Nautilus Biotechnology, Inc. (NASDAQ:NAUT) Q1 2023 Earnings Call Transcript May 2, 2023

Nautilus Biotechnology, Inc. beats earnings expectations. Reported EPS is $-0.12, expectations were $-0.17.

Operator: Good morning and thank you for standing by. Welcome to the Nautilus First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would not like to hand the conference over to your speaker today, Carrie Mendivil, Investor Relations. Please go ahead.

Carrie Mendivil: Thank you. Earlier today, Nautilus released financial results for the quarter ended March 31, 2023. If you haven’t received this news release or if you’d like to be added to the Company’s distribution list, please send an e-mail to investorrelations@nautilus.bio. Joining me today from Nautilus are: Sujal Patel, Co-Founder and CEO; and Anna Mowry, Chief Financial Officer. Nautilus Co-Founder and Chief Scientist, Parag Mallick, will be joining us for Q&A. Before we begin, I’d like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.

Additional information regarding these risks and uncertainties appears in the section entitled “Forward-Looking Statements” in the press release of Nautilus issued today. Except as required by law, Nautilus disclaims any intention or obligation to update or revise any financial or product — pipeline projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast, May 2, 2023. With that, I’ll turn the call over to Sujal.

Sujal Patel: Thanks, Carrie. Good morning and thank you to everyone for joining us today. On this call, we’ll share our results for the first quarter and provide an update on recent activities. Since our call in February, we’ve made steady progress towards many of our key scientific and engineering objectives. That progress is the result of the outstanding work being done by our talented and dedicated teams in San Carlos, Seattle and San Diego. Every member of the Nautilus team understands that our long-term goal is to provide ubiquitous access to the proteome to every lab, researcher, and clinician around the world. We continue to see this as our long-term purpose, while recognizing the many intermediate benefits that will accrue to biological research and healthcare as we move towards that ultimate goal.

We continue to believe the reach and impact of Nautilus’ innovation will be very significant. Recent estimates are that the current annual proteomics market is approximately $27 billion and growing at a 15% CAGR. While this near-term opportunity is an immediate and exciting area for us to focus, we believe that easy-to-use high throughput platforms that match the scale of the proteome like Nautilus, represents a type of long-term catalysts that hold the potential to expand this market beyond what is currently envisioned. We’ve designed a Nautilus Proteome Analysis Platform to, among other things, dramatically accelerate target identification and drug development. Using it, we expect researchers will ultimately be able to quantify proteomes for any samples they wish.

Armed with that fundamentally new insight, our platform aims to make it easier for those researchers to discover how disease processes impact our bodies and to create drugs that target the molecular underpinnings of each disease. We continue to see a broad array of potential users for our platform. From researchers in biopharma and academic institutions to clinical practitioners, we believe our instrument will fit the needs of a wide range of proteomics users. Among these groups, the common thread will be the need to dig deeper and more quickly into proteins and proteoforms of interest. We believe that Nautilus will enable them to develop more effective therapies to build more precise diagnostics, and eventually to pick the best therapy for a particular patient.

Over the past year, progress has been made in development activities surrounding each of the core components of the platform, including the core reagents, sample preparation methodologies, affinity reagent probes, chips, flow cells, the instrument and software. These activities include, hardening our standard operating procedures and improving the scale, quality and performance, while also working to define clear specifications for each component of our platform. Additionally, progress has been made in advancing our integrated assay towards our product targets. In Q1, we made specific progress on several fronts, including advances in our reagent development, qualification and manufacturing pipelines. This effort not only directly supports our ability to routinely perform experiments involving many dozens of cycles and reagents, but also moved us closer to meeting our product specifications.

Improving the stability, reproducibility and performance of our integrated assay across an increasing number of cycles and reagents, as we push towards larger scale experiments. And finally, advances in our commercial instruments with a focus on integrating the hardware and software components of the platform. We also made good progress on actively identifying, developing and qualifying multiple sources, both internal and external, for key reagent production and instrument assembly capabilities as we build towards and prepare for full commercial availability. And building on the near doubling of our patent portfolio in 2022, we added 5 new patent applications in Q1, and were granted 4 new U.S. patents, raising our total to 12 granted U.S. patents.

Our IP strategy will remain global and reached as we seek protection in the U.S. and in foreign markets where we expect to commercialize our platform. On our last call, we shared our excitement for our First Access Challenge, a contest designed to enable researchers from a broad spectrum of disciplines to uncover new biological insights and explore new areas of the proteome at massive scale. The response from researchers across the globe to the First Access Challenge was incredibly rewarding. It unlocks the type of creativity we hope to see when we offered them the chance to apply Nautilus’ novel platform to ask and answer important biological questions. Research groups from a dozen countries across North America, Europe and Asia, submitted grant-like applications to participate.

In reviewing the submissions, it was clear that each of them understands how important single-molecule intact protein analysis and the resulting sensitivity and dynamic range that our platform is designed to deliver can be to their explorations of the proteome. The applications cover a wide variety of research areas, including oncology, neuroscience, kidney disease and inflammation across human tissues, cell lysates, blood, serum and cerebrospinal fluid. They also included some of the top research laboratories and pioneers in our field, which is an encouraging indication that the broader proteomic community is excited about what we are building and understand the potential of our platform. The winners announced that the U.S. HUPO Conference in early March and whose samples will be run as part of our Early Access program, represents a diverse set of investigators spanning a wide range of exciting areas of the study across aging, inflammatory disorders and cancer.

Doctors Joanna Bons and Jordan Burton, postdoctoral research scientists in the Schilling Lab at the Buck Institute for Research on Aging, will use our platform to investigate total proteome remodeling in acute kidney injuries of ischemic-reperfusion injury and cisplatin-induced AKI to identify potential biomarkers or therapeutic targets. Dr. Samuel Payne, Associate Professor at Brigham Young University will apply our platform to analyzing a 3-dimensional lung alveolar organoid model to better understand the systems biology of organoids and potential applications to the pathology of human diseases. And Dr. Nicholas Graham, Associate Professor at the University of Southern California will use Nautilus’ platform to identify protein biomarkers of sensitivity to arginine deprivation-induced cancer cell death, aiming to enable a deeper understanding of metabolic vulnerabilities in glioma, a type of aggressive primary brain tumor.

We’ve always envisioned our platform as one of great interest to researchers across the spectrum, from small undergraduate institutions to large pharmaceutical companies. The participants in our First Access Challenge, along with existing collaborations with Genentech, Amgen, MD Anderson and TGen, are reflective of the broad set of use cases, our collaborators, partners and future customers envision for our platform. I’m pleased that we’ve been successful in building a balanced portfolio of relationships that reinforce our stated goal of democratizing access to high-value proteomic data. A moment ago, I mentioned that the U.S. Human Proteome Organization conducted their annual conference in early March. Nautilus had a focused and effective presence at the event designed to both educate the community about the underpinnings of our technology, and to encourage that community to reimagine what’s possible in proteomics.

From our fill-to-capacity hour-long lunch seminar to our poster and podium presentations, Nautilus scientists led by Parag, shared insights on topics such as the theoretical foundations of our protein identification by Short-epitope Mapping methodology, commonly referred to as PrISM. Data demonstrating the beginning-to-end instantiation of PrISM, spanning from sample preparation to multi-cycle measurement to the machine learning analysis that enables the translation of those measurements into the identification of model proteins. Additionally, we introduced the rigorous strategies that we’ve built and are now routinely employing for estimating false discovery rates and for investigating the robustness of protein identifications. This unusual transparency among new entrants in our market was very well received by the community and underscored our commitment to building long-term trust and scientific credibility.

Parag and all the Nautilites [ph] in attendance engaged in conversations with researchers, many of whom are current mass spec users excited to know more about the potential of our platform to complement their existing workflows and address their unmet needs. We see the positive attention our presence at HUPA received, as a good sign for things to come with this critically important and influential buying audience. Based on what we heard at HUPA and from many other conversations in Q1, I believe more than ever that the Nautilus platform is going to spur tremendous creativity and innovation in the broader proteomics community. We’re excited to get our platform into the hands of researchers and see the type of impact their work can have on biology and healthcare.

As I mentioned on our last call, in 2023, we will continue to make steady progress in addressing key scientific and business milestones leading to the planned launch of our platform, instruments, reagents and software in mid-2024. A critically important part of that effort is the disciplined and efficient way in which we have, and we will continue to manage our resources to maximize Nautilus’ cash runway through the planned launch and well into 2025. We’re successfully balancing financial and operational efficiency with appropriate levels of investment in key areas that will enable us to drive our scientific progress forward. One area in which we are investing, without overextending is in hiring. We’re excited that Nautilus’ culture, mission and product value proposition continue to attract the attention of some of the best and brightest scientific minds in the proteomic space.

They and others understand, as we do, that when you look across the landscape of our sector, Nautilus is a unique company on a path to revolutionize biomedical research by unlocking the full potential of proteome. They see what we are doing and want to participate in revolutionizing biomedical research. We will continue to take full advantage of this valuable and timely opportunity to increase the strength and experience of our team across the board. For a look at our Q1 financials, let me hand the call over to Anna. Anna?

Anna Mowry: Thanks, Sujal. Total operating expenses for the first quarter of 2023 were $18.1 million, up $2.1 million compared to the first quarter of 2022, and $1.8 million above last quarter. This increase is largely driven by an uptick in the pace of hiring as we continue to invest in the development of our platform. Research and development expenses for the first quarter of 2023 were $10.9 million, compared to $9.7 million in the first quarter of 2022. General and administrative expenses were $7.2 million in the first quarter of 2023, compared to $6.4 million in the first quarter of 2022. Overall, net loss for the first quarter of 2023 was $15.0 million, compared to $15.8 million in the first quarter of 2022. Now, turning to our 2023 guidance.

On our last call, we stated that we expect our overall operating expenses to be up approximately 40% from 2022 levels, ahead of a more meaningful ramp in 2024, along with our commercial launch. As we’ve consistently said, we are continuing to invest in the business but in a conservative intentional manner. That will continue over the remaining quarters of 2023. Finally, turning to our balance sheet. We ended the quarter with approximately $302 million in cash, cash equivalents and investments, compared to $314 million at the end of last year. While we expect that our cash burn will increase going forward, we continue to anticipate our cash runway extending well into 2025. We believe this puts us in a strong position to focus on our scientific progress and to deliver the type of platform that we believe will enable our customers to achieve new levels of proteomic insight.

With that, I’ll turn it back to Sujal.

Sujal Patel: Thanks, Anna. We’re excited about what lies ahead for Nautilus and the difference our platform aims to make in biological science and healthcare. Our mission to positively impact the health and lives of people around the world remains our guiding light. I’m grateful to our investors, our strategic partners, our research collaborators and our team for joining us on this journey to transform proteomics and empower the scientific community in ways never before I thought possible. We continue to make solid and steady progress and look forward to updating all of you along the way as we move towards commercialization of our platform and beyond. With that, I’ll turn the call back to the operator. Operator?

Q&A Session

Operator: [Operator Instructions] The first question comes from Tejas Savant with Morgan Stanley.

Operator: Please stand by for our next question. The next question comes from Daniel Brennan with Cowen.

Operator: Please stand by for our next question. The next question comes from Matt Sykes with Goldman Sachs.

Operator: I show no further questions at this time. This concludes today’s conference call. Thank you for participating. You may now disconnect.