Singular Genomics Systems Inc. (ticker: SG) has announced its financial outcomes for the second quarter of 2024, reporting a revenue of $0.7 million and shipping two G4 sequencing instruments. The company emphasized its commitment to supporting existing customers and preparing them for the upcoming transition to spatial sequencing with the G4X system.
Singular Genomics is gearing up for the launch of the G4X early access program later in the year, with a full commercial release expected in the second quarter of 2025. The firm also reported a lease amendment that has improved space efficiency and reduced long-term lease obligations by about $50 million, bolstering its financial position.
Key Takeaways
- Singular Genomics generated $0.7 million in revenue in Q2 2024.
- Two G4 instruments were shipped, with increased system utilization and consumables sales.
- The company is preparing for the G4X Spatial Sequencer early access program launch in Q4 2024 and commercial launch in Q2 2025.
- A lease amendment has reduced long-term lease obligations by approximately $50 million, enhancing financial flexibility.
- Over 50% of existing customers have shown interest in the new spatial technology, with a majority expected to convert.
Company Outlook
- Singular Genomics anticipates the commercial launch of the G4X Spatial Sequencer by the end of Q2 2025.
- The company is focused on maintaining current customer relationships and preparing them for the transition to spatial sequencing.
- Spatial technology access services program is attracting interest, with the company targeting 300 genes and a dozen proteins.
Bearish Highlights
- The company is not actively seeking to expand its customer base for sequencing systems at this time.
Bullish Highlights
- Positive feedback has been received from customers interested in purchasing the G4X system or partnering for services.
- The recent lease amendment is expected to positively impact the company's financial flexibility.
Misses
- Singular Genomics' revenue remains modest at $0.7 million for the quarter.
Q&A Highlights
- Drew Spaventa confirmed that the development of the G4X platform is on track with planned timelines.
- Technical challenges being addressed include optimizing protocols for various tissue types and simplifying workflow.
- Costs related to the Spatial Sequencing Technology Access Services are accounted for within the company's financial projections.
In summary, Singular Genomics is progressing steadily with its development of the G4X Spatial Sequencer and is preparing for a phased launch starting with an early access program. The company is optimizing its financial strategy through significant lease savings while focusing on technology development and customer conversion to spatial sequencing. Despite a modest revenue report, Singular Genomics appears to be advancing towards a pivotal expansion in its product offering with the G4X, which is anticipated to strengthen its market position in the genomic sequencing industry.
InvestingPro Insights
Singular Genomics Systems Inc. has been navigating the competitive landscape of genomic sequencing with strategic moves, such as the lease amendment to enhance financial flexibility. As the company prepares for the launch of its G4X Spatial Sequencer, it's crucial to consider the broader financial health and market performance of the company. Here are some insights based on real-time data and InvestingPro Tips:
InvestingPro Data:
- Market Cap (Adjusted): 18.04M USD, reflecting the current valuation of the company in the market.
- Price / Book (as of Q1 2024): 0.12, indicating the company is trading at a low multiple of its book value, which could suggest undervaluation.
- Revenue Growth (Quarterly, Q1 2024): -48.78%, showing a significant decline in revenue compared to the previous quarter.
InvestingPro Tips:
- Singular Genomics holds more cash than debt on its balance sheet, which is a positive sign for the company's financial stability and its ability to invest in future growth.
- Analysts do not anticipate the company will be profitable this year, which aligns with the modest quarterly revenue and could be a concern for investors looking for short-term gains.
It's important for investors to weigh these factors, including the company's valuation and its cash position, against the anticipated sales decline. For those considering investing in Singular Genomics, there are additional InvestingPro Tips available that could provide deeper insights into the company's financial health and market prospects. Currently, there are 13 more InvestingPro Tips listed on https://www.investing.com/pro/SG, which could further guide investment decisions in this evolving sector.
Full transcript - Singular Genomics Systems Inc (OMIC) Q2 2024:
Operator: Greeting. Welcome to the Singular Genomics Second Quarter and Business Update Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Philip Taylor.
Philip Taylor: Thank you, operator. Presenting today are Singular Genomics Founder, Chair, and Chief Executive Officer, Drew Spaventa; and the Company's Chief Financial Officer, Dalen Meeter. Earlier today, Singular Genomics released financial results for the three months ended June 30, 2024. A copy of the press release is available on the company's website. Before we begin, I’d like to inform you that comments and responses to your questions during today's call reflect management's views as of today, Tuesday August 13, 2024 only, and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other information related to our financial and operating results, plans, and strategies. Actual results may differ materially from those expressed or implied by these statements as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission, including our most recent Form 10-Q and 10-Q filings and the Form 8-K filed with today's press release. Our SEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements. Please note that this conference call will be available for audio replay on our website at investor.singulargenomics.com in the Presentations and Events section. With that, I will turn the call over to CEO, Drew Spaventa.
Drew Spaventa: Good afternoon, and welcome to Singular Genomics' Second Quarter 2024 Earnings Call. Q2 was a busy and productive quarter for our team. In Q2, we progressed development of the G4X Spatial Sequencer; initiated our first spatial technology access services projects; and add to our spatial pipeline of customers interested in services, collaborations and G4X instruments. We will focus our call on the following areas, one, revisiting our strategy following the pivot to spatial sequencing earlier this year; two, a summary of the second quarter results; and three, an update on the development of the G4X Spatial Sequencer and our spatial services. We announced a strategy shift in February at AGBT when we unveiled the G4X Spatial Sequencer. The G4X is being developed to offer readouts of targeted transcripts, targeted proteins and a florescent H&E stain, all in the same tissue section. In addition, its novel capabilities will include Direct-Seq, which is the sequencing of RNA in situ and has the potential to open new areas of scientific discovery. This combination of readout modalities will offer significantly higher throughput than any spatial profiling technologies currently on market. We continue to be encouraged by discussions with spatial experts and prospective customers. Spatial biology is quickly growing in many customer segments and throughput is a significant limitation. We believe that G4X will be uniquely suited to address these pain points and has the potential to accelerate growth in the spatial market. The business setup is encouraging in that we plan to deliver cost savings to our customers while supporting a high-margin sustainable business. In addition to the exciting development work to get G4X to market, we are focused on supporting our existing G4 customers, most of which we believe will benefit from our move to spatial and are poised to become G4X customers. Supporting and continuing to improve their G4 sequencing experience is paramount to our offering a second product into an existing customer base. The G4 and G4X share the same platform, which will allow for a streamlined upgrade process for existing G4 customers. Our strategy with existing G4 customers is to continue to improve their experience and facilitate higher usage with the G4 sequencer as we prepare them to convert to spatial sequencing when the G4X becomes available. We are seeing improved reliability and usage across the existing installed base. System uptime has been averaging 95% during the quarter. Average annualized consumable pull-through for the installed base was approximately $60,000 in Q2, which was roughly double Q1. In addition, we recently initiated the rollout of our V2 system upgrade package, which will include system performance and feature enhancements to further improve the reliability and usage of the system as we continue to prepare for conversion to spatial sequencing on the G4X. Now let's move into the second quarter results. We shipped two G4 instruments during the quarter and generated $0.7 million in revenue. Of these shipments, one was an academic core lab and one was to a commercial lab. One of the most important focus areas for us is to maintain our emphasis on supporting existing customers. We continue to see improvements in system utilization and consumables pull-through. Q2 was our highest quarterly total yet for consumable orders and shipments. Now let's turn to an update on our development of G4X. In R&D, we are advancing work on instrument method development, expanding the compatible tissue types and improving protocol performance for combined readout modalities. Our internal focus is centered around developing the G4X platform and optimizing the spatial sequencing methods and protocols. Our planned initial G4X kit offering will be our V1 immuno-oncology panel with 300 genes, 12 proteins and the ability to customize content. We are excited about the technology as we have continued to progress the development of capabilities and methods. In services, we continue to see growing interest in the funnel of service projects as part of the G4X Spatial Sequencing Technology Access Services program that was launched in the second quarter. Our strategy in services is twofold, to learn from running initial customer samples in order to accelerate product development, and generate customers that will buy the instrument and consumables when available. Our initial focus in services is our V1 immuno-oncology panel. The project submissions in our service funnel make it clear that a lower target flex, higher sample throughput offering is addressing an unmet need in the market. Several months ago, we opened a G4X Spatial Research Grant award program, which was well received by prospective customers and researchers from some of the top institutions across the world. We received over 50 applications from institutions interested in using the G4X in various applications, including cancer research, the study of autoimmune diseases, chronic disease research, cardiovascular and liver diseases, vaccine development and neuroscience. We look forward to sharing more information about the award recipients and our collaborations with these institutions to bring forward these exciting demonstrations of G4X applications later this year. Lastly, we are planning for our G4X early access program, which we intend to deliver late this year. This will include a select number of customers with early access to the G4X, the purpose of early access to both learn and incorporate feedback for broader commercial launch as well as to generate demand. Now I'll turn it over to Dalen to go through the details of our second quarter financial results.
Dalen Meeter: Thank you, Drew. Revenue for the second quarter of 2024 was approximately $0.7 million, predominantly made up of $0.4 million from revenue recognized on consumable sales and $0.3 million from revenue recognized on one capital purchase instrument placement during the quarter. Gross profit was negative $0.2 million in the second quarter of 2024 compared to negative $0.1 million in the second quarter of 2023. Our gross margin was negative due to discounts on G4 instrument sales, our use of the reagent rental and other noncapital purchase models, and higher costs associated with the support of system placements, partially offset by higher margins on increased consumable sales. Operating expenses for the second quarter of 2024 totaled $22.6 million compared to $27.5 million in the second quarter of 2023. These totals included noncash stock-based compensation expense of $2.2 million in Q2 2024 and $2.8 million in Q2 2023. The year-over-year decrease was primarily driven by a noncash expense in Q2 2023 related to a onetime adjustment in the carrying value of property, plant and equipment, and decreases in employee compensation costs due to reduced headcount. Net loss in the second quarter of 2024 was $21.3 million or $8.57 compared to $25.6 million or $10.58 per share in the second quarter of 2023. The weighted average share count for the second quarter of 2024 used to calculate net loss per share was approximately 2.5 million. Ending cash, cash equivalents and short-term investments excluding restricted cash totaled $133.2 million. Cash burn for the second quarter was approximately $17.5 million, which was sequentially lower than the previous quarter driven by the timing of cost savings measures implemented. Lastly, I wanted to take a moment to comment on the lease amendment that was announced last week. I'm pleased to note that we successfully amended a long-term lease obligation rightsizing our facilities footprint to better align with our operational needs. This move not only optimizes our space utilization, but it also reduces our long-term lease obligations by approximately $50 million. This amendment will enhance our longer-term financial flexibility, allowing us to focus more resources on development and commercialization of the G4X. The amendment included a onetime upfront lease modification payment of $4.5 million, which was paid upon execution of the agreement. As such, we expect our Q3 2024 cash burn to be higher than the second quarter. We do not expect the lease modification payment to have a material impact on our previous comments around cash runway extending to late 2026. Back to you, Drew.
Drew Spaventa: Thank you, Dalen. I want to thank all our employees for their hard work and dedication over the last quarter. We are excited by the level of interest from early collaborators and prospective customers as evidenced by the growth of inbound inquiries around our technology access services and research collaborations and growth in the sales funnel. The G4X' designed ability to read transcripts, proteins and a fluorescent H&E stain at scale will provide a unique solution in an exciting high-growth market. Where other spatial solutions in the market are pushing up on target flex, we see an unmet need for lower target flex and higher sample throughput. We look forward to updating you on our progress through the rest of the year. Now let's open it up for questions. Operator?
Operator: [Operator Instructions] And the first question is from Dan Brennan with TD (TSX:TD) Cowen. Please proceed.
Daniel Brennan: Great, thanks guys. Congrats on the quarter here and continued progress. Maybe could you start off with just time lines? I think you reiterated them just now, but just kind of walk through a little bit about early access and then about commercial launch. I think last quarter, you guys were discussing in and around Q2. Just can you guys confirm are we still thinking of the same kind of time lines right now?
Drew Spaventa: Hey Dan, thanks for the questions. Yes, I'll start off with time lines. We're just starting services now and in the midst of a few very exciting projects. We're on track to do our first early access later this year, probably end of Q4, and then we'll sequentially roll other early access sites in through the first part of Q1. And at this point, we are on track. We are planning to have a commercial launch towards the end of Q2 next year.
Daniel Brennan: Great. And then could you just speak to both, I guess, the pathway to the commercial specs, which you guys reiterated? And then as you had more customer’s kind of evaluating the product right now, just kind of walk through some of the experiences, I know you spoke about some of the Dana-Farber and Harvard, I think, on the last call. But just kind of how is the interest level? Just a little more granularity on that front. And then the funnel, I think, the last time you talked about maybe dozens of customers. I know it's not a firm kind of backlog, if you will, but just speak to kind of the interest level if you can as well.
Drew Spaventa: Absolutely. So we feel like we've really hit on something here based on the response that we've gotten both from services and from people interested in buying a system or partnering to set up services of their own. I think that will be something unique for spatial in the G4X that was different from G4 in that a lot of the customers we're talking with whether they're a large core lab or a CRO or a major oncology medical center. They are very direct and one of the biggest issues they have is throughput for spatial and cost per sample, and that's exactly what we're addressing. The feedback that we get is -- relates to very positive directional information on the scope of the product. And what I mean by that is we're targeting 300 genes, which is less transcripts than most of the other spatial platforms leased at this point and about a dozen proteins. And what most people have said is that's more than enough on the transcripts and the proteins, 300 genes. And a lot of times, it's less than 10 proteins people want to look at. But if you can do that in combination in the same section and you can do that at a lower sample cost point and more samples per run, that's exactly what they need. So we're really seeing that across the board in a number of different settings and applications. I think one other thing that is worth mentioning, if we segment the customer type into three buckets in sequencing, we have about 30 instruments out right now. The majority of those are in academic settings. There are two other segments that the G4X applies to that was a little bit different when we started talking with prospective customers. And one is CROs or contract research organizations that are providing services, in a large part, to pharma. And the other is going to be major medical centers, places where there's high throughput core labs that right now are doing pathology or looking at proteins and doing tumor microarrays. And that's another area where the cost and the throughput is prohibitive right now from scaling. And a lot of these places say things like we have 40,000 or 50,000 samples a year we want to run, and we run less than 10,000. And that's really a symptom of cost and throughput. So it's really encouraging. On the funnel side of things, both on the instrument side and the services, we have over 50 at this point. And it's kind of pointless to really count more than 50. What we're doing right now is trying to prioritize what are the projects that don't require customization or what are the projects that we can do as a pilot now that have larger batches of work to come behind them, and we're just trying to prioritize based on those factors on the services side. And then on the commercial side, I think we still have some time to think about that. We're still, again, not launching this until Q2. So very much, it's just put our head down and get the product developed in the place where it's robust and usable for external parties and in the meantime, try to advance services projects that we think have a long tail of work or could create a customer that buys an instrument down the road.
Daniel Brennan: Hey, I’ll sneak one final one in. Just in terms of from here to the TAP and then the full commercial launch, what are the biggest kind of technical or product development or manufacturing issues? I mean I'm sure there's a lot on your plate, but just wondering the level of confidence in kind of hitting these time lines and what needs to happen between now and then. Thanks guys.
Drew Spaventa: Thanks, Dan. Yes, a lot of it is optimizing the protocols to be as high quality as possible across all different tissue types. We're initially launching with six different tissue types. And tissue can be variable depending on how it was stored or how it was treated, and we're still understanding a lot about how our immuno-oncology panels of genes and proteins work across different tissue types that were stored in different conditions. So that's one part of it. The other part of it is really optimizing the workflow to try and simplify it where we can and make it as user friendly as possible. The workflow right now is similar to what's done with other spatial instruments in that there's a couple of days of pipetting, some overnight incubations, things like that before it's run on the sequencer, and we're trying to just understand each and every part of that to make sure that the requirements and the user instructions are clear, and the protocol is robust so that we have consistency in results. And outside of that, there's all the activities related to transferring the product into manufacturing, thinking about scaling it up, the informatics. I mean there's a lot to it, but it's all -- right now, the work's being done with the experience of going through the G4. So I'd say we've all been through this once a year ago, and I think we're eyes wide open. And we do plan to stay on schedule. So hopefully, that answers your question.
Daniel Brennan: Great. Thanks, guys.
Operator: [Operator Instructions] The next question comes from Matt Sykes with Goldman Sachs (NYSE:GS). Please proceed.
Matthew Sykes: Hey good afternoon. Drew and Dalen, thanks for taking my questions. Maybe just first, the step down in reagent rental placements from the last quarter. I think you did five last quarter. It was one this quarter. Should we think about that more as a function of the shift in resources to G4X and less so about sort of the demand environment?
Drew Spaventa: Yes. Our strategy right now is to maintain the existing network of customers and prepare them for a conversion. Right now we’re doing pathology or looking at protein engine. We're not actively trying to push and expand new systems for sequencing only. We're really focused on developing the G4X platform, maintaining and frankly, selling instruments at a higher ASP than the sequencer itself. So it is part of the strategy, really is maintain existing. And we aren't saying we won't put any sequencers out, but that's not our priority right now. Our priority is maintaining and getting spatial customers in the queue to buy the more expensive combined system next year.
Matthew Sykes: Got it. And then of the G4s that you have installed now with those customers, do a majority of them have interest in spatial as well? Like do you feel like that's a pretty good conversion rate you could get out of the existing installed base? Or are there some that weren't going to be doing spatial?
Andrew Spaventa: Yes. So about two thirds of them have said directly there's interest, and we assume fewer than two thirds will initially convert just to be conservative. But we have line of sight to a good number of initial customers converting probably very early in the product being launched. So the answer -- the short answer is yes. We think the majority of the existing customers will convert into a spatial customer.
Matthew Sykes: Got it. And just one more. The Spatial Sequencing Technology Access Services, that program, could you maybe talk about just sort of the costs you're incurring on that? And is it -- I'm assuming it's within, Dalen, the forecast of sort of cash runway and everything like that.
Dalen Meeter: Matt, this is Dalen. Yes, that's right. The cost that we're incurring related to the spatial services lab are baked into kind of the directional commentary around cash runway. Just to give you a sense, we've got an internal lab that we've earmarked several G4X systems specifically for services, and we have a small number of lab personnel that kind of do double-duty internal work but then also work on the services projects that come in as well. But all of that internal cost is baked into what we've talked about previously in terms of cash burn.
Operator: Okay. We have no further questions in queue. I'd like to turn the call back to management for any closing remarks.
Drew Spaventa: No further closing remarks from here. Thank you, everyone, for listening. I look forward to updating you on future calls. Thank you.
Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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