This story has been updated to include a response from 10x Genomics.
NEW YORK – 10x Genomics has slashed prices on its Chromium controller and the market has responded strongly, company officials said this week.
In April, in anticipation of launching its high-throughput Chromium X, which can process 1 million cells at a time, 10x dropped the price of the base model to $35,000, down from about $50,000. During a conference call following the release of the firm's second quarter financial results, company officials told investors that the sales promotion led to 100 instrument placements above what the company had otherwise expected. Total instrument revenues tallied $16.9 million, a 131 percent increase from $7.3 million in the prior-year period.
10x Officials also discussed the other instruments in the Chromium lineup — the new Chromium X and automated Chromium Connect — as well as the financial implications of the company's settlement with Bio-Rad Laboratories over single-cell intellectual property.
Whether the price change could lead to an inflection point in adoption remains to be seen. On the one hand, "demand … is strong, especially at this price point," 10x CFO Justin McAnear said. "And so that could drive a pretty large increase in installed base this year."
On the other, the promotion was originally set to end June 30, however, it has been made permanent. "So, I think some of that could be driven by the urgency of having a promotion that's expiring at the end of the quarter," he said. "And what that means, as far as when the price is made $35,000 on a long-term basis, we'll have to measure that over time." McAnear added the company was "keeping a close eye" on pricing and how it affects demand.
Many of the instruments went to customers new to 10x. "We …. have made concerted efforts in the marketing organization to start reaching customers new to 10x," especially in neuroscience and infectious disease, said Serge Saxonov, 10x's CEO and cofounder. "That has been bearing some fruit getting into these areas."
He also noted that the Chromium X was changing the economics of single-cell genomics in other ways.
"This platform represents a huge advance for single-cell genomics, as it will allow our customers to supercharge the experiments, and they're getting as many as a million cells in a single run at a significantly lower cost per cell," Saxonov said. "Chromium X was developed in response to the desire of many of our early customers to run ultra-high-throughput experiments. We're pleased with the initial response and look forward to getting it in our customers' hands this quarter."
10x did not specify how much the Chromium X will cost, though in January, Saxonov said it would be around $100,000. "We just started talking to our customers with concrete specs and pricing," Saxonov said. How many the firm expects to sell this year is also unclear. 10x Genomics declined to provide sales expectations.
"Our earliest, most forward-looking customers have been kind of asking for this kind of capability for a while," Saxonov said. "So definitely there is some amount of baked-in demand that's coming, but I'm not sure if I'd classified it like a huge tsunami kind of deal." Most of the interested customers are already in the 10x ecosystem, "but there's quite a few new customers as well that are coming up with interest in the platform, especially … more on the biotech side of the world," he said.
McAnear also noted that Q2 was "a really strong quarter" for the Chromium Connect instrument. "Part of that was driven by some instruments that we had shipped out, but had not been able to fully install and get up and running due to COVID restrictions," he said. "But [Chromium] Connect is still a very low percentage of the overall instruments that we're shipping each quarter."
10x's settlement with Bio-Rad, which resolves about two dozen lawsuits in various venues, will also have a material impact on the firm's business.
"From a financial point of view, we expect that agreement to be cash-positive for us when considering cost savings from litigation, our ability to offset certain payments against other licenses, and the reduction in past royalties related to the Delaware litigation," Saxonov said. The reduction in royalties is approximately $15 million. "Any payments of royalties by Bio-Rad on sales and services would be incremental to this. We expect the impact to our gross margins will be less than 1 percent, also excluding any potential royalty payments from Bio-Rad," he said.
10x disclosed that it spent $3.3 million in external legal fees during Q2. In fiscal year 2020, the company attributed a 55 percent increase in SG&A expenses to litigation expenses alongside personnel expenses.
10x officials didn't specifically address the potential impacts of paying royalties to Bio-Rad on sales of its newer Next GEM reagents, which were the subject of one of the patent infringement suits. 10x will also receive royalties from Bio-Rad, according to terms of the settlement.
"We don't know what kind of payments we'll get from [Bio-Rad] in the future," McAnear said. "Any payments that we receive from Bio-Rad would be incremental. So right now, with that statement, we're assuming zero."
"Apart from the financial benefits, this agreement eliminates the distraction and uncertainty of litigation," Saxonov added.
He also noted that the company has hired "just over 200" of the 400 additional employees it planned to hire this year. "So, we're well on track there."