Quanterix Corporation — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Financial statements are unaudited. Quanterix develops Simoa ultra-sensitive digital immunoassay platforms and related products and research services, primarily for life-sciences research and diagnostics.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $23.5 million | $25.4 million | $53.1 million | $52.6 million |
| Gross profit / margin | $8.7 million / 37% | $13.9 million / 55% | $23.3 million / 44% | $30.2 million / 57% |
| Operating loss | $(25.0) million | $(13.7) million | $(43.1) million | $(23.5) million |
| Net loss | $(24.9) million | $(11.9) million | $(43.1) million | $(22.0) million |
| Net loss per share | $(0.67) | $(0.33) | $(1.17) | $(0.62) |
- Revenue mix: Q2 product revenue was $14.8 million, down 21%; service and other revenue was $8.5 million, up 51%. First-half product revenue was $35.4 million, down 4%, while service and other revenue rose 44% to $17.4 million.
- Cash flow: First-half operating cash use was $29.6 million, versus $23.8 million a year earlier; investing cash use was $5.9 million, versus $2.1 million. Financing provided $1.2 million, compared with $275.7 million in 2021, which included public-offering proceeds.
- Liquidity and obligations: At June 30, cash and cash equivalents were $361.3 million and restricted cash was $2.6 million. Total assets were $488.6 million and stockholders’ equity was $405.5 million. The filing reports no outstanding note payable after its maturity in Q4 2021. Operating lease liabilities totaled $45.8 million, including $2.7 million current and $43.1 million long-term.
- Other metrics: Accumulated deficit was $348.5 million. Deferred revenue was $13.7 million, including $12.2 million expected to be recognized within 12 months. One customer represented 18% of revenue in both Q2 and the first half.
Material changes and management commentary
- Q2 revenue declined 7%, and first-half revenue increased 1%. Product sales fell amid lower instrument and consumables sales, including reduced consumables purchases by a large customer. Management cited product quality challenges and lower COVID-19 antibody-test sales.
- Gross margin contracted substantially. Cost of goods sold and services rose 29% in Q2 and 33% in the first half. Management cited manufacturing and inventory-management inefficiencies, lower productivity, excess and obsolete inventory, and product mix. A $1.7 million reclassification to cost of goods sold from operating expense reflected staff time spent on quality-related work; management said these costs could continue until quality challenges are resolved.
- SG&A increased 30% in Q2 and 31% in the first half, primarily due to higher headcount, compensation and stock-based compensation, as well as increased rent from a new Bedford, Massachusetts facility. First-half R&D expense was up 2%.
- The Lilly collaboration contributed approximately $2.7 million of Q2 and $5.4 million of first-half service revenue. The agreement’s stated transaction price is $10.9 million, recognized over time; contingent amounts payable to Lilly may reduce service revenue when probable.
- After quarter-end, on August 8, 2022, Quanterix announced a restructuring that includes eliminating approximately 130 positions, about 25% of its workforce, and other cost-saving measures. Management expects $7–$10 million in mostly cash charges in Q3 2022 and approximately $25 million in annualized operating-expense savings. The company is reviewing options for additional Bedford facility space; related charges are not yet estimable and could be material.
- Management said it expects significant expenses and operating losses for at least the next 24 months, while pursuing the restructuring, assay improvements, commercialization and product development. It believes available cash, commercial sales and interest income will fund anticipated requirements for at least 12 months, but notes this estimate depends on assumptions and may prove wrong.
Outlook, risks and unusual items
- The restructuring’s expected savings and costs are estimates, not guaranteed outcomes. Execution could disrupt operations, result in unanticipated costs, or make it harder to retain personnel; facility-related charges could be material.
- Management launched an assay redevelopment effort intended to improve manufacturing and delivery of high-quality assays at scale, with completion expected in 2023. The filing warns that benefits may be delayed or not achieved.
- Quanterix voluntarily withdrew FDA Emergency Use Authorizations for its COVID-19 antibody and antigen tests in May 2022, citing changing testing demand; it intends to continue commercializing research-use-only versions.
- Other notable items include a $2.1 million employee retention tax credit recorded in Q2 2021, which contributed to the year-over-year comparison in other income, and a new 85,800-square-foot Bedford lease with an initial payment term of eight years and nine months.
- The company reported no material pending legal proceedings, no material changes to its previously disclosed risk factors other than restructuring-related risks, and effective disclosure controls as of June 30, 2022.
Important facts for investors to verify
- Whether assay quality and manufacturing issues improve, and whether the improvement program meets its expected timeline.
- Whether product and consumables revenue recover, particularly sales to the large customer that reduced purchases, and how customer concentration evolves.
- Whether the restructuring delivers the estimated $25 million annualized savings, and the final severance, facility and other restructuring costs.
- Cash burn, liquidity runway and lease commitments in subsequent filings, given continuing losses and management’s expectation of losses for at least 24 months.
- Progress and revenue recognition under the Lilly collaboration, including any variable consideration payable to Lilly, and the commercial or regulatory progress of diagnostic initiatives.