HTGM - Earnings call transcript Q2 2019 | HTG Molecular Diagnostics, Inc.

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Operator

Good afternoon, and welcome to HTG Molecular Diagnostics Second Quarter Earnings Conference Call. My name is Amy, and I will be your coordinator for the call today. At this time, all participants are in listen-only mode.

We will be facilitating a question-and-answer session towards the end of today's call.

As a reminder, this call is being recorded for replay purposes.

to Advisors conference remarks. for like Kosse to now LifeSci from a would turn over the Monique I few introductory

Monique Kosse

you, XXXX. HTG quarter today, Amy. results Thank the for released ended financial XX, June Earlier

growth the related Before we let including benefits of product include growth call, in customers, begin statements meaning RUO revenues, regarding statements the business Securities collaborations in for company's with activity, anticipated programs you within pharma the biopharma me forward-looking Federal and remarks and remind XXXX. development the expected and that and Laws, possible expectations profiling revenue from additional full-year continued collaboration, commercialization

circumstances, subject from cautions of beyond events to differ is to HTG's events information These are forward-looking to described those and forward-looking on are statement. any in HTG of time risks materially from providing time of HTG's those to and statements uncertainties call. cause may no undertakes HTG on uncertainties, call, could materially projected Factors that forward-looking statement. update that differ reliance date include which actual or many control today's the not or and undue as results numerous listeners HTG to risks results any to HTG this this filing. obligation SEC place cause

like the that, Lubniewski, call turn Officer. to John? With Chief I'd over to Executive John

John Lubniewski

that we're call. improve building pleasure afternoon to the thank precision a on for the cancer making that our you conference given and business report Good quarter help joining company today a to results, update and provide patients. Monique. care everyone, on you, in on medicine be It's our here to progress can Thank second an to again us

recorded months year June with high million some current million our track revenue six XXXX, for guidance. So level $X we the XX, ended which first, on and three was and numbers, of total $X.X

Europe, business, product-related the including services the our our over which increase XXXX. ended the June reflects of driving three expanded our performance recognized RUO as Our periods the team XXXX, product-related respectively. the six and of be in States million sale month driven adoption for strong quarter products sale first by services, and products in a and $X.X to and in during our commercial $X.X products product CE/IVD XX, continued of revenue, the revenue same the assays, continued the menu services of in our and RUO We primarily of success million This Europe. grew and profiling the increasing expansion well as and second United of quarter product XXX%

We and recognized revenue June respective XXXX, number the of in active $X.X a in $X.X XX% three XX, collaborative XXXX. respectively, two six for activity lower in reflecting the the from in these in month XXXX, programs to over development of development million and programs, XXXX periods representing and million and three XX% periods ended decrease the services the

revenue services to will episodic. development collaborative Our be continue

revenues of However, expenditures these for are companion and potential collaborative high-value essentially programs. programs associated R&D believe long-term service to development related the a the value development in we for subsidized expenses these HTG. The diagnostics

inbound profiling Although business. year, grow this and will program optimistic added confident to we liked to remain new be biopharma RUO that a would our have we have programs there we new as continue

We end grow, at QX. On grown we're XX our the a and and ongoing that with have in Europe, profile dedicated programs biopharma subject, biopharma to pipeline now active of sales progress. pleased our its have to specialist business continues

market rest will programs pipeline forward. of we our launch We opportunities the the continue year of our in autoimmune grow, finish in believe in both to clients We of later as panel biopharma per the the expect the XXXX. this planned to of going and number client also number further

a reminder, CDx are biopharma RUO system future As programs the feeder opportunities. our for profiling

make continue operational, to we and proprietary the in development first breast phase we've this great started our San facility. now our on of specifically program, efforts, diagnostic Moving our progress project. development is California new The to laboratory Carlos,

is expected to a product [technical the which used breast products. and KOLs positioned RUO difficulty] at be initial to Our be comprehensive define HTG IVD future [ph] will

We medical breast the will currently diagnostic then IVDs that unmet paradigm. and points follow with a treatment within address series of cancer needs intervention

of and [technical time. greatly expanded in difficulty] about Bay how in a not through partners. excited facility HTG providers short a other technology capabilities, very fast staff with how we've our and the far Area And We're come has such having amount only

of to to lead continue we region. the throughout Europe, work our users with adoption In products drive the

And We the U.S. the new revenues. are adding diagnostic done begin on we biopharma building but a franchise new we've strong with our surely specialists slowly just biopharma in increasing ground out expect our as customers, to and

business. to for recently, Most assays continue EdgeSeq HTG to our enhanced analysis Immuno-Oncology of Panel, the new mRNA our Panel. released contains we the X.X.X data software. the Tumor enabling drive bring to newly analytical market Reveal, Oncology announced Lastly, Mouse the and we The and release Panel, to capabilities Precision the version functionality profiling new release RUO continue Response Biomarker

and from Reveal This in graphical their updated share their to version to gained analyze experiments. then insights allows and present of their our model customers forms data, software their findings

sequencer-agnostic a assays more where adoption. a Torrent of manner, appealing in introduce to HTG compatible customers assays sequencing Ion them let's barrier SX released Fisher larger has completed the necessary This makes with Thermo the our of assays, with Cell Assay, procedures and also footprint. DLBCL This the potential two previously platform. in making Fusion these Lung eliminating Thermo our development a Origin RUO Europe, of work We our Assay,

the directly on summary, on business and elements we results our we're executing in plan delivering So can the that control.

especially strength and past relentless surge Our driving the quarter about at our business, excited RUO the strong of XXXX. second-half to are performance this continue We'll this revenue in core reflects profiling. in be business, very

the to to review financials. turn like I'd call a our for that, Shaun QX over With of

Shaun McMeans

Thanks, John.

of growth the in services revenue. pleased product product-related and extremely our are We

As by product which business, in revenue to total in million QX RUO services RUO services The was on earlier, revenue and and the in QX instrument the revenue our revenue for versus consumables increasing our product this product-related million profiling driver This for services $X.X included $X million success was in diagnostic $X.X million technology increase opportunities in of the and $X.X in compared John and XXXX, applications. and proprietary adoption compared shows XXXX. reach XXXX. primary into to same increases base of period strengthening profiling downstream highlighted of product led our extended

year, $X.X cost million versus revenue decreased continuing XXXX, our was $X.X in our at prior $X.X programs with QX from services anticipated, and million to we of reflect As product collaborative product-related in levels services development of continuing revenue Future Selling, revenue in revenue PDP $X.X in XXXX. customer to QX for activity services XXXX, relating the QX, lower decreased $X.X million QX, versus general, lower million administrative programs. million from in and XXXX. margin laboratory contracted ongoing million our in increased and QX to primarily $X.X reflect profiling to biopharma slightly expenses

diagnostic XXXX. of research This in in being from $X.X driven in the is and our QX, development proprietary R&D additional development XXXX. assays additional million Our expenses products primarily RUO to expense QX, $X.X by million and increased

in This development unrelated development services to is QX million research $X.X expense and million collaborative for of compared $X revenue. to in increase that's reflected QX XXXX

short-term $X.X for ended million million to million We QX, Our available-for-sale per QX QX $X.XX have common compared operating securities. compared for loss million and equivalents, was outstanding. $X.X XX.X share XXXX. cash, QX We of XXXX. loss stock $X.XX shares was currently in for Net to QX, $XX.X in with approximately cash

We restricted $X.X in also cash. million have

top The company providing to full-year guidance is the line million XXXX the for $XX million $XX revised range. in

reflect expectation services top for revenue of full-year the guidance our the to XXXX. the adjusting our for development lower are of We reminder prior end collaborative

year. to We continue XXXX in our compared I results our grow to to profiling look to QX revenue November. RUO reporting prior forward expect the

And point, for would this to call comments. closing to at like back John turn the I

John Lubniewski

you. Thank Shaun.

in to think As momentum. we're [technical off difficulty] an I excellent start XXXX, earlier, mentioned

continue are to We our ways. going three to in success measure

QX base to in strategy our we strategy. fund area business profiling on grow continue to continuing both look our ability operations First, validates create PDP our this to well as and believe surge will execute our to as We new opportunities. this to

the Second, look our and pipeline both pharma in and PDP grow customers of the we're number to going to projects. of number

positive we this Our and growth anticipate a reflects trajectory, will continue. year-to-date pharma program trend

and our Finally, our expanding European be model. adoption our we in quarter steady made show This the business our strategy customers, to positioned opportunities leader in we've diagnostic progress in technology business the solid molecular of is HTG grow by collaborations, We're look has [technical business. franchise, to against RNA out these that difficulty] second-half climb program, our in continues strong a breast and European validating execution profiling for strategy by expectations. been to our to and diagnostics pharma revenue diagnostic of and medicine. The energized precision our forward our business, year. growing building the executing another RUO and look our increased

to now to open call the up like that, questions. I'd With any

Operator

a We'll Instructions] Cantor from Fitzgerald. [Operator question session. you. Thank conducting now question-and-answer first is Jordan be from The Abrams

Jordan Abrams

guys. Hey, questions. taking the for Thanks

quarter that academic that Can and of Europe. color academic this on traction highlight customers, provide activity are last in you types out the of medical So, the highlighted seeing? coming with expanding RUO projects in and U.S. the you and quarter you're some those centers also

John Lubniewski

Oncology thousand Biomarker growth in programs, RNA-Seq our that surrogate coming And from we use as not doing they're cut because centers. by by only surrogate RUO and PDP the range Yes, areas, a get the academic comprehensive in medical thanks, growth using primarily well of one RUO in that medical driven centers, John. panels off is pharma. full can the are I European Precision This But using would also samples. Actually having, yes, this may RNA-Seq they from specifically as above two the expectations products, XXX to Panel is a profiling medical academic is tissue. that is as why cohorts those reason a centers being say, pretty Immuno-Oncology people Jordan. and driven our is of and the one, for increased, our but the Panel the It's

predominantly So leaders these are we're coming -- principal investigators. key opinion opposed as from to

business modest very performance actually and by we're expectations of us. going we year, very the So, into of excited had that line for the

Jordan Abrams

the to having about in you. MDx And biopharma over Good, switching Europe, then a talked you specialist. business thank

recurring like how Now you insight European into business? can with us have customers conversations seeing your in give you're going any [indiscernible], what you for potential capability are the or customers, Thanks.

John Lubniewski

Yes, to on we specialist actually had the we're sure a make in We've a put team; had always we U.S.-based so for was dedicated specials never talking just right, biopharma. Europe.

portfolio nice to that going and biomarker users same a regards the to With expecting have and translational countries programs question; on MDx, of think of we're pharma the up phase our that X is essentially the be of work. Assay. and build ALKPlus In all focused in we're that phase U.S., bringing to we our the in addition X the not lead are obviously up able and of size is big the core DLBCL of the I which but

-- run to clinically, as year had they're do last concordant they each different. year, they're that and them starting the to well This as to reimbursement, year to So studies. seek bring country was is the up

Europe, MiSeq to because Europe actually the XX% do U.S. we install predominantly they that a clinical. where has take probably SX comes it's In it Thermo an important than was clinically your the these as when Thermo Adding footprint in Thermo base. to we at products bigger least in Illumina compatibility started it's on found

So has forward move can barrier Thermo customers with now we equipment. that removed with been that approaching

Jordan Abrams

the goal? now. the lastly, of or projects Okay. pipeline And the end biopharma what's What's year for XX expectation so the

John Lubniewski

[ph] rigorous We'd it's list, we year understand. have expect activity to those programs hundred. from would trip of a would just up, or remove so if the to score back-of-the-envelope with like got a the close way we naturally if of number we people see we don't example, And that we into We've don't continue, XX just just these. that if for hypothetically very out. doesn't to that it because kind that And a program XX walked frame the always just

together. XX new words, So to us task get And of and how and put those re-up to we then in come on the to have of to going programs for find team, a the XX hit and that's hundred forward programs. that's pharma go XX, other essentially our we numbers have

Jordan Abrams

Okay, thank you. That's helpful.

Operator

The at Alex next Nowak from question comes Craig-Hallum.

Alex Nowak

around your assay, the since drug everyone. what your with the a we are drug? Great. go-forward what Good or failure failure was the investors had PDP afternoon talked here steps it Could if the here, happened a a one more you technology last color with failure indications if with we this partner? it John, some of And just was from provide Two. partners, from

John Lubniewski

things in it's Yes, mentioned a you good PDP so as big for before, actually, Yes, cuts are Alex. it is indications. program, Hope thanks, the Two across north. XX

are to this client do program three and But rescue forward what was And whether know. or go endpoint. on a I response versus The our think where how with at They're reach doing. with RNA, the moves has an not work strategy biomarkers, And of same. IHC. did IHC the was this competitors don't with no-biomarker this DNA, forward, continuing the and decision is well DNA rate we they're the they for were us. and not not the -- so it their looked indication to essentially lot a indication to then RNA a assay not predictive, They about its

We'll probably progresses. on as continue this know to more year the

assay is take However, going across it XX to it going trials. be -- play that three the out across couple, all this so it's been I as indications a indications which registration anticipate of start think I we to other this they to for years in think using now is validated. And the Two PDP by used

to short-term play. So anything going it's a be that's not

I of going as one think positive, we to the biomarker. readout a the it's have positive and using all would them is RNA expect eventually

Alex Nowak

don't Three, color to into any as Is this there. should confidence switching this companion program, over we Okay, can provide really ongoing anything there we PDP well, you that turn what's understood. be a And still have then what us, and diagnostic? that's watching program, just for to program your can timing,

John Lubniewski

went of PDP sample. four therapy. one, big also combination It's It's pause the Three because Yes, in they is a first-half This is that in it's types. a one different out the on of a more tumor narrow. product ran

of should type the of get. And are get a again, They I process year, with to end the they asked on data. the basically Whether sample then some or so our client. they ran trial end revalidate information for they -- more still guidance so for is had high this that That on client. us This assay back to those data now the don't expect the trying that going type. a we my enough to go by and the power don't generating out that's the big this we're priority the we pessimism, optimism primary is have of, -- project know. in FDA. different sample get this and a response truthfully that of I I mean we back

in of a black box. So working we're kind

Alex Nowak

XXXX or PDP a Okay we a at event a then, see PDP like understood. point? And should Four a this expect even 'XX this when Five, second-half event to this is more is

John Lubniewski

fairly see one bullish two pre-PDP in early Good I'm XXXX. progress. programs question. optics Thanks we one. that or we have that the Obviously on for will

Alex Nowak

then real two going when and quick, clinical cancer think your breast share more that menu rest And about the some you're markets, expect launch the do detail it. program just you more to the of into do developing? when you're got that internal Okay, you

John Lubniewski

provide we expect October, quickly to dates upon on out or you Another for great will and will line Analyst/Investor late clinical to still we'll panel, within up then a kind year product some the trying from early I think the clinical should the cohorts more that index couple that, depending that expect be have of that the we able next next can yes. that We're how weeks. question, right on us on early a be we now to to panel validation meeting of XXXX. do in hear Day We version XXXX early it's -- of for the bigger when so to product, on put RUO breast. at And -- able access

Alex Nowak

are that's the this just Shaun here, for good all plans that keep for have your forward? to here, ATM used one and then, want to you what facility Got and at quarter just it, you going hear,

Shaun McMeans

We used not but out it yet, have QX. utilizing in not we are ruling ATM

Alex Nowak

Okay, got you. it. Thank

Operator

comes question Leerink. from next The SVB at Puneet Souda

David Delahunt

for this additional your around programs that longer could I biopharma is color Puneet. expectation to any the into on get on guys, Dave wanted and Hey PDP there? your term expectations register stage,

Shaun McMeans

thanks, Yes, Dave.

As kind pipe watching the of moving of our mentioned, we pharma as of are partners are these are have and programs our what we -- have visibility XX kind these as are through doing. that

would one little That I that As two will didn't have new have next one there. year optimism we being that we I one have ones. mentioned, year, early I had you get great would new not this we expected disappointed know, said, have if

addition platform level are Two very biopharma that we've us. that PDP on graduate trials In to in-depth that, -- with technology that could we've of of established platform same that our us top potentially and of a really potential five currently with two doing two study client, a the to to that up got technology open our could lot

It's is a grow. because business out. this nice So, the continues grinded to

As into growth programs. in a the that I eventually graduate this XXX% think they for we this PDP mentioned, long-term RUO still over profiling, XX-plus quarter us percent and business of is

and proprietary diagnostics, which business us So completely that, simultaneous things to and out then, these Carlos San will And in generating our start of in as diagnostics facility. platform it going we companions. us kind keeps over obviously, control, will the our are are give technology, it builds of that coming time a premium

David Delahunt

programs? PDP Great. add And color these conversion any the you could projects was on of then, additional the hoping I into rate

John Lubniewski

open statistically bit move Yes, XX% it's PDP forward. unfortunately readouts, -- now, a well, we're to right

new think far, executing our losses a just the industry customers, adding so is number I -- of reputation we've have plan, to the but it's two-point publications we in So we're continues grow. we're lost

viewed leader think -- eventually think business get at tissue, gene we're we're homeruns. I of these a in while continuing from that's I a as profiling, we'll clip, and eventually grow one our nice especially expression to

David Delahunt

Thanks, Great. gentlemen.

Operator

question next The H.C. Instructions] [Operator Wainwright. at from Chen Yi comes

Yi Chen

you for taking for during should Thank my XXXX? look operating How we of expenses the remainder question. the at

Shaun McMeans

should the year. in tracking patterned more marketing of saw see the opportunities as in you've indication. certainly think see expenses in increases in our expense R&D We after essentially a where you and what you pursue increase think I first-half pipeline, selling, the I but and be general, operating we QX, in first-half -- pharma is SG&A I on the our some we think, pharma seen good

John Lubniewski

Yes, in mentioned, the outfitted as Carlos I first-half, we the basically San lab.

some, were there calm I would that. with associated say, one-time expenses So

probably same would increase spending. to move step not expenses. supplies, us spend will level see I but and We change in just of services any may still that It the like

Yi Chen

Got you. it, thank

Operator

management There time. turn are further I the closing for no questions at like would back comments. floor to to over this

John Lubniewski

I thank updating quarter, first our in our in like well, especially Yes, to our lab. at their of That shareholders VERI/O put to the the and employees support, work today, November. we continued just joining in their to especially I'd was look tremendous call for forward our earnings for all, thank base. Initially, they you here Thank particular, board again from and you. the in again employee next thank to really that us everyone this HTG I'd like like tremendous Also for questions. for work

Operator

today's concludes This conference.

at your your Thank lines participation. you time. this You may disconnect for

HTG Molecular Diagnostics (HTGMQ) 6 Aug 192019 Q2 Earnings call transcript