Akoya Biosciences, Inc. (AKYA) on Q2 2023 Results - Earnings Call Transcript
Operator: Good day and welcome to the Akoya Biosciences Second Quarter 2023 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. As a reminder, this call is being recorded. I would now like to turn the call over to Priyam Shah, Head of Investor Relations at Akoya Biosciences. You may begin.
Priyam Shah: Thank you, operator and thank you to everyone who’s joining us today on this call. I am Priyam Shah, Head of Investor Relations at Akoya Biosciences. On the call today, we have Brian McKelligon, Chief Executive Officer and John Ek, our Chief Financial Officer. Earlier today, Akoya released financial results for the second quarter ended June 30th, 2023. A copy of the press release is available on the company’s website. Before we begin, I’d like to remind you that management will make statements during this call that include forward-looking statements within the meaning of Federal Securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. For a list and description of the risks and uncertainties associated with Akoya’s business, please refer to the risks identified in our filings with the US Securities and Exchange Commission, including in the Risk Factors section of our annual report on Form 10-K for the year ended December 31st, 2022, filed on March 6th, 2023, and subsequent filings with the SEC, including our quarterly report on Form 10-Q for the second quarter ended June 30th, 2023, filed today, august 7th, 2023. We urge you to consider these factors and you should be aware that these statements are considered estimates only and are not a guarantee of future performance. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 7th, 2023. Akoya disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This audio portion of this call will be archived on the Investors section of our website later today under the heading Events. Akoya plans to participate in several upcoming investor conferences this quarter, including the Canaccord Genuity Growth Conference, UBS MedTech Tools and Genomics Summit; and the Morgan Stanley Healthcare Conference. Details can be found under Events on our Investor section of our website. And with that, I will now turn the call over to Brian.
Brian McKelligon: Thank you, Priyam and good afternoon or evening to everyone. We appreciate you joining us today. On today’s call, I'll provide an overview of our performance for the second quarter, discuss our business progress, and review our new product introductions. Johnny will then provide a more detailed look at our financials, business trends, and outlook. Akoya had a very strong second quarter of 2023, highlighted by record revenue of $23.5 million, a 31% growth over the prior year and record system placements of 72 in the court. Our cumulative installed base is now 1,064 spatial biology instruments, the largest in the industry. Akoya's stable growth and leadership in spatial biology is a byproduct of delivering a best-in-class portfolio of products and services that span the full continuum of market opportunities from early Discovery to translational to the emerging spatial clinical market. We provide complete end-to-end spatial solutions purpose-built to serve the unique needs of each of these customer types and market segments. With over 1,000 publications to-date and more than 80% of these in the last two and a half years, the transformative power of Akoya's solutions has been validated by our customers. As noted in our 1,000 publications press release this morning, our current PhenoCycler platform is driving profound advancements in the discovering markets, highlighted by recent nature publications from the Human Biomolecular Atlas Program or HuBMAP and the Human Breast Cell Atlas Initiative. We also continue to see robust growth in the translational markets with growing momentum within our biopharma and CRO partners as they leverage the PhenoImager HT platform to address their growing biomarker needs, especially in an in oncology and immunotherapy applications. Owning the full biomarker journey, using Akoya's continuum of solutions , first for biomarker Discovery studies with the PhenoCycler-Fusion, then validation in the translational setting and ultimately, clinical applications on the PhenoImager HT is a key value driver for Akoya's continued long-term sustained growth. As discussed on the prior call, we're making targeted investments in our business to drive strong revenue growth, while streamlining our cost structure as we move the business towards profitability. Our stated strategy during and following our IPO in April of 2021 was to make the necessary investments to rapidly develop and deploy an industry-leading portfolio of solutions, while in parallel, expand our organization and commercial channels to have the scale and expertise to drive successful product launches and secure a market leading position. The successful launch of the Fusion Instrument in 2022 was central to this strategy as it solidify our full instrument portfolio. We were also focused on enhancing and improving our PhenoImager HT platforms and the organization's readiness to serve the large spatial biology clinical market. Our progress here included for the HT system meeting clinical platform requirements for system of robustness and reproducibility, meaning regulatory quality standards, deploying our platform in a clean environment, including establishing a clear lab at our Marlboro headquarters, and securing our first companion diagnostic deal. From beginning of 2021 to the end of 2022, we succeeded in achieving all of our internal strategic objectives, while also consistently beating external financial performance expectations during this first phase of our multi-year strategy. The second phase of our strategy initiated beginning of this year, targets improving operational leverage, while continuing to deliver sustained topline growth, with a focus on system placement expansion and especially, driving increased reagent revenue. With the best-in-class instrument portfolio now in place and over 1,000 boxes in the field, we are focusing our R&D and operational initiatives on delivering workflow improvements and reagent solutions to our customers, enabling a broad suite of applications and higher system utilization and as a result increased instrument pull-through. Since the start of 2023, Akoya initiated efforts to expand our reagent menu not only with new content, but also with ready-made panels for both the PhenoCycler-Fusion for HiPlex Discovery and the PhenoImager HT for high throughput translational studies. These biomarker panels are part of the PhenoCode reagent brand and included our Discovery panels for the PhenoCycler-Fusion and the signature panels for the PhenoImager HT. The Discovery panels have a rolling launch throughout 2023, and are designed in a modular fashion of 10 to 20 markers, providing our customers the ability to easily combine a handful of these modules into a large HiPlex panel, while also including the ability to add additional Akoya catalog antibodies or their own antibodies of interest. The signature panels for the HT are designed to enable fast and scalable assay development and deployment for large immuno-oncology translational biomarker studies, resulting in accelerated HT utilization and an increased ASP percent. Along with the launch of these high-value reagent panels, we are also making additional workflow improvements on the systems and instruments to simplify the user experience and further accelerate data processing and analysis. The Fusion 2.0 instrument hardware and software field upgrade was initiated as of the second quarter. This upgrade includes a multi-slide carrier, enabling parallel processing of tissue samples with improved and faster fluidics, which effectively doubles the system throughput of the PhenoCycler-Fusion to 20 or more samples per week. The upgrade also includes the necessary hardware and software components to support R&M enablement. Field upgrades started with our first customers in June and we expect a significant percentage of our PhenoCycler-Fusion customers to upgrade by year-end. On the PhenoImager HT, we are also streamlining our informatic workflow and post-processing. In July, we introduced improvements to the HT that moves post-processing and tissue analysis workflow directly on to the HR for on instrument and real-time compute. This results in a severalfold reduction in both in image processing and turnaround time, delivering meaningful capacity increase, reduction in hands-on time, and workflow simplification. Now, as a reminder, Akoya's platform leverage on instrument image processing and file compression that reduces bio sizes from terabytes to gigabytes, delivering the data in a single standardized format. This standardization and the large-scale market adoption of our platforms has catalyzed third-party development of next-generation spatial biology analogist solutions to support our customers. To-date, we have partnered with leading software providers, including Enable Medicine, Visiopharm, Indicalabs, PathAI, and Oracle Bio, providing our customers with a range of desktop, cloud, commercial, and open-source solutions, allowing us to serve the full compendium of customer needs and requirements. We expect and intend for this trend to continue, while we focus our internal investments upstream. Coupled to the software partner network, our expanding content menu and workflow improvements will accelerate system utilization, reduce time from sample to answer, and drive increased instrument pull-through. We continue to make great progress in the downstream, translational, and clinical markets. At industry conferences like AACR and SITC, where the focus is on clinical relevance and patient impact, spatial technology and multiplex tissue analysis are seeing a rapidly growing presence and central -- are central to emerging clinical biomarker efforts, particularly in immuno-oncology. Akoya has led these efforts by delivering a clinic-ready program, driving adoption through our CLIA lab and CRO partners and forming transformative partnerships with true thought leaders, including Agilent, AstraZeneca, Acrivon, and more. We continue to expand this ecosystem. For example, our clinical market development and commercial team are leveraging the HT workflow improvements and best practices for advanced biopharma solutions CLEAR Lab or ABS to build a rapidly growing qualified CRO service provider network. This CRO network amplifies Akoya's presence and impact in the translational and clinical trial markets and like ABS, helps advance our companion diagnostic pipeline and opportunities. On the operational side of the business, we are rapidly refining and reworking our product supply chain and manufacturing processes to drive continuous improvements in our inventory management and overall margins, which we expect to approach 60% as we exit 2023. On the expense side, we completed a minor reduction in force across the company in the second quarter to optimize our teams after a period of rapid growth in 2021 and 2022 and to better align our organization and processes to achieve profitability. We further solidified our balance sheet in the second quarter, completing a follow-on offering with the $50 million in gross proceeds. To review, we're focused on the following initiatives throughout the remainder of 2023. First, continue to deliver new applications and drive further workflow and speed improvements to increase the reagent pull-through on the PhenoCycler-Fusion for the Discovery market and the PhenoImager HT for the translation on clinical markets. Second, continue to build and expand ecosystem with biopharma, medical centers, CROs, and diagnostic leaders to drive adoption of the PhenoImager HT in the translational and clinical research markets to support our companion diagnostic goals. Third, drive operational efficiencies and targeted investments to achieve cash flow positivity in 2025. With that, I'll turn the call over to Johnny to discuss our financial results. Johnny?
John Ek: Thanks Brian. As Brian highlighted, total revenue for the second quarter of 2023 was $23.5 million, a 31% growth over the second quarter of 2022. Our robust year-over-year growth reflects a strong portfolio with diversified revenue across multiple geographies, customer segments, products, and services. Product revenue, including instruments, reagents and software, totaled $17.1 million for the second quarter, representing 20% growth over the prior year period. Instrument revenue was $11.3 million for the second quarter, representing 19% growth over the prior year period. We had another strong quarter with 72 total instruments sold, of which were PhenoCyclers and 45 were from the PhenoImager portfolio. We ended the second quarter of 2023 with a total installed base of 1,064 instruments, which includes 300 PhenoCyclers and 764 PhenoImagers. A total of 181 Fusion instruments have shipped since the full commercial launch at the start of 2022 and we now have a total installed base of 159 for the combined PhenoCycler-Fusion system sold either directly as a combined system or as an upgrade to standalone PhenoCycler instruments that previously utilized third-party microscopes. Approximately one and a half years into the Fusion launch, the majority of PhenoCyclers are being sold in combination with the Fusion and we expect this combination to drive increased reagent pull-through with new content and even faster workflows. Reagent revenue was $5.8 million for the second quarter, representing a 29% growth over the prior year period. In the first half of 2023, we are seeing encouraging results of our emphasis on driving reagent growth. The annualized second quarter reagent pull-through has now increased to the mid-$30,000 range for both the PhenoCycler and HT as more PhenoCyclers paired with Fusion are up and running and as we see increasing utility of HT among biopharma and CROs, which are also our target customers for the recently launched PhenoCode signature panels. This is compared to an annualized pull-through per instrument in 2022 in the low $30,000 range for both the PhenoCycler and the PhenoImager HT. Given the ongoing dynamics across our end users, a growing installed base and our new product launches designed to realize pull-through expansion, we anticipate annual reagent revenue growth to be in this range for the next several years. Service and other revenue totaled $6.4 million for the second quarter, an increase of 73% over the prior year period. Services have been a substantial growth segment for us over the past several quarters as our installed base and warranty revenue expand and as our lab services are driving more and higher scale studies. Gross profit was $12.1 million in the second quarter, representing 17.2% year-on-year growth and gross margin was 51.5%. COGS totaled $11.4 million for the quarter, including a non-routine $2 million charge related to the expiration of materials purchased in prior periods to help mitigate against the global supply chain challenges and enable new reagent product lines. In the first half of 2023, we have made great strides to strengthen our operation planning and supply chain with improved systems and operational leadership as we plan for reagents to become a bigger part of our revenue mix. We will continue to scale and optimize operations and leverage our manufacturing investments to drive the expansion of our gross margins towards the 60% range in the second half of 2023. Operating expenses for the quarter totaled $31.4 million as compared to $29.7 million in the first quarter. Our continued efforts to leverage our cost structure to drive the business towards profitability are underway as we work to flatten our operating spend throughout 2023 and into 2024. As Brian mentioned, in the second quarter, we reduced our workforce across certain areas of the organization, which will moderate spend in non-essential areas and help ensure that a more substantial portion of expected revenue growth falls to our bottom-line. Included in our second quarter expenses was $2 million in severance and other charges with $1.1 million of this in cash, which stemmed from the expense reduction efforts. Excluding these charges, operating expenses decreased from Q1 to Q2. Akoya has developed world-class products, a robust operating infrastructure, and has streamlined commercial execution to drive topline growth. Our plan for 2023 is to focus on -- focus our targeted investments in areas that will generate the highest returns as we work towards operating cash flow positivity in 2025. We ended the quarter with approximately $93.3 million of cash and cash equivalents, which includes net proceeds from an equity raise in the second quarter and have approximately $11.3 million in additional available debt capacity. We expect to maintain robust topline growth throughout 2023, with increases to gross margin, resulting in reduced cash burn as we recognize operating leverage and continue to flatten our OpEx. Common shares outstanding and fully diluted shares including the impact of outstanding options and unvested restricted stock awards are 48.8 million shares as of June 30th, 2023. To summarize, we had another record quarter with $23.5 million in revenue, a 31% growth over the prior year. Akoya's total installed base is now at 1,064 instruments, the largest installed base in the spatial biology industry. We continue the rapid expansion of our installed base, while driving meaningful reagent revenue growth and pull-through increases. We have implemented critical organizational changes to improve efficiencies, drive gross margin improvement, and cost advantages to help recognize operating leverage, while maintaining robust topline growth. And finally, with an industry-leading volume of publications featuring Akoya's platforms now over 1,000, we remain very confident in our ability to deliver growth -- continued growth in 2023. Currently, we are reiterating our revenue guidance range of $95 million to $98 million for 2023 as we continue to see tailwinds for our business in the spatial biology market. Now, I'll turn it back over to Brian for a few closing remarks. Brian?
Brian McKelligon: Thank you, Johnny. We're pleased to report a strong quarter, announced multiple exciting and new developments across the portfolio, and we'll look to execute on them throughout the year as we drive the business to near-term positive cash flow. We're thankful for the hard work of our fellow dedicated clients as well as the support of our customers and shareholders. Akoya remains very well-positioned for growth, and we're excited about the opportunities that lie ahead as we deliver new space solutions from the Discovery to the clinical markets. And at this point, we'll open the call for questions. Operator?
Operator: Thank you. [Operator Instructions] Our first question comes from Kyle Mikson with Canaccord Genuity. Kyle, your line is open.
Kyle Mikson: Hey thanks guys. Thanks for the questions. Congrats on the quarter. So, first, I -- yes, no problem. I first just want to ask some stuff about Fusion. I mean, first of all, great instruments kind of strength here. What's the attach rate right now, Fusion to PhenoCycler? And then how would you kind of characterize the pull-through for the PhenoCycler-Fusion combined instruments? And then from this point going forward, every Fusion kind of bundle was going to be 2.0, right? Thanks.
Brian McKelligon: So, yes, let me answer those in serial. So, the Fusion attach rate is still well over 80%. It is way more common than not that when we sell a Cycler dose with the Fusion and while we're not calling out the pull-through on PhenoCycler-Fusion as a standalone relative to the PhenoCycler the third-party. If you just look at, Kyle, our top 15 to 20 that are maybe fivefold above that mid-$30,000 range, they're all PCF customers. So, consistent with what we're expecting, the PhenoCycler-Fusion pull-through is elevated well above those using the PhenoCycler with third-party scopes, which is why as we look at that total installed base, cyclers, it's about 300, a little more than half of those are attached to Fusion, huge opportunities going forward to continue to upgrade. And as far as the 2.0, that's cutting into manufacturing over time. So, we'll probably still do them as a field upgrade through the second half and then probably cut those into manufacturing more towards the tail end of the year, focusing on those field upgrades right away. So, a little bit of a hybrid.
Kyle Mikson: Yes, that was really helpful. And on the service and other revenue was higher than our model, not by time, but it was pretty strong. What's driving that? What kind of projects? Is it mainly the HT work or is there any Fusion work being done as well?
Brian McKelligon: Yes. Johnny, you can chime in, just remember kind of what's rolled into that services line. It certainly includes both our lab services as well as warranty, so we don't really yet carve that out. So, it's really a combination of both. Growing installed base, which means higher warranty revenue, especially when you have continued strong instrument performance. But it's also the services across the board, which includes our CLIA lab this is at ABS and the ongoing partnership with Acrivon in terms of both the latter are both continuing to advance with kind of larger scale projects with our biopharma customers through our CLIA lab and the continued advancement of the Acrivon CDx.
Kyle Mikson: Okay. All right, great. I thought Johnny was going to chime in. So, maybe last question on like the company's success outside immuno-oncology. I was curious if any of your more recent publications are kind of like veering outside the borders of I/O? And if I/O is going to remain like the main clinical use case for spatial or do you think like targeted therapies like the therapeutic as like the that could be like a wildcard kind of an important aspect going forward as well?
Brian McKelligon: Yes, it's a really good question. I think when we answered it, Kyle, as we take a look at the market segments where our products go. And in the case of the Discovery segment of the PhenoCycler, a lot of publications outside of immuno-oncology and oncology more generally, including areas like inflammatory disease and dermatological diseases. On the HT translation on the clinical side, it's still largely dominated by I/O. That said, it's worth noting that Acrivon leadership in the new therapeutic is in targeted DNA damage repair. So, that's not in I/O. But I would say that, Kyle, for near-term, there's still so much headroom in the sort of oncology I/O space with the translational clinical market, I expect we're still there for some time as you look at the advancement of that pipeline.
Kyle Mikson: All right. awesome. Thanks Brian. Thanks guys.
Brian McKelligon: Thanks Kyle.
Operator: Thank you. Our next question comes from Lucas Baranowski with UBS. Your line is open.
Lucas Baranowski: Hi guys. This is Lucas on for John Sourbeer here at UBS. In the past, you've talked about how the majority of PhenoCycler-Fusion customers aren't yet at full ramp in terms of utilization. I guess, is that still the case today? And do you anticipate that changing in the coming quarter or two?
Brian McKelligon: Yes, I think when we talk about full capacity, I just think it's rare, generally speaking, for any life sciences tool system to operate at full capacity. That said, what we do feel like, John, is we do feel like with some of these field upgrades with the improvement on, we'll call it, the bookends, more and more panels upfront and then the improved software partners. We do feel like, Lucas, that median is going to begin to shift to a larger and larger pull-through a number. I suspect getting full capacity is more of an idealized, but again, having a higher percentage of your customers, running this at a frequency that gets your pull-through from the mid-30s now, we continue to grow at a similar rate over the next couple of years is what we expect.
Lucas Baranowski: That's very helpful. And then I guess that kind of leads into my other question. The 2.0 upgrade clearly has started now. Is there any commentary you can provide on how that's going both in terms of how things are going on your end of it and also you know what you're hearing from customers? Thanks.
Brian McKelligon: Yes, I think, Lucas, it's still pretty early. As I noted in the commentary, we really -- in June, we started doing those field upgrades. But there's two things we look for. Number one is just a simple robustness of the upgrade in terms of install it and it works out of the box. That's going extremely well. And the second thing you look for is, is it having the realized utilization ramp where people are now prepping a lot more samples per week because they can turn multiples per day. I think it's still a little bit too early, Lucas, for that. But given the former, the robustness, we're pretty optimistic that our ability to realize those benefits and accelerate those upgrades as we're optimistic about that to second half and into 2024.
Lucas Baranowski: Great commentary guys. That’s all I had. Thanks.
Brian McKelligon: Thank you, Lucas.
Operator: Thank you. Our next question comes from Rachel Vatnsdal with JPMorgan Chase. Your line is open.
Rachel Vatnsdal: Great. Hi guys. Thanks for taking the questions and good afternoon. So, first off, I just want to talk about some of the performance by geography. China, I believe, is roughly 15% of total co-revenues. We've heard of a lot of weakness from other peers on the instrumentation and tool players from the sector in the retail. Can you kind of walk us through how did China play out? What was this quarter? How are orders trending? And then are you seeing any impact or benefit from some of the recent government stimulus programs?
Brian McKelligon: So, great question. While we don't call out China specifically, it is -- APAC is about 25% of our total. Generally speaking, it's probably a little bit less than that now and China is the majority of that. And we did see a material impact on the capital purchases through APAC negatively, obviously, because of the pullback of some of these interest-free loans, for example, that were happening in China. So, it did it did negatively impact our APAC capital purchases. That said, we've got a really nimble and talented team in Asia-Pacific and they're able to realize some growth and benefit in APAC outside of China. So, while we did feel the pain, it wasn't yet to a scale where it materially impacted our topline and on our performance for the quarter.
Rachel Vatnsdal: Great. Thank you for that color. And then just on the gross margin performance, it looks like gross margin stepped down a bit sequentially. Can you just kind of walk us through some of the drivers there, obviously, some solid placements this quarter? And then just on gross margins heading into next year. You guys have talked about the 200 basis points of expansion in tax for this year, how should we think about that translating to next as this becomes more and more of a rages consumable-focused business? Thank you.
Brian McKelligon: Yes, it's a great question, Rachel. And maybe we'll allow Johnny, the money man, to talk a little bit about margins and some of the unique dynamics in this quarter.
John Ek: Yes. Thanks Brian. It really was unique this quarter. Our standard margin as we sell-through product, really hasn't changed for -- on the downside, we really continue to expand that margin. What we saw this quarter was sort of a non-routine item where we had some expiring or expired inventory that we took the charge for in Q2. And this inventory was purchased a year to two years ago sort of at the tail end of the global supply chain lockup. And as we were in the middle of a high adoption mode, launching new products and really, that sort of -- that inventory came to sort of expire in Q1 and Q2. And so we took that charge in Q2 and cleaned that up. But to answer the second half of your question, we expect, and as Brian mentioned and I mentioned on the call, we expect sort of to exit into -- end of 2023 in that 60% range. And then we'll see the expansion, as we've mentioned, of a couple of hundred basis points into 2024. As -- and certainly as reagents make up a larger portion of our revenue as it continues to shift, we should expect that margin expansion related to that shift in addition to the internal operational improvements and efficiencies that we're working on.
Rachel Vatnsdal: Great. That’s it from me. Thank you.
Brian McKelligon: Thanks Rachel.
Operator: Thank you. Our next question comes from Mark Massaro with BTIG. Your line is open.
Mark Massaro: Hey guys. Thank you. So, you've now had, I believe, six quarters consecutive with services and other revenue exceeding 50%, which is great to see. I'd love to hear maybe a little bit more what's driving that and how sustainable you think it is? On the other hand, your reagent revenue growth rate has lagged your topline revenue growth rate for five consecutive quarters. I'm curious as to when you think the reagent revenue will start to sort of materially inflect or do you think that the services and other line will pretty much drive similar levels of growth for some time?
Brian McKelligon: No, it's a good question Mark. I suspect while we don't guide to this level of granularity, I suspect you'll see those trends start to change a little bit. I mean if you just look back over the last three years or so, in 2021, we're doing about $3.5 million in releases per quarter; 2022, that's up to $4.5 million; 2023, kind of we're in the high $5 million, getting close to $6 million. So, we're continuing that step function. And I suspect that we'll start to realize more growth there, Mark, as the 2.0 becomes a larger percentage as PhenoCycler-Fusion becomes dominant PhenoCycler third-party. And if a lot of these recent offerings that we're beginning to roll out throughout full year begin to have their impact. So, I think that's probably how I would look at that overall, Mark. And then on the services side, a lot of that, Mark, is really a combination of both the growing installed base, but most certainly, the realization of the revenue contributions for both the growth of the ABS and the continued productive advancement of our partnership with Acrivon. So, hopefully, that gives you some color.
Mark Massaro: Yes, that's very helpful. So, you guys have a lot going on with the 2.0 upgrade, the RNA scope. Obviously, you've got the signature panel. As we think about the panels rolling off, which of the -- rolling out, which of the new product launches do you think is most likely to be material in the back half of 2023 and which do you think will take more time to kind of become more material in 2024 and beyond?
Brian McKelligon: Yes. Yes, I really like to tell you, phrase. I think, Mark, that -- I think for me, as we get towards the end of 2023 and into 2024, I really think it's the signature panels on the HT that -- and again, this is sort of how I look at it. I think those have an opportunity to be material because the way those go, Mark, is there's a limited evaluation, and there's a bit of a validation period with our biopharma partners and CROs, and then they get to full implementation at scale. These are being evaluated for larger-scale projects. So, that's the one I look at -- that's the product line I look at to have more a step function impact then something like the 2.0 where you have kind of a gradual roll in over time.
Mark Massaro: Okay. Thanks. That’s it for me.
Brian McKelligon: Thanks Mark.
Operator: Thank you. Our next question comes from Tejas Savant with Morgan Stanley. Your line is open.
Edmund Tu: Hey guys. This is Edmund on for Tejas. Thank you for taking my questions.
Brian McKelligon: Hey Edmund.
Edmund Tu: Hey. The first question, just wanted to touch on the competitive dynamics here. With the proteomic side, with tax announcements that acquired and Ruger making a hard push with sales game, are you starting to see them come across them in your customer conversations? And how does this change the competitive dynamic on the protein side?
Brian McKelligon: Yes, it's a great question Edmund. I think I look at it two ways -- well, maybe three Edmund. I think it's a little bit early on the Lunaphore Bio-Techne side to look for potential impact. I think if you look at the narratives and the investments coming out of our colleagues at Bruker and Bio-Techne, I think -- I look at it as kind of an endorsement of the value of spatial proteomics and the Discovery market, which has been a lot of inappropriate so attention paid to spatial transcriptomics. I think the narrative and investments coming out of our colleagues at Bruker and Bio-Techne. I think even more accretive to the power of spatial proteomics as a true discovery engine. And so we're going to continue our eye towards a road towards multiomics. So, I think that's how we look at it. A little bit too early for the impact, particularly as it relates to the Lunaphore additional resources being part of Bio-Techne.
Edmund Tu: Got it, that's super helpful. And then switching to the competitive dynamics on the transcriptomic side, there's a lot going on with the litigation between your peers. But as of now, both of them are now announcing 5,000 and 6,000 plex by next year. So, I was wondering if you guys have any updates for your internal 1,000-plex RNA chemistry? And has this changed your view on your approach to the transcriptomic side at all?
Brian McKelligon: Yes, I think that as we've been articulating in prior calls and certainly at the last ADPD Conference, I think as we look at the market opportunity for us, we feel like for our installed base, for our customers, and for our core competency that exists today, for example, we just talked about in the proteomics side, we think there's huge opportunity and really in the multiomics space in more of a targeted fashion. We'll go ahead and let our friends at 10x and NanoString really go after these much higher plexes. Our focus is really, Edmund, on capturing sample velocity, experience per unit time, giving our customers the ability to churn through experiments in the 20 to 30 to 40, 50 samples in a week or two. And so that's why we're focused on the right amount of content for the right question, giving them the answer in a reasonable amount of time versus something that may be a very long protracted time result in a very expensive per sample. So, we're more focused in that multiomic kind of mid-plex range, Edmund, in this higher plex, thousands and thousands of transfers.
Edmund Tu: Great answer. Thank you.
Brian McKelligon: Thanks Edmund.
Operator: Thank you. Our next question comes from Tim Chiang with Capital One. Your line is open.
Tim Chiang: Hi thanks. Brian, I know you've provided three initiatives for the remainder of the year. Could you just talk a little bit about what you see the pushes and pulls are in the second half of the year to getting more biopharma medical centers, CRO customers, one? And then I had a follow-up question for Johnny on the gross margins.
Brian McKelligon: Yes, that's a good question Tim. As we think about what do we need to do to catalyze penetration in the biopharma side, whether it's for the PhenoCycler-Fusion or the HT, I think it's what we talked about in terms of our pillar number one on system utilization and pull-through. It's about investing in that full workflow, Tim. So, it's technician-friendly. Sample modules and panels ready out of the box, a very simple streamlined workflow on both the PhenoCycler-Fusion on with the 2.0, the HT with the onboard compute to get through that sample in a technician easy friendly manner. And then to come out the other side with a compressed data file and a number of options available to you in terms of analysis through third-parties. I think that core strategy on a simple workflow end-to-end ready to go, that's what our biopharma customers look for versus sort of investing in technologies and having to have some skin in the game on tech debt. So, I think we're there, and that's sort of number one. And I think number two as we look around having higher utilization downstream, I think what we're doing with our CRO partners in the CRO network really enabling them with best practices like we have internally and that's what we've done with our CRO network is really gotten them to best practices. So, when our biopharma partners are looking to outsource projects, they have a number of options available to them, including those that they've historically worked with. So, I think that's how I would focus on the biopharma penetration side, Tim.
Tim Chiang: No, that's good color, Brian. And then, Johnny, I don't know if this is the right way to look at it, but if I would have stripped out that, I guess, absolute inventory and taking out the $2 million charge, your gross margin probably would have been, what around 60%? Is that right?
John Ek: Yes, you're exactly right. That's the right way to look at it. These -- while there's always an element of inventory obsolescence or expiry that you'll have to be tracking, this was -- is pretty unique in nature, just the timing of when it was purchased and the nature of the world, the time from a supply chain perspective. And then to -- sort of the what now to make sure that we are driving that margin and we're fully leveraging our ERP resource planning, including expiration dating, excess inventory tracking, all those things you would expect, really, we've strengthened the operational leadership with folks who have strong operations experience, strong management of inventory. And so like you said, excluding this charge, we're at that 60% range, which is why we sort of said in the back half of the year, we think that's the range where we should be. Mix of revenue, as you'd imagine, moves margin a little bit up or down, depending on instruments, reagents, or service. So, that's always a factor that if we can predict our revenue well, then we have a real good view of margin. While we don't break out margin specifically by product line, certainly, those impact that margin, which is why we push for what we're going to do from a reagent perspective, that will drive as we grow reagents, we will drive that margin up.
Tim Chiang: Got it. Okay, that’s very helpful. Thank you guys.
Brian McKelligon: Thanks Tim.
Operator: Thank you. Our next question comes from David Westenberg with Piper Sandler. Your line is open.
David Westenberg: Hi, thank you for taking my questions. So, you have launched a lot of products on the year -- in the last couple of years that I would think would drive a pretty significant utilization. So, -- as we look at the content that you've launched, is there any specific ones you want to highlight that have been good contributors to reagent growth versus ones that were a little less than you expected?
Brian McKelligon: I don't think there's anything -- it's a good question David. I don't think there's anything I would call out yet. And mostly because if you look back, David, over the last two years, while there was a good bolus of additional content on the PhenoCycler in 2022 and that did contribute to topline, a lot of what we rolled out in 2022, which would impact 2023 pull-through was really on the platform side. And I think as you look at full year 2023, I think the balance between our signature panels for HT and then some of the discovery panels is where we'll start to see that impact. And I think consistent with Mark Massaro's question, we really think the step function for the signature panels is something that we might realize more explicitly than I would call the gradual rolling of what we're going to see for the pull-through on the PhenoCycler-Fusion as we get more 2.0s -- as we get more Fusion versus third-party as those Discovery panels rollout.
David Westenberg: Got you. So, I mean is there any way to kind of framework the adoption of that as major revenue contributors. So, I mean, are they dabbling in at first and then bigger and bigger experiments as we go on. And I get that this is you have -- or so worth of data here, I'm just kind of thinking about how reagents are going to grow over the next couple of years, and I think that would be helpful?
Brian McKelligon: Yes, I think there's two different -- generally speaking, two different adoption methodologies for the discovery market versus for the downstream transition market. On the latter side, it is really about a targeted evaluation of 10 to 20 samples on signature panels in deals like I/O. They do that because they have a specific large-scale scale clinical study in mind. So, we're at that evaluation kind of validation phase. Assuming we get through those, then David, you're talking about a big step function of large orders where they want to lock in a large kind of bolus of reads and orders for a large-scale retrospective or prospective clinical study. Those are step functions. And then I'd say on the Discovery side, you're really talking about a migration to larger panels as projects wind down and wind back up. So, those are the dynamics I would point to. With respect to the latter, I think that will probably average in more because the PSP panels are such a big bump in ASP, I think we'll realize that topline benefits more acutely than on the Discovery side.
David Westenberg: Got you. And again, that you bring up a good point. I mean there's two different platforms that have two different user kind of characteristics. So, maybe I'm just going to focus on one and then off-line, I can maybe talk about the -- or the other. So, let's just go with the PhenoImager, what kind of -- I mean, the customers that are using it to full capacity, I mean, what are kind of the characteristics of those customers and just in terms of projects or content or what not? And that will be my last question.
Brian McKelligon: So, if you look at our current highest user HT customers, they're generally made up of two customer types. A lot of them are CROs and increasingly so and that's what gives us a lot of excitement around signature panels because a lot of that is in I/O, and we remove their need to have to do any panel building because these are already made. So, CROs are a significant percentage of it as our academic institutions that are working directly across their institution in biopharma for large-scale clinical trials. So, those are the two largest customer base. And I would say I think for the earlier question, I think, from Kyle, a lot of these are on the HT Imager side are really still in the I/O, immuno-oncology immunotherapy space, which is why these signature panel content is so appropriately designed.
David Westenberg: Got it. Thank you guys. And great job on the quarter.
Brian McKelligon: Thanks David.
Operator: Thank you. And our last question comes from Mason Carrico with Stephens Inc. Your line is open.
Mason Carrico: Hey guys. On the Fusion upgrades, have you prioritized who gets upgraded first? Is it based on customer location, customer schedule? Are you targeting the highest utilization accounts first? Any color there would be great.
Brian McKelligon: Yes. We have, I'd say, loosely. So, it's mostly those that have high utilization and need the additional bandwidth. That is usually the case -- they have it or need it, they have scale or are scaling. Those are really the customers that we're looking at first. And that includes people that not only want the higher capacity, but not to get in the weeds, Mason. But the new -- the software upgrade that's going with the hardware also makes it a lot easier for our customers to put multiple tissues on that slide because we have the largest imageable area in the market and it certainly supports their productivity there as well.
Mason Carrico: Got it, that's helpful. And then within your ABS business, how is the pipeline shaping up, could positive data from Acrivon study in the back half serve as a catalyst, additional CDx opportunities? And how are you thinking about the pacing there of when we could potentially see the next CDx announcement?
Brian McKelligon: Yes, it's a great question. Your last one is sort of the money question that I will deflect for now because it's a tough one to answer and one that I probably wouldn't do explicitly. But yes, Acrivon has announced that not only Acrivon attract but they're going to at least to-date report urine results in the second half. So that will be really interesting to hear. I think one of the things that we've seen, Mason, as our expertise because of Acrivon, because of our partnership with Agilent and our ongoing success with the number of pharma. What's happened to our projects, Mason, is we've gone from exploratory studies at a reasonable size to larger retrospective studies to then an even larger retrospective-prospective ongoing study. So, I think what we're seeing frankly, Mason is a migration of project types from exploratory to getting even closer to those clinical trial assays. And in addition to the additional work and leveraging our capacity, it's in nature. It's the nature of those studies that I think we're equally excited about moving farther and farther downstream.
Mason Carrico: Got it. That’s helpful. Thanks guys.
Operator: Thank you. There are no further questions. I'd like to turn the call back over to Brian for any closing remarks.
Brian McKelligon: Listen, nothing additional to close on. We appreciate everybody's time, attention to detail. We're certainly excited by our results and look forward to continuing our priorities to drive system utilization to really advance our translational and clinical opportunities. And I think, as Johnny articulated so well is really drive that operational excellence on our path to profitability as we deliver on those other two pillars. So, thank you all for your time and your attention and we look forward to following up conversations and seeing you all again soon.
Operator: Thank you for your participation. This concludes the program and you may now disconnect. Everyone, have a great day.
A - Brian McKelligon: Thanks Michelle.
Related Analysis
Akoya Biosciences Inc Receives New Price Target from BTIG Analyst
- Price Target Adjustment: BTIG analyst Mark Massaro has set a new price target for Akoya Biosciences at $6, indicating a potential upside of 45.63%.
- Financial Performance: Akoya Biosciences reported a quarterly loss of $0.35 per share, showing improvement from the previous year's loss of $0.49 per share.
- Revenue Challenges: The company's revenue for the quarter was $18.35 million, missing estimates and showing a decline from the previous year.
Mark Massaro of BTIG has recently adjusted the price target for Akoya Biosciences Inc (NASDAQ:AKYA) to $6, as reported by StreetInsider on May 14, 2024. This new target suggests a significant potential upside of about 45.63% from its current trading price of $4.12. Akoya Biosciences, operating in the competitive field of biomedical and genetics within the healthcare sector, is under the microscope for its financial performance and market position.
Akoya Biosciences reported a quarterly loss of $0.35 per share, which did not meet the expectations set by Zacks Consensus Estimate of a $0.30 per share loss. However, this result, shows an improvement from the previous year's loss of $0.49 per share. Despite the miss, the company has shown some resilience by reducing its losses compared to the previous year. This performance could be a factor in the analyst's optimistic view of the stock's future, as it indicates potential for improvement and growth.
The company's revenue figures for the quarter ending in March 2024 were $18.35 million, missing the Zacks Consensus Estimate by 23.94% and showing a decline from the previous year's $21.41 million. This shortfall in revenue, alongside the reported loss, paints a challenging picture for Akoya. However, it's noteworthy that Akoya has managed to exceed consensus revenue estimates in three of the last four quarters, suggesting some level of unpredictability and potential in its financial performance.
The stock's recent performance, with a decrease of 3.40% to $4.12, reflects the market's reaction to these financial results. The shares have seen a wide range of prices over the past year, from a low of $3.04 to a high of $8.8, indicating volatility but also the possibility for significant gains, as highlighted by the new price target set by Mark Massaro. With a market capitalization of approximately $203.45 million and a trading volume of 118,482 shares, AKYA remains a notable player in its industry, facing both challenges and opportunities ahead.