Hi, welcome to the Canaccord Genuity Global Growth Conference. Kyle Mikson, covering tools and diagnostics for Canaccord. Pleased to present our chat with Standard BioTools today. With us from the company, we have Michael Egholm, CEO. As a reminder, Standard offers a range of instruments and consumables for genomics and proteomics applications. So thanks, Michael, for joining us today. Hey, thanks, Kyle. Happy to be here. Yeah, so maybe, starting with the company's history, it's been kind of a, you know, I guess interesting, somewhat complex, like, you know- Yep. Lots of roads and stuff like that. So just maybe walk through the last couple of years for Standard, including acquisitions and stuff. Yeah, no, thanks for the opportunity to tell our story. So Standard BioTools was founded about three years ago with Casdin and Viking backing us to solve what we see as a problem here in the tool space, where most companies in this space really struggle with scaling and manufacturing instruments, supporting instruments, making products at healthy margins, building out a sales force. And we were basically created to build a platform from scratch. I got together initially a set of people I worked with before that I knew through my Danaher network. So we all believe in lean, and we believe that the antidote to one-trick ponies is that you need to have a platform. You need different technologies and then leverage the infrastructure. And then we were backed by Casdin and Viking, as I mentioned. We early on identified Fluidigm as an interesting asset. So it's a company that historically had fantastic technology in microfluidics, mass cytometry, but struggled with consistent growth, diminishing margins, and then an astronomical OpEx. But it was publicly traded, and it had a good following, so customers loved the technology. A lot of other areas for improvement. So we did a PIPE in... What was it? In April of 2022, which installed me as CEO, and I brought my management team in. And in a year, so we were able to take out very significant OpEx, get back to growth, fix all our legacy quality problems, and improve gross margins. So I think it was about 10% from 2022 to 2023. And then in January of this year, we did a merger of equal with SomaLogic. Similar, but different story. Beautiful technology. In fact, we believe it's, it's really the only scalable proteomics technology out there, but really no organizational infrastructure around it. And so we brought the two companies together, and so now we are six months, six months into that combined journey here. Okay, all right, awesome. So, you just had the second quarter results for the company, reported those with everyone else in the group. So, maybe walk through the pro forma performance for you in the second quarter, and then maybe just walk through how the first six months or so of the acquisitions kind of like, you know, impacted your financial results. Yeah, so we missed the consensus number by a fair amount, and so came in about $37 million in revenue. Consensus was around $48 million. The biggest dip here was in our SomaScan services, which was good in Q1, down in Q2. And what we're seeing here in the market, sort of the two aspects of it. One, more of a forecasting error than sort of a fundamental change. Again, all my challenge, of course. But it's also the nature of the SomaScan business, which historically have been reliant on a few customers, and now we're really focusing on the long term, our relationship with Illumina, our authorized side, and now making individual somas available to smooth it out. But it's... We knew it was gonna be like overly reliant on a few big accounts, which historically, SomaLogic have always been. On top of that, we of course have the CapEx headwind that everybody else is seeing. I'm coming off a really strong year. From 2022 to 2023, we grew our instruments, instrument sales 46%. And so tough year-on-year comp, and we're selling very expensive instruments, so we are seeing a slowdown there, but just building the pipeline. And as part of Q2, we also took down our guide for the year from $200-$205 to $170-$175. Approximately half of that was the instrument headwind, and the other half is, call it, better visibility to which projects are gonna come in this year or not on the SomaScan side. Okay. And then on the synergies from the Soma deal, I think you've, like, pulled forward the target. Now it's $80 million or so by end of the year, compared to, like, $40 million before. So what drove that? Yeah. So when we announced, we put out a savings target of $80 million, which is at a. We We used as the jumping-off point, the first half 2023 pro forma, where between SomaLogic and Standard Bio, we had a combined OpEx of a whopping $250 million. We have said that over a two-year period, we were gonna take it down to $170 million, which we believe is good basis to work off. And after Q1, I believe we announced that we were $50 million into it already. We had previously announced we're gonna do $40 million, now we're saying we've done another $10 million, and then we're gonna do the remaining $20 million here. We sort of developed an appetite for that, and already have sort of made good progress on that already, and now we see we can pull it forward, which of course then lowers our burn going forward. And as everything goes well and get a little bit of recovery, we'll get back to a healthy growth rate, and we'll be really well situated there. Okay. On these kind of like SomaLogic headwinds, I guess, SomaScan headwinds, just given the concentration in the kind of customer base and the revenue base, which is, I think it's pharma, pharma companies primarily, mm-hmm? Mm-hmm. So how does the Illumina deal to basically decentralize, like, you know, scale SomaScan kits, highplex proteomics kits, across the NGS kind of install base of NovaSeq, like, through instruments, how does that help kind of, you know, like, defragment, I guess, the base here? Yeah, no, so for, for sure. This is what we're generally excited about, and as, as much as it was tough for us to deliver, hopefully investors also saw my genuine excitement about the future and, and the Illumina relationship. The basic deal we have with Illumina is that they're gonna do the selling and, and marketing of our proteomic solution for all NGS-based readouts. We have a fantastic relationship with Jacob and the new management team there, and our interests are greatly aligned. What's also happened here the last six months is that the technical risk, the residual technical risk, I see it as essentially retired, and so now it's execution. Then what has also happened here, we knew of the data coming out, but now it's actually out in preprint, Josef Coresh paper. Josef Coresh from NYU, comparing Olink, which is the main competitor, 5K versus our 11K, and just show how our technology can scale, and our competitor's technology failed to scale. So I think it makes both us and Illumina really excited about that launch. They have 2,200 NovaSeq out there. It's a reach that just an order of magnitude, or orders of magnitude greater than we have. The other thing we've seen in the customer feedback and in our initial strategy plan we did when we came in, was very strong feedback that customers wanted it in their own hands, and that they wanted to use NGS. There's a very, very strong pull. So the combination of Illumina's technical excellence, their sales and marketing organization, and now these data points and more coming, that, that just absolutely show how we can scale. That, that is the key thing about the technology. Are there synergies between getting to those like, you know, I guess, genomics labs with a NGS instrument, with proteomics kits, and then kind of selling, you know, your core, like, legacy genomics instruments as well, and I guess, you know, consumables too? Is there, like, anything there? That's probably a stretch, but more generally, like making, like, so, like taking just one step back here again. Proteomics is really exciting because now we cover about half the proteome, like, with 10,000 proteins in our 11K Assay, and can really see biology at a level that nobody ever actually thought was possible. And the proteome is not static, so it's not like... Unlike our genome, unlike in the case of cancer, the immune system is, you know, one, and you're done. Proteomics is something that begs itself to do longitudinal studies, whether it's in clinical trials or eventually diagnostic, very long-term. So it's a really high growth market, and because that solution can scale, we're sort of excited about entering the post-genomic area. So we'll really dramatically grow, grow, grow the reads. We actually think that we'll probably help our service business also. So we have a white glove service business, which has been the only way it's been available, but there will be customers that like that handholding and getting the samples from the CROs and doing all the bioinformatics. So we see it as a very strong growth vector. Okay, there may be, like, one or two on this, on this deal again. So, is the price point much higher than the typical SomaScan, like, offering? And also, like, you know, can you, how much do you actually, you know, benefit from the revenue from this? 'Cause given Illumina is, like, marketing it, basically. Yeah, so the nature of the deal is more like an OEM relationship, so they carry all the SG&A, and so net-net, it will be good for us. But you have to look at it as on the P&L level, not at the top line revenue level. But important thing is here, this is an order, maybe orders of magnitude increase in reads, and is... We've not published the economics yet. We'll probably start talking about them when Illumina launches, and we can see that flow through to the bottom line. So it's kind of like the reverse of the Biomark, like agreement that you have with Olink? It's kind of like you're on the other side. No, actually, I would say it's similar. So it's the nature is an OEM deal here. We, except that we make the instrument- Yeah ... but we also make the consumables, the proprietary consumable. The IFC is actually where all the economics lie for us. The same way here, we're making the juice of the, like, 11,000 SomaScan and associated bead reagents. So in that way, it's very similar. With Illumina, we'll get a royalty as well. Yeah. Okay. But think of it as an OEM deal. So we've been very good partners to Olink. I think, hopefully, Illumina will tell you that we've been very good partners to them, and we have a third OEM relationship with NextGen Diagnostics, and working on others, so. Because I can't afford to build a big sales organization. I have a set of specialists, fairly targeted, but getting the help of Olink, now Thermo, much broader reads for our Q100 platform or their Q100 platform, that, where we are participating in the economics, and now getting SomaScan out on the Illumina basis, is good for us, so. Okay. I guess on that note, talk about the growth drivers within the genomics side of the business. And I know it's not growing super fast, but, you know, I think it was, like, approaching breakeven in recent quarters and stuff. Mm-hmm. Just talk about what's going on there from the financial profile perspective. Yeah, so like, about 20% of our business today is what we call genomics. It's the legacy, the Fluidigm microfluidics platform. So when we came in, we did a dramatic product rationalization. Went from several instruments, we think we're selling at least five, but maybe more, with different variants out there. We have one instrument now, the Biomark X9, and then we're manufacturing the Q100 for Olink. They all use a proprietary integrated fluidic circuit, which was sort of the main profit driver there. And so as Olink kicks up, as we're getting into new users, we expect some growth. The headwind we are having is that the legacy applications more on moving to NGS. NGS eventually took over a big chunk of what was that business. So the last... I think this year and last year, so far, we're down year-over-year, 6%, but once our OEM relationships with NGD and Olink, and then the new applications kick in, we should get back to some sort of formal growth. 5%-10% is what we are projecting, but it is still accretive to this day on a contribution basis. The margin, okay. And the NGD, like agreement or like collaboration. Just kind of expand on that. Dive into that. Yeah, so we are making a box that do bacterial library prep, and then they're using it in their diagnostic version. So for sequence-based infectious disease testing, it's super interesting. And again, it's with a team that had been there, done it before. Yeah. Okay. And what are the company's plans for, like, you know, clinical and kind of diagnostic work, you know, over the next several years, I guess? Again, that was definitely a focus of SomaLogic, for example. Mm-hmm. How are you guys thinking about it now? Yeah, so actually, all our technologies, the SomaScan technology, the Imaging Mass Cytometry, our immune cell profiling, I all believe have long-term clinical utility. In the short to mid-term, we are focusing on pharma, because the regulatory burden and the burden of proof you would have to move to clinical diagnostic is just so overwhelming. So we still believe in the vision, but my guess is, it's 10+ years out. Gotcha. Okay. And maybe... Okay, so I think, like, a big, like, strategy of the company was to be, like, a consolidator within- Mm-hmm ... you know, tool, I guess, kind of diagnostics over time, possibly. Is that on hold, kind of, like, given you're doing the synergies with SomaLogic and stuff, or do you-- But you have this, like, large cash base, so how are you thinking about kind of using that? Yeah, we have... Excuse me, my voice. We have just under $400 million in cash. Obviously, need some buffer. We need some cash to set some cash burn left before we are profitable. So there's something left in left there. And then we are obviously cultivating a large number of relationships. Most, like, most M&A deals take a year to two of cultivation, so I obviously cannot go out and do another diluted merger right now. I would, I think my shareholders will hate me if I do another dilution, but we think where we are currently is temporary. So we're doing all the legwork, but I won't do anything irresponsible. You think you're, like, participating in most of the, like, attractive markets in this sector, or is there, is there something adjacent that you have your eye on? Yeah, so 80% is proteomics, and I think we're really well situated with immune cell profiling, imaging, and plasma profiling with SomaScan. And we are now in a go-to-market effort that is really pushing in more to pharma and much more deliberate than we've done before. So we're leveraging that framework. We are looking at other technologies that either augment that or get in further in with a pharma engagement. But most importantly, on sort of the profile of tuck-ins. We are looking at companies, but so pharma that are not broken businesses. I can't sort of do the amount of work we had to do on Fluidigm and now SomaLogic. I can't do on smaller deals, but many attractive companies out there that meet that profile, good gross margins, and just need the operating leverage and, and the sales channels leverage, so. Okay. A few minutes left. Let's talk about, like, the outlook, I guess, for the year now. Mm-hmm. So kind of, you refined your second half outlook. There's two components of it, I would say. Instrument side, it's pretty clear. Yeah. CapEx is constrained, with those purchase cycles are gonna be elongated. You have really expensive instruments, Hyperion, I wanna talk about that. And then on the consumable side, and services probably, too, with SomaLogic, like, just seems like visibility is, like... Again, you're sort of, like, you now you have a better understanding of, like, what that looks like, the revenue for second half. Maybe just walk through the forecasting process, and, and starting with this, the consumables and services side, how, like, the visibility and the customer concentration is sort of just funneling into this kind of reduced forecast, I guess? Just, yeah, anything on that. Yeah, yeah. So again, the two components that we had on the- Yeah ... On the Standard BioTools side, we had a very standard and still follow that sales funnel management. We can see our funnels are building, and we can see that the sales cycles are elongated. Our ASP for our top-end instrument is hovering around $700,000, so it's not a simple sale, just to begin with here. And here, we're just seeing this continued headwind. We actually saw it already in the second half last year. We, while we grew well, we could see actually the slowdown relative to our funnels. On the SomaScan service side, we simply just did not have a good process with daily management, visual management, which is integral to how we work on when big projects were gonna come in. And so I had a lack of visibility, and I got lulled into a little bit of a false sense of comfort in Q1. Obviously, I had a lot to do in Q1, as we just took over the company, and we're doing our strategic plan and planning for the cost out. But we did well. It grew in the first half, and so, Sorry, the first quarter. So on a first half basis, it's more or less where one would have thought it'd be, but it was just some big projects here we were missing, and where there was sort of wishful thinking involved in thinking that these projects were gonna come in. For all of these projects, you need. It's just how it works in pharma. Your master service agreement, which we have in place for a handful of pharma, and then you need the statement of work, and then you actually need the purchase order, and then you need to get the samples almost exclusively from a third party, so a CRO. It's quite a lengthy process involved with that, and now we wrapped our arms around that. I did not have that in the beginning of the year. Mm-hmm. And then, on the instrument side, you just said you had, like, a lot of instruments that you sell, but, like, I feel like the Hyperion XTi, given it's, like, you know, in between $500-$1 million per box, like, that's probably a big driver of this, given it was such a growth driver last year. Yeah. Yeah, just talk about what's going on there, and just given, you know, spatial proteomics, not super competitive, I would say, 'cause, like, compared to the other side of spatial, like, yeah, what do you... What's that look like? I mean, you've got to be pretty excited about that past this whole CapEx headwind situation. Yeah, so, our position in spatial, I love it. It's. We can do tens of slides, up to 40 slides a day in 40 colors. It's just an order of magnitude higher throughput than anyone. And we're really competing with sort of two set of technologies, the other companies that do proteins, but they are. We do much, much higher data quality, like, by orders of magnitude, and then we do many more slides per day. So we feel we're really well-positioned there. Our instruments cost between 2x and 4x more than the competition. On a per slide basis, we're actually cheaper, but that's not how a scientist thinks, and so it's definitely two aspects there. We're doing price discovery. What is the right price for an instrument like that? And then, of course, we're developing a roadmap, so it doesn't have to be that expensive, but that's a multi-year exercise. I'm excited, though, about the roadmap on what we'll be able to do here. We're gonna... As part of the strategy now, we are augmenting our CapEx sales. So we have a good user base out there. I've not yet talked to a user of legacy IMC that does not want an upgrade, and so that actually will be enough to support our growth aspirations, and then I'm leaning into service to get that- Okay ... in between. Yeah. That sounds good. So I guess, like, finally, I know it's, like, we're kind of early on this, but 2025, it's gonna be an easy comp probably, you have this, like, second half-... and stuff. So when you think about, what do you... I mean, you're gonna have some Illumina kits, you know, revenue, so some of it's gonna revenue coming in. You're gonna have, like, some right-sized... I mean, hopefully, this CapEx environment gets better and everything. What excites you about next year? Any catalysts that people should be monitoring? Yeah, so obviously, I'm hoping we get out of this- Mm ... cycle we're in now, but I can't predict when that's gonna happen. We're truly excited about the Illumina launch, and then now, as we're putting our translational medicine offering together for pharma, like, combined with all our technologies, that's exciting. And then, I think we've not talked a lot about, but we are doing a minimal viable product launch of our individual SOMAmer. So I have 11,000 monoclonal reagent sitting. They're not ready to ship, but we're gonna begin shipping them, and we think it'll be an amazing complement to the antibody reagent market. So we haven't sized up that opportunity, and then obviously excited for the whole sort of post-genomics, proteomics revolution, which is just about to set in. It's super early still. Okay. Long-term growth rate for the company and margins, what are you gonna want to settle at? I hope we will grow at and above the proteomics market, which is 15% ±, yeah, once we get out of the cycle we are here. Okay. Sounds good. Well, thanks a lot.