Quanterix Corporation (NASDAQ: QTRX) — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018; filed March 18, 2019. The filing also provides unaudited fourth-quarter results. Quanterix develops and sells ultra-sensitive Simoa protein-detection instruments, assays, consumables and research services, principally for research use only.
Financial performance and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $37.6 million | $22.9 million |
| Product revenue | $23.4 million | $14.1 million |
| Service and other revenue | $12.1 million | $7.7 million |
| Collaboration and license revenue | $2.2 million | $1.1 million |
| Gross profit / margin | $17.9 million / 48% | $10.0 million / 44% |
| Operating expenses | $49.5 million | $36.0 million |
| Operating loss | $31.6 million | $26.0 million |
| Net loss | $31.5 million | $27.0 million |
| Operating cash used | $28.7 million | $22.1 million |
| Cash and cash equivalents at year-end | $44.4 million | $79.7 million |
| Long-term debt, net of current portion | $7.6 million | $4.3 million |
- Revenue increased 65%, led by higher instrument and consumables sales and greater use of the Accelerator Laboratory. Consumables revenue rose to $13.8 million from $7.6 million.
- Gross margin improved as revenue mix shifted toward consumables and collaboration revenue. SG&A rose 71% to $33.7 million, reflecting organizational expansion, public-company costs, acquisition-related expenses and stock compensation; R&D declined 3% to $15.8 million.
- Net cash declined $34.3 million during 2018. Investing used $5.5 million, including $3.8 million net cash paid for the Aushon acquisition; financing used $0.1 million.
- Year-end current assets were $59.5 million and current liabilities $18.1 million. The company also reported $1.0 million of restricted cash for its new headquarters lease.
- Term-loan principal was approximately $7.8 million, with repayment due at maturity in March 2020. The facility is secured and includes restrictive covenants.
Fourth-quarter results
Unaudited Q4 2018 revenue was $10.9 million, compared with $6.6 million in Q4 2017. Q4 2018 net loss was $9.3 million, versus $7.4 million a year earlier. Q4 revenue included $7.5 million of product revenue and $3.4 million of service and other revenue; no collaboration and license revenue was reported for the quarter.
Material changes and notable items
- Quanterix acquired Aushon Biosystems in January 2018 for total consideration of $4.0 million, adding planar-array technology, a CLIA-certified laboratory and customer relationships. The acquisition supported development of the SP-X platform.
- bioMérieux terminated its collaboration in September 2018, relinquishing future Simoa IVD licensing rights. Quanterix recognized remaining deferred collaboration revenue upon termination; collaboration and license revenue for 2018 totaled $2.2 million.
- The company entered an 11-year, five-month lease for approximately 91,600 square feet of new office, laboratory and manufacturing space. Disclosed minimum operating lease payments totaled $39.1 million.
- The 2018 net loss increased from 2017, and the accumulated deficit reached $175.9 million. Quanterix reported losses in each of the three years presented.
Outlook, risks and contingencies
- Management expects continued significant expenses and operating losses, at least through the next 24 months, as it expands sales, support, R&D and facilities. It set a development goal of improving Simoa sensitivity 100-fold by 2021.
- The SP-X entered early access in January 2019, with full commercial launch planned for April 2019; the HD-X launch was planned for the second half of 2019. These are plans, not assurance of launch or adoption.
- Management’s liquidity estimates are not fully consistent across the filing: MD&A says resources should cover anticipated cash needs into at least Q2 2020, while the financial-statement note says cash is expected to fund operations for at least one year from issuance. Both are estimates and subject to risks.
- The company is not profitable and faces market-adoption, lengthy sales-cycle, competition, product-development, regulatory-approval and reimbursement risks. Its products are currently marketed for research use only; Quanterix had not applied for or received diagnostic regulatory approvals.
- Consumables and services tied to the Nf-L assay represented approximately 17% of 2018 total revenue, according to the filing. The assay also depends on a single-source antibody supplier.
- A STRATEC minimum-purchase commitment for HD instruments could result in an $11.1 million fee if the required purchases are not met, assuming no further qualifying purchases; the company said it expected to meet the commitment and had not accrued a liability.
- The filing reports no material pending legal proceedings. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the external auditor did not provide an opinion on internal control effectiveness.
Most important facts for investors to verify
- Whether revenue growth and recurring consumables usage continue, and how instrument placements translate into consumables sales.
- Cash burn, the stated liquidity runway and any need for additional financing or shareholder dilution.
- Commercial launch timing and customer acceptance of SP-X and HD-X, alongside the potential effect on existing instrument sales.
- Progress toward meeting STRATEC purchase commitments and the remaining debt maturity and repayment terms.
- Whether the new facility’s long-term lease obligations and expansion costs are supported by operating growth.
- Reliance on Nf-L-related revenue and single-source assay inputs, and progress toward any regulatory pathway for diagnostic products.