Singular Genomics Systems Inc. (ticker: SG) announced its financial results for the fourth quarter of 2023, with revenue reaching $1.1 million—the highest quarterly total to date. The company highlighted the shipment of eight G4 instruments, the launch of new flow cell products, and a preview of the G4X Spatial Sequencer.
Despite these developments, the company faced a negative gross profit and a net loss of $23.2 million for the quarter. To address financial challenges, Singular Genomics has reduced its workforce by 20% and is implementing cost-saving measures to extend its cash runway to late 2026. The company is strategically pivoting towards spatial sequencing and multiomics, with a focus on developing the G4X system.
Key Takeaways
- Singular Genomics reported $1.1 million in Q4 revenue, the highest for any quarter so far.
- Eight G4 instruments were shipped; new products such as F3 flow cells and Max Read flow cell kits were launched.
- The company showcased the G4X Spatial Sequencer, expected to be customer-ready by year-end.
- A strategic shift towards spatial sequencing and multiomics is in place, with a focus on the G4X.
- Workforce reduced by 20%, and cost-saving initiatives are set to decrease annual operating expenses by $20 million.
- Singular Genomics reported a negative gross profit of $0.5 million and a quarterly net loss of $23.2 million.
- The cash runway is projected to extend to late 2026 due to cost-saving measures.
Company Outlook
- The G4X system targets the spatial and multiomics markets, expected to offer a strong value proposition and higher margins.
- Partnerships and collaborations in the clinical market are being explored.
Bearish Highlights
- The company reported a negative gross margin, influenced by discounts to customers and higher costs for installation, training, and support.
- The net loss for the quarter was substantial at $23.2 million.
Bullish Highlights
- The shift to G4X and multiomics is anticipated to capture strong market interest.
- The company's cost-saving measures aim to secure financial stability and focus on the promising G4X platform.
Misses
- Singular Genomics faced a negative gross profit this quarter, with gross margin impacted by additional costs.
Q&A Highlights
- The company is prioritizing G4X opportunities over G4-only opportunities.
- It is still early in the year to predict revenue trends.
- Plans for G4X launch include a strategy shift towards services and reinvestment in go-to-market efforts.
- Headcount reductions have been made to concentrate on critical priorities and support for existing customers.
Singular Genomics is navigating a period of transition with the introduction of its G4X Spatial Sequencer and a strategic realignment towards spatial sequencing and multiomics. The company's financials reflect the challenges of this pivot, balanced by proactive measures to streamline operations and secure its future in a competitive market. As Singular Genomics progresses through 2024, investors and industry watchers will be closely monitoring the G4X launch and its impact on the company's financial health.
InvestingPro Insights
Singular Genomics Systems Inc. is making strategic moves to navigate through its financial landscape, as evidenced by its latest quarterly report. To enrich our understanding of the company's position, let's consider some metrics and tips from InvestingPro that could be particularly relevant.
InvestingPro Data:
- Market Cap (Adjusted): $40.17M USD
- P/E Ratio (Adjusted) for the last twelve months as of Q3 2023: -0.44
- Revenue for the last twelve months as of Q3 2023: $2.6M USD
InvestingPro Tips:
1. Analysts anticipate sales growth in the current year for OMIC, which could be a positive sign for investors looking at the potential for Singular Genomics' revenue increase.
2. OMIC's liquid assets exceed short-term obligations, indicating that the company has a cushion to manage its immediate financial needs, which is crucial during its strategic shift towards spatial sequencing and multiomics.
Investors interested in a deeper dive into Singular Genomics' financial health and future prospects can find additional InvestingPro Tips by visiting https://www.investing.com/pro/SG. There are 11 more tips available that could provide further insights into the company's operational and financial metrics.
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Full transcript - Singular Genomics Systems (OMIC) Q4 2023:
Operator: Good afternoon, everyone, and welcome to Singular Genomics Fourth Quarter and Full Year 2023 Earnings Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Philip Taylor. Sir, the floor is yours.
Philip Taylor: Thank you, operator. Presenting today are Singular Genomics Founder, Chair, and Chief Executive Officer, Drew Spaventa; and the Company's Chief Financial Officer, Dalen Meeter. Earlier today, Singular Genomics released financial results for the three months ended December 31, 2023. A copy of the press release is available on the company's website. Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's views as of today, Monday March 18th, 2024 only, and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other information related to our financial and operating results, plans, and strategies. Actual results may differ materially from those expressed or implied by these statements as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission, including our most recent Form 10-K filings and the Form 8-K filed with today's press release. Our SEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements. Please note that this conference call will be available for audio replay on our website at investor.singulargenomics.com in the Presentations and Events section. With that, I will turn the call over to CEO, Drew Spaventa.
Drew Spaventa: Good afternoon, and welcome to Singular Genomics' fourth quarter 2023 earnings call. It was a productive quarter to finish off an important year for the company and I am pleased to update you on our progress. We will focus our call on the following areas: one, business highlights and key accomplishments from 2023; two, new data and product announcements; and three, strategic focus for 2024. Let’s start with our fourth quarter results. We shipped eight G4 instruments during the quarter and generated $1.1 million in revenue, our highest quarterly total again. Of these shipments, three were to academic core labs and five were to commercial labs. The shipments comprised an equal split between traditional capital purchases and non-capital arrangements, bringing our total G4 shipments to 24 as of December 31st. In addition to our Q4 revenue performance, we had several other key accomplishments and activities for the year to note. We commercially launched and transitioned the majority of our customers to our F3 flow cells allowing users to get up to 450 million reads per flow cell or 1.8 billion reads per run for some of the most widely run applications. We commercially launched Max Read flow cell kits to customers for single cell sequencing increasing the output of the G4 to 800 million reads per flow cell or 3.2 billion reads per run for specific single cell in spatial sequencing applications We improved sequencing quality on the G4, recently increasing the specifications to 85% bases greater than or equal to Q30. Lastly, we narrowed our priorities across the R&D roadmap to focus resources on the highest impact activities and projects for new innovations, while reducing our cash burn and extending runway. Turning to new data and products announcements, we recently showcased our near-term product pipeline at the AGBT Conference in Orlando, Florida. At the conference, we unveiled the G4X Spatial Sequencer, a high throughput in situ spatial sequencing platform. The G4X is designed to offer novel capabilities, stackable data streams and unprecedented throughput for spatial profile filing of tissue. Its novel capabilities will include Direct-Seq, which is the sequencing of RNA in situ and has the potential to open new areas of scientific discovery. In addition, the G4X will offer readouts of targeted transcripts, targeted proteins and a fluorescent H&E stains, all in the same tissue section. This combination of readout modalities will be offered at an unprecedented scale with 40 square centimeters of flexible imaging area and single-day run times, the G4X system will enable labs to process 20 times more samples per week than existing technologies. At the conference, our CSO and Co-Founder, Eli Glezer, presented to a standing room-only audience sharing the performance data and technical specifications of the G4X system. In addition, we hosted a successful customer and KOL event, including lab directors and scientific leaders in the spatial community. The event provided an opportunity to develop relationships, solicit feedback on the system and discuss opportunities for collaborating and working together to bring the G4X forward. We presented internal and external data at the conference. Internal data included transcripts, proteins and direct sequencing of RNA, external data came from two technology access programs or TAP partners. Early collaborators included Catherine Wu from the Dana-Farber Cancer Institute, who noted the high sample throughput and excellent data quality that’s been generated on the G4X with our bone marrow samples, that tours via very difficult tissue types have been impressive and have allowed us to envision much larger studies that have not been previously possible. The scale provided by the G4X promises to have tremendous impact on expanding our understanding of the tumor micro environment in acute myelogenous leukemia, AML and beyond. In addition, Ioannis Vlachos from Harvard’s Beth Israel Deaconess Medical Center noted as the spatial value field matures, high throughput spatial platforms such as the G4X will empower more researchers to incorporate spatial tissue profiling into their work, as well as enable us to answer bigger questions and to perform increasingly larger studies. We are encouraged by the feedback from early collaborators and interest from potential users coming out of AGBT. The conference generated more than 200 qualified marketing leads and now we have a growing pipeline of near-term service projects on the G4X and a funnel of potential sales opportunities for early adopters of the platform. We intend to initially offer kits in the G4X that will support transcripts, proteins, and offer fluorescent H&E stain. The system is designed to accommodate a large number of samples and will have the capability to readout hundreds of gene targets and dozens of proteins in the same tissue section. Content will be available in fixed panels, or customizable for the customer. Future kits in the G4X will also support Direct-Seq, which is designed to directly read regions of RNA such as cancer hotspot mutations, guide RNAs and CRISPR screens, or B and T cell receptor sequences. The capability to perform direct sequencing of RNA within cells and tissues is expected to bring a powerful new readout modality for in situ molecular pathology. Direct-Seq will be initially available as a service with plans for broader release shortly thereafter. The G4X upgrades are expected to be available to G4 customers by the end of this year as part of a G4X early access program. Initially available will be an immune oncology panel of approximately 300 gene transcripts, 10 to 15 proteins and the ability to customize content. Direct-Seq and additional panels are expected to be released at a later date. We also plan to provide G4X technology access services starting in the second quarter. Turning to our views and strategic focus in 2024. We are encouraged by the level of interest and engagement around the G4X. We are seeing strong interest from early collaborators, especially as it relates to our technology access services offering. Based on early feedback and interest in the G4X, we intend to focus more heavily on spatial sequencing and multiomics moving forward. We believe this is an area where we can offer novel and differentiated solutions with compelling business economics. The setup for the G4X has multiple compelling aspects driving this shift in focus. First, strength of the value proposition. The g4x value proposition is expected to provide unique capabilities that customers are asking for. This can be categorized into novel data output modalities and high throughput. The G4X is designed to be highly differentiated from any other current offering, while directly addressing customer paintpoints. Second, the business economics are attractive. ASPs on both the G4X instruments and consumables are expected to be higher than the current G4 business. The ability to offer high throughput in the form of 10 to 40 tissue samples on a single flow cell translates to expected ASPs and margin dollars to be materially higher than current kits and significantly higher potential for consumable pullthrough for a G4X instrument. Third, market dynamics and growth. The spatial profiling in multiomic spaces in the early stages and is expected to grow rapidly. The current market is largely comprised of academic labs, CROs and reference labs. These labs need higher throughput and lower cost per sample. Current tools are limited. We believe the G4S (CSE:G4S) will be uniquely able to serve these customers and accelerate growth within this space. We see a strong setup for the G4X to be a highly successful product and we are making the necessary trade-offs and decisions to invest and bring this product to market as fast as possible. We also recognize the need to manage our cash and resources preudently and have continued to identify and implement actions to drive additional cost savings. To this end, we recently made the difficult decision to reduce our headcount by approximately 20% and we reduce our spending plans to decrease cash burn and focus resource more heavily on our spatial sequencing product roadmap. This reduction was incremental to the cost savings taken in October of 2023 and discussed in our last earnings call. We believe these actions will extend our cash runway into late 2026, while still supporting our current G4 customers and focusing our development work to bring the G4X to market as fast as possible. We will provide additional color and updates on our outlook for 2024 on our Q1 earnings call. Now, I'll turn it over to Dalen to go to the details of our fourth quarter financial results.
Dalen Meeter: Thank you, Drew. I'll start with financial results for Q4 2023 and talk briefly about 2024. As previously discussed, we shipped eight G4 instruments in the fourth quarter of 2023. Revenue for the fourth quarter was $1.1 million, predominantly made up of $0.9 million from revenue recognized on four capital purchased instrument placements and consumables pullthrough of $0.2 million. We expect revenue from the remaining four instrument shipments to be recognized over time as these customers purchase consumables. Gross profit was negative $0.5 million in the fourth quarter of 2023, compared to approximately flat in the fourth quarter of 2022. Our gross margin was negative because of both additional discounts we provided to certain customers, as well as higher costs associated with the installation, training, and support of our system placements. Operating expenses in the fourth quarter of 2023 totaled $24.8 million, compared to $22.5 million in the fourth quarter of 2022. These totals included non-cash stock-based compensation expenses of $2.7 million in Q4 2023 and $3.1 million in Q4 2022. The year-over-year increase was primarily driven by the timing of expenses related to certain compensation and benefits and severance costs. Net loss in the fourth quarter of 2023 was $23.2 million or $0.32 per share, compared to $21.1 million or $0.29 per share in the fourth quarter of 2022. The weighted average share count for the fourth quarter of 2023 used to calculate net loss per share was approximately $73.6 million. Ending cash, cash equivalents and short-term investments, excluding restricted cash totaled $173.9 million. Turning to 2024, as Drew discussed, we recently implemented a reduction force of approximately 20% of our workforce. We have also taken actions to reduce our non-personnel related operating expenses in 2024 to further decreased our cash burn. These actions were incremental to the cost savings initiatives implemented in October of 2023 and discussed on our last earnings call. In total, we estimate the combined savings from these actions will reduce annualized operating expenses by approximately $20 million and extend our cash runway to late 2026. While these actions were not easy we believed right-sizing the cost base of the organization was a necessary step to position us for success in the long term. Back to you, Drew.
Drew Spaventa: Thank you, Dalen. I'm excited as we look ahead to 2024. This will be a pivotal phase for Singular Genomics. Singular has spent the last seven years developing incredible technology. We have invested approximately $300 million and in doing so created a powerful sequencing platform with significant modes around our system, our chemistries and methods, our IP and our products. Over the last few years, we have increasingly focused on leveraging our NGS Technology and Foundation to address the spatial and multiomics markets. Our NGS Foundation and continued innovation has resulted in a unique and powerful on ramp to spatial sequencing. Our many years of investment in both NGS and spatial sequencing now positions Singular to enter these high growth markets with a highly differentiated product. The recent restructuring of our business will provide extended runway, give us time to get this product to market and scale commercially. The synergies and footprint of our current NGS business and customer base will allow us to onboard existing customers and leverage our current commercial operations. Now, let's open it up to questions. Operator.
Operator: [Operator Instructions] Your first question is coming from Dan Brennan from TD Cowen. Your line is live.
Dan Brennan: Great, thank you. Thanks for the questions guys. Congrats on the quarter and on the G4X. Yes, so, it sounds like we need to get more color at 1Q, but could you unpack a little bit their strategic shifts from the sequencing side to the G4X? And can you just give us some sense of what that entails, like are you still selling – are you just still going to be charging ahead on the G4X impact that this shift and kind of what it means?
Drew Spaventa: Hey, Dan. Thanks for the questions. This is Drew. We lost you at the end there, but I think I understood the most of the most the question. In terms of the strategic shift, it's really a confluence of factors that's driving the shift. It's really best understood kind of looking at three different aspects to the setup we talked about it on the call. The first is the value proposition of the G4X and I think there's two ways to think about it. The value proposition of the system relative to other options out there in the customers’ eyes and the value proposition relative to the current G4 and what we see with the X is, it's really resonated with customers. It's the novel ability to use sequencing in situ and do things like Direct-Seq and it's also the high throughput lower costs that our large imaging area will deliver. And that combination is really resonating and it's just a very strong value proposition. The second is the business economics on X. We expect to see you know higher ASPs for the instruments and we also expect to see a very different pullthrough profile on sequencing our kits range from around $600 to about $1200. On spatial, the cost per sample and the ability to get anywhere from five to 40 samples on a single kit gives us the ability to potentially have ASPs that are many, many times higher on the same kit - on the same system with much higher margin dollars. So the amount of time someone has to press go to have a healthy pullthrough system with significant margin dollar contribution to the bottom-line is just it's about five to ten times less. So, it's just a very different set up on those two. And then I think the last thing is that the market is growing very fast. And when you have high growth, you have areas that you can kind of find a foothold and differentiate yourself. And it's just much easier to launch and grow a business when growth is abundant whereas sequencing in a lot of ways in the academic and in the segments we’re currently selling in, it's not really growing as fast that wallet share is starting to shift towards spatial and single cell and protein and all the things that the G4X directly addresses. On the clinical side, there's still absolutely going to be growth in sequencing. But that's reimbursement-driven. It's decentralization of sequencing. And it's going to require much longer timeframes. We're still very interested in pursuing that market and ideally advancing that through partnership over time. But the G4X we think has the set up to be a much different profile of business in the short-term when we're measuring over the next quarters and years.
Dan Brennan: Got it. And then in terms of just, so you will still be pushing ahead then, I guess, in terms of the clinical market, maybe not research, just wondering from a from like an operational, commercial basis as we go through ‘24. Is it - I think the street probably has somewhere in the midst of I don't know 30 or so placements of the G4. It sounds like any color on how we think about like strength of the business in ‘24 as you - this business model?
Drew Spaventa: Yeah. We're still working through a lot of that. I mean, I want to be clear. We are shifting our focus and we are putting all of our resources towards getting X developed and out. And that does require difficult and challenging trade-offs. We will have more color in the next quarter’s call. But right now, we are not pounding the pavement on putting additional dollars to go drive G4 right now. We are focusing the resources on G4X. We're 100% committed to supporting our existing customers and we are also interested in advancing the G4 through partnership. And we do have efforts that are ongoing and outreach, but our focus again, we're trying to really hone in on what the highest value, best return on the dollars and resources we have and that to us is very clear at this point of X and that's where the majority of our attention is going.
Dan Brennan: And maybe a last one. Just on the G4X and what's the key milestones this year that we could be watching for in terms of some of the early access customers like when we see publications. Just kind of give us a sense of what are the guideposts we can watch throughout ‘24 that'll give us confidence you guys are on the right trajectory there? Thank you.
Drew Spaventa: Thanks, Dan. yeah, So, we're expanding our technology access program now. Early on a lot of these are collaborations where you're doing work to submit grants or you're doing evaluations to demonstrate the technology to potentially early adopters. We'll move into kind of a paid for services arrangement, kind of in Q2, really probably taking more effect in Q3, because there's always onboarding there's work to get people onboarded. But that'd be something to look out for services and kind of uptake in Q3. And then we're targeting early access placements with just a few select customers. Again, the idea is here these are very high volume customers in places where you're going to have a tremendous amount of demand. So, the hand selected early access customers end of the year and then moving into a full commercial launch first half of next year.
Dan Brennan: Great, thank - great, thank you.
Operator: Thank you. Your next question is coming from John Sourbeer or from UBS. Your line is live.
Unidentified Analyst: Hi guys. This is Lucas on for John Sourbeer at UBS. Is there any commentary you could provide on the sales funnel mix between the G4 and the G4X right now? Thank you.
Drew Spaventa: Yeah, yeah, thanks. It's still early to look at the sales funnels for both and comment apples-to-apples. What we're seeing on X is, we have a growing list, a dozen plus potential service collaborators that are in the funnel and that's growing very quickly. Coming out of AGBT, we had a hundred plus interactions and it does take time to follow up with all those interested parties. And we're doing it in the very formal way where we're trying to identify specific projects where they could utilize the G4X and a lot of that that's working through to understand the details of the project to make sure it's a fit for the current capabilities of where we are. We still have a ways to go to develop kind of the full set of capabilities in the platform. But that Funnel on the services side is really starting to take shape nicely and we're executing on those now. On the funnel for instrument placement side of things, that's going to take some time. Like I said, we're only talking about early access placements later this year with commercial launch in the beginning of next year and people are going to want to see publications and services and we still have a lot of work to do to kind of launch this product the right way, which we reporting ourselves the time to do. On the sequencing side, there remains demand, but not, not ready to comment specifically on the funnel number. It's not seeing we've talked about before. But again our focus at this point is really identifying where are their G4X customers. And if those customers are interested in taking a G4 now as part of a package to step into X, those are the opportunities we would move through the funnel. But right now, we are not actively seeking G4-only opportunities. We are focusing our attention on G4X opportunities, our combination opportunities.
Unidentified Analyst: Thanks. That’s all are really good color. And then, is there any commentary you could provide on revenue and just kind of the general cadence of how things could track throughout the year?
Drew Spaventa: It's still very early for us. We're working through this now. A lot of this reorganization and shift has been work that we've done over the last couple months. I think we'll have more information as we work through this kind of at the next quarter call.
Unidentified Analyst: Okay. Not a problem. And then lastly, on the PX, should we consider that product as still being in development? Or given the rollout of the G4X, is that kind of a replacement for the PX?
Drew Spaventa: Yeah, it's a good question. I would consider that the G4X is our spatial sequencing platform we’re bringing to market. And it's all hands on deck to focus on getting that platform out. The PX platforms, we have a six beta platforms that we may revisit at some point, but right now they're on hold. Again, our mindset right now is very much focused, focused, focused on getting the G4X out.
Unidentified Analyst: Okay. Thank you. That's all I had.
Operator: Thank you. Your next question is coming from Matthew Sykes from Goldman Sachs. Your line is live.
Jake Allen: Hi, this is Jake Allen on for Matt. Thank you for taking my question. First, for the anticipated G4X launch, do you expect a similar go to market strategy offering both reagent rental and outright instrument purchases?
Drew Spaventa: I think we envisioned a somewhat different strategy. I think we're going to lean into services a lot more. And I expect that we'll be more discerning on alternative methods versus capital sales. Again, the demand profile at this point seems different and we learned a lot from the G4 launch. So, it's still early to say you're from now when we're selling units and we're commercial what we expect that mix to look like. But I think one thing that we have learned is the service can be a really nice on ramp. There's a lot of demand there. So, I think the other thing that we're planning is, a few early access placements, but really partnering with those early access customers and making sure they're at places where those very high pullthrough and that's something that uniquely the system is suited to address.
Jake Allen: Got it. Thanks. That's really helpful. And then, lastly, so, as you continue to cut headcount to reduce cost, could you just talk about what you’re thinking about in terms of level of investment into the business to support the G4X launch?
Drew Spaventa: Yeah, the reductions are very difficult and we've been a lean operating company to the extent possible from onset. The thought process behind reducing and focusing was really to try and eliminate anything activities and priorities that weren't critical to kind of the revised focus and that focus is supporting existing customers and existing sequencing business and then putting all R&D and product resources on G4X. A lot those into developing these systems. It's multidisciplinary teams. These are complex systems and reagents. So you can get to a point where you have really nice proof-of-concepts or really nice data, but productizing that and getting it out robustly. That's something that we know it does take resources to do that. So, we've gone as is lean as we can with the more narrow focus on G4X and supporting existing customers and we're going to try and advance as quickly as we can in that lean nature.
Dalen Meeter: Hey Jake, this is Dalen. I'll maybe just add one thing. In the savings estimates that we talked about in the prepared remarks and the statement about extending our runway out to the end of 2026, we are contemplating internally some just kind of modest investment for some of the infrastructure that we think will need to stand up to support the good market strategy such as services, right? So, we are contemplating some reinvestment to get this product to market.
Jake Allen: Got it. Thank you. That's it for me.
Operator: Thank you. That concludes our Q&A session. I'll now hand the conference back to our host for closing remarks. Please go ahead.
Drew Spaventa: Thank you everyone for joining the call today. I look forward is update you on our progress as we progress this year.
Operator: Thank you everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
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