NEW YORK (GenomeWeb) – NanoString Technologies reported after the close of the market on Tuesday that its second quarter revenues grew 53 percent year over year driven primarily by a one-time uptick in collaboration revenue.
NanoString also said on Tuesday that it has entered into a strategic collaboration with Lam Research Corporation to develop NanoString's proprietary Hyb & Seq next-generation sequencing platform.
For the three months ended June 30, NanoString reported total revenue of $34.6 million, up from $22.6 million a year ago and besting the Wall Street estimate of $32.9 million.
Total product and service revenue grew 5 percent year over to $18.3 million from $17.5 million. Consumables revenue grew 7 percent to $11 million, including $1.8 million of Prosigna breast cancer prognostic gene signature assay kits. Instrument revenue fell 6 percent year over year to $6.0 million.
NanoString's second quarter collaboration revenue more than tripled to $16.3 million, including $11.3 million related to the termination of a collaboration with Astellas Pharma and Medivation (now owned by Pfizer) to develop a companion diagnostic test for an investigational breast cancer drug. NanoString noted at the time that the termination was unrelated to work it performed in the collaboration, and that it received $10.6 million in deferred revenue related to the agreement, which it subsequently recorded as collaboration revenue.
Under the newly announced collaboration with Lam Research, Lam will provide NanoString with up to $50 million in funding over a period of about three years to cover the costs of development and regulatory approval of a next-generation sequencing platform based on NanoString's Hyb & Seq technology. Lam will also provide advanced engineering and technical support.
In exchange, Lam will receive a warrant to purchase 1 million shares of NanoString common stock at $16.75 per share, as well as a royalty on all products developed under the collaboration, which is not expected to impact NanoString margins. NanoString will retain all rights to commercialize the resulting Hyb & Seq products, and the partners will share ownership rights in jointly developed intellectual property.
"While we have independently advanced the Hyb & Seq chemistry over the past several years, the collaboration with Lam Research … is a major inflection point in this program," NanoString President and CEO Brad Gray said during a conference call recapping NanoString's Q2 earnings.
"By combining NanoString's molecular profiling expertise and novel barcoding chemistries with Lam's capabilities in nanoscale manufacturing, we believe we can deliver a powerful and highly scalable solution," Gray added. "We envision our collaboration with Lam will enable open-ended innovation at the intersection of semiconductors and genomics, the potential of which we're only beginning to appreciate."
NanoString's R&D expenses grew 25 percent to $11.0 million from $8.8 million a year ago, reflecting increased costs associated with biopharma collaborations announced in 2016 and investments in new life science research products and technologies, particularly its 3D Biology Digital Spatial Profiling and Hyb & Seq technologies.
Meanwhile, NanoString's Q2 SG&A costs rose 20 percent to $18.6 million from $15.5 million in the year-ago quarter, reflecting added staffing, including an expanded sales channel, and other costs supporting the company's growth.
Specifically, Gray noted during the conference call that the company has added 20 new sales positions since the beginning of the year, primarily to drive consumables sales for NanoString's installed base of about 540 nCounter systems. The company expects this added investment to begin paying dividends and driving growth toward the end of this year and into 2018.
NanoString's net loss for the quarter was $4.6 million, or $.20 per share, compared to $10.8 million, or $.55 per share, in Q2 2016. Analysts, on average, had expected a loss per share of $.35.
NanoString upped its revenue guidance for 2017 to a range of $114 million to $118 million from previous guidance of $100 million to $105 million, primarily reflecting the recently recorded collaboration revenue from the Astellas/Medivation terminated partnership, as well as expected collaboration revenue from the Lam Research partnership. Prior to the release of the Q2 results, Wall Street expected NanoString to post full-year revenues of $107.2 million.
Product and service revenue guidance of $81 million to $85 million remained unchanged, although the company said that it is increasing its guidance on Prosigna sales to a range of $7 million to $8 million from previous guidance of $6 million.
NanoString also changed its guidance for net loss per share to a range of $2.03 to $2.20 from a previous range of $2.51 to $2.61. On average, analysts are expecting a loss per share of $2.40.
The company finished the quarter with $40.6 million in cash and cash equivalents, and $58.7 million in short-term investments.
In Wednesday morning trading on Nasdaq, NanoString's stock was down about 11 percent to $13.61.