Hi, welcome to the Canaccord Community Growth Conference. I'm Kyle Mixon, the cover life science tools and diagnostics for Canaccord. Pleased to welcome you to this fireside chat with Quanterex. Here with us today, Quanterex offers a highly sensitive platform based on digital ELISA for, you know, I guess a target on neurology and oncology and we'll talk about more today. From the company, we have CEO Everett Cunningham. for joining us today. Appreciate it. Thanks for having me. Appreciate it. All right, so starting with the performance in the second quarter, you guys announced your earnings, I think it was on like a few days ago, Monday. What were some key drivers of performance during the quarter and any, you know, I guess revelations or like changes that kind of arose from the update?

Yeah, thanks for that question. And we had our earnings call on Monday morning, so it's kind of fresh. Let me talk about the things that we feel good about at Quanterix. We had our earnings call. We talked about kind of what drove, you know, our top line and bottom line. First of all, we did our acquisition of a Koya. We announced it a year ago, a year under our belt. And the synergies that we acquired or that we drove from that acquisition, $85 million of revenue synergies over the last year. We completed that in Q2 along with our ERP integration. So just the discipline around our spending, hitting those synergy targets, I commend the entire company. With regards to kind of our top line, you know, Mike Miller, who's in the audience, and I, our chief technology officer and product officer, we did and just exhausted ourselves with scouring our different regions, talking to customers, and what they tell us in terms of what we offer on the spatial side and our legacy Samoa side is just differentiating from a technology standpoint. and validated by our customers and how they use our technologies from instruments, consumables, our clinical trials business. So just what we offer there has been very, very positive. And just some green shoots that we've seen quarter over quarter, our accelerator clinical trials bookings were up quarter over quarter. We feel really, really good about that. We've added some things on the commercial side to give us a little bit more scale and drive more net new business in terms of lead generation reps and also added some revenue, some investments on the marketing side. Where we're challenged, a couple of places, right? The academic, U.S. academic and government market. Listen, there's funding constraints. We're not just saying that due to our research, but talking directly to customers. So that's been a, it's been a headwind for us. And then our commercial execution. We are very forthright and transparent around. We need more out of our commercial organization to start driving some sequential growth. And so we've done what I would say the right focus, the right transforming, and the right adding of resources on the commercial side so we can get that sequential growth.

Maybe just on that note, the mix of the company's revenue, the combined company now with Acoya, biopharm is pretty material. It could be near half or it could be like definitely over a quarter of the business. So maybe you just talk about the A&G, the academic and government challenges, but how is the biopharma side a little bit pressured as well?

So our biopharma side, what we're seeing is we're doing the same amount of clinical trials, biopharma deals. Those deals are just smaller deals. And the feedback we get from our customers are, again, they might be constrained a little bit from a funding standpoint, but this is mostly on us. And where I feel optimistic about our clinical trials business is, if you go back a year ago, we did not have solely dedicated resources on the clinical trial side. We've added back a team that will be solely dedicated to clinical trials. And you talk about a quick transformation. Looking at Mike, Mike ran that business two years ago, solely ran that clinical trials business. We have people that are currently at our company that have experience, have pharma relationships. What we're doing is we're just deploying them the right way. So now they'll be dedicated. It's a team of about seven to ten people moving forward that they'll drive our bigger deals with key pharma customers.

And where, you know, so if the total dollars or dollars per project are lower, where do you think that the money is going? I guess is it to other, you know, I guess competitors or just to other, you know, the AI stuff or something?

I mean, listen, everybody has, you know, spending choices. Again, in doing our research, what we feel is we have our opportunity to compete for those deals. You know, some of those deals are going to our competitors. and some of those deals we're just missing out and we're not there at the right time having the right conversations with the right people. We've also done a good job. I give credit to our operations team on that side. We know which companies are doing neurological clinical trials. We've got to be at the right time at the right place. With that dedicated team, I'm confident we're going to start to see that pick up.

Yeah, I mean, I will say I think MonteroX did have a head starter, like a nice lead in neuro. What do you think it is from others and other vendors in this space that, you know, your competitors, again, that maybe makes their platform or portfolio a little bit more attractive or maybe, like, you know, makes a biopharma company open to testing it out, at least?

Yeah. When I think of that biopharma piece, you know, it's all within our control, right? Meaning, if I look at our competitors, maybe, and this is a little bit in hindsight, we've been through a lot of transformation over the last year, bringing over Akoya, a lot of resources. You say distractions, I'll say distractions, but a lot of transformational efforts, which is important, while our competitors that are in this space maybe had a little bit more, less distractions, let's just say. We're back. We're back. Like I said, we finished our our synergies and the synergies actions back in Q2. We're now focused. Our theme is we're now investing to grow and people now have their focus roles to go after and go after it. So I'm really optimistic about our pharma clinical trials piece, because, as you know, in that business, right, it takes like one or two deals to start to turn that to turn that around. Our bookings are up quarter over quarter. We get a couple of deals in the second half. We're confident that that business will start to generate growth.

And just one more on this note. So I guess I'm just kind of asking, like, you know, the low-plex, high-sensitivity approach that Quinterix has historically had, that's the path forward. It's a good strategy.

So let me just touch on that. Like you said, low-plex, you know, ultra-sensitivity. What we're hearing from our customers are, especially in the clinical trials, translational space, as it goes into diagnostics, the reproducibility of our instruments, the way that we develop assays, that reproducibility is critical in clinical trials, especially in the second and third phase. You need lot-to-lot, plate-to-plate, lab-to-lab consistency, and that's where we differentiate.

Oh, so that's a positive attribute of the platform now? Okay. Yeah. In the past, that was like more of an issue. All right. So in the second quarter update a couple of days ago, you talked about the pivot, you know, kind of like the, you're going down the diagnostics road a bit more and like focusing a little less on the kind of core research side, let's say. Just talk about like the rationale for that, because it's been like in the works for a while and your background is very diagnostic heavy, obviously. But like, you know, what does that also look afford to you longer term and why does it make sense to do it now?

Yeah, let me rephrase that a little bit. What I love about our company is the balance of our research tools business and diagnostics. So when I think about our comments and not just our comments, but our plan moving forward, we have three major priorities. Number one, we have to stabilize and start to grow our research tools business. And I'll just give you a little bit of color of what we've done there. If you go back a year ago, when we were Okoya and Quanterix, you had people with deep expertise selling in spatial. You had people with deep expertise selling the Quanterix, blood-based Samoa, low-plex, high-ultra-sensitive platforms, right? Then we came together and a hypothesis was we can have one person sell the entire portfolio. We can have one person sell Spatial, one person sell Samoa, and one person even sell clinical trials. That assumption was wrong. We burden our commercial organization with too much. And if you look at our customer base, how we grow our business, our sales executive, they have to have deep expertise within that segment. So what we've done is we've now segmented our organization. We've unburdened our commercial organization so they can go deep within their expertise. So moving forward, we're going to have one person sell spatial, a separate person sell Samoa, and a separate person sell accelerator without expanding our commercial organization because we already have the people there. And that's on the research tool side. So we're focused. We just announced on Monday a new chief commercial officer, Jim Goot from Exact Sciences. Jim is well-experienced in selling commercial tools, capital equipment, service, and he comes in with amazing discipline in terms of driving pipelines, forecast accuracy. I know that because I've worked with Jim over the last six years of prior companies. So that's on the research tool side. So we've made changes. We've added leadership. We feel good about that. And we're really excited about our diagnostics opportunity. Just three months ago, we added a diagnostics leader, Jeff Albrecht, 28 years at Quest Diagnostics, well-versed in terms of blood-based biomarkers, because he sold blood-based biomarkers at Quest Diagnostics. And Jeff, in short order, has taken our diagnostics opportunity and set up an internal team focused on how are we going to scale from a commercial selling standpoint, how do we focus on reimbursement and taking our clinical utility studies and using that data to get widespread reimbursement, and also working on order to cash in the lab. So our diagnostics opportunity with Lucent AD Complete is really, really, you know, positive and optimistic.

Yeah, let's go to Lucent AD in a second. But first, just understand the sales force, kind of the change in strategy. Makes sense that you wouldn't want to have one person with these three different jobs, basically. But essentially, when the companies combine, let's say the total entity had like 150 sales reps or something like that. And then, obviously, there were synergies and maybe it ended up being like 100. And now it's – and they were – each of those 100 people were doing the three, the clinical trials, the research, the diagnostics. Now it's, like, split in three, like, equal parts to do each one, right? So maybe, obviously, the prior – like, I'm not sure why, you know, why that was taken, that strategy. But the thought was it was a large team going, like, across, you know, these areas. Is, you know, for the – in this scenario, 33 people enough for each of these different segments?

Yes, no, I totally understand your question. And listen, we've done before we went and announced this, we've actually went out and looked at our deployment state by state, country by country. And we're looking at do we have the right headcount, the right reach, you know, to really drive our second half and 27 and beyond. The answer is yes. Now, what we're going to do is we're going to have people then say, take Boston as an example. We have four commercial salespeople within Boston. We asked those four people to cover from Boston all the way up to the Canadian border. Now we're going to take those four salespeople, thank goodness, to our legacy Akoya, to our Quanterix. We might have to add one person just due to the amount of business that's here in the New England area. But those additions are onesie, twosie globally. And because we kept the right amount of a Koya legacy, the right amount of Quanterix legacy, we're going to be deployed correctly in this new model.

And you guys are guiding to a third quarter revenue number. I believe it's kind of flat to the second quarter levels. And you did decrease the guidance by quite a bit. But it still implies a pretty nice, meaningful step up in the fourth. And that's driven by what exactly?

Yeah, so these commercial, not just commercial, I mean, I know I'm talking a lot about commercial, but we've added firepower in our assay development. We've added, you know, firepower in our manufacturing in terms of being intentional about bringing some spatial talent back in the organization so we feel good about that. We started all that at the end of Q1. These things take time, right, especially commercially. It takes time to kind of build up. So from a guide standpoint, that's why you see kind of flattish from Q2 to Q3. And then what we imply in Q4 in terms of the sequential improvement, these commercial things are going to start to take hold. Our commercial, I'm sorry, our accelerator bookings, you know, Q1 over Q2, hopefully some of these deals will pop. our new assays that we've launched in the first half of this year on the spatial side, we think will give us some added, you know, juice, if you will, or momentum into Q4. You kind of put that together, that will justify kind of our sequential improvement.

Okay. Now, on the diagnostics business, so Lucene AD completes is kind of the flagship test you're going on with. I guess that's an ultimarker test. All right, so you had roughly $10 million in diagnostic revenue last year, diagnostic enablement revenue with partners. And then this past quarter, maybe it was like nearly $2 million, and for the year, maybe $10 million is a good way to think about it. So what I wanted to ask to start off was, you know, current, like the run rate of revenue you have now with the diagnostics, is that all Lucent AD complete? And what is this program, as I sort of look at it, like what is that, what learnings have be taken that will help you like, you know, commercialize next year and so forth?

Yeah, we're excited about, you know, our entire diagnostics framework or moat is what we say. Maybe let me start with some of the milestones or levers that need to hit. You know, we filed our 510K for Lucent AD complete in January. We've been having productive conversations with the FDA. and we're looking for, you know, kind of that to come to fruition in terms of FDA approval of Lucent AD Complete sometime in Q4. Maybe it might slip into Q1. It's hard to say we can't control the FDA, but what we can say is our conversations have been very productive. So that's good from that standpoint. We have three clinical utility studies that are out there with three reputable partners, and those clinical utility studies should read out in the second half. And I say that only because we're going to take that, the clinical utility studies data, that's the discussions we're going to have with payers, because that's real life, you know, looking at Lucent AD compared to the single marker and how they work in real life settings. So we're happy about those studies. Just recently, July 1st, Anthem Blue Cross Blue Shield started covering blood-based biomarkers, which includes Lucent AD Complete. So that, to me, is representative of the legitimacy of blood-based biomarkers and what they play into that journey of the treatment of Alzheimer's, right? So we're really happy about that. We have a CMS price crosswalk of Lucent AD complete of $897, so we feel good about CMS and how they, again, validated our five marker test. And then lastly, and this gives us variety, our flagship instrument, our HDX machine, we are actually filing and going to file 510K, and that will be submitted in 2027. So that gives us the opportunity to not just have a centralized strategy of people sending samples back to our lab, but it will also give us a decentralized strategy of putting our machines, our IBD HDX machine, into labs so we can scale in that way. So we're excited about our diagnostics opportunity. In terms of, you know, yeah, we have $10 million in the plan in 26. We're pacing to hit that $10 million. I even think with a little bit of upside is kind of our trend.

Yeah, there's a lot there to kind of walk through. But I guess with the HDX IVD, I mean, would the throughput need to be maybe increased with that version of it? Or is it just simply like a filing?

It's a filing. You know, there's more of a, you know, stability standpoint. We have to get that up to about 98% from a machine standpoint. There's some software that we're adding to the HDX machine. But all in all, Mike and I had a trip to Stuttgart and talked to our contract manufacturer. we're making the right strides with the HDX machine.

And in terms of the interactions with payers, I guess, because this will be like a prior to Medicare age, most likely, right? Because it's kind of like younger patients. So it's good to see the Anthem. But did Anthem, will they most likely honor the $900 rate that you have, do you think? I mean, I know it's not final.

It's early on. It was just July 1st. You know, we've seen, yes, that's what we're assuming, that they will honor the $897 price point. But with early on, we haven't really seen much, much volume yet in terms of, you know, gaining approval, but we'll keep our eye on it. And we just look at that as a really good sign for blood-based biomarkers.

Are you eligible to be reimbursed today? I think there's, like, other criteria that you don't, or FDA approval and stuff.

Yeah, right now, before FDA approval, we are, yeah, we are eligible for reimbursement.

All right, so the volume should pick up and the revenue. I mean, but I guess, you know, in terms of now going towards the revenue cycle management and the billing and the government affairs and all that, I mean.

That's what we're building now. This is, you know, Jeff, what I like about Jeff Albrecht and, you know, he has this experience at Quest Diagnostics is what I would call the end to end build out of our diagnostics plan. You know, if you start with, first of all, the lab, we have a lab right now that, you know, has been, you know, accepting samples of Lucent AD complete. We're used to that. We have lab capacity now that when that volume starts to pick up, we have capacity at the lab. You talk about, you know, our government affairs. We have to be front and center in Washington, D.C. to start impacting guidelines around how Alzheimer's is treated. Jeff is doing that. Recent hire around billing. We have two people now that we've hired to really focus on billing to make the easy button. We've been in diagnostics before with our past experience. If you make blood-based biomarkers, especially for primary care, challenging, man, that's a deal stopper, right? So what can we do from the billing side? And we have two people working on that. And then Jeff is bringing in a seasoned pro that will handle our payer navigation. and we have a large Rolodex of people that have been there and done that so Jeff's putting a team together that's not just sales and oh by the way we just hired a sales leader for diagnostics two weeks ago but it's end to end in terms of how we approach this market. We look at it this way we have I look at the competition we have a year head start and we need to continue to take advantage of that so when these key milestones hit we're ready to go Yeah in terms of competition it seems Like there's either the larger companies that are maybe not as focused as like on this one, you know, like a niche kind of area.

Then, you know, the smaller companies that there's no way they have the resources that you just talked about.

So here's because I was I was once one of those larger companies. Right. And, you know, I won't speak to any name. But when I was part of that larger company, we we focused on scale. We like we're a logistics company. Right. Scale. Right. Right. And listen, good for them. And what I think when I think about the larger companies in this space, I like it because it raises it raises the noise level of the importance of non-invasive blood based biomarkers. Where we differentiate is around the effectiveness of a blood based biomarker. We're five analyte, five marker test. Right. Every patient that takes our test gets a quantitative score. versus the other competitors, only 70% get a quantitative score. The indeterminate zone of our competition, the indeterminate zone is 30% or more. Because of the five-marker test, our indeterminate zone, we've lowered 10% or below. Especially in going into primary care, primary care physicians need answers, especially in Alzheimer's, we provide more answers. So that's where we're going to differentiate ourselves to garner more share in the space.

Yeah, no, the performance is definitely very, very strong compared to the other tests out there. However, you're going at it alone, it seems like mostly. However, you have this Tempest partnership, probably of others in the fold. I would ask, why hasn't the Quest partnership happened yet? It's kind of a competitor, honestly. But maybe just on that note, what is Tempest? How does that help you and other partners that have neurology kind of endpoints?

No, I appreciate that. This is a market that we can't do by ourselves. And we know that. I love the fact that our company is thinking that way. Our new CFO, Jason Fessler, who I've been working with, we're really thinking about how do we invest prudently to grow this market? We're going to do it in two ways. We will build out our internal team, but we're going to be smart the way we do that. We cannot do the likes of the Quest, the LabCorp, the Exact Sciences, and build out armies of 500 people. It's just we can't do that. What we can do, though, is we can invest and really segment the market and say, if we have the number of reps that we can afford, we've got to make sure that we go after neurologists, memory care centers, people that are really seeing a large volume of cognitively impaired patients. And we're going to do partnerships like Tempest AI, which help us in the health system space. They're vertically integrated with EMR. And so right now we're working with Tempest to say, here are the select health systems that we're going to go after with their reps, and they're going to represent Lucent AD Complete. It makes sense. What I also love that Jeff is doing, because Jeff has deep experience in doing this, is we're working with reference labs, too. Hopefully we'll be able to announce some here in the near future of reference labs. They have representatives themselves. They're selling their capabilities within a certain geography. and how do they partner with us, again, to help us scale.

I think an AVREP collaboration was announced in recent years. So that's an example of a reference lab.

That's a great example. AVREP is a reference lab. They're right now partnering with us with our single marker test, and that's a good example.

We're going to have partnerships with our five marker test also.

And you mentioned Quest. Jim Davis and I, the CEO, we're good friends. We probably talk too much, but we talk on a bi-weekly basis. Listen, Jim's rooting for me, and I'm rooting for him, so we'll continue to do so.

Yeah, and from what I understand about the neurologist kind of market, I think there's like over 10,000 neurologists in the country, but it's like a more concentrated market. So you don't need as many salespeople. You don't need like a screening, like 1,000 people salesforce going for PCPs. You take less maybe, right? Is that fair?

Yeah, it's very fair. I was at AACI and I was pleasantly surprised with a few conversations that Jeff Ulbricht and I were having with neurologists. And one thing that's a little different that I have an experience with the neurologist primary care, the neurologists are embracing primary care physicians to use blood-based biomarkers. They're embracing it because it's going to increase their funnel of patients in the specialty side. So it's not like they're competing. They want us to be very successful, not just with them. They love our five marker tests, but also in the primary care call point.

Yeah, and I guess from what you kind of know about the therapeutic side of this, that landscape and how that's driving, you know, a reason to even have these tests. Like, maybe just talk about the developments on that side.

Yeah, no, we're happy with the first generations of pharma, you know, therapeutics like Katsunla, Lakembi. We're excited with that. You see and you look at their volumes, you know, quarter over quarter, and it's very, very positive. You know, what we also like, well, not like, but what we also need to understand is we need to understand, listen, this is an unmet disease state. You think of Alzheimer's, you think of the journey that Alzheimer's patients go through but have gone through in the past. You know, this is they get cognitively impaired. Their loved ones are concerned. There's not many tools that are out there, and they usually go to a neurologist, and the neurologist says, you have Alzheimer's, right? Where we want to play is we want to play, what, there's 7 million people in the U.S. that have Alzheimer's, another 12 million that are cognitively impaired, and who knows the younger patients that are out there that are getting plaque buildup? But we want to give those people answers so they can start early in their journey with whether it's therapeutics, whether it's diet, lifestyle changes, things like that. That's where we play to just reshape the way that Alzheimer's disease today is navigating.

Yeah. All right. Awesome. Now, with the last minute or two, just on the financials, this is all very exciting and promising. But, like, you know, you push back the cash flow break even target from the second half of this year to, I guess, I think sometime next year is kind of the language. So, I mean, to be honest, what gives you confidence and why are you comfortable with that target at this point?

Yeah, when we think about the cash flow break even, why I'm confident is what we've done. You think about the $85 million of synergies that we delivered with the acquisition. That really spells out the discipline that we have as a company around managing our cash, you know, expenses, that type of thing. So that's number one. The other thing, what gives me confidence is this is a revenue story and we're doing the right thing. We started back in Q1. We're doing the right things to show sequential improvement on the top line. You combine those two, you know, we're confident that we'll hit our cash flow break even next year.

Perfect. Thanks, Everett. Thanks. Appreciate it for having me.