You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSecurities and Exchange Commission (SEC). In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results, performance or experience could differ materially from what is indicated by any forward-looking statement due to various important factors, risks and uncertainties, including, but not limited to, those set forth under "Special Note Regarding Forward-Looking Statements" included elsewhere in this quarterly report or under "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K for the year endedDecember 31, 2021 as may be updated by "Part II, Item 1A, Risk Factors" of our subsequently filed Quarterly Reports on Form 10-Q.
Overview
We are a life sciences company that has developed next generation, ultra-sensitive digital immunoassay platforms that advance precision health for life sciences research and diagnostics. Our platforms are based on our proprietary digital "Simoa" detection technology. Our Simoa bead-based and planar array platforms enable customers to reliably detect protein biomarkers in extremely low concentrations in blood, serum and other fluids that, in many cases, are undetectable using conventional, analog immunoassay technologies, and also allow researchers to define and validate the function of novel protein biomarkers that are only present in very low concentrations. These capabilities provide our customers with insight into the role of protein biomarkers in human health that has not been possible with other existing technologies and enable researchers to unlock unique insights into the continuum between health and disease. We believe this greater insight will enable the development of novel therapies and diagnostics and facilitate a paradigm shift in healthcare from an emphasis on treatment to a focus on earlier detection, monitoring, prognosis and, ultimately, prevention. Our instruments are designed to be used either with assays fully developed by us, including all antibodies and supplies required to run the tests, or with "homebrew" kits where we supply some of the components required for testing, and the customer supplies the remaining required elements. Accordingly, our installed instruments generate a recurring revenue stream. As the installed base of the Simoa instruments increases, total consumables revenue overall is expected to increase. We believe that consumables revenue should be subject to less period-to-period fluctuation than our instrument sales revenue and will become an increasingly important contributor to our overall revenue. We commercially launched our first immunoassay platform, the Simoa HD-1, inJanuary 2014 . The HD-1 is based on our bead-based technology, and assays run on the HD-1 are fully automated. We initiated commercial launch of the SR-X instrument inDecember 2017 . The SR-X utilizes the same Simoa bead-based technology and assay kits as the HD-1 in a compact benchtop form with a lower price point, more flexible assay preparation, and a wider range of applications. InJuly 2019 , we launched the Simoa HD-X, an upgraded version of the Simoa HD-1, which replaces the HD-1. The HD-X has been designed to deliver significant productivity and operational efficiency improvements, as well as greater user flexibility. We began shipping and installing HD-X instruments at customer locations in 2019, and by the end of 2021, approximately 68% of the HD instrument installed base was HD-X instruments. We also provide contract research services for customers through ourCLIA-certified Accelerator Laboratory .The Accelerator Laboratory provides customers with access to Simoa technology, and supports multiple projects and services, including sample testing, homebrew assay development and custom assay development. To date, we have completed over 1,700 projects for approximately 400 customers from all over the world using our Simoa platforms. We sell our instruments, consumables and services to the life science, pharmaceutical and diagnostics industries through a direct sales force and support organizations inNorth America andEurope , and through distributors or sales agents in other select markets, includingAustralia ,Brazil ,China ,Czech Republic ,India ,Hong Kong ,Israel ,Japan ,New Zealand ,Qatar ,Saudi Arabia ,Singapore ,South Africa ,South Korea ,Taiwan , andUAE . In addition, Uman sells Nf-L 21 Table of Contents antibodies and Nf-L ELISA kits directly, and in conjunction with us and another distributor worldwide. We have an extensive base of customers in world class academic and governmental research institutions, as well as pharmaceutical, biotechnology and contract research companies. During the three months endedMarch 31, 2022 , we entered into a Master Collaboration Agreement with Eli Lilly and Company (Lilly) establishing a framework for future projects focused on the development of Simoa immunoassays (the Lilly Collaboration Agreement). We also entered into a Statement of Work under the Lilly Collaboration Agreement to perform assay research and development services within the field of Alzheimer's disease. In connection with the Lilly Collaboration Agreement, we received a non-refundable up-front payment of$5.0 million during the three months endedMarch 31, 2022 , and under the Statement of Work receive$1.5 million per calendar quarter during 2022, beginning with the three months endedMarch 31, 2022 . The revenue will be recognized over a one-year period. Concurrent with the execution of the Lilly Collaboration Agreement, we entered into a Technology License Agreement (the Lilly License) under which Lilly granted to us a non-exclusive license to Lilly's proprietary P-tau217 antibody technology for potential near-term use in research use only products and services and future in vitro diagnostics applications within the field of Alzheimer's disease. In consideration of the license, we paid an upfront fee, are required to make milestone payments based on the achievement of predetermined regulatory and commercial events, and will pay a royalty on net sales of licensed products. We concluded that the Lilly Collaboration Agreement and the Lilly License represented a single contract with a customer and are accounting for the agreements as service revenue recognized over time as the services are delivered. The transaction price for the Lilly Collaboration Agreement is$10.9 million . Contingent amounts due to Lilly represent variable consideration payable to a customer and will be recognized as reductions to service revenue up to the amount of the transaction price recognized, when probable. We are utilizing an input method to measure the delivery of services by calculating costs incurred at each period end relative to total costs expected to be incurred.
During the three months ended
OnSeptember 29, 2020 , we entered the Abbott License Agreement withAbbott . Pursuant to the terms of the Abbott License Agreement, we grantedAbbott a non-exclusive, worldwide, royalty-bearing license, without the right to sublicense, under our bead-based single molecule detection patents in the field of IVD.Abbott paid an initial license fee of$10.0 million in connection with the execution of the Abbott License Agreement, which was recognized as license revenue for the year endedDecember 31, 2020 .Abbott has also agreed to pay us milestone fees subject to the achievement byAbbott of certain development, regulatory and commercialization milestones and low single digit royalties on net sales of licensed products. In view of the COVID-19 pandemic, in 2020 we began developing a SARS-CoV-2 antibody test (the "Antibody Test") and a SARS-CoV-2 antigen test (the "Antigen Test") for our HD-X instrument. The FDA issued EUAs for the Antibody Test and the Antigen Test inDecember 2020 andJanuary 2021 , respectively. InSeptember 2021 , the FDA expanded the EUA label for the Antigen Test to include testing with nasal swabs and saliva and for asymptomatic serial testing with nasal swab samples. InMay 2022 , we submitted a request to the FDA to voluntarily withdraw the EUA for each of these tests as we no longer intend to market the EUA version of the tests. This decision was made in recognition of the changing testing dynamics of the COVID-19 pandemic. Our tests are optimized for use in central laboratory testing environments that process samples in high volume. As the health crisis transitions from the pandemic to endemic phase, public health policy has shifted to prioritize more routine use of low-cost, rapid antigen tests. Additionally, a substantial majority of revenue from our COVID-19 test portfolio has been from the RUO-labeled versions of these tests, which continue to be utilized in research and clinical settings. We intend to continue to commercialize the RUO-labeled tests. InSeptember 2020 , we entered into WP2 with theNIH under the RADx program. This contract, which had a total award value of up to$18.2 million , was intended to accelerate the continued development, scale-up and deployment of the Antigen Test, in particular to expand assay kit manufacturing capacity and commercial deployment readiness. 22 Table of Contents Contract funding was subject to the achievement of pre-defined milestones and the contract period ran throughSeptember 2021 , with one milestone extended toMay 31, 2022 . As ofMarch 31, 2022 , we had received$17.7 million out of the full$18.2 million under WP2, and inMay 2022 we received the final$0.5 million . Performance under the RADx WP2 contract is now complete. We are subject to ongoing uncertainty concerning the COVID-19 pandemic, including its length and severity and its effect on our business. In 2020, we saw an impact on instrument revenue due to limitations on our ability to access certain customer sites and complete instrument installations, as well as an impact on consumables revenue from interruptions in certain customer laboratories through the first quarter of 2021. As customers began returning to normal operations in the second quarter of 2021, we have seen less of an impact related to COVID-19 related shutdowns. However, we expect COVID-19 related challenges to continue for the foreseeable future and potentially increase if variants result in new shutdowns. The COVID-19 situation remains dynamic, and there remains significant uncertainty as to the length and severity of the pandemic, the actions that may be taken by government authorities, the impact to the business of our customers and suppliers, the long-term economic implications and other factors identified in "Part I, Item 1A, Risk Factors" of this Annual Report on Form 10-K. We will continue to evaluate the nature and extent of the impact to our business, financial condition, and operating results. As ofMarch 31, 2022 , we had cash and cash equivalents of$376.9 million . Since inception, we have incurred annual net losses. Our net loss was$57.7 million ,$31.5 million , and$40.8 million for the years endedDecember 31, 2021 , 2020, and 2019, respectively, and$18.2 million and$10.1 million for the three months endedMarch 31, 2022 and 2021, respectively. As ofMarch 31, 2022 , we had an accumulated deficit of$323.6 million and stockholders' equity of$426.4 million . We expect to continue to incur significant expenses and operating losses at least through the next 24 months. We expect our expenses will increase substantially as we:
? expand our sales and marketing efforts to further commercialize our products;
? strategically acquire companies or technologies that may be complementary to
our business;
expand our research and development efforts to improve our existing products
? and develop and launch new products, particularly if any of our products are
deemed by the FDA to be medical devices or otherwise subject to additional
regulation by the FDA;
seek PMA or 510(k) clearance from the FDA for our existing products or new
? products if or when we decide to market products for use in the prevention,
diagnosis or treatment of a disease or other condition;
? hire additional personnel and continue to grow our employee headcount;
? enter into additional collaboration arrangements or in-license other products and technologies; ? add operational, financial and management information systems; and ? continue to incur increased costs as a result of operating as a public company. 23 Table of Contents Results of Operations
Comparison of the Three Months Ended
Three Months EndedMarch 31 ,
Increase (Decrease)
2022 % of revenue 2021 % of revenue Amount % Product revenue$ 20,656 70 %$ 18,248 67 %$ 2,408 13 % Service and other revenue 8,810 30 % 6,409 24 % 2,401 37 % Collaboration and license revenue 86 - % 261 1 % (175) (67) % Grant revenue - - % 2,291 8 % (2,291) (100) % Total revenue 29,552 100 % 27,209 100 % 2,343 9 % Cost of goods sold: Cost of product revenue 10,746 37 % 7,480 27 % 3,266 44 % Cost of service revenue 4,247 14 % 3,380 12 % 867 26 % Total costs of goods sold and services 14,993 51 % 10,860 40 % 4,133 38 % Gross profit 14,559 49 % 16,349 60 % (1,790) (11) % Operating expenses: Research and development 7,034 24 % 6,683 25 % 351 5 % Selling, general, and administrative 25,712 87 % 19,455 72 % 6,257 32 %
Total operating expenses 32,746 111 % 26,138 96 %
6,608 25 %
Loss from operations (18,187) (62) % (9,789) (36) %
(8,398) (86) % Interest income (expense), net 52 - % (163) (1) % ` 215 132 % Other expense, net (217) (1) % (194) (1) % (23) (12) %
Loss before income taxes (18,352) (63) % (10,146) (37) %
(8,206) (81) % Income tax benefit 199 2 % 42
- % 157 374 % Net loss$ (18,153) (61) %$ (10,104) (37) %$ (8,049) (80) % Revenue Total revenue increased by$2.3 million , or 9%, to$29.6 million for the three months endedMarch 31, 2022 , as compared to$27.2 million for the three months endedMarch 31, 2021 . Product revenue consisted of sales of instruments totaling$6.2 million and sales of consumables and other products of$14.2 million for the three months endedMarch 31, 2022 . Product revenue primarily consisted of instrument sales totaling$7.0 million and sales of consumables and other products of$11.3 million for the three months endedMarch 31, 2021 . The increase in product revenue of$2.4 million in the first quarter of 2022 was due to the increase in consumable sales year over year, partially offset by a decline in instrument sales. The increase in service and other revenue was due to the$2.7 million of revenue recognized from the Lilly Collaboration Agreement during the three months endedMarch 31, 2022 . Our collaboration and license revenue during both periods was mainly related to licensing technology and intellectual property. Grant revenue of$2.3 million for the three months endedMarch 31, 2021 consisted of revenue related to WP2. We did not have any grant revenue during the three months endedMarch 31, 2022 .
Cost of Goods Sold, Services, and Licenses
Cost of product revenue increased by$3.3 million , or 44%, to$10.7 million the three months endedMarch 31, 2022 , as compared to$7.5 million for the three months endedMarch 31, 2021 . The increase was primarily due to inefficiencies in our manufacturing and inventory management processes resulting in higher excess and obsolete product during the quarter. Accordingly, we changed our estimate for excess and obsolete product during the three months endedMarch 31, 2022 , increasing our reserve. Cost of service revenue increased to$4.3 million the three months endedMarch 31, 2022 , as compared to$3.4 million for the three months endedMarch 31, 2021 , primarily due to our increased service revenue. Overall, cost of goods sold as a percentage of revenue increased to 51% of total revenue the three months endedMarch 31, 2022 , as compared to 40% for the three months endedMarch 31, 2021 . This was a result of the inefficiencies in our manufacturing and inventory management processes noted above. 24
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Research and Development Expense
Research and development expense increased by$0.4 million , or 5%, for the three months endedMarch 31, 2022 , as compared to the same period in 2021, primarily due to additional headcount in research and development as we scale our organization and invest in process improvements.
Selling, General, and Administrative Expense
Selling, general and administrative expense increased by$6.3 million , or 32%, for the three months endedMarch 31, 2022 , as compared to the same period in 2021, mainly due to additional headcount as we scale our organization and discretionary spending increases.
Interest income (Expense), Net
Interest income (expense), net increased to income of$0.1 million for the three months endedMarch 31, 2022 , as compared to an expense of$0.2 million in the same period in 2021, due to maturity of the Company's note payable in the fourth quarter of 2021 and higher interest income on our cash equivalents during the three months endedMarch 31, 2022 .
Other Expense, Net
Other expense, net was consistent at
Income Tax Benefit
Income tax benefit was$0.2 million for the three months endedMarch 31, 2022 and less than$0.1 million for the three months endedMarch 31, 2021 consisting primarily of provisions recorded on the operating results of our foreign subsidiaries.
Liquidity and Capital Resources
To date, we have financed our operations principally through equity offerings, borrowings from credit facilities and revenue from our commercial operations.
Cash Flows
The following table presents our cash flows (in thousands):
Three Months
Ended
2022
2021
Net cash used in operating activities$ (21,695) $ (14,089) Net cash (used in) provided by investing activities (874)
2,435
Net cash provided by financing activities 979
273,313
Net (decrease) increase in cash, cash equivalents and restricted cash$ (21,590)
We derive cash flows from operations primarily from the sale of our products and services. Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses to invest in process improvements. We have historically experienced negative cash flows from operating activities as we have developed our technology, expanded our business and built our infrastructure and this may continue in the future. 25
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Net cash used in operating activities was$21.7 million during the three months endedMarch 31, 2022 . The net cash used in operating activities primarily consisted of the net loss of$18.2 million offset by non-cash charges of$3.8 million of stock-based compensation expense and$1.4 million of depreciation and amortization expense. Cash used as a result of changes in operating assets and liabilities of$8.9 million was primarily due to a decrease in accounts payable of$5.3 million and a decrease in accrued compensation and benefits, other accrued expenses and other current liabilities of$4.9 million offset by an increase in deferred revenue of$3.0 million . Net cash used in operating activities was$14.1 million during the three months endedMarch 31, 2021 . The net cash used in operating activities primarily consisted of the net loss of$10.1 million offset by non-cash charges of$3.4 million of stock-based compensation expense and$1.2 million of depreciation and amortization expense. Cash used as a result of changes in operating assets and liabilities of$8.9 million was primarily due to a decrease in accrued compensation and benefits, other accrued expenses and other current liabilities of$5.6 million , and an increase in inventory of$2.3 million .
Historically, our primary investing activities have consisted of capital expenditures for the purchase of capital equipment to support our expanding infrastructure and work force. We expect to continue to incur additional costs for capital expenditures related to these efforts in future periods.
Investing activities used
Investing activities provided$2.4 million of cash during the three months endedMarch 31, 2021 primarily related to$2.5 million in grant proceeds related to WP2.
Net Cash Provided by Financing Activities
Historically, we have financed our operations principally through sales of our stock, borrowings from credit facilities, and revenues from our commercial operations.
Financing activities provided$1.0 million of cash during the three months endedMarch 31, 2022 , mainly from proceeds from employee stock purchases and stock option exercises. Financing activities provided$273.3 million of cash during the three months endedMarch 31, 2021 , primarily from$269.7 million in net proceeds from our underwritten public offering during the first quarter of 2021, and$3.1 million in proceeds from common stock option exercises.
Capital Resources
Other than the third quarter of 2020, since inception, we have incurred net losses, and we also expect that our operating expenses will increase as we continue to increase our marketing efforts to drive adoption of our commercial products. Additionally, as a public company, we have incurred and will continue to incur significant audit, legal and other expenses that we did not incur as a private company. Our liquidity requirements have historically consisted, and we expect that they will continue to consist, of sales and marketing expenses, research and development expenses, working capital, debt service and general corporate expenses. We believe cash generated from commercial sales, our current cash and cash equivalents, and interest income we earn on these balances will be sufficient to meet our anticipated operating cash requirements for at least the next 12 months. In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our sales and marketing activities and grow our customer base. Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties and actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in Item 1A, "Risk 26
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Factors" of our Annual Report on Form 10-K for the year endedDecember 31, 2021 We have based our estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including:
? market acceptance of our products;
? the cost and timing of establishing additional sales, marketing and
distribution capabilities;
? the cost of our research and development activities;
? our ability to enter into collaborations in the future, and the success of any
such collaborations;
? the cost and timing of potential regulatory clearances or approvals that may be
required in the future for our products;
? the effects of the COVID-19 pandemic; and
? the effect of competing technological and market developments.
If the conditions for raising capital are favorable, we may seek to finance future cash needs through public or private equity or debt offerings or other financings. OnNovember 6, 2020 , we filed an automatically effective shelf registration statement with theSEC . Each issuance of securities under the shelf registration statement will require the filing of a prospectus supplement identifying the amount and terms of securities to be issued. The registration statement does not limit the amount of securities that may be issued thereunder. Our ability to issue securities is subject to market conditions and other factors. This registration statement will expire onNovember 6, 2023 , three years after its date of effectiveness. However, we cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. If we do not have or are not able to obtain sufficient funds, we may have to delay development or commercialization of our products. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations.
Contractual Obligations and Commitments
As ofMarch 31, 2022 , except for theBedford, Massachusetts lease detailed in Note 10, there have been no material changes to our contractual obligations and commitments from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Off-Balance Sheet Arrangements
We did not have, during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under applicable
Critical Accounting Policies, Significant Judgments and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted inthe United States , orU.S. GAAP, requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of assets and liabilities in our financial statements and accompanying notes. The most significant assumptions used in the financial statements are the underlying assumptions used in revenue recognition and valuation of inventory. We base estimates and assumptions on historical experience when available and on various factors that we determined to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies and significant estimates that involve a higher degree of judgment and complexity are described under "Management's Discussion and Analysis of Financial Condition and Results of 27
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Operations-Critical Accounting Policies, Significant Judgments and Estimates"
included in our Annual Report on Form 10-K for the year ended
There have been no material changes to our critical accounting policies and estimates as disclosed therein, with the exception of our adoption of recent accounting pronouncements, as discussed below.
Recent Accounting Pronouncements
Information concerning recently issued accounting pronouncements may be found in Note 2 to our unaudited condensed consolidated financial statements included in the quarterly report on Form 10-Q.
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