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10x Genomics Discloses Supply Chain Spoilage Issue Amid Product Update


This story has been updated to correct the attribution of certain quotes to the proper 10x Genomics executive.

NEW YORK – 10x Genomics on Wednesday disclosed that some European customers have experienced product spoilage as a result of supply chain issues.

The firm's first quarter revenues in Europe, the Middle East, and Africa grew 7 percent year over year but were affected by the Omicron wave of COVID-19 as well as a "process breakdown in the region's logistics cold chain that led to intermittent assay performance issues," 10x CFO Justin McAnear said on a conference call with investors following the release of results.

The company was forced to replace some assay kits shipped to Europe that spoiled after falling out of required refrigerated temperature ranges. The problems were "in part due to pressures on the overall global supply chain that includes increased delays and then also some processes on our side along with our partners that needed to be tightened up operationally," he said.

The firm has implemented additional safeguards in its logistics operations that improve monitoring as well as "quarantine" procedures for when it detects spoiled products. "We are working with impacted customers in the region," he added.

The impact to 10x's business was "relatively small," McAnear said. "We're talking a couple of million dollars in Q1 [and] about a couple of million dollars planned and executed already in Q2." A bigger impact came from stopping work while troubleshooting the issue and a delay in ordering due to rerunning experiments.

"Looking at Q2, we are still experiencing some lingering impact from the cold-chain driven spoilage in Europe, which we expect to be fully resolved by quarter end," he added.

10x officials also discussed the upcoming Xenium in situ analysis platform launch and other product updates.

Since acquiring ReadCoor and Cartana in 2020 for $350 million and $41.2 million, respectively, 10x has been developing what has become the Xenium platform, which combines spatial and gene expression analysis. Though not yet taking orders, 10x is still on track for a release by the end of the year. The firm has put some projects on hold to bring up the Xenium launch, including a high-definition version of its Visium spatial analysis platform.

"We have already received extremely strong interest in the platform from many customers eager to be among the first to receive Xenium, and we feel great about the large funnel of opportunities we're building," 10x CEO and Cofounder Serge Saxonov said.

The firm has not disclosed pricing, but McAnear said the early placements will not have high margins. "It's a complicated instrument," he said. "The focus initially is not going to be on quantity, it's going to be on customer success. And, so, when looking at the financials, I expect a low financial contribution this year."

During the Q&A portion of the call, 10x officials appeared to confirm that Xenium will launch with a 400-plex assay and is planning a path to reach 1,000-plex over time.

"We're developing Xenium to have great performance across all key metrics including multiplex levels, sensitivity, specificity, and throughput," Saxonov said. "And in particular, we know from customers that high throughput is critical because it determines whether the instrument is practical for reuse."

Saxonov highlighted two other product launches. A fixed RNA profiling kit will be exclusive to the Chromium X series and has "helped drive instrument demand with new customers and accelerate the replacement cycle among existing customers, as expected," he said. And a nuclei isolation kit could drive adoption of certain single-cell assays including multiomics and ATAC-seq (assay for transposase-accessible chromatin by sequencing), which require single nuclei as input.

"We're now taking pre-orders for both products, which we expect to begin shipping over the coming weeks," Saxonov said, adding that the multiomics assay is among the fastest-growing products in company history.

High-throughput single-cell kits delivered strong growth and "robust reorder rates" as customers begin designing new experiments specifically for the scale they unlock and apply for grants, he said.

The CytAssist tissue slide preparation instrument for Visium, one of the products delayed by the Xenium push, will ship next quarter, Saxonov added.

McAnear noted that 10x has begun hiring sales and marketing as well as support staff for the Xenium launch. In general, the firm is on track to add 100 new roles this year and finish 2022 with a commercial team of more than 500 employees worldwide.