Quanterix Corporation
Q4 2018 Earnings Call Transcript

Published: 8 Mar 2019

[Operator:]

Good day, ladies and gentlemen, and welcome to the Quanterix Corporation Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Mr. Joe Driscoll, Chief Financial Officer. Please go ahead.

[Joe Driscoll:]

Good afternoon. Before we begin, I would like to remind you that today's call will contain forward-looking statements that are based on management's beliefs and assumptions and on information available as of the date of this call. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The risks and uncertainties that we face are described in our most recent filings with the Securities and Exchange Commission. This call will also include certain financial measures that were not prepared in accordance with US GAAP. The information required by the SEC pursuant to Regulation G including reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our earnings release issued previously today which is on our website. With that, I will turn the call over to Kevin Hrusovsky, our CEO, President and Chairman.

[Kevin Hrusovsky:]

Thanks, Joe, really appreciate. We really feel good about the fourth quarter of 2018 and also the overall progress made throughout the year. In the same framework that we've used in the past, I'm going to go through a series of slides that are online and on our website. I'm going to start with the agenda where I'm going to talk through the Q4 results and the 2018 highlights, but also going to lay out the 2019 goals and priorities. And then finally, we've made so much progress in the last few months in the area of neurology and the momentum is just continuing to build. I would like to take a few moments to give you some updates that I think are fairly material. Joe will then provide some commentary around the financial reports and then we will go into Q&A. So starting with a slide that basically says, we've defined a technology that's got exquisite sensitivity on measuring protein biomarkers and blood and that sensitivity is approximately 1000 fold greater than the traditional ELISA technology that already was more sensitive than many other technologies. We've been around really since around 2013 with the technology being launched. And you can see that back about four years ago, we decided to go after research first where there's no regulatory reimbursement risk. And we really went from no revenue to 38 million this past year. So that's a very rapid ramp. And about 40% of that is consumables, which is also a very high level of visibility with those types of businesses, which is -- also generates most of our margins as well. So we're pretty excited about just the ramp that we're having at the consumables of this business, but longer term, we are going to go back into diagnostics. And we do believe that the opportunity in diagnostics is about 10 times the size of research. So we wanted to get the order, right and we wanted to minimize risks for investors. And so we think we've stepped up -- we're stepping through that as planned. We felt our execution was absolutely superb in ‘18. We actually started the year by acquiring Aushon for immaterial levels of money. I think we paid 4 million for a technology that probably had over 30 million of investment had gone into it. And then in September, we actually regained all of the bioMérieux exclusive rights that we had licensed to them. We were able to get those back into our company. This was a fairly significant moment for us that immediately caused our attention towards attracting some of the best talents that next to me is Jackson Streeter who's a neurosurgeon who was actually CEO of Banyan for many years and he got the first two biomarkers and blood for concussions approved by the FDA back in April. I think it was an accelerated approval, only took four months. So we're really excited, he left there to join us as well as we got Mary Ellen Cortizas who actually ran a lot of the LDP labs coming out children's hospitals. And so we're continuing to bring in some of the top talent in the landscape of what we're going to be doing with our biomarkers. We also 2018 had two FDA meetings, where we actually presented on the neuro-filament light biomarker, which has really become over 10% of our revenue when you consider not just the sales of the NFL assay, but also the services that we're providing for NFL. It's a way to look in blood for neuro-degeneration and looking at when the neurons break down across almost every disease state as well as physical injury like from concussions, so pretty excited. Could this become the cholesterol of the brain as an example, we're pretty excited that this has shown a lot of promise and the FDA was [indiscernible]. And then we did launch another product in 2018, which is part of why for the first time we're seeing significant instrument growth. It's been three years, we were pretty flat. In the second half of this past year, we've had really strong instrument growth. And we also are launching in the second quarter a product for cancer called SP-X. And we had a really awesome participation in the Powering Precision Health Summit over in Amsterdam in December. So on the right hand side, you can see the growth has been continuing to step up. And we -- this is the fourth quarter really of us being a public company of reporting. And the first quarter we reported was flat. Then, we went up 41% in Q1, 66% in Q2, 61% if you eliminate the one time and then this quarter Q4, we’re showing 65% growth. And we really want to thank the investors who have played a pretty big role through and helping us position our technologies of pharmas and biotechs, that they also own and benefit from our technologies and helping get drugs approved. So it's a pretty important piece of our overall evolution. The next slide breaks down the growth that we had, and looks at first Q4 and you can see that we had 100% growth in our instruments. This is really the result of the SR-X launch and a lot of the work that we've been doing towards bringing instruments to bear that are much more user friendly and democratizing this overall -- and scaling this overall technology out into the marketplace. Obviously, we're not going to continue seeing that. That's the surge of new products. And at first half of the new product launch, which really was the second half of 2018. So we did have also nice margin movement. We ended up with 4 gross margin points of improvement, 400 basis points of improvement, which if you remove the one time, it was probably a little over 2.5 or 250 basis points, but still very nice movement, a lot of it through the mix and improving the consumable portion. And then when you look at the full year, 60% growth, you can see that once again, when you average the growth in instruments, we still end up, for the full year of having 45% growth and you can see that our consumables were at 83% and the utility across the instruments is also pretty attractive. We were able to get to 40% of our list price and consumption per instrument, which is a pretty high hurdle that we were able to achieve. And it takes us normally six months, we believe to get to a third of the revenue, but we are -- we actually outpaced that and a lot of it's because there's so much attraction to seeing biomarkers in blood and that's a key for our future growth as well as having that strong installed base. The next slide is what we've laid out as being our strategic roadmap. Slide 6, where we really work on publications being the leading indicator when third parties peer-review based on some study, it can have a profound effect on researchers around the world then, reading that study and then wanting to get the technology or applying the technology. And you can see that there's a really rapid ramp of up to 409 third-party peer reviewed publications now, most of those or half of those are in action in neurology. And then that leads to the number of biomarkers and blood in the menu expansion. And we're now up to 259 markers, have been run in our technology. And you can see the accelerators were our services business. We continue to grow that and do a lot of studies for customers. And we now have run 45 drug trials, phase 1, phase 2, phase 3 in our labs, which when we acquired Aushon, it gave us a clear lab and that's allowed us to further expand our capability. And then you can see the instrument installed base continuing to rise pretty quickly and you can see the overall growth that we talked about. And then on the right hand side, you can see the consumables, which has been a very steady growth and we're pretty excited the way that has been growing and really above 50% growth. Next slide just shows our overall demographics of the company right now, we're still running about 60% United States and we're just beginning to move into Asia, while distributors at this point, we see that being a stronger part of our growth in 2019. And most of our customers still are pharma, biotech, but we're getting a little bit better balance now of academia. We think 50-50 is where we'll probably end up as time goes on. And you can also see that our growth over neurology and oncology, which is our primary focus, because that's where you see disease, the latest stage, we just heard about Alex Trebek getting pancreatic cancer, stage 4. It's very hard when you get some of these cancers early. And so, it's already talked about blood testing for pancreatic cancer, et cetera. But the key here is when you can see disease earlier, it really can have a big effect in oncology and neurology. And we're starting out in neurology. The next slide 8 was what we walked into 2018 with was all the strategic priorities that we laid out and the goals and then everyone of the categories, financials, commercial, strategy and new products, we were able to overachieve. So we actually feel very confident that we were able to lay the foundation for 2019 and beyond by overachieving and getting the FDA rights back, the IBD rights was a major achievement that really took four years and we're still very friendly with bioMérieux and they still utilize the technology. It’s just that they're more infectious disease versus the oncology and the neurology that is the focus of our technology. Slide 9 lays out and you may have seen this in the JP Morgan presentation and the Leerink last week, lays out our goals for 2019 and we're going to continue growing the franchise and neurology where we still believe we’re less than 10% penetrated. We're going to continue increasing the menu in the second half of this year. We're going to roll out an advancement to the HD1, which we're going to -- we call the HD-X, we're expecting in Q4, we will see that launch as a way to migrate customers to some new features that will allow a little bit greater sensitivity, temperature control as well as what we consider better beat loading. And that enables better efficiencies of the technology. We're going to continue scaling the company around the world, putting a lot into IT. And facilities, we’re moving into a new facility in the middle of May. And our headcount, half of will go to commercial where we continue to grow very rapidly. The second major categories oncology and that's that SP-X comes right out of the Aushon acquisition allows us to multiplex and move into cancer, which we think is three times the size in neurology. So we’ve just done that and we hope that by the end of the second quarter that will all be launched and will be off and running. And then the third category is entering diagnostics. We want to continue these drug trials and we expect that we’ll have at least 50 trials this coming year in neuro and oncology and we want to land an LDT relationship. All of the major reference labs right now are working with this. They all have our instruments and they would like to migrate from just CRO services, contract research for pharma into actual LDT testing. And many of the neuro drugs that are being approved are looking at disease progression markers like neuro-filament light as a way to monitor whether the drug is having a desired effect. And ultimately, for Alzheimer's, we like to have a blood test that could actually move patients into the Alzheimer drug and that's a new field of opportunity that we'll talk about in the moment. And then in financials, we've kind of gone through those already. But across the board, we feel that we want to continue evolving our gross margins and maintain our utilization and we do believe the 40% growth, which we've talked about, stays intact. We feel -- still feel good that we should be able to get to that 40% in 2019. We also -- we aren't guiding but that's our overall goal that we're shooting towards. The next slide 10 just shows the disruption that we've laid out in what we call the third generation amino assay digital technology. But we did announce at the beginning of this year that we're going to go for another 100x in sensitivity. And this is important because as customers use our technology and the cerebral spinal fluid, they're learning that there are sub protein groups called protein translational modifications that are about one, I'd say, 50 of -- the concentration of the larger total protein level and they're able to see it in the cerebral spinal fluid with our technology and they're asking now, can we get to see those in blood, those protein translations, and we think that by going 100x, we're going to open up a whole new frontier of science by enabling that, not just for neurology, but also oncology. The next slide just shows a competitive roadmap. We continue to focus on improving the multiplexing our menu and lowering our costs and we feel like we've really honed in on two different platforms that's enabling us to be superior across what we will call the direct competition. But we also know we have competition coming to us from many different facets, particularly as we evolve the business into the imaging could become some somewhat competitive with us. But these are markets that we're moving into that makes those competitors that we're trying to disrupt. You can see in slide, the next slide 12, the whole point of our basis here is today, it's very invasive to see cancer and neurological disorders, either spinal tap or a biopsy and it's pretty late in the disease. And so what we're really about is non-invasively, through blood, through saliva, being able to see much earlier the disease and allow it to be then treated much more productively with drugs. And if you can see these diseases very early with our biomarkers, it gives the drug companies a better chance of actually treating the disease, because it's earlier stage and they can do it with less dosing, which makes those drugs safer. And we know that the safety and toxicity of drugs is still one of the biggest issues in the industry. The next slide just gives you an understanding of how this neurological pathway has occurred. It all started with the NIH basically looking at post-traumatic stress disorders in soldiers and seeing concussions in blood. That led to us winning the NFL General Electric health challenge twice. At the same time, the movie concussions was coming out, we got put on Good Morning America. And we talked the world that we could see these biomarkers in blood for neurology and that led then to a myriad of publications, third-party trials by neurologists around the world and all of these different disease categories, Alzheimer's, TBI, concussion, multiple sclerosis, and now we're seeing a lot of work in Parkinson's. The next slide just shows how rapidly that has ramped up and you might have seen recently about three weeks ago where -- there was a major CNN interview where one of our scientists, not of ours, but one of our collaborators from Europe, a neurologist, was able to look at familial Alzheimer patients where they can predict when symptoms of dementia are going to hit. And they were able to see elevations of NFL 16 years before the dementia. And that got a lot of excitement in many of the neurological journals around the world because if you can see Alzheimer’s that early and know that the disease cascade has started and you have a biomarker that can look at disease progression, it's a way to help the drug industry to change into a much more objective model ways to get drugs approved and we're pretty excited about that future opportunity. So the next slide just says, if you look at how our business has benefited from all these publications, you can see the pubs have got -- having a compound annual growth rate of 139% and that's led to our biomarkers growing to 67% and then our instruments growing at 67% and as you know, we've had triple digit growth in many of the quarters for neurology for our consumables, which is basically like the K cup going across the current coffee maker and we have 80 different K cups, different proteins that we're looking at across primarily oncology and neurology. The next slide shows that the number of NFL publications itself have really skyrocketed, have somewhat gone [indiscernible]. We've seen a major exponential growth and that has enabled some pretty big breakthroughs, particularly in MS where we actually estimate right now that there's 62 drug trials underway for multiple sclerosis and there's already $22 billion worth of approved drugs in the marketplace, attempting to help multiple sclerosis patients from staying out of a wheelchair, by slowing down the disease progression and they typically look today at MRI as somewhat of a late stage endpoint to look at MS progression that could take 2 to 2.5 years to see brain atrophy from the MS disease progression on the body. And there was a belief in a lot of these publications, you can see neuro-filament light in blood much earlier being an indicator of disease progression. And that's why it's now being used, we estimate, in 10 different drug trials looking for to be a surrogate endpoint. That led us to run a trial this past year where we went across 17 different sites that have our technology around the world. And we ran a study and then on slide 19, you can see that the NFL ended up being perfect and the CVs were less than 10%. That's the coefficient of variance. This is a very important analytical achievement on our technology for its repeatability. And it was really well done across all of our collaborators. And we're real excited. That's a key step in scaling this technology. And the next slide basically not only describes the fact that we've done really well with the NFL, particularly for multiple sclerosis, but you can start to see that there are publications coming for Alzheimer's and TBI and ALS and Parkinson's. And those diseases are actually a lot bigger, particularly Alzheimer's is a lot bigger than MS. And so the next slide is our attempt to say someday, we're hopeful that there'll be a blood test that could play a role that will allow you to see Alzheimer’s very early and then maybe move you into imaging where today there's actually beta amyloid PET scan already as an approved diagnostic for Alzheimer's. And they've now approved a cerebral spinal fluid test for Alzheimer's, looking at beta amyloid and we have evidence and I'm going to show you in a subsequent slide that we can already see amyloid, the beta amyloids with very high levels of repeatability and accuracy. And we think that this is a game changing opportunity that we're going to be working with most of the bio-pharmas that have interest in Alzheimer pipelines to try to help use it to further advance our technology. This next slide just goes through three of the big publications in the area of Alzheimer's and the progress we're making. We already mentioned the CNN, but there's also been this really nice publication on beta amyloid, measuring Aβ42 and Aβ40, two of our markers that that we measure in our Simoa and that's where we got an area under the curve of 95% and that's without optimizing it. So we're really excited that this could be the beginnings of CNN blood a much less invasive way than the cerebral spinal fluid, spinal tap, the beginnings of Alzheimer's. And this next slide is just the actual publication that showed the Alzheimer's 16 years before symptoms and the slide after that is the actual data on the area under the curve. So I'm going to close by just showing this last slide, which if you go to our website, we've got several links that you can click on and then see videos of the recent Powering Precision Health Summit, where many of the researchers from around the world are interviewed and they describes how neuro-filament light, NFL is going to transform many of this scientific landscape for seeing brain health in blood. And we also had recent interviews on ABC and Bloomberg Radio that you can click on and see as well. So that's all in our deck that just give you more evidence of the progress we're making. And I'd like to do now is turn over to Joe for a financial report.

[Joe Driscoll:]

Thanks, Kevin. I'm going to provide some additional financial details now. As Kevin noted, revenue in Q4 of 2018 was 10.9 million, compared to 6.6 million in Q4 2017, which represents 65% revenue growth. There was no collaboration revenue in Q4 ‘18. Year to date, total revenues are 37.6 million, a 65% increase over the 22.9 million for fiscal 2017. Adjusting for a one time revenue item in Q3 related to the termination of the BM-X agreement, year to date growth was 60%. Gross margin percentage in Q4 was very strong at 48.2%. Prior year Q4 was 43.7%. The 450 basis point increase over prior year was due to a positive mix of consumables revenue, which had 67% growth in Q4 plus the leverage we are generating by the total company's revenue growth. For full year 2018, gross margin percentage was 47.8% versus prior year 43.7%. Excluding the impact of the one-time item in Q3, adjusted gross margin was 46.3% for full year 2018. We believe we have a significant opportunity for gross margin expansion in the future, as we scale our overall business, reduce product costs and continue to drive the mix to more consumables revenue. Operating expenses totaled 14.2 million in Q4 2018, versus 10 million in Q4 2017. We are attempting to accelerate the growth trajectory of the business by making significant investments in the commercial team and the infrastructure required to support our growth. The main drivers of the Q4 2018 increase include increased headcount in sales and marketing plus external strategic marketing investments. 2018 hires of new senior management personnel, payroll and other costs related to the Aushon transaction, non-cash rent expense related to our new headquarters and public company costs, also stock comp expense which is a non-cash expense, was 1.4 million in Q4 2018 versus 800,000 in Q4 2017 due to new grants made in 2018. We will look to continue to add to our commercial organization and other key areas of the business in 2019, including resources to support the development of a diagnostic strategy. Therefore, on a quarterly basis, we expect operating expenses to increase from the current baseline level of 14.2 million. The balance sheet is in good shape as of 12/31/18 with approximately 45 million in cash. This gives us the financial resources to accelerate the growth in the business as well as look at potential acquisitions and the diagnostics development. There were 22.4 million common shares outstanding as of year-end. For 2019 earnings per share, we expect weighted average shares outstanding to be in the range of 23 million. I will now turn it back over to Kevin.

[Kevin Hrusovsky:]

Thanks very much, Joe. Basically, we have a market that we are using some major disruption to get to find and that market we think is somewhat category defining with our unrivaled sensitivity. And so the pace of us continuing to advance our sensitivity we think is important now that we see a real market for additional sensitivity and we are best in class and we want to keep investing to stay best in class on the sensitivity front. We also have had a methodical way of going at this market, starting with research and then evolving into diagnostics as a secondary opportunity, which is where the size of the market opportunity we think could be significantly larger in diagnostics versus research, but it's a little bit riskier, and so we're being much more careful in the way we enter it. Once you find the market which we've done, it's been about the execution. I think that's what is -- has a lot of investors interested in us is that we've got a very disruptive aspirational opportunity for significant value creation, some serious promises coming out via the publications, but we're still executing in the research sector flawlessly so far. And that's our key is to continue to drive the install base, with the consumables going across it. And when we do that, it's actually creating publications and those publications then further fuel the longer term diagnostic opportunity. And so you can see, we've got a built in engine that we're trying to utilize research to actually further enhance our opportunities in diagnostics. And so it starts with validation. And we now have 19 of the top 20 pharmaceuticals using our technology. It's one of the fastest adoption cycles and I've been running these businesses for 25 years in life sciences. This is the fastest I've seen of the adoption cycle. We also have 800 actual drug trials have been completed already, utilizing a similar technology, again, further validation of the possibilities of using biomarkers. And there's a lot of guidance now from the FDA on using biomarkers for the purposes of getting drugs approved more efficiently with less toxicity. And then finally, the publications. Those are third-party peer-reviewed, they get critiqued before that science is allowed to be published. This is a key validation point that we really feel is imperative when you're disrupting is to have third-parties validated. And that publication pace has almost increased to a couple of weeks now of new publications. So we consider the validation to be the crossover point between an exciting market in the execution and on the execution, the fact that we have a lot of consumable, gives us a lot more visibility into this with a lot of utility going across the installed base and for the first time, we actually may have a growth catalyst of instrument growth. We've been doing all of this significant growth over the last three years with really instruments being flat. And now, we've got it somewhat of an inflection point where our newer investments around new instruments has created some instrument growth, which we think is another risk mitigating positive for our execution. And then finally, the track record of the team that we've assembled and the people that we continue to bring into our company, we’re able now to attract some of the best in the landscape and we are -- we know this is all about people. We got some of the best people in the industry in our company and they're very motivated. They're very much mission based around Alzheimer's, around neurodegenerative diseases, concussions, Parkinson's, MS, as well as cancer. And so we really have a shot of disrupting medicine. So that's key to us is attracting the best people. So with that, we're going to turn it now -- open it up for questions around our Q4 and our 2018 performance as well as 2019 outlook.

[Operator:]

[Operator Instructions] Our first question is from the line of Sung Ji Nam with BTIG.

[Sung Ji Nam:]

Congratulations on the quarter and for the year as well. I was wondering for the SP-X, sorry if I don't know this, but is it fully automated and or does -- is it like an SR-X where it will require sample test module as well. Just trying to get a sense of that and also if you might be able to comment on the list price for that as well as what's the potential consumable flowthrough, whether that could be closer to the SR-X model?

[Kevin Hrusovsky:]

Yeah, great question, Sung Ji. And basically, let me start with the consumable side of this. We expect that we're going to maintain this one-third and 75,000 is roughly the list price that we're targeting here. And roughly one third of that is what we feel we are going to be able to drive. The first part of the question was on automation and on automation, there's two things that we've been describing for the marketplace. When we say automation, we actually mean that the SR-X is automated because you can do most of the steps. But then we have this thing called integrated automation, which was what you were asking. And that's when sample prep like on the HD-1 is also integrated. The SP-X is just like the SR-X. It's automated, but not integrated automation. So we have what we would call the different steps for preparing a sample automated, but it's not integrated into this instrument. So for the moment, it's automated, but not integrated automation. And we actually have found a lot of customers that actually prefer not having the integrated automation because they have a lot of sample prep technologies already installed like the T cans [ph] and the Hamiltons and they want to utilize that installed base technology. So we think it's actually good to start this way. Someday though, we could end up with a fully integrated automation for the SP-X, particularly for utilizing it in the area of diagnostics where many times you want that complete, will call bleed the read, the blood sample going in and the actual results coming out.

[Sung Ji Nam:]

Great, thank you. That's very helpful. And then for the HD-X platform, which you're targeting launch later this year, was curious to what level of capability that will have and also we're starting to look at kind of I -- I'm not sure if I'm looking at this correctly, but some sort of a product line bifurcation here potentially with the ST-X and also with the SP-X, was curious as to what the product positioning might be or if that’s not how we should think about that?

[Kevin Hrusovsky:]

Yeah. So, HD-X has a couple of dimensions to it. First, I would say, we're looking at more like a Q4. But before the end of the year, we'd like to get this thing launched and we've got a lot of prototyping going on right now and testing going on and it's looking really encouraging. And anyone who buys an HD-1 in the first half or third quarter of this year, we're going to really provide them some incentives. So we don't want to, in any way, impair our HD-1 sales. We want to make sure that customers can get in right away with the HD-1s, which by the way, we've made major advances on that technology over the last 24 months as well. But the HD-X in general, we believe is going to provide temperature control, which today when people run the HD-1, we tell them to manage their laboratory to a certain temperature. So they got to really condition the error in the laboratory where this will be self contained conditioning, so that you can actually run with a lot more precision without having to condition the actual total laboratory. We also will increase with magnetic, the bead loading, which will provide the ability for getting better economics as well as a little bit better sensitivity and we think that those things will be pretty important advances on the HD-X and we also feel that the HD-X is going to be the workhorse with the HD-1s for many years to come. So we think it's -- there's a lot of interest in fully automated technology and so we will continue to evolve this technology with those investments and it will do 6 plex. We do have also on the HD-1, I'm sorry the SR-X, we were able to get to, I think, one assay on xix plex, but it's primarily four plex and less. And the HD-X, we’re feeling pretty good that it's going to be very similar to the SR-X, it'll be at least four plex, we will have some six plex essays, but in general, if you go to 10 plex and above, we’re thinking that the SP-X technology is going to be better suited and cancer research has a -- really needs particularly for cytokines where we're honing in on the immunotherapies and helping make sure those immunotherapies get greater response rates to help cancer patients because the immuno therapies have been very productive, but they only work 10% to 15% of time. The 85% to 90% time, they don't work. A problem is that about 10% time, they actually become very lethal and they can actually kill the patient. So it's not just that they don't work 85% to 90% of time, it's just that they also can be very lethal and our whole platform and looking at cytokines, we're launching a 10 plex, which is looking at the immune system, some of the top cytokines in the immune system is in our templates10 plex and you can see with our exquisite sensitivity, any movements from baseline of those cytokines. And that's a capability that we think is somewhat disruptive in that landscape. And so the SP-X will be primarily utilized for those 10 plexes and above, and that's why it's better suited for oncology.

[Sung Ji Nam:]

And then just lastly, maybe one for Kevin in terms of your gross margin targets for next year, was curious as to how much of that do you expect to come from the product mix to a volume versus manufacturing efficiencies and other production – reduction in production costs. Thank you.

[Kevin Hrusovsky:]

Yeah. And Joe might want to comment after me, but it seems that we've got the potential here for both of those -- the mix because of consumables as well as the overall build out of just leveraging our fixed costs, particularly in consumables where we have a real -- we produce them ourselves in our facilities, and we have a lot of leverage there. So I think we got an opportunity for both of those categories to be productive. I think we said 300 basis points. Joe, I don't know what you would say.

[Joe Driscoll:]

Yeah. I'd say it'd be about half and half. That would be the genesis of the increase.

[Operator:]

Thank you. Our next question is from Tycho Peterson with JP Morgan.

[Unidentified Analyst:]

This is Julia on for Tycho today. So first off on instrument, you're expecting 25% growth this year. Just wondering how much of SP-X contribution is embedded in there and to the extent possible, could you give any color on sort of the preliminary order funnel, if you will, or customer interest in the pipeline?

[Kevin Hrusovsky:]

Yeah. So we don't guide at a granular level instrument growth rates and we don't even guide at a macro level our overall revenue. We have said over the last 24 months, though, that we think we can maintain a 40% growth overall, that's not guidance and it’s aspirationally what we feel we can still achieve with this disruption that we're managing. We haven't again provided any granularity to how instruments might play out inside of that. We have seen a major upturn in instrument growth in the second half of 2018, however, which does bode well for helping us pull through consumables and it also is a great leading indicator that the products that we're designing and launching are getting good adoption and interest by our customers to see that kind of pickup. We would believe that SP-X, last year when we launched the SR-X, we felt we could get 40 units out there throughout the year and I think we ended up beating that for about 50% last year, getting I think more like maybe roughly a 50% uplift on what we originally set out to. I think that we're starting out, launching this a little bit later in the year, but I'd be happy if we could get 10 instruments a quarter type of SP-X volume starting in the second half of the year, maybe for sure in fourth quarter. But again, it's – you just never know when you launch new products, how long it takes. That's why we think it would only potentially trip people up if we guided at this point.

[Unidentified Analyst:]

And then in terms of the mix of capital sale versus reagent rental, just curious if there has been any sort of changing attempt there or do you expect to see any change in the mix going forward?

[Kevin Hrusovsky:]

Well, it is interesting. We've had a lot of investors as well as analysts say, geez, whatever you do stay away from the reagent rental. It just complicates everyone's worlds. And interestingly, so far, we haven't had the user reagent rental at all. We're hopeful that we can kind of continue to sell our instruments and make gross margin on them, while then later on also selling the consumables across it. That's our goal. And that's -- we've had a good track record over the last 15 years of -- in our management team and we have 65 people kind of in the company from the previous companies that are pretty experienced at doing that. So our hope would be that we can continue doing it. I would say interestingly though, that the economics for the SP-X are somewhat off the charts compared to anything I've seen in a while. It's a much lower cost instrument than what most of the bead based technologies are. So we're able to get to a much lower COGS on that SP-X and so if you ever, we're going to have a reagent rental opportunity, you probably, I think I would probably know of some competitors and that would aggressively start to use the reagent rental to expand penetration very rapidly, but then they could get themselves caught later on in that and so we're going to try to get good momentum without using in a significant way the reagent rental and hopeful that that's going to deliver and we have some couple of test beds by the way, we're actually seeing consumption levels as much as five to six times the COGS annually on the SP-X test beds. So when people get going on this type of test bed technology, we can actually see really interesting economics and again the gross margins there, we believe are more at the 80% level. So it starts to redefine the possibilities of taking our disruption into new economic models. We've been able to be very successful thus far with our technologies and delivering this kind of growth, even though our prices are probably at a higher than, let's say, a Luminex or an MSP in many cases, our pricing has actually been higher, but yet, we've been able to command this installed base because of the differentiation we're bringing something to the market that no one else can bring. So despite the fact that we were higher priced, we've been able to command that growth trajectory. What's also exciting is as we move into multiplex, we're changing the economics so that we're going to now become more competitive with the competition while still delivering the disruption so that's why multiplexing on the SP-X, couple them with a lower instrument cost starts to change the possibilities of the economics of what we're trying to do with the disruption. So pretty excited about the SP-X.

[Unidentified Analyst:]

And maybe if I can just squeeze in one last question, regarding gross margin on the service side, could you give us an update on the current capacity utilization of your in-house CLIA lab and like, how do you expect gross margin on the service side to ramp going forward and how does that compare to the expected margin expansion on the product side?

[Kevin Hrusovsky:]

Yeah. It’s interesting. I know you're asking the question for Tycho too, so I wanted to -- one of the things Tycho, Tycho can see a lot of the aspirational opportunity we have in our business and many of the reports he has seen that our service business is very different than what people traditionally think about. This is a almost a strategic Trojan horse for selling instruments later on and then selling consumables on top of instruments. Initially, it was a promotion, it was an expense side. And when we got started, and then we started saying, let's start charging for these trials. And we started to drive gross margins that I think are north of 50%, 60%, maybe, as high as 65% in our services business. And so it's been exciting to see the Trojan horse of every third trial we run translate into signing an instrument to the people that started to run the trial and paid for it. And then later on, they buy consumables on that instrument. So it's kind of an engine for us. But what's really more strategic is the fact that we're now running trials for drugs where those biomarkers that we're running can become complimentary or they can become companion diagnostics. So it's actually like a Greenfield opportunity to actually start looking at relationships with pharma that could lead to diagnostic opportunities and help us start to move into that landscape, now that we have a CLIA lab of our own. So again, there are so many levels of strategy going on in that services that we can talk about, like the utilization levels. But I would encourage all the analysts to continue thinking about the strategic dimensions of what we're doing there. And don't get just wrapped up in a traditional service model and think that this isn't something that is that productive because it's very productive. Now, with that said, we can expand our capacity at any moment by just adding headcount. And we're moving into a new building in the middle of this year, that's going to house both Aushon’s original building of people that we now have a lot of the Quanterix personnel in there. And then our original Quanterix building which we've now moved a lot of the Aushon people into for our integration efforts. So we now today have two different buildings that we're going to be consolidating everything into one and our accelerator lab has got plenty of, what I'll call, fixed cost scaling opportunity in there. So I think we're going to be less than 50% utilized from a, what I'll call, the fixed cost dimensions of the operation, which would be the buildings, the facilities, but we can simply by adding people and adding instruments, we can scale that capacity. So it's a very efficient scaling. It's not major capital investment steps. These are pretty much variable steps. So I actually don't think it's going to be too burdensome for expansion.

[Operator:]

Thank you. Our next question is from Puneet Souda with SVB Leerink.

[Puneet Souda:]

Kevin, great, congrats on the quarter and congrats on completing the first year as a public company. So my first question is around what you are calling about a 40% long term growth, how should we look at that for 2019 and just I'm trying to understand in terms of what consensus modeling you're ahead of that, maybe close to about 3 million or so ahead of that, given the growth you're seeing here in instruments in the fourth quarter, SP-X adding on top of that, and HD-X coming in the year, shouldn’t we assume a bit more acceleration from the long term guide and versus in 2019?

[Kevin Hrusovsky:]

Puneet, you and I go back and forth on this all the time. I'll say a few things here. First, I would say that the way to look at our 2018 revenue performance is 36 million, meaning that we had some one time stuff that went on there around the collaboration revenue and all that. So I think our run rate is running around 36% and what I've been trying is to inform everyone on is that we've got so much disruption and possibilities of significant aspirational value creation that the last thing you want to do is trip up over any models, our short term execution, even though I think you've watched, we've been executing with a lot of visibility into what we're doing with a lot of track record. So I personally think that there's a room for the models to say whatever they need to say. But I would not go beyond the 40%, if I were an analyst, just because there's no need for that, we got plenty of momentum, we believe to be able to bring visibility and bring some level of performance, but hey, we got to remember, this is a disruptive company in any moment. You could end up with something, it gets tripped up. And so I want to make sure everyone understands, we don't want to compromise the possibilities of the future value creation by having a real short term execution of me -- having to push more revenue out. So you're right, could we beat. I don't know we've beat every quarter, I guess if you look at the way the models have been laid out, but I would be more wrapped up in what the possibilities are for, going after an Alzheimer blood tests, or going after the possibility of an MS diagnostic ultimately, and looking at the neuro-disruption that we are beginning to impair or beginning to create and impairing some of the traditional ways of doing business and try not to get too wrapped up and pushing us, I mean, 40% growth is going to be very exciting for a lot of people because our base continues to get bigger. So, we've now said 40% since we were one third our size and so we're continuing to say we still believe we can achieve that and I think it's a good place to kind of think about our future ambitions around growth

[Puneet Souda:]

And let me ask on oncology and cardiology, you grew quite strongly there. Just give us the, what was the driver behind that. And if you could elaborate on overall, pick up there. More importantly, SP-X, the traditional similar instruments have been designed around sensitivity versus you're getting a lot of sample already in oncology and cardiology. So I'm just trying to parse out what's driving the growth there, SP-X hasn't launched, I mean, SP-X is going to be more of a 2019 story. So just trying to understand what's driving the growth for oncology and cardiology.

[Kevin Hrusovsky:]

One thing that was pretty exciting is once -- we got one of the best sales groups as you know, [indiscernible] heads this thing up, he’s a post-doc from Harvard Medical School and we got a lot of, what will call, application sciences, some of the best in the world. These are a -- a lot of them PhD, supporting our field. We got a very hungry group and then we got investors that look at their pipelines of getting drugs approved that the pharma biotechs and they say to us, these drugs, if you can do something to increase the probability, which we know that using biomarkers can increase the probability of a drug getting approved from phase 1 to phase 3 by 300%. So we have a very strong commercial engine. And so when we bought Aushon, there was already the basis historically of what I'll call some oncology assets, because they were multiplexing. And so our team did do pretty well in placing some traditional Aushon technologies in 2018 and so we did create some oncology movement, but that wasn't what I would consider to be the kind of movement that we really are going for. We have to kind of restructure and launch an instrument that we know has all the scalability and all of the dimensions of longer term financial performance to really get the results that we are used to getting. And that's what the SP-X is, we've taken it and we've [indiscernible] it. We've got greater sensitivity, which we think is a differentiator that's important to have. The old Aushon really didn't have a lot of differentiation from MSP and Luminex. Sensitivity brings great differentiation there. We also work to automate, not integrated automation, but the automation of some of that liquid handling process before you actually read the plate. We also brought homebrew on to it. That's a key thing that a lot of people don't believe in competitively. They like these closed systems. We actually like open systems, NFL neuro-filament light wasn't even a revenue element in our business 24 to maybe 30 months ago and it was a homebrew that really got NFL where it is today and several other of our key biomarkers today came via homebrew. So even though you might look at walking down an instrument with -- you got to use our reagents in order to run it as being a good thing, we actually think that it might be a good thing in the short term, but it doesn't give you that longer term growth engine that homebrew gives you. And that's why we go after the homebrew approach because we're looking for longer term growth as well as the short term lockdown growth. And so oncology got a little bit of a bump, because of the traditional Aushon technologies, which weren't the scalable ones. SP-X has now got all of that stuff built into it. And we're hopeful that we can now get that technology placed and that's going to then allow what we’ll consider to be a much more productive longer term sustainable revenue growth in oncology.

[Puneet Souda:]

Okay. And just if I could squeeze another one on commercial organization, where do we stand now currently in terms of the salesforce, if you could give us a sense there and overall commercial organization. And clearly, you're spending into 2019 OpEx is going up, just to help us give us a sense of overall commercial organization. Where would you like that to be at a steady state?

[Kevin Hrusovsky:]

Absolutely, Puneet. In general, we keep trying to increase our installed base or our number of sales of what I call card carrying, number carrying sales people by about 25% to 30% each year. And I think we're probably up around 15 sales people, 16. But then we have all these other PhDs and field application personnel in product management that support them. So it's probably more like three times that when you end up adding up all those headcount and what we would like to do is continue to expand that by about 25%, 30% and then drive through that revenue growth that’s greater than that. Right. So you'll have some productivity gains in your commercial investments. Now, I would say that we've got some one-time things going on in 2019 that again, if I'm an investor, I'm excited about the fact that we got our all of our IVD rights back for diagnostics, whether that be laboratory developed point of care or IVD centralized or decentralized, we get those rights back. And so we are investing in bringing in Jackson Streeter, bringing in Mary Ellen, some of the key industry leaders in diagnostics to help us sort out and build strategic pathways. We're not exactly sure yet how we're going to go at that, we've laid out a goal that we would like to at least form one LDT relationship in 2019, and we have a lot of interest already from those reference labs and we got great collaborative meetings, but we will have some OpEx, I believe, in 2019 to support that diagnostic build out and the thinking that we're putting into building the right roadmap for the future.

[Operator:]

Our next question is from Doug Schenkel with Cowen.

[Doug Schenkel:]

Hey, guys. Could you elaborate a bit more on some of your recent leadership hires, you just touched on it briefly there, but I'm particularly curious how the addition of Dr. Streeter furthers your aspiration in clinical diagnostics?

[Kevin Hrusovsky:]

Yeah, it's -- Jackson's here. And I told him today, I didn't want him like spend too much time talking because we're still trying to sort of lay this out. He's running corporate development for us. So, there's what we would call as pathways between research and diagnostics, particularly in the area of CROs. We have a whole lot of these drug trials running and many of them can be used to help support disease progress validation markers with the FDA, so if you can get an approved drug that can modify the disease by the way, there's none for Alzheimer's right now. They have a lot of them of them for MS, but if you can get an approved drug that can modify the disease and then you can look at retrospective samples and how your biomarker got moved by that disease modification of that approved drug, it can actually lead to you getting a clinically validated biomarker for drug approvals and for disease progression and that's the pathways that Jackson himself did when he was at Banyan, they got UCH-L1 and GFAP, two biomarkers that they did a rule out on the CAT scan that if you could see levels of these markers in blood, you wouldn't benefit from having a CAT scan. So it was a rule out. And in the area of MS, and many of these diseases, you got all these drugs today that might take 2.5 years using MRI, which is much more expensive. And I think on average, MS patients are doing 2.5 MRIs per year to just try to monitor their disease progression, it's the only approved endpoint today but we know brain atrophy could take 2.5 years before MS can bring that result to an MRI where in blood, many of these publications are suggesting that you can see pretty rapidly within three months the disease progression on the NFL, the neuro-filament light. And so you can see the cycle time of just patient monitoring and getting them on to the right drug could be the difference of a patient dying in a wheelchair versus dying standing up and that's the kind of cycle time stuff that is being considered in the whole concepts of rule out which Jackson did with the FDA. You got that done in fast track four month period. That was, if you look at Alzheimer’s, that could be a pretty interesting opportunity because these PET scans today for beta amyloid, these things can be as much as $4,000 a piece. And I don't think they're reimbursed yet. But it's the way you can diagnose in the whole Alzheimer's Associations now are saying, we want to get biological definition of Alzheimer's versus cognitive assessments, which are very subjective. They want to see biologically, what's going on with amyloid beta or beta amyloids, what's going on with, they're wanting to see real biomarkers of what that diseases and this is where rule outs, just like they did for the CAT scan and concussion can play a role for rule outs of even the PET scan. Why do the PET scan if there's a very low probability that that person has Alzheimer's and could you use a blood screen to kind of really increase the fertility of the number of people that actually go into the $4,000 PET scan and someday could you eliminate the PET scan completely with the blood test? These are all possibilities, is there only promise we would not at this point, say by our stock based on these things, because there's enough value creation in the research world, and that's where a lot of our focus has been. And that's where we're executing without the regulatory risk, without the reimbursement risk. But we want the Jacksons, the guys that have been through this with the FDA, we want them on our team to help us sort out how this disruption of these NFL, neuro-filament, the disruption of the beta amyloid, and the test beta to these publications are shown. How can we translate that into action with the FDA? So the meetings that I held last year, standing room only where I presented on NFL, there's already a lot of excitement. So how do we bring that to bear, given that we know there's 10 trials right now using NFL today for MS drugs that are trying to get approved so that should give you a sense, so Jackson's one person, Mary Ellen. She ran LDT Labs and she's running the CLIA lab that we actually acquired from Aushon, very low economics. We moved into this CLIA position and she's helping us continue to evolve our quality standards, hire the right people into that landscape to make sure that we can be much more predictable with our services as well as regulated, as we do more of these phase 1, 2, 3 trials, many of these drug companies want it to be in the CAT CLIA approved facility. And so we're trying to accommodate that. We've had major audits in the last three months, four months, some of the biggest in the world have come to audit us and Mary Ellen is fronting on our behalf those audits and they've been going very positively because that capability is now in house. We also brought Dawn Mattoon in earlier in the year last year, she ran all the product development for cell signaling, which is an antibody engineering company. This company can engineer some of the best quality antibodies in the world. Well, that's our raw materials. That's the kits that we make our antibody pairs and so we want that capability in house. NFL, there's two different antibodies that basically capture and then bring the light to it in our digital life of technology. So Dawn was a major add and just incredible capability. Great Leader, Julian Bradley's another person, wasn't a company, he left and he said, my gosh, you guys are disrupting the world and he came back, right. And so he's been doing a lot of the commercial build out, working with [indiscernible]. So these are pretty important adds, as we're trying to sort out the next steps of our growth trajectory. But again, I would bias based on what we think we can do in research. It's a much lower risk proposition.

[Doug Schenkel:]

Maybe just one quick follow-up, you held the first Powering Precision Health European Summit in December. Given this is the first time you've done something like this in Europe, I’m just curious to hear if you could give us a flavor of the customer response and would you typically expect an event like this to impact sales or accelerate adoption right after the event?

[Kevin Hrusovsky:]

And what I would like to say here is that, let me say first, Doug, that the Powering Precision Health Summit is independent from Quanterix. That is a nonprofit that I found that independent from Quanterix, but it's got a greater purpose of going after disease modifying capabilities for cancer and for neuro-degeneration, those two broad categories and it's looking at biomarkers, whether they be from Quanterix or be from other companies as a vehicle for the revolutionizing way of seeing these diseases earlier and then later stage getting treatments for those diseases and ultimately, can we look at biomarkers to prevent the disease through our annual physicals, knowing really early on that the way we're conducting our life and the environmental factors, the way we [indiscernible], the way we growth hormones, or the way we get subjected to concussions and things of that nature, are those environmental factors triggering disease that you can actually prevent the disease cascade by looking at biomarkers. So I want you to understand that's independent from Quanterix. But Quanterix did participate. And they did a really nice job and they found a lot of customers very excited about biomarkers and you can find on the Quanterix website of a video that gives you direct feedback from many of those researchers that attended and I would say neuro-filament light was showcased there by some of the leading neurologists in the world and they talked about what they consider to be real significant disruption and neuro-filament light has been around for a while. It's a -- it can be tested in cerebral spinal fluid, it's been something that's been -- the key here is the ability to see it non-invasively in blood. That's leading to a lot of new cohort studies because patients don't mind giving blood, they don't like giving spinal fluid from a spinal tap. It's very invasive, very painful and there's even drugs that stand and recruit patients to the drug trials when a spinal tap is needed. So the lesson base of ability to see the same thing you could have seen in cerebral spinal fluid, there were a lot of publications showing those correlations and that was exciting to see that you can get the answer from blood, it's just that, it's a lot lower, it's a lot lower abundance level in blood which means you need sensitivity to be able to see it. But the fact that it's correlated was, well, a lot of those scientists were presenting and that was great body of evidence. Again, having a body of evidence of third party, peer-reviewed science and seeing that published created a groundswell of excitement. There was a lot of excitement and you'll see it in the summary video around PPH on our website. So it was big. And, some of the key sponsors there was Novartis themselves sponsored, JP Morgan sponsored, Leerink sponsored, Cowen sponsored, Canaccord, so we had great sponsorships from a lot of customers as well as banks that are seeing the real importance of going after cancer and Alzheimer's the way biomarkers can achieve it.

[Operator:]

Our next question is from Mark Massaro with Canaccord Genuity.

[Mark Massaro:]

Hey guys. Thanks and congrats on the solid Q4. I guess just to maybe bridge Doug's question. One of the highlights that I thought out of PPH was the presentation from [indiscernible] and he said that he began offering blood based NFL to some of his patients with informed consent. So I guess I'd be curious to hear your thoughts, Kevin, on how quickly other physicians and researchers may begin to offer blood NFL to patients and then more broadly clinically?

[Kevin Hrusovsky:]

Yeah, so our position here is that the test should only be being used for research use only. That's the research sector that we're selling this instrument into. But there are like, you say, a lot of trials that they do get patient consent, and they are appropriately running those regulatory trials. And there's more and more of that going on. And we have a lot of patients coming to us asking, not just in neurology, but also in cancer. You might remember the kind of game changing PSA publication that came out five years ago, where we can see PSA at [indiscernible] and that could be a Johns Hopkins and NYU and show that that can be a major for, especially people with radical prostatectomies, it can be an incredibly important biomarker to determine whether the prostate is regrowing or not. And CRO is what you see in today's technologies. But when you take all those CROs, they showed that you can stratify based on our sensitivity and see different disease progression markers. And so not just in neurology, but in cancer applications coming to us and we do not today -- we cannot, we don't have any approvals to be doing that kind of testing. And so laboratory developed tests would be the first possibility we would see in house. Certainly Quest and LabCorp and [indiscernible] they all have our technologies and they all are incredibly great collaborators that have tremendous hope for what we're doing. And we see them to be really well statured around regulatory and reimbursement. And so we're going to be working those relationships in a more formal way with those types of companies in 2019. We ourselves are not suggesting that we will be running any kind of LDT tests in house, but we will continue to run CRO tests in house and that's the kind of worked out of studying that we're doing. I would call your attention Mark to slide 16, where we show the NFL publications taken off. There was a publication that just aired I think yesterday from the doctor that you mentioned. And I just showed the quote from their abstract that says abstract neurology 2019 journal, blood NFL levels are associated with clinical and MRI related measures of disease activity and neural accidental damage and have prognostic value. Our results support the utility of blood NFL as an easily accessible biomarker of disease evolution and treatment response. And then the editorial had said neuro-filament light chain, an important step toward a disease biomarkers in multiple sclerosis. So, those are the publications we have on our website on the Quanterix website where you can read from these third parties and those publications and it would suggest that we get continued momentum towards achieving the ability to see the disease progression, but again there's nothing that's been approved yet and that approval process is necessary before it would be something that we would condone.

[Mark Massaro:]

Understood. And then I also wanted to ask, the number of publications using your technology has doubled each of the last three years. So I'm wondering if a year from now, we'll be looking at 800 publications and if that's the case, I was wondering to what extent do you think your new SP-X launch could play a role in driving oncology and then related to that was wondering if you could give us a sense of what the multiplexing within the core plex assays in oncology might look like and in which types of cancer do you think the SP-X will be used the most?

[Kevin Hrusovsky:]

Yeah. I was texting nonstop to a lot of my pancreatic like MD Anderson, there's a guy named [indiscernible] presented at PPH and there's a lot of pancreatic interest given, Alex Trebek’s situation of announcement and so this, I'm really excited about going after cancer and the SP-X is the ten plex and it's looking at 10 different cytokines which are the proteins of the immune system and we selected what we consider to be the most important ones. And the challenge in the immune system is these cytokines typically at baseline levels when you're healthy and the immune system hasn't been up regulated, the challenges you can't measure them with today's technologies. And so I think about a third of those 10 plexes that we're launching, we're going to be able to see baseline levels, which is a game changer because you really want to see the first movement of those cytokines, particularly when you're looking at response to a treatment because the way these immune therapies are working is that they're tricking the immune system, to basically see the cancer. What's happened historically is the cancers are able to hide in the immune system and so the immune system doesn't fight them. And so many of these new immune-therapies are being triggered to see the cancer and then fight the cancer and so you want to up regulate based on the treatment, but many times, it goes into what's called cytokine release or cytokines storm, where the patient ends up basically dying through the toxicity of that elevation from that drug. And so the ability to see very early stage movements can lead to getting response understanding much earlier. And I think there's some evidence of some researchers that I've talked to that say hey, today if you lose imaging, it could be six months before you can see if a tumor has shrunk based on applying immunotherapy and sometimes immune-therapies, a couple of hundred thousand dollars per therapy. And in six months, you could have really as over $2 million worth of therapy going into a cancer patient before you have, what I would consider to be today's gold standard, the ability to see in a CAT scan or a PET scan, whether that tumor has shrunk. There's some evidence maybe with our technologies, some promise and some hope that you could maybe get to that answer after one treatment or after two treatments. And so these are the types of things we want researchers using our technology for to see if they can get much earlier indications of whether the drug is going to have the desired effect on those cytokines or going to have the undesirable effect and that is an area I think of tremendous possibility and tremendous interest and we tried to build this thing to achieve that with and using sensitivity to get there. So those cytokines is what really are 10 plexes on the SP-X and we're not that good at cancer yet. That's not what our channel to market spend, so we've brought in some really great people, Daphne came from the stand up to cancer. She's a PhD that's working in our commercial organization. Martha, another PhD has had a lot of experience with cancer. We're bringing some of those cancer specialists now into our company into the commercial ranks under Mark Roski’s leadership to start to really teach the researchers out there how this instrument can be deployed. Some learning that’s going to be required here. So we don't know how fast that will be. So we don't want to guide, but we're pretty interested and excited that publications will be then a carry on effect. How many publications will we have in 2019 was a question? Yes? Can we double again? Can we get to 800 publications by year end? We didn't show that as a leading metric and say what our goal is there. But I like to think that if we can, I know we're going to have a profound effect on cancer, we are going to have a profound effect on Alzheimer's and MS and Parkinson's. And so we're going to do everything we can, utilizing PPH as a vehicle to market to excite different researchers to the publications that have already been done to open their eyes up to those possibilities. So it's like a little bit of a cult effect to being able to get that information out there, so people can see it, they can start writing grants, and then they can get those going. So I would like to think, we'll have at least 20 publications, at least in draft mode by year end for SP-X, but it's hard to say, Mark.

[Mark Massaro:]

Okay. And my last question, maybe for Joe, the number of instruments, I think you said at 278, just wanted to ask a clarifying question. Are those orders or are those installed and generating consumable revenue? And then I also wanted to ask about the pull through on the HD-1, I think you had increased it to 60,000 per box per year at the end of Q3. Where are you now? And where do you think that can go at the end of 2019?

[Joe Driscoll:]

So the 278 is actually installed units out in the field that are generating consumables revenue.

[Kevin Hrusovsky:]

And Mark, the way we've been saying it is that six months after an instrument is installed, we're going to be able to get a third, you should model a third of the list price as being what we're going to be able to pull through it from that point forward. So that's the way we've been trying to get everyone to model, look at our total instrument revenue and then a third of that is what you should see repeating six months later and so I think that the HD-1 did deliver pretty good numbers. We set out saying 50,000 for the year and we were at 40,000 the previous year and we ended up I think at 55,000 at some point. So we were approaching heading towards 60,000. And I think our list price on those are like 155, so that was a little bit above one third and so I think that product has been out there longer and that's what you can expect. The HD-X, we're hopeful is going to even provide even more excitement eventually, they even drive that further. The SR-X, right now, I would say it's probably 25,000 is what we're trying to get to with that product line and we really haven't had much of a six month kick in on those yet. And SP-X, again it's the same price point as SR-X. We have some test beds that are even significantly beyond the one third, but our hope would be that we can keep maintaining that and so we feel pretty good that that's a good place to model us.

[Kevin Hrusovsky:]

I think we probably should cut it off. We’re beyond time, but I can't thank everybody enough. Great call and we'll follow up with you as any of you have questions. Thank you very much.

[Operator:]

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