Hi, welcome to the Canaccord Genuity Global Growth Conference. I'm Kyle Mikson, and I cover life science tools and diagnostics for Canaccord. Please welcome me to a fireside chat with Akoya Biosciences. Akoya offers one of the leading solutions, instruments, and consumables for spatial proteomics. It has its sights on the large and lucrative spatial biology market. With the company, we have Brian McKelligon, CEO, and Johnny Ek, CFO. Thanks, guys, for joining us today. Thanks for having us. Thanks for having us. So, you just had, you know, Q2 results recently. Could you kind of walk through how the quarter progressed for you and any twists and takes, and where- Yeah you're expecting going forward? Yeah, I mean, I think for us, what we wanted to show coming out of what was a challenging Q1 is really good sequential performance and a path and return to both top line growth, but also meeting our bottom line objectives of being operational cash flow breakeven by the end of the year, and that's what we did. We did 23.2 million in the second quarter, which was a significant step up from the 18.4 million in Q1. You know, essentially flat versus prior, and that's kind of the trajectory we see as we get into second half is getting back to growth. 51 instruments in the second quarter, a pretty good step up from the 30 in Q1. In terms of the bottom line, so Johnny can speak to how we address that. Yeah, I mean, just part of the focus for coming out of Q2 and the rest of the year is really ensuring that we focus on that goal of getting to cash flow breakeven by the end of the year. As we exit the year and starting to focus on adjusted EBITDA is an important measure of the business going into 2025. Yeah, let me return to that. Yeah. I guess in the Q1 - Yeah ... there were, like, two main issues. You had the Center of Excellence that was kind of being stood up, I guess- Yeah for the past few Q1, sort of, and just created, like, a little bit of like a, an air pocket, I guess, in the first quarter. Yeah, yeah. And so that happened. Yeah. And then also, there were some biopharma trial, like kind of milestone revenue, I guess, that just didn't come through in the first quarter. Now, those... The revenue from that stuff, it's basically coming through in the full, like, within the full year, so it's in the guidance again. It's in the second half. That's correct, yeah. Okay. So that's good. However, the guidance was lowered for those year- Yeah the revenue guidance, and that was because Yeah You now have, like, a refined view of the outlook for the second half of the year, and it's just every comp- You know, if you have a couple of instruments, and you're, you know, you're in a kind of a, you've got a few trick pony, I guess, is the way to kind of describe it, like, you're going to be hit by these CapEx constraints. So maybe just walk through what you're seeing macro-wise with that, like, elongated purchase cycles and stuff. Yeah, it's yeah, it's. I mean, it's consistent with what everybody is seeing in the market, which is the degree of fidelity assessment and approval required on capital purchases is significant, and that's coupled to, you know, regions where there's some pullback in instrument funding as well. And so you put all those together, and what you have is an established pipeline of instruments with effectively a longer sales cycle, and so your conversion rates get impacted, as does your revenue. So that's essentially been an ongoing dynamic that really, I think for us, began to seed itself in Q3 last year and, you know, sort of has reached an apex here as you get out of Q1 and got through Q2. You know, does it begin to improve with rate cuts through the second half? We're certainly not going to count on it. I think optimism is not a plan. And so we looked at second half, and we looked at pipeline, and we said, "Let's just ensure that we looked at our cost basis, you know, coupled to that more challenging environment to sell instruments and respond accordingly." Because, again, you know, maintaining our commitment to achieving those bottom line goals were vital. And then 50, I guess, 51 instrument placements in the Q2 definitely is a step up from the first. Yeah. But, you know, I was looking at last year, it's like 78 a Q1 basically was what you were doing for some of the quarters. So, how do you kind of get back to- Yeah, so it's really the seasonality is quite stark if you just look back over the last couple of years. We went from, I think we went 57, 71, 69, 56, and- You had the new instrument as well. Had the new instrument that drove a lot of that. So, you know, with now selling the bundled PhenoCycler-Fusion, you know, getting to the mid-50s, kind of mid-60s, I think. Okay. We couple that with a really healthy margin base, a much tighter control on working capital as we've been making reagents internally, and as those reagents continue to move north as well, in terms of their quarterly revenue, with better margin on those. I think those are all the dynamics that get us excited, that the base business gets back to growth, the base business hits our bottom line goals, and then, as we'll probably speak to, look to the, you know, the midterm to begin hopefully layering on some of these clinical upsides to further catalyze that- Yeah -financials. Yeah. Definitely. So right now, in terms of like, you know, your win rates and your market share and all that stuff, it's not being impacted by anything out in the field, and you're still, you know, by far the leader, the first choice in spatial proteomics, for sure. Yeah, I mean, as we know, it's sort of a 100 million business, going to exit in the mid-60s% gross margin, you know, fairly balanced on the bottom line. There's been a ton of competitive dynamics and, as we discussed, self-imposed dynamics over the last 3 to 4 quarters, but, I think it's pretty stable. Competition isn't the driver here. It's really about our performance. Then on the bottom line, I guess, the margins, I feel like gross margin's been kind of like, you know, mid- to high-50s or around 60%, pretty consistently when you adjust it for some items here and there. Mm. But, you know, you made some cuts, a RIF or so forth, like, you know, kind of recently, to maintain this goal of operating cash flow break-even by year-end. Just what'd you do recently to kind of cut that, cut expenses to get there? Yeah, there's... So really across the organization, there was areas where we were able to look at, you know, did we have some effort that, that- ... you could call it being duplicated. For example, in R&D, in operations, we were doing things where we, you know, as we're developing content, some of that's being manufactured in manufacturing, some in R&D, and there's opportunities to kind of consolidate and clean a little bit of that up to take advantage of those bringing those costs out. And as we got the Center of Excellence up and running, there was actually, in addition, some sort of found savings. If you think about the work that it takes to manage a supply chain when everything is outsourced and you have multiple components within a supply chain, as well as the customer care and support and getting orders out, just by bringing that all in-house, it frankly allowed us to find some savings, even in the customer support, as well as R&D and operations. And so, in those functions, as well as other support functions, you know, we're able to find those savings to really continue to drive towards our bottom line objectives. Okay. So those like sort of like cuts, I'll just keep calling them cuts, I guess. Mm-hmm ... to like, head count and that sort of thing. Just general investments that may affect growth, but will that affect the growth of the product revenue line or more like our services? 'Cause I feel like you have a nice service business, too, that shouldn't be affected by that kind of a thing. So we, we made the decisions under the belief that our ability to hit our numbers and return to growth into next year can be done with the personnel that we have on hand. Look, you're always making choices between growth- Mm ... and achieving profitability. It's not binary. And so, you know, we made some specific decisions knowing that our growth going forward can largely happen within our reagent install base. And we have the capabilities now to really continue to drive that content. And with the more recent 2.0 upgrades to both the Fusion and the HT, we really have already sunk and delivered and are realizing the investments on the instrument side. So we don't require a whole lot of R&D on the instrument side. It's really about continued workflow improvements and content expansion, so our pull-through numbers continue to grow, as does our reagent quarterly numbers. Yeah. So Yeah ... I guess let's talk about pull-through- Yeah ... and I don't have all the numbers in front of me. Yeah. I think it's, like, mid-ish 50s for the PhenoCycler-Fusion- Yeah ... and then maybe, like, in the 30000 range per box for the, or I guess the, the- The HT, yeah. ... HT. HT. Yeah. So yeah, I mean, those are. They're actually kind of solid, like. I mean, it doesn't sound huge compared to some of the RNA companies- Yeah ... I,... I, I suppose, but I think it's good for proteomics. What's the HT expansion, I guess, and it's about workflow, but- Yeah, it's interesting, as you look at... Not to make it too complex, but as you look at the product line for our highplex instrument, for the discovery market, the PhenoCycler, it really is a heterogeneous population of instruments. Initially, when we launched that, it was designed to work with a third-party microscope, and then we launched our own microscope, Fusion, to go with that, and we upgraded that. So if you look at the pull-through across that heterogeneous installed base, it is the PhenoCycler with our microscope that's driving the most of the pull-through. Mm. So on average, though, we've seen that we've seen that pull-through number continue to move north, driven by largely the improvements on the workflow because of our Fusion instrument. And that, the pull-through on that is sort of in the mid 55000 range. I think last year we were talking in the, in the mid 40000 or so. So as we continue to improve the workflow, higher plex, more samples per unit time, those are the drivers for the pull-through increases. The HT pull-through drivers, you know, you know, certainly getting, you know, the, the full signature panels helps, but these are real step function moves that are gonna happen as we move farther and farther into clinical. You know, we can think about, in the future, layering in our, our HT revenue that's part of our services lab because it's a material number of samples to get run. Okay, and in terms of pull-through utilization, which, like, customer type is the most, I guess, the most, like... Is the highest pull-through? I don't know, it's—I assume that you don't have the most customers in, like, you know, the CRO segment, but maybe that's where, like, you know, maybe that's how we have pull-through. CROs and the HT are by far the largest. So how does that- Yeah ... what's the percent? Like, what is the, is it, is that over 50, 50,000 basically for PhenoCycler? On the HT, if I think of our largest CRO customers, they're routinely doing, you know, north of 100, 120,000 on the HT in pull-through. And then on the, on the PhenoCycler side, there's actually a number of different types of customers. A lot of these imaging cores or spatial cores, where they're serving multiple customers- Yeah ... you know, that's, that's an obvious example, but there are some academic institutions, some of the larger ones, where there is a significant number of multiple large-scale projects that get run on them. So we see it both in biopharma as well as a lot of the, a lot of the core labs on the PhenoCycler side. And some of our largest ones, I think there's a handful of that are actually over 200,000, but that's me from memory. How has the, like, kind of PhenoCode launch it has actually helped, I guess, pull-through utilization? The PhenoCode launch has—they have materially helped on the PhenoCycler side because with increased capacity to increase throughput, there's a desire to do higher plex. And the more ready-made content you have in a modular fashion, the more that's gonna help. So as we look towards the rest of the year, it's certainly rounding out that content, but also getting into other areas like neurobiology. Preclinical biology is a large space for us, particularly with mouse models. Got it. Yeah. I guess, what's the vision now, moving into kind of like really intense translational and then clinical? Yeah. I say the intense translational because it's like clinical trial. Yes. It's not quite like... clinical is like, like in the clinic, right? Where it's like, you know- Yes ... medical kind of terms. Yes. But when it's, you know, the Acrivon deal- Yes ... well, I mean, that's, it's been like, you know, a couple of years almost- Two years ... it feels like for that one. So what's-- we're closing in on something there. Maybe, like, just what's the update on that one? Yeah, I mean, they just announced this morning they're gonna present their data at ESMO. It'll be really interesting to see how much they disclose in terms of their progress because we sort of parrot them in terms of the timelines. Mm. That said, and we did say on our Q call, we are beginning to make targeted investments internally, to ensure that we're, we are fully prepared to support a potential approval of that and the commercial execution thereof. So we have to be ready for that well ahead of their potential timing. So I would say, I would say that's, that's sort of part one. And you're right, the characterization of the clinical market is advancing quickly. Our CLIA lab and our CDx team spent a ton of time with biopharma auditing our facility, spent a ton of time building up what are called clinical trial assays, the fully analytical validated assay you're going to use before you go into your clinical trial. So right now, I mean, it doesn't give you a lot because there's nothing to hang on to in terms of an announcement or a number on the P&L or balance sheet. But we are really at that transition point as we look to 2025 and beyond, where it's going to start to contribute, you know, not just to the top and bottom line for the business, but how people value us. Is there any risk that you would have, like, excess inventory, kind of like, you know, in anticipation of an Acrivon approval, but, like, they, they don't get it or something like... Okay. No. Yeah, there's not a buildup of invent- No. It's more the ensuring we have the procedures and the infrastructure in place such that we can support that. It's not necessarily a buildup of inventory, but it's making sure we can handle the volume that, you know, could come through. Whatever we do there helps the other partnerships. As an example, you know, clinical-grade software to support a pathology user interface, that's not something that we sell, nor our software partners sell. You know, that's something we've had to do, and that, that not only supports that effort, but it supports our other partners. Going through the process of GMP manufacturing of the ready-to-use components to go out on an autostainer, you know, having that methodology locked and documented not only helps that partnership, but other ones. So there really is a kind of a flyback, a flywheel and feedback loop from our success there and how it helps our other partnerships as well. Yeah, just like circling, going full circle, I guess, to the Center of Excellence, like, does that really help prepare you for, like, a, you know, clinical approval kind of thing, too? Yes, but yes and no. I mean, yes, it helps us have highly consistent reagents that are highly reproducible. Mm. People trust the value of the data from a translational setting, but it is not our immediate intent to take that manufacturing Center of Excellence and have it full GMP-grade manufacturing. That is something that we'll use a specialized firm for GMP-grade manufacturing, for CDXs. And what the NeraCare partnership- Yeah. Can you just, like, walk through that a little bit? Just the personalized therapies, like selection. Yeah. So, NeraCare has a clinical assay that's been validated over 10 years. And it enables the prediction of early-stage melanoma patients that are likely to relapse and transition to Stage III and Stage IV. So the ability to predict whether any of us as a Phase I or Stage I or Stage II melanoma patient would progress to Stage III or IV, that opportunity for biopharma partners gives them a chance to provide earlier intervention. And what the NeraCare assay did, it was able to predict those Stage I, Stage IIs that would progress. And so we are working with them and the pharma partners that they initially seeded to take their assay, which is a 7-plex, 7 IHCs, put it on one, and then we're in the process of discussing with a number of the key players in melanoma, this particular asset as a, as a label expansion in melanoma. Is that kind of a big opportunity for you, or is it just more of a validation? It's an enormous opportunity. You're talking about 240,000 melanoma patients annually that don't get treatment until they're Stage III or Stage IV. The ability to intervene earlier with an assay that has already shown the ability to predict those high-risk patients is significant. And so, as we look into 2025 and beyond, additive contributions above our projected financials include signing, you know, one or more deals with that particular asset. Gotcha. So, but NeraCare, they haven't really commercialized it, like, to that extent yet, or? No, they, they have run the clinical studies, they've established the clinical data, and then it's been licensed to us to go- Yeah ... commercialize it. Okay, gotcha. And then the partnership with, like, I think it was like Pharmtech in China. Yeah. I mean, it sounds like such a, it sounds like it's unclear how you could derive, like, you know, generate revenue from that, but it's also, like, a really interesting, like, proof statement in another country. So like- Yeah, so- Like- Getting regulatory approval in the China markets requires a really good partner like KR Pharmtech. But the process there is the opposite of what we just talked about. You essentially get what's equivalent of a Class II approval, a system approval first, and then you go through the process of establishing your clinical assay and its clinical utility. It's done actually in that order. And so we've completed that first phase, and now generally under their guidance with effectively a system that's based on the HT in China. Now, we're in that second phase of working with the KR partners to establish that clinical utility. So it's a 2- to 4-year walk before we realize on the instrument and reagent side, you know, the benefit of that. So it's really the first step. Other than just being, like, so far ahead and having these partnerships already in place, what really, like, sets Akoya aside and, like, apart from others to really, like, you know, advance this clinical spatial strategy? You know, a lot of it was initially just technical. Yeah. You know, the ability to get high-quality, quantitative fluorescent data, particularly immuno-oncology or the antibody-drug conjugate markets, where these very important markers all sit on the same cell. To be able to identify those and technically isolate those, those fluorescent peaks, that's sort of step one. That's the differentiator, is technically the ability to do clinical-grade multiplexing. And then step two is to ensure that we have a system that can show intra- and inter-site reproducibility, that's highly reproducible. And the third is what differentiated. It's under design control, and it's in a CLIA setting. And hopefully soon, the fourth is it's got an approval on it... as the first spatial signature. You know, all of those things kind of really help unlock it, and then I think the last one, in part because of our partnership with Agilent, you know, one could imagine that a large pharma would say, "Can Akoya really support an on-market companion diagnostic? They can sell RUO stuff, but can they support it?" I think we can, but we do have an opportunity through partners like Agilent to work with them on the commercialization side of a CDx. So all of that really helps de-risk clinical spatial for our pharma partners. So, Agilent and companies like Guardant, they have these, like, CDXs that may have taken time to like, you know, kind of like get market penetration. Yeah. For those that think that it's gonna take too long for it, for it to be material for you guys, and you're just kind of, it's just gonna take too long to really capture any kind of clinical opportunity. It'll take, you know, beyond five years, maybe, devil's advocate, what's kind of the response to that? You know, like, what's... Why, why would you benefit, even if it does take time, or, you know, that's not an apples-to-apples comparison, maybe? So a couple of ways to think about that. I spent a long time on the Ion Torrent side. We did pretty well in second place against Illumina. How about with Compendia? There was the Compendia. There was a bunch of things that we did, but, but when we started the CDx journey in 2015, we got our first deal. 2017, I wasn't there the next approval, and by, by 2022, you know, I think they're on something like 15 labels. The exact same dynamic is happening in spatial because of immuno-oncology antibody-drug conjugates. There is an absolute pressing need for multiplexing, and someone's gonna capture that. And capturing that, that revenue doesn't just mean having an approved CDx. Ventana's done an amazing job of building a revenue base on the pharma partnerships that lead to a CDx. These CDx pharma partnerships are—they're high single-digit, low double-digit in terms of million-dollar programs that are multi-year long. You get one of those, you get a second, you get a third or your fourth, on a cost basis, it's largely already there in our CLIA lab, that those projects generate meaningful margin and meaningful revenue, even if you don't have success. So CDx partnerships happen in two phases, really, three. You build a clinical trial asset, you validate it, you run the clinical study, you get paid milestones, you get paid per patient, and then you get an approval, and there's gonna be attrition. You're not gonna bat a thousand. And so signing more and more partnerships, you'll see our lab services revenue grow. You'll see things like, receivables numbers get really big. Those dynamics are gonna happen, and then if and when an approval happens, that's even more catalytic. So those are the dynamics of CDx deals. And in the meantime, obviously, making sure we have an efficient RUO business that can... That's what's in our model currently is the RUO business, right? Those are certainly upsides we're pursuing and hope to be able to achieve, but we wanna make sure we've got a business that can get to cash flow break even and continue to run even on our RUO business. And that's why so much effort has been put into trying to drive margin and ensure we're using, you know, our OpEx is used very, very efficiently, so that we can have that business to support these opportunities as they come, 'cause they may take a year, two years, right? We realize that. Yeah, this is like a long-term question- Yeah. Probably not really worth asking, honestly, but like, you know, given- Okay. -You're not really... Given, given that it could take, you know, you're not like transforming into a diagnostics company, I guess, we're not really, but, but you're definitely touching diagnostics- Yeah. -in some way, CDx and so forth. Yeah. You know, but a lot of DX companies are just burning cash forever. Yeah. It takes forever to get profitable. Yeah. You're going the other way. You wanna be profitable, you wanna be operating cash break even, like, really soon. When you have these CDx deals, I guess, and, well, not-- You have deals, but when they get approval, et cetera- Yeah, yeah. Is that a drag on cash, or is that No ... creative? No, it's, I mean, the reason why, in terms of our desire to take our portfolio to the clinic, the reason why we chose the CDx path, not just because it was just the obvious, the most obvious path, if you're not always dealing with first in human, but it de-risk a ton. It gets paid for, you identify your patient population, you've got a go-to-market strategy that's tied to a therapeutic. So these CDx partnerships are funded, and there's not, and there's not a cash outlay from our side. Got it. Okay. Interesting. And so in 2025, I guess let's just, like, kind of go forward and talk about that. I mean, is there any... I don't know, like, could there be interesting milestones from some of these- Yes ... clinical deals? You could, yeah. Like, is it more likely that there would be new deals announced? Is that pretty much a certainty, or could you, you know, announce some important milestones that actually sort of change the P and L, maybe, actually? I think both are possible. As we look at our guide for 2025, it won't include those- Mm. But both are possible. I mean, obviously, we've got to be, we've got to be prudent and diligent with our enthusiasm on clinical, because we don't want to... The core business is really the core business, which is, as we look to 2025, it's continuing to achieve our bottom line goals, you know, getting back to solid growth on the top line, seeing those reagents numbers extend and expand, and then hopefully layering on some of these meaningful clinical upsides. So, you know, looking at ourselves today as a 100 million company with, you know, likely exiting in the low 60% gross margins, with really a solid bottom line and a back-to- growth trajectory in 2025, layering on the clinical, that's sort of the foundation that we look at. Okay. Hopefully, the stock's not at 2 and change by then. Yeah, we hope not. I guess, you know, just last question: as we think about the RUO kind of core business really- Yeah pushing through and growing, we want, we want. We're focusing on that, obviously. It feels like it could grow on its own with the protein kind of Yes. So how much of that maybe, you know, in the next few years is gonna be based on just expanding into RNA or at least leveraging RNA in multiomics, like the Thermo- I think the latter is the best characterization, which is leveraging RNA as complementary. I think in terms of the real drivers, I think continuing in early 2025 what we've done in 2024, which is these incremental workflow improvements that are driving pull-through expansion and that are driving total reagent revenue increases, while we also invest in improving those margins. I think that, that's first and foremost the fundamental. I think multi-omics does become additive, but I think it's secondary. Got it. Okay. Yeah. Well, let's leave it there. Thanks, guys, for joining. This was great. Thank you.