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NanoString Technologies Q1 Revenues Down 2 Percent

NEW YORK – NanoString Technologies reported after the close of the market on Tuesday that its first quarter revenues dropped almost 2 percent year over year.

For the three months ended March 31, the Seattle-based spatial biology company’s revenues were $31.1 million, down from $31.6 million last year and trailing behind Wall Street analysts’ average estimate of $33.6 million. Revenues were in line with preliminary results the company had announced last month.

“Recently, changes in our commercial approach have temporarily reduced the effectiveness of our sales process and our revenue visibility,” NanoString CEO and President Brad Gray told investors in a conference call following the release of the Q1 results. “With the benefit of hindsight, we believe that we have developed a firm understanding of the challenges we encountered in Q1, and this understanding is guiding our path forward.”

Previously, Gray had blamed the disappointing results on sales force realignment issues and an imbalanced sales execution. After further review of the Q1 results, he said, the company identified two additional factors that stymied its first quarter performance. The company’s sales team is still learning how to allocate its time and effort across three product lines, he said, and new GeoMx customers are taking longer than expected to reach their full consumables run rate, likely due to the strong uptake of the whole transcriptome atlas, which requires more sequencing capacity and informatics capabilities.

First quarter product and service revenue fell to $30.8 million from $31.4 million in Q1 2021, while collaboration revenue increased to $239,000 from $223,000 a year ago.

Instrument revenues totaled $9.1 million in Q1, including $4.8 million GeoMx instrument revenue and $4.3 million nCounter instrument revenue, down 22 percent from $11.7 million during the year-ago period.

The installed instrument base grew to 295 GeoMx DSP systems during the quarter, with 40 new instruments installed, representing 84 percent year-over-year growth; and 1,070 nCounter Analysis systems, with 20 new instruments installed during the quarter, representing 8 percent growth over the prior year.

Consumables revenues amounted to $17.5 million in Q1, up 9 percent from $16.0 million in the year-ago quarter.

Services revenues grew 16 percent in Q1 to $4.3 million from $3.7 million a year ago, primarily driven by increased service contract revenue from the growing installed instrument base.

The company’s Q1 R&D spending rose 15 percent to $17.4 million from $15.1 million a year ago, mainly due to increased personnel and product development costs related to CosMx, as well as the company’s investments in software and technology that will support data storage and analysis for customers.

Its SG&A spending in Q1 swelled 36 percent to $36.4 million from $26.8 million in Q1 2021 and included $693,000 in litigation expenses. The SG&A spending increase was driven primarily by investments made in the company’s spatial biology-related commercial initiatives, including investments to expand its sales force, service, and customer support groups as well as costs related to licensing and implementing new information technology solutions to support the company’s virtual operations and finance functions.

NanoString’s net loss for Q1 was $39.5 million, or $.86 per share, compared with a net loss of $27.7 million, or $.62 per share, a year ago. On average, analysts had been expecting a smaller Q1 net loss of $.56 per share.

The company ended the quarter with $98.5 million in cash and cash equivalents and $213.6 million in short-term investments.

For the second quarter, the company expects revenue to be in the range of $31 million to $33 million, including $11 million to $12 million of GeoMx revenue and $20 million to $21 million of nCounter revenue including service revenue.

NanoString lowered its revenue guidance for 2022. It now expects revenues of $150 million to $160 million for the year, compared to prior guidance of $170 million to $180 million. For GeoMx, the company updated its full-year revenue guidance range to $60 million to $65 million, representing annual growth of 16 percent to 25 percent, compared to previous guidance of $73 million to $78 million. For nCounter, NanoString adjusted its full-year 2022 revenue guidance range to $90 million to $95 million, reflecting annual revenue that is flat over the prior year at the midpoint, down from prior guidance of $97 million to $102 million.

“We have put in motion a targeted set of actions that we expect to improve commercial execution over the next several quarters,” Gray assured investors. “NanoString’s market opportunity is compelling, and we're confident in our ability to capture it.”

In Wednesday morning trading on the Nasdaq, NanoString’s stock was down almost 2 percent to $14.80.