Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements in the section titled “Part I. Item 1. Financial Statements (Unaudited)” in this Quarterly Report on Form 10-Q and our audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 29, 2024 (the “Annual Report on Form 10-K”). Certain columns and rows may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded numbers. In addition to historical information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results, performance, or experience may differ materially from those discussed below due to various important factors, risks, and uncertainties, including, but not limited to, those set forth under the sections titled “Part II, Item 1A. Risk Factors” and “Note Regarding Forward-Looking Statements” included in this Quarterly Report on Form 10-Q or under the section titled “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K, as may be updated by Part II, Item 1A. Risk Factors in our subsequently filed Quarterly Reports on Form 10-Q. Unless the context otherwise requires, the terms “Quanterix,” the “Company,” “we,” “it,” “us, “and “our” in this Quarterly Report on Form 10-Q refer to Quanterix Corporation and its consolidated subsidiaries.
Overview
We are a life sciences company that has developed next-generation, ultra-sensitive digital immunoassay platforms that advance life sciences research and diagnostics. Our platforms are based on our proprietary digital “Simoa” detection technology and enable customers to reliably detect protein biomarkers at ultra-low concentrations in blood, serum, and other fluids that, in many cases, are undetectable using conventional, analog immunoassay technologies. The ability of our Simoa platforms to detect proteins in the femtomolar range is enabling the development of novel therapies and diagnostics and has the potential to facilitate a paradigm shift in healthcare from an emphasis on treatment to a focus on earlier detection, monitoring, prognosis, and, ultimately, prevention. Our Simoa platforms have achieved significant scientific validation and commercial adoption, and our Simoa technology has been cited in more than 2,900 scientific publications in areas of high unmet medical need and research interest such as neurology, oncology, cardiology, infectious disease, and inflammation.
Our instruments are designed to be used either with assays fully developed by us, including all antibodies and supplies required to run the assays, or with “homebrew” assay kits where we supply some of the components required for testing and the customer supplies the remaining required elements. Accordingly, our installed instruments generate a recurring revenue stream. As the installed base of our Simoa instruments increases, we expect total consumables revenue to increase.
We commercially launched our HD-X instrument in the second half of 2019. The HD-X is an upgraded version of the Simoa HD-1 (our first Simoa instrument, launched in January 2014), collectively “HD Instruments”, that is designed to deliver significant productivity and operational efficiency improvements, as well as greater user flexibility. The HD-X uses our bead-based technology and assays run on the HD-X are fully automated. By March 31, 2024, approximately 83% of the HD Instrument installed base were HD-X instruments.
Further, we launched our SR-X instrument in 2017 as a compact desktop instrument with a lower price point, more flexible assay preparation, and a wider range of applications. The SR-X utilizes the same Simoa bead-based technology and assay kits as the HD-X.
With our acquisition of Aushon BioSystems, Inc. in 2018, we acquired a CLIA certified laboratory and proprietary sensitive planar array detection technology. The Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) are federal regulatory standards that apply to all clinical laboratory testing performed on humans in the United States (with the exception of research testing that does not report patient specific results). Leveraging our proprietary
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sophisticated Simoa image analysis and data analysis algorithms, we further refined the planar array technology to develop the SP-X instrument to provide sensitivity similar to that found in our Simoa bead-based platform. We commercially launched the SP-X instrument in 2019.
Our wholly-owned subsidiary UmanDiagnostics AB (“Uman”), a company located in Umeå, Sweden, supplies neurofilament light (“NfL”), antibodies, and enzyme-linked immunoassay (“ELISA”) kits, which are used by researchers and biopharmaceutical and diagnostics companies world-wide in the detection of NfL to advance the development of therapeutics and diagnostics for neurodegenerative conditions.
We also provide contract research services for customers and Laboratory Developed Test (“LDT”) services through our CLIA-certified Accelerator Laboratory (the “Accelerator Laboratory”). The Accelerator Laboratory provides customers with access to our Simoa technology and our Lucent Diagnostics clinical testing services (launched in July 2023), and supports multiple projects and services, including sample testing, homebrew assay development, custom assay development, and blood-based biomarker testing. To date, we have completed over 2,300 projects for more than 480 customers from all over the world using our Simoa platforms.
We have an extensive base of customers including pharmaceutical, biotechnology, contract research organizations, academic and governmental research institutions. We sell our instruments, consumables, and services through a direct field sales force and support organizations in North America and Europe, and through our own sales force and distributors in additional countries, including Australia, Brazil, China, Czech Republic, India, Hong Kong, Israel, Japan, New Zealand, Qatar, Saudi Arabia, Singapore, South Africa, South Korea, Taiwan, and the United Arab Emirates. In addition, we sell NfL antibodies and NfL ELISA kits directly, and through distributors, worldwide.
As of March 31, 2024, we had cash, cash equivalents, and marketable securities of $301.9 million. Since our inception, we have incurred annual net losses, including net losses of $10.1 million and $6.1 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $444.6 million and stockholders’ equity of $341.4 million.
We expect to incur significant expenses and operating losses at least through the next 24 months and we expect our expenses to increase substantially as we:
● expand our sales and marketing efforts to further commercialize our products;
● expand our research and development efforts to improve our existing products and develop and launch new products, particularly if any of our products become subject to additional or more burdensome regulation by the U.S. Food and Drug Administration (the “FDA”);
● invest in Lucent Diagnostics, additional LDTs, and other diagnostics initiatives including entry into translational pharma and clinical diagnostic markets;
● seek Premarket Approval (“PMA”), de novo classification, or 510(k) clearance from the FDA for our existing products or new products if or when we decide to market products for use in the prevention, diagnosis, or treatment of a disease or other condition;
● hire additional personnel to support our growth and research and development;
● strategically acquire and integrate companies or technologies that may be complementary to our business;
● enter into collaboration arrangements, or in-license other products and technologies; and
● add operational, financial, and management information systems.
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Recent Business Developments
In March 2024, our Lucent AD p-Tau 217 blood test was granted Breakthrough Device designation by the FDA. This designation is granted to products that have the potential to offer more effective diagnosis of life-threatening diseases with an unmet medical need. Proposed indications for this blood test include use of the test results in patients presenting with cognitive impairment who are being evaluated for Alzheimer’s disease risk to aid in diagnostic evaluation. The test is not intended as a stand-alone diagnostic test and test results will be interpreted in conjunction with other diagnostic tools to establish a final clinical diagnosis. This test has not been otherwise cleared or approved by the FDA and Breakthrough Device designation does not guarantee that the FDA review and approval process will be shortened or that an application will be approved. We do not expect material revenue from this test, or other Lucent Diagnostics tests, until late 2024 or later, if at all.
During the fourth quarter of 2023, we substantially completed our six-quarter assay redevelopment program. The objective of this operational program was to improve our ability to manufacture and deliver high-quality assays at scale. We have now launched five new Simoa Advantage PLUS assays, which have been developed using improved protocols, by leveraging manufacturing efficiencies and reagent improvements to provide more consistent results and improved lot-to-lot consistency, and through enabling production of larger lot sizes with extended shelf lives. These assays began shipping to customers in the first quarter of 2024. We expect to continue to apply these improved protocols and manufacturing efficiencies to other existing assays as well as assays that we may develop in the future.
Comparison of Results of Operations for Three Months Ended March 31, 2024 and 2023:
The following table sets forth select Consolidated Statements of Operations data, and such data as a percentage of total revenues (in thousands, except percentages):
Three Months Ended March 31,
Increase (Decrease)
2024
% of revenue
2023
% of revenue
Amount
%
Revenues:
Product revenue
$
19,670
61
%
$
19,287
68
%
$
383
2
%
Service and other revenue
11,967
37
%
8,579
30
%
3,388
39
%
Collaboration and license revenue
155
—
%
368
1
%
(213)
(58)
%
Grant revenue
274
1
%
222
1
%
52
23
%
Total revenues
32,066
100
%
28,456
100
%
3,610
13
%
Costs of goods sold and services:
Cost of product revenue
7,145
22
%
7,033
25
%
112
2
%
Cost of service and other revenue
5,295
17
%
4,497
16
%
798
18
%
Total costs of goods sold and services
12,440
39
%
11,530
41
%
910
8
%
Gross profit
19,626
61
%
16,926
59
%
2,700
16
%
Operating expenses:
Research and development
6,675
21
%
4,720
17
%
1,955
41
%
Selling, general and administrative
25,993
81
%
20,850
73
%
5,143
25
%
Other lease costs
924
3
%
776
3
%
148
19
%
Total operating expenses
33,592
105
%
26,346
93
%
7,246
28
%
Loss from operations
(13,966)
(44)
%
(9,420)
(33)
%
4,546
48
%
Interest income
3,948
12
%
3,449
12
%
499
14
%
Other income, net
206
1
%
8
—
%
198
2,475
%
Loss before income taxes
(9,812)
(31)
%
(5,963)
(21)
%
3,849
65
%
Income tax expense
(260)
(1)
%
(140)
—
%
120
86
%
Net loss
$
(10,072)
(31)
%
$
(6,103)
(21)
%
$
3,969
65
%
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Revenues
Total revenues increased $3.6 million, or 13%, to $32.1 million for the three months ended March 31, 2024, compared to $28.5 million for the three months ended March 31, 2023.
Product revenue of $19.7 million for the three months ended March 31, 2024 consisted of instrument sales of $2.6 million and sales of consumables and other products of $17.1 million. This represented an increase of $0.4 million, or 2%, compared to product revenue of $19.3 million for the three months ended March 31, 2023. The increase in product revenue was primarily due to a $3.1 million increase in sales of consumables from increases in both customer demand and selling prices. This increase was partially offset by a $2.7 million decrease in instrument sales due to reduced demand in what we believe is a constrained capital funding environment. Based on this, we expect softness in instrument sales to continue for the remainder of 2024.
Service revenue was $12.0 million for the three months ended March 31, 2024, compared to $8.6 million for the three months ended March 31, 2023, an increase of $3.4 million, or 39%. This increase was primarily due to a $3.2 million increase in Accelerator Laboratory revenue driven by higher volumes of sample testing and assay development services. We expect to see continued growth in Accelerator Laboratory services through 2024.
Cost of Goods Sold and Services
Total cost of goods sold and services increased $0.9 million, or 8%, to $12.4 million for the three months ended March 31, 2024, compared to $11.5 million for the three months ended March 31, 2023.
Cost of product revenue increased $0.1 million, or 2%, to $7.1 million for the three months ended March 31, 2024, compared to $7.0 million for the three months ended March 31, 2023. This increase was primarily due to consumables related revenue increases, including compensation and benefit costs from increased headcount, and was partially offset by decreased costs due to lower instrument revenue.
Cost of service and other revenue increased $0.8 million, or 18%, to $5.3 million for the three months ended March 31, 2024, compared to $4.5 million for the three months ended March 31, 2023. This increase was primarily due to the increase in Accelerator Laboratory revenue, including compensation and benefit costs from increased headcount and increased volume of lab supplies used.
Research and Development
Research and development expense increased $2.0 million, or 41%, to $6.7 million for the three months ended March 31, 2024, compared to $4.7 million for the three months ended March 31, 2023. This increase was primarily due to a $1.2 million increase in compensation and benefits costs related to increased headcount, and a $0.4 million increase in professional services and research lab supplies and equipment to enable product development. We expect research and development expense to continue to increase throughout 2024 due to continued investments in product development and new offerings.
Selling, General and Administrative
Selling, general and administrative expense increased $5.1 million, or 25%, to $26.0 million for the three months ended March 31, 2024, compared to $20.9 million for the three months ended March 31, 2023. The primary reason for the increase is additional headcount to expand the size of our sales team. More specifically, the increase was primarily due to (1) a $3.5 million increase in personnel related costs, primarily compensation and benefits related to increased headcount, (2) a $1.1 million increase in stock-based compensation expense due to increased headcount, and (3) a $0.6 million increase in travel related expenses. Included within selling, general, and administrative expense are $2.1 million and $1.8 million of shipping and handling costs for product sales for the three months ended March 31, 2024 and 2023, respectively.
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Other Lease Costs
Other lease costs increased $0.1 million, or 19% to $0.9 million for the three months ended March 31, 2024, compared to $0.8 million for the three months ended March 31, 2023. Following our restructuring in 2022, we are not using two leased office and laboratory facilities and are evaluating alternatives, including sub-leasing the facilities . Other lease costs include amortization of the related operating lease right-of-use assets and other leased facility operating expenses from periods after the restructuring and determination that the facilities would not be used.
Interest Income
Interest income increased $0.5 million, or 14%, to $3.9 million for the three months ended March 31, 2024, as compared to $3.4 million for the three months ended March 31, 2023. This increase was primarily due to higher interest rates earned on cash, cash equivalents, and marketable securities, and the accretion of discounts from the purchase of marketable securities.
Other Income, Net
Other income, net was $0.2 million for the three months ended March 31, 2024, as compared to less than $0.1 million for the three months ended March 31, 2023.
Income Tax Expense
Income tax expense was $0.3 million for the three months ended March 31, 2024, as compared to $0.1 million for the three months ended March 31, 2023. The increase was primarily due to estimated foreign income taxes.
Liquidity and Capital Resources
Our principal sources of liquidity are cash, cash equivalents, marketable securities, and funds generated from sales of our products and services. As of March 31, 2024, we had cash and cash equivalents of $45.3 million and $256.6 million of available for sale marketable securities. Historically we have also financed our operations through equity offerings and borrowings from credit facilities.
We believe our cash, cash equivalents, and marketable securities, along with funds generated from sales of our products and services, will be sufficient to meet our anticipated operating cash requirements for at least 12 months from the date of this Quarterly Report on Form 10-Q.
Our liquidity requirements have consisted, and we expect that they will continue to consist, of sales and marketing expenses, research and development expenses, working capital, and general corporate expenses. Our future capital requirements will depend on many factors, including, but not limited to, our pace of growth, expansion and introduction of new products and services, including Lucent Diagnostics, and advancing access to our diagnostic tests, market acceptance of our products and services, regulatory requirements, regulatory approval of our products or services, and the effects of competition, technological developments, and broader market and economic trends.
We regularly assess potential acquisitions and pursue acquisitions of complementary businesses, services, and technologies. To the extent our existing cash, cash equivalents, and marketable securities are insufficient to fund future activities or requirements to continue operating our business, we may need to raise additional capital. If the conditions for raising capital are favorable, we may seek to finance future cash needs through public or private equity, debt offerings, or other financings.
If needed, we cannot guarantee that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we raise
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additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. If we do not have or are not able to obtain sufficient funds, if needed, we may have to delay development or commercialization of our products and services. We also may have to reduce marketing, customer support, or other resources devoted to our products, or cease operations.
Cash Flows
The following table summarizes our cash flows (in thousands):
Three Months Ended March 31,
2024
2023
Net cash used in operating activities
$
(20,164)
$
(9,502)
Net cash used in investing activities
(109,195)
(136)
Net cash provided by financing activities
599
551
Net decrease in cash, cash equivalents, and restricted cash
$
(128,760)
$
(9,087)
Net Cash Used in Operating Activities
We derive cash flows from operations primarily from the sale of our products and services. Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses to develop new products and services, invest in process and product improvements, and increase our sales and marketing efforts. We have historically experienced negative cash flows from operating activities as we have developed our technology, expanded our business, and built our infrastructure. We expect negative cash flows from operating activities will continue in the future.
Net cash used in operating activities was $20.2 million and $9.5 million for the three months ended March 31, 2024 and 2023, respectively. The $10.7 million increase in net cash used in operating activities was primarily driven by an overall increase in our net loss, adjusted for non-cash items including stock-based compensation and the accretion of our marketable securities. The increase was further driven by changes in working capital items, primarily (1) an increase in accounts receivable and deferred revenue from sales timing and revenue growth, (2) an increase in inventory as a result of completing the assay development program and manufacturing and stocking new assays, and (3) a decrease in accrued compensation.
Net Cash Used in Investing Activities
Our primary investing activities consist of purchases of marketable securities to increase the interest income we would otherwise earn in cash accounts. Additionally, we use funds towards capital expenditures for the purchase of property and equipment to support our expanding infrastructure and work force. We expect to continue to incur additional capital expenditures related to these efforts in future periods.
Net cash used in investing activities was $109.2 million during the three months ended March 31, 2024, which consisted of the purchase of $137.9 million of marketable securities and $0.5 million of purchases of property and equipment, offset by proceeds from the maturities of marketable securities of $29.2 million.
Net cash used in investing activities was not material during the three months ended March 31, 2023.
Net Cash Provided by Financing Activities
Financing activities provided $0.6 million of cash during both the three months ended March 31, 2024 and 2023 , from sales of our common stock under our employee stock purchase plan and from the exercise of options under our equity incentive plan .
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Future Cash Obligations
As of March 31, 2024, there have been no material changes to our contractual obligations and commitments from those described in the section titled “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.
In addition to the cash commitments disclosed in our Annual Report on Form 10-K, we may have other payables and liabilities that may be legally enforceable but are not considered contractual commitments.
Critical Accounting Policies and Estimates
Our critical accounting policies and significant estimates that involve a higher degree of judgment and complexity are described in the section titled “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies, Significant Judgments and Estimates” included in our Annual Report on Form 10-K.
There have been no material changes to our critical accounting policies and estimates as previously disclosed in that report.
Non-GAAP Financial Measures
To supplement our financial statements presented on a U.S. GAAP basis, we present non-GAAP gross profit, non-GAAP gross margin, non-GAAP total operating expenses, and non-GAAP loss from operations. These non-GAAP measures are calculated by including shipping and handling costs for product sales within cost of product revenue instead of within selling, general and administrative expenses. We use these non-GAAP measures to evaluate our operating performance in a manner that allows for meaningful period-to-period comparison and analysis of trends in our business and our competitors. We believe that presentation of these non-GAAP measures provides useful information to investors in assessing our operating performance within our industry and to allow comparability to the presentation of other companies in our industry where shipping and handling costs are included in cost of goods sold for products. The non-GAAP financial information presented here should be considered in conjunction with, and not as a substitute for, the financial information presented in accordance with U.S. GAAP.
Set forth below is a reconciliation of non-GAAP gross profit, non-GAAP gross margin, non-GAAP total operating expenses, and non-GAAP loss from operations to their most directly comparable GAAP financial measures (in thousands):
Three Months Ended March 31,
2024
2023
GAAP gross profit
$
19,626
$
16,926
Shipping and handling costs
(2,142)
(1,829)
Non-GAAP gross profit
$
17,484
$
15,097
GAAP revenue
$
32,066
$
28,456
GAAP gross margin (gross profit as % of revenue)
61.2%
59.5%
Non-GAAP gross margin (non-GAAP gross profit as % of revenue)
54.5%
53.1%
GAAP total operating expenses
$
33,592
$
26,346
Shipping and handling costs
(2,142)
(1,829)
Non-GAAP total operating expenses
$
31,450
$
24,517
GAAP loss from operations
$
(13,966)
$
(9,420)
Non-GAAP loss from operations
$
(13,966)
$
(9,420)
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Recent Accounting Pronouncements
Refer to Note 2 − Significant Accounting Policies in the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements, including the expected dates of adoption and effects on our Consolidated Financial Statements and related disclosures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 2024, there have been no material changes to the market risk information from those described in the section titled “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” included in our Annual Report on Form 10-K.
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