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NanoString Projects Q4 Instrument Growth; Sees Strong Early Demand for New Spatial Imaging Platform

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NEW YORK – Despite slow nCounter consumables sales from lingering pandemic effects, NanoString foresees strong demand for the nCounter gene expression analysis platform and GeoMx digital spatial profiler, which should drive product and service revenue growth for the remainder of the year, company executives said this week.

In addition, demand for projects involving NanoString's forthcoming CosMx spatial molecular imager (SMI) outstrips supply, as the company prepares for a slow rollout of the platform next year.

In a conference call on Tuesday recapping the firm's Q3 earnings, executives said they anticipate total product and service revenue of $140 million to $144 million for the year, down from previous guidance of $143 million to $147 million, primarily due to slower consumables sales for its legacy nCounter gene expression analysis platform.

Despite the lower outlook, the company looks forward to growing sales of both nCounter and GeoMx instruments, as well as consumables sales for GeoMx, as pandemic-related research slowdowns recede.

"We expect…about 40 new GeoMx orders in Q4," Doug Farrell, vice president of investor relations, said during the call.

While the pandemic impacted nCounter consumable sales, Tom Bailey, the firm's CFO, said that nCounter instrument sales exceeded Q3 consensus estimates by 25 percent, at roughly $6 million dollars, "indicating that we are returning to pre-pandemic levels on the instrument side of our business."

The firm is also expanding into the basic research market with its recently launched mouse whole-transcriptome atlas (WTA) for the GeoMx platform.

Bailey stated that with the release of the mouse WTA, "about 20 percent" of GeoMx orders came from customers who adopted the platform specifically for mouse transcriptome research. About 90 percent of new projects came from next-generation sequencing-based products such as human and mouse WTAs, with mouse WTA projects accounting for approximately 25 percent of those.

"We're successfully expanding beyond our core strength of translational research and into basic discovery," said CEO Brad Gray.

The company also began marketing its new in situ spatial molecular imager as CosMx SMI and released a publicly available dataset generated by using the platform to analyze formalin-fixed paraffin-embedded (FFPE) tissue samples from eight different non-small cell lung cancer samples from five patients.

The dataset is accompanied by its corresponding paper, which can currently be found as a pre-print on bioRxiv.

Bailey said the platform's compatibility with FFPE samples will enable researchers "to unlock value in archival samples, as well as to apply the platform to clinical samples."

The company plans to begin shipping CosMx SMI instruments in the second half of 2022, in what Bailey described as a "careful rollout." Because of the planned slow commercial release, Bailey said that CosMx is unlikely to factor into revenue projections for that year.

Nonetheless, Bailey also commented that the demand for CosMx SMI projects currently outpaces the company's project management capacity.

NanoString reported that it has so far signed up between 10 and 20 projects and expects to have over 20 projects in motion within the year.

"That really is the entire capacity that we have," Bailey said.

The SMI projects that are underway have begun to yield results, with posters being presented this week at the Society of Immunotherapy and Cancer meeting and more scheduled for future events.

NanoString also stated that the company does not see supply chain issues impacting its ability to build demand.

Finally, the company said that it anticipates a "typical pattern of seasonality" in Q4, with no major budget flushes.

NanoString shares were trading down about 2 percent at $45.80 on the Nasdaq on Wednesday afternoon.

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