Ana Petrovic - Director of IR Gajus Worthington - President and CEO Vikram Jog - CFO.

Shawn Bevec - Deutsche Bank Kevin Chen - Leerink Partners Bill Quirk - Piper Jaffray Bryan Brokmeier - Cantor Fitzgerald Sung Ji Nam - Avondale Adam Wieschhaus - Cowen and Company Doug Schenkel - Cowen and Company.

Good day, ladies and gentlemen, and welcome to the Fluidigm Fourth Quarter 2015 Financial Results Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Ms. Ana Petrovic, Director of Investor Relations. Ma'am, you may begin..

Thank you. Good afternoon, everyone. Welcome to the Fluidigm fourth quarter 2015 earnings conference call. At the close of the market today, Fluidigm released financial results for the fourth quarter and full year ended December 31, 2015. During this call, we will review our results and provide commentary on recent commercial activity and market trends.

Following these comments we will host a Q&A session. Presenting for Fluidigm today will be Gajus Worthington, our President and CEO; and Vikram Jog, our Chief Financial Officer. This call is being recorded and the audio portion will be archived in the Investor section of our website.

During the call and subsequent Q&A session, we will be discussing plans and projections for our future financial results and business and market trends and opportunities, including among other statements regarding expectations for the single-cell biology and production genomics markets and our prospects and growth opportunities in such markets.

Our anticipated product launches, anticipated impact of recent organizational changes and other business strategies, product performance matters, our views of our competitive market position and impact of competition, seasonality and product revenue trends, and current estimates of 2016 total revenue, GAAP and non-GAAP operating expenses, stock-based compensation expense, interest expense, capital spending and currency related impact on 2016 revenue.

These statements are forward-looking and are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from our currently anticipated events or results.

Information on these risks, uncertainties and other information effecting our business and operating results are contained in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 and our other filings with the SEC.

Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2015 to be filed with the SEC. We advise investors to review these risk factors carefully. The forward-looking statements in this call are based on our information available to us as of today’s date February 4, 2016.

Fluidigm disclaims any obligation to update these forward-looking statements except as maybe required by law. During the call, we also plan to present certain financial information on a non-GAAP basis. This non-GAAP financial information excludes the impact among other items various non-cash or one-time charges.

Fluidigm has chosen to provide this information because it believes it enhances an understanding of our ongoing economic performance and because it permits investors to perform comparisons of operating results in a manner similar to Fluidigm’s internal operating analysis.

Reconciliation between GAAP and non-GAAP results are presented in a table accompanying our earnings release, which can be found in the Investors section of our website. I will now turn the call over to Gajus..

Thanks, Ana. Good afternoon. 2015 was a tough year for Fluidigm, however there have been some encouraging signs in the past two quarters that helped galvanize our enthusiasm and commitment to meet the challenges and opportunities of 2016.

Our fourth quarter revenue of $30.7 million resulted in two consecutive quarters in which we met or exceeded the forecast we reset in mid-year. At the beginning of the year, several aspects of our business surprised us from a forecasting standpoint and we feel we now have a handle on our trajectory.

There are no victory laps here until we return to robust growth, but we are heartened that our analysis of the situation and forecasting discipline produced reliable forecast for the back half of the year. After Q1 there was concern around what looked to be a rocky start for CyTOF.

At the time, we voiced confidence that our proteomics business would deliver strong growth in 2015. It did. For the year demand for our CyTOF 2 and recently launched Helios systems was robust coming from both academic and biopharma customers.

Among many applications pursued by our pioneering customers, mass cytometry is increasingly accepted as a premier tool to elucidate the heterogeneity and dynamism of the immune system with unprecedented resolution.

When we acquired this technology it stemmed from the commitment to enable the pursuit of single-cell biology in its totality; genomic, proteomic and functional. Helios is delivering on its part of that promise. We are incredibly proud of our proteomics team in Markham and are excited about continuing to drive this platform in 2016.

While there is no question, we remain dissatisfied with the performance of our single-cell genomics business last year. We can say that from a booking standpoint this business stabilized in the back half of 2015.

We continue to believe that our commercial efforts in this business suffered from an imbalance of attention between our core and new products. As previously noted, we moved to stem this effect by limiting the sales staff devoted to new products. Rebuilding the pipeline for return to robust growth takes time given the sales cycles of these instruments.

Although there is much work yet to be done, the pipeline has improved. I'd like to talk for a moment about production genomics. A shortfall in production genomics consumables was the principal driver of our underperformance in analytical chip pull-through in 2015, including in the fourth quarter.

As previously discussed, we did not make up for attrition in this customer base. The good news is that we have the capability to grow this business with a new and dedicated team.

This is a group of seasoned veterans of sales to service [to additions] [ph] in our marketing organization all with an aggressiveness and focus that this business has long deserved. Some of Fluidigm’s early business success was in the field of production genomics.

Exiting 2015, we have the devoted resources, the personnel and even some great new offerings like the award-winning Juno such that we should see this business return to growth in 2016. As a management team, we are keenly aware of the necessity to make consistent progress toward growth trajectory over the course of 2016. We believe this will occur.

Our overall guidance of $124 million to $128 million including a negative impact from currency of 2% represents growth of 10% at the midpoint. Our confidence in this guidance is a product of several factors. Number one, conviction that our strategic focus around single-cell biology will enable growth.

Number two, our assessment of our strong competitive position in this market. And number three, belief that the organizational changes and improvements we have made will produce growth in both the single-cell and production genomics markets, particularly towards the back half of 2016.

Our 2016 revenue guidance includes growth contributions from single-cell biology, new products introduced in 2015 and production genomics consumables. We understand that one concern about our 2016 outlook is competition, particularly the announcements of recent weeks.

As we have noted throughout the last year, however, while this may be a new concern to some, it is not at all new to Fluidigm. We built the market for single-cell genomics because we believe it held transformational potential in the field of biology from the research lab and over time beyond into clinical practice.

The vibrant C1 community with over 50 leading publications has now taught a generation of researchers that single-cell heterogeneity matters and that analyzing that landscape is feasible. For many applications in cancer, neurology and immuno-oncology to name a few, analyzing averages just didn’t cut it anymore.

One defining characteristics of a good market is competition, Fluidigm never anticipated being alone in this market even for as long as it has been. Others have finally taken notice and are understandably trying to capitalize on the exciting market we created.

Our focus and attention on competition began the moment that we began to imagine this market nearly eight years ago. We welcome it. Our practice as the market leader has been to stoke a healthy paranoia and to act deliberately.

And there is also an appropriate level of confidence that comes from having lived this market with our customers for several years. So let’s assess our position.

We were first to this market with a breadth of solutions more comprehensive than any of those promised by our new competition and we have established a commanding position with an installed base of approximately 400 C1s.

Through multiple comparative publications that show that the C1 delivers the highest quality data relative to other techniques only some of which are being commercialized. While some of these techniques promise higher throughput, they do so at the expense of sensitivity and data quality.

Notably, when we increased our throughput by a factor of 10 with a high throughput chip, we still maintained excellent representations of the RNA landscape on a per cell basis. We did this without changing the instrument other than updating the software.

Our strategy to meet the demand for more sales per run will follow the same path wherein we increase our throughput by another factor of 10 and the same instrument platform. Competitive offerings have also focused essentially exclusively on one type of RNA assessment either global RNA expression or targeted.

The C1 currently has over a dozen essential workflows including total RNA, targeted RNA, micro RNA, whole genome, whole transcriptome and targeted DNA sequencing. No real or hypothetical competitive offering comes close to the breadth of workflows available now on the C1.

And this list is ever expanding through the use of Script Hub whereby our customers develop and make available new workflows for the entire C1 community. There has been a lot of noise about competition but in reality there is very little that is new.

One aspect of the noise is consternation over the recent communication Fluidigm made with our customers regarding the occurrence of doublets in our medium-cell C1 IFCs. All current single-cell isolation technologies grapple with doublets. Let me repeat that. All current single-cell isolation technologies grapple with doublets.

The question here will be not only the rate, but on the ability to discern them, a subject on which we have now spent a lot of time and effort.

Most of the high throughput approaches promise must rely on bioinformatic approaches that are not easily achieved beyond examples of canned mixed experiments and instances in which expression patterns of two cells are so distinct they can be easily [disparate] [ph] from one another.

However, oftentimes cellular heterogeneity is important when cells are similar except in subtle ways. The C1 with its ability to visualize its capture site already allows for reliable way to screen out doublets as well as obtain phenotypic information regardless of how similar or different the cell’s RNA are.

Of course part of how we now understand so much about visualizing and screening doublets is based on the meticulous investigation we’ve conducted on our IFCs for the C1.

A few weeks ago we initiated a broad communication to our customer base regarding the observation of a high rate of doublets on our medium cell IFCs together with detailed information to help our customers understand the issue and mitigate it. As a reminder this issue applies only to our medium cell IFCs, not our IFCs for small and large cells.

We understand the fact that there has been concern around this, but we'd like to share a few highlights from our C1 customer outreach program.

We have spoken with over 200 customers and have generally been greeted with support in expressions of confidence, many, if not all cutting life science tools companies have performance issues with their product’s life cycles. Not all of these commit to the transparency the way we have and our customers have been complimentary on our approach.

We have been in close contact with customers for some time. Those communications extended all the way through the conclusion of our extensive experimentation at the end of last year. Helping our customers based on empirical study rather than anecdote and an identification of the path to a permanent chip sticks has been our priority.

These new medium cell chips are slated for release in Q2. As a quantitative metric of this confidence, not to-date, not a single C1 has been returned as a result of our doublet communications. And indeed we are receiving new orders for both C1s and medium-sized cell chips in this quarter. To be clear, we are declaring victory on this challenge.

We still have lots of work to do to deliver improved chips, to minimize the occurrence of doublets. We are however very encouraged by the response from our customers and as certain we are handling this the right way. It is also important to note that as a company, we standalone in a variety of cutting edge single-cell technologies.

Between the Biomark, the C1, Helios and now Polaris, we have fielded an unprecedented level of capability, throughput and much needed variety and analytical modalities. It is our privilege to lead this market.

Our partnership with our pioneering customers in this space is one of Fluidigm’s most precious assets and we do not take our market leadership for granted. We will continue on our roadmap towards high throughput, but also high quality and analytical flexibility to provide customers with market-leading solutions.

We start 2016 with the energy and will to return to growth. I’ll hand it over to Vikram now. .

Thanks, Gajus, and good afternoon, everyone. I will now walk you through our fourth quarter 2015 operating results and highlights. For the full year 2015, total revenue of $114.7 million was down 1.5% year-over-year and up 3.5% on a constant currency basis.

For the fourth quarter of 2015, total revenue of $30.7 million was down by 8% year-over-year and down 4% on a constant currency basis. On a sequential basis, total revenue for the fourth quarter of 2015 grew by 7%.

Total instrument revenue of $15.7 million declined by 13% or $2.4 million year-over-year in the fourth quarter, primarily due to decreased core genomic system sales, partially offset by growth in Helios system sales and contribution from new products. On a sequential basis, instrument revenue for the fourth quarter of 2015 grew by 4%.

Approximately 75% of the BioMark HD systems sold during Q4 were motivated by single-cell research and approximately 20% of C1 systems sold in the quarter were combined with a BioMark HD system.

Total consumables revenue of $11.7 million, which includes IFCs, assays, reagents and antibodies declined by 8% or $1 million year-over-year for the fourth quarter, mainly due to lower sales from production genomics application. On a sequential basis, consumables revenue for the fourth quarter of 2015 grew by 16%.

Our genomics analytical and preparatory IFC pull-through for the fourth quarter tracked within our historical ranges of $25,000 to $35,000 per system per year and $15,000 to $25,000 per system per year, respectively. Proteomics analytical pull-through also tracked within its historical range of $50,000 to $70,000 per system per year.

Total service revenue of $3.3 million increased by 22% or $600,000 year-over-year in the fourth quarter. On a sequential basis, service revenue for the fourth quarter of 2015 declined by $200,000 or 6%.

Our total instrument install base was approximately 1,630 instruments at the end of 2015 including approximately 805 systems designated for single-cell biology research. Approximately 52% of the install base was analytical systems compared to approximately 53% for the third quarter of 2015, with the balance comprising preparatory systems.

Geographic revenues as a percentage of total revenue for the fourth quarter of 2015 were as follows; US 45%, Europe 35%, Japan 7%, Asia-Pacific 8% and 5% other. Geographically, the year-over-year revenue growth rates for the fourth quarter of 2015 were as follows; US down 20%, Asia-Pacific down 26%, and Europe down 2%.

Other and Japan were up 131% and 60% respectively. Notably, on a constant currency basis, Europe grew 26% for the full year 2015 and 7% for the fourth quarter of 2015. Net loss for the quarter was $12.9 million compared to a net loss of $10.9 million in the prior year fourth quarter.

Non-GAAP net loss for the fourth quarter of 2015 was $6.9 million compared to the $1.7 million non-GAAP net loss for the fourth quarter of 2014. Net loss for the full year 2015 was $53.3 million compared to a net loss of $52.8 million for 2014.

Non-GAAP net loss for 2015 for the full year was $24.4 million – pardon me, non-GAAP net loss for 2015 for the fourth quarter was $24.4 million compared to $6.4 million for the prior year period. GAAP product margin was 58% for the fourth quarter of 2015 versus 62% for the year ago period and 58% in Q3 of 2015.

Non-GAAP product margin was 70% in Q4 2015 compared with 74% in the year-ago period and 72% in Q3 of 2015. The sequential and year-over-year decline in non-GAAP product margin was primarily due to IFC inventory reserves related to product transition, low consumables capacity utilization and lower instrument selling prices.

Turning now to OpEx, research and development expenses were $9.7 million in the fourth quarter of 2015, compared to $11.7 million in the fourth quarter of 2014 and $9.4 million in Q3 2015.

The year-over-year decrease in research and development expenses was primarily due to one-time acquisition related stock-based compensation expenses and a decrease in outside services. SG&A expenses were $22.1 million for the fourth quarter of 2015, compared to $18.8 million for the year ago period and $19.6 million for Q3 2015.

The year-over-year increase in SG&A expenses was mainly driven by continued investments in our global commercial infrastructure. On a sequential basis, SG&A expenses increased primarily due to the buildout of our production genomics commercial organization. Moving on to the balance sheet.

Total cash, cash equivalents and investments were $101.5 million at the end of the fourth quarter of 2015 compared to $114.1 million at the end of Q3 2015 and $142.8 million at the end of 2014.

Please note, the decline in total cash, cash equivalents and investments for the fourth quarter 2015, which amounts to approximately $12.6 million included a patent purchase for approximately $6.5 million and capital expenditures of approximately $1.4 million.

Net cash used in operating activities were $34.7 million for 2015 versus $22.6 million for 2014. Net use of cash was $4.4 million in the fourth quarter of 2015 compared with $12.7 million in the third quarter of 2015, primarily due to a decrease in accounts receivable resulting from higher collections and lower inventory in the fourth quarter 2015.

DSO at the end of four quarter of 2015 was 75 days compared to 82 days at the end of Q3 2015. Accounts receivable decreased to $25.5 million from $26.2 million at the end of Q3 2015, and inventory was $17.9 million, down from $19.1 million at the end of the third quarter of 2015. Moving on now to our financial guidance for 2016.

For the full year 2016, we expect revenues to be in the range of $124 million to $128 million. This includes an estimated negative currency related impact of approximately 2% at the midpoint of the range.

As you update your models for 2016, we would like to draw your attention to quarterly pacing, and remind you that the first quarter of the year represents the lowest contribution to our full year product revenue. In addition, we believe the organizational improvements we made will have a greater impact on revenues during the second half of 2016.

Operating expenses are projected to be between $134 million and $138 million on a GAAP basis. On a non-GAAP basis, operating expenses are projected to be between $114 million and $118 million, excluding approximately $16 million of estimated stock based compensation expense and $5 million of estimated depreciation and amortization expense.

Interest expense is projected to be $6 million, capital spending is expected to be between $4 million to $6 million and cash outflow for 2016 is expected to be between $25 million and $30 million. And with that, I will now turn the call over to the operator to open it up for questions..

[Operator Instructions]. And our first question comes from the line of Shawn Bevec with Deutsche Bank. Your line is now open. .

Thanks guys. Gajus, I know you mentioned that you have seen, or you have orders for the C1s and the medium cell chips in the first quarter. I am just wondering how much the doublet issue has impacted the demand for the medium cell IFC chips.

And then can you tell us what the mix of the chip sales by small, medium and large cell IFCs is?.

Hi, Shawn. We haven’t broken out the ratios of medium size to others, there is experimentation that goes on at all areas. As an example, immune cells can be small, some developmental biology stem cells can be larger, cancer cells can be either small or medium or large.

So without a doubt it’s important, but we don’t have a ratio of that one to others to share with you.

With respect to your other question about the impact, all we are prepared to say right now is that we are taking orders and from our perspective that’s something that should be taken as a real positive than an indication that as we said earlier, throughout all of our communications now with customers, which now literally are in their hundreds, we have generally been greeted with support and confidence that not only can we ensure that they are able to continue to use the systems that they have productively, but that will have a very satisfactory solution to this problem going forward.

.

Okay. With regards to the revenue pacing for this year, with the exception of last year, revenues in general have been pretty consistently weighted around 45% in the first half, 55% in the second half.

Should we expect 2016 revenue to be more skewed than this in the second half, so higher than the 55% in the back half?.

Hi, Shawn. This is Vikram. I think at this point in time, we will just point you to our historical performance over several years, not just 2015, but really want to stop short of giving granular quarterly guidance for 2016. .

Okay.

And then one last one, Vikram on the lower gross margin, you did note lower instrument selling prices, I am just wondering what kind of instrument discounting you guys might have been doing in the quarter that of that, and how much of the impact of the lower gross margin that was?.

Well, there is three reasons for the gross margin and without giving specific quantitative information, I would share with you that the instrument selling prices was probably the least significant of the three reasons we alluded to.

I don’t think there was any – not that I don’t think, there was no specific discounting program going on in the quarter. .

Okay. Thanks gentlemen. .

Thank you. And our next question comes from the line of Dan Leonard with Leerink Partners. Your line is now open..

This is actually Kevin Chen for Dan today. So, you spoke about single-cell as the main driver this year.

Could you give some qualitative color on the impact of various product lines based on the trends of the [indiscernible] cells pipeline you witnessed this quarter?.

We expect single-cell biology be one of the three main contributors for growth in the year, again those are single-cell biology production genomics chips and then new products that were launched in 2015. Within the overall umbrella of single-cell biology we're not breaking out individual product lines there.

However, we’ll say that we continue to have a lot of faith as we expressed during the prepared remarks in the Helios platform..

Okay, thanks. And how much of your guidance if at all depends on a rebound in Japan, I know this quarter has been strong.

And also can you just give some more color on that market?.

To be honest I wouldn't necessarily describe the fourth quarter of this year as strong. Although it certainly didn’t have as much volatility as we have experienced over the last really over a year. We’re not really banking on a – we’re not assuming meaningfully better performance out of Japan until we have seen it consistently.

There is too much macro uncertainty there to make – draw any conclusions at this point in time. So, we are taking a more conservative and cautious approach which I think consistent with commentary you've heard from a lot of our peers..

Thank you. And our next question comes from the line of Bill Quirk with Piper Jaffray. Your line is now open..

So I guess first question is on C1 and recognizing that you guys have obviously communicated with your customers both in terms of the formal kind of letter that went out as well as obviously on the phone and in person.

Is it reasonable to assume guys that the placements for C1 are going to be more back half weighted for 2016?.

We certainly haven't indicated that. So I wouldn't lead you to draw that conclusion..

And then on CyTOF, hoping you can give us some additional color around the performance specifically around Helios and I guess, I'm trying to get at here is, I guess thinking a little bit about new system placements of Helios versus upgrading some of the CyTOF 2s in the field?.

So if the question is about what's driving the adoption, is it upgrades versus new customers, definitely new customers. The Helios and the CyTOF technology has without question achieved a broader level of appeal particularly in the sort of nexus of immunology and oncology.

And I think upgrades definitely represents an opportunity but the lion’s share of our commercial focus has been around new customers and that's been fruitful..

And I guess lastly from me is just a word on some of the new systems Juno and Polaris, in particular you talked about that being one of the growth drivers here for 2016.

Can you just help think a little bit about where we are with these two systems kind of how does the selling cycle look relative to some of your other instruments, is it more prolonged, is it relatively in the same ballpark? Thanks..

So still early days with Polaris and we are encouraged by the pipeline development similar to last time we had third call, see real progress there. But still early in the actual selling activity of that system.

Juno we launched earlier in the year, so we have more history there and Juno has achieved some pretty remarkable notoriety in a fairly short amount of time, particularly its recognition in Time magazine.

So, have more history there and more understanding of the sales cycle really by virtue of the fact that it was out in the market almost six months prior to when we first really started selling Polaris.

But as you point out and as I’ve said already couple times now, a significant component of our growth projection for 2016 comes from this category of new products..

Thank you. And our next question comes from the line of Bryan Brokmeier with Cantor Fitzgerald. Your line is now open..

Guys, thanks for all the color on the doublet issue that you've been experiencing.

What is the timeline that you expect for that to be resolved, how easy is the fix is required for it? And what are the new challenges could arise as you’re continuing to work on that?.

The fix is something that we fully understand and that’s why we are able to declare that it will be out relatively soon in Q2.

And it's a very interesting and also subtle problem that of doublets and it’s something that has plagued all single-cell methodologies that we’re aware of going all the way back to really the first systems that did flow cytometry and Coulter counters, what have you.

What makes us unique here is that we actually can measure them and we can tabulate them. We can on a per experiment basis, the fact that you can image all of our IFCs, all of our C1 IFCs, you can actually tell which sites have doublets and which ones don't and you can remove the ones that have doublets from your data analysis.

So that’s actually a pretty distinctive capability versus really any other single-cell methodology that we are aware of. Other methodologies require characterization of one type or another but then you assume that whatever you characterize carries through to your experiment.

So in the vein of things that we've uncovered that is important and perhaps not as well understood and maybe a bit of a surprise. The variability of the rate of doublets is pretty dramatic, and it is detailed in the white paper that we published on our website.

But in some of the experiments on primary cells that we conducted, we could see variability across energy multiples as much as maybe even a factor of four. And what that I think signals is that other technologies that aren't capable of measuring the doublet rate on a per experimental basis.

The amount of contribution of doublets to those experiments may vary widely and maybe far more significant than a characterization would suggest. So, there is a lot that we've learned and a lot that as a result of that that gives us confidence that these problems will be substantially mitigated very soon with our new [indiscernible] coming out soon.

Another thing it's really taught us is how to deal with this problem generally and frankly in a way that’s unique to our platform. We believe that this is going to be a substantial hurdle for other technologies to figure out and assess, and come up with ways to really ensure that their customer’s data is pure in a way that we'll be able to do..

Thanks guys and Vikram you highlighted that the first quarter is historically the weakest quarter of the year.

Do you expected to be any weaker than normal and what factors should be consider beyond just normal seasonality whether that be different circumstances last year versus this year?.

Well as we alluded to in the prepared remarks and my response to Sean's question earlier. And Sean has pointed out that 2015 was somewhat of an anomaly, so I would encourage you to look at not just one year in terms of historical phasing.

And the other aspect I would remind you is that the organizational changes we effected in 2015 are, we believe likely to have a much greater impact relatively speaking in the second half, in the back half of 2016 compared to the front half..

And then just lastly, guys are you continuing to see strength in the Biomark as you saw last quarter and is that with the C1 and the biomarker in addition to the Helios which you mentioned in the prepared remarks..

We continue to see that biopharma, biotech are a really important opportunity for us going forward. Contribution in the fourth quarter wasn’t as significant as it was in the third quarter on a revenue basis.

However, in terms of the pipeline, the outlook, the application space, we’re confident that that's going to be a significant area for us in 2016 and for the next several years..

Thank you. And our next question comes from the line of Sung Ji Nam with Avondale. Your line is now open..

Guys, I was wondering about Helios and CyTOF and the recent strength.

Are you taking share potentially from flow cytometry there or is this opening up new markets for the new applications?.

We really don't position CyTOF against flow cytometry as a matter of routine, there are occasions when that is a comparison that a customer really requires us to make but in general, the capability of the CyTOF and of Helios is utterly distinct from what's possible with the flow cytometer.

So if a customer is really contemplating the kind of experimental horsepower that CyTOF or Helios provide, they’re really not a prospect for flow cytometer to begin with.

So I wouldn't say that we are taking share per se from flow cytometry, I think probably a more accurate way to put is, when customers and institutions are contemplating investment -- substantial investment in new cutting-edge technologies that cost $0.5 million or more, there is a variety of different areas in which they can look that could include imaging capabilities or next-generation sequencing or of course flow cytometry or cell sorting and something like Helios.

So I think we’re participating in that high-end very cutting-edge allocation of budget, some of which would come from flow cytometry but probably more generally just comes from all those different areas or might otherwise be spent.

But just to reiterate in general, we really don't position the Helios platform as an alternative to flow cytometry or as competition to it because it really isn’t, it's a very distinct capability and anybody who is really seriously considering using it really couldn't begin to contemplate running those same experiments on really any other platform..

And then in terms of your production genomics business, I was wondering -- you're talking about commercial restructuring and things like that but could you talk given there a lot of you know number of announcements around biobanking deals recently.

Just curious as to if your strategy there is going after the existing market in a better way or if you have identified some new opportunities for that business?.

Well it's a combination of both.

They are existing markets like agbio that have been around for quite some time, where the combination of Juno and other high throughput methodology is particularly for doing things like genotyping at very high throughput and at extremely low cost per data point that’s an arena where we are likely to be taking share from other conventional technologies that have been participating in the production genomics segment for a while.

There are -- now, there are opportunities in production genomics that have been created as a result of some of the single cell work and as a result of some breakthroughs in oncology and so a significant part of our participation there and I think this is a relatively new development is -- new applications, some of which are migrating from single cell applications and some of which are migrating from other discovery platforms like next-generation sequencing..

And then if I could squeeze one more in, you didn't talk about Callisto, you talked about how the other -- some of the new products are -- in terms of customer interest and things like that, could you kind of comment on what type of feedback you’re getting on Callisto and any surprises there if any in terms of demand for that system?.

Well, that was probably an oversight. Callisto is definitely included in the category of new products that launched in 2015 that we expect to contribute to growth and inherent in our 2016 guidance. Callisto, as I've said before, is really a mould breaker when it comes to cell culture because really there have been nothing like it in a long, long time.

Some of the initial experimentation is really interesting, it's still very early and I think we’re still getting our arms around the kind of the breadth of the opportunity there, how fast it will grow and what have you, but there are some really interesting applications for this in the initial customer base..

Thank you..

[Operator Instructions] And our next question comes from the line of Doug Schenkel with Cowen and Company. Your line is now open..

Hi, there. This is Adam Wieschhaus on for Doug. Thanks for taking my question. If you divide the number of instrument placements into the product and services revenue each quarter, you get an overall revenue associated with each placement.

At the beginning of 2015, this amount was around 190,000, while it increased to about 275,000 at the end of the year. Was this driven by a mix or increased service revenue or maybe pricing and also is it sustainable going forward? Thank you..

So I’m not sure that I follow your math there and so I guess I can't comment on the math, because I’m not sure that I can reproduce it.

Vikram, do you have anything to say?.

No. Maybe you might try one more time..

Okay. And given the data you’ve provided on the split between the analytical and the proprietary instruments and a positive commentary on site-offs [ph] in the quarter, we believe that Biomark placements were at their lowest level for the year.

Is this right and was there any particular event that may have driven this?.

So, I think if you’re trying to back into it with the percentages that we give, is that how you’re coming up with that, the 53%, 52% that we alluded to?.

Right. Yeah.

We’re using that percentage and we are also kind of assuming that the site-offs are again strong in this quarter, does that kind of factors into the Biomark placements which we believe are at their lowest level?.

Yeah. So I think I mean, given the growing size of the installed base and given that we are at over 1600 units, the math around this is somewhat trickier than it was when we were much smaller. So percentage point would equate to 16 units, I mean, and that's obvious.

But, so I would say a rounded percent does not really provide a clear gauge if you are trying to precisely use that to model individual placements.

So it's more of a directional tool that we provide, but so -- I think there are some hazards if you will of using it to precisely tighter model, individual platform placements during a quarter or for that matter a year..

I guess one other qualitative thing that we can say is that early in the prepared remarks, we said that we have several quarters now where we've seen, we’re talking about from a bookings perspective that our core genomics business is stabilized, that of course includes the Biomark?.

Okay.

And if I can just sneak in one more, maybe I might have missed it, but did you say that 10,000 cell chip is expected by the end of this year?.

We haven't given a timeframe on that yet, at least, we didn't hear..

Okay, thank you..

Thank you. And we have a follow-up question from the line of Shawn Bevec with Deutsche Bank. Your line is now open..

Thanks.

I just wanted to understand if there was any additional demands from the imaging requirement on the C1 from an instrument perspective or how it impacts the workflow in terms of the time that it would take the image to capture sites and/or any potential personnel requirements?.

So the image to capture site effectively to look for doublet, you need 40X magnification, which is not at all a common. I know for certain it's more than 10X and it may not be exactly 40 X, but it's more than the sort of gross magnification, but anyway, it’s something that is quite common.

It does require that -- close to around that level of magnification and it requires somebody to be paying attention, you can’t just page through these very quickly and not be looking.

However, that has been part of our recommended workflow, since the very beginning when we launched the C1, not just to look for doublet, but also to do things like live/dead staining and to garner some phenotypic information from the cells have been captured.

For example, you can stain the cells with antibodies and if you have a multichannel microscope, you can categorize them at a phenotypic level prior to gathering their genomic information. So really isn't fundamentally different from the workflow that we've always advocated for our customer base and one that actually is pretty routinely followed.

I think the only question is whether or not magnification has taken place at an initial level that really discriminate doublet, but again the level of magnification that you really need is something that is very readily available..

Okay. Thanks guys..

Thank you. And we have a follow-up question from the line of Doug Schenkel with Cowen and Company. Your line is now open..

Hey, guys. It's actually Doug. I’m here with Adam. I just wanted to clarify a couple of things. So throughout the call, your commentary suggests that I’m probably not using these exact words, but that customers are reacting surprisingly well to the doublet issue and how you handled that.

So just in terms of modeling things, and recognizing what you’ve said is your guidance assumes that the doublet issue doesn't have a material impact on placements.

Combining those two observations, what you said about customer reaction and the guidance for the year, should we assume then when we’re modeling Q1 that the doublet issue has no material issue on your ability to place instruments or on instrumental -- consumable utilization?.

Yes.

So we don't really have a comment on how to model Q1 really other than to say as we did that, you have to be mindful of seasonality, which always affects our instrumentation business and usually more so than it does the consumable business I’d say usually, because we also experienced production genomics customers that can be lumpy, but in any case, that's really the only thing we have to say about modeling Q1.

Now if I can give you a little bit more color here. We are not declaring victory on the doublet challenge and we know that there are customers that are affected by this. So I'm certainly not saying that they aren’t affected.

There are customers whose experiment, we’re going to have to wait until they have the medium-sized chip and then there are customers, some of those same ones that can proceed with the other two chip types and going to do other things. So we have some impact in our guidance.

And we are not going to break out specifically what that is and how much it is, but it is prudent to do so and that's implicit in our guidance..

Okay. So recognizing as always, we should be cognizant of typical seasonality from Q4 to Q1, which keeping in mind what happened last Q1, we probably had to go back a couple of years to look at, but just keeping in mind normal seasonality, that's how we should be modeling things, nothing out of the ordinary related to this doublet issue..

You’re certainly not calling the attention to doublet with regard to our quarterly pacing, the only other thing that I will reiterate, which I think Vikram also said was that, the organizational changes that we’ve made, they take about a sales cycle in order to fully have effect and if you remember, we started recruiting people, senior executives into the company starting in May of last year and have really persisted through, right through the end of the year.

So there is no clean starting point at which to start the clock, here is where a sales cycle starts, but it really will distribute it through that entire period, we’ll be making some really important hires like now our Senior VP of Marketing right at the very end of the year. Sales cycle can be 9 to 12 months for some of our products.

Again, it would be as short as six for some of them, but that's why we say that it will take really until the back half of the year for all these changes to have their most meaningful effect on revenues. That’s the other comment that I just encourage you to be mindful of as you’re working at your model..

Okay.

And just one final cleanup one for Vikram, just because I think a few of us ran into this issue last quarter, just to use a number specifically, you talked about approximately 52% of the installed base was analytical systems at the end of the quarter, does that -- recognizing there are some error bars around that, does that mean it’s somewhere between 51.5% and 52.4%, that's how I think most of us take that, but I know last quarter you used wider error bars around the number?.

Yeah. So we definitely narrowed it in response to that, but as I pointed out, one percentage point is 16 units, but yes, your assumption is correct..

Okay, thank you..

Sure..

Thank you. And that does conclude today’s question-and-answer session. I would now like to turn the call back to Ms. Ana Petrovic for closing remarks..

We like to thank everyone for attending our call. A replay of this call will be available on the Investors section of our website. This concludes the call and we look forward to the next update around the close of our first quarter 2016. Good evening, everyone..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day..