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NanoString Customers Cautiously Optimistic About Future as Company Declares 'Not Going Away'


NEW YORK – When Xinkun Wang, director of the NUSeq Core facility at Northwestern University, first heard about NanoString Technologies' Chapter 11 bankruptcy in February, he was quite shocked.

"It seems to be pretty dramatic," said Wang, whose lab operates one NanoString NCounter instrument for gene expression analysis projects. "We know they have been competing with other platforms, but I didn't expect that they would go so far as filing for bankruptcy."

Like Wang, many NanoString customers were also somewhat taken aback by the company's announcement, with emotions ranging from surprise to sadness.

"I was a little bit surprised, honestly speaking," said Joe Yeong Poh Sheng, an immuno-pathologist at Singapore General Hospital and a group leader for the country's Institute of Molecular and Cell Biology. "It looks like the [company's] so-called collapse is very sudden."

As customers have had the chance to digest the news, many say they now understand NanoString's strategy and feel optimistic about its technology and future, while others expressed wariness about choosing the company's products going forward.

However, people seem to agree that recent positive developments — namely the European Unified Patent Court (UPC) Court of Appeal's decision to overturn the preliminary injunction against NanoString in Europe and the acquisition agreement with healthcare investment firm Patient Square Capital — have significantly boosted their confidence in the company's future.

Business as usual

NanoString's decision to file for Chapter 11 bankruptcy was not entirely out of thin air. By the time the company announced the restructuring on the eve of this year's Advances in Genome Biology and Technology (AGBT) annual meeting in early February, it had already suffered a string of legal losses to 10x Genomics in the US and abroad, leading to financial distress.

From the get-go, NanoString's message has been clear: that the costly lawsuits instigated by 10x were debilitating and that the restructuring along with the $47.5 million in loans it secured could revive the firm as it continues to serve its employees and customers.

"Chapter 11 restructuring is a protective action that offers us significant benefits to shield the company from threats created by our ongoing IP litigation and related debts," NanoString President and CEO Brad Gray then said in an open letter to customers shortly after the company announced the bankruptcy. "By entering restructuring, we protect our mission, employees, and customer access to our products."

That message was echoed by CSO Joseph Beechem, who promised a ballroom full of AGBT attendees that "NanoString is not going away."

"Everything is exactly the same. We bought ourselves [another] year and [will] get on with business," Beechem said. "I'm going to keep doing exactly what I've done. The [product] roadmap is exactly the same. … Nothing is going to change for our customers."

To some customers, the company's messages seem to be reassuring enough.

"Initially, you have the shock," said Arutha Kulasinghe, a researcher at the University of Queensland in Australia and the scientific director of the Queensland Spatial Biology Center, but the company's subsequent messaging "gave us the confidence that this was something that NanoString has done as a protective move."

Kulasinghe said his lab has not slowed down a bit using NanoString's platforms. "For us, when I came back to Australia, nothing has changed," he noted. "We are still full steam ahead."

Likewise, Nicholas West, a professor at Griffith University in Australia who helps lead the institute's Central Facility for Genomics, said he felt "surprised and a bit saddened" upon hearing the restructuring. However, the news "hasn't had too much of an impact" on his lab, he said, which currently operates three GeoMx, two CosMx, and one NCounter instruments.

Holger Heyn, a group leader of single-cell genomics at the Centro Nacional de Análisis Genómico (CNAG) in Spain, expressed similar sentiments. Despite initially feeling "really shocked" by the news, Heyn, who is a paid consultant to NanoString and serves on the firm's scientific advisory board, said his lab maintains faith in the company's technology and "keeps on going full steam."

Some researchers, however, are taking a more cautious approach.

"It is not like nothing has happened," said Wang, whose core lab performs about 20 projects every year on the NCounter platform. Even though his team still maintains the current service on the NCounter, which is not at the center of the patent battles, Wang said, "there is always a concern for the future" regarding customer support and product availability if NanoString goes out of business.

"If people are planning an NCounter project, but they may not be able to [start] in one year, we will let them know that 'Be prepared, you might want to think about another approach,'" he noted, adding that his lab, too, will be "very cautious" when considering NanoString's products.

"It's not going to be [that] I won't touch anything from NanoString. …They are still a decent company from all the interactions we have been having with them," Wang explained. "If we have a large investment, we cannot afford to make a bad decision."

A learning curve

As the clash between NanoString and 10x evolves, some researchers feel they are venturing into unfamiliar territory outside of their science expertise.

"I would say, absolutely, all of this litigation has been a learning curve for scientists," said Miranda Orr, a neuroscientist at Wake Forest University School of Medicine, whose lab uses NanoString platforms to help study chronic neurodegenerative diseases.

Like many other customers, Orr said she initially "had no idea" what NanoString's Chapter 11 filing was going to mean for the company, but eventually got a better handle on the situation after learning more about the ins and outs.

Even before the bankruptcy filing, she said, colleagues and collaborators were asking her questions regarding the lawsuits and whether she feels confident about continued use of NanoString's instruments.

"As a scientist using a commercially available platform, whether or not the technology would be around in the future is never anything I had ever even thought to consider," Orr said.

Now, as Orr and her team seek more funding for their research projects, there is also the uncertainty on whether grant reviewers will not fund projects using NanoString's platforms.

"I don't know what will happen," Orr said. "It definitely is a fear that people who are just reading headlines but are not really following what is going on will make snap judgments, so any grant using a NanoString technology clearly is not going to succeed because [the company] filed Chapter 11."

Gray told GenomeWeb that the company is "working hard to make sure that everyone in the scientific community understands that NanoString isn't going anywhere … whether that is someone who already owns our technology, someone who is considering buying our technology, or someone who is influencing the choice of platform by virtue of grant."

According to Gray, the company has seen a few order cancellations, though he declined to provide an exact number. Additionally, he said the company has seen some customers "hit pause" on their orders. "They are really just looking to see how the company is going to emerge from Chapter 11 restructuring and what the future looks like," he noted.

He also acknowledged the challenge that the word "bankruptcy" is not exactly music to people's ears.

"When [customers] hear the word bankruptcy, they imagine that a business is closing down, that it is no longer going to exist as a going concern, and that the assets are just being sold off — think about the chairs and the desks being sold, everything must go," Gray said. "In the US, that is called a Chapter 7 bankruptcy; that is not the type of bankruptcy that NanoString is in."

Nevertheless, he noted, any type of bankruptcy is difficult. "Obviously for our shareholders, in particular, it has been an awful experience — the share price has dropped to pennies, and our employees have to work hard and explain it to our customers."

That said, while Singapore General Hospital's Sheng believes that Chapter 11 is "actually a good thing" for NanoString, he also thinks the company could have done a better job interacting with its customers beyond just press releases and email blasts.

Despite being a longtime customer who operates a whole suite of the company's platforms, Sheng said no NanoString local representatives have reached out to him to explain the news, even though the company has a field office in Singapore.

Dedicated fan base

Still, NanoString seems to have fans who are ready to stick around for the long haul.

"There are a whole lot of things [NanoString offers] that cannot be replaced," Griffith University's West said, adding that his core lab has been collaborating with various sectors, and, so far, "no researcher or commercial group has asked the question of whether they should change."

"We're not going down another technology path right now because we think NanoString provides the best use case for what we are doing," the University of Queensland's Kulasinghe said. "If we need to pivot to another technology in 12 months or 24 months, we can always do that."

Meanwhile, Wake Forest's Orr said although she is not currently considering pivoting to other technologies, it is also not exactly easy to do so.

"Where I am at now has been a steady, consistent growth and investment in a technology that worked best for me to answer my questions," she said. "I'm not able to buy a whole other suite of these instruments [from another company] in my lab. … I don't have $1.5 million sitting around somewhere [to start] from scratch."

Because her lab has been more or less "all in" on NanoString's technologies at this point, Orr said the prospect that they might vanish from the market makes her feel uneasy.

"I am very frustrated at the how it is playing out, not in scientific labs but in court," she said. "As a scientist, I know that I bought an instrument from a commercially available vendor, and I have grants that are using that instrument to answer scientific questions. Now there is a threat that I might not be able to use that technology, and that's very troubling."

And it appears that 10x's legal moves has touched some researchers' nerves.

"What we have today, unfortunately, is a dominant player 10x bullying the market," Kulasinghe said, adding that innovation in the RNA space is ultimately stifled because competitors "don't have deep pockets to go to town with 10x."

"It's crippling to the field," West agreed. "This idea of putting people out of business, which has certainly been the fiasco, is sad because, at the end of the day, innovation drives progress."

Still, some customers showed signs of sympathy toward 10x when stepping into their shoes.

"You can't blame them to do that," Sheng said. "Honestly speaking, if I were 10x, I would do it, because it is a business."

However, Sheng also thinks10x's aggressive legal strategies have been "a little bit unreasonable" so far. "It is not like they are already an established company in the field, and then there are newcomers coming in and they are going to sue them," he explained. "I would say 10x, at least in this field, compared to NanoString is actually a late comer."

Northwestern's Wang also thinks 10x's legal moves are "understandable."

"If you run a business, you want to get all your competitors out of the marketplace," he noted. "If there is a demand, I'm not worried that 10x is going to stifle the entire field; something is going to come out sooner or later."

10x is aware of its potential image problem.

"[I]t has been so painful to watch the integrity of our mission and our company called into question," 10x CEO Serge Saxonov and CSO Ben Hindson wrote in an open letter earlier this week.

"The narrative portraying 10x as impeding scientific progress could not be further from the truth," they said. "We are not here to stifle innovation; we are here to fuel it. We're here to accelerate scientific discovery."

At the end of the day, Chapter 11 also does not magically erase NanoString's lawsuits with 10x.

"Immediately upon entering Chapter 11, all litigation against the company is immediately stayed or put on a formal pause in the courts," Gray explained. "The lawsuit does not go away; it doesn't mean that those court cases won't eventually resume, but for a period they are on pause."

Nonetheless, the recent German patent ruling and acquisition news has boosted management's and customers' confidence in the company's future.

"If the lower courts in Germany and the UPC had arrived at the same decisions as the appeals courts ultimately did, we may not have needed to pursue Chapter 11 … but that's water under the bridge," Gray said.

He added that the company has already received new orders in the first week from the impacted region after the European preliminary injunction was lifted, giving him "great confidence" about the outlook.

"For us and for everyone, that biggest problem over the last year was there was so much uncertainty," Heyn from CNAG said. The ruling "gives us much more security betting on [NanoString's] platform."

Commenting on the acquisition agreement with Patient Square Capital, Wang said the news made him "feel more assured of the company's future, despite the setback caused by the bankruptcy filing."

"I am glad that our NanoString instrument will have a good chance to be supported into the future," he said.