Good afternoon, everyone, and welcome to day two of the Morgan Stanley Global Healthcare Conference. My name is Edmund Tu, and I work on the Life Science Tools team. Before we begin, I'd like to remind everyone that important research disclosures can be found at morganstanley.com/researchdisclosures. And with that, I'm very excited to have Mr. Brad Gray and Mr. Tom Bailey, CEO and CFO of NanoString, on stage with me today. Brad, I think you wanted to start with the presentation? That's right, Edmund, I appreciate you accommodating us. Given the recent volatility in our share price, the management and team and I decided to release this morning a slide set and file an 8-K, providing some updated information that we think will help investors understand the intrinsic value of our company. We've been having constructive investor discussions all day on these materials, and if you're following on the webcast, I'll just talk through the slides by number, so that you can follow along. We will be making forward-looking statements and using non-GAAP metrics, and we'd refer you to our filings on both those topics. I wanna cover three things that have been part of the investor dialogue in recent weeks. The first is our business trends, which I wanna clarify, remain strong and remain independent of the ongoing litigation activity. Our fiscal year 2023 guidance is intact, as is our Q3 guidance. Second is the patent litigation, which I know investors are challenged to follow, but today I wanna kind of give you a roadmap to that and also bound the downside risk for the company. And the third is financing, where we have a convertible debt that we are in the process of refinancing, and we wanna provide an update on that process and give you a sense of the type of credit providers that we're talking to and how they're thinking about the business. On Slide five, we provide a business trend update, and I guess the first thing I wanna say is, the momentum of our business continues despite some of the noise in the market. We continue to retain 97% of our overall CosMx order backlog, that's unchanged from Q2, despite ongoing litigation noise. And we're continuing to receive numerous CosMx orders, especially in the regions of North America and APAC, that are less subject to litigation risk. Today, we're reiterating our guidance for both the full year and the Q3. From a litigation perspective, as we flip to Slide six in the slide pack, I wanna clarify that, you know, litigation is a multi-step process, and given the jurisdictions that we have patent litigation in, it should be expected to play out over months and even years. There's a variety of possible outcomes to this litigation, but investors should not think about them as binary. There's a range of outcomes in each jurisdiction, there's a range of jurisdictions, and we have a multilayer defense that we feel really good about. In addition to the typical defenses of non-infringement and invalidity of patents, we believe that our specific circumstance means that injunctive relief is not appropriate, especially in the United States. In addition, in the United States, we've been afforded an unclean hands defense, as well as antitrust counterclaims, based on the way that our competitor has gained a monopoly, you know, given their approach to licensing. So, we believe there's a multilayer defense. We feel great about our prospects, and you know, we continue to prosecute those in the court. Now, flipping to the next slide, Slide seven, I wanna provide an update on the patent litigation that's really most active right now, which is in the new European Unified Patent Court, where we had hearings last week on September 5th and 6th. Now, this is a brand-new court, so precedents really aren't available. This is, in fact, the first preliminary injunction hearing that's ever been held in this new jurisdiction, and the focus is on a specific set of patents that relate that are being asserted against our ability to sell our CosMx Spatial Molecular Imager for RNA detection in these 17 countries covered by the UPC. The issues considered at last year's, last week's hearing, rather, were the validity of the relevant patent, the interpretation of the claims, and the appropriateness of injunctive relief under the current circumstances. We were very pleased with the level of engagement of the panel of judges on the topics, and we think it's clear that this is not a case where preliminary injunction is appropriate. Now, the hearings last week concluded with the panel of judges setting the expectation that a ruling would come sometime on September 19th, which is next week, following another hearing that we have and scheduled related to a different patent. Now, the patent litigation is tricky to keep track of, so on Slide eight, what we've tried to do is lay out the differences in patent law and procedure on the three major jurisdictions, where we have ongoing intellectual property litigation related to CosMx. The first is Germany, where there was an infringement trial that yielded an injunction back in the May timeframe. Germany is special, as we've said in the past, because in Germany, the courts separate the question of infringement from the question of patent validity. And we haven't had our day in court yet on the question of whether or not the patents that have been asserted are valid. In addition, German law defaults to injunctive relief as the primary remedy in any instance where infringement is found. So Germany is not prognostic for what was happening in the UPC or what will happen in the United States. Now, the UPC courts are brand new. They are structured differently. There is a simultaneous evaluation of invalidity and infringement. There is a set of technical judges, a panel of judges, including technical judges, who are involved, and the approach to injunctive relief does, in contrast to Germany, you know, balance the potential harm to the parties from granting an injunction. We don't know how it's gonna play out, and we'll talk about the overall level of exposure in the UPC, but that's, that's the differences in the court there. Finally, in the United States, we similarly have a simultaneous testing of patent validity and patent infringement. We have, of course, a jury trial in the Delaware courts, and we have a series of tests and relatively high bars that have to be met in order for injunctive relief to be granted, including a test that involves making sure that an injunction is not counter to the public interest. And in the specific facts of our case, where the inventor of the patents in question has in writing promised to make non-exclusive licensing, citing specifically potential harms to science from exclusion of people practicing these methods, we think the probability of injunction is relatively lower in the U.S. than in most other cases or in these other jurisdictions. But because the UPC is difficult to predict the outcome of, and we know investors are concerned about it, we wanna give you a sense of the magnitude of risk. So on our Slide nine, we show the overall exposure of our CosMx backlog to the 17 countries in the UPC. And as you can see, of the approximately 150 CosMx systems that we have in our backlog, which is valued at more than $35 million, only 11 of them are in UPC countries. And so overall, about 7% of our CosMx backlog is exposed to the outcome of the UPC hearing next week. Now, I don't wanna minimize the strategic impact of not being able to sell in these 17 countries long term. It would be a terrible shame for scientists not to have access to CosMx. But in terms of the near-term financial impact in NanoString, the overall downside is bounded. So let me now shift to the question of our convertible debt and our approaches to refinancing that. In Slide 10, on the slides that we've shared, we talk about the basic process that we're undergoing. We talked about this on our earnings call as well. We have active discussions with multiple parties to help refinance the convertible debt that is outstanding. Now, these parties take a different look at the value of NanoString than the public equity markets do. They tend to take a sum of the parts approach, where they look at the credit foundation that's provided by the predictable revenue streams of the nCounter business and the GeoMx business, which are our two more mature businesses, and they balance that with a substantial upside that's provided by CosMx. So these groups are sophisticated, they're under NDAs, they're in our data rooms, they're having a chance to look at customer-by-customer business trends, and I think they're able to arrive at a high degree of confidence about our ability to service credit in a way that will allow us to raise capital to refinance our debt. I wanna give you a little taste of what they're seeing in that data room. On Slide 11, what we've tried to do is disclose for the first time the relative EBITDA margins of the two portions of our business. In this slide, you can see the growth rate of our overall business over the last 12 months has been about 37% year-on-year, with an anticipated adjusted EBITDA margin of -40% based on our full-year guidance. But that's a tale of two very different businesses. So our nCounter business, which is the one that the financiers we're talking to focus on first, is a relatively stable business, down just 1% year-on-year, but with a 30% EBITDA margin. A very strong business that can continue, that's creditworthy and can serve as the foundation for any financing. And then, of course, our spatial business is undergoing explosive growth. It doubled from the Q2 of 2022 to the Q2 of 2023. Our guidance for this quarter shows that it will triple. So that provides tremendous upside for debt providers. So this particular look, that's kind of a sum of the parts look, is why we believe we're in a position to gain an infusion of capital that will allow us to retire our convertible debt. Finally, I wanna flip to Slide 12. So to give you a sense of just kind of how you apply the sum of the parts logic in more of an equity type of framework, where we're used to looking at things like enterprise value to revenue multiples. Compared to our peer set of higher growth life science tools companies in the sort of $100 million-$200 million range, NanoString is currently trading at a vastly depressed multiple that the management team does not think reflects the value, the intrinsic value of the prospects of our business. Specifically, the median trading multiple for this group, that's a 4x revenue multiple, and we're trading at 1. For just showing the potential upside, even if we were just to get back to the median of the peer set. In addition, if you were to totally drop the value of our spatial business and focus only on how you would value our enterprise on the basis of the nCounter revenue, we're looking at a 2.4x multiple, still just about half what the median multiple is of businesses in our industry, and certainly less than what you'd expect from a business that's got a 30% EBITDA margin.... So hopefully these types of analyses are gonna help our investor set understand our prospects in terms of our business momentum, our view of the bounded nature of the downside that's associated with our ongoing UPC litigation, and a sense of where the floor value is for the company overall, and our prospects for refinancing our convertible debt on terms that should be acceptable to shareholders. I hope this is helpful to all of you, and I'd be happy to sit down and take questions. Okay, thanks for that, Brad. I guess sticking on the subject of the litigation, your stock recently came under renewed pressure with the UPC hearing starting earlier this month. How much of it--how much of that do you think was driven by the mix of the German judges on the panel, including the judge that presided in your Munich case, and how much of that was driven by the topics discussed in the hearings? You know, that, that question is really impossible for me to answer. You know, the trading in the stock and the, and the days during the September 5th and 6th hearings was really hard to understand. Yeah, fundamentally, even if the hearings had gone terribly for us, as you can tell, the overall exposure of the business is only 7% of our CosMx revenue, which is or CosMx backlog, which is basically 2% or 3% of the whole company's revenue. So the kind of fluctuations we're seeing in our stock, on the UPC hearing, we believe are totally out of sync with the fundamentals of our business. It, some people might express a concern that if we lose in the UPC, ruling in the weeks ahead, that it'll make it more difficult to finance, refinance our, our convertible debt. I wanna assure you that the types of financiers we're speaking to are focused on nCounter first, GeoMx second, and CosMx third, and that our ability to refinance is really focused on the cash flows of those first two businesses and not, you know, the upsides and downsides of CosMx specifically. In terms of the composition of the court, yeah, you're right, there are two German judges, one French judge, and one Dutch judge. You know, I don't know... They're not applying German law, they're applying European law, so time will tell how those dynamics play out. Got it. And then, do you think the presence of technical experts on the panel and the fact that the validity of the patents came up a lot during the discussions would be, I guess, giving you confidence in that the rulings on the nineteenth would go in your favor? Well, I think they certainly help. You know, I think, you know, the validity questions about these patents are very real, and during the hearings, we presented, you know, multiple pieces of prior art. And it was critical to have a technical judge who's there, able to understand and interpret those. So the fact that we get to have a conversation about validity, and we get the expert opinion of a technical judge, is certainly helpful to our case. Got it. And, just out of curiosity, how are your conversations sounding with your customers in Germany and EU today, and are you still marketing CosMx in those regions today? Well, you know, we're in Germany, we're enjoined from marketing and selling CosMx for the purposes of RNA detection. So our activities on CosMx, we can still market CosMx for protein detection or protein analysis, but our overall efforts have scaled back massively in Germany. We are continuing to market and sell CosMx in Europe, in the other, I should say, in Europe writ large. In that half of Europe, approximately, market-wise, that's UPC related, you know, things have slowed. And I think you see that in the slide I showed about our overall backlog mix. What's implicit there is we've had, in the last few quarters, a lot of strength in North America and Asia, and candidly, more noise and slower order flow in Europe as a result of some of the ongoing noise. But there's a lot of Europe that's not subject to UPC. As you saw, half of the backlog in Europe is outside of the UPC jurisdictions. And, you know, business remains strong there. Got it. And you provided some color on some of the nuances between different jurisdictions, but why do you think an unfavorable outcome in Europe wouldn't be a precursor to a similar decision in, say, the U.K., or the U.S., or even APAC? Well, I mean, first, you have to look at where there are actually issued patents. So APAC is not a place where there are a large number of issued patents. I think intellectual property enforcement there is challenged fundamentally. So that's kind of a 30%-40% of the market that's pretty well insulated. In North America, as we described, they're applying different laws with a jury trial and a set of counterclaims and defenses that we don't enjoy in other parts of the world. So what the unclean hands defense in North America in the U.S. really means is, you know, Harvard and 10x cannot enjoy the benefits of enforcing their patent if, you know, their exclusive right to those patents came from bad behavior. And you know, that's a defense we don't enjoy elsewhere. And then, you know, the antitrust counterclaims really are related to what we believe people argue is an ill-gotten monopoly that 10x and Harvard have developed, you know, that involved, among other things, violating their contract with the NIH, and exclusively licensing patents that they had promised to share non-exclusively. So, those are two totally different defenses that don't exist in any of these other jurisdictions. And that's part of why, you know, it's hard to extrapolate prognostically from Germany or the UPC to the United States. Got it. And then, I guess, looking at the United States, it's pretty rare to successfully link a failure to comply with commitments made to open source licensing in NIH grant to actions which actually constitute as violations of antitrust laws. So why do you think you'll be able to succeed here? Well, look, just because there haven't been a lot of cases on it, doesn't mean that the law doesn't apply. Mm-hmm. I'm not aware of any other cases that have precisely the same facts and circumstances as this one, where a researcher committed in writing to non-exclusively license a technology and then went back on that commitment to tremendous personal financial gain and, you know, their institution's financial gain. Got it. And then, I guess, switching gears to some of your recent business trends. Your backlog and order momentum for CosMx continues to be impressive. What's driving some of the strength here? And can you talk to some of the dynamics that you're seeing in ASP and bundling deals? And how are you, I guess, reacting to more aggressive pricing dynamics from competitors? Yeah, I think, you know, CosMx demand remains strong in all the ways I described. I think when customers choose CosMx, they often do so on the basis that it is the highest plex of the spatial imagers, looking at 1,000 RNAs today, going to 6,000 RNAs in the Q1 of next year, which is 2.5 times what the competitors are offering today, going to, I don't know, 15 times what the competitors are offering. And it's the only platform that really provides RNA and proteomics on the same platform. And that proteomics piece is integral to our ability to segment and probe cells, and finding their boundaries and accurately assign RNAs to each individual cell. So I think it's on the merits of, you know, the product itself that we have strong demand. Pricing trends have been very stable for CosMx. In fact, our ASPs are going up, as bundling was more common in the early days of the CosMx launch than it is today. So our net, our ASPs, you know, netting out the bundling impacts, have actually been increasing. Got it. And then, I guess, you talked about plex just now. With competitors launch, announcing their roadmap to the 5,000 plex, have you seen any changes in your order momentum? And I guess, more importantly, going forward, could plex become less of a differentiating factor? That, I think, we have not seen any change in customer interest based on our competitors announcing plans to have higher plex panels. We think we're ahead of them in both time and in, you know, the credibility of our ability to deliver that kind of performance. Time will tell the degree to which plex, you know, normalizes across other platforms. I mean, I'd say intrinsically, our chemistry has some characteristics that we think will allow us to drive plex as far and as fast as anyone. You know, unlike other chemistries, CosMx's chemistry does not involve amplification. Mm-hmm. When you amplify, you create very large dots inside, fluorescent dots inside these cells, that tend to overlap and become hard to distinguish. That limits the number of RNAs you can look at in a given cell, and therefore, plex. By having a non-amplified chemistry, we believe we can. We have already demonstrated we can be the plex leader, and we think we'll stay the plex leader. Got it. And, I think Joe might have alluded to whole transcriptome CosMx data, AGBT, in 2024. So based on your track record, would that be something we should expect in 2025? Look, we, Joe's obviously made no secret that we hope to push plex as far as we can. You know, the holy grail is single cell and whole transcriptome all together in a spatial system. We're not making any promises about AGBT, but you can rest assured that we're working hard to push beyond the 6,000 that we've already demonstrated. Got it. And then, you just talked about proteomics or protein capabilities earlier. With your 6,000-plex, you're bringing that up to about 120. I was just wondering, how much of this is being used for cell segmentation and morphology, and how much of this is actual customizable protein markers for customers? It's both. So, I think the first order impact is on the segmentation side, where being able to use protein markers to find the boundaries of individual cells, allows us to much more confidently assign RNAs to individual cells than the other platforms can. And you can, you can see that in the data today quite easily. But over time, I think the protein applications will become more and more important, both for CosMx and GeoMx. And I mean, I think one thing that's exciting about GeoMx in particular, is the architecture of that platform, where we just have oligo tags that are going to be read out on a separate Illumina sequencer, is virtually uncapped in terms of its theoretical plex on antibodies. While we've only pushed to about 150 plex in the past, you know, we have an opportunity to continue to go there, drive up more and more plex and, and protein. You know, stay tuned for those types of offerings. They're on the roadmap and will come out in due course. Can you remind me, is this currently... This isn't co-detection, right? This is serial imaging. Well, today, we do offer co-detection on GeoMx and on GeoMx, sorry. On CosMx, we're not, we're not co-detecting at maximum plex yet today. Yeah. Okay, got it. And I guess on GeoMx, can you speak to some of the recent trends you're seeing in Genome- GeoMx and, I guess nCounter as well, if you have the two businesses? Well, you know, let me start with nCounter. nCounter is the little engine that could, as we showed in our slides, right? That's a platform that is tried and true and beloved by the owners of it. There's about 1,100 of those systems out there. You know, they're generating great pull-through at about $45,000 per system on an annualized basis. It's an incredibly productive system. It's pumping out more than 1,000 new papers every year, even 15 years into its life. And so, that's a platform that I'm very pleased with the performance of. This year, we've seen-... stronger consumable performance on that business, partly because, you know, we refocused the team, our sales team, who'd been very spatially focused for the last few years on getting back to basics, you know, learning and becoming proficient in our nCounter non-spatial consumable menu and getting out there and selling it. And, you know, we grew consumables 8% year-on-year during the Q2. GeoMx is humming along, too. And I mean, what's exciting about GeoMx is we're really getting into the steep part of the curve of scientific productivity. We've passed, I think, 310 peer-reviewed papers. We have a peer-reviewed paper a day coming out now, most working days. You know, I think as I said this in the August earnings call, I think three or four of those in the leading weeks and months leading up to that call were in Nature, so at the highest levels of peer review. GeoMx is a platform we still believe has a lot to offer, even though it's maybe not quite the shiny object that CosMx is today. Got it. And I guess on a higher level, for the spatial market, do you expect to see a continued degree of insulation from some of the macro challenges and headwinds, given that it's an emerging technology? And where does spatial fall in terms of customer priorities versus other new technologies like GeoMx, single-cell sequencing, and long-read? Yeah, I think... I mean, sorry, I think spatial will continue to enjoy extraordinary growth in the years ahead, really, regardless of any tiny ebbs and flows and things like NIH funding, or regardless of the financing environment that small biotechs find themselves in. That's because, look, science moves forward regardless of these macro challenges, and spatial biology is really the revolution that's happening right now. Many centers are building de novo new core labs focused on spatial biology or expanding existing single-cell non-spatial labs to include spatial. We see that really all over the map of both academic centers and biopharma companies. So, I think it's a very high priority for institutions and for scientists, and, you know, that's why I'm not too worried about the macro. Got it. And then I guess, switching over to you, Tom, your guidance is looking at about $105 million in spatial revenue, and $75 million-$80 million for nCounter revenue for 2023. On the spatial side, I think the backlog provides you a lot of visibility, and for nCounter, I think, mid-single-digit decline is still the right way to view it. But, what are some puts and takes to consider for your second half 2023 to take your other- I think you summarized it well, and I think the other important element besides the backlog that I think de-risks the second half of the year is we've had a good first half of the year on nCounter, and I think our outlook there is still reasonably conservative relative to what we posted in the first half. So I think we feel really good about the setup for the second half of the year on guidance, and that's one of the reasons why we came out and affirmed our range in the materials that we put out today. Got it. And then, looking at gross margins, there's a few things that impact it, especially with the CosMx launch. On one side, you have the instrument manufacturing, where you can become more efficient, and on the other side, later on, you have consumables mix coming in. So how should we be thinking about gross margin expansion in 2024? Sure. I think that the... In the order of the things that you mentioned, Edmund, I think that consumables starting to come online for CosMx and continuing to grow through our other platforms are the number one thing, because we manufacture our consumables ourselves in our own facilities. And so there's the benefit of overhead absorption that we get as we fill up those facilities with more volume. I think the second half of that equation is the CosMx instrument manufacturing getting more efficient and the ASP rise that we've been having in the later orders. And then there are other things as well around the margins that will contribute to gross margin improvements as the company expands and grows. But those first two things are the big ones that we'd expect to see- Got it. Some improvement headed into next year. I mean, with all these things taken together, what are some... I know you guys aren't guiding in 2024, but what are some early, puts and takes to think about when we're trying to frame 2024? I think the most important thing to think about with respect to 2024 are the things that we've been talking about for Q3 and Q4, which is we've said that we're starting our march now to improve cash flow and improve the adjusted EBITDA profitability. And that's the commitment as we head into 2024, is to continue that march and continue to improve upon those, so that we can get to breakeven on our existing cash resources, independent on what we might do with the convertible debt. So I think you'll hear those themes continue to resonate as we get into the 2024 timeframe and guide for next year. Yeah, and the other thing I'll say about 2024 is, we expect to carry material backlog- Right. -on the CosMx instrument side into 2024. That benefit, in terms of the predictability of our revenue streams, is not something that goes away at the end of this year, but something we benefit from many quarters ahead. Got it. We covered a lot of ground today. Is, is there anything that we should have spoke about and didn't speak about or anything like that? No, I think what I like to always end on is, you know, spatial biology is gonna be a revolutionary part of the next decade of biology. And, you know, I think stepping back, there's gonna be a very strong secular growth over multiple years ahead, and I expect, you know, NanoString to be, right at the top of the list of market leadership in that exciting field. And I would just add that in spite of the recent volatility in our stock, management has as much confidence as ever, in the trajectory of our business, so we're really excited about it. So we appreciate you all having us here. Great. To talk about it. Thank you very much. Thank you. Thank you, guys. Thanks, Edmund.