SLGC (2021 - Q3)

Ladies and gentlemen, thank you for standing by and welcome to SomaLogic third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Marissa Bych, Investor Relations. Please go ahead. Marissa

Thank you. And thank you all for joining us. This morning, SomaLogic released financial results for the three months ended September 30, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make forward-looking statements during this call within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relates to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements including, without limitation, those relating to our market opportunity, gross margin, future financial performance, protein content and database growth, customer base, diagnostic pipeline, expectations for hiring, and growth in our organization are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our Form 10-Q filed with the Securities and Exchange Commission today. This conference call contains time-sensitive information and is accurate only as of the live broadcast, today, November 15, 2021. SomaLogic disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. I will now turn the call over to Roy Smythe, Chief Executive Officer.

Good morning. Welcome to SomaLogic's first quarterly update as a public company to review our results for the third quarter of 2021. After more than two decades of hard work, we are indeed excited to now be public and have this opportunity to speak with you today about our rapidly growing, uniquely positioned proteomics business. We are the proteomics company at the nexus of capabilities needed to realize this field's long anticipated potential. Both the ability to measure a sufficient amount of the proteomic scale and then to simultaneously interpret and use that data to deliver impactful research and clinical applications. This has provided us with a substantial first mover advantage and now positions us to capture a disproportionate share of the fast growing proteomics market. We've made use of this first mover advantage to develop the broadest and most flexible technology, the largest clinical proteomics database and the deepest diagnostic pipeline. And with our completed strategic merger with CM Life Sciences II, we now have more than $650 million on our balance sheet. We've already leveraged these added resources to attract talent and transform our Board of Directors with world class industry veterans and we'll continue to leverage our balance sheet to invest in both organic and inorganic growth opportunities moving forward. As you might expect, many have facilitated our recent success and it's helped make our public transition possible. We sincerely thank the investors that have supported us over the last few years, as well as our partners, collaborators, advisors, and notably, of course, our customers. I also thank our leadership team and our employees for their patience, competence, hard work and mission orientation that they bring to their work each and every day. Companies are nothing other than the people that constitute them and the things they agree to do together. And due to the efforts of our people, SomaLogic has an objectively incredible opportunity to create both financial and, more importantly, human value as we move ahead. For those newer to our story, I'd like to provide you a brief overview of SomaLogic. Founded in 2000, SomaLogic is a commercial stage proteomics company with a pioneering technology that provides more coverage of the proteome than any other commercial enterprise. And I will enumerate several unique first mover advantages as I go through today due to our tenure. Considering technology, every proteomics company must have one capable of enablement. In this case, that's the identification and quantification of proteins. However, in addition to this, we also have a clinical proteomics database and the bioinformatics stack, and these three things comprise our integrated platform, which is creating a virtuous cycle of value creation. Our basic enablement technology was discovered by a founder and his colleagues 30 years ago. Over time, we have grown the number of proteins we can identify and measure using proprietary modified aptamers, oligonucleotide sequence ligands we synthesize and modify biochemically, which bind to specific protein targets. There are multiple benefits and advantages of using synthetic nucleic acid ligands compared to other approaches. Breadth, depth, speed and cost, just to name a few. And the trajectory for this technology moving forward in time is significant. With this technology as the backbone, we have created SomaScan, an assay that uses our proprietary aptamer library to identify at present approximately 7,000 human proteins with high specificity, high sensitivity and industry-leading reproducibility in a single sample. Notably, this is more than 4,000 proteins than any other commercial enterprise is capable at this time. Importantly, we are working to commercialize measurement of approximately 10,000 proteins over the next 12 to 18 months using this technique, putting more distance between ourselves and others. And there's no theoretical limit to the number of proteins we can measure on this platform over time. As the vast majority of life sciences use cases for proteomics are to better understand human biology, to find new targets for medicines and vaccines, more data simply means more insights, and content really matters. The SomaScan assay is currently provided primarily as a service product, but we have proven notably in the past to deliver SomaScan kits to site of service, and these will be increasingly deployed over the next few years in a variety of formats, likely including arrays and NGS, and possibly other approaches currently in development. The ability to accurately provide this amount of protein data to our biopharma and basic research customers means we are facilitating their work in ways previously unavailable and as no other can currently do to better understand biology. Our contribution is facilitating the development of new medicines and vaccines and our shared efforts with our customers and collaborators to relieve human suffering and to extend meaningful life. We have built this integrated proteomics platform to be capable of robust high throughput proteomics analysis, with broad proteome coverage, low limits of detection, a short turnaround time and at low costs. Furthermore, we've designed it with the goal of being a universal proteomics platform that can not only be used across the life sciences industry, but also with the robustness and reproducibility required for clinical applications. Our growing clinical proteomics database currently contains approximately 1.5 billion protein measurements across approximately 450,000 assay runs, with over 675,000 participant years of clinical follow-up. Approximately 80% of the samples in the database have been run on high-plex SomaLogic assays, measuring either 5,000 or 7,000 proteins, and about 40% of all the samples offer fully annotated clinical patient data. This unique asset is the largest in the world of its kind, and one that will grow over time as we add prospective clinical data with partners and fully access biobank opportunities. We've used this database and our proteomics bioinformatics capabilities to create a new class of diagnostic tools called SomaSignal tests. Leveraging artificial intelligence, machine learning, and high plex proteomics, SomaSignal tests are protein expression pattern algorithm models that can contribute to diagnosing diseases in the present, but also real time body morphology as well, something genomic tests are incapable of. As a former clinician, I personally believe the most exciting thing about these tests is that they also have the unique ability to predict future biologic and medical risk and to see these risks when traditional diagnostics may not. Some internally validated examples of our tests include a prediction of near-term cardiovascular disease or events, the future development of cancer and complications arising from diabetes, as well as real-time disease detection with less cost and risk, such as a diagnosis of non-alcoholic steatohepatitis or NASH with a blood test rather than a liver biopsy. We have over 100 of these first-in-class high plex protein pattern recognition test in our development pipeline, 20 of which had been validated and a subset of those which have been used by clinicians in our demonstration market over the past two years and are now being evaluated by our health system partners. Our unique market-vetted and market-proven platform capabilities position us extremely well to remain the leader and at the forefront of the global commercial proteomics field as we're working across a broad spectrum of both enablement and applications use cases for research and clinical partners, collaborators and customers. The total addressable market for proteomics will approach $100 billion over the next several years, and includes a current $50 billion life sciences tools component, represented by both biopharma translational and academic researchers, an emerging diagnostics opportunity, which over the next few years, several years, should grow to more than $40 billion. This is an opportunity with clear parallels to the early growth years of genomics. However, proteomics should impact human life with even greater significance over time. Importantly, we believe there are several meaningful and discrete characteristics, which distinguish SomaLogic from other proteomics enterprises. Number one, we have a core proprietary technology on track to identify and measure 10,000 total proteins on a near-term horizon. Our core technology utilizes synthetic nucleic acid ligands with signal development potential, including a number of next generation proteomics product development opportunities, using chip-based and other approaches. This technology is married with our clinical proteomics database and the bioinformatics stack that allows us to translate protein data to create our high value clinical applications. As I mentioned previously, these three components can constitute a platform, not just a protein identification and measurement technology. Number two, we are heavily market validated with real customers and real revenue, both of which are growing substantially in real time. We've actually had more than 300 customers and collaborators on our platform over the past two decades and, at present, these include leading biopharma organizations, such as Novartis, Amgen GlaxoSmithKline, and Novo Nordisk, as well a growing list of basic research investigators around the world. We also have a growing number of contracted partnerships with leading clinical institutions and our proteomics for precision medicine initiative that will accelerate the prospective validation, reimbursement and regulatory clearance for our high plex protein pattern recognition diagnostic tests. Number three, we are the knowledge leader for proteomics. We and our collaborators have published approximately 400 publications on our platform, many of them not just references to the use of our technology in the method section, but rather considered recent landmarks in human proteomics. Number four, our platform is much more than a research tool. We have successfully evolved into a full spectrum proteomics enterprise by leveraging our market leading platform to go beyond enablement and into clinical applications and products. But there's obviously a great deal of value being created by the measurement identification of proteins. The development of downstream diagnostic applications significantly expands our total addressable market potential. Our bioinformatics group has been working with proteomics data for more than a decade, such that they were not just conceptualizing applications, but we are actively putting them into the hands of our customers and collaborators in real time. Finally, we have the best leaders in the field, including our newly expanded board and a recent addition of several key executives to our organization. So, combined, these objectively differentiated capabilities, support our assertion that we are well positioned to take a disproportionate share of the rapidly growing proteomics market. Importantly, as we don't have to use a large amount of our resources to make our technology work or to get initial market traction, we can focus on real-time business opportunities. These include advancing our technology trajectory, expanding the 10,000 proteins measured and beyond, and developing and deploying a variety of site service deployed products. We will also be able to continue to invest in our clinical proteomics database, and as a result, to develop increasing numbers of clinical applications, and in turn to pursue commercial partnerships and collaborations for these products. On the life sciences tool side, we can focus on the realization of business partnerships across a variety of applications, such as the deployment of our aptamer reagents into other areas where antibodies are currently used. Therefore, our balance sheet will be leveraged in a number of very visible ways in the near term, including internal development, business partnerships, and finally, M&A activity. So, how are we doing in the present? One of my father's favorite quotes and one that I think about a lot as a CEO follows. The problem with potential is it it's usually just that. My dad was a football and basketball referee when I was growing up and saw a lot of promising high school athletes in both sports, some of whom moved to the next level, but many who did not. So, are we living up to our potential or not? I believe a host of recent developments would substantiate we are. Shaun Blakeman, our Chief Financial Officer, will discuss our financial progress in a few moments, but there are a number of notable qualitative milestones that we have achieved over the past few months. In May, we announced our Proteomics for Precision Medicine initiative and definitive partnerships with Emory Healthcare, Intermountain Healthcare, CommonSpirit Health, and the University of Colorado Health. This initiative for health system partners who are working with our new diagnostic platform will facilitate market uptake and the advancement of a regulatory and payment strategy for clinical products. In June, we announced new life sciences tools, disease specific and custom proteomics panel products, as well as new customer collaboration agreements at Novo Nordisk and Ixaka. In July, we announced our relationship and deployment of our SomaScan asset capabilities to Beth Israel Deaconess Medical Center in Boston. In August, we announced a collaboration with Twist Bioscience to probe our database and other proteomics data for new therapeutic antibody targets. And in September, we added UPMC to our Proteomics for Precision Medicine initiative. Finally, I started my comments today by suggesting a company's success is a reflection primarily or almost exclusively of its people. I'd like to circle back to the importance at this point by mentioning a number of additions to our management team over the past year. Jason Cleveland is our Chief Technology Officer. Jason has an incredible physics and engineering background, but also success as an entrepreneur. Tracy Hervey is Executive Vice President for Life Sciences markets who came to us from a very successful career in CRO commercial sales. David McGovern is senior vice president of marketing. David came to us with a great background in biopharma, most recently at Pfizer. Todd Johnson is Executive Vice President of Business Development and Strategy. Todd has been founder and CEO himself of a number of digital health companies, and has extensive healthcare market experience. Ruben Gutierrez is General Counsel. Ruben most recently worked at Natera and previously Human Longevity. Shaun Blakeman, who you'll hear from momentarily, is Chief Financial Officer. Shaun comes to us with extensive experience as a public company financial executive at Cantel Medical and Medtronic. And finally, just in this past month, we've added Steve Mermelstein as our SVP of M&A, a role he previously held at Agilent, and Adam Taich as Chief Business Development and Strategy Officer following a number of important executive leadership roles at Thermo Fisher. Before I hand this over to Sean, I want to mention, in addition to these qualitative examples of progress, the objective progress we are making on many fronts that are now translating into quantitative growth and that we believe we'll continue to do some moving forward. Since the beginning of this fiscal year, we've grown ourselves a marketing groups from 14 to 47. Largely due to this investment in our commercial staff, we will have added 61 net new revenue producing customers year-to-date as compared to this time last year, and 34 of these were added in this last quarter, quarter three. This represents a total year-over-year increase of new customers of 179% and a third quarter year-over-year increase of 50%. Finally, we greatly exceeded our top line revenue projections. Prior to the completion of our business combination and public transition, we protected $65 million in revenue this year. A few months ago, we gave guidance that we would achieve north of $73 million. And as you will hear from Shaun momentarily, we're again revising our projections report. I want to thank you all very much for your time and interest. We'll look to expand further on these insights during an analyst investor day that we are planning now and we'll provide additional details on soon. So, I'll turn it over now to Chief Financial Officer, Shaun Blakeman. Shaun?

Thank you, Roy. To begin, I'd like to summarize our highly successful recently completed merger with CM Life Sciences II, which closed on September 1 and our subsequent listing on the NASDAQ exchange under our new ticker symbol, SLGC. As Roy mentioned, we are very pleased that we successfully closed the transaction with total proceeds of approximately $630 million. I'd like to start off by talking about why we're ahead of expectations and why we expect continued strength and are raising our guidance a second time by highlighting some important metrics this year that reflect the strength of our business. First of all, our year-to-date revenue growth is over 110% compared to the first nine months of 2020 and we are seeing that growth broadly across all channels. Even more significantly, we are driving growth disproportionately by the addition of new customers, creating a broader and more diversified base on which we are growing our sales pipeline. In fact, this year, we have added 34 new accounts in Q3 and 61 year-to-date alone, which is 170% more new accounts than we added year-to-date last year. And the driver of this is our aggressive commercial team ramp. We have more than tripled our commercial team from 14 employees to 47 year-to-date 2021 and we are going to continue this aggressive investment in our commercial team, which we believe will build on the strong sales trends we've executed on through 2021. Now, let me turn to our financial results for the third quarter. Revenue for the three months ended September 30, 2021 was $20 million, a 40% increase from $14.2 million in the same period of the prior year. As I already mentioned, revenue growth was driven by the aggressive growth of our sales organization and the associated increase in our customer base. Gross margin for the third quarter of 2021 was 56% compared to 65% in the third quarter of the prior year. However, as noted in the press release, our third quarter 2020 included a one-time non-cash adjustment to inventory. It is worth noting that our gross margins have steadily improved over the past two years, with customer diversification, with our core service business at a solid mid 50% plus range. Total operating expenses for the third quarter of 2021 were $36.2 million, a 138% increase from $15.2 million in the third quarter of 2020. R&D expenses for the third quarter of 2021 were $15.6 million compared to $6.9 million in the third quarter of 2020, but includes a non-recurring non-cash $6.5 million stock compensation expense related to a secondary sale of stock and options, which is excluded in our adjusted EBITDA. Sales, general and administrative expenses for the third quarter of 2021 were $20.6 million compared to $8.3 million in the third quarter of 2020. The primary drivers of these increases are headcount additions as we continue to invest in our technology platforms, the commercial team and related functional support and public company readiness. Following non-GAAP adjustments for loss on extinguishment of debt and stock compensation charges related to a secondary selling above fair value, our adjusted EBITDA for the third quarter of 2021 was a loss of $31.8 million. This compares to an adjusted EBITDA loss of $5.2 million for the year-ago period. Please see our press release and 8-K on file with the SEC as of this morning for a reconciliation between GAAP net loss and non-GAAP adjusted EBITDA. I would like to explain specifically the impact of earnout shares and warrants related to the SPAC merger on our Q3 results. Combined, they account for $13.8 million or over 40% of our adjusted EBITDA loss for the quarter. It is also important to note that, going forward, as the estimates and assumptions that lie behind these valuations change, these particular liabilities on our balance sheet can swing between significantly, albeit as non-cash items. We ended the quarter with $676 million of cash, cash equivalents and short-term investments. Based on the ongoing strength in our business, we are initiating formal 2021 guidance of $77 million to $79 million in revenue, representing growth of 38% to 41% over 2020 revenue of $55.9 million. At this point, I would like to turn the call back to Roy for closing comments.

Thanks, Shaun. And thanks so much for the time today to give you some background and updates on SomaLogic. We've already developed a successful, increasingly comprehensive set of proteomics products and solutions, and you'll see us broadening and deepening these capabilities over the coming months and years to better serve those who would benefit from them. We have an objective opportunity and a real opportunity to work with all of you in the investment community as well as our partners, collaborators and customers to relieve human suffering and extend meaningful life, an opportunity for which I am personally grateful to have. With that, we'll open it up to questions. Joining Shaun and I for the question-and-answer session portion of the call is our President and Chief Operating Officer, Melody Harris, and our Chief Medical Officer, Dr. Steve Williams. Operator?

[Operator Instructions]. Your first question comes from Dan Brennan with Cowen.

Congrats on the quarter. The sales trajectory in 2021 has been exceeding the forecasts that you initially laid out in the stock filing this summer and then you raised the guidance subsequent to that, and now you're raising it again. And I know, Shaun, you spoke about the impact of the expanding commercial team which is great. Maybe just taking a different angle, can you just give us a sense on the business trends, particularly by customer application and what has been progressing better than you would have expected given two guidance ranges to date?

We really attribute the growth in 2021 and the two upward revisions of our projections and guidance to two things. One is – really three things. The first is we've obviously alluded to and you've alluded to as well, just the simple growth of our commercial team. There is a fairly strong correlation, or at least there has been over the last year, between the addition of new field team staff and new business. And that's generated a pipeline that's about 3x larger than it was last year. The second is related primarily to some changes in business model that we made over the last year. And we were hopeful that the changes that we made to the business model would have a large impact. But, no, obviously, couldn't predict exactly what that impact would be. And basically, those changes were primarily centered around removing a restriction from our customers to have to provide us data and rights to data when we ran our samples. In other words, allowing for a fee for service component, and then announcing to the market that we would be adding a variety of new products on to the large discovery platform that we have in regards to these panels that we put out. And then, the third thing, I believe, is just the general interest in proteomics and the general market growth for the field. So it's really nothing more complex than that. It's really related to those three things.

So the company, you alluded to some of the large pharma customers or some of the key customer contracts you have. Amgen and Novartis were disclosed in the filing as being notable customers. Can you just give us a sense of the contribution of some of your larger customers this quarter? And then, kind of as we look out, how does that contribution change to kind of get a sense of the contribution from biopharma versus the academia and then diagnostics as we look out?

Classically, over the last couple of years, our ratio of biopharma customer revenue to basic investigator, academic investigator revenue has been about 80/20. And over the last year, I would say that that ratio has been maintained because we've added, as we've mentioned, a large number of new customers in both sectors, in both biopharma and in basic research. I, obviously, can't predict what will happen to that ratio over time. I do think that, with the additional products that we put into the market over the last year and with a growing field team, that we could certainly see some disproportionate increases in that basic research component just because of the hand to hand combat that's required to bring those customers on to the platform. We are assiduously focused on bringing longer-term higher volume contracts onto the platform. We signed Novartis to a 10-year deal back at the end of 2019. And over the last year, we've added three additional two to three-year contracts with large biopharma organizations as well. And I think you'll see us bringing some more of those onto the platform as well over time.

I'm in the SPAC filing, management laid out some sales forecast for 2022 and 2023. I know you're not guiding today. But I'm just wondering, given the strength of the business year-to-date, I think the sales forecasts then were implying somewhere in like the 34%, 35% year-over-year growth in 2022, 2023. Any way to think about – I would presume, given the strength that you've seen year-to-date, this is not like a pull forward. This is like organic growth given everything you've discussed. So, just a high way of asking any way to think about the trajectory as we exit this year versus those sales forecasts that you originally laid out back in the filing?

I'll make a high level comment, then I'll turn it over to Shaun to talk about philosophy around guidance for 2022 and 2023. At a high level, we are very optimistic and very confident that the trajectory that we've seen this year will continue over the next two years, again, as we add to our field team and bring customers onto the platform, some of which have been waiting for us to make those business model changes we made over the last year. Shaun, any additional comments about guidance for 2022 and 2023?

Certainly, we look forward to talking with you about our 2022 guidance sometime in the next few months and giving you more details behind that. I would like to follow up, in that it does also relate to the customer diversification question that you had, which is that – what I think is remarkable that I'd like to point out is that the growth of our diversified pipeline with the new commercial teams and the expanding commercial team and how you're seeing that affect our numbers. So, although you can see in our past, right, that we have the benefit of large customer contracts and we'll continue to have those benefits in certain quarters, we're also filling that in aggressively with our new diversified customer base at a fast clip. And we expect that to continue. So, I think you will continue to see those quarters where we benefit from two or three really good things happening, but we're going to be backfilling it with our rapid expansion of our diversified customer base.

This might be a good opportunity for Melody Harris, our President and COO, to comment a little bit more specifically on how the concentration of the business has changed over the last year. Melody?

Over the last year, with the addition of the 61 additional new customers, we're seeing those come in as first time wanting to try the platform. The good news is, we're super excited to see that those initial test runs with those customers are increasing. So, they're taking larger bites as they come in. And then, we're starting to see them come through as repeat customers. So we're very excited about the growth. We've also seen good diversification. As you know, we had the large contract with Novartis. That's been fueling a lot of our revenue in the past, but this year, we're seeing that concentration with Novartis fall and our regular business from those new customers is actually taking up that space in between with where Novartis and Amgen previously were.

Yeah, the contribution from Novartis is falling relative to the other customers. Actually, the contribution on a year-over-year basis is increasing. So, as Melody elucidated there, the business is becoming much less concentrated as we move forward and bring all these new customers on to the platform, even though there's large contracts that we've had the benefit of, over the last few years, continue as well.

If I can just get one more in, if you don't mind, Roy, you spent a fair amount of time on the diagnostics traction and the $40 billion TAM. Any way to think about how meaningful diagnostics could be, whether traditional diagnostics or translational, for use in clinical trials or however you want to characterize it? Like, how meaningful could this be as we look out over the next, say, 12 to 24 months? I'm not quite sure what it's contributing today. But given the TAM and how much time you're spending there and the uniqueness of the platform, just wondering if this is going to be a real revenue driver kind of in the near to intermediate term.

In time, Dan, this will be an incredible revenue driver. And just to step back for a moment and talk about what this diagnostic approach is capable of doing, one of the major problems in population health management is making accurate predictions about groups of patients. So, imagine if you're running a large Medicare Advantage plan and you've got 50,000 diabetics, imagine the ability to run a test on those individuals every other year and determine what their risk of long-term complications could be and then take that 2000 that you identify and bear down on those to prevent those and to bend the cost curve considerably. And then, of course, just managing individual patients to be able to tell someone whom you thought you were managing at the top of your license that they're actually very high risk for cardiovascular event and to make a change in their drug regimen that prevents that event and so forth. So, medically, over time, these tests should be transformational. And I was a clinician for 20 years. And so, I don't say that lightly. Over the next two years, what we'll be doing is stepping through the hoops that you have to step through to get a new diagnostic platform into clinical practice. So, we've created this Proteomics for Precision health initiative. We have six partners. We'll be adding a few more of these. They'll be doing benefits proof and utility proof trials. Intermountain is already enrolling on those. I'll ask Steve Williams in a minute to comment on where we are in these trials. And then, we're also collecting the data for regulatory filings. And then another thing is that we have a huge number of these assets already. We have 20 first-in-class tests that are already validated. These are unique assets. We've got, as I mentioned, more than 100 in our pipeline. And so, we're thinking really hard about how we diversify, taking those two market through a combination of us taking some to market, licensing some to other partners who have already expressed an interest in these, we are having those conversations as we are speaking in real time. And then, in addition, being the development partner for these as well. Steve Williams, can you talk a little bit about where we are on these benefits proof and utility proof trials?

I think that the way we like to think of these tests in the near term is that they have a dual use in both markets. So, if you think about our leading tests, which are most differentiated from the competition, prediction of near-term catastrophic cardiovascular events is one and NASH is another, non-alcoholic steatohepatitis. And both of those have uses to accelerate the path of drug development and stratifying patients' entry into clinical trials and monitoring their response. And that's a very attractive formula for clients who get the 7,000 protein measurements and they get validated tests that can be used during the exploratory development phase to monitor response. So, let's not forget that they actually have these dual use. And we do have clients, pharma clients who are using these tests. But what Roy asked me to speak about really was the use in this Proteomics for Precision health. And there we have, intending to start six clinical studies, and the key objective of those studies is to show that clinicians can and will act upon this information, this new kind of information. And what we're providing them with is a prediction that finds people who have a one in two chance of death, heart attack, stroke or a heart failure within about 18 months. And it turns out that, in a slightly higher than typical risk population, like people with diabetes, that's about 20% of the population. So, 20%, one in five people, has a 50/50 chance of one of these events, and the communist event type is death. And it happens about 18 months after the sample. The exciting thing about that is that it's not destiny, that actually we can change it. And there are new kinds of cardio protective drugs out there that are not very widely used, but they could be used in these people to reduce the event rate. So, we believe this cost effective allocation of existing drugs is a huge opportunity. And those studies, those six studies that we're in the process of starting, as Roy said, Intermountain has already started, the primary endpoint is, can we achieve risk concordant prescribing. The people I just mentioned who are in that high group, can we up the prescription rates from what's typically 15%? Can we get nearly 100% of those people on these newer drugs? And the reason they're not on them today is because there's no way of accurately assessing their residual risk. And you don't want to put someone on a drug with side effects and costs when you don't actually know. It's not like blood pressure and cholesterol where you can measure them and the drugs treat them. The newer approaches like SGLT2s and GLP1s, there isn't a measurable thing relating to the drug mechanism. And that's what we provide. So, we're really excited about that. And within the next one to two years, what you'll see as we complete those studies is can we achieve risk concordant prescribing that leads to more cost effective application of existing drugs?

Your next question comes from Dan Arias with Stifel.

Roy, on the scope of analysis that the platform enables, 7000 plex today, going to 10,000 next year, I believe, where do you see the incremental demand coming from when you do that? And do you have any loose timelines that we can think about for development and then commercialization of those capabilities?

We were very excited to move the content up from 7,000 to 10,000 and, of course, beyond and moving forward. At 7,000, we're already measuring 4,000 proteins that no other commercial proteomics enterprise can at scale. And then, at 10,000, that gap is kind of going to widen. There appears to be an almost insatiable demand from our biopharma customers for more content. And that's not shocking if you think about the fact that they use this information to drive better understanding of human biology, to develop new medicines and new vaccines, and to find things like newer gene protein associations, what are called pQTLs, all of which can potentially lead to the development of more effective medications and therapeutics. So, there does appear to be an insatiable demand for content from those customers. And the reason I say that is that, at least three of our large biopharma customers have actually asked us in the last year, if we would write into their contracts that they continue to have access to the higher content. So, as far as the timeline, we are currently creating about 500 of these new – or synthesizing ourselves about 500 of these new aptamer – we call our aptamers, some of them are ligands for proteins, a quarter. And we should be reaching that 10,000 mark, at least the capability to measure 10,000 proteins, during the fiscal year of 2022. That likely will be early in 2023 before we can commercialize that because once you get to that level of content, you still have to productize it and shift the collateral and so forth to match that that new product. So, capability in 2022. That'll become part of our product portfolio, if all things go well, in the first two quarters of 2023.

Maybe on the diagnostic side, the menu that you have there is, or the plan menu is pretty expansive. So I know you touched on some of the points during Dan's questions, but can you just spend an additional minute on sort of how you handle those plans and how we should think about where you carry the load when it comes to development activity versus where you might have the partners drive more of the process or do more of the work?

I think Steve Williams and others who predate my arrival here were very smart in thinking about which areas to focus on initially. The thing about proteomics tests and the way that we make these, of course, is that we find protein expression patterns between – in our models, it's between 16 and 360 proteins, a vast majority of the proteins, we would not fit into those models. So this is where the machine learning becomes important. Steve and his colleagues decided to focus initially on cardiovascular metabolic disease. I think it was very wise. It's a set of endemic conditions. It's also a set of conditions for which there are therapies that can change the trajectory of those illnesses. We, as a follow on to that, have created in that metabolic area, these diagnostic tests that predict complications from diabetes. And then, sort of as a corollary to that, from an organ system, we've moved into renal disease as well. And so, sort of rounding out that cardiac and metabolic and renal, there's certainly a disease access between the heart and the kidney and with diabetes. And then, we have decided to focus next on cancer. We believe that we are likely to have a set of tests over the next year that can predict not early detection. So, not like a cell-free DNA test, but a set of tests that will be able to tell you what your actual biologic risk of developing cancer in the near future is. And so, you can imagine the impact on the way that we screen patients for cancer and the way that you could potentially coordinate those with these early detection cell-free DNA platforms and so forth. So, we believe that could be transformational as well. As far as other diseases, I would say next in the pipeline, we are looking at neurologic diseases, Alzheimer's and related conditions. And we're really letting, moving forward from there, the market inform us as to what it's most interested in. As far as determining the breakdown between what we decide to take fully to market and what we decide to partner for or license to take to market, we haven't made that discernment yet. And we're actively in discussions now, both internally and with potential partners, several potential partners, to make this decision about what we'll take forward and what will license or provide others access to take forward. And then, of course, moving past even that is this opportunity to be the developer of these algorithms and for others on demand, using both our growing database and/or the samples that those partners might bring to the table.

Your next question comes from Tycho Peterson with J.P. Morgan.

Roy, I want to go back to the Precision Medicine initiative. I appreciate the additional color Stephen provided. But do you envision this being expanded at all beyond the six initial trials? And how should we think about kind of data readouts? I know you said over the next one to three years, but will there be kind of interim data? And how should we think about kind of milestones we can track from the outside?

I'll make a couple of high level comments, Tycho, and then I'll ask Steve to elaborate a bit. So, yes, we have designed these trials in a way that it's not going to take three or four years for them to be complete. We will be getting data – some data, we think, within a year or so to talk about back to the market. We also do plan to grow this. We are in discussions with another number of leading medical institutions in North America to expand this list from six to a to a higher number. We haven't decided what the top end is going to be. It's going to it's going to be determined largely by the next set of – these first six are primarily focused on cardiovascular disease and the number that we bring to the table will be primarily focused or determined by which disease process or which set of tests we want to work with this next set of partners on. But we will be adding additional partners to this Proteomics for Precision Medicine initiative. It's really, from a variety of standpoints I already mentioned, the ability to put these individual health systems and their physicians to the benefits proof and utility proof work to take notice or to further validate beyond our demonstration market, which has already run more than 2,500 tests itself. But for these to be validated and the utility proof determined by these partners to create a dossier for regulatory filing. And then, two other things. One, obviously, some of these health systems could be our first real customers at scale. And then lastly, we are discussing with all of these health system partners the potential to share data on a prospective basis to create more diagnostic models moving forward. As you know, clinical data is the is the gift that keeps on giving. Steve, would you like to discuss just briefly how soon you think we'll begin to see some data come out that that we can talk about in these trials?

I think you said it well. The studies themselves are only just beginning to recruit patients. And typically, we're looking at about six months duration for an individual in a study. So when you add up the recruitment time from the beginning of the first patient to the end of the last, I would imagine 18 months to 2 years is a reasonable timescale. And I would, depending on Roy's decisions, I think we would anticipate releasing some of that information to the market. Roy mentioned some of the other indications we'll be going for. I think the next one, the first studies are all in people with diabetes. Can we improve this drug allocation that we talked about earlier? The next salvo of studies to mimic that is going to be in people with pre-existing cardiovascular disease who've had an event in the past. Once again, it's an opportunity where risks can be high, but not everyone has a high risk. And there's a wide armamentarium of effective pharmacologies available, expanding out PCSK9s as well as the SGLT2s GLP1s for people with diabetes. So, there's a nice availability of enhanced cardio protection. But again, there's the same problem about who do you allocate that more expensive pharmacology to. So, that will be the next group of tests after the people with diabetes.

Following up on the content discussion, just thinking on what's on deck for next year, you've got a couple of launches around kidney disease, you've got dementia, you've got COVID recovery, I think lung cancer susceptibility in Japan. Do any of these in your review has kind of a disproportionate potential to move the needle? I guess, if we think over next year, what's most interesting in terms of new launches?

I think they all have the potential to move the needle. Again, because this type of diagnostic test has never existed before. The ability to tell a clinician or an individual that you have risk that you did not realize was present and then to act on that risk in any of these disease areas, it's going to be impactful. And it's something I can tell you as a clinician, I would have loved to have had in the past. So, I don't know which is going to be most impactful. I certainly think – if you think about the cardiovascular metabolic disease and cancer, these are the two mortality drivers and cost drivers around the world for human beings. And so, I believe that both of these could be very impactful moving forward from the standpoint of value creation.

The wildcard for me is COVID recovery because you have a condition that has insulted kidneys, heart, lungs, and we can measure the effects of all of those systems. And so, today, it's unknown to what extent we can characterize the residual damage. But we'll know that shortly. And I think of all the things that could go from zero to 100 quickly, it may be that COVID recovery is one such rather unpredictable application.

Roy, at the Analyst Day, you talked obviously about the evaluation of NGS. I know you're thinking next 24, 36 months to kind of move forward with a box strategy. But can you just maybe share some insight in terms of how you're kind of evaluating that process and how much you're thinking about internal development versus partnering with OEMs?

We certainly know that site of service solutions are going to be important moving forward. And so, we are evaluating a variety of approaches, Tycho, and believe that the market will best be served if we can deploy a variety of approaches. So, as I mentioned earlier, next generation arrays, NGS, and even some newer approaches that we actually have in development. So, on the NGS side, as we've said previously, we have been in discussions with potential partners for this to hopefully accelerate that development. And we continue to have those discussions and will hopefully elaborate on the results of those discussions very soon. And then, the other thing, as I've mentioned before in previous releases, this concept of the things that we're interested in from an M&A standpoint, we certainly are interested in next generation proteomics measurement platforms, especially those where we can use our reagents, our proprietary synthetic aftermost. And so, that's an area of focus for us for M&A and we're actively in discussions and looking there, as we previously mentioned, and hopefully be able to talk about it relatively soon as well. So, hopefully more details on all of that in the near future, Tycho.

One quick one for Shaun before I hop off. Just on share count, given all the moving pieces, what's the right share count we should be using going forward?

So that would be approximately 182 million, I believe.

Thank you. And that includes a question-and-answer session of today's call. I'll hand the call back to Roy Smythe.

Great. So, we really appreciate everybody being with us today for us to share again some information and recent progress at SomaLogic. We are both excited and grateful for our recent accomplishments, and also very excited for what the future holds for this company and its unique capabilities and unique position in the market. We hope to see all of you or at least some of you relatively soon, and in-person would be great, perhaps in San Francisco or elsewhere. So thanks very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.