Good day, and thank you for standing by. Welcome to the Seer, Inc. Third Quarter 2024 Earnings Conference Call [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Carrie Mendivil, Investor Relations. Please go ahead.

Thank you. Earlier today, Seer released financial results for the quarter ended September 30, 2024. If you've not received this news release or if you'd like to be added to the company's distribution list, please send an e-mail to investor@seer.bio. Joining me today from Seer is Omid Farokhzad, Chief Executive Officer and Chair; and David Horn, Chief Financial Officer and President. 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 Seer 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 ended September 30, 2024, and its other filings with the Securities and Exchange Commission. 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, November 6, 2024. With that, I'll turn the call over to Omid.

Thanks, Carrie, and thank you, everyone, for joining us this afternoon. I will begin our call today by providing updates on our business, and I will then turn the call over to David to provide more detail on our financial results for the third quarter of 2024 and our outlook for the remainder of the year. We continue to see growing enthusiasm for the Proteograph Product Suite during the third quarter despite the ongoing macro environment pressures, especially for the adoption of new technology. We ended the third quarter with $4 million in revenue and approximately $312 million in cash, cash equivalents, and investments. In particular, we were pleased to see multiple large orders from government agencies and continued strong interest in our STAC. While the capital purchasing environment remains challenging and a continuous headwind for us, we believe we're starting to see the flywheel effect and an increasing tailwind that comes with a growing number of customer publications and preprints highlighting the value of the Proteograph. In the near term, we expect to see fluctuations in the relative strength of these 2 vectors. That said, I'm confident that directionally, we're picking up momentum as the data and evidence is strongly supportive of Proteograph's unique value proposition. At Seer, we're continuing to push the boundaries of what is possible to provide access to large-scale deep unbiased proteomics and help researchers generate meaningful insights into human health and disease. To that end, we're delighted that Thermo Fisher Scientific, the leading mass spectrometry provider, is partnering with Seer, a pioneer and leader in proteomics, to co-market and sell the Proteograph Product Suite alongside their Orbitrap Astral mass spectrometers. Under this non-exclusive agreement starting in early 2025, Thermo Fisher's global sales force will have the ability to quote and sell the Proteograph Product…

Thanks, Omid. Total revenue for the third quarter of 2024 was $4 million, representing a decrease of 3% compared to $4.2 million in the third quarter of 2023 and was primarily due to a decrease in related party revenue and grant revenue recognized in the quarter. Revenue recognized primarily consisted of sales of the Proteograph SP100 instruments, consumable kits and service revenue, of which $366,000 was attributed to related parties. Product revenue for the third quarter of 2024 was $3.1 million, including $180,000 of related party revenue and consisted of sales of SP100 instruments and consumable kits. Product revenue grew year-over-year, primarily driven by an increase in instrument sales and consumable kit sales. Despite seeing continued pressure on CapEx budget and elongated sales cycles for the outright purchase of new instrumentation in the third quarter, we were encouraged by signs of a more constructive capital purchasing environment. Service revenue was $847,000 in the third quarter of 2024, including $186,000 of related party revenue and primarily consisted of revenue related to STAC service projects. We continue to be encouraged by the customer interest in running projects through STAC and their ability to gain access to Proteograph data. We also continue to undertake projects for key strategic studies that will result in additional presentations and publications in the near term, but are conducted at a lower price point than our typical STAC service projects. This had the effect of lowering the amount of service revenue that was realized in the third quarter. Grant and other revenue was $90,000 for the third quarter of 2024 and consisted of lease and shipping revenue. Total gross profit was $1.9 million for the third quarter of 2024, representing a gross margin of 48%, compared to $2.2 million in the third quarter of 2023, representing a gross…

Thank you, David. I'd like to thank our incredible team for their hard work this quarter as we continue navigating through a challenging macro environment for the adoption of new technology. We have made solid progress on a number of initiatives that we established to enhance access to the Proteograph Product Suite and assist our customers to generate novel data. Looking ahead, we believe these initiatives position us well for growth in 2025 and beyond. I look forward to keeping you updated on our progress. With that, we will now open it up to questions. Operator?

[Operator Instructions] Our first question comes from the line of Yuko Oku with Morgan Stanley.

This is Jason on for Yuko. So maybe just starting off, given the midpoint of your 2024 guide of $14 million, it seems to imply a flat or slightly negative sequential step-down from 3Q to 4Q, which seems to break with the 4Q seasonality trends for your company in the past few years. So maybe can you talk a bit about your assumptions surrounding this? So is it mostly conservatism? And what are your assumptions surrounding the budget flush dynamic?

Yes, in terms of the guidance, given where we are in the quarter, we do have a number of opportunities in our pipeline. And as we look at those, it really just comes down to a timing issue. So if some of those come -- timing of those deals roll in our favor, we'd expect to be at the high end of the range. But if some of them get pushed out, then it's obviously going to be a different outcome. So it's really just given where we are and given the timing of some of the things and given our revenue base, that could break either way. So we're really just trying to be -- just to continue with that range that we have, just depending on the timing of the deals. We do continue to see pressure on budgets. And so we're not really forecasting in a budget flush for the fourth quarter. So we're -- again, you could do that it's just kind of where we're sitting right now.

And then maybe as a follow-up question. During 2Q, you talked about significantly expanding your sales and marketing team to include the addition of multiple new regional sales managers. So did that initiative drive the beat at all? If it hasn't, then presumably it might take some time to ramp up. So when can you expect benefits from this initiative to flow through to the P&L?

As we mentioned at the last earnings call, we had significantly expanded the sales and marketing team. We have added multiple new regional business managers. We had added our new VP of Global Marketing, Zach Crowther, to the team. Now these new team members are ramping up. They're already making good progress. We feel very good about the opportunities that they're creating, getting us to the end of the year and into 2025. I think the additional build that we did to the team was just the right move and the benefit of it, we should be seeing later this year and into 2025.

And then maybe if I could just sneak one more in. So I think you've also previously commented on your sales channel kind of flipping from a 60-40 mix of commercial and academic historically to now being 60-40 academic and commercial. So I was wondering like what's kind of driving the shift towards academic customers? Like how much would you attribute this shift to benefits from the cadence of publications that you have seen to date versus like headwinds and capital constraints from larger biopharma customers who are maybe like announcing strategic shifts or pruning their portfolio?

Let me take a crack at it, and maybe I'll also have David comment on the back end of it, if I leave anything out. So our pipeline of customer and the closed accounts, meaning customers that we actually close, that's different. So we're seeing more and more academic folks end up in our pipeline of customers. And as I mentioned, an increasing number of academics are coming on board in terms of opportunities. But if I look at our installed base and if I look at the accounts that we're closing, it's still tilted, Jason, toward the commercial, probably exactly the flip ratio, meaning about 60-40 or so tilted towards commercial. You're making an interesting point that whether it's the increased evidence and publications that's driving the academics, I think that's part of it. The other part of it is that academic need time to get grants. That's different than the commercial budget framework. So the product has been out there, the evidence has been growing, and these academics are beginning to secure the funding for the type of research needed to work with Seer. So I think that's also in part driving it. And then the comment you made about the capital constraints in terms of the commercial customers, and that is correct. I mean, clearly, the macro picture is making it difficult for CapEx purchases, especially for new technologies like Seer. That said, also the increased publications are helping us with those dialogue. And increasingly, we're seeing the size of the studies that we're having conversations with, whether it's for commercial entities or academic entities to be getting larger and larger. I mean, we're now in multiple conversations of studies that are 10,000-plus in study size. And I can tell you about a year ago, we were having very, very few of those kind of conversations. So I think that the data and the evidence is also driving larger and larger studies to become possible for us. David, do you want to add anything?

No, I think you covered it, Omid. I think that was great.

Our next question comes from the line of Dan Brennan with TD Cowen.

This is William on for Dan. First question I have is about kind of a competition question. The proteomics space is gaining a lot of attention, and there are other solutions that think to overcome the same problems as Proteograph. Just wondering how we should think about the evolution of the affinity-based proteomics market as more solutions become available? And is growing overall awareness a tailwind?

So the proteomic market, by the way, I think, is in its infancy and it's only going to grow. And the growth is going to be among the omics customer or the genomic customers that are going to begin to connect their genomic information functionally to proteomic information and get a ton more value in terms of that content. The targeted approaches scaled first, and that's because the untargeted approaches like the approach that Seer takes with the Proteograph leveraging a mass spec, those approaches were not available. And so the customer, years ago, had only the optionality to use a targeted approach if they were going to do a study of any size. Today, that dynamic is changing. I had predicted, by the way, that in 2025, the first population scale unbiased, deep unbiased proteomic study will go underway. I actually have increasing visibility for that statement to be correct. I mean, the notion of doing tens of thousands of sample, deep unbiased proteomics on a mass spec would seem like a pipe dream. Today, that is completely a reality because of the Proteograph Product Suite and because the mass specs are getting better and better. So the customers are progressively recognizing this. And I think going forward, there is going to be room for targeted approaches to exist and there's going to be a very important role for untargeted approaches to add the content in proteomics that today has not been discovered yet. I think as content is discovered more and more, there's actually the utility and a need for targeted approaches to interrogate those very specific proteins that have been discovered using unbiased approaches. So both are going to coexist. I think it's a flywheel where more and more untargeted approaches is probably going to drive more and more demand for targeted approaches. I don't see the other side working other than the fact that untargeted approaches were the first to become at scale available. But I think the way this will work is that untargeted approaches will drive content. Those content will drive value for targeted approaches to exist and then potentially new end markets would get created and existing end markets would expand because of it.

One more question I have is on the margins. Just wondering how we should think about margins exiting the year and into '25. Previously, we're targeting around 50% gross margins. Should next year see a dip in gross margins if instrument placements ramp?

I think for the back half of the year, I think we're still on track to kind of be in that area. We were 48% and I think we're trending for the 9 months, I think we're around 49%, 49.5%. So I think we're going to be in that 50% area. We're not giving any guidance right now on next year, and we'll kind of give you an update and more detail on that on our year-end call at the beginning of the year. But again, we'll have more clarity around that and more color to provide you at that time.

[Operator Instructions] Our next question comes from the line of Rachel Vatnsdal with JPM.

This is Jaden Rismay on for Rachel Vatnsdal from JP Morgan. So first, maybe just to start off, how do you anticipate your recently announced collaboration with Thermo will impact Seer's market reach, customer base, and ultimately, the top line? And are there any specific customers where you expect to see the most growth as a result of this partnership?

Jaden, thank you for the question. This is Omid. So first of all, let me give you context. I think the timing was just right to do this kind of a partnership. And the reason is that the value proposition of the Proteograph was getting more and more accepted and recognized by KOLs and by customers. And that made it easier for our partners to be able to sell our products versus requiring the very, very experts that reside within Seer to sell our products. So that's -- so I think that's the timing part of it, and it was perfect. Now we signed the agreement with our partners at Thermo Fisher Scientific. We still need to work through a lot of the implications for 2025. Over the course of the coming weeks, we're going to be in discussion with them to operationalize this partnership and to be able to launch it in Q1. I think I'll have a better idea in terms of what you can expect from a revenue perspective on the top line given this partnership, probably on our next call, on our Q4 call, year end call. Now the beauty of the partnership is that Thermo already has a number of opportunities for the placement of their Astral that are at various stages of the sales process. Now the opportunity for Seer is that we may be able to shorten the Proteograph sales cycle by essentially piggybacking on existing Astral instruments that will be placed. Now that said, keep in mind that the length of a typical capital equipment sales cycle is not short. And so I expect that to still exist for the Astral and consequently for the Proteograph that's going to be placed. You asked about what type of a customer would this likely…

And then for my second question, I was wondering, what are you seeing from the STAC program you launched in Germany? And how is the progression of that service been so far? And any expectations for the end of the year and into '25?

So yes, we continue to see good traction, both in our US STAC as well as our EU STAC. We've seen, I think, just in the ramp-up and the operationalizing of the EU STAC. During the third quarter, we've seen good demand from that -- from those customers in Europe to be able to use our service over there. So we are very optimistic about that. And I think we'll continue to see the trend of continuing nice steady growth in terms of the service business for the fourth quarter. And then we certainly anticipate continuing that into 2025. Obviously, we can give you more thoughts on that on our year end call. But we are pleasantly surprised with the amount of interest we've had. We are continuing to also invest strategically. So we'll do some projects at a lower cost for collaborators such that we can get data and they publish studies and publish papers. So it's actually a strategic asset for us as well as we work to get data out there quickly into the hands of our customers that want to publish and do various studies. So overall, we're very pleased with it, and I think we'll continue to see nice steady growth out of it.

I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.