NanoString Technologies, Inc.
Q3 2016 Earnings Call Transcript

Published: 3 Nov 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the NanoString 2016 Third Quarter Financial Results Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I will not like to turn the call over to Doug Farrell, Vice President of Investor Relations. You may begin.

[Doug Farrell:]

Thank you, operator. Good afternoon, everyone. On the call with me today is Brad Gray, our President and CEO; and Jim Johnson, our CFO. Earlier today, we released our financial results for the third quarter ended September 30, 2016, and a copy of the press release can be found on our website at nanostring.com. During this call, we will make various statements that are forward-looking statements, including financial projections, existing and future collaborations, future business growth, trends and related factors, prospects for expanding and penetrating addressable markets, interactions with third-party payers, the timing and outcome of any related reimbursement decisions, our strategic focus and objectives, and the development, status, and anticipated success of recent and planned product offerings. Forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described in our SEC filings. Our results may differ materially from those projected on the call today and we undertake no obligation to update any forward-looking statements. So with that, let me turn the call over to Brad.

[Brad Gray:]

Thanks Doug. Good afternoon everyone and thank you for joining us today. In the third quarter, we continue to extend our leadership in precision oncology, delivering strong growth through excellent commercial execution while advancing our product pipeline and our partnerships. Out total revenue for the third quarter increased by more than 50% year-on-year driven by the unique value proposition offered by nCounter. We generated robust demand across all product categories and end-markets with product and service revenue growing by 38%. Instrument placements for the third quarter were nearly double those for the same quarter last year translating into 62% growth in instrument revenue and underscoring how effectively SPRINT has helped us reach new customers. At the end of Q3, our installed base had expanded to approximately 450 systems up about 40% year-on-year. We believe we are still less than 5% penetrated in our target markets providing plenty of opportunity for our installed base to continue to expand. During Q3 our installed base generated some consumable flow through that exceeded $100,000 per system on an annualized basis. Our Panel products continued to grow in popularity, with Panel revenue increasing by more than 45% year-on-year and accounting for approximately half of Life Science consumable sales. Demand was particularly strong from biopharma companies and their CRO’s accounting for 45% of Life Science consumable revenue growing 35% year-on-year and helping offset slower growth in consumable orders from academic customers. Commercial execution remains a focus and a key element of our strategy is to continue strengthening our team. As part of this effort, we recently added Kirk Malloy to our board of directors. Kirk is an industry veteran with more than 20 years of experience in life-science tools applied markets and molecular diagnostics. Most recently Kirk was Senior Vice President and General Manager of Life Sciences and Applied Markets at Illumina. Well for more than 13-years he guided commercial and operational teams through periods of tremendous growth. We welcome Kirk to the board and we’re excited to have the benefit of his perspective and insights as we scale our business. In addition to our commercial success, the scientific momentum of our technology is building. Since our last call, our customers have published peer-reviewed papers based on our nCounter platform, at a pace of about 10 per week bringing the cumulative total to more 1,350 papers. Recent publications are weighted heavily towards oncology and immunology. Two fields were nCounter’s high multiplexing and compatibility with small samples are distinct advantages. No, where are these advantages more important than in immuno-oncology or IO. Understanding how the immune system is responding to cancer is critical. Our central role in addressing the biomarker challenges of immuno-oncology would be highlighted later this week at the Annual Meeting of The Society for Immunotherapy of Cancer the SITC. Where we will present several scientific abstracts and will hold two workshops on the use of nCounter in IO. Now I would like turn to our strategic objectives for the year. Our first strategic objective is to better penetrate our commercial opportunities by building an installed base of nCounter SPRINT systems. In Q3, we sold more 20 SPRINT systems, which led to a record number of total instrument units sold in a single quarter. Consistent with our expectations SPRINT accounted for approximately half of the units sold in quarter. SPRINT’s compelling combination of high performance and affordability was proving especially popular with academic customers worldwide. We drove the vast majority of SPRINT purchases during Q3. SPRINT appealed to academic researchers that’s helping power our continued growth in this segment, despite the headwinds reported by some other companies. Since the SPRINT launch in mid-2015 we have sold more than 55 SPRINT instruments into a potential installed base that we estimate was up to 10,000 systems. During Q3 over 80% of SPRINT systems sold were to new customers who had no previous access to the nCounter platform. Now we expect SPRINT systems to continue to play a key role in reaching our expanded addressable market. Our second strategic objective for 2016 is to expand our suite of 3D Biology products. 3D Biology is our initiative to enable a simultaneous measurement of DNA, RNA and proteins from a single biological sample on a single instrument. This enables customers to abstract as much biological information as possible from the limited tissue samples, which is especially important in cancer. Additionally we expect 3D Biology to extend our competitive advantage over platforms that are constraints for more limited step of applications. At the Annual Meeting of The American Society of Human Genetics or ASHG held last month in Vancouver we introduced two new Vantage 3D Assays for profiling Solid Tumor FFPE samples. The 3D Biology workshop that we hosted as part of the launch – another great indication of the customer interest that we are generating. The new Vantage DNA Solid Tumor Panel is our first product to enable DNA mutation detection targeting 104 mutations and 25 genes that drive growth across multiple solid tumors. As described during ASHG by our collaborators from the Fred Hutchinson Cancer Research Center, this Panel can detect mutations from as little as 5 nanograms of DNA. The sensitivity to detect mutations that that were missed by X1 sequencing at 100X depth. These capabilities are complemented by our new Vantage Protein Solid Tumor Panels which profiles proteins and phospho-proteins in key ontogenetic development pathways. Together these Panels allow researchers to more efficiently co-relate genotype and phenotype and solid tumor samples which is critical to Biomarker discovery in drug development. While our Vantage Assay was not yet significant the 3D Biology capability of nCounter is already increasing the appeal of our technology and played a role in several customers purchasing instruments during Q3. We plan to continue to build out our portfolio of 3D Biology products and we expected this product line will become a more important growth driver for the time. Our third strategic objective for 2016 is to extend our leadership in the development and commercialization of the Molecular Diagnostics. This includes growing our Prosigna business and building a pipeline of companion diagnostic tests in collaborations with biopharma companies. I’ll start with Prosigna, during the quarter we achieved important U.S. reimbursement milestones including positive coverage decisions from EmblemHealth and several independent BlueCross BlueShield plans. We currently estimate U.S. coverage and more than 80% of indicative patients and our market access team continues to focus on winning over the remaining major private payers. In addition our collaborators continue to generate data to support reimbursements and adoption of Prosigna. And we expect at least 8 PAM50 studies to be presented at the San Antonio Breast Cancer Symposium or SABCS in December. Meanwhile we have expanded our Prosigna installed base, which is growing to approximately 65 clinical labs worldwide paving the way for increased adoption in 2017 and beyond. Turning now to our companion diagnostic efforts, during the past several months the healthcare industry has experienced some extraordinary events that elevate the strategic value of Biomarkers and companion diagnostics in the minds of biopharma executives and investors alike. Merck’s successful use of a Biomarker driven strategy to expand the use of KEYTRUDA in non-small cell lung cancer combined with the unexpected failure Bristol-Myers Squibb’s CheckMate-026 study have highlighted the importance of having the right Biomarker strategy particularly in the highly competitive field of immuno-oncology. These events have already heightened biopharma company interests in using our nCounter platform to help manage risks in clinical trials. We believe that we are well positioned to benefit from the increased focus on IO biomarkers, flow through sales of instruments and consumables to biopharma companies and through companion diagnostic partnerships like the one established with Merck earlier this year. Recall that in June, our colleagues at Merck presented data showing that nCounter based gene expression assays had strong analytical and clinical performance across multiple tumor types. And outperformed conventional PD-L1 IHC techniques in predicting response to KEYTRUDA in a head-to-head comparison. Our collaboration with Merck continues to proceed according to plan. And Merck is currently enrolling three registrational studies that incorporates the nCounter based Tumor Inflammation Signature. Importantly the terms of our collaboration with Merck provide the flexibility for us to partner with other biopharma companies. And these business dialogues have accelerated in recent months. Meanwhile our collaboration with Medivation and Astellas continues to progress well. With no disruption in progress expected from Pfizer’s acquisition of Medivation. As described on clinicaltrials.gov, The Phase 3 ENDEAR study of enzalutamide in patients with triple negative breast cancer is currently recruiting study participants who will be enrolled based on the results of our modified PAM50 Assays. The rapid and successful transfer of the gene signature algorithm from RNAC to the nCounter system, will be described in an abstract at the upcoming SABCS in December. In parallel our collaboration with Celgene in the field of lymphoma is progressing nicely as the Phase 3 ROBUST study continues to enroll, useful data on the impressive site to site reproducibility of our lymphoma subtyping assay to be presented at the American Society of Hematology meeting next month. Finally in addition to the steady progress that we've been making in our exiting biopharma partnerships we have continued to expand our pipeline of collaborative opportunities through pilot studies and that now includes 37 projects with 17 different biopharma companies. Our fourth strategic objective for the year is to expand our addressable market through new applications that leverage our optical barcoding technology. This includes our Hyb & Seq single-molecule sequencing program as well as our digital spatial profiling platform, which we previously referred to as digital IHC. At the ASHT conference in Vancouver last month, we presented an update on the development of our Hyb & Seq chemistry, which is designed to enable library free amplification free single-molecule sequencing. We were able to demonstrate a workflow that goes from FFPE tissue to initiation of the sequencing run in less than 60 minutes with only 15 minutes of hands on time. Hyb & Seq’s simple work flow creates the potential for a sequencing instrument with rapid sample to answer capabilities that are well suited for clinical applications where ease of use and speed are critical. Our next step is to demonstrate the sequencing of a cancer focused Panel by coupling the same sample prep-methodology unwinded at ASHG with an expanded barcode step on a prototype instrument. We’re very excited with the progress that we’ve made and we look forward to providing our next update at the Annual Advances in Genome Biology and Technology or AGBT meeting held next February. Meanwhile we've continued to generate compelling proof-of-concept data for our digital spatial profiling platform. Our goal of this program is to enable our customers to extract the maximum amount of Biomarker information from their tumor tissues, including insights on how the biology differs across the geography of the tumor. Earlier this year we’ve demonstrated the ability to spatially profile 30 or more proteins at once from a singled slice of FFPE tissue using highly multiplexed labelled IHC antibodies. Next week at the meetings of SITC and the Association for Molecular Pathology or AMP we will highlight a powerful new capability the spatial profiling of proteins and RNA expressions on the same system. This capability gives researchers the flexibility needed to interrogate RNA if suitable antibodies do not exist. A recognition of this added capability we are now referring this technology as digital spatial profiling. In addition we’re in the process of introducing our digital spatial profiling capability through a technology access program in which biopharma companies and leading academic will send us tumor samples for spatial profiling of proteins. We plan to incorporate insights gained through these experiments into our development of a new digital spatial profiling instrument, that will fit upstream from the nCounter System. We have recently begun to engage a limited number of customers ahead of the official launch of our technology access program and interest among biopharma companies is strong. Three Biopharma’s have already signed on and we expect the numbers to grow in the quarters ahead. Overall we are pleased with the important progress toward our strategic objectives in the quarter. And are confident that we have laid the ground work for continued growth. Now I’ll hand the call over to Jim, who will review our third quarter financials and guidance

[Jim Johnson:]

Thank you, Brad. Total revenue for the quarter was $23.9 million, up 53% versus the third quarter of 2015. Total product and service revenue was $19.2 million, 38% higher year-over-year. Foreign exchange rate fluctuations primarily related to the British pound reduced growth of product and service revenue by approximately 100 basis points. Instrument revenue was $6.9 million, 62% higher than in the third quarter of 2015. Instrument demand was strong across all geographic regions and was particularly strong in Europe. Total consumable pull through for the quarter was $11.5 million, up 27% year-over-year, and keeps us on track to meet our historical run rate of over $100,000 per system for the year. Life sciences consumable revenue, the largest component of consumable pull through, was $10.3 million, up 23% as compared to the third quarter of 2015. Prosigna IVD kit revenue, the other component of pull through, was $1.1 million for the quarter, up 73% year-over-year and roughly constant sequentially. Ex-U.S. markets continue to generate the majority of sales as recent U.S. reimbursement [indiscernible] have yet to impact Prosigna revenue. We recorded $4.8 million of collaboration revenue for the quarter, compared to $1.8 million in the third quarter of 2015. The increase resulted from our new collaborations with Merck and with Medivation and Astellas. Gross margin on product and service revenue for the quarter was 58%, up from 55% reported for the third quarter of last year. The improvement was driven by higher gross margin on consumable revenue, which resulted from efficiencies of scale and a favorable mix of consumable products sold during the quarter. In addition gross margin across all products benefited from the achievement of a revenue milestone that permanently reduced the loyalty rate on our license of the foundational nCounter patents. R&D expense was $8.7 million for the quarter, up 50% over the third quarter of the prior year. The increase was driven by costs supporting the advancement of our biopharma diagnostic collaborations, as well as increased investment in new technology and product development programs including 3D Biology, Hyb & Seq and digital spatial profiling. SG&A expense was up 30% year-over-year to $15.6 million for the quarter. And the increase largely reflects costs associated with added staffing to support the company’s growth, increased legal and other professional fees and higher state and local taxes related to amounts received under collaboration agreements. Stock based compensation expense was $2.2 million compared to $1.8 million for the third quarter 2015. Our net loss was $10.1 million or $0.51 per share compared to $9.5 million or $0.49 per share for the third quarter of last year. We ended the quarter with approximately $54 million of cash and investments and in the year to-date we’ve had positive operating cash flow. Our biopharma collaborations are having a substantial positive impact on cash flows and revenue. We continue to expect that the collaborations with Medivation and Astellas and Merck together will bring in $40 million to $45 million of cash for the full year 2016. As of September 30, we had accumulated approximately $40 million of deferred revenue from collaborations on our balance sheet. And we forecast that approximately $14 million of this deferred revenue will be recognized on our P&L as revenue over the next 12 months. Before considering the incremental benefit of ongoing R&D funding and potential future milestones. Additionally in October we strengthened our balance sheet by selling two blocks of common stock to our after-market facility for aggregate net proceeds of approximately $20 million. So we expect to end the year with more than $60 million of cash and investments on hand. Turning to 2016 financial guidance, we are reiterating our guidance for the year. Total revenue is expected to be in the range of $89 million to $93 million for the year, including approximately $18 million of collaboration revenue. Total product and service revenue is expected to be in the range of $71 million to $75 million including approximately $5 million of Prosigna revenue. Gross margin on product and service revenue is anticipated in the range of 54% to 55% and is trending towards the high end of the range. As a reminder collaboration revenue is excluded from this calculation. Operating expenses are expected to be in the range of $94 million to $99 million including approximately $8 million to $9 million of stock-based compensation expense. Operating loss is expected to be in the range of $37 million to $40 million. Interest and other expense is expected to be between $5 million to $5.5 million for the year. And net loss is anticipated to be $42 million to $45 million or $2.15 to $2.30 per share. So with that, I’ll turn it back over to Brad to wrap up.

[Brad Gray:]

Thanks Jim. In summary solid execution continued to build our momentum across the multiple dimensions of our business. Our diverse revenue streams and new product cycles are producing strong results that uncorrelated with any one particular end marker. The nCounter SPRINT Syterms is accelerating our pace of instrument sales, demonstrating our ability to a large under penetrated market. We believe our pipeline of products are potentially transformative promising to provide even more insights than our current offerings. Finally we have positioned the Company in the center of the immuno-oncology revolution with products and partnerships designed to help solve the relevant Biomarker challenges and maximize the potential of these new life savings therapies. I would now like to open the line for your questions.

[Operator:]

[Operator Instructions] Our first question comes from Doug Schenkel of Cowen & Company. Your line is open.

[Adam Wieschhaus:]

Thank you for taking the question. This is Adam on for Doug. I don't know if you mentioned in the call but I was wondering how much of the catch up from Q1 was there in Q3. Sounds like there was about $750,000 remaining to be caught up from Q1. So I was wondering how much of that was reflected in Q3 revenue. Thank you.

[Brad Gray:]

Sure. So as a reminder during the first quarter we experienced poorer than expected commercial execution, that caused about $1.5 million dollars in instrument business to slip beyond the first quarter. During the second quarter we estimate that we captured about half of that, or about $750,000 leaving another $750,000 to potentially capture during the remainder of the year. During the third quarter, we expect that we capture another 20% or so of that slip. Causing – suggesting that maybe a $300,000 benefit from that slip accrued to our instrument revenue during the third quarter. And I think what that shows you is instrument revenue growth was very robust even excluding the catch up that we continue to make for the Q1 slip.

[Adam Wieschhaus:]

Okay And maybe just a follow up on that do you expect to capture the remaining amount of that slip in Q4.

[Brad Gray:]

We do expect to continue to make up ground in Q4 capturing, what we probably estimate today is about 90% of the slip. There probably was one instrument that slipped that will not be captured this year. But we do expect to continue to make up ground in the fourth quarter.

[Adam Wieschhaus:]

Okay, if may – if I could just get in one more, you noted that academic customers drove strong SPRINT ordering in the quarter. I just want to make sure I heard it right, were orders strong from both U.S. and OUS academic customers or was it more concentrated to a particular geography. Thank you.

[Brad Gray:]

Yeah academic revenue for Nanostring was strong across the board. Geographically both U.S. and ex-US customers. I think Jim noted that instrument demand particularly in Europe was strong. So total academic revenue for Q3 was up about 30% for us. Instruments grew most of that. Instrument revenue in academic end-markets was up about 50% year-on-year. And we really do attribute that to SPRINT where I think the combination of power and affordability is resonating strongly and that's great because that is exactly the strategy for the development and launch of that product which is target the individual research or in the academic context. Consumables were a slightly different story. We had a good consumable quarter overall. But that was driven primarily by biopharma which grew about 35% which offset slower growth in the academic, which we estimated about 15% year-on-year growth. So that’s the story with academic context.

[Operator:]

Our next question comes from Steve Beuchaw of Morgan Stanley. Your line is open.

[Liza Garcia:]

Afternoon guys thanks taking a question. It's Liza on for Steve. I just was hoping that maybe when you were discussing the roll-off of the patent, if you could maybe provide some sizing around that and also clarify whether it applies to both consumables and instrument revenues.

[Jim Johnson:]

Sure, hello Liza. We basically the contract that we have with the inventors of our base nCounter technology had a provision that when we reached a certain threshold of revenues that the royalty rate would decline. We've never disclosed the actual royalty rates on that agreement. But suffice to say it is – does have a meaningful impact on our cost of goods. And that's cost of goods basically for any products that are made for nCounter, so it's instrument and consumables even Prosigna.

[Brad Gray:]

And just one point of clarification to build on that, I want to make it clear to everyone. These patents have not expired. We have not lost exclusivity or patent protection related to our core IP. This is just a pre-negotiated reduction in royalty rate that was achieved based our cumulative revenue to-date.

[Liza Garcia:]

Sorry about that, probably not the sharpest wording. If I could just ask one more, I guess just moving to Prosigna now that you guys have over 80% coverage in the U.S. Have you guys thought about kind of the sales strategy to kind of move doctors to your tests and how you're going to tackle that?

[Brad Gray:]

Thanks for the question, Liza. We’re we thinking about how to drive adoption of Prosigna and our technology in the U.S. and beyond. Let’s say I think Prosigna is tracking about where we expected it for the year. I think our guidance was $5 million for 2016, doubling over the $2.5 million we did last year. Year-to-date Prosigna has grown 92%, so we’re tracking pretty nicely towards our expectations. I think that what we have found is the first rate eliminating step is getting reimbursement and we've made a lot of progress there. We still have a few major payers to go, but we feel really good about the trajectory that we're on. Once you've got reimbursement, the challenge becomes shifting market share. And the fact is most physicians in the U.S. have been using a competitive product for nearly a decade and they’re largely satisfied with that product. And so, where we’re focused today is on finding the customers who truly value the localized testing option that Prosigna provides. And where we’re really finding adoption here in the U.S. so far is in places like integrated delivery networks, who value the fact that they're both doing localized testing and internalizing the cost of testing. And community oncology networks, who also value the ability to internalize testing, control the sample and also the economics that that comes with the product. And that's what we're seeing most of our market share gains here in the U.S. Yes, over time we hope that the larger commercial labs will embrace the opportunity to enter this market using Prosigna and competing a winning market share, but we've learned not to expect miracles from their commercial capabilities. And for that reason, we continue to really think about a steady linear growth in Prosigna over time. That's not to say Prosigna isn't already contributing and paying dividends well beyond its revenue in terms of the strategic impact of it, Prosigna has driven clinical installed base of 65 systems worldwide. And that was a meaningful contribution to our revenue and set the stage for new menus to be launched on those insurance. And of course it increased our credibility and our capabilities as a companion diagnostic partner to biopharmaceutical companies and in many ways that menu of forthcoming tests through those partnerships that are likely to drive our truly diagnostic revenue growth in the long-term.

[Liza Garcia:]

Great, thanks so much.

[Operator:]

Our next question comes from Dane Leone of BTIG. Your line is open.

[Dane Leone:]

Hi, thank you guys. Just for historical context before you started receiving coverage decisions or how the big coverage pushed over the last year for Prosigna. Just how many institutions were you actually in? I feel like you had said 45 in the past and just want to make sure that was right regarding the number of clinical labs with Prosigna capabilities?

[Brad Gray:]

Yeah. The number of clinical labs offering Prosigna has increased steadily over time, so it really depends on at what point in time you would be looking at. I think 65 is up maybe about five systems from where we were last quarter, if I remember correctly, and about fifty of our sixty five instruments are active and I think that’s also up about five systems over the 45, who are active in the quarter ago. It's hard for me to remember back to another point in time Dane, but I think the point is with reimbursement and with guidelines we are continuing to become more, more well understood and well known to our customers. We have continued to expand its installed base and I would expect to continue to do so both in the U.S. and abroad.

[Dane Leone:]

Okay. I guess looking at the collaboration landscape, how do you think about expansion, you touched on a little bit, how do you think about expansion and maybe deeper penetration with some of the institutions you’re currently working with? And I guess that specifically bring up the efforts over at Celgene to look at similar products to REVLIMID CC-122 specifically what’s called out is having a classifier and development for DLBCL. Is that something you're working with them on? And if not would that be something to contemplate in the future?

[Brad Gray:]

Yeah, obviously, Dane, we couldn't speak about any kind of confidential ongoing discussions or collaborative work that haven’t been announced yet, but suffice it to say we think that nCounter is really emerged as the gold standard for companion diagnostic development based on gene expression signatures. Really I think of our – expansion of our collaborations overall is really permitting on two axis. One is taking the existing diagnostic content that we already have meaning the Prosigna, the Lymphoma assay that we have developed with Celgene and now our tumor inflammation signature that we’ve developed with Merck and looking for new diagnostic partnerships built around that content. And I really think that being able to bring content to the table puts NanoString in a unique position compared to other platform companies, who generally speaking only bring technology to the table. And I am very optimistic about us continuing to form partnerships around those products. And then of course the other dimension is to take diagnostic content as that emerges from biopharma companies and poured it on to the nCounter platform. A lot of that work is actually already taking place on nCounter and very large number of biopharma companies, the 18 of the top 20 biopharma companies, who are doing their biomarker work on our system. Although it’s being poured de novo from RNA-Sequencing as we did demonstrated in the Medivation instance. So we think really regardless of how diagnostic content is being discovered, if it's a gene expression signature people are going to afford to go on to nCounter. And we look for the opportunity to work with Celgene or anybody else who have new gene expression content.

[Dane Leone:]

Okay, thank you very much.

[Operator:]

[Operator Instructions] Our next question comes from Catherine Ramsey of Robert W. Baird. Your line is open.

[Catherine Ramsey:]

Hey, guys, I appreciate the question. Can you talk a little bit about the dynamics behind the strengths in Europe and if you are hearing any concerns from researchers in the UK about future funding?

[Brad Gray:]

Yes, thanks to the question. I think we obviously think the Europe trend looks strong, especially from an instrument perspective, during the third quarter. So, overall, if there is a funding challenge that exists there, I think the affordability in the field of SPRINT is helping us power through just as it is as we mentioned earlier, overall in the academic markets. I have not yet heard any specific feedback from UK customers about their fears, but I mean – but I have read news reports of others that’s scrapping us. So, I think our overall exposure to the UK is actually very small as a company. So I would not expect a material impact on our growth rate from that. Jim did mention that from a FX standpoint, there’s about a 100 basis point impact in Q3 just from the moving currencies. But I don’t think that we’ve seen yet or expect any substantial change in demand from a unit perspective.

[Catherine Ramsey:]

Okay, great. That’s helpful. And could you talk a little bit about what you saw from China in the quarter?

[Brad Gray:]

Asia Pacific trends were robust and in line regionally with other parts of the world. Instrument demand was strong. And as we have mentioned in the past, the spread actually appeals very strongly in Asia Pacific region because it is a more affordable platform that probably has the capacity to meet the needs than many of the researchers there. So I wouldn't say there was a notable trend in either direction with respect to China. Other than you know maybe as a reminder China is an important market for us. It's the second largest installed base of nCounter systems outside the U.S.

[Catherine Ramsey:]

All right, great, thank you.

[Operator:]

There are no further questions. I would like to turn the call back to Brad Gray for closing remarks.

[Brad Gray:]

Well, thank you for your interest today. We look forward to seeing many of you at the upcoming AMP and SITC meetings next week and at our investor conferences later in the quarter. Thanks for your time.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.