Quanterix Corporation — Q1 2022 Form 10-Q
Business and period: Quanterix develops Simoa ultra-sensitive biomarker detection platforms, instruments, consumables and research services. This unaudited report covers the three months ended March 31, 2022, compared with Q1 2021. Amounts below are in U.S. dollars; financial statement figures are in millions unless otherwise noted.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $29.6 | $27.2 | +9% |
| Gross profit / gross margin | $14.6 / 49% | $16.3 / 60% | Margin down 11 percentage points |
| Operating expenses | $32.7 | $26.1 | +25% |
| Operating loss | ($18.2) | ($9.8) | Loss increased |
| Net loss | ($18.2) | ($10.1) | Loss increased 80% |
| Net loss per share, basic and diluted | ($0.49) | ($0.29) | |
| Operating cash flow | ($21.7) | ($14.1) | Cash use increased |
| Capital expenditures | $1.4 | $0.1 |
- Product revenue was $20.7 million, up 13%; higher consumables sales more than offset lower instrument sales. Service and other revenue rose 37% to $8.8 million, including approximately $2.7 million recognized from the Lilly collaboration. Collaboration and license revenue was $0.1 million. Grant revenue was zero, compared with $2.3 million in Q1 2021.
- Cost of product revenue rose 44% to $10.7 million. Management attributed the increase primarily to manufacturing and inventory-management inefficiencies and higher excess-and-obsolete inventory reserves. Total cost of goods sold and services increased to 51% of revenue from 40%, pressuring gross margin.
- R&D expense increased 5% to $7.0 million; selling, general and administrative expense increased 32% to $25.7 million, mainly due to headcount growth and higher discretionary spending.
- At March 31, cash and cash equivalents were $374.3 million, with $2.6 million of restricted cash; total cash, cash equivalents and restricted cash were $376.9 million. Current assets were $433.7 million and current liabilities $31.8 million. Accumulated deficit was $323.6 million and stockholders’ equity $426.4 million.
- The filing reports no material changes to market-risk disclosures and no material legal proceedings. No borrowings are shown on the balance sheet; the company’s reported lease liabilities were $45.4 million, including $1.9 million current and $43.6 million long-term.
Changes, outlook and notable items
- Revenue growth did not translate into improved profitability: the absence of prior-year grant revenue was more than offset at the top line by product and service growth, while higher product costs and operating expenses widened losses.
- Quanterix said existing cash, commercial sales and interest income should fund anticipated operating cash requirements for at least the next 12 months. It expected significant expenses and operating losses to continue at least through the next 24 months, with spending expected to rise as it expands headcount, sales and marketing, R&D and operations. This is management’s outlook, not a revenue or earnings forecast.
- The Lilly collaboration and license arrangements have a stated transaction price of $10.9 million; revenue is recognized over the service period. Quanterix received a $5.0 million upfront payment and was to receive $1.5 million per quarter during 2022. The license also entails potential milestone payments and royalties, and contingent amounts payable to Lilly may reduce service revenue when probable.
- A new 85,800-square-foot Bedford, Massachusetts office and laboratory lease commenced February 1, 2022; the headquarters was expected to open after construction in Q3 2022. Its initial payment term is eight years and nine months, beginning May 1, 2022. The reported lease liabilities increased significantly with the new lease.
- After the quarter, Quanterix announced a CEO transition effective April 25, 2022: Masoud Toloue became CEO and E. Kevin Hrusovsky became Executive Chairman. In May 2022, the company requested voluntary withdrawal of the FDA emergency use authorizations for its COVID-19 antibody and antigen tests, citing changing testing demand; it intended to continue marketing research-use-only versions. It also received the final $0.5 million under the NIH RADx workplan.
- COVID-19-related uncertainty, competition, customer and supplier conditions, product adoption, regulatory requirements and the possibility of needing additional financing are identified as factors that could affect results. Management reported no material changes to the risk factors in the 2021 Form 10-K. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether manufacturing and inventory-management issues and the increased obsolescence reserve are temporary, and how they affect future gross margins and inventory.
- Whether recurring consumables and service growth can offset weaker instrument sales and the end of grant revenue, and whether Lilly-related revenue is repeatable beyond the stated work period.
- The pace of cash consumption relative to management’s stated 12-month liquidity outlook and planned operating and capital spending.
- The full cost and cash-flow effect of the Bedford lease, including construction costs, tenant-improvement allowance and future lease payments.
- Progress and commercial implications of the voluntary COVID-19 EUA withdrawals, and any regulatory, milestone or royalty developments related to licensed products and collaborations.