Good day and thank you for standing by. Welcome to the Seer, Inc. First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Carrie Mendivil, Investor Relations. Please go ahead.

Thank you. Earlier today, Seer released financial results for the quarter ending March 31, 2022. If you have not received this news release or if you'd like to be added to the company's distribution list, please send an email to investor@seer.bio. Joining me today from Seer is Omid Farokhzad, Chairman, Chief Executive Officer and Founder; Omead Ostadan, President; and David Horn, Chief Financial Officer. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of 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 here issued today. For a more complete list and description, please see the Risk Factors section of the company's quarterly report on Form 10-Q for the quarter ending March 31, 2022, and in its other filings with the Securities and Exchange Commission. When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* They just revealed what they believe are the ten best stocks for investors to buy right now… and Seer, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys. Except as required by law, Seer disclaims any intention or obligation to update or revise any financial projections or 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, May 04, 2022. With that, I'd like to turn the call over to Omid.

Thanks, Carrie, and thanks, everyone, for joining us this afternoon. We had a strong start to the year as we further ramp our commercial efforts, expanded our installed base and made tangible progress across all areas of our strategic plan. These efforts led us to close the first quarter with $3.3 million in revenue and continued growth in our installed base. I'm particularly excited by the growing body of customer data, demonstrating in a concrete way the unique capabilities of the Proteograph Product Suite to provide proteomic insights at a depth and scale that was previously not possible. We've not seen presentations at conferences from the Broad Institute, Oregon Health & Science University, Sanford Burnham Prebys Medical Discovery Institute, Protein Metrics and PrognomIQ. To date, there have been more than 40 public presentations on Seer's technology with four more coming up in June at ASMS, and we expect an increasing number of abstract data and presentations as more customers not only adopt the technology but scaled their use of the platform. Given the growing demonstrations of customer use of the Proteograph, coupled with the forthcoming advances on our platform, have never been more confident about our ability to become the definitive tool leader in proteomics. To reach this ambitious goal, we have a strong balance sheet and are well capitalized with more than $470 million of cash, which we believe will support us as we execute on our multiyear strategic plan and enable us to build a durable organization that will drive meaningful impact on the trajectory of science and medicine. We're focused on five key objectives to drive growth in 2022 and to set us up for growth long term; first, supporting customers with an industry-leading onboarding experience while helping them to systematically scale their use of the Proteograph…

Thanks, Omid. Total revenue for the first quarter of 2022 was $3.3 million, compared to $62,000 in the first quarter of 2021. The increase in first quarter revenue was primarily due to an increase in sales of products related to the Proteograph Product Suite. Product-related revenue for the first quarter of 2022 was $3.2 million, including related party revenue of $1.1 million and consisted of sales of SP100 instruments, consumable kits and platform evaluations. Related party revenue of $1.1 million represents product sales to PrognomIQ. Total gross profit inclusive of grant and other revenue was $1.2 million for the first quarter of 2022, representing a gross margin of 38%. As a reminder, in 2022, we expect gross margins will be dampened due to an anticipated larger percentage of instrument sales, a significant reduction in service and grant revenue and our continued investment in and scaling of our operations, resulting in higher overhead absorption. We continue to target long-term gross margins between 70% and 75%. Total operating expenses for the first quarter of 2022 were $25 million, including $8.1 million of stock-based compensation, compared to $16.6 million, including $6 million of stock-based compensation in the first quarter of 2021. Research and development expenses for the first quarter of 2022 were $10.7 million, an increase of 73%, compared to $6.2 million in the first quarter of 2021. The increase in R&D expenses was primarily driven by an increase in product development efforts related to the Proteograph Product Suite, including $2.6 million in employee compensation costs and other related expenses, including stock-based compensation, due to growth in research and development personnel and $1.9 million related to the expansion of facilities, maintenance and depreciation of laboratory equipment. Selling, general and administrative expenses for the first quarter of 2022 were $14.3 million, an increase of…

Thanks, David. Unlocking the power of the proteome will only be possible through deep unbiased profiling of the proteome at scale. This has not been possible with previous methods and is the path forward in driving novel biological insights to transform our understanding of human health and disease. As we move forward in pursuit of our vision this year, we will continue to drive execution against our core strategies. We're paving the way for a portfolio of products that will open up a new gateway to the proteome. I look forward to sharing updates of our progress over the course of this year. With that, we will now open it up to questions.

[Operator instructions] Our first question comes from the line of Tejas Savant from Morgan Stanley. Your line is now open.

Hey, this is Neil on for Tejas. So I just want to start on commercial sales. You previously mentioned that sales in SKU commercial, given the shareholder cycles versus academic customers. Is that still trending accordingly? And have you seen any lengthening of sales cycles from biopharma customers with all the noise around funding concerns?

Yes. This is Omead Ostadan. So far, yes, the sales are more heavily weighted toward commercial versus academic. And as we had mentioned to you previously, we expect that to continue for some period of time to a large extent because commercial entities typically go through a different set of funding cycles and are much more able to make decisions on a short-term basis. So yes, more heavily weighted toward commercial versus academic, and I would expect that to continue at least through the balance of this year, if not leading into next year. And we are not seeing anything that is outside of what we had expected in terms of the buying cycle with biopharma. Again, keep in mind, the numbers are small. We are still early in broad commercial release, but we're not seeing anything with respect specifically to biopharma that is outside of what we had expected coming into the year. So hopefully, that answers your question.

Thank you. And as a follow-up to that, on the demand funnel, is that still trending 50-50 between academic and biopharma customers?

More or less, yes. Yes, exactly.

Got it. And then one more from me. So on the product road map, you previously mentioned initiatives, such as increasing throughput, increasing content and reducing sample volume requirements. Any progress you can share on these fronts or when we might expect to hear some updates on that end?

Neil, thanks so much. So I think I'll be able to -- this is Omid Farokhzad. I'll be able to give you more details on the next product, I would say, toward the second half of the year. As I had highlighted before, customers' needs or customers' asks were in the areas of increasing content while decreasing the required sample volume and then increasing throughput. And by the way, keep in mind, that the throughput increases will come at the level of a detector, not so much at the level of the Proteograph. And so those asks are, in fact, areas of R&D investment for us. And you can imagine that the subsequent products and then the products that follow it reflect basically those needs of the customers. We've guided to have at least one new product coming up, and you can expect a new product in the second half of the year. That product will address some of the requirements for the customers and then the subsequent products, the additional needs that the customers are going to be addressed.

Got it. That's very helpful. Thank you.

Thank you. Our next question comes from the line of Derek De Bruin from Bank of America. Your line is now open.

Hi. This is Nisarg on for Derek. So to start on cash, where do you expect to end 2022 from a cash balance perspective?

Sure, Nisarg. This is David Horn. And so as you saw in the release, we ended March 31 with $472 million in cash. And as you note, we feel really good about where we are with respect to a cash position. I would point to the metric we track is free cash flow, which is operating cash flow plus CapEx. And this quarter, we've earned about $20 million. And so we feel pretty good about where we are. We are going to be -- continue to be prudent with our outlays and always mindful of earning an attractive rate of return on any capital we are deploying. So we feel good about where the balance is and where we are for the rest of the year. But we're not giving guidance on where we're going to end cash balance, but I think you can look at the first quarter and feel that we've got plenty of cash for many years to come.

Great, thank you. That makes sense. On OpEx, can you talk a little bit more about like the pacing for this year? How can we think about the back half of the year? As you guys have been saying, the revenues are expected to kind of increase there. And also a little bit of color on -- in terms of instruments versus consumable kits looking toward the rest of 2022 would be helpful too.

Yes. So in terms of the investment, we have said -- we reiterated our guidance of $14 million to $16 million. As we've also said, we expect the majority of that revenue to be in the back half of the year. And so we will continue to invest to obviously realize that additional revenue in the back half of the year. We are continuing to build the commercial organization. So I think we ended the year end with a commercial organization of approximately 30 people, and we will continue to expand that over the course of the year. So again, continued investment in some critical areas across the organization. So I think you will continue to see spend continue to increase along with revenue, although, again, we are being very mindful of that. And I think you'll see us be prudent about that. So really being thoughtful about how we increase that spend over the course of the year. And then in terms of the instrument versus consumable I think was your second question. We do -- as we've said, we feel that over the course of the year, it probably will end up being around close to 50-50. It may be a little bit more skewed toward instruments. But again, I think the thing to keep in mind is that we -- most of the limited release customers that we placed at the end of last year won't really -- it takes people probably kind of nine to nine-ish months approximately to really start to ramp. And so we really won't see the benefits of the consumable pull-through again toward -- until the back half of the year. But again, hopefully, that's helpful color for you.

Yes, great. Thank you so much.

Thank you. Our next question comes from the line of Daniel Brennan from Cowen. Your line is now open.

Hi, good afternoon. This is Kyle on for Dan. Thanks for taking my question. So I'll lump these two together here and then hop back in the queue. So I just wanted to ask about your sort of go-to-market strategy with heavy mass spec users. Can you sort of walk through your commercialization strategy in terms of who are you targeting first? And what pushback, if any, are you getting from customers as you try to engage with them? And on that note, on the publication side, how should we think about the timing of some of these publications. And are there any, in particular, that people are really looking for to drive adoption? Thank you.

This is Omid Farokhzad. Let me break that up into two questions really, and I'll tackle the second part of it first and then the first part of it second. So you may have seen that we recently published a paper in the Proceedings of the National Academy of Sciences. And this actually followed the previous publication from Seer in Nature Communications. You can expect another paper toward the second half of the year. This would be in another top-tier journal. And by that, I mean journal with very high impact factor, which is the way quality of journals are typically measured. There may be another paper that also comes on top of that in the second half of the year, but if not, kind of beginning of the next. We have, by the way, put these papers in print in bio archives, so you're welcome to read them. But those papers are now under peer review. On top of that, we've now had over 40 different presentations at conferences, posters, abstracts and then most recently talks coming up as well, not just from Seer but also from Seer's customers. You can expect the slope of those presentations to increase as the installed base and the number of customers increases. So for example, if I just look at what is happening just in the first five months of the year relative to, let's say, the first five months of the year last year, there's a dramatic increase in the number of presentation that's happening from Seer and the Seer customers. And we're seeing progressively the tilt being that these presentations are coming from the Seer customers as they get experience with the instrument. So now let's go back to your -- the first part of your question, which is the go-to-the-market strategy. How do we present the solution to the mass spec users? And by the way, not just the mass spec users, if you look at our customer base, there are a number of customers that are genomic customers with literally very little experience, if at all, with a mass spec who adopted the Proteograph Product Suite and then later either implemented a mass spec or get the mass spec down to their core facility. But what I want to do is I want to turn it to Omead Ostadan to give you kind of a deeper picture of what that commercial strategy looks like and how that has played out over the course of the last 12-plus months through the three phases of our commercialization strategy.

Thanks, Omid. So just building on what Omid Farokhzad said. If you recall, our strategy was and continues to be to start with the collaboration phase, which we commenced in late 2020, have that lead into a limited release phase, which span essentially the entirety of 2021. And that was very much focused on selecting what we call lighthouse customers among a set of key markets/applications, some of which are deeply embedded in, I would say, traditional proteomics, others of which are actually turning much more toward genomics and multiomics. And we really wanted to spend a broad spectrum where people were looking to and were capable of doing large-scale proteomics and/or multiomic studies where we believe the unique power of the Proteograph can help them advance their understanding the biology in a far more accelerated way. And then we're building on that by starting into our broad commercial release, which commenced at the onset of this year. And so systematically, we're essentially trying to build one phase on top of the other. And so far, I think we've been very pleased with both the progress of each of those phases and, most importantly, the experience of the customers with the technology once it's in their hands and they're generating data. In terms of pushback, quite frankly, I'm not qualifying anything as a pushback. But as you would expect with any technology, there are areas where customers would like to see some enhancements and improvements, most of which Omid already covered as he was describing some of the technology improvements that you can expect coming in the back end of this year and obviously moving forward. So far, I would say, in a nutshell, very pleased with the acceptance of the technology across the three phases of our commercialization. So hopefully, that answered your question.

Definitely. That's great. Thank you.

Thank you. This concludes today's conference call. Thanks for participating. You may now disconnect.