NSTG (2019 - Q4)

Ladies and gentlemen thank you for standing by and welcome to NanoString’s Q4 and Fiscal Year 2019 Operating Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today Vice President of Investor Relations, Doug Farrell. You may begin. Doug Far

Thank you, operator, and good afternoon everyone. Joining me on the call today is Brad Gray our President and CEO; and Tom Bailey our CFO. Earlier today afternoon, we released our financial results for the fourth quarter and fiscal year 2019. If you have not seen that press release already there is one available on our website. During this call, we will make various statements that are forward-looking in nature, including financial projections, existing and future collaborations, future business growth, trends and related factors, prospects for expanding and penetrating our addressable markets, our strategic focus, and objectives, and the development status and anticipated success of recent and planned product launches. Forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, including the risk and uncertainties described from time to time in our SEC filings. Our results may differ materially from these projections and we undertake no obligation to publically update any forward-looking statements. Later in the call today Tom, we'll be discussing our 2020 guidance in connection with the guidance. We've made modifications to our earnings release and guidance approach that we believe will make it easier to interpret and compare our financial results. We have prepared a supplement to GAAP financial measurements, selected non-GAAP adjusted measures, the calculations which are described in detail in our press release throughout the call. All financial measures will be GAAP unless otherwise indicated. In order to help analysts and investors model these changes, we've posted a reconciliation for each quarter and fiscal year 2019 under the financial tab of our investor relations page. You can find reconciliations of GAAP and non GAAP measures as well as the description, limitations and rationale for using these measures in our press release as well. I'd like to remind everybody that we'll be in Boston next week for the Cowen Healthcare conference. We look forward to seeing many of you there. With that let me turn the call over to Brad.

Thanks, Doug. Good afternoon and greetings from Marco Island, Florida, where we are just wrapping up the final day of the AGBT conference and a fantastic few days for NanoString. Our focus this week has been to promote the emerging spatial genomics market and to generate customer interest in our GeoMx Digital Spatial Profiler or DSP. Spatial genomics was the talk of AGBT with nearly 30 research studies presented a 50% increase over last year with GeoMx being the most well represented platform across these studies. The coming spatial genomics revolution has been hailed not just by NanoString and our GeoMx customers, but numerous other leaders in the field, such as the first four speakers at the AGBT plenary session including NIH director, Francis Collins, who commented on the importance of integrating spatial tools into the research continuum. We kicked off the meeting on Sunday afternoon with our 2nd Annual Spatial Genomics Summit, which featured GeoMx data presentations by researchers from leading centers such as the Broad Institute, the Sanger Institute, the Garvan Institute, and Stanford University as well as panel participants by senior scientists from Illumina and Bio-Techne. Our summit drew a crowd of more than 170 attendees, an increase of more than 60% over the inaugural summit that we held last year. These attendees arrived in Florida early and spent extra time away from home for the opportunity to learn from many GeoMx early adopters and to imagine the possibilities that are unlocked when the GeoMx DSP is used in conjunction with Next Generation Sequencing or NGS. They remain engaged for the full four-hour duration of the summit despite the temptation to wander outside to Marco Island's lovely beach and many followed up throughout the week by visiting us in our suite to learn more about GeoMx. I could not be more delighted with our AGBT commercial presence and customer engagement, and I'll share more details on the momentum of GeoMx DSP launched later in my premiere remarks. Now, I'd like to provide an overview of our strong performance in 2019 and outline our strategic objectives and key milestones for the year ahead. After that, I'll turn the call over to Tom to review our operating results for the fourth quarter and provide our financial outlook for 2020. 2019 was a transformative year for NanoString. Through our December transaction with Veracyte, we simplified our business, streamlined our cost structure, and focused our energy on growth opportunities in the research markets. With the launch of GeoMx DSP, we introduced our first new platform in a decade, accelerating our product and service revenue to 24% growth for the full year. nCounter demand remains robust and we grew our installed base to approximately 855 systems in 2019, an increase of about 17% over the prior year. nCounter placements benefited from our expansion into immunology and neurology, which accounted for about 30% of system sales. We generated record life science consumable sales of about $51.6 million last year, an increase of 18% over 2018. We continue to expand our core business both within and beyond cancer with the introduction of four new panels throughout the year, including strong launches such as our CAR-T characterization and human organ transplant panels. More importantly, we made tremendous progress in commercializing GeoMx. DSP orders exceeded our expectations and totaled more than 60 systems during 2019, bringing the total cumulative GeoMx orders to over 90 systems. This GeoMx launch pace is vastly outpaced in what we achieved with nCounter, which did not reach 90 cumulative orders until its 13th quarter. Q4 was our first full quarter of GeoMx installations and our product and service revenue growth accelerated to more than 40% year-over-year, marking our eighth consecutive quarter of double digit growth. We ended the year with 44 systems shipped, 35 installed and 24 sites trained. We intend to build on this momentum in 2020 and are making GeoMx commercialization our top priority. For 2020, we expect GeoMx order volume to increase by about 50% over 2019 equating to about 90 new GeoMx orders this year. This growth will be achieved by targeting both customers who will read out spatial experiments using nCounter and others who will use NGS as the readout. Overall, the Company will focus on four strategic objectives for 2020. Our first objective is to accelerate the adoption of GeoMx DSB and translational research. Translational research described scientific efforts to develop cure for human disease through the search for biomarkers and the development of therapies. Translational research has been the core market for NanoString for a decade, that's reflected by our large installed base of nCounter systems within biopharma companies and academic medical centers. Within translational research, the search for biomarkers is driving the need for spatial analysis of protein and RNA expression, among the more enormous trove of FFPE human tissue samples collected during clinical studies and held in biobanks. Almost every GeoMx system sold to-date has gone into translational research and we have substantial momentum and leadership within this market. In addition to records GeoMx orders in the fourth quarter, we see a number of positive leading indicators in this market. One indicator is our TAP program, which provides a mechanism for customers to test drives GeoMx ahead of instrument purchase. We saw steady sequential growth in TAP projects throughout 2019 and booked about 50 new projects in the fourth quarter. Today, we've completed more than 200 TAP projects for more than 125 unique customers. Second important indicator is peer-reviewed publications, which are also gaining momentum. To-date, there have been 13 peer-reviewed publications that included GeoMx data, a rate that is about double the pace achieved during the nCounter launch. Importantly, these GeoMx publications are taking on a high-profile within their fields. In the past six months, GeoMx studies had been featured on the cover of two AACR publications, starting with Clinical Cancer Research in September and followed by more recently, in the February issue of the Journal Cancer Research. In January, two GeoMx-enabled publications were published simultaneously within the same issue of nature demonstrating the high, the potential for high impact results. These strong leading indicators along with the steady expansion of our sales funnel and form our expectation for a 50% increase in GeoMx DSP orders in 2020. As in 2019, we'll continue to paste installations to ensure that customers have an exceptional user experience. For instance, we had about 20 systems that were shipped into Q4, but were not installed or trained by year end, so we'll need the temperature pace of shipments have been in Q1 in order to get caught up. Tom will provide more details when he reviews our guidance. Our second strategic objective is to expand GeoMx adoption into the discovery market with the midyear launch of next generation sequencing readout. Discovery researchers represent a distinct customer group, often focused on basic biological research to understand pathways, structures, and mechanisms. For these customers, more information is usually better. So, the massive increase in RNA content using NGS readout for GeoMx is compelling. By putting GeoMx systems upstream of the installed base of Illumina sequencers will increase our addressable market by approximately 20-fold. We've been laying the groundwork for our launch into discoveries research over the past several months. In November, we launched the Cancer Transcriptome Atlas through our technology access program. The Cancer Transcriptome Atlas is the first GeoMx assay that uses NGS for the readout, allowing the simultaneous analysis of more than 1800 RNAs. We also brought our first two external NGS early access slides online in Q4 and expect them to provide valuable input as we finalize the commercial software and user interface for NGS readout. We use AGBT to unveil our roadmap of NGS-based GeoMx applications that will be available to discovery market over the coming year. All 10 GeoMx studies presented during AGBT took advantage of NGS readout, demonstrating the scalability of a GeoMx platform, as well as the flexibility to provide any targets in any region on any sample. Researchers took full advantage of the versatile tools that the GeoMx software provides for automated liason selection, demonstrating insights that result from focusing on cell types of interest or the unique geometry of biological structures. Most of the GeoMx studies presented at AGBT included use of our Cancer Transcriptome Atlas, which will become commercially available around midyear. This assay will be priced at $1,250 per sample and is expected to appeal to both discovery and translational researchers. We also unveiled the first data from our whole Transcriptome Atlas, which profiled 18,000 protein coding genes. We plan to develop a whole Transcriptome Atlas assays for both human and mouse, which we expect to be available for trial use under our technology access program by the end of 2020, followed by a full commercial launch in 2021. We expect these whole transcriptome offerings to accelerate uptake across the discovery continuum and to drive the next leg of growth in 2021 and beyond. The audience response to our roadmap was extremely positive. As discovery customers made it clear that the ability to span from focus panels to whole transcriptome content is a unique and powerful advantage for GeoMx. Our third objective for the year is to maintain the momentum in our nCounter business. nCounter demand remains robust at an average of about 125 new system placements annually over the last several years. This linear growth in our installed base has fuel healthy growth in consumer revenue as existing sites maintain their annualized consumable pull-through and new sites come online. In 2014, we expect the dynamics of the nCounter business to be very similar to those in 2018 and 2019 except without the distraction and the expense of Prosigna and the nCounter diagnostic business. We expect to once again place approximately 125 nCounter systems and for consumable pull-through to be similar to 2019 when adjusting for the impact of the Veracyte transaction. We expect to launch at least four new nCounter panels this year and to grow the adoption of panels that were introduced late last year. To meet this continued nCounter growth, we have recently opened a state-of-the-art manufacturing facility in Bothell, Washington, which will double our consumable manufacturing footprint and expand our instrument storage and QC space by fourfold. Our fourth strategic objective is to identify the key applications for Hyb & Seq platform and to pursue partnerships that can support our emerging commercial strategy. Key applications that are focused include infectious disease testing, which was described into peer-reviewed publications last year, as well as the application of Hyb & Seq to specialized research applications. Updates in this program will be limited as we plan to focus most of our energy and communications on GeoMx. In addition to the four procedures, objectives that I've outlined, another goal for the year is to demonstrate a meaningful step on our path towards breakeven. This will be enabled by the combination of accelerating revenue growth, operating expense discipline, and the elimination of costs associated with our nCounter diagnostic business. Tom will expand on these as part of our outlook for 2020. With that, I'll now turn it over to the Tom.

Thanks Brad. I'll start with a review of our fourth quarter and fiscal 2019 results and conclude with our outlook for 2020. For the fourth quarter of 2019, product and service revenue was 33.6 million, representing year-over-year growth of 42%. In December, 2019 we completed our transaction with Veracyte under which we now recognized about one third of the previous Prosigna revenue over the same units sold. On a pro forma basis for the effect of this transaction, year-over-year of products and service revenue growth was 48%. Product and service revenue included record instrument revenue of 13.8 million. Our fourth quarter instrument revenue included 7.8 million from 34 GeoMx systems shipped during the quarter, representing an average revenue per GeoMx system of about $230,000. Q4 life sciences consumables revenue was 14.9 million, representing 14% year-over-year growth and driven by strong nCounter panel sales. Life science consumables revenue also included approximately $700,000 of GeoMx consumable shift in Q4. Q4 Prosigna revenue was $2 million. Sales and dollars were approximately 10% lower as compared to the prior year, which reflects the start in December of our new transfer pricing arrangement with Veracyte. Q4 nCounter consumable pull-through was approximately $79,000 with approximately 70,000 contributed by life sciences consumables at approximately 9,000 by Prosigna. Absent the December impact of the Veracyte transfer pricing arrangement Prosign Q4 pull-through would have been approximately $12,000 and total Q4 pull-through would've been approximately $82,000. Service revenue was 3 million, representing 18% growth over the prior year, driven by strong demand for our GeoMx TAP service. Gross margin on product and service revenue was 56%, an improvement as compared to prior year and driven primarily by increased life sciences consumable sales and our instrument sales mix. Turning the operating expenses, the Veracyte transaction resulted in one-time gains in costs during the fourth quarter. Transaction costs incurred were recorded across general and administrative expense, research and development and other expense. In addition increases in stock based compensation in part driven by the increase in our stock price have impacted comparisons of our GAAP reported expenses across periods. For the fourth quarter, total stock-based compensation expense was 4.8 million, up from 2.8 million of the prior year period. Q4 R&D expense was 18 million, an increase of 9% over the prior year excluding the impact of transaction-related expenses and stock-based compensation. R&D expense was approximately in line with the prior year. Q4 SG&A expense was 26.9 million, an increase of 33% over the prior year period, excluding the impact of transactional related expenses and stock based compensation. SG&A increased approximately 20%, driven primarily by investment in the GeoMx launch. For the full year 2019, product and service revenue was 103.7 million representing year-over-year growth of 24% is reported and 27% pro forma. Gross margin was 58% in line with our guided range. 2019 R&D expense was about $1 million above our updated guidance as a result of restructuring expenses related to the Veracyte transaction. SG&A expense was about $3 million above her updated guidance with approximately 1 million related to Veracyte and approximately $1 million related to GeoMx commercial efforts. Cash used in operating activities at the capital expenditures was approximately $60 million in line with our guidance. We exited the quarter with approximately $157 million in cash, cash equivalents and short term investments. Transitioning to 2020 guidance, as Doug mentioned, we've made modifications to our earnings release and guidance approach that we believe will make it easier to interpret and prepare our financial results. The Veracyte transaction led to one-time gains and costs that were recorded in Q4. In addition in 2019, we implemented changes to our stock-based compensation plans that coupled with the recent rise in the stock price impacted the amount of expense required to be recorded and therefore the comparability of our operating expenses across periods. As a result, we are prepared as a supplement to our GAAP financial measures selected non-GAAP or adjusted measures for calculation of which is described in detail in our press release. These measures make adjustments for three main items. First, for one-time gains and costs related to Veracyte; second, for collaboration revenue as with nCounter diagnostic rights now owned by Veracyte and the completion of our Lam collaboration, that revenue will no longer be material part of our future business; and third, for stock-based compensation, which is the non-cash item and can be challenging to estimate. Measures include adjusted operating expenses and adjusted earnings before interest taxes, depreciation and amortization or adjusted EBITDA. Adjusted EBITDA is the measure we use internally to evaluate business trends and profitability as a supplement to GAAP operating and net income or loss. In order to help analysts and investors model these changes, we posted a reconciliation for each quarter and of the full year 2019 on our Investor Relations homepage. With that backdrop, we will transition to specifics of our 2020 outlook. Commencing with revenue, we expect 2020 products and service revenue of $124 million to $131 million representing annual growth of 20% to 26%, taking account of the Veracyte transaction impact pro forma annual revenue growth is expected to be 26% to 34%. We expect $94 million to $96 million of that revenue to come from our base nCounter business. We expect nCounter's trajectory to be consistent with the last two years with instrument revenue approximately in line with 2019. We expect total consumable pull-through of approximately $65,000 per installed system, which reflects the new pricing we receive for Prosigna for the terms of the Veracyte transaction and would imply total nCounter consumables revenue inclusive of Prosigna of approximately $60 million in 2020. Note that in 2020, we will report Prosigna revenue together with life sciences consumables and no longer as a separate revenue line item in our earnings releases or SEC filings. We expect to see a similar seasonal pattern of roughly 45% of nCounter revenue recorded in the first half of the year and 55% in the second half. We expect GeoMx revenue of $30 million to $35 million when approximately $25 million to $30 million derived from instrument sales and approximately $5 million from consumables. With GeoMx, we also expect to see a seasonal pattern of roughly 45% of revenue reported in the first half of the year and 55% in the second half. We expect adjusted gross margin to be in the range of 54% to 55%, which will approximately flat compared to 2019 when considering the impacts of the Veracyte transaction on Prosigna gross margins. Transitioning to expenses and profitability, in 2020, we expected to post approximately 15% reduction in total adjusted operating expenses year-over-year. This positive step realizes the full impact of actions that we've taken in late 2019 and early 2020 to rebase our operating expenses in support of our longer range business and profitability objectives. Starting with adjusted research and development expense, we expect to record 46 million to 48 million a 24% to 27% reduction compared to 2019 adjusted R&D reflecting the full year impact of the Veracyte-related reductions we made in December and our plans to refocus R&D investments in spatial genomics. For adjusted selling general and administrative expenses, we expect to record 76 million to 78 million, a reduction of 6% to 8% as compared to 2019 adjusted SG&A expense reflecting the full year impact of the Veracyte related reductions. Turning to adjusted EBITDA, we expect to record an improved adjusted EBITDA loss of 46 million to 51 million in 2020 reflecting the combined benefit of the expected revenue growth and reduced expenses. That expected range represents a 37% to 43% improvement compared to 2019. Lastly, cash used in operating activities stands for capital expenditures as expected to total between 55 million and 60 million in 2020, which was approximately flat as compared to 2019 and reflects the offsetting effects of our improved adjusted EBITDA and the conclusion of our Lam collaboration. For the first quarter, we expect products and service revenue of approximately 25 million to 28 million representing pro forma products and service revenue growth of 26% to 41% this wider than usual quarterly range reflects uncertainty as to the impact of COVID-19 on our Q1 results. As recently as yesterday there were additional reports of potential travel and other restrictions that may impact countries where we do business both in and outside of Asia. At this time, we have elected to set our full year guidance. As for me, any impact will be reflected primarily in the first quarter or current range reflects base nCounter revenue of 19 million to 21 million, which as soon as an approximately $1 million to $2 million impact of potential business disruption due to COVID-19. Our Q1 range also includes 6 million to 7 million in GeoMx revenue, which reflects a more tempered pace of instruments shipments as we catch up on installs and training for system shifts in Q4. Also, as Brad mentioned in his remarks, we currently expect GeoMx system orders to grow by approximately 50% this year, which wasn't for an expectation of 15 plus orders in Q1. This number of expected orders is consistent with the typical Q4 to Q1 seasonal pattern we'd experienced with nCounter. Our correct Q estimates for Q1 GeoMx revenue and system orders at this time assuming negligible COVID-19 impact on GeoMx. Now, I'll turn the call back over to Brad for closing comments.

Thanks Tom. In closing, 2019 was a transformative year and 2020 is off to a great start. The GeoMx roadmap and build this week secures our leadership in translational research and provides a strong entry into the discovery markets. We're set up for acceleration and our revenue growth in 2020 while making important steps on the path to breakeven. I look forward to updating you on our progress over the course of the year. With that, I'd like to open the line up for questions.

[Operator Instructions] Our first question comes from the line of the Doug Schenkel from Cowen and Company.

This is Adam Wieschhaus on for Doug. Thanks for taking my question. Your guidance of 90 new GeoMx orders for 2020 would be more on in a quarterly basis than the 20 generated in Q4 19 or the 15 you generated in Q3 19. So, just trying to understand that if you believe this inflection orders will be timed with the launch of your new product such as your upcoming NGS compatibility or the more broad-base just trying to understand your line of sight to heading this number for 2020?

I think we have a good line of sight dating this number for 2020. Most of our instruments sales this year will continue to go into the translational market and are already supported by the funnel that we've been building in the translational over the -- almost 12 month period since the launch last April. We have great leading indicators of that strength, coming both through our funnel which increases every week, and the great leading indicator of technology access programs, test drives that have been done by customers who are interested in potentially purchasing with GeoMx. In addition, we will begin to benefit from the entry into the discovery markets through the opening up of NGS readout. That benefit will accrue in terms of orders largely in the second half and will further increase the overall momentum of the business. But overall in terms of pacing throughout the year, I'd say, if you look at the 50% year-on-year increase, I would expect that to be spread pretty evenly throughout the quarters of the year. As Tom mentioned, that would imply about a 15 plus set of orders in Q1, up from a 10 plus that we did in Q1 2019.

The divestiture to Veracyte removed the material amount of operating expenses as evidenced by your 2020 OpEx guide. You've also chosen to de-prioritize the Hyb & Seq program relative to GeoMx rather than investing in both. I think you've mentioned there's just a lot of excitement around GeoMx, when you are choosing to capitalize on that in the near term. Was there any thought to maintain the Hyb & Seq development program considering the restructured P&L? And I believe in the past, you've talked about a profitability of around, at around $200 million in revenue. Could this happen sooner now?

Yes. So, I want to be really clear. We are continuing to invest in Hyb & Seq, while we are not investing perhaps at a pace on a dollars per quarter basis that we did at the peak of that program when we were collaborating closely with Lam Research. We are continuing to invest in that program and we do believe that, that chemistry will have an important part of our future product lineup. That being said, with GeoMx we have really once in a career opportunity to transform an entire new field of spatial genomics. And we and the board and the entire management team are excited to fully capitalize on that opportunity on behalf of our shareholders. So, we have moved resources, we have reduced the number of resources on Hyb & Seq and move them over towards GeoMx and will continue to do so. If you look carefully at the guidance that Tom provided, I think you will start to see the mathematical underpinnings of how we will achieve cash flow breakeven at the $200 million revenue mark. I think we're showing that really for the first time here in this guidance. That being said, I do not think that we are constraining our operating expense enough to breakeven any faster than that. I mean, that remains our goal and the divestiture of the diagnostic business to Veracyte was just one important step along that goal. I think in the year ahead, look for us to grow our partnered service revenue at a substantially faster rate than we grow operating expenses, but we remain sort of guided by the idea of cash flow breakeven at $200 million in product and service revenue.

Okay, it's great. And then maybe just to close on coronavirus, I appreciate a commentary on the potential impact of that Q1 revenue. But have there been any updated thoughts on your exposure to China from a supply chain perspective?

Yes. So, we've been obviously carefully looking at both our exposure from a supply chain perspective and the disruption that our customers are feeling, that could lead to delays in orders or deliveries. I'm glad to say, we don't have any major supply chain challenges at this point. Our instruments themselves are assembled and manufactured in North America and in Japan, where we have not yet seen the major disruption, but we're obviously keeping an eye on that, and we'll let you know if anything changes.

Our next question comes from the line of Catherine Schulte.

This is actually Tom Peterson on for Catherine. I'm just wondering that AGBT this past week, we had heard one of your special competitors talk about, enabling protein analysis and FFE capabilities in 2021. So can you just remind us how you're viewing your competitive positioning specifically in the discovery market?

Yes. So, I think, we did hear a lot here at AGBT about spatial, excitement about spatial. And of course with that comes, new product offerings and new product road maps and the overall spatial genomics area. I would again divide into the translational and discovery markets. In the translational market, we feel very secure in our leadership. GeoMx provides today, not in the future, but today the exact combination of ability to look at any sample, meaning both FFPE and fresh frozen, any targets meaning RNA work protein on any region as related to the sophisticated regional selection tools inside GeoMx. Other competitors are beginning to lay out a roadmap that emulates some of those features. But the timeline of that roadmap is such that we think we will be able to continue to extend our leadership, including in protein expression in the translational market before some of those capabilities are available in ways that translational customers are likely to embrace. The discovery market is different. We're the newcomer of the discovery market. We feel very confident in the roadmap we've outlined, but we see more competition in that market in the year ahead and it's incumbent on us to demonstrate the full power of GeoMx when combined with next generation sequencing, which we feel we've done an exceptional job of here.

And then, do you have any sense that you'll see some of the customers holding off on a GeoMx order until you see the whole transcriptome unlocked? Or do you think they'll go ahead in time in anticipation with this capability?

Overall, we think the unveiling of the whole transcriptome capability on a roadmap increases customer interest in purchasing GeoMx systems. It does not decrease it. It's hard to predict the exact timing of when all the interests were generating and discovering what will manifest as orders. We'll begin to see that in the second half I would expect, and we'll have more commentary on the mix of instrument orders between the translational and discovery markets as the year goes on. But to answer your question, I don't think that the unveiling of whole transcriptome in any way hurts the momentum of GeoMx. It helps it.

Last one for me and understanding it's still early, but you know, any qualitative feedback you guys can provide from some of the early access on the sequencing readout?

Well, I mean, I think the best feedback is the 10 studies that were all presented here this week, all of which use NGS readout. Most of those were done with the NGS capability was affected here in our Seattle facilities, but some was done by our early customers who've actually received the full pipeline and being able to run the sequencing data themselves. And if you were here, you would have seen overwhelmingly enthusiastic presentation of those results and really positive reception of them. So, I think it's the great showing of NGS readout across both cancer transcriptome and whole transcriptome data here this weekend and it's all positive so far.

Next question comes from line of Dan Brennan from UBS.

Brad, I know you gave a lot of information during the prepared remarks and some of the Q&A. But can you just review again, if we think about whatever information you provided on the sales funnel to the first question, Doug's team talking about the 90 orders and you particularly give visibility on the pharma? Can you just remind us again? I know you've mentioned some qualitative factors during prepared remark, but just what can you share with us today about metrics on the sales funnel and kind of how that may be expanded overtime?

Yes, I mean, our sales funnel for GeoMx expands every week. We have whole teams now dedicated to marketing efforts to lead qualification efforts, and it doesn't just grow and major conferences like we're holding here, it grows every single week. And it grew substantially over the course of the year from 2019 to the beginning of 2020. And if we apply our basic funnel metrics, then the conversion rates that we're seeing, the current funnel it supports50% increase in order this year. We're not done obviously generating new leads. Just this week, we had 170 participants validated their interest in spatial by sitting in a dark room for four hours, when there was an 80 degree beach day happening 100 yards away. Interestingly, we recorded this spatial summit that took place on Sunday. And we used the recordings to host earlier this week, what we call a GeoCast set of summits in 11 cities simultaneously around Europe. We had another 275 people watch replays of some of the summit presentations and engage with us there. We have similar plans in North America over the weeks ahead. So, we are both generating leads at a very rapid pace, and we're qualifying those into the sales funnel, and feel that, that underpins the guidance that we provided.

And given the increase in China and the visibility in the publication, have you seen conversion rates tick up? I'm sure it's a complex formula depending upon the type of customer that's expressing interest? And just wondering what you can share on conversion rates?

No. I mean, it's so early to you can't parse conversion what race to finally over time. So, we feel good about the conversion rate. We've seen the technology access program and the test driving type of offering that we have, become an important part of converting interest into actual orders. I don't think anything has changed there almost for the past several quarters. We've talked about 30% of our instrument orders coming through technology access program test drives that will continue. And then, we'll look forward as good strong sequential growth in technology access program test drives, which really over the course of 2019 grew almost 20% sequentially every quarter. So those are the kinds of indicators that we see. I am not really in a position to provide too much more color, but that's quite a lot to work with.

And then, maybe just one or two more. I know when the previous question or maybe two of those, the questions related to the competitive landscape, and obviously there's -- given the size of the market, there are a lot of companies going after. But specifically related to protein, did you mention that you, we should expect even more innovation or changes to how you're doing a translational approach or I was kind of unclear from your answer whether or not, there is some improvements to be expected?

Dan, I don't think I alluded to any improvements though we're not standing still. On the protein readouts, the primary thing we're doing now is continuing to add antibodies to our library. So today, I think we have about 200 antibodies that are available to select from. We have a team that's dedicated to continuing to validate and label antibodies. We of course have our partnership with Abcam, the largest antibodies manufacturer out there. So, for protein for us, at this stage, it's really about growing the size of the library, so that our customers have just a tremendous number of proteins to choose from. And I think we have a nice head start there now.

Any maybe last one, just on the discovery side. What your plan to address that market in terms of a sales force? Is that baked in through OpEx? Because, I mean, you're going after relatively -- I don't know how much overlap there is any kind of markets to that discovery markets? I'm just wondering, what you can share with us today? How you've attacked that market? And to touch for that market develops faster than the translation market just given your experience when you're targeting that market?

Any operating expense associated with the launch into discovery is baked into our guidance. The same sales reps who carried nCounter in GeoMx for translational customers will also be the sales reps who are targeting the discovery market. And the discovery market is usually different researchers within similar institutions to academic institutions to what we've had in the past. So where we might go to Harvard University and one day and talked to a cancer researcher, we could go to Harvard University tomorrow and talk to a biological researcher. So, we haven't felt the need to make a major headcount increase. What we have done, of course, is redirect our small group of specialists sales force -- sorry, GeoMx technical sales specialists towards the cultivation of those customers who'd be interested in the NGS readout. As we've been now in the GeoMx launch for about 10 or 11 months, most of our sales reps have become capable of selling GeoMx to translational customers without much handling from our technical sales specialists. That frees them up to focus on the new offerings like the NGS readout. So, that's the way that we're kind of evolving the sales force. In terms of the pacing, yes, it's just too early to say whether adoption and discovery will be faster than adoption and translation. We'll able to update that as the year goes on.

[Operator Instructions] Our next question comes from line of Dan Arias from Stifel.

This is Carolina Ibanez Ventoso for Dan Arias. Thank you for taking the questions. Brad, in the past, you've mentioned that about 60% of the completed top projects using DSP were for unique accounts. Are you still finding that portion of unique accounts remains about the same for your new TAP project orders? Or are you seeing an increase there?

Yes, I'd say today, the fraction of new TAP orders is greater than 60% at this stage. We're trying to evolve the technology assets program, away from its original mix of doing large studies that were designed to really answer scientific questions and results interview papers, towards something that's really meant to be simple, fast, relatively modestly scaled test drives. And as a result, people who want to do large GeoMx product projects, and not own an instrument when redirecting them to one of several CROs, who've adopted GeoMx and we're allowing them to service that so we can continue to direct our technology access program towards potential instrument customers. So, I expect that number to continue to go up in terms of the percentage of people who are coming along to take their first test drive.

Can you also comment on the progress made from the transition of the diagnostics business to Veracyte? And in addition to the commercial product lines already mentioned, the Prosigna LymphMark and FLEX. Do you stand to benefit from collaborations between Veracyte and biopharma companies like the one that, it was recently announced with Acerta Pharma, while they are still in their R&D phase before the commercialization of diagnostic test?

Well, we will participate as needed in those collaborations. Our participation will be, I think, largely focused on the manufacturing of the consumables as the sort of contract manufacturer. I would not say that we stand to be a primary beneficiary of those efforts. That's really the role of Veracyte and the team that they have. So any benefit that we would experience is built into our guidance and is relatively material in size.

And then the last one for me. Now that you're coming out from the AGBT conference, can you review for us what other conferences or events are going to be important for the DSP platform this year? And then on the Hyb & Seq sites, when can we expect an update on commercial application from partners there? Thank you.

Sure. So, for GeoMx, the next major conference will be AACR which this year happens, I believe in late April. AACR is the most important conference of the year for NanoString to engage with translational oncology research customers. It's the meeting at which we launched GeoMx last year and it's the place where we'll really be unveiling the Cancer Transcriptome Atlas in a commercial way. We also know already that some of our customers who've been working with the GeoMx system will have some exciting data that are presenting. I'm aware that these two oral presentations so far that have been awarded to GeoMx customers. And so stay tuned, I think we'll have a lot of demonstration of what the technology is capable of at that time. And that's probably as much as I can comment on the GeoMx front. For Hyb & Seq, I think don't expect a lot in the way of updates until probably the second half of the year as we start to enter meetings like ASHG and the AMP conference, where we traditionally provide our technical updates. I don't think we'll probably have a lot to updates to provide until the second half.

Next question comes from the line Julia Qin from JP Morgan.

Hi, good afternoon guys. Congrats on coming out of a successful AGBT. I just had a question regarding GeoMx ASP because looking from your guidance of 25 million to 30 million of instrument revenue for 2020. It seems to suggest an uptick in ASP compared to the 230 K that you guys realizing in 4Q. So could you just help us understand a little bit better the underlying assumptions here? And where do you see GeoMx ASP going in the next couple of years, especially in light of competition? Thanks.

Sure. I'll take the quick one, the first one quickly. So, as we mentioned in the last couple of calls, we've been working through some of the early GeoMx priority site orders that we took back in 2018, which were bought part of bundles. And so, the ASPs relative to those orders were slightly lower than what we expect to realize this year. So, we've gone from 220 in the Q3. Q3 ASP approximately through about 230 this quarter to what is referred in our guidance is about 240-ish or so. ASP throughout the course of this year of our base price of 295, which is pretty consistent with the types of discounts that we see, on other platforms that we sell a little bit less than other platforms given the early stage of this, but generally speaking, that's the trend that is built in to our assumptions. And I let Brad comment on some of the longer term ASP trends we might see.

Yes. So for now, I think your pricing is -- we're in a good position with respect to pricing on GeoMx. If you compare our instrument to the other spatial genomics instrument out there, from Fluidigm, GeoMx looks like a bargain by comparison in terms of the capital expenditure there's required. The other major competitor has chosen a format that does not have instrumentation at all. So, it's not really -- it's sort of an apple and oranges type of comparison in terms of the competitive dynamics. So, I'm optimistic that we will be able to maintain instrument pricing. By way of reference, we've maintained the list price of the nCounter system at $235,000 for the base max and its equivalent now for a decade. And discounting has been relatively consistent over that whole period. So, I think we have a good history of maintaining instrument pricing discipline in our traditional core business and I anticipate the same in the spatial business.

Last question comes from the line of Dan Brennan from UBS.

I wanted to follow up one. Just in terms of the presentation there were at AGBT or other research that your customers are doing, in what cases are the customers finding new important things that they wouldn't have found, if they had not done this spatial approach? Because I know early on, it was really validation, but the key is going to be finding new signatures that they can't find. So maybe can you just discuss that a little bit? Number one. And then also I think the question that we're going to ask. What was the split this quarter in terms of placements between the types of end market customers, CRO versus biopharma versus academic? Thanks.

Yes, I'll do the second question first. So our mix of end market is continued to be about 60% academic and then 40% biopharma plus CRO, with most of those being biopharma. So, that's how remarkably stable over the period of time that we've been taking orders for the GeoMx system. In terms of the biological insights coming off to GeoMx, I think they're incredible and they're happening in almost every case. None of the 10 presentations given here at AGBT were technical validations in nature. They were not designed to compare GeoMx's performance against traditional immune to chemistry or other profiling. They were all focused on biological insights. One of our presentations, that was given just two nights ago for instance successfully identified a new potential diagnostic marker in the development of melanoma. This was done by identifying markers that are expressed more frequently as melanoma develops. And in particular, by looking at expression in the non-melanoma cells, the keratinocytes, which experienced damage as the melanoma develops. And so, it's not usually the place where people look for biomarkers, but using spatial profiling, one was identified, that seems very intriguing. If you look at our peer-reviewed literature, of the 13 peer-reviewed papers, only one of those papers is a technical paper that designs is simply described the performance of the system. Every other publication is a biomarker publication that identifies new biology using the tool. So, we really see this as a very productive instrument in terms of new biomarker identification, where we've moved past the stage of simply having people benchmark our performance versus other platforms.

At this time, there are no more questions.

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.