the year and working with customers really helps us to harden the base platform, because the base platform is common between both use cases. That hardening will help us hopefully shrink the timeline a little bit for our early access program. Just from a nomenclature perspective, the work that we're doing with proteoforms in the first half, we don't refer to that as early access. We're really focused on collaborations and partnerships that help us to one, show the world what's possible and two, help us to inform what we're going to do with that capability over the course of the coming quarters.

Got it. Thank you.

Thank you. One moment for our next question, please. And it's from the line of Subbu Nambi with Guggenheim Securities. Please proceed.

Hi guys, thank you for taking my question. Investors are increasingly focused on 2025 heading into the year. Recognizing 2025 is the year you move from development to commercial stage. What metrics would you expect to share to help us better understand your corporate goals in this next stage, and for us to better be able to assess progress towards these goals? And then as a follow-up, as you move to commercial stage, where are the biggest areas you expect to increase investment over the next two to four quarters? And are there areas where investment actually could be pulled back? Thank you.

Great. Well, thank you, Subbu, for the question. Let me take the first half of it, and then I'm going to kick the second half to Anna here. So the first half of your question was really metrics to track. I think that for us we're a little different than most of the coverage universe. For those of you that are analysts, for us, we are still a pre-commercial company and we have an incredibly exciting product coming, but it's not there yet. The first half of the year, as I mentioned, we're focused on proteoform engagements and those engagements are not engagements where revenue is important to us. Those are engagements where learning, and demonstration of what's possible and informing us about our roadmap of pricing are the important goals. In terms of broad scale, what we said in prepared remarks is that we still intend to launch our broad scale capabilities late in 2025. With that, I think the most important metric, of course, that I think everyone's focused on is top line. I think that those comments sort of help you to think about top line for us in 2025. When you look at the metrics you should use to measure our progress, I think it really is all related to our development milestones. In particular, we've talked about getting our proteoform capabilities in the hands of customers in the first half, which is an important goal of ours. We talked about getting to the goal where we can decode a significant number of proteins out of cell lysate—500, 1,000, 2,000 proteins, whatever it might be. That's a critical milestone for us that will likely mark the start of our early access program. At that point, more than half of the probes will be platform ready on platform running, decoding proteins. From there, we anticipate that the timeline remaining and the work remaining will be relatively estimatable and will be finite in nature. Anna, do you want to talk about the key spend areas as we head into 2025?

Sure, I can speak to that. Subbu, we, as you've heard us say repeatedly, we're continuing to be very focused on tight spend management. That's something that will continue into 2025. We will be trying to hold our spend but do more with that spend, particularly in the areas of development and launching our product. As we get closer to launch, we'll make very targeted investments in the commercial team. That should add some level of spending. In terms of pulling back our, as you heard us talk about, where spending in developing both broad scale and targeted applications, which is one way that we're doing more without increasing our spend. At some point, we can make prioritization decisions and be more targeted in how we spend our time in that development. That gives us an opportunity to pull back. But I think as of right now, we feel really good that the level of spend we have gets us to the cash runway we need to support both our product milestones and our commercial launch.

Thank you, guys. Super helpful.

Thank you. One moment for our next question. And it's from the line of Matt Sykes with Goldman Sachs. Please proceed.

Hi, this is Evian from Matt. Thanks for taking my questions. You mentioned some of the targeted opportunities, including your collaboration with Genentech and discussions with potential customers. Are you observing increased interest in discovery, considering your historical focus in that area, or have you seen interest in the targeted side as well? Additionally, how should we think about the potential opportunity sizes on both ends of the spectrum?

Good morning, Evian. So let's talk a little bit about broad scale first and address that part of your question. I think that broad scale is something that we have been talking about with potential customers, whether they be pharma, diagnostics, or academic customers. We've been talking about that with customers for many years. I think that what we continue to see is an incredible amount of excitement for broad scale proteomics from everyone that we talk to. So that is a given, and it's been going on for a long time. On the proteoform side, you'll recall that the work that we have been doing with Genentech has been for over three years now. We've been talking about proteoform with customers for a long time as well. While our original plans didn't have us going and focusing on proteoforms first, really it's our customers who've been pushing us to do more on the proteoform front, in particular with tau. That's work that has gained a little bit of natural momentum through the engagements that we've had with customers, and they're incredibly excited about it. I think that when you think about sizing the opportunity, I think it's easier to size the opportunity for broad scale because there's an existing market where there are assays and mass spectrometry-based workflows that are focused on selling into protein discard weight environments. That's a large multi-billion dollar opportunity, and we've talked about it for a long time. With respect to proteoforms, a lot of the work that we want to do in the first half is really related to discovering what the ideal business model is for this kind of capability and how large that financial opportunity is. Our belief is that being able to see this new biology is incredibly important to understanding the function of proteins inside of cells and inside of your body, and that it can have significant implications on drug development and precision medicine. We think that it's really important. We look at previous types of innovation, like the introduction of spatial biology and look at the impact that it had on the market, and we think that there's a really big opportunity here. But I think in terms of sizing and more specifics, give us through the first half of next year to really make some progress with some of these customers, and then from there I think we'll have a little bit finer precision on how we want to take that capability forward.

That's super helpful, thank you. And then, we've seen recent traction with the Astral and the Ultra 2 within proteomics. So how are you thinking about breaking into this market with these established players, and then maybe contrast this with the potential competition within the targeted side of things?

You want to take that one first, Parag, and then I'll jump in.

Certainly! When examining the technology landscape, while new platforms and iterations are emerging, the overall market structure remains fairly stable. There are still two main types of players: mass spectrometry and targeted players like the links and standard bio tools, along with our newer technologies. The latest iterations, such as the Astral, TIMS, and ToF, excel in rapidly collecting a significant number of spectra in a brief period. However, they do not effectively tackle essential challenges in the space, such as ease of use, dynamic range, and effectively sampling low abundance proteins. In contrast, in a single molecule context, the identification, detection, and quantification of proteins are not directly related to concentration as they are in mass spectrometry. When we engage with stakeholders, they express enthusiasm about several core aspects of our approach. Firstly, they appreciate the sensitivity of our platform, which outperforms existing solutions by orders of magnitude. They are also impressed by the dynamic range, which is a product of our capacity to measure billions of protein molecules. Many emerging platforms focus on peptides rather than proteins and certainly do not address the scale we are targeting, which is very appealing. Moreover, our platform is designed to be accessible to biologists. While mass spectrometers are powerful, they are not typically user-friendly for average bench scientists. This ease of use is a significant advantage for us. We offer a unique ability to measure proteoforms with a level of resolution and scale that no other platform does, marking a new milestone in measurements. This capability is exciting as it brings unprecedented resolution and scale to the field. As mentioned previously, similar advancements have drastically transformed biology, such as the evolution from x-ray diffraction to angstrom-level crystal structures or the shift from bulk analysis to single-cell and then to spatial analysis. These improvements in resolution have been game changers for biology, and that is what we aspire to achieve.

Matt? All right, one moment for our next question, please. And it comes from the line of Matt Stanton with Jeffries. Please proceed.

Yes, hi, this is Jack on behalf of Matt. Thank you for taking our call. First, I would like to discuss pricing. Over the last 12 to 18 months, we have observed that high-end mass spectrometry systems like Astral have maintained good pricing, despite facing pressures in other areas of our portfolio. There seems to be less price sensitivity in the leading edge of technology. How do you interpret price elasticity among your target customers today? Also, have you revised your approach to the pricing model you might consider upon launch, whether it be a direct instrument sale or a rental reagent? Thank you.

Yes, this is Sujal. I'll take a first step here. I think what we are seeing in the marketplace is exactly what you just described, which is that the new instruments coming out of the leading mass spectrometry vendors have been received well and in the case of the Astral, at a significant price point of well over $1 million for an Astral installation. So, we look at that as, number one, significant validation of the importance of proteomics and proteomics research to all of the potential customers that we're talking to and that are out there in the scientific community. Secondly, we look at it as an indication that even with some choppiness in capital spend, there is still significant spend available for projects that are related to proteomics. From my standpoint, that's very supportive of the roughly $1 million initial deal size that we expect to launch with. Now, as we get into next year and we get closer to a launch, we do intend to walk through our final pricing with Wall Street, with the analysts, and with our investors, and as well walk through what that exact business model looks like. Any tweaks might be a little bit higher in terms of the price initially because the market has proved out that those price points are acceptable to customers. Our product, as Parag described in his answer to the last question, is incredibly disruptive both with its broad scale use case, given the sensitivity and coverage, and dynamic range of our product and with the targeted use cases, first with the ability to provide up to 2,000 different proteoforms of tau, but then in the long run focus on other biomarkers as well.

Okay. Great. Yes, that was super helpful. And I guess following up on that, you mentioned pharma, but it would be great if you could provide an update on sort of the academic gov funding landscape, sort of that side, particularly for proteomics. Some NIH data show flat growth this year, whereas other categories might be growing a little bit more healthily, I guess. Do you sense any sort of change in the overall appetite for proteomics research? And then a quick follow-up there, I guess based on your engagements today, how should we think about the mixed split of customers, pharma versus academic following commercial launch? Thanks.

In terms of what we're seeing in the academic and non-profit research space, in particular the government funded research, I think what I would say is that what we're seeing at the marketplace echoes what you just described, which is that at a macro perspective, funding might be flattish year-over-year. I think that for platforms that aren't super disruptive or don't have a huge value proposition, that sort of environment can create some difficulties. In the conversations we have with the academic type of customer, there's a broad recognition that our platform has the potential to be incredibly disruptive on both the broad scale side and on the targeted scale side. With that, there's a great desire for customers to get their hands on the platform and see the data that it generates and experience that first hand. I think that whether we're talking about an academic customer or a pharma customer, I think that any choppiness in the capital spend market will certainly manifest itself in terms of potentially lengthening a sales cycle here or there, or increasing the friction in a sales cycle. But I think that fundamentally our value proposition will hold up very well, even in a tighter capital spend environment. I think that's the case both with academics, which we're asking about, but as well on the pharma side of things and on the DX side of things, which you could consider the more commercial end of the spectrum of our customer base. In terms of mix, I think we will discover in our first year or two of selling what that mix actually looks like. I think we continue to expect that of the first year's worth of customers that adopt our platform, there will be a mixture, perhaps close to even, of both academic and non-profit research customers as well as more commercially oriented customers like pharma.

Appreciate it. Thank you.

Thank you. One moment for our next question, please. And it's from the line of Dan Brennan with TD Cowen. Please proceed.

Great, thank you. Thanks for the questions. Maybe the first one just on hitting that milestone of the 500 to 2000 proteins and lysate. So I assume you expect to have that completed and published by U.S. HUPO. Could you spell out specifically? I know you addressed them early on in your prepared remarks, but just kind of walk through what are the key tech hurdles that you need to achieve in order to enable this result at that time frame?

Thanks for the question, Dan, and good morning to you. The key milestone that you described—being able to see 500, 1,000, 2,000 proteins in cell lysate or any complex sample—that is the critical milestone for broad scale. At that point, every piece of our platform has come together. There are enough platform ready probes to be able to show you a significant number of proteins from a sample. Because PrISM is based on sort of an exponential curve of how many proteins you can see versus how many platform ready probes we have, it means that we're substantially through all the development, and we'll be able to provide some specificity on the remaining development. It is incredibly important to us. In the interest of just being transparent, we wish we were there by the end of the year. In Anna's prepared remarks, you saw that she had said that we had some accrual changes related to annual bonuses and that was frankly because we intended to be there and we're not. You can expect that we are working very, very hard to be able to get to a broad scale milestone by U.S. HUPO; timing is not working for us. U.S. HUPO is very early this year; it's in February, and so I'm not committing to being able to get there. We certainly would like to, but as Parag mentioned in his prepared remarks and gave a little bit of color during Q&A, the key thing for us to get through here is to have enough platform ready probes that are functioning well on our platform to be able to get to that milestone. That's a function of some improvements that we're making on our labeling strategy and our labeling chemistry, and some improvements that we're making to try to improve the diversity of probes that function very well on our platform. That work is continuing well and progressing nicely. The company is super focused on it, but I just don't have an exact answer that lets me go and say, yes, we're going to have it done by U.S. HUPO, but we're working really hard on it.

Got it. And then I think last quarter, you did talk about the probes and you talked about the probes not attaching at a high enough rate. You talked about moving away from using a DNA construct to another undisclosed material. Just how has that progressed? This sounds like it's a central part of what you're doing underneath the hood, but I don't know if it's possible to expand a little bit on that and the confidence in that shift?

Yes, so when I talk about adjusting our labeling strategies, that really is trying to evolve our construct; that work progress is progressing very well. I think that it's moving along just fine, where we are with respect to having that work and our labeling chemistry far enough along that we are getting our platform ready probes up to that target, initial target yield of a third that I mentioned in the remarks. I can't give you an exact specific spot of where we are, but that particular construct evolution is something that we have completed at this point. We continue to work on the optimization of the chemistry and the specifics of how to get that to improve the yield of our probes on the platform.

If I can just layer on a little bit on that. Dan, when we think about development in general, really throughout the entire ecosystem, we're focused on quality, we're focused on scale, we're focused on things like guard banding. We're constantly in a state of evaluating every single component of our system, tweaking, tuning, optimizing, and improving. While it's tempting to focus on this and say, oh, this is a big thing, you know, we've probably evolved our label 100 times in the course of the last couple quarters. That's a natural and expected part of development—to continue to refine and optimize towards the commercial targets. It’s an important thing, but it is also an expected part of development that you're going to refine your reagents, and you're going to refine the manufacture of those reagents, and you're going to refine your specifications for all of those reagents.

Maybe final one; it sounds like in the press release and I think in the prepared remarks you talked about the commercial launch still kind of planned for the back half of '25. So I think consistent with what you said at Q2. So maybe why not push to '26 to give yourself more room? Just any color on that? Thank you.

Yes, Dan, I think that our philosophy on this front is to just try to be open with Wall Street and to tell you how we're planning. We continue to plan for a late 2025 launch. We continue to look at where we are from a development perspective and don't feel like we need to update that timeline to 2026 at this point. Is it possible that something could push out and it could be '26? Certainly it's possible. You'll also see that in our P&L that we're managing our spend in an incredibly tight way to make sure that we have the resources to complete our development, even if there were a push. We do continue to target '25. We think that late 2025 still represents an achievable target. We continue to be pleased with the progress that we're making on the broad scale side and continue to. Honestly, I'm incredibly proud of our team for being able to do that on the broad scale side at the same time that we have something along the lines of 12% of our headcount and resources on the proteoform side of the business, and we're doing all of that within a really tight spend envelope, and we still feel like it's the right timing.

Thank you. And with that, ladies and gentlemen, we conclude our Q&A session and conference for today. Thank you all for participating, and you may now disconnect.