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NanoString Q4 Revenues Up 13 Percent, Anticipating Sales Shakeup in 2017

This story has been updated to include information about funds raised through an at-the-market financing facility during the quarter.

NEW YORK (GenomeWeb) – NanoString Technologies reported after the close of the market Wednesday that revenues for the fourth quarter rose 13 percent year over year.

For the three months ended Dec. 31, total revenues rose to $25.2 million from $22.3 million in Q4 2015, beating the average Wall Street estimate of $24.9 million and in line with its own preliminary revenue projections.

"Despite record revenue in the fourth quarter, we fell short of our expectations," NanoString CEO Brad Gray said on a conference call with analysts following the release of results. "While our total revenue growth during 2016 was strong, our product and service revenue growth rates were inconsistent across quarters." Sequential growth from Q3 to Q4 was only 6 percent, he added.

The Seattle-based firm's instrument revenues fell 5 percent year over year to $7.5 million from $7.9 million, driven by the absence of a year-end purchasing spike and weaker-than-expected sales of nCounter SPRINT instruments. Consumables revenue rose 11 percent from Q4 2015 to $11.0 million from $9.9 million, excluding the Prosigna breast cancer testing panel, driven by growth in the pharma end market. Revenues from Prosigna totaled $1.0 million for the quarter, up 22 percent over $822,000 in the prior-year period, driven by sales in Europe. Collaboration revenue grew 69 percent to $4.9 million from $2.9 million in Q4 2015. And revenues from services rose 18 percent to $866,000 from $731,000.

Gray pointed to a "constellation" of internal and external factors for the firm's performance. "The absence of a year-end spike was highly unusual and something we didn't anticipate," he said, adding that the academic end-market was weak, with approximately flat revenues year over year. Gray also suggested that NanoString missed out on opportunities to sell instruments during the quarter to other genomics firms offering steep year-end discounts.

"The experience of 2016 was a harsh reminder of the risks of relying on Q4 budget flush to drive substantial revenue growth," he added, noting that the firm would no longer project such a factor in its guidance.

Internal factors also played a role, Gray said — while revenues and instrument placements have grown, NanoString's sales outfit has not adapted to optimize the efforts of its field reps, who have been responsible for both instrument and consumables sales, potentially contributing to the instrument revenue shortfall.

"We had not sufficiently supported the field-based reps to achieve productivity," he added.

In response, NanoString is planning a major sales and marketing overhaul that will take place over the next year. The firm will replace its commercial leadership and hire several dozen new sales staff, in newly defined roles.

NanoString's net loss for the quarter widened to $11.6 million, or $.55 per share, from $8.8 million, or $.44 per share in Q4 2015. Wall Street analysts had estimated a net loss of $.48 per share.

R&D spending jumped 41 percent to $10.0 million, up from $7.1 million in 2015, driven by increased costs associated with collaborations and new products for the research market. SG&A spending increased 18 percent to $16.7 million, up from $14.2 million in the prior-year period, due to investment in the firm's sales channel.

NanoString CFO Jim Johnson noted that foreign exchange fluctuations reduced growth by almost 2 percent and that the firm sold approximately 1.3 million shares of common stock under its at-the-market (ATM) financing facility, with net proceeds of approximately $26 million. "This represents the remainder of the shares that were available under the ATM program," he said. 

For full-year 2016, NanoString reported revenues rose 38 percent to $86.5 million from $62.7 million in 2015, beating analysts' consensus estimates of $86.3 million.

Instrument revenues rose 15 percent to $24.2 million from $21.0 million a year earlier, and consumables revenue, excluding Prosigna, rose 23 percent to $37.5 million from $30.6 million. Prosigna revenues rose 68 percent to $4.2 million from $2.5 million in 2015. Collaboration revenues nearly tripled to $17.4 million from $6.0 million in the year-ago period. And revenues from services rose 23 percent in 2016 to $3.2 million from $2.6 million.

Gray said that the new nCounter SPRINT accounted for 45 percent of units sold, without slowing growth in other instrument sales.

The firm said its installed base of nCounter instruments grew to approximately 480 placements as of Dec. 31, with approximately 140 new placements during the year.  

NanoString's 2016 net loss widened to $ 47.1 million, or $2.34 per share, from $45.6 million, or $2.40 per share, in 2015. Wall Street analysts had expected a loss of $2.27 per share for the year.

The firm's R&D spending increased 41 percent to $34.7 million from $24.6 million in 2015. SG&A spending rose 18 percent to $62.7 million from $53.2 million a year ago.

The firm ended the year with $20.6 million in cash and cash equivalents, and $53.5 million in short-term investments.

For 2017, the company said it expects total revenues of $100 million to $105 million, and a net loss of $2.51 to $2.69 per share. Analysts are expecting revenues of $108.2 million in 2017, and a loss per share of $2.03.

In Thursday morning trading on the Nasdaq, shares of NanoString were down more than 6 percent to $17.89.