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10x Genomics Outlines Growth Plans, New Products for 2021

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NEW YORK – 10x Genomics is planning to expand on multiple fronts in 2021, including its workforce, product lines, and physical space.

The firm plans to increase its headcount by 50 percent this year, mostly in R&D but also in operations and G&A, according to CFO Justin McAnear, who spoke during a conference call on Wednesday to discuss the firm's earnings. CEO Serge Saxonov confirmed that in addition to opening a manufacturing and distribution center in Singapore in Q4, the Pleasanton, California-based company has purchased additional land there to expand its campus. According to local news reports, 10x bought a former shopping complex near its headquarters for $29.4 million. The deal will allow 10x "to bring our sophisticated manufacturing capabilities closer to our R&D to support the rapid pace of product development," Saxonov said.

He also provided updates on the firm's product lines and launch schedule for this year and early 2022, revealed a single-cell sequencing-based pharma biomarker study, and estimated the total addressable market for the firm's single-cell and spatial genomics technologies.

10x's transition to its Next GEM reagents, which do not incur a royalty paid to Bio-Rad Laboratories as part of an injunction stemming from a patent infringement lawsuit,  "is now substantially complete," McAnear noted. The company did not immediately respond to a request for more information on the transition.

Demand for the firm's Chromium instruments remained strong in the fourth quarter. "Customer engagement drove pull-through back to pre-COVID levels and usage in biosafety labs continues to drive incremental instrument placements," Saxonov said. "While we're still navigating this pandemic, our customers have adapted to work within this new environment. We believe labs have reached a steady operating state, which will continue until the pandemic is brought under control."

At the end of 2020, approximately 90 percent of customer labs were operational "at varying degrees of capacity," McAnear said. "Going forward, we expect this capacity to fluctuate in the near term, and we view the percentage of labs open as a less important metric compared to the available capacity per lab." He added that the firm doesn't expect to see large improvements in lab capacity to start off the year and anticipates first quarter revenues to be down sequentially from Q4.

The firm reinstated guidance, which includes the expected effects of several new product launches planned for 2021, first announced in January at the virtual JP Morgan Healthcare conference.

Saxonov noted that the firm added 250 employees in 2020, including 70 in its commercial organization. As part of the broader push to hire more people, 10x plans to add another 100 people to its commercial operations this year "to support global expansion and new product launches," he said.

He reiterated that 10x will launch its CellPlex technology, which enables customers to run multiple samples in a single Chromium channel and can reduce costs per sample by up to 60 percent, will launch this quarter. The Visium formalin-fixed paraffin-embedded assay will launch in the second quarter and the fixed RNA assay is still slated for the second half of the year. He also provided more precise timing for both the CytAssist instrument to convert histology slides for use with Visium and for the Visium HD assay, both expected in the first half of 2022.

Asked whether the CellPlex cost savings would erode revenues for 10x, Saxonov said that while customers will spend less per sample, 10x's expectation, "borne out by what we have seen on customers doing using … homebrew solutions previously, is that this will lead to more usage overall and more dollars flowing into the single-cell experiments in total." This may not happen immediately, he added, but over time. He also said that the Visium and Chromium systems do not currently drive use of each other much.

Saxonov noted that the new Singapore facility will support growing sales in the Asia-Pacific region, including customer service.

Brad Crutchfield, 10x's chief commercial officer, said that China is going to be "a major growth axis" for the company, and that it continues to hire new personnel and add commercial partners in China.

Saxonov also said the company's Chromium technology is going to be used for the first time in a single-cell sequencing-based multinational biomarker study for drug development, which will involve clinical samples from 12 collection sites. He did not provide additional details.

Finally, Saxonov outlined the total addressable market for in situ analysis, which the company plans to address with a new platform based on IP acquired through its ReadCoor and Cartana acquisitions. Beyond the $15 billion addressable market for high-throughput research, "there will eventually be many powerful clinical applications based on single-cell and spatial analysis of tissues," he said. "We expect our in situ platform will be well positioned to bring many of those applications to the clinic. If we make modest assumptions around the numbers of potential samples and pricing, we estimate the size of this opportunity is around an additional $10 billion."

Several Wall Street analysts raised their priced targets in response to the earnings and outlook. "Given the rich new product pipeline and encouraging early momentum of translational research adoption, as well as lowering sequencing cost that frees up customer budgets, we feel confident in the path ahead for accelerated market penetration in single-cell and spatial genomics," JP Morgan analyst Tycho Peterson wrote in a research note. He increased the December 2021 price target to $190 from $160.

Cowen Analyst Doug Schenkel raised his price target to $200 from $155. "This was a strong close to 2020," Schenkel wrote. "Q4 [instrument] placements exceeded our forecasts. [Consumables pull-through] was also stronger than expected."

In afternoon trading on the Nasdaq, shares of 10x Genomics were down just over 1 percent at $185.34.

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