Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Quanterix Corporation Q3 2020 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to your speaker today, Mr. Amol Chaubal, CFO, Quanterix. Please go ahead, sir.

Thanks, Annie. Good afternoon, everyone, and thanks for joining us today. With me on today’s call is Kevin Hrusovsky, our Chairman and CEO. Before we begin, I would like to remind you about few things. We had few problems with Business Wire today, and hence, the earnings release can be found on our website and also on StreetInsider. Today’s call will be recorded and will be available on the Investor Resources section of our website. Today’s call will contain forward-looking statements that are based on management’s beliefs and assumptions and on information available as of the date of this 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 the uncertainties that we face are described in our most recent filings with the Securities and Exchange Commission. During today’s conference call, we will discuss some financial measures that are not presented in accordance with U.S. Generally Accepted Accounting Principles or non-GAAP financial measures. In the Q3 earnings release and in the appendix of our presentation, which are available on our website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to comparative GAAP measures. We believe that these non-GAAP financial measures provide investors with relevant period-to-period comparisons of our operations. These financial measures are not recognized under GAAP and should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP. With that, I would turn the call over to Kevin.

Thank you very much, Amol. I will start off with a – on Slide 3 of the deck that’s on our website. I’m going to review the strategic and financial progress the company has made. Starting first with some of the key advances in Q3, and then ultimately, describing the vision and strategy, which continues to evolve very comprehensively. Let me start with Slide 4, where we’re showing publications. As you know, about 3, 4 years ago, we really started on a key focus of showing the world about how noninvasive early detection could lead to a real game change in health care. And we now are up to a nearly 1,000 third-party peer-reviewed publications and there’s been over 368 markers run. And on the right-hand side, you can see that Alzheimer’s already has surpassed where we were last year in publications. There are some pretty key things that have gone on here. Simoa pTau-181 has been shown to be highly specific for Alzheimer’s in allowing cohorts to be enriched and to eliminate frontotemporal dementia as well. Serum Nf-L levels have been able to reveal 16 years before dementia in familial patients, Alzheimer cascades, which that is a real early detection opportunity. And also serum Nf-L has continued its evolution in MS disease progression and even it’s found its way into COVID, and some of the publications showing that if you lost taste and smell and neuro function, these scientists have been able to measure it with our Nf-L. And there’s obviously a lot of excitement going on right now around aducanumab from Biogen as being another key market mover in this whole landscape of neuro products. The next slide basically illustrates our continued revenue ascent. And as you know, we pivoted towards really putting a lot of focus on…

Thanks, Kevin. I’m going to provide you some additional financial details about our Q3 2020 performance. I’ll be referring to Slide 49. As Kevin noted, our GAAP revenue in Q3 of 2020 was $31.4 million and included $11.2 million revenue in connection with our nonexclusive license agreement with Abbott, and $1.9 million revenue from our RADx Phase I award. Excluding these nonrecurring items, our non-GAAP Q3 2020 revenue was $18.3 million, a 22% increase versus prior year Q3. Instrument revenues increased 8% and consumables revenue increased 9% despite challenges in accessing customer sites for installations and customers-facing interruptions in their operations due to COVID-19. As previously discussed, we have proactively expanded our Accelerator services capacity to support our customers, sustain their research and clinical trials. This drove 56% increase in service revenue, which finished at $6.6 million. The RADx Phase II contract, that we entered into at the end of Q3, did not affect our Q3 results. Year-to-date total revenues are $60.2 million. Excluding the Q3 nonrecurring items previously discussed, non-GAAP year-to-date total revenues of $47.1 million, a 50% increase. As previously stated, we are not providing the revenue guidance We do expect to see RADx Phase II contract revenue of about $6 million per quarter and associated cost of about $5 million per quarter over Q4 2020 and first half of 2021, which we will continue to exclude from our non-GAAP financials. Across Q3, we have seen demand progressively recover in U.S. and Europe. However, a second wave of coronavirus may force renewed lockdowns, resulting in challenges such as limitations in accessing customer sites to complete installations and drop in consumables utilization due to interruptions in certain customer laboratories. On a non-GAAP basis, Q3 gross margin was 51.5% versus the prior year Q3 gross margin of 51.8%. Q3 2020…

Thank you, Amol. And I would like to close them all on Slide 50 to just illustrate that, as we’ve been saying from the beginning, we have an incredible employee group as well as a large ecosystem of though-leaders and many investors that have actually supported us in creating demand by working with many of the pharmas that they have stock positions with to help create opportunities to get drugs approved in the pipelines of many of our customers. This slide just illustrates it on the left-hand-side. As we said, we’re mostly a research business today. I’d say 95%-plus of our revenues really are coming from this research side where there’s no real regulatory or reimbursement risk. And we feel like it’s a solid place to create value for investors with a great backstop. But there is absolutely, we’ve been calling it an aspirational opportunity to start to migrate into diagnostics. And COVID has enabled us a showcase opportunity to help the world with our incredibly inspired employee-base, but also further demonstrate what this technology can do and help us advance into many of the different disease sectors that we know our technology can disrupt. So this slide just shows that we have a very formidable market opportunity, as we’ve outlined outlined and we think we’re rivaling and creating a new category with our sensitivity in proteomics. And we have been penetrating this market and that we can see being $1 billion today of TAM, but evolving very productively into a very large TAM numbers, as you can see on this slide. We also are better linking the DNA and RNA to the protein, trying to get a better map of where the protein links up with the DNA and RNA, particularly looking at these protein modifications that the disease triggers and environmental factors are created. 19 of the top-20 pharma have now deployed our technology. There’s been thousands of drug trials run, Phase I, II and III. Almost 1,000 peer-reviewed pubs really validating this technology and so when we look at the penetration opportunity, we think it’s a significant razor-blade opportunity. We have a lot of consumables. We’ve invested significantly in our products and we’ll continue to advancing our sensitivity another 100X and continuing to evolve with off-the-shelf kits that allow our customers to get to a very large menu of proteins for measuring. We have an incredible Board of Directors that have been through this over the years. They’re very instructional and very brought in and very much skin in the game very much excited about this opportunity. And there is a real track record amongst the Board and the management for commercializing disruptive technology. So with that, we’d like to open it up for – I know it’s a busy day to day, a lot of earnings releases given the election this week. We’re going to open it up and see if there are any questions.

Thank you, sir. [Operator Instructions] We have our first question from the line of Puneet from SVB Leerink. Your line is open. You may ask your question.

Hi, Kevin, Amol. This is Scott Mafale on for Puneet. Thanks for taking my question.

Sure, Scott.

So, Kevin, I’m…

Hey, Scott, you’re breaking up.

Oh, there we go. I was on mute. I’m sure you saw the – Kevin, I’m sure you saw the initial positive stance from the FDA on aducanumab from the recently released briefing documents. I was wondering if you can comment on maybe how this might impact the pace of new trial starts from neurology more broadly. And if you believe it will encourage the use of neurology assay such as Nf-L and pTau in these trials?

Yeah, great question, Scott. And obviously, this has been a very challenged landscape for the past 10 years, trying to get an Alzheimer drug across the goal line. And when we entered 4 years ago, we brought the hope of objective markers versus the subjective markers, looking at such things as how long does someone with Alzheimer’s, how long does it take them to traverse a maze out of hospital being somewhat of a subjective measure. So more of a concrete objective marker of a biomarker in blood, so we have a vision around that possibility and then the FDA created guidance about 3 years ago under Scott Gottlieb to actually have biomarker guidance to recruit patients precognitive impairment. And if you could show and validate that the biomarker was clinically relevant to the disease cascade, you can utilize that to actually help support your data. And I’m intrigued by this particular advance that it does look like pTau-181 in cerebral spinal fluid has played a nice correlative effect of increasing the dose reduces the level of pTau-181 in the cerebral spinal fluid, as we commented on an earlier slide. And I think that the fact that there is some level of biomarker usage occurring even if it’s in CSF, creates an opportunity because of all the correlative work that’s been done in the last 4 years in blood for this to become a less invasive opportunity. So I think that we are looking at many pharma companies in general, looking at the amyloid thesis that was almost being shot down as not really being a relevant thesis. I think that some of the enthusiasm that’s going on with Biogen right now has created a little bit of a resurgence to some level of support for the amyloid thesis. I…

That’s very helpful. And I want to move my second question on the RADx program. It was really great to see you guys move on the Phase 2 of development there. I was just wondering if you could describe what the next couple of steps are in the process. If there’s any timeline you could provide here. And just do kind of remind us where you expect the product to fit in the current testing paradigm of COVID-19. Thank you.

Sure. Yeah. First of all, I would say that we feel very honored to have been discovered by the NIH, and our relationship there has continued to evolve to the most senior levels and they have been incredibly productive, as had the FDA where we haven’t really had a lot of interactions with either of these 2 agencies until COVID really started to reveal the possibilities of our exquisite sensitivity playing a role to help. And so how we evolve at this point has been interesting. It’s started out with the feasibility study. Our data looked very promising. And as a result of that, they invested and are investing and scaling up our ability to make the kits for this antigen assay that ultimately could be deployed, we believe, in blood. We’re initially trying to prove it out in nasopharyngeal. We got really good trials underway that are showcasing this technology sensitivity and capability for some of the traditional sample matrices, but we ultimately think that the blood and maybe someday in saliva, and I think the NIH is interested saying, can you also pull where you can run multiple samples, because their interest is to scale up significantly. And I think one area of promise or at least of concern, and we hope that we can play a role, is in the asymptomatic. When children started going back to college, that’s when the testing really started to move from those who had symptoms when it’s easier to detect when you have the symptoms of virus to those that don’t have symptoms. And unfortunately, it’s much harder to see this virus when you don’t have symptoms either pre-symptomatically, meaning that someday you will have symptoms, you’re just getting it early or some of those that get the virus never do…

I could just slip one more in. On HD-X, the instrument upgrade cycle there. I know that’s a big story coming into the year. Can you just kind of bring us up to speed there? Should we expect the reacceleration of placements as academic customers kind of return to labs and things being the normalized? And do you still expect to convert about 50% of your HD-1 customers? Thank you.

Absolutely. Amol, you might want to follow this one up with just a description of the mix of trade-ins versus new purchases. But to start off this answer, Scott, this HD-X is something that we’re putting a lot of emphasis on. It’s fully automated. So you put in blood or saliva or whatever the sample matrix is and you get out the answers. So it’s a fully automated. And we have a lot of our customer base saying, what your automation and getting the same answer every time in the throughput that you can get on the HD-X of about 1,000 samples per day, fully utilized, I think it’s probably better for planning purposes to look at 500 to 750 samples per day. That capability of having it fully automated and creating that throughput for a lower cost antigen-type test that’s got a lot of sensitivity and precision, we actually think that this could create more demand for the HD-Xs as we move forward, either in research or if we further evolve into diagnostics. We would try to utilize partners, third party, I’ll call them more like LDT labs that have infrastructure. We’re going to try to evolve our HD-X deployment for at least the COVID landscape to either research customers or customers that have experience using this platform to give it just a higher level of performance in utility. But I think in general, that’s going to lead to new sales either in RUO. And the neurology trials is just another area where we think there will be increased interest in buying HD-Xs. So overall, this is just another area where we think there will be increased interest in buying HD-Xs. So overall, I think that the numbers that we cited going into the year are not going to be way off relative to trying to get to half of our installed base being HD-Xs – of the HD series by year-end. Amol, anything you can add here?

No, no, I think, you summarized it really well. And we will get exceedingly close to half of our installed base being HD-Xs.

And I was going to also comment around trade-ins to Amol. That was a question that we were getting. I wondered if you could give a sense of the margin implications, because I know it’s a good thing in the long-term, but it would be good to just discuss that.

Yeah, sure. And Scott, I mean, as we’ve discussed sort of before, right, like we – when we do trade-ins, we basically offering an instrument at a discounted price, still above our cost structure. And it’s a great thing for the business, because it’s going to drive a lot more utilization in a much more reliable platform and going to expand our consumables revenue going forward, right. So what happens, because of the dynamics is, the gross margin when we do this trade-in gets sort of temporarily suppressed, which creates a drag on our gross margin. But it’s a great problem to have because it creates a longer term better customer satisfaction and an expanded consumables utilization going forward. We continue to see a lot of interest from our customers on HD-X trade-in. And because the way sort of grant processes and federal budget cycles work, we expect some of that trade-in volume to continue into Q4 as well as initial half of 2021. We can move to the next question.

Is there any other questions?

Thank you, sir. We do have another question from the line of Chris from Cowen. Your line is open. You may ask your question.

Hey, Kevin and Amol, thanks for taking our questions. This is Chris on for Doug today. I apologize if you addressed this during your prepared remarks. We’re – I think we’re juggling about 8 earnings calls this afternoon. But first, maybe just to follow up on the prior question. I think you were previously targeting 75 HD-X and SPR-X – SP-X and SR-X systems this year. Is that still the plan? And are there any bottlenecks in terms of being able to get an instrument shipped and installed in the current environment?

I would say, in general, Q2 was obviously a major headwind, and we still have a lot of risk around what happens with this virus moving forward. Does it affect and shut down any labs, and we’re starting to see the potential of that, some closures in our European operation, in which those can affect our ability to install. But I do think that the overall numbers that we cited going into the year for HD-X still feel pretty productive given some of the new opportunities that we’re focused on. And, Amol, did you have other thoughts on this question?

I think, Chris, you’ve picked it up correctly, right, because in our Q1 earnings call, we had stated 75 HD-Xs and 75 SR-Xs plus SP-Xs. And at that point, we had reduced it from 90 before and also reduced the 50% to roughly 40% mix. And we are still in line of sight with those numbers that we have shown during our Q1 earnings call. And as I said, we’ll get really close to 50% of our installed based in HD-X by year end, provided we don’t get disrupted by the second wave and associated lockdowns. If things continue to stay where they are today. We have a good line of sight to get to those numbers we shared during our Q1 earnings call.

Okay, great. Maybe just moving on to Abbott, what timelines have you committed to regarding development and commercialization of a product and how much of that is in Abbott’s hands versus yours? Well, I’ll just leave it there and ask my follow-up after.

Yeah, I would say that we’ve not communicated any details. It’s a very minor level of communication around this relationship, except to some of the financial terms. I would say that they are incredibly motivated by what Simoa can do. And I would expect that this is going to lead to them deploying this technology into some new form-factors sometime over the next several years. So it’s a longer-term opportunity. But for us, it was a big validation to be able to achieve this on a nonexclusive basis in a market that really has 3 premier, large IVD, distributed IVD players, and to give an opportunity for our technology to evolve inside of other channels to market. It’s a $22 billion landscape across these large 3 or 4 diagnostic IVD houses. So to establish this foothold is important. And again, we have a very strong relationship with the Abbott team. We’ve been working on this for a couple of years, and it’s – they have a new CEO and a lot of excitement right now around this opportunity, which I think could bode well for us in the long term.

Thank you, sir. There are no further questions on the line. I’m turning the call back to Mr. Chaubal. Sir?

I’ll pass it back to Kevin to close our call.

Sure, yeah. Hey, thank so much for everything that you guys have done with us, the investor group. We look forward to further evolving our discussions, our performance and our story. We’re very committed to driving growth in this landscape and feel very honored to have a chance to be working with all of you. And stay safe out there and we’ll talk soon. Thank you very much.

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.