Ladies and gentlemen, thank you for standing by, and welcome to the Akoya Biosciences First Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions].

I would now like to hand the conference over to your speaker today, David Deuchler, Investor Relations. Please go ahead. .

Good afternoon, everyone. Thank you all for participating in today's conference call. On the call from Akoya, we have Brian McKelligon, Chief Executive Officer; and Joe Driscoll, Chief Financial Officer. .

Earlier today, Akoya released financial results for the first quarter ended March 31, 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 statements during this call that include forward-looking statements within the meaning of the 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 relate to expectations or predictions of future events, results or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors..

For a list and description of the risks and uncertainties associated with Akoya's business, please refer to the Risk Factors section of our Form S-1 filed with the Securities and Exchange Commission on April 15, 2021.

We urge you to consider these factors, and you should be aware that the statements should be considered estimates only and not a guarantee of future performance..

The conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 18, 2021. Akoya 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..

And with that, I will turn the call over to Brian. .

Thank you, David. Good afternoon, everyone, and thank you for joining Akoya's first quarter earnings call. .

Joe and I will start with prepared remarks, and then we will be happy to take some questions. So I'd like to start by saying that we're very excited to be speaking with you on our first quarter following our recent IPO on April 16, where we listed on NASDAQ and raised $151 million in gross proceeds.

And on behalf of Akoya, I'd like to thank everyone who is involved in the IPO. We are now better positioned to execute on our mission of delivering a revolutionary class of spatially derived biomarkers to empower life sciences researchers to better understand disease and predict response to therapy..

While we had the chance to tell our story to many of you through our IPO process, we will integrate within today's call and my remarks or a review of Akoya's spatial biology platforms..

We're pleased to be able to report that we had a strong first quarter with reported total revenue of $12.2 million coming in at the high end of our previously reported range of $12 million to $12.2 million. As noted, this performance was achieved prior to the benefit of the additional capital investment from our recent public offering.

And with our demonstrated momentum and the benefit of the additional capital, we are confident that we are on track to execute our strategic plan for 2021..

Some additional first quarter highlights with more detail to follow shortly include we sold 37 instruments in the first quarter. This is higher than any quarterly total achieved in 2020. We saw continued and meaningful acceleration of our peer-review publications.

And with the IPO funds in hand, we began aggressive expansion of our commercial and R&D teams to accelerate our strong momentum as the leader in spatial biology..

For background and reviews, spatial biology refers to a rapidly evolving technology that enables researchers in academia and biopharma to detect and map distribution of cell types and biomarkers across whole tissue samples at single cell resolution.

Akoya offers solutions to perform this tissue analysis and spatial phenotyping to scientists across the full continuum from discovery through translational and clinical research..

By way of comparison, current genomic and proteomic methods such as next-gen sequencing, single-cell analysis, flow cytometry, mass spectrometry, they do provide meaningful data but require the destruction of the tissue sample for analysis.

While these approaches are clearly valuable and broadly adopted, they do not provide the fundamental information about tissue architecture, cellular interactions and localized measurements of key biomarkers. This spatial context is central..

Akoya has developed and deployed our CODEX and Phenoptics platform to address the profound opportunities and scientific discoveries enabled by spatial biology. We provide end-to-end solutions that enable researchers to quantitatively interrogate a large number of biomarkers and cell types across an intact tissue section at single cell resolution.

The result is a detailed and computable map of the tissue sample that thoroughly captures the underlying tissue dynamics and the interactions between key cell types and biomarkers..

Akoya's platforms are designed to serve the unique needs of our customers in the discovery, translational and clinical research markets.

Both CODEX and Phenoptics offer seamless and integrated workflow solutions for our customers, including important benefits such as proprietary reagents, to analyze a variety of tissue types, automated sample processing, scalability, comprehensive data analysis, software solutions and dedicated field and application support. .

With these platforms, our customers are performing spatial phenotyping and developing a deeper understanding of complex diseases such as cancer, neurological and autoimmune disorders and many other therapeutic areas..

Our first platform, CODEX, is an ultra-high parameter and cost-effective platform, which is ideally suited for discovery research, and provides the capability to identify more than 40 biomarkers in a tissue sample. CODEX was originally developed in the lab with Dr. Garry Nolan at Stanford University and was launched in 2019.

In the first quarter of 2021, we sold 20 CODEX instruments compared to a total of 46 in all of 2020. The install base for CODEX was 132 instruments as of March 31 of this year. And while we saw a real impact from COVID in 2020, we are extremely excited about the momentum we are seeing for CODEX in 2021. .

Our second platform, Phenoptics is a high-throughput spatial biology platform with the automation and robustness needed for translational and clinical applications. This workhorse platform enables researchers to visualize and analyze and quantify and phenotype cells in C2 across the entire slide at subcellular resolution.

Our proprietary multispectral imaging technologies enables whole slide scanning in 10 to 15 minutes providing our customers in the translational and clinical research with the required and necessary automation and throughput and robustness..

The Phenoptics product line is currently comprised of 3 scanners, the Mantra, the Vectra and the Polaris, with the Polaris being our signature platform and most popular solution. In the first quarter, we sold 17 Phenoptics instruments, growing the installed base to 455 Phenoptics instruments..

Across both CODEX and Phenoptics, our total instrument installed base grew 28% year-over-year despite substantial impact from COVID..

Reagent revenue was $2.5 million in the first quarter of 2021. And as discussed through IPO, this is an important area of investment for Akoya, and we anticipate strong growth here in 2021 and beyond. Reagents are a key revenue contributor to our business and have a positive impact on our gross margins..

The quality and the value of our solutions is demonstrated by our broad customer base, our relationship with key thought leaders and an extensive and accelerating publication list. As noted earlier, the rate of publications utilizing our technology continues to accelerate. There were 109 peer-reviewed publications in 2020.

That's a near fourfold increase over 2019. We have already seen over 60 new peer-review publications in the first quarter of 2021. That is also a nearly fourfold increase over the same period last year.

A key driver of these publications and our commercial success is the growing body of evidence that spatial biology solutions deliver significant value to our customers and are increasingly becoming a preferred modality for biomarker analysis..

One recent publication highlight comes from the team at the Providence Cancer Institute and was just recently published in the Journal of Breast Cancer Research.

They used our Phenoptics platform to measure tumor infiltrating lymphocytes, PD-L1 expression and other immune variables to enable, and I quote, "A comprehensive characterization of activity of novel immunotherapy agents." The paper highlighted both the required concordance with current clinical assays and importantly, the enhanced precision and predictive power enabled with Phenoptics.

And I'd invite you to look at that publication..

As with the team at Providence, we are grateful to have relationships with leading biopharma companies, top research institutions and medical centers, such as Dana-Farber Cancer Institute, Johns Hopkins University, UCSF and MD Anderson and many others.

These collaborations and partnerships help demonstrate the utility of our solutions across a broad array of applications, including immuno-oncology, immunology, neuroscience and developmental biology..

Specifically, our partnerships in the field of immuno-oncology are delivering real advancements in translational and clinical research. For example, Akoya's spatial biology platforms were featured in several talks at this year's AACR meeting, and here are 3 highlights..

First, in line with our March 2 announcement of our partnership with John Hopkins, Dr. Janis Taube highlighted best practices of their validation efforts on our platform as part of a session on future directions for immunotherapy diagnostics. Second, Dr.

Laura Esserman, from UCSF and Principal Investigator on the I-SPY trials outlined her work to leverage the Phenoptics platform to identify spatial biomarker signatures in breast cancer. Third, Dr.

Garry Nolan of Stanford University, Akoya Founder and CODEX inventor, gave a plenary talk detailing his advanced work on CODEX to understand patient outcomes in colorectal cancer and cutaneous T-cell lymphoma..

Consistent with the theme of partnering with thought leaders, Akoya made 2 recent announcements further supporting the goal of driving accelerated adoption of an innovation on the CODEX platform.

First, we announced our Imaging Innovators network as termed I2, which is a collaborative network of leading scientists specifically aimed at supporting open innovation on code for rapid application expansion, and I invite you to go to our website to read our most recent press release on the I2 network..

Second, yesterday, we announced our co-marketing agreement with ZEISS, one of the world's leading microscopy vendors to further enhance the integration of our platforms for the benefit of our customers..

Following our successful IPO, Akoya remains focused on driving revenue growth by investing in the business with an immediate focus on expanding our commercial team and accelerating our research into development. .

In the first quarter, we added 21 people to the organization, bringing our headcount up to 190. We also recently added the newest member of our executive team, Dr. Frederic Pla, who joined Akoya in March as our Chief Operating Officer.

Fred most recently served as Chief Operating Officer at the Parker Institute for Cancer Immunotherapy and previously served as CEO of Genomic Health prior to its acquisition and through its acquisition by Exact Sciences in 2019. He also has an impressive history at Life Technologies and GE.

Fred's operational, scientific and market expertise are valuable additions to our organization..

In summary, we are pleased with our first quarter performance, achieving great progress across a range of important metrics, and we look forward to executing our financial and strategic plans as we move forward through 2021. .

I will now turn over the call to Joe Driscoll to discuss our financial results.

Joe?.

Thanks, Brian. Good afternoon, everyone. .

As Brian mentioned earlier, total revenue for the first quarter of 2021 was $12.2 million compared to $11 million in the first quarter of 2020.

As a reminder, we have seasonal fluctuations in our business, where the first quarter is typically our lowest revenue quarter of the year, the second and third quarters being somewhat higher than Q1 and the fourth quarter being our strongest. We expect 2021 to follow this quarterly pattern..

Product revenue was $10 million for the first quarter of 2021 compared to $8.9 million in the first quarter of 2020. Services and other revenue totaled $2.2 million for the first quarter of 2021 as compared to $2.1 million in the prior year..

Within product revenue, 2 important categories are instrument revenue and reagent revenue. Instrument revenue was $6.8 million in the first quarter of 2021 compared to $6.7 million in the prior year quarter. Reagent revenue was $2.5 million in the first quarter of 2021 versus $2.1 million in the first quarter of 2020.

We saw meaningful orders near the end of the first quarter for both instruments and reagents, resulting in strong backlog heading into the second quarter..

We monitor instruments sold in the installed base as key performance indicators for our business, which Brian discussed earlier. We had a strong quarter with 37 total instruments sold highlighted by 20 CODEX installations.

Over the last 12 months, our total installed base has grown 28% to 587 instruments as of March 31, 2021, which gives us a great base to drive growth in reagents and all other parts of the business. We continue to expect a solid recovery in our business in 2021 after some COVID-related disruption in 2020..

Gross profit was $7.4 million in the first quarter of 2021 compared to $6.7 million in the first quarter of 2020. This resulted in solid gross profit margin of approximately 61%. As reagents become a larger portion of the overall revenue mix, this will benefit gross margins in future periods..

Total operating expenses were $12.8 million in the first quarter of 2021 compared to $8.1 million in the first quarter of 2020. As discussed during our IPO process, the increase was part of our strategic plan to invest in the business as we aggressively hired during the quarter in addition to increasing marketing spend.

Our plans are to invest the IPO proceeds heavily into the business, especially in expanding the worldwide commercial team as well as in research and development to accelerate progress in a number of active projects related to instruments, reagents and software. We expect the total operating expenses will be at least $15 million for Q2 of 2021..

Net loss for the first quarter of 2021 was $8.1 million compared to $2.1 million in the first quarter of 2020 due to increased investment in the operating expenses and certain noncash charges. We ended the first quarter with $11.7 million of cash.

In April, the net proceeds of the IPO after deal-related fees totaled approximately $138 million which gives us significant resources to invest in the business. Post IPO, as of April 30, total common shares outstanding are 37.1 million and fully diluted shares are 41.1 million..

Moving on to our outlook for 2021, we expect full year 2021 revenue to be at least $52 million. As highlighted earlier, we remain confident in our ability to deliver strong growth in 2021, and are anticipating second quarter revenue growth of approximately 45% over the prior year second quarter.

The first quarter results represent a solid start to fiscal 2021, and we are focused on delivering consistently strong results each quarter. .

Now I'll turn it back over to Brian. .

Thank you, Joe. .

In summary, we continue to see robust adoption of our CODEX and Phenoptics solutions and the discovery, translational and clinical research markets. We're very pleased to report strong results in our first quarter as a public company. We're thankful for the hard work of our dedicated Akoya team and for the support of our customers and shareholders..

Following the IPO, Akoya is well positioned for growth, and we're excited about the opportunities ahead. At this point, we will open up the call for questions.

Operator?.

[Operator Instructions] Our first question comes from Tejas Savant with Morgan Stanley. .

Brian, just wanted to get your take on sort of reagent trends, particularly in April and into May here. And where I'm coming from with that question is that a couple of your peers saw some residual COVID impact continuing, and they expect that to continue through the second quarter. .

So just wanted to get your take on sort of lab activity levels, where they stand today versus pre-pandemic, and what are the assumptions you're baking into your '21 outlook. .

Yes. It's a great question, Tejas. I think what we're seeing is there were some bit of a hangover. Some instances on the capital equipment side -- I recognize that wasn't your question, in Q1.

A few instances where COVID had an impact, but for us, in our business, as we're looking at the activity here in April and May, we're continuing to see growth versus Q1. .

So we're really continuing to see a resurgence of our portfolio in terms of our reagent consumption. Is there still some sort of lingering COVID impact? Perhaps some, but I think not to an extent where it's going to meaningfully mute our performance in Q2. And I'd invite Joe maybe to add any color if he'd like. .

Yes. Yes. Similar to what Brian said, we're seeing good ordering levels across the board in Q2. And you can expect the number, $3 million or more in Q2 for reagents versus the $2.5 million we had in Q1. So we're feeling good about that. .

Got it. Very helpful. And then just in terms of the rapidly evolving competitive landscape here in terms of instruments with single cell or perhaps even subcellular resolution.

Brian, can you share some light on what the product pipeline looks like for Akoya over the next sort of 12 to 18 months, particularly on the CODEX side of things?.

Yes. I mean I think we're going to probably withhold explicit details on the exacting product development launches that are forthcoming likely impacting 2022. I think our focus right now is really driving adoption of the existing products, but maybe a couple of additions, Tejas. .

Number one is, I think what we're seeing in the market, and I think it's an endorsement of spatial biology, is a real flood of new entrants, some really powerful announcements by some of our colleagues of forthcoming future products.

And I think our mindset right now as a company, with CODEX having been on the market just since 2019 and 2019 also being our first full year with Phenoptics, is really focused on driving the performance of those existing products..

That said, I think you can expect us to continue our advancements on 2 fronts. You'll see forthcoming product announcements as we get through this year into next year, but also as highlighted in some of the opening comments, Tejas, we feel like partnerships are also a key part of our product innovation driver.

And I made some specific mentions to some stuff on the discovery side with CODEX with our I2 innovation network, using our customers to help drive innovation, but also our partnership with ZEISS. .

So we'll review more details on our product road map as it comes, but I think what you can also see, as I mentioned, is a parallel branch of leveraging our partners to help drive innovation. .

Got it. And then one final one on OpEx for Joe. Joe, you guys -- looks like you came in a touch ahead of where we were in terms of the first quarter.

So should we think of $15 million essentially as a run rate to use on a go-forward basis for OpEx?.

And then on a related note, can you share any updates on your investments in the CRO service offering? I mean you're obviously seeing very strong traction there.

So any plans to expand capacity? Or do you essentially view it as a hook to drive instrument purchases down the road?.

So Joe, why don't you take the OpEx, and I can take the CRO portion?.

Sure, sure. So definitely for Q2, we believe OpEx will be $15 million, and then we see it expanding actually beyond that for Q3 and Q4.

So if you used $15 million in Q2 and then bump it up closer to 16% for Q3 and a little bit more for Q4, because we're in the mode right now where we're in an aggressive investment mode, and we're trying to hire people really in all phases of the business. So that would be my recommendation on OpEx. .

And Brian, do you want to talk about the CRO?.

Our CRO lab services business is really a strategic arm of our business, working very closely with our key biopharma partners on clinical trial work. And we are investing in not just the laboratory resources but dedicated business development and field to help drive that portion of the business. .

It's not focused on doing proof-of-concept studies to support capital purchases of our instruments. It really is a strategic driver as part of our aim to work with large pharma on clinical trials and become really integral and integrated to their clinical trial efforts. .

And our next question comes from Steven Mah with Piper Sandler. .

So first, on the headcount expansion, I was wondering if you could provide some color on that and a sense for where the adds were. It sounds like they were mainly in sales and commercial. So maybe just a little bit more color on that, if you could. And then also if any of the headcount expansion was global. .

Yes. So I would say the numbers that we quoted, they were likely either -- they're evenly split between expanding our commercial team and our research and development organization, sort of consistent with our priorities on the use of funds.

And the expansion of the commercial team is global across all geographies, and that will continue through the balance of the year. .

Okay. Great. And then digging in a little bit on the ZEISS co-marketing agreement. Can you give us a sense on how that's structured. Is it going to be some Akoya resources and then ZEISS combined for the co-marketing of CODEX? And maybe give us a sense for their sales force capacity and commercial scale that they can bring to bear. .

Yes. So at a high level, the real objective -- there's really 2 prongs to that partnership. Number one, As you know, CODEX integrates with existing microscopes.

And what this partnership allows us to do is really be very close with their development teams on ensuring current and ongoing integration with their microscope platform and platforms going forward. That is the technical side of that partnership..

In terms of the co-marketing agreement, we're really just beginning to map out the detailed co-marketing activities and exactly how we sort of leverage our respective marketing and field organizations. But they've got -- they really are one of the leaders in terms of their installed base for microscopes that we integrate with.

And I can't, at this time, speak to the exact scale of the number of field reps that they have. .

Okay. Great. And my last question on the Imaging Innovators network. Is this a -- what you guys are doing for -- you're providing it for free. But is this what you're providing as a Proxima software on a fee-for-service, except you're giving it for free? Am I thinking about that... .

I really appreciate you asking that question and giving you a chance to give more clarity. So the announcement of the Imaging Innovators network is these are instruments that are purchased. We're not giving away CODEX instruments.

And what is powering that -- our ability to build a network of users of CODEX that are exploring novel applications, our ability to do that. .

And that is the goal of that network, Steven, is to allow people to innovate on codecs because if you recall, CODEX really is an in situ reagent delivery device. And it allows our customers when we sort of unlock the system. As outlined in the press release, it allows them to integrate codecs with novel microscopy technologies attempt new assays. .

So this is really about expanding the field of applications that CODEX can attack and leveraging real thought leaders in the market to develop new capabilities on codecs. That's what it's really about.

Proxima is a whole separate offering, and that is our cloud-based compute technology that is enabling our customers to leverage the power of the cloud to store, share and analyze their data sets. So hopefully, that clarification was helpful. .

Congrats on the quarter. .

Thank you, Steven. Appreciate it. .

[Operator Instructions] Our next question comes from Julia Qin with JPMorgan. .

Congrats on the quarter. Maybe just a follow-up on the I2 partnership. Could you give us an idea of the scale of this network.

Like how many labs are involved?.

And you mentioned this is really to the development of novel applications.

What specific applications should we be thinking about? Is it kind of expanding into other disease areas? Or where should we think about it another way?.

And also for customers involved in this network, are there any preferential pricing or terms that we should be thinking about?.

Yes. I think there are some details within the agreement. But in terms of the scale, the scale right now, we're talking sort of 10 to 20 sites. And we have a lot of different areas that we're investigating with the partners. We're just onboarding many of those now, and they include novel microscopy approaches.

They include novel assay methodologies on the CODEX instrument. .

Really, it's about expanding the application menu that's available on CODEX, not just in terms of analytes but other microscopy technology. So that's really the focus is leveraging the capabilities of our customers and their ability to innovate to help drive the advancement of the CODEX application space. .

Got it. That's very helpful. And then in terms of CODEX, obviously, the placement strength is above what we were modeling. So could you just give some color on the drivers of this trend. And what surprised you to the upside.

And have those been mostly greenfield placements? Or have you seen any competitive wins against other discovery spatial platforms?.

Yes. I mean there's always a valuation of competing technologies, and it just comes down to the scientific preferences of our customers.

And I think what's really growing our ability to continue to do well on CODEX is the recognition and continued postulation of the use of the platform, not just at conferences like the one I highlighted, but also with growing publications..

As the platform is in the market for a more meaningful periods of time, people begin to recognize the power of the system. And I think we're just beginning to feel that momentum. And again, we sort of -- like everybody, we had this sort of wet blanket that was last year, which was one of our first full years of CODEX.

So we're just really coming out of that kind of regaining the momentum that we had. .

Got it. Very helpful. And last one from me in terms of the sales force expansion, you've added 21 additional people already.

How should we think about the cadence of additional hires throughout the year? And what's the timing for these new hires to reach full productivity?.

Yes. We will continue to expand our sales team throughout this year and into next year. And I think the number that we gave you in aggregate across the company of 21, we will continue to aggressively hire at that rate or higher quarter-over-quarter, generally equally balanced likely between our commercial and R&D teams. .

So that is our objective through this year. And I think that the numbers we gave you for this last quarter, I think, are starting benchmark. And Joe, feel free to add any additional color if you'd like. .

And I'm not showing any further questions at this time. I would now like to turn the call back over to Brian McKelligon for any further remarks. .

Yes. Just in closing, I just want to thank everybody for joining the call. And we're looking forward to providing you our next update after the second quarter. So thank you all so much. .

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