Seer, Inc. (NASDAQ:SEER) Q1 2023 Earnings Call Transcript May 13, 2023

Operator: Good day. And thank you for standing by. Welcome to the Seer First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised today’s conference is being recorded. I would like to hand the conference over to your speaker today, Carrie Mendivil, Investor Relations. Please go ahead.

Carrie Mendivil: Thank you. Earlier today, Seer, released financial results for the quarter ended March 31, 2023. If you have not received this news release or if you’d like to be added to the company’s distribution list, please send an e-mail to investor@seer.bio. Joining me today from Seer is Omid Farokhzad, Chief Executive Officer, President and Chair; and David Horn, Chief Financial Officer. 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 were issued today.

For a more complete list and description, please see the Risk Factors section of the company’s quarterly report on Form 10-Q for the quarter ended March 31, 2023, and in the other filings with the Securities and Exchange Commission. Except as required by law, Seer disclaims any intention or obligation to update or revise any financial 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 9, 2023. With that, I’d like to turn the call over to Omid.

Omid Farokhzad: Thanks, Carrie, and thank you, everyone, for joining us this afternoon. I will begin our call today with a review of our first quarter results as well as the progress we’re making across our core focus areas to drive growth, then I will turn the call over to David to provide more detail on our financial results. Thanks to the tremendous effort of the entire team at Seer, we had a solid start to the year and ended the first quarter with $4.1 million in revenue and continued growth in our installed base. Even more importantly, we’re increasingly seeing more and more data being shared by our customers, the initiation of larger studies with a growing interest in population-scale studies, and the first customer publications making their way through the peer review process.

We have consistently said that the increased publication of customers and third-party data will be critical to developing the market, and this is exactly what we’re seeing. We now have more than 150 public presentation on Seer’s Technology to date with the additional data expected at the American Society of Mass Spectrometry, or ASMS, annual conference in early June. With this solid start, we’re reiterating our 2023 guidance and continue to expect revenue in the range of $23 million to $25 million for 2023, representing significant year-over-year growth of 48% to 61%. While we continue to drive top line growth, we’re taking a very disciplined approach with our operating expenses in order to protect a robust balance sheet. With over $410 million cash, we’re well positioned to execute on our multiyear strategic plan and are building a resilient organization that can make a meaningful impact on the advancement of science and medicine.

We’re committed leveraging our resources to drive innovation, creating value for our customers and investors and contributing to the positive trajectory of the proteomics field and human health overall. As mentioned, on the last earnings call this year, we’re focused on executing across our 4 core areas. First, enabling breakthrough discoveries with the Proteograph Product Suite; second, demonstrating the power of our technology; third, catalyzing new applications and markets; and finally, fourth, expanding our industry-leading team. Starting with our first objective. The Proteograph Product Suite is highly extensible and is providing reproducible unbiased access to the proteome with flexibility and scale, allowing us to address many unmet needs in our customers’ hands.

We’re encouraged by the growing enthusiasm for what the Proteograph workflow can enable. As I mentioned in my opening remarks, more customer data is being shared publicly. Dr. Karsten Suhre, a leading multiomic researchers and a Professor of Physiology and Biophysics as Weill Cornell Medicine, has a manuscript under peer review that is now available as a preprint in BioRxiv. This is the first study using the Proteograph Product Suite to perform protein quantitative trait loci or pQTL analysis. I view this study as an important milestone in which the biological value of connecting genomic variant data to deep unbiased proteomic data at the peptide level has been robustly exemplified. In a cohort study of 325 diabetic subjects and controls, Dr. Suhre identified approximately 3,000 proteins and over 18,000 peptides and associated these with genetic variants across the study, allowing them to identify variation in plasma protein concentration among subjects.

Importantly, this publication highlights the shortcoming of affinity-based approaches in which the measured abundance of a target protein may be impacted by protein-altering variants that changed their binding epitope of the affinity reagent. Dr. Suhre’s work highlights the importance of peptide level resolution to more deeply understand the proteome, which the Proteograph Product Suite is uniquely able to deliver at scale. Another interesting emerging application of the Proteograph is targeted mass spectrometry workflows for quantifying specific high-value human plasma and serum proteins, for example, in obesity and diabetes research. Most assays today in obesity and diabetes research rely exclusively on antibodies via certain publications have shown this approach has limitations, including failure to detect the intended target for the post-translationally modified biologically active forms.

The combination of mass spec-based targeted proteomics combined with the Proteograph workflow provides a solution to this problem with a robust, highly reproducible method for detecting and quantifying the desired protein barriers across a wide range of concentrations at the peptide level. Dr. Jenny Van Eyk, who’s a Professor of Cardiology and Director of the Advanced Clinical Biosystem Research Institute and founder of the Precision Biomarker labs at Cedars-Sinai is leading this work. Dr. Van Eyk is an international leader in clinical proteomics and current President of the Human Proteome Organization, or HUPO. Her team has leveraged the Proteograph Product Suite to identify and quantify clinically relevant biomarkers that are inaccessible to immunoassays.

The targeted methods they performed using the Proteograph ensures accurate quantitation of lower abundance proteins that are not easily accessible by standard proteomics workflow, while also allowing the monitoring of several hundred other plasma proteins of interest, which may contain additional biomarker needs. Importantly, this method allows for rapid completion of large-scale studies and the potential for quick diagnostic turnaround in an assay that can be offered as a service to stratify obese and diabetic patients into optimal treatment groups. Her team presented the Proteograph evaluation data at the targeted mass spectrometry assay in diabetes and obesity research meeting that is funded by the National Institute of Diabetes and Digestive and Kidney diseases late last year and are currently in the process of scaling up this study toward the publication later this year.

Dr. Van Eyk’s research is a great illustration of the unmet needs that the Proteograph workflow can address in the hands of customers and speaks directly to its potential to deliver new clinical applications that have not been possible with existing methods. In January, one of our multiomic liquid biopsy customers PrognomIQ announced early results for what they believe to be the largest deep multiomic study to date. This study was run across 1,031 subjects with non-small cell lung cancer or NSCLC and non-cancer controls and demonstrated the power of diverse molecular biomarker to improve sensitivity and specificity early detection of NSCLC. Last month, they presented new data in 2 posters at the American Association for Cancer Research Annual Meeting that demonstrated novel biomarker discovery and the potential feasibility of their approach for early cancer detection.

Their first poster leveraged deep multiomic profiling of proteins, metabolites, transcripts and cell-free DNA in blood from NSCLC patients for biomarker discovery. Data showed multiple biomarkers for NSCLC, we taxed it across all holding types with many overlapping biomarkers of interest and demonstrated a broad ability to distinguish between individuals with and without cancer. The Proteograph played a significant role in biomarker identification, demonstrating the importance of peptide level resolution to drive novel discovery. The second poster demonstrated that a multiomic classifier achieved high sensitivity and specificity for detection of pancreatic ductal adenocarcinoma or P-D-A-C, also referred to as PDAC. In the case control study of 146 subjects, in this proof-of-concept study, PrognomIQ levers multiomic data to identify novel combination of analytes with both known and unknown relations to PDAC into high-performance biomarker panel for detection and discrimination of PDAC from non-cancer controls.

The high-performance of analytes collected from blood draws makes these panels amenable to rapid development and utilization. Results support the feasibility of this approach as a potentially clinically useful test for early detection of PDAC. These results from PrognomIQ illustrate how the Proteograph can drive the identification of novel biomarkers, which can then be utilized in clinical application. This is just the beginning of what we believe the Proteograph will enable in the hands of customers. In late March, at the US Human Proteome Organization Conference, there was 1 podium presentation and 9 posters highlighting Seer technology, including customer data on COVID-19 vaccine response and an optimized method for the Proteograph with the Thermo Fisher Orbitrap Exploris for AV using FAIMS Pro.

The oral presentation covers the first look at the Alzheimer’s disease cohort of approximately 1,800 plasma samples using our next product which is in the hands of several early access customers. We also hosted a well-attended industry workshop with 3 features presentations highlighting Proteograph performance, flexibility to address multiple sample types and ability to drive large-scale studies. In June, at the upcoming American Society for Mass Spectrometry or ASMS annual conference, we are looking forward to more exciting data with 15 Seer and 12 customer abstracts in the program. Customer posters and presentations include using an aging in mouse models, translational pharmacoproteomics in Nonalcoholic Steatohepatitis or NASH, improved sensitivity with precision for quantitation in targeted applications and host cell proteins for biologic manufacturing among others.

And we’re continuing to drive standardization and partnership with our commercial partners, Thermo Fisher, Bruker and SCIEX with multiple posters and costs, demonstrating the exceptional performance on the Proteograph across these leading mass spec platforms. One customer study of note at ASMS is from Dr. Steve Carr’s lab at the Broad Institute. Dr.Carr will have an oral presentation, demonstrating the performance of the Proteograph in plasma from multiple myeloma patients using the Bruker timsTOF HT and dia-PASEF. These results are particularly exciting as they show how larger skilled studies that are enabled by the Proteograph with optimized mass spec protocol can get us deeper into the proteome than previously possible. In 2017, Dr.Carr published a seminal paper that achieved a depth of 4,500 proteins in plasma, and this paper has remained the benchmark for deep unbiased proteomics and plasma until now.

Importantly, the 2017 study, given the complexity of the workflow was accomplished on only 16 samples. Dr.Carr’s current study identified over 5,900 proteins and is being applied to 300 samples. This is yet another example of the step-function increase in the depth and throughput of proteomic that has been enabled by the Proteograph Product Suite. It is exciting to see an acceleration of customer-driven data beginning to make its way into publications of significance. One such notable example of a customer manuscript on their peer review includes the use of the Proteograph to follow the civilian crew of SpaceX Inspiration4, combined with additional multiomic data to further understand the body’s response to space flight. This project is providing new opportunities to understand the molecular and cellular changes that occur in human viewing space travel.

We look forward to sharing more details following the publication of this study. We have visibility to multiple additional manuscripts being submitted by customers in the coming months as more third-party data is generated we will see more proof of the unique value of Proteograph to drive novel biological insights that will accelerate the next generation of multiomic studies. We feel very confident about our market opportunities and thrilled by the emerging validation of the Proteograph and [end] customers and expect a progressive increase in the velocity of adoption in the coming several quarters. Turning our attention to the second objective, demonstrating the power of the Proteograph Product Suite. We continue to innovate, extend the capabilities of our technology and drive our own abstract and publication.

In March, we announced that our paper on bone morphogenetic protein 1 or BMP1 was published in PLOS ONE. This peer review publication highlighted the importance of the Proteograph in identifying peptide level insights that discovered links between protein variants and lung cancer progression at the protein isoform level. In upcoming months, we expect to have multiple papers released from Seer in addition to what we are expecting from our customers. These papers will continue to advance the field of nano bio-interactions, proteomic workflows and large-scale data science, showcasing the disruptiveness of our technology and its unique ability to push their boundaries and proteomics. We remain committed to delivering cutting-edge solutions that drive more access to proteomic data.

We know that enabling streamlined data processing, analysis and interpretation is key. Throughout 2023, we will continue to expand our software capabilities and lay the road map for large-scale studies with our Proteograph Analysis Suite. We believe that this will be an important component of our workflow and will serve to enable more customers to onboard deep unbiased proteomic at scale. From the very beginning, we believe there would be broad interest to incorporate unbiased deep plasma proteomic into studies at scale, well beyond the existing installed base of mass spec users engage in proteomic research. That is exactly what we’re seeing play out in our discussion. Consistent with our original vision, the market opportunity is large, spanning the mass spec installed base as well as the genomic market with increased appetite for adding multiomic data to genomic data sets.

Our next product is meant to capitalize on this need to serve a broader audience. It is already in early access with multiple sites, and we’re getting great feedback on its performance. Our first product delivered a step-function change in unbiased proteomics and this next product does the same. We are really excited about what it will enable in the market, and we look forward to sharing more with you in the upcoming months. Turning to our third objective, catalyzing new applications and markets. Our technology is inherently extensible. It is PCs agnostic and is compatible with a diverse range of sample types. The Proteograph Product Suite is being used in a range of applications across our growing customer base in academic research, translational, commercial, pharma, CROs and even applied markets.

One example of a new application that has emerged from our customer base is the use of the Proteograph to detect host-cell protein or HCP. HCPs are proteins produced or encoded by the host organism used to produce recombinant therapeutic protein such as those used in biomanufacturing of vaccines. Removal of HCP is one of the biggest challenges for the production of biopharmaceuticals, an ideal HCP screening assay, it’s high throughput, reproducible quantitive and sensitive with high dynamic range. The Proteograph fits this bill. In a study in partnership with a major pharmaceutical company, we demonstrated that the Proteograph Product Suite detects 2x to 6x more HCPs than traditional methods, identifying 98% of the HCPs and overall improving measurements across purification steps.

A poster on this work will be presented at the upcoming ASMS biopharma partner. Customers continue to find value in Proteograph proof of principle studies as they build the case for capital equipment funding within the organization, including the grant submission process for academic customers. These small studies of 40 to 100 samples are a key enabler for customers to onboard our technology and often results in posters or abstracts on their own as preliminary insight, and punitive biomarkers can be uncovered even from small studies at this size. We had the shipment of a Proteograph to a nonhuman health company in the first quarter, for example, following a small proof of principal study conducted for this organization. With our proof of principle study program, we have demonstrated use in the Proteograph in chicken, dog, cat, baboon and plant tissue across studies looking at COVID exposure, diet, aging, cognitive impairment, multiple cancers and transplant.

We will continue to drive market development efforts such as these studies, [indiscernible] collaborations and KOL work to accelerate and enable broad market adoption. Through these efforts, we’re building relationships with key opinion leaders and expanding our scientific advisory board with the recent addition of Dr. Josh Kuhn, Dr. Chris Mason and Dr. Jenny Van Eyk. Dr. Kuhn is a Professor of Chemistry and biomolecular chemistry at University of Wisconsin management. Dr. Mason is a Professor of Genomics, physiology in Biophysics at Weill Cornell Medicine and the Director of the WorldQuant initiative for qualitative prediction as well as an affiliate of Memorial Sloan Kettering Cancer Center, Rockefeller University, Harvard Medical School and a Yale Law School.

As mentioned earlier, Dr. Van Eyk is Professor of Cardiology at Cedar-Sinai as well as the Director of the Advanced Clinical Biosystems Research Institute, Founder of the Precision Biomarker Lab and the current President of the HUPO. These relationships are reinforcing the power of the Proteograph in the hands of these luminaries in their fields. They’re partnering with us to imagine a new future in multiomics, and I’m excited to continue our engagement to push the boundaries of what’s possible together. Before I turn the call over to David, I want to share an update on our leadership team. Scott Thomas, our Chief Commercial Officer, will be transitioning from here in July. I want to thank Scott for his contribution, leading and developing and commercial organization.

Our two senior regional Vice Presidents will lead commercial in the Americas and EMEA, APAC, respectively. We have an excellent team in place, and we’re confident we will continue to deliver on the promise of our transformational technology. With that, I will now turn the call over to David.

David Horn: Thanks, Omid. Total revenue for the first quarter of 2023 was $4.1 million, representing an increase of 22% compared to the $3.3 million in the first quarter of 2022. The increase in first quarter revenue was primarily due to increased consumable kit sales related to the Proteograph Product Suite. Revenue recognized primarily consisted of sales of Proteograph SP100 instruments and consumable kits. Additional sources of revenue include platform evaluation, service, grant and lease revenue. Product-related revenue for the first quarter of 2023 was $3.6 million, including related party revenue of $1.3 million and consisted of sales of SP100 instruments, consumable kits and platform evaluations. Service revenue was $69,000 in the first quarter of 2023 and was primarily derived from the completion of a customer service project.

As we have mentioned previously, we will continue to be strategic in undertaking certain service projects for customers that we ultimately believe will lead to purchases of the Proteograph. Grant and other revenue was $335,000 in the first quarter of 2023. As discussed last quarter, contributions from grant and research-related collaborations will resume beginning in the fourth quarter of 2022 related to our SBIR grant from the NIH. The grant period will run through May of this year. In addition, we placed some instruments with key accounts that also require these customers to purchase consumables. We recognized a portion of this revenue as lease revenue. Total gross profit was $2.1 million for the first quarter of 2023, representing a gross margin of 51%.

Gross margins were aided by the mix of consumable versus instrument revenue and additional grant revenue in the first quarter. This was offset by overhead expenses and other cost of revenue. We expect to see variability in our overall gross margin on a quarter-by-quarter basis as the proportion of instrument and consumable sales will fluctuate between any given quarter. Total operating expenses for the first quarter of 2023 were $29.5 million, including $8.7 million of stock-based compensation, an increase of 18% compared to $25 million including $8.1 million of stock-based compensation in the first quarter of 2022. Research and development expenses for the first quarter of 2023 were $14.5 million, an increase of 35% compared to $10.7 million in the first quarter of 2022.

The increase in R&D expenses was primarily due to an increase in product development efforts related to the Proteograph Product Suite, including employee compensation costs and other-related expenses due to growth in R&D personnel and expenses associated with the build-out of our facility. Selling, general and administrative expenses for the first quarter of 2023 were $15 million, an increase of 5% compared to $14.3 million in the first quarter of 2022. The increase in SG&A expenses was primarily driven by greater employee compensation expenses due primarily to growth in personnel for our global commercial organization. Net loss for the first quarter of 2023 was $24 million compared to $23.6 million in the first quarter of 2022. We ended the quarter with $410.5 million in cash, cash equivalents and investments.

As Omid mentioned, while we continue to drive growth on the top line, we’re taking a very disciplined approach to spend in order to protect our robust balance sheet. We’ll continue to be very mindful of our level of spend as the year progresses in light of the volatile macroeconomic environment and its potential impact on demand. With disciplined deployment of capital, we believe we are well funded to execute on our strategic plan for many years to come. Turning to our outlook for the year. We continue to expect revenue to be in the range of $23 million to $25 million for 2023, representing significant year-over-year growth of 48% to 61%, similar to 2022. We expect revenue to be more weighted to the second half of the year. At this point, I would like to turn the call back to Omid for closing comments.

Omid Farokhzad: Thanks, David. We started the year off with a good momentum as more and more customers generated data using the Proteograph, further solidifying the need for large field unbiased deep proteomic studies. It is exciting to see the Proteograph enabling breakthrough science as shown through its power extensibility and ability to catalyze new applications and markets. I have never been more excited about the opportunities ahead. With that, we will now open it up to questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from TJ Savant from Morgan Stanley.

Operator: Our next question comes from Dan Brennan from TD Cowen.

Operator: [Operator Instructions] Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.