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NanoString Reports Q1 Revenues Jump 27 Percent, Positive Cash Flow

NEW YORK (GenomeWeb) – NanoString Technologies reported after the close of the market Thursday that first quarter revenues increased 27 percent, and that the firm achieved the first quarter of positive operating cash flow in its history.

For the three months ended March 31, the Seattle-based molecular diagnostics firm reported total revenues of $14.7 million, compared to $11.6 million in the prior year period. However, revenue fell short of the average Wall Street analyst estimate of $14.9 million. Foreign exchange rates affected growth by less than 1 percent.

In the products and services segment, revenues from consumables rose 35 percent year over year to $7.2 million from $5.5 million. However, this was offset by a 22 percent drop in instrument revenue to $3.4 million from $4.4 million a year ago, which the company said was due to "seasonal trends compounded by slower than expected conversion of sales opportunities into orders, as well as a lower overall average selling price resulting from the mid-2015 launch of the nCounter Sprint Profiler."

The firm's total nCounter installed base grew to more than 370 during the quarter, and consumables pull-through per system was just under $100,000.

On a conference call with analysts following the release of the financial results, NanoString CEO Brad Gray said that although the firm entered the quarter with a "strong" sales funnel, several deals took longer than anticipated to close and slipped to the second quarter. Gray further added that he was "disappointed with the productivity" of NanoString's sales team, diagnosing the problem as having "not yet mastered lead generation and early cultivation efforts."

The new nCounter Sprint platform comprised almost half of all instrument sales during the quarter. "Sprint is expanding our reach," Gray said, adding that it is appealing to individual researchers, smaller biotech firms, and to the Asian market, and is not cannibalizing sales of more expensive systems such as the nCounter Max. Sales of the Sprint in Asia helped drive revenue growth in that region to more than 50 percent, year over year.

Additionally, the firm's newly launched RNA Protein assay is "motivating a meaningful number of instrument purchases," Gray said.

Sales of the Prosigna breast cancer test rose to $754,000 from $381,000, and services revenues rose to $772,000 from $579,000. During the quarter, Medicare contractors Noridian and Novitas issued favorable final local coverage determinations for Prosigna and the French national healthcare system followed suit in April. Overall, product and service revenues rose 12 percent to $12.1 million from $10.8 million in Q1 2015.

Collaboration revenue also rose to $2.6 million from $761,000 the year before.

NanoString's net loss narrowed to $14.6 million, or $.74 per share, from $14.9 million, or $.81 per share, a year ago, but missed the consensus Wall Street estimate for a loss of $.69 per share.

The firm's R&D spending increased 22 percent to $7.2 million from $5.9 million a year ago, attributable to increased costs from collaboration and development of new products. SG&A expenses grew 6 percent to $14.9 million from $14.1 million in Q1 2015.

NanoString ended the quarter with $29.6 million in cash and cash equivalents, and $27.2 million in short-term investments.

The company also reiterated its guidance for full-year 2016 revenues of $86 million to $90 million and net loss per share of $2.30 to $2.45. Analysts on average are expecting revenues of $89.0 million and a loss per share of $2.38 for the year.

On the call, NanoString executives noted that the firm expects a $5 million milestone payment from its collaboration with Medivation and Astellas in Q2 — the US Food and Drug Administration has approved the use of a companion diagnostic the firm developed to enroll patients in a clinical trial of the biopharmaceutical companies' investigational breast cancer drug enzalutamide.