Quanterix Corporation (Nasdaq: QTRX) — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited results; dollar amounts below are in millions unless noted. Quanterix develops and sells Simoa ultra-sensitive biomarker detection platforms, instruments, assays, consumables, and related research services.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $27.7 | $31.4 | $80.3 | $60.2 |
| Gross profit / margin | $15.2 / 55% | $21.1 / 67% | $45.5 / 57% | $33.1 / 55% |
| Operating expenses | $30.5 | $18.8 | $84.2 | $54.8 |
| Operating income (loss) | $(15.2) | $2.3 | $(38.7) | $(21.7) |
| Net income (loss) | $(15.7) | $2.2 | $(37.7) | $(21.7) |
| Net loss per share, diluted | $(0.43) | $0.07 | $(1.05) | $(0.75) |
- Q3 product revenue was $20.7 million, up 77%; service and other revenue was $5.9 million, down 10%. Collaboration and license revenue fell to $0.1 million from $11.2 million, largely because the 2020 quarter included Abbott license-related revenue. Grant revenue was $1.0 million versus $1.9 million.
- Nine-month product revenue increased 104% to $57.6 million, while total revenue rose 33%. Higher product sales reflected increased instrument installations as customer sites reopened and growing consumables sales from the installed base.
- Q3 gross margin declined to 55% from 67%; management attributed the comparison in part to the prior-year $1.0 million Tufts royalty cost associated with Abbott licensing. Nine-month gross margin improved to 57% from 55%, with management citing grant revenue mix, manufacturing efficiencies, and higher average instrument selling prices.
- Operating expenses increased substantially: Q3 R&D rose 27% to $6.8 million and SG&A rose 76% to $23.7 million. For the first nine months, R&D increased 45% to $20.2 million and SG&A increased 57% to $63.9 million, reflecting headcount and organizational expansion; R&D also included WP2-related work.
- Cash and cash equivalents were $410.7 million at September 30, 2021; restricted cash was $1.7 million. Total assets were $510.8 million and stockholders’ equity was $455.5 million. Accumulated deficit was $285.4 million.
- Operating cash use was $37.6 million in the first nine months, compared with $28.0 million in 2020. Investing cash use was $4.1 million, including $11.2 million of property and equipment purchases offset by $7.0 million of RADx grant proceeds. Financing provided $271.6 million, principally $269.7 million net proceeds from the February 2021 stock offering.
- Debt was approximately $2.0 million at quarter-end; the company made the final principal payment and end-of-term fees of $2.0 million on October 1, 2021. Lease liabilities totaled $22.2 million at September 30.
Material changes versus the prior comparable period
- Q3 total revenue decreased 12% despite strong product growth, as the prior-year quarter included approximately $10.0 million of Abbott initial license revenue and $1.2 million of previously deferred license revenue.
- Q3 results shifted from net income of $2.2 million to a net loss of $15.7 million, as higher operating expenses and the absence of the prior-year license revenue outweighed product growth.
- Nine-month net loss widened to $37.7 million from $21.7 million. The prior-year period included substantial Abbott license revenue; 2021 operating expenses also increased with business expansion.
- Cash rose from $181.6 million at December 31, 2020, driven principally by the February 2021 equity offering. Shares outstanding increased to 36.6 million from 31.8 million at year-end 2020.
Outlook, risks, and unusual items
- No specific revenue or earnings guidance is provided. Management expects significant expenses and operating losses to continue at least through the next 24 months, and expects operating and capital expenditures to increase as it expands headcount, sales and marketing, R&D, and manufacturing capacity.
- Management states current cash, commercial receipts, and interest income should cover anticipated operating cash requirements for at least 12 months. This estimate is forward-looking and subject to risks; future funding needs depend on product acceptance, spending, regulatory requirements, COVID-19 impacts, and competitive developments. Additional equity financing could dilute shareholders.
- The NIH RADx WP2 award has a total value of $18.2 million and runs through March 2022; funding depends on achieving milestones, and the company cautions it may not receive the full award if milestones are not met. Nine-month 2021 grant revenue included $4.2 million related to WP2.
- The FDA expanded the EUA for the Simoa SARS-CoV-2 N Protein Antigen Test in September 2021 to include nasal swabs, saliva, and asymptomatic serial nasal-swab testing. The company was exploring home-based collection and pooling; these are not stated as completed or authorized expansions.
- COVID-19 disruptions had eased as customer sites reopened, but management said pandemic-related challenges could persist or increase if variants lead to renewed shutdowns.
- Other income for the first nine months included $2.1 million related to an employee retention tax credit. Abbott milestone fees and royalties remain dependent on specified development, regulatory, and commercialization events and licensed-product sales.
- The company reported no material legal proceedings, no material changes to previously disclosed risk factors, and effective disclosure controls. It will cease to qualify as an emerging growth company at December 31, 2021 and expects public-company accounting-standard adoption requirements to change starting in 2022.
Important facts for investors to verify
- Whether product and consumables growth continues as customer activity normalizes, and how instrument placements translate into recurring consumables revenue.
- Whether operating expense growth, particularly SG&A, can be matched by revenue growth and improved margins.
- Actual cash burn and the assumptions supporting management’s stated 12-month liquidity outlook; monitor investment spending and potential future financing or dilution.
- Progress against RADx WP2 milestones, remaining funding availability, and the commercial and regulatory status of COVID-19 tests.
- Potential Abbott milestone and royalty receipts, and the timing and amount of any related revenue.