On November 2, 2017 NanoString Technologies, Inc. (NASDAQ:NSTG), a provider of life science tools for translational research and molecular diagnostic products, reported financial results for the third quarter of 2017 (Press release, NanoString Technologies, NOV 2, 2017, View Source [SID1234521519]). The results were consistent with the company’s announcement of preliminary revenue on October 11, 2017.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Third Quarter Financial Highlights

Total revenue of $27.0 million, 13% year-over-year growth
Total product and service revenue of $16.9 million, 12% year-over-year decline
Consumables revenue of $10.7 million, including $1.7 million of Prosigna IVD kits, 7% year-over-year decline
Instrument revenue of $4.4 million, 36% year-over-year decline
Collaboration revenue of $10.1 million
“We have taken a number of actions to improve the growth of our life science business, including appointing new commercial leadership, expanding and specializing our sales channel, and launching a number of new consumable products, and we expect these initiatives will help to stabilize the business in the fourth quarter and return to growth over the course 2018,” stated Brad Gray, president and chief executive officer of NanoString. “Our management team is intensely focused on revitalizing the growth of our core business while advancing our pipeline of new instrument platforms, including Digital Spatial Profiling, which is scheduled to launch late next year.”

Recent Business Highlights

Increased installed base to approximately 570 nCounter Analysis Systems at September 30, 2017
Appointed J. Chad Brown as senior vice president, sales & marketing to lead commercial operations
Launched PanCancer IO 360TM gene expression panel for translational research, which assays key pathways from the tumor, microenvironment and immune system and includes more than 20 potentially predictive signatures of therapeutic response to immunotherapy
Entered into collaboration with the NSABP Foundation to study colorectal tumor samples using the PanCancer IO 360 panel to identify biomarkers of immune evasion that may inform the development of novel immunotherapies
Launched new Neuropathology gene expression panel for research of neurological disorders, such as Alzheimer’s Disease, Parkinson’s Disease, Amyotrophic Lateral Sclerosis, and Huntington’s Disease
Entered into $50 million collaboration agreement with Lam Research to advance development of the Hyb & SeqTM next generation sequencing platform
Presented proof-of-principle research demonstrating the capability of Hyb & Seq technology to perform liquid biopsy measurement by direct capture and sequencing of cell-free DNA
Third Quarter Financial Results

Revenue for the three months ended September 30, 2017 increased by 13% to $27.0 million, as compared to $23.9 million for the third quarter of 2016. Instrument revenue was $4.4 million, 36% lower than the prior year period, primarily due to a reduction in the number of systems sold. Consumables revenue, excluding Prosigna, was $9.0 million for the third quarter of 2017, 12% lower than in the comparable 2016 quarter due to a reduction in the consumable pull through from the installed base of systems. Prosigna IVD kit revenue was $1.7 million for the quarter, an increase of 47% over the third quarter of 2016. Collaboration revenue totaled $10.1 million, compared to $4.8 million for the third quarter of 2016. Gross margin on product and service revenue was 57% for the third quarter of 2017, compared to 58% for the third quarter of 2016.

Research and development expense increased by 30% to $11.4 million for the third quarter of 2017 versus $8.7 million for the third quarter of 2016, reflecting investments in new products and technologies under development for the life science research market, including Digital Spatial Profiling and Hyb & Seq technologies, as well as increased costs associated with biopharma collaborations. Selling, general and administrative expense increased by 18% to $18.4 million for the third quarter of 2017 compared to $15.6 million for the prior year period, reflecting added staffing, including expansion of the sales channel, and other costs supporting the company’s growth.

Net loss for the three months ended September 30, 2017 was $11.4 million, or a loss of $0.45 per share, compared with $10.1 million, or $0.51 per share, for the third quarter of 2016.

Outlook for 2017

The company has revised its financial outlook for 2017 as follows:

Total revenue in the range of $109 million to $112 million, which was previously $114 million to $118 million
Product and service revenue in the range of $68 million to $71 million, which was previously $81 million to $85 million
Gross margin on product and service revenue of approximately 56%, which was previously 57% to 58%
Operating expenses in the range of $119 million to $121 million, which was previously $123 million to $126 million
Operating loss in the range of $38 million to $41 million, which was previously $42 million to $46 million
Net loss per share in the range of $1.86 to $1.99, which was previously $2.03 to $2.20
Conference Call

Management will host a conference call today beginning at 1:30 pm PT / 4:30 pm ET to discuss these results and answer questions. Individuals interested in listening to the conference call may do so by dialing (888) 793-9492 for domestic callers, or (734) 385-2643 for international callers. Please reference Conference ID 88331168. To listen to a live webcast, please visit the investor relations section of the company’s website at: www.nanostring.com. A replay of the call will be available beginning November 2, 2017 at 7:30pm ET through 7:30pm ET on November 9, 2017. To access the replay, dial (855) 859-2056 or (404) 537-3406 and reference Conference ID: 88331168. The webcast will also be available on the company’s website for one year following the completion of the call.