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Fluidigm Q2 Revenues Grow 7 Percent; Stock Tumbles on Microfluidics Weakness, Soft Guidance

NEW YORK – Fluidigm reported after the close of the market on Thursday that its second quarter revenues increased 7 percent year over year on continued strength in its mass cytometry product portfolio.

Despite the increased revenues, the market reacted negatively as Fluidigm missed top-line estimates and provided soft third quarter guidance on continued weakness in its microfluidics product sales. In Friday morning trading on the Nasdaq, Fluidigm's shares were down around 38 percent to $7.52.

For the three months ended June 30, 2019, Fluidigm reported $28.2 million in revenues compared to $26.4 million a year ago. Analysts, on average, had expected revenues of $30.6 million.

Instrument revenues spiked 17 percent year over year to $12.2 million from $10.4 million, while consumables revenues fell 4 percent to $11.0 million $11.4 million a year ago. Service revenue grew 6 percent to $5.0 million from $4.7 million.

Fluidigm said that mass cytometry revenues increased 28 percent to $17.5 million from $13.7 million in the year-ago period, due to higher sales of both instruments and consumables. Microfluidics revenues, though, dropped 16 percent year over year to $10.7 million from $12.8 million due to lower sales of both instruments and consumables.

Notably, Fluidigm's overall sales in the Americas declined 11 percent year over year to $11.1 million, while sales in the EMEA and Asia Pacific regions rose 40 percent and 21 percent, respectively. In a conference call to discuss the company's results, Fluidigm President and CEO Chris Linthwaite said that the company was "surprised and disappointed" by this performance as the company's management has been focusing its attention and energy in the Americas region.

"The key takeaway is that we do not see a structural problem, and microfluidics is the challenged area," Linthwaite said. "A few mass cytometry systems pushed out into the second half of the year, some linked to funding delays, but that funnel is on the whole very deep. Our microfluidics business was weak. But the drivers were not new."

In a note to investors, Piper Jaffray's Bill Quirk said that the investment bank "acknowledge[s] the continued strength and opportunity in mass cytometry (though it was below our estimate), but the microfluidics business continues to be a drag."

Fluidigm also provided soft third quarter guidance, noting that it expects revenues of $27 million to $30 million in Q3. On average, analysts are expecting Q3 revenues of $32.7 million. Noting that the guidance was "conservative," but recognizing the company's continued strength in mass cytometry, Piper Jaffray maintained its Overweight rating on Fluidigm's stock but adjusted its price target downward to $15 on slightly lower 2020 estimates.

Linthwaite noted during the earnings call that the company has recently seen strong uptake of new products and associated consumables in the Americas. "We believe our mass cytometry consumables sales are poised for acceleration, and we think the Americas will be a big second-half story, with a major step-up in Q4."

During the quarter Fluidigm launched a number of new mass cytometry products, including 25 new antibodies for imaging mass cytometry; three new imaging mass cytometry panel kits for immune-oncology research; CyTOF software to streamline the selection and acquisition of regions of interest from mass cytometry slides, and seven new metals for CyTOF-based cellular analysis.

In addition, the company launched two genomics assays, marketed through its microfluidics division: Advanta RNA Fusions and Solid Tumor NGS Library Prep assays. The company also said today that it will introduce an automated RNA sequencing library prep workflow for its Juno microfluidic system in the third quarter.

Regarding the forthcoming RNA-seq library prep product, Linthwaite noted during the call that market studies indicate that the overall RNA-seq market is greater than $1.2 billion and growing 15 percent annually. The company estimates that library prep in front of RNA-seq represents a $300 million market.

"The market is fragmented, and there are no competitors that combine an automated platform with reagents for an integrated solution," Linthwaite said. "Reagent costs and long hands-on time requirements consume four to five hours of a researcher's day. … Fluidigm's automated microfluidics solution can provide a significant cost advantage — perhaps as much as two to three times less expensive than other offerings, reducing cost per sample and unlocking the potential for more sequencing and therefore more throughput."

Fluidigm's Q2 net loss was $13.8 million, or $.20 per share, compared to $16.2 million, or $.42 per share, in the year-ago quarter. Fluidigm used approximately 69 million shares to calculate per-share loss in the recently completed quarter compared to about 39 million shares in Q2 2018. Adjusted loss per share was $.10, beating analysts' consensus estimate for a loss per share of $.21.

Fluidigm's Q2 R&D expenses rose 7 percent to $7.9 million from $7.4 million, while its SG&A expenses jumped 16 percent to $22.1 million from $19.0 million.

The company finished the quarter with $24.0 million in cash and cash equivalents and $44.8 million in short-term investments.