Singular Genomics Systems, Inc. (OMIC) Q1 2023 Earnings Call Transcript


Greetings. Welcome to the Singular Genomics Systems, Incorporated First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to your host, Philip Taylor. You may begin.

Philip Taylor

Thank you, operator. Presenting today are Singular Genomics’ Founder and Chief Executive Officer, Drew Spaventa; and Chief Financial Officer, Dalen Meeter.

Earlier today, Singular Genomics released financial results for the 3 months ended March 31, 2023. A copy of the press release is available on the company’s website.

Before we begin, I would like to inform you that comments and responses to your questions during today’s call reflect management’s views as of today, May 9, 2023, 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-K filings and the Form 8-K filed with today’s press release. Our SEC filings can be found on our website or 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, in the Presentations and Events section.

With that, I will turn the call over to CEO, Drew Spavanta.

Drew Spaventa

Good afternoon, and welcome to Singular Genomics’ First Quarter 2023 Earnings Call. It was another productive quarter, and we look forward to updating you on the progress made across the business. We will focus our update on the following 4 key areas: one, commercial execution; two, market opportunity; three, operational execution; and four, our innovation pipeline.

Starting with commercial execution. I am pleased to report another positive quarter of commercial progress for the company, including new G4 shipments, an increase in the order book and increasing system utilization in the field. I am proud of the team’s work during the busy Q1.

We shipped 3 G4 systems during the quarter. This included 2 academic labs and a commercial clinical lab. We are encouraged to see the G4 getting traction across different customer segments, which we believe is a testament to the value proposition of the speed, power, flexibility and accuracy.

Our customer service and support team was actively engaged with system shipments, installations and trainings during the quarter, contributing to sequential quarter-over-quarter revenue growth as we recognized revenue on 3 G4 instrument placements in addition to shipping 1 reagent rental during the quarter.

Customer feedback continues to validate the G4’s value proposition as it relates to use cases in the field. For example, the University of New Mexico noted that, Overall, we are very pleased with the performance of the G4 and with the support we have received from Singular Genomics. Our core facility has many users doing different kinds of projects, and the G4 fits perfectly into that setting. We have successfully used the G4 for bulk RNA-Seq, 10x genomic single-cell RNA-Seq and for epigenetics assays like ChIP-Seq and CUT&RUN assays.

In addition, I recently had the opportunity to visit several customers and prospective customers in the Boston area. The feedback on the G4 was positive, and they were impressed with the fast run times, flexibility of 4 flow cells with individual lanes and quality of the system, noting the consistency of data across flow cells in a run.

Early customer utilization and the ramp into consumable pull-through is still in its early stages, and we expect this to increase over time as customers gain experience with the system and move more of their work onto the G4.

Consistent with the launch of any new and complex technology, we intend to continue implementing enhancements to the system which are designed to further improve usability and robustness. We expect this to support increasing utilization and consumable pull-through for systems in the field over time.

I want to sincerely thank our early customers for their continued partnership and support in our mission to accelerate genomics for the advancement of science and medicine.

Turning to market opportunity. We remain confident about our TAM, or total addressable market, and the G4’s product market fit. We continue to believe that over half of the roughly $6 billion NGS market today is broadly addressable by mid-throughput sequencers, such as the G4. This portion of the market is predominantly made up of about 2/3 research and translational labs and 1/3 clinical labs running applications such as targeted panels, RNA-Seq and single-cell RNA-Seq. The G4 addresses these customers’ needs and provides a compelling alternative in a market that is today largely served by a single NGS provider.

Our sales funnel is strong and growing, with triple-digit qualified sales opportunities. A qualified sales opportunity fulfills these 4 criteria: one, there is a specific need; two, there is budget available; three, we are engaged with the decision-maker; and four, there is a near-term timeline to purchase.

While the funnel spans a variety of market segments, we are seeing early traction with academic core labs. Core labs are often managing varying sample volumes and output requirements from a wide range of applications. The combined speed, power and flexibility of the G4 can enable these labs to optimize sequencing runs, scaling up or down based on the needs of their PIs’ experiments and delivering results in less than a day.

Beyond academic core labs, the speed and flexibility of the systems make them ideal for clinical research and commercial labs. We recently showcased the G4’s performance capabilities, along with some innovative methods and applications, at the American Association for Cancer Research Conference in Orlando. Here, we presented posters and data sets demonstrating the G4’s ability to deliver data with more speed, power and operational efficiency than any other sequencing technologies in the market for applications in cancer research, including rapid somatic and germline variant detection.

While the clinical market segment represents a smaller part of the sales funnel today, we expect this to grow over time as we increase our installed base, grow the number of customer reference sites and establish the G4 in the market.

Turning to operational execution. Our focus has been on optimizing the supply chain, streamlining the manufacturing process and continuing to improve the usability and robustness of the G4. We continue to execute on a foundational set of capabilities and infrastructure to support our next phase of growth in the second half of the year and into 2024.

In operations, we are taking steps to improve our G4 production capabilities. These steps include increasing redundancy and alternative suppliers for certain critical components and working with vendors to refine specifications and improve component testing. Internally, we are implementing additional QC testing for incoming parts, reducing the time required to build and bring up the G4 instrument and enhancing field service and support. We recently received ISO 9001 certification for our dedicated manufacturing facility in San Diego, a milestone accomplishment that represents our commitment to continual improvement in product quality.

Turning to our innovation and product pipeline. We are excited about the pipeline of innovations, including improvements in performance and specs on the G4, higher-throughput consumable kits and specialty application kits with novel content and workflows for specific applications.

We have started shipping F3 flow cells to early-access customers. The F3 flow cell will expand our consumable offerings on the G4, doubling the number of reads and throughput for the most widely run applications.

In addition, earlier this year we announced the launch of our Max Read kits for single-cell sequencing. This kit is designed to allow users to get up to 800 million reads per flow cell, or 3.2 billion reads per run. Max Reads provide a novel method to achieve NovaSeq-level pricing for single-cell sequencing on a benchtop system. We look forward to offering this kit in early-access format later this quarter, with a full commercial release in Q3.

With the F3 and M-Series single-cell kit both widely available in the second half of 2023, we expect to see an uptick in G4 system demand, as these highly differentiated kits provide significant value to a wide set of customers in our target markets. We also expect an uptick in reagent pull-through, given the higher data outputs and corresponding kit prices of both the F3 and Max Read kits.

And finally, we continue to progress the PX system, with a focused team working on the PX instrument and methods development. We are also engaged with several potential TAP, or technology access partners. We are collaborating with these KOLs to demonstrate novel applications utilizing the PX’s high-throughput in-situ sequencing technology to provide spatial information in single cells and in tissue. At this stage, we are busy in the lab working on the system and look forward to sharing additional updates as we continue to develop.

Before turning the call over to Dalen, I would like to provide some directional commentary on the 2023 outlook. We continue to believe a moderated deployment of systems in early 2023 is appropriate to lay the right foundation for sustainable success and prepare for a scaling phase in the second half of the year.

We are seeing a positive start to the year with respect to the commercial engine. Our sales funnel is strong, and the number of qualified opportunities is growing. We are getting early traction in the academic segment, with 6 of our 8 G4 systems in the field being placed in academic labs. We believe budget cycles in this customer segment will be more back end-loaded during the year, resulting in purchases in the second half of the year.

In addition, customer interest in our F3 and Max Read kits remains high for many of the opportunities in our funnel. We believe this will be a significant driver of adoption as they become more broadly available in the coming months.

Now I’ll turn the call over to Dalen to go through the details of our first quarter financial results.

Dalen Meeter

Thank you, Drew. I’ll start by covering the Q1 2023 financials. Then I’ll provide additional directional remarks on key metrics for the rest of 2023.

Revenue for the first quarter of 2023 totaled $863,000, made up predominantly of the revenue recognized on an additional 3 instrument placements during the quarter.

Operating expenses for the first quarter of 2023 totaled $25.4 million, compared to $22 million for the first quarter of 2022. These totals included noncash stock-based compensation expense of $3.1 million in Q1 2023 and $3.6 million in Q1 2022. The year-over-year increase in total operating expenses was driven primarily by scaling SG&A headcount to support our growth for the G4 launch.

Net loss for the first quarter of 2023 was $23.6 million, or $0.33 per share, compared to $22 million, or $0.31 per share, in the first quarter of 2022. Our weighted-average share count for the first quarter used to calculate net loss per share was approximately 71.9 million.

And cash, cash equivalents and short-term investments, excluding restricted cash, totaled $226.1 million.

Turning to comments on 2023, the G4’s value proposition is being validated through instrument placements and field discussions with our target customer market segments. Our team is supporting early G4 placements, installing new systems, training and supporting customers and working to drive consumable utilization. As expected, pull-through is in the early stages, and we anticipate learning more about early customer utilization patterns over time.

As mentioned by Drew, we expect sales to be concentrated in the second half of the year, resulting from budget cycles and commercial releases of the F3 and Max Read kits.

Regarding operating expenses, we are steadfast in our focused expense management. While we do expect ’23 investment to modestly increase in areas directly related to the G4 success, we intend to manage existing resources to provide cash runway into the second half of 2025.

Thank you, and back to Drew for closing remarks.

Drew Spaventa

Thank you, Dalen. In closing, I’m proud of the progress our team has made during the quarter with our earliest customer placements. The G4 value proposition is resonating, and commercial interest is growing in our target markets. We are taking the right steps to build the foundational infrastructure to scale our operations over the course of the year. We have a strong product portfolio of system improvements, new kits and an innovation pipeline that positions us well for the future. Our team remains confident and committed to driving long-term value by executing on our product launch, prioritizing key activities and investments to ensure continued innovation, meticulously managing expenses and building a business with sound fundamentals and a path to profitability over time.

Now let’s open up to the questions. Operator?

Question-and-Answer Session


[Operator Instructions] Your first question is coming from Tom Stevens, at TD Cowen.

Tom Stevens

So just a quick one on placements. So 3 for the quarter was about in line with consensus, it looks like, and you’re baking in a much bigger back half. Can you talk about maybe some of the manufacturing challenges you continue to see and maybe be more precise with some areas that you continue to work on? And then I’ve got some follow-ups on that.

Drew Spaventa

Tom, thanks for the question. This is Drew. I think, overall, we’re really encouraged where the system is and how the customers are using the system. On the manufacturing side, with a complex instrument such as the G4, it’s very common that you’re going to have learnings and you’re going to have a variety of ways that you’re improving the robustness, the reliability of the system and also incorporating upgrades such as additional kits, faster run times and run modes.

I’d say the core of what we’re doing right now is working on vendor management for quality control of incoming complex subcomponents. We’re also doing a lot of work doing quality control testing of those components internally before we put them into the instrument.

And then there’s also a number of learnings that after putting the first 4 or 5 instruments in the field back in November/December, you learn things in the field. There are small places where you want to make upgrades, change things to the system or the subcomponents. And this is just very natural. And part of the slower and moderated pace in the first half of the year is taking the time to really incorporate those changes and those improvements and make the most robust and reliable systems you can.

So it’s really just not one thing. It’s just all of the normal things that go with a complex system with many moving parts and making sure you’re assembling them and building them in a predictable way and working through all the challenges that are very typical. So it’s not one thing. We’re comfortable where we are, and it’s going to take time to harden the system and get it to the point where it’s kind of gold standard-level manufacturing efficiency like companies that have been doing it for many years with really large budgets.

Tom Stevens

Absolutely. That makes sense. So I guess, in terms of capacity for production in the back half, given the kind of slightly more aggressive ramp than initial, should we expect maybe mid-teens capacity is kind of where you’re at, at the moment, or going into the back half?

Drew Spaventa

Well, I think we’re very aware of the consensus numbers. And I think for the comments we made for the first half, it’s really kind of getting our feet under us, moderating the pace of deployments. And definitely, there’s a lot of demand out there. So it’s just making sure we’re ready to really scale.

In the second half, I think our plan is to be more in line with being able to have supply and demand kind of in sync 1-to-1 and kind of ramping through Q3 really into Q4. And we’re aware of the consensus numbers.

And again, part of this is making sure that as you’re scaling, you have the right field application support, technical support, you’re setting expectations the right way. And it’s all about the customer.

So yes, we believe capacity will go up in the second half, and it’s trending that way and so is demand. And I think the important thing is to make sure we scale appropriately so we can ensure our customers are happy and they’re successful using sequencers.

Tom Stevens

Right. And then just one last one, on the PX, if I could. So it’s great to hear you guided some TAPs almost ready to go. I guess, could you give any more color as to kind of what kind of projects they’ll be embarking on or what kind of checks they’ll be running the PX with?

Drew Spaventa

Yes, we’ll make a note to provide more color on the next call on this. What we can say is there’s 3 partners that we’ve kind of engaged with, all leading academic institutions and kind of KOLs in their space. And we’ve really picked a variety of applications that help demonstrate the novel capabilities of being able to sequence in cells or in cells in tissue that the PX offers. And we’ll work with those partners over the next few months to receive samples, run assays, provide that data to them and then to work with them to really show new capabilities and new things that the PX can offer that other systems can’t.

Over the course of the year, we’ll share more information on that. And again, I think we’re in a place where we have a very lean team working on it. So we really want to set expectations modestly on what we can do. We turned away many, many potential TAP partners just because we don’t have bandwidth right now, but we chose 3 that we think are awesome partners that will really be good examples of these novel capabilities that the in-situ sequencer offers.


Your next question is coming from John Sourbeer, at UBS.

John Sourbeer

It sounds like you’re having some success in the academic markets. Just any additional color when you’re going to those customers on where you’re thinking that you’re winning. And then I guess, how do you think the potential for the Max Read kit, when that is launched, how that could fit into those conversations with the academic labs?

Drew Spaventa

John, this is Drew. Thanks so much for the question. I think that the G4 value proposition just fits really well for the academic community. And if you think about how a lot of the academic core labs or even the investigator labs are doing sequencing, the ability to have fast turnaround times, which gives people the ability to take a sample, run an experiment and get data faster, mixed with the ability to scale up or down, to press Go; and what I mean by that is the instrument’s ability to run in sub-24 or 20 hours or even 15 for shorter kits, that’s one part.

But the part that’s equally important is that you can load up a single flow cell. You don’t have to fill up 400 gigs worth of run capacity. And giving them that ability to scale down and press Go; at a cost-effective price point is really attractive. And by the same token, a lab that has higher throughput or has more samples that come in, in a given day or week, they can fill up multiple flow cells or go to a higher throughput flow cell, and it doesn’t really change the cadence in which they’re operating their lab. So it’s just a really nice fit from a workflow and a usability standpoint for those labs.

And I think the other thing that’s really nice about the G4 is individual lanes. A lot of core labs sell individual lanes or they sell individual samples, and other sequencers don’t have individual lanes. So their ability to say, you can have a single lane out of a 4-lane flow cell on an F2 or an F3, and that’s only going to cost you $100 or $200 or $300; that’s very unique. It doesn’t exist somewhere else. Typically, people are buying much higher price points and they are forced to buy more data for a given run if they want their own lane.

So it’s really kind of providing a unique solution that doesn’t exist. That’s why I think the academic labs are so interesting.

And I think one other point is that the application set that we’re offering and the library partnerships that we’ve developed are all right in the sweet spot of most of what these academic labs are running, which is RNA-Seq, single-cell sequencing and then targeted panels.

So it kind of just fits on all fronts, and that’s why I think there’s so much traction and interest there.

Max Read and F3 is just an extension of what I already talked about. It’s just providing higher throughput and even better economics for labs that have maybe more volume or more variability in volume.

And then on the Max Read, specifically, for single cell, again, there’s a lot of single cell that’s done in the academic segment right now, and having that kind of capacity to get 800 million reads in a single flow cell at about $1 per million reads is just — it’s unique. It doesn’t really exist. And it’s a really attractive value proposition. A lot of the customers in the funnel are waiting for that. They’re saying, once you have that, I want the system. When will you have it? And it’s an exciting place to be, but also we want to get it out as soon as possible and capture those customers that have interest in that kit.

John Sourbeer

Appreciate that. And I know it’s early days, but now that you have placements out in the field, just any color you can find on learnings from those initial installs? Any areas that you could also touch on, like software, or just how those users are starting to ramp on the G4?

Drew Spaventa

I’d say, broadly speaking, we’re encouraged by the diversity of applications. That’s something that’s just cool to see, kind of different types of applications, everything from paired-end exomes and targeted panels to single cell to RNA-Seq and different library prep providers working on the system. It’s really cool.

Different customers are ramping at different rates. Some people are using the system, and we’re learning things much quicker when you see usage day-in and day-out in third-party hands. And I talked about that directly and transparently, that we are learning things about the systems that you only learn when you have somebody using the system at high frequency in their hands. And we’re taking all of those learnings, supporting the customer and incorporating that into all types of upgrades to the system.

On the software side, specifically, that’s an area where it’s pretty common with other systems and kind of the existing major player out there, that you will see upgrades in software over time. That can allow faster run times, better error handling. It could be a UI component. So there’s always going to be software upgrades that you make over time that improve and enhance the user experience. And those are also typical things that we’re working on, probably at a more frequent cadence early on with an initial launch than when you’re a hard and established product that’s many years in.

John Sourbeer

Got it. And then I guess, last one here on my end, I think you mentioned in your prepared remarks, Drew, that there was 1 reagent rental positioned through actually the selling cycle. Just any color there on the opportunity and how you think that could potentially expand some of the user base?

Drew Spaventa

It’s encouraging. I mean, I think we’ve talked about it before, that we want to have kind of a menu of options on how people could get a system. So we support, obviously, the sale of a piece of equipment. We have a lease option. We have a reagent rental option.

I think there will be interest in the reagent rental. We’re starting to see it — the traditional way and the majority of our interest has been in the traditional capital purchase. But I think the reagent rental is a really nice way that somebody could get into a system without money out of pocket upfront and with kind of a commitment over time to use this system that still has better economics on the consumables than if you were to buy a system and run a current mid-throughput kit. So it’s kind of like very attractive if you look at it in view or in context of what’s the existing offering on kind of a NextSeq benchtop system.


Your next question for today is coming from Michael Ryskin, at Bank of America.

Michael Ryskin

First one was just going to be a quick tack-on to the very last little bit you said there. I just want to make sure I reconcile the numbers correctly. I think this quarter, you said you shipped 3 and also like you accounted revenues for 3. In 4Q22, you shipped 5, but you also recognized revenues for 3. So are the other 2 that are part of the installed base now, are both of those reagent rental? Is that the delta? Or were there some that were sort of like really late in March that you just didn’t see the revenues from?

Dalen Meeter

Mike, this is Dalen. We had shipped 5 systems at the end of December, and in Q4 we had recognized revenue on 3. So 2 rolled into Q1. We recognized on those 2, shipped 3 new ones, recognized on one. One was a reagent rental, and the other one we’ll expect to recognize here in Q2.

Michael Ryskin

Fantastic. That’s exactly the bridge I was looking for. So that, just making sure 2 plus 2 still equals 4. All right. And then the real question then is consumables pull-through and utilization. I know you’re, given what you just said, you’re 5, 6 months to getting these boxes up. But anything you can say in terms of, like, the first customers out there? Are they reordering and reordering and reordering at a faster rate when it comes to consumables? Anything you can say in terms of when do you think those initial, initial placements are going to hit steady state from a pull-through perspective? Is that 4 quarters post shipment or install? Just to give us some idea of how to think about the consumables ramp over time.

Dalen Meeter

Good question. It’s still very early days, like you’d mentioned, right? So we’re learning about the utilization patterns. Our team is out there engaged with customers. And so we’re going to definitely learn more about how customers ramp up the utilization curve here over time.

The consumable revenue in Q1 was 34,000. So still pretty small. Predominantly instruments in the quarter, as you’d expect.

We do go through and offer discounts to some of these early customers. I think that’s pretty normal with a launch like this. Over time, I think as they get used to the system, comfortable with it, turning their applications over, more and more volume will start to move over there, and our teams are helping engage on that. And I think just as they understand kind of the value proposition of the speed and flexibility, that just adds more comfort to move sample volume over.

In addition to that, we’re going to offer the F3 kit more broadly, the Max Read kit. Both those increase the throughput and essentially the ASP on the consumables. So that’s going to, I think, be a nice tailwind for us once we get that more broadly issued.

But we really think about this as kind of a multi-quarter ramp-up. So that could be anywhere 6, 9, 12 months to get to kind of a steady state utilization. That’s how we think about it internally. But like I said, we’re definitely learning and we’ll share more as we see more customers running them out in the field here over the next quarter.

Drew Spaventa

Michael, just to tack on, Dalen mentioned discounting. Part of — I don’t know if he misspoke or he meant to say, but a credit of reagents for early customers. And as they go through their credits — obviously, we’re not booking revenue on reagents reflected in the realized revenue. But as people run through their reagent credits, it will start to show up as revenue as they ramp as well. So we kind of expect that to start to show up more.

Dalen Meeter

That’s right.

Michael Ryskin

Got it. Makes sense. And then a last one, if I could squeeze one more in. Just to make sure — I think this was cut in half, but I don’t know if I caught the answer properly. So I would appreciate the repeat. You talked previously about 2 to 4 shipments per month, definitely back end-loaded. Is that still the right way to think about 2023 overall for the year as a whole, even with the back half ramp? Or 2 to 4 as an exit rate for the year? Just it’s a number you’ve talked about the last couple quarters. I want to make sure if that’s the one that’s still on the table.

Drew Spaventa

I think in the last call we kind of redirected to kind of in the lower side of that and moderated pace for the first half, and then really scaling in Q3 and Q4. And beyond that, I think we’ve pointed to kind of the consensus numbers, and they kind of show a more appropriate scale quarter-to-quarter through the back of the year. So I think that’s kind of a good guidepost for how we’re thinking about it.

Definitely Q3 and really Q4, we see kind of a confluence of factors that lead us to believe those will be really strong quarters for us, and that’s when we’ll really start to ramp.


This concludes the question-and-answer session and conference call. You may disconnect your lines at this time. Thank you for your participation.