Good day and thank you for standing by. Welcome to the Quanterix Corporation Q3 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' 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 first speaker today, Ed Joyce. Please go ahead. Thank you, Hope, and good morning. With me on today's call is Masoud Toloue, President and CEO of Quanterix, and Vandana Sriram, Chief Financial Officer. Vandana joined us in August as Mike Doyle transitions into retirement in early 2024. Before we begin, I'd like to remind you of a few things. The call will be recorded and will be available on the Investor Resources section of our website. Today's call will contain forward-looking statements, within the meaning of the US Private Securities Litigation Reform Act. These forward-looking statements are based on management's beliefs and assumptions and on information available as of the date of the call. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. The risks and uncertainties that we face are described in our most recent filings with the Securities and Exchange Commission. To supplement the company's financial statements presented on a GAAP basis, the company has provided certain non-GAAP financial measures. Management uses these non-GAAP measures to evaluate operating performance in a manner that allows for meaningful period-to-period comparison and analysis of trends in its business. The company believes that such measures are important to comparing current results to the other period results and are useful in assessing the company's operating performance. The non-GAAP financial information presented here should be considered in conjunction with, and not as a substitute for, the financial information presented in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures set forth in the appendix of the presentation posted to our website and in the earnings release issued today. With that, I'll turn the call over to Masoud.

Thank you, Ed. Good morning, everyone, and thank you for joining us on our third quarter call. We're pleased to announce the six-quarter transformation plan we laid out last year is expected to be substantially complete by year end, with assays rolling off our new scalable production platform in January. Incremental improvements made throughout this year have been positively reflected in our financial results and continue to do so in the third quarter, with year-over-year revenue up 18% to $31.3 million, non-GAAP gross margin improving 1,300 basis points to 48.6%, and disciplined cash use going from over $17 million for the corresponding prior year period to under $2 million this quarter. On the foundation of this new operations platform, we will continue to improve gross margins and take our research business from one that is burning cash to one that is generating it. We will deploy capital to first expand access to our platform and second, enable patient testing with new biomarker solutions we've recently developed. Simoa continues to be the leader in measuring proteins at the lowest detectable levels and as we said at the beginning of this year, our goals are ubiquity, such that Simoa is not limited to just specialty labs, but accessible by all labs. This means additional biomarker diversity, instrument utility that ensures broad reach. We spoke a lot this year about improving operating scale and margins. In 2024, we're going to talk a lot about increasing the innovation rate, a metric we're going to measure ourselves by. Last month, at the Clinical Trial for Alzheimer's disease, CTAD Meeting, small-based blood biomarkers testing was revealed in several neuro clinical trials for monitoring, measuring efficacy of neuro therapies, and diagnostics. Simoa's ultra-sensitive digital immunoassay technology delivers scaled high-throughput measurements of neurodegenerative blood biomarkers including those for Alzheimer's disease. Of these presentations, Eli Lilly presented analytical validation and clinical performance of a P-tau217 blood-based diagnostic test to identify amyloid PET positivity using the Simoa platform. Their study included over a thousand samples and was run over multiple lots, operators, and Simoa instruments. The study demonstrated high correlation of P-tau217 with amyloid PET with an area under the curve of 91.6%. Simoa's ultra-sensitivity translates to a very low limit of quantitation necessary for blood biomarkers like P-tau217. The VUMC Medical Center in Amsterdam presented Phase 1 data, highlighting the potential for differential diagnosis of Alzheimer's disease and dementia. Recall, we are working with the VUMC and ABBS on a clinical trial to support the diagnosis of Alzheimer's and determine through a multimodal algorithm threshold levels of key blood-based biomarkers to differentiate other forms of dementia, such as frontal lobe or Lewy bodies. Early data suggests that the combination of P-tau and NFL measurements can aid in discerning frontal temporal dementia from Alzheimer's disease with an area under the curve of 0.87. While there's much more work to be done in this study, including work at multicenter clinical trial sites, the early insights are promising. Reported in Nature Medicine in July, a one-thousand-plus participant study examined why certain amyloid positive patients without cognitive impairment do not develop tau pathology. Our CMO platform was used to look at astrocyte reactivity by measuring GFAP levels in blood. The study led by researchers at the University of Pittsburgh found astrocyte reactivity influenced a-beta effects on tau pathology in preclinical Alzheimer's disease. These studies emphasize two critical points. First, there's a lot more work left to be done with this terrible disease, and we believe we're entering a decade where significant effort and capital will be invested in research and clinical trials for Alzheimer's. Second, we're in the early innings of treatment where there'll be a focus on screening and diagnostics, expanding into prognosis and disease staging, both of which will require precise blood-based biomarkers at the highest levels of sensitivity. As an indication of the future and based on what we're observing with the latest results, trials, and research, it will be multiple neuro blood biomarkers measured together that will tell the whole story. Finally, I'm happy to report that a few weeks ago, we signed a new agreement with Johnson & Johnson Innovative Medicines and launched the Lucent AD P-tau217 blood-based biomarker test, combining Quanterix ultra-sensitivity, Simoa Technology, and J&J P-tau217 antibodies to refine high accuracy Alzheimer's disease testing. P-tau217 levels can become elevated in very early stages of the Alzheimer's disease continuum, well before symptoms arise. Our P-tau217 test achieved sensitivity, specificity, and an overall accuracy each exceeding 90%, meeting the criteria outlined in the revised National Institute of Aging and Alzheimer's Association criteria for diagnosis and staging of the disease. These guidelines are important because the performance criteria for diagnostic use case with a blood test was defined for the first time with P-tau217 being the only plasma biomarker appropriate for accurately diagnosing amyloid pathology. This validates the use of fluid-based biomarkers and puts it on the same playing field as the historical standard of PET imaging. We believe we're in a strong position to capitalize on these opportunities from supporting clinical trials to use in diagnosis. With the simplicity of our sample to answer system and the number of new biomarker discoveries happening on our platform, we're in a great position to maintain a long-term leadership role. Now, I'll turn the call over to Vandana to cover our financial results.

Thank you, Masoud. Good morning. First, let me start by saying that I'm thrilled to be part of the Quanterix team. It's a really exciting time to be here and after a couple of months in the role, I'm even more impressed with our technology and its potential. Today, I'll take you through our third quarter results and an update on our guidance for 2023. Our total revenue for the third quarter 2023 was $31.3 million, an increase of 18% from the third quarter of 2022. Our instrument revenue was $3.7 million, a decline of 53% over the third quarter of 2022 and up slightly versus the prior quarter. Consistent with prior quarters and in line with our peers, we continued to see CapEx constraints impacting the timing of instrument sales, a trend we expect will continue in the fourth quarter. Our consumables revenue increased to $16.2 million, or 63% compared to the third quarter of last year. This speaks to the strength of our installed base as well as the improvements in our manufacturing processes as we were able to catch up with demand. Revenue from our Accelerator Lab was $6.2 million, more than double over the third quarter of 2022. Our Accelerator services continue to be a valuable and differentiated offering and have been especially effective in providing customers an alternative to continue their projects in the current funding environment. Now, let's move on to gross margin for the quarter. Our GAAP gross profit and margin was $17.8 million and 56.8% in the third quarter of 2023 compared to $10.9 million and 41.1% in the third quarter of 2022. Non-GAAP gross profit and margin was $15.2 million and 48.6% in the quarter as compared to $9.3 million and 34.9% in the third quarter of last year. Our corporate transformation has enabled us to reduce inventory losses and drive efficiencies in our processes, and this is evident in our gross margin performance. Our third quarter GAAP operating expenses were $31.6 million compared to $47.5 million in the third quarter of 2022. Excluding the impact of one-time impairment charges of $20.3 million in the third quarter of 2022, GAAP operating expenses increased 16% and non-GAAP operating expenses were up 13%, primarily due to higher consulting fees and personnel costs. Our net loss declined from $35.1 million in the third quarter of 2022 to $7.8 million in the third quarter of 2023 due to improved margins from our redevelopment program, the absence of the impairments from 2022, as well as higher interest and other income. Moving on to liquidity, we ended the third quarter with $330.4 million in total cash and equivalents, a net usage of $1.9 million during the quarter as compared to cash burn of $17.6 million in the third quarter of 2022. Our efficiency gains have translated to significantly reduced year-over-year cash burn. Turning to guidance now, for the fourth quarter full year of 2023. As Masoud mentioned, we've made great progress with our redevelopment efforts and are in the last of the six-quarter transformation process. For the fourth quarter, we will be focused on upgrades and readiness of our production lines as we introduce new assays in 2024 and executing on the final steps of our transformation. With these objectives in mind, we expect our fourth quarter revenue to be between $27 million and $29 million. This increases our revenue guidance for the year to be in the range of $118 million to $120 million compared to our previous range of $110 million to $116 million. We are also increasing our gross margin expectations for the year and now anticipate GAAP gross margin percent to be in the high 50s and non-GAAP gross margin percent to be approximately 50%. As we implement the upgrades to our production processes, we expect non-GAAP gross margins to be in the mid-40s for the fourth quarter, slightly lower than past quarters to account for potential higher costs from these transitional changes. Lastly, we now expect our cash usage for the full year to be in the range of $22 million to $25 million, an improvement from our prior estimate range of $30 million to $35 million. We expect higher cash outflow in the fourth quarter due to the timing of certain initiatives and payments. For the year, this reflects a significant improvement in cash burn over 2022. Our increased guidance across all our key metrics reflects the continued strong demand for our Simoa Technology and our execution against our transformation goals. Our balance sheet remains strong and we are well-positioned to support our growth and strategic initiatives. I will now turn it back over to Masoud before we take your questions.

Thanks, Vandana. I want to thank the entire Quanterix team for their hard work and focused effort. Dan, our COO, and Darren, our CCO, have been relentless in this pursuit. And as a result, there's been remarkable progress in building a solid and scaled operations platform for our existing products and developing the engine for new product releases to come. If you can't tell, we're super excited about next year. Let's take some questions now.

Yes. Hey, guys. Thanks for taking the questions. Congrats on the progress here. Just starting off with the new P-tau217 agreement with Johnson, I had a few questions about that. First, Masoud, can you talk about deal economics? I think with Lilly, a year and a half ago, that was about $11 million in accelerated revenue for like about a full year. So, curious if there's a comparison here? And then this agreement, was it brought on by any change in the relationship with Lilly and does Lilly remain an important partner for you going forward? And then maybe just one clarification. Will Lilly be using Simoa for its own Alzheimer's test because the company is working with other analyzer and assay vendors as well?

Yes. Thanks, Kyle. Yes. So, the answer to your first question, we haven't announced any sort of deal economics on the J&J agreement that we signed. However, I would say that Quanterix expects the majority of the economics to come from our LDT and our kit sales and what we're doing in the market trying to get 217 into a lot of folks' hands. To your second question, I think it was on the broad use of 217. Our view on 217 is that we want to try to get it into as many hands as possible. We think that our collaboration with Lilly continues and it's a very strong collaboration. They presented some great data at CTAD on the Simoa platform, and so we expect that relationship to continue. And then on our LDT, it is using the J&J solution. But we want to make both solutions available to this market. And I think you had a third question. I might have missed it there, Kyle.

Yeah. I mean, so far, so good. Does Lilly have its own Alzheimer's assay? Will that be based on Simoa or another analyzer assay vendor?

Yes. So, I think there was some clarity, at the CTAD meeting, there was a strong analytical and early clinical validation up to Simoa platform in 217. And as I view this, there's a lot of different types of solutions and platforms in the market for Alzheimer's detection. We're one of the more sensitive ones around 217 and I expect our efforts in cooperation to continue.

Okay, that was perfect. Thanks for that. And it was good to see the NIAAA guidelines know, I guess, like, the new recommendations recently. I was curious how influential those are to clinicians in terms of going against the grain and ordering with these novel products or these tests that we're talking about here? And then how could those guidelines, if finalized, impact CMS decisions regarding reimbursement as well? Like, is that a question, given the size of tests, it's still pretty early days?

Yes, I agree with you, Kyle. It was great to see the NIAAA guidelines and criteria. While it's not a direct clinical recommendation, it has significant influence and could impact future decisions. I completely concur with the points made in the guidelines. Firstly, regarding a blood test, if it is to be considered on the same level as PET, the response regarding 217 was clear, and we've been collaborating with our partners on this for years. The data from the clinical trials has been quite robust. Secondly, the accuracy required for blood tests is high, and the sensitivity requirements are also elevated. I commend the organization for selecting an excellent test and a suitable marker for diagnosis.

Perfect. One more before I hop off. On just on the P&L, and I guess as you kind of break out revenue, you guys have a lot of one-time items if you parse those out, you know, product revenue was a little bit softer than service. Service was quite strong. Product has the macro headwinds in there, but instruments declined a lot year-over-year this quarter, but it is down, I think, 37% year-to-date. So, that's not just due to the recent CapEx constraints. Maybe, I guess why, I mean, recognizing that overall revenue has been solid and you have this program going, why has product revenue been relatively soft, in particular the instruments recently? And then for how much longer would you rely on kind of the service and accelerated revenue to drive growth?

Yes. Maybe I'll start with that and then, Vandana, if you have additional color. First, I would say that we do think that some of the instrument softness, at least more recently, has been CapEx constraint related. This has transferred to our Accelerator program where people can do services. I'd say that what you saw this year with our redevelopment program was really building a platform. If you think back, I'll say four or five quarters, when we announced the program and we built that quality wall, we made sure things are going up the door at the highest level of quality. Throughout the year, there's always going to be a focus on our products and getting them at the highest level to customers. So, some back and forth. Overall, the consumables are going out the doors of our customers, the utility and usage on a per platform basis is good. And as you could see a lot of folks want to come and use our Accelerator program to run these trials. We don't see any softening on demand and desire for the Simoa platform, nor do we see it in the area that we're in.

Yes, I'd just add, within product revenue, if you're combining instruments and consumables, consumables are actually up 63% year-over-year and up 7% sequentially. So, we're very pleased with the momentum we're seeing on consumables. Some of this was a catch-up on demand as we streamlined our processes. Instruments, as you pointed out, we continue to struggle with the overhang of the macro environment. We saw a little bit of sequential improvement this quarter; we were up about 5%, with one extra instrument. But we do expect—as this overhang on instruments continues, we do expect to continue to see volume come through the Accelerator, which is helping to soften and balance that out for us.

Okay. And Vandana what was the catch-up for consumables? That was like super helpful. Catch-up is if you can quantify that; we were getting any questions about that too? Thanks.

Yes, I'm not sure we can quantify it in dollar terms, but if you just look at our sequential improvement, we've had about $15.2 million last quarter. We went up about $1 million this quarter. All of these have a little bit of just catching up on pent-up demand. Our team is now at a point where we are mostly caught up with orders that we couldn't fulfill, and we're now kind of back on a steady state.

Awesome. Okay. Well, thanks a lot, guys. Appreciate the time.

Thanks, Kyle.

Hi, this is Jake Allen on for Matt Sykes. Thank you for taking our questions. I'll ask both of my questions upfront. First, could you give us an update into the timing of the FDA filing and approval for the Lucent AD and the IVD pathway for a broader menu of biomarker tests? And then additionally, how should we be thinking about the longer-term gross margin profile for the business given the progress that you have made on margin expansion, which has trended ahead of expectations? Thank you.

Hey, Jake. So, I'll take your first question. The FDA—we've always said our strategy, as an organization, is to ensure that we're getting these tests out there, as early in as fast as we can. And so that mechanism has been through our CALIA, CAP certified laboratory here in Boston. That's the start. We've also believed that these tests should go through FDA approval as well, and our plan is to do that within the next several quarters to ensure we have a submission on our 217 to the FDA. In terms of timing, that can take some time, of course, and depends on the agency. But in the meantime, we think getting testing done through the CAP CALIA lab is going to be important.

Yes. And on gross margins, let me address near-term expectations and then I'll talk a little bit about the longer term as well. Near-term, I'd say our gross margin performance this quarter exceeded the expectations we would be at; we had signals to an early mid-40s number for the quarter, and we did much better than that, partly because of volume, partly because of our improvements. We see a similar trend going into the fourth quarter, but we do expect some amount of margin headwind as we implement all of our production changes. Longer term, however, we've previously guided to wanting to accomplish margins in the early 60s. We continue to work towards that. There are obviously a lot of factors that will impact that, product mix being a significant part of that as well as the timing of how quickly some of our production processes start to spin out the new assays.

Thank you guys and congrats on the continued progress.

Thanks, Jake.

Hey, good morning. Thank you for taking the questions. Maybe the first one just on the guidance. Just you've had some really good success here year-to-date. Just wondering on the fourth quarter kind of implied guide, it looks like kind of looks very conservative in light of kind of what you've done year-to-date compared to what you did in 2022. So, I'm just wondering, can you give us a little color on how should we be thinking about that fourth quarter guide? And then, if we cycle past the fourth quarter, are we still thinking double-digit growth expectation for 2024 or just any early read there?

Yes, thanks for the question, Dan. So, for the fourth quarter, as Masoud and I mentioned earlier, we are going to be hyper-focused on implementing the last stages of our transformation, standing up our second production line, and getting assays on the shelf for 2024. Keeping that in mind, that's going to impact the velocity at which our consumables go out. On the other hand, for instruments, you still have the macro overhang that others have talked about, which is unpredictable and hard for us to get good line of sight on. So, keeping both in mind, also considering that the fourth quarter has less working days, which impacts the services businesses, we basically try to balance our guide to a reasonable number. With that said, we continue to work towards the double-digit number for next year. As we get into the February quarter, we'll start to size that up more and define that a little bit more. But for now, definitely expecting the fourth quarter to have some headwinds and planning for that.

Got it. And then maybe just one on Alzheimer's. How should we be thinking about the sensitivity and specificity of a blood-based test compared to PET when we think about both rule out and rule in? And then, B, how should we think about timing for Medicare coverage on the various tests that you're looking to implement?

Yes, Dan. So, on the Alzheimer's side, I think what we saw in the guidelines, I would sort of direct folks to the NIAAA guidelines. There, it was very clear that tests would need accuracy above 90%. In our studies, one was the Amsterdam dementia cohort, around 500 individuals tested, and the other was a multicenter site spanning 17 US clinical sites. In both large studies, we were able to achieve accuracies that were above 90%, which is the criterion in the draft NIAAA. So, very happy about that. I think that's going to be the case for any sort of test that wants to try to be on the same playing field as PET. Your second question was on timing of reimbursement. Was that the question?

Yeah, yes, yes. It was on Medicare. How do we think the pathway forward for Medicare?

Yeah, so I expect the Medicare path maybe initially will be laid out either by local coverage determination or maybe in the next year or so as this becomes more and more important and in the hands of neurologists and people performing testing. It potentially becomes an NCD in the future. Hard to say from a timing perspective, but we hope that it gets the attention it deserves.

Hey, Masoud. Yeah, thanks for taking the question. So, the first one may be, and I don't know if this is covered, but there was a discussion of a two-cut assay to drive performance improvement at CTAD. Can you maybe just talk about that? If the P-tau assay is structured that way, and sort of, what's the performance level that we should expect here? There was also quite a bit of discussion on the performance that would be needed to deliver on P-Tau-217, where obviously Simoa has done well historically. Can you just talk about how Simoa's positioned products that are?

Hey, Puneet, can you hear me? You got cut off there at the end, but I got the first part of the question.

Yeah, if you could also talk about reference labs competition too, I mean, what do you think about that? Thank you.

Yep, so as I said, we looked at two different sample cohorts, two large sample cohorts. When you start to look at a blood test that's going to be on the same playing field or could be the diagnostic test, meaning something that's a rule in or rule out, you're obviously doing it some comparator, either CSF or PET. The two-cutoff approach is incredibly important. We use the two-cutoff approach as recommended by the draft NIA guidelines. It basically establishes a three-zone test and reflects low, intermediate, and high risk of amyloid pathology. So, samples reading below the cutoff are unlikely to have the pathology, and those reading above the upper cutoff are likely to have that pathology. I think that's it. As we move forward, that becomes more and more the type of test that would be used if you're not going to be doing imaging or CSF. In terms of the sensitivity required, the guidelines require above 90% accuracy. Our assay had the sensitivity, specificity, and accuracy in both cohorts, so that was incredibly promising. I just want to remind folks that it's measuring the Ptau-217 effectively in blood, getting the femtogram per milliliter sensitivity, and then doing it in clinical samples, where you're looking at patients that are in the hospital early stage subjective cognitive decline, mild cognitive decline, Alzheimer's, dementia; that's a broad range. If you want a test that's going to be able to effectively measure folks in the early stages of cognitive decline or in the future pre-symptoms, you want a test with the highest sensitivity that will be broad-based for patients at all ends of the spectrum. Based on these guidelines and data that we're seeing, not all tests and not all platforms are going to be able to do that. We're happy that the Simoa and the 217 platform will be able to cover the broadest range of patients.

Got it. Super helpful. And then just wanted to clarify. Obviously, you had the launch of 217, but just sort of the timing for the multiplex and sort of how do you think additions to that 217, additional biomarkers with that 217 are required, or do you think 217, given the significance of this biomarker is now adequate enough for the field?

Good question. There was some of that discussion at the CTAD meeting, and I think one thing I just want to make very clear is that 217 is very important for diagnosis, and that has been well established. Based on what I said earlier, I also want to make clear that this is an evolving field where prognosis, staging, and differential diagnosis are all going to be important. It's not one patient comes in, they're diagnosed, and that's it. There's treatment monitoring, and there's following on the patient. What we're seeing, if you look at the latest clinical trials and research, it's going to likely be several multi-marker tests. The sensitivity required for each of those biomarkers is going to be high. Having a platform where you have a wide sensitivity bandwidth to measure tau at the same time as you're measuring beta, or GFAP, or NFL on the same run, same patient sample, is going to be incredibly important. I think you're right; 217 is the best, the single marker for diagnosis. I think it can be enhanced with multi-markers, and then staging measurement of a patient over time, and the prognosis is likely to be multi-marker based.

Got it. Okay. That's perfect. Thanks, Masoud. Thanks, guys.

Thanks, Kyle.

Thank you. This does conclude the question-and-answer session. Thank you for your participation in today's conference. This concludes our program. You may now disconnect.