Q1 2024 Nautilus Biotechnology Inc Earnings Call

Participants

Sujal Patel; Founder & CEO; Nautilus Biotechnology Inc

Parag Mallick; Co-Founder, Chief Scientist; Nautilus Subsidiary Inc

Anna Mowry; Chief Financial Officer, Treasurer; Nautilus Biotechnology Inc

Yuko Oku; Analyst; Morgan Stanley

Presentation

Operator

Good day and thank you for standing by, and welcome to the Nautilus Biotechnology Q1 2024 earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, [Jeon E] Investor Relations. Please go ahead.

Thank you. Earlier today, Nautilus released financial results for the quarter ended March 31, 2024. If you haven't received this news release or if you'd like to be added to the Company's distribution list, please send an e-mail to Investor Relations at Nautilus dot Bio. Joining me today from Nautilus are Sushil Patel, Co-Founder and CEO, Per-Arne Malik, Co-Founder and Chief Scientist, and Adam, our Chief Financial Officer.
Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.
Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements in the press release Nautilus issued today, except as required by law, Nautilus disclaims any intention or obligation to update or revise any financial or product pipeline projections or other forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast, April 30, 2024.
With that, I'll turn the call over to Sujal.

Sujal Patel

Thanks, John, and welcome to everyone joining our Q1 2024 earnings call. Q1 was a highly productive quarter for Nautilus as we continue to execute on our vision to establish a new gold standard for the creation and comprehensive analysis of high-value proteomic data in order to deliver a range of long discussed and long desired improvements in human health, biomedical research needs a dramatic acceleration in target identification and therapeutic develop. But as they have for many years, researchers remain impeded by the lack of sensitivity, scale and reproducibility of traditional protein analysis method and have emerging affinity based and peptide sequencing matters.
We believe fundamentally new approaches required to overcome these limitations and to unlock the potential value of the proteome, something we continue to view as one of the most significant untapped opportunities in biological science. Today, we and the proteomics KOLs with whom we regularly speak understand how important Intacct single molecule protein analysis and the Nautilus platform could be to their explorations of the proteome. They know that deeper, richer proteomic data could one day, make it possible for researchers to more quickly identify the mechanisms of action of diseases ranging from cancer to Alzheimer's.
Understanding those mechanisms will be key identifying effective treatments. Interestingly, many of these KOLs maintain a heavy focus on use of mass spectrometry for proteomics. The positive attention, our platform continues to receive from them is a good sign for things to come with this critically important and influential buying model. As you'll hear from Rob in a few moments, those KOLs are encouraged by the data we shared at the recent U.S. fubo conference, and several of them have begun imagining specific initiatives against which they plan to apply our platform as part of our early access program.
As we've previously shared, the EAP will launch in the months leading up to commercial availability in 2025. Never intended to be a significant revenue driver. The program will serve as a high-value means by which to generate data to support both internally and externally generated scientific papers, customer grant proposals, and we'll get meaningful data into the hands of potential future, we will keep you informed as we get closer to launching the EAP. I remain pleased with the progress that has been made in development activities surrounding each of the core components of the platform, including the core reagents, sample prep for DVB-H probes, chips flow sells the instrument and software for more on those and other R&D related updates.
Let me now turn the call over to Parag. Parag?

Parag Mallick

Thanks to Jill. Overall, we continued to make solid progress against our core development goals. In Q1. We remain incredibly focused on increasing scale, stability and reproducibility across our consumables, assay and platform and continue to see meaningful gains along those dimensions. This progress goes hand-in-hand with advancing the reliability quality and customer readiness of our instrument and software platform, stability enhancements, increased consumable scale and quality and increased instrument availability and capacity have allowed for a significant increase in the number of high cycle number protein decoding experiments that we can initiate and complete successfully.
In fact, we completed nearly three times the number of experimental runs in Q1 as we did in Q4 of last year. This increase in experimental scale is essential as we continue to optimize all aspects of our platform towards launch targets. Increases in experimental scale and asset robustness have enabled us to increase the complexity of the model systems that we are using for ecosystem wide optimization. We are excited to be continually increasing the complexity of these model systems to include an increased diversity of proteins across wider ranges of concentration.
We are also excited about an increasing focus on activities critical to our commercial launch, such as pre verification studies of key platform characteristics such as reproducibility and sensitivity from the standpoint of sharing the foundational elements of our platform with the broader proteomics community.
The highlight of Q1 was our participation in the annual conference of the U.S. human proteome organization you as CFO, US UK, attracts many of the types of researchers and organizations that could be potential users of our platform was exciting to see that this year's conference attracted approximately 600 attendees more than doubling the attendance of just two years ago.
This increase in participation points clearly to increased interest in the proteomics space overall from our standing room only lunch and seminar tour, many posters and significant traffic at our booth. Grupo provided an extraordinary opportunity to share with the community additional progress on the experimental implementation of PRISM further detail on our multi affinity Pro pipeline and on computational methods to estimate Vault discovery rates, in addition to continuing to educate the community about how our platform works.
Our goal this year was to begin introducing experimental data from our pre verification studies that demonstrate the key performance characteristics of the platform. This new data on both broad scale and pretty form analysis generated a great deal of interest and questions from attendees. Specifically, we shared data showing ultrasensitive and repeatable single molecule quantification of the protein transfer one of the key differentiators of our platform is its incredible sensitivity. This is critical for finding diagnostic and prognostic biomarkers that can be indicative of diseases at their earliest and most treatable stages, we demonstrated lower limits of quantification in the high Octo to lose optimal range. This represents a more than five order of magnitude, better sensitivity than typical mass spectrometry methods we also shared how by exploiting the ability of our platform to either positively probe individual molecules.
We were able to quantify the abundance is of 32 distinct tau CAR-T forms this measurement is not possible on both traditional and emerging peptide-based platforms. We showed the ability to also do measurements of tau from complex samples such as enrich cell isolates. These results lay the foundation for future assays that enable more detailed investigation into molecular mechanisms of properties like Alzheimer's disease, as well as potentially opening new frontiers for more specific diagnostics beyond how we showed how the platform can be applied to measure EGFR protein forms. These findings are the results of the targeted PRETTY from studies that we have been pursuing in partnership with Genentech and Amgen, I and the other new satellites in attendance.
Since the significant shift in the depth of the questions we received from attendees during the event, clearly indicating an increased understanding of enthusiasm for the Model S platform, our booth was packed with researchers eager to understand that the platform might be well suited to addressing their specific research questions.
One of my most enjoyable conversations was with a researcher who presented work on a new Alzheimer's disease biomarker that he believes is the result of changes the abundance of a specific protein form that is challenging to measure using traditional immunoassays. It's exciting to see how the additional data we've shared from the Nautilus platform is encouraging researchers to expand their proteomics horizons. With that I'll turn the call back to Sujai.

Sujal Patel

Thanks for the update, Parag. I could not agree more with proxy takeaway from the event having been there myself, I heard so many things that convinced me that momentum for the space and for Nautilus, our building in lockstep researchers are beginning to really focus on the role that next-gen technologies like Donlin will play in creating advances in basic biological research, enabling them to make a substantial impact on the efficiency and cost effectiveness of biomarker discovery and drug, develop our next significant opportunity to educate the community about the platform and our progression towards commercial availability will occur when Nautilus participates as a top level sponsor of this year's Coupa World Congress October 20 through '24 in Dresden, Germany.
We look forward to that event as it aligns closely with the timing of when we anticipate having updates on both our scientific and business progress when it comes to educating the marketplace and bringing the community along on the Nautilus journey. You've heard Piraquê say many times how committed we are to being as transparent and fulsome as we can in our communication to that end.
And as a means of sparking interesting conversations about proteomics and its future. This quarter, we introduced the translating proteomics podcast and video series hosted by Parag and Dr. Andreas humor, a 20-year Thermo veteran and now our Senior Director of Scientific Affairs. The show was not a deep dive on the Nautilus platform, rather, it explores the scientific underpinnings of proteomics and challenges to audience to imagine what may be possible in the future where proteomic data is more easily and cost effectively created.
We are heartened by the warm reception to the show's first few episodes and encourage anyone who wants a better and broader understanding of the space to subscribe and participate with suggestions for topics they'd like to see it.
For a look at our financials. Let me now hand the call over to Anna.

Anna Mowry

and I think total total operating expenses for the first quarter of 2024 or $21.6 million, up $3.5 million compared to the first quarter of 2023 and $1.6 million above last quarter. This 20% increase in operating expenses year-over-year was driven primarily by continued investment in personnel and their activities towards the development of our platform.
Research and development expenses in the first quarter of 2024 or $12.9 million compared to $10.9 million in the prior year period.
General and administrative expenses were $8.7 million in the first quarter of 2024 compared to $7.2 million in the prior year period. Overall, net loss for the first quarter of 2024 was $18.7 million compared to $15.0 million in the prior year period.
Turning to the balance sheet, we ended the year with approximately $248 million in cash, cash equivalents and investments compared to $264 million at the end of last quarter.
We continue to expect our total operating expenses to grow by approximately 25% from 2023 levels, and growth has been to steadily increase as we prepare for our commercial launch. We continue to anticipate our cash runway to extend into the second half of 2026.
We remain focused on running a very capital efficient business with tight management of our expenses while making the investments necessary to drive our scientific progress forward looking ahead, we are confident that we are strongly positioned to execute our strategy sufficiently to launch our game-changing proteome analysis platform.
With that, I'll turn it back to Sujal

Sujal Patel

As Anna to wrap things up, we continue to make solid progress against our development and business goals. And for that, I want to thank the entire Nautilus team. We're excited about what's to come, and we look forward to providing additional updates on our next call with that and happy to open the call up for questions.
Operator?

Question and Answer Session

Operator

(Operator Instructions)
Yuko Oku with Morgan Stanley.

Yuko Oku

Hi, this is Madison on for Hugo morning. Just want to maybe start off with sorry, if I missed this on the call, but just wanted to make sure I'm so on time line, you guys are still targeting 2025 expected launch?
Correct. And then just any update updated thoughts on further refine timelines beyond 2025? And if there's like particular milestones that you think you need to achieve before we have any clarity on specific launch timing? And if there's any steps you're taking to ensure like?
No, I need no more slippages it beyond 2025.

Sujal Patel

Yes. So on the last time, we gave some time. Our guidance was was on our previous call, which was our fiscal year 2023 call. We didn't make any updates at this time. Things continue to progress on the timeline that we outlined earlier. We don't have any greater specificity at this point. But one of the things that I think I said in Q&A in the last call, just still true is that as we get and as we get to the point where we're able to measure a significant number of our teams, whether it be 1,000 or 2000 or for something in that range from cell I say, and do that in a reliable and reproducible way.
That will be a key our line for us where we will be able to likely project a little bit with a little bit more specificity what the remaining time line looks like as well as a good opportunity for us to walk through with the scientific community or potential customers and the Street fee our final or near final specifications of the product. So station.

Yuko Oku

Okay. That's good to hear. And then maybe turning to.
Yes, fubo data, you've shared data there demonstrates the platform's ability to quantify mixtures of tau protein forms that you guys are talking about stepping back. I was just wondering where some like biological questions or use cases they can be answered with disability. I think you mentioned Alzheimer's on the call and for context, could you share how you go about characterizing proteome form mixtures on an BACK, for example?

Parag Mallick

Sure. I'll take that. This is Per ag. When we think about pretty forms, generally, we think about them as providing additional detail and specificity about the function of proteins such as tau. So for instance, the first level of regulation is just by whether tau is present or absent the second being how much is present and then the third level of detail that we're really getting to for the first time is studying, how is modified and what the prevalence of the different Modus modified pretty forms are that may have, for instance, three different phosphorylation sites that have been populated and an additional splice variant.
The way that you would use this data is is really in two places the first is understanding the biology of the disease right now because this hasn't been a measure of all before, we really don't understand how these protein farms contribute to driving either the initial onset of diseases like Alzheimer's or their progression. But it's hypothesized that different people may have different distributions of these variants that may drive their disease to progress more quickly or more slowly.
Additionally, they may be used in the periphery as biomarkers to delineate where where the disease course is and to determine whether or not particularly therapeutics might be effective and so there's a tremendous amount of excitement about being able to provide that level of detail into that into the disease and its mechanisms and progression being a mass spectrometer and the traditional method of mass spectrometry, shotgun proteomics or which looks at peptides is unable to measure protein forms at all.
And another method which has been pioneered by our collaborator, Neil Kelliher is called top-down mass spectrometry. And that method is and able to generally identify the masses of different party forms. And from those masses infer what credit forms might be present however, our method is extremely direct as well as single molecule instead of looking at large ensembles of molecules.

Yuko Oku

Got it.
That's really eyeballs, I think thank you.

Operator

Matthew Sykes, Goldman Sachs.

Hi, this is Avi on for Matt. Thanks for taking my questions. As I know in the past, you've mentioned antibodies as being one of the final pieces needed to address before the launch. Can you give an update on how you're working through that? And then any other areas of improvement before the launch.

Our joint tackle this first, and I'll add any color at the end of Q3 and Q4.

Parag Mallick

So as we've talked about in the past?
Thank you for the question. Really there are a couple of key areas that we've been focused on. The first is scale, and that applies to the reagents aspect of the consumables, the chips and flow cells as well as the instruments themselves and scale has two different pieces. The first and the first is just are we able to manufacture sufficient amounts of these consumables with sufficient quality to build a reproducible assay.
The second aspect of scale has to do with the ability to execute successfully on large cycle experiments, dozens, hundreds of cycles and and we've demonstrated it to PO data showing that the protein stay mobilized on the ship over 100 cycles that the we don't see degradation in substantial degradation in binding rate. So that might indicate damaged proteins. We additionally demonstrated we don't see significant buildup on the surface of the chips.
So those are two key aspects of scale that we're continuing to be focused on as well as robustness alongside those development efforts, our traditional things like guard banding to understand what the specifications need to be of each of the components of the system.
When we talk about the regions themselves and the affinity, our agents, what we're focused on there is really about the characterization of the affinity regions to understand very specifically and for each affinity reagent, what does it bind to how well does this bind have what are its other biophysical characteristics? Is it a little sticky? Is it easy to produce.
So there are a number of aspects to the affinity reagents that that really get to understanding the individual behavior of each reagent at a level of detail that is not typical for a for for a standard affinity region workflows.

Okay, great. That was super helpful. And then how are you shoring up your supply chain ahead of the launch and sort of on the back of that question and also balancing your cash runway through the second half of 2026?

Sujal Patel

Yes, that's a it's a good question, Ian. I'll take that one this residual unit from a supply chain perspective, we continue to on the other side on the electronics side and electronics side, we continue to purchase ahead and manage inventory of some of the longer lead time parts in our in our instrument.
And we continue to ramp up from a contract manufacturing perspective, our capabilities to build the instrument outside of non-loss walls and continue to build instruments, which we're using internally for testing for verification validation studies and for working with our collaborators. So that work that work continues and we don't foresee any of particular issues on that side.
In terms of on the on the chips and the consumables side for chips and flow cell, we continue to mature our supply chain increase the capacity of that supply chain, tight tolerances for error in our production. And we made a number small tweaks to the flow cell design in Q1 that are being implemented here through Q1 and into Q2 here that are aimed at improving quality on the reagent side.
Remember that Al, our reagents are kind of consist of two separate categories of things one is bulk offers and those sorts of things. And that stuff is pretty simple. And we, for the most part, manufacture that stuff with partners outside of our walls for the antibody side and the probe side and the progress basically antibody plus our proprietary label.
We have a year we've been building us for quite some time. We have a robust supply chain that that includes building some of that stuff internally as well as some of the constituent parts that go into those externally. And we're managing the supply of the input materials well. So I don't I don't see any issues there as we begin to scale up here in the latter part of this year and next year.

Okay, great. Thanks so much.

Operator

[Matt Stan, Jefferies].

Thanks. You guys discussed and improved our margin per ton at the experimental runs, continue to make good progress.
If you go back to last quarter, I think you talked about order of magnitude improvement, three times better sequentially in 1Q as well just given how important this is for for scaling the platform, I guess, how much more of an improvement do you need or should we expect to see? Are you getting closer to kind of where these models and systems need to be? Thanks.

Sujal Patel

Now I'll take that one as a starting point, when when we think about our launch targets, we typically have expected to want to be able to execute on hundreds of measurements using hundreds of probes, expect it to be in two colors. So somewhere in the 100, 50 to 200 cycles are what we're targeting for having before our launch targets.
And so accordingly, the you should continue to see us advancing towards that improving towards that and further increasing the reproducibility and stability across hundreds of cycles as where we're aiming to be in terms of reliability and reproducibility.
Some of the other areas that we're continuing to push on are and to end assay reproducibility as well rather than components reproducibility, for example, in the limit of detection studies that we presented at US Hippo, one of the things that we did with repeat those measurements several times across different instruments across different operators across different days. And so those are the kinds of things that we're going to continue pushing towards as we move towards releasing and our are our instruments and platform.

Thanks. And then maybe one for surgical. Sounds like a lot of positive momentum coming out from, but would love to just hear a little more on some of the learnings from the recent event here in the US and then you know what you'll look to build upon ahead of the event this fall in Germany. It sounds like a lot of interest you might have a bit more of an update both for the scientific and investment community. So just would love your thoughts on kind of building on the recent momentum and capitalizing on the next event here in October?

Sujal Patel

Yes. Why don't I start that and then I'll let Greg maybe delve in a little bit more detail. I think that, you know, the U.S. two-part event was one where I think that we continue to see a lot of momentum both for the proteomics space, but for Nautilus specifically as well. I was down there in Portland and had the opportunity to walk around and see all the posters and the boots. And I had a number of conversations with many of the KOLs and and scientists in the proteomics space. And there certainly was a lot of excitement around the data that we were showing and anomalous method.
Our booth traffic was excellent. We have a lot of people who are well known party. I'm excited not just stopping by that stopping by and spending extended amounts of time talking to our boots that having a conversation with Parag or myself or with Nick Nelson, our Chief Business Officer, and really engaging in a way that I think was gratified to see. But as well, I would say is a little bit different and improved from what we've what we've seen in years past. I think that was great.
One of the other highlights I was I was down there during one of progress. Talks broke at multiple talks at the USUPO. conference, and what his talks was really one that is an updated version of the talk that you've given before, which really describes the genesis of the Nautilus scientific method, our technology, how the assay works and what our end goals are as well as updated data and progress session was absolutely packed.
We were turning down our competitors at the door. We're trying to get at every seat was full with potential customers and scientists looking to learn more. The aisles were full of people on really great to see and lots of good questions and engagement as well. So from that regard, I think it was it was a really successful show.
And just to address the second half of your question head on and then I'll let Bob add any detail that he wants to add but certainly, you know, for the world to be coming up, we're working very hard to take the data that we have now and take it to one step closer to having a product that's out the door, right. And Tom, we're not committed to exactly how to think about on the call exactly what we have as we head into UltiPro here.
But we're we are hopeful that we can we can start showing them much more data than just being able to decode transplant, for example, which is what we showed at USC valid So we're working hard. Our heads are down and the entire team is focused on that. Probably anything to add there in terms of some detail on our US CFO.

Parag Mallick

Yeah, I think one of the one of the largest, as Sergio mentioned, one of the largest changes that we saw was a transition in key opinion leaders and other scientists asking to understand how the platform works towards a transition towards could I use it for my specific application. And those applications were incredibly wide ranging.
They ranged from very detailed mechanistic studies or biological time courses or biomarker studies of, but it spanned a wide range of substrates from cell sites to blood to CSF. and vaccine researchers get into that level of detail of really thinking through how our platform might apply to the research questions that they're asking. It should be done beyond understanding the way that it works. And we're really excited about how it might expand their proteomic horizons.

Super. Thank you.

Operator

Thank you. (Operator Instructions)
I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.