Ladies and gentlemen, thank you for standing by, and welcome to the Quantum-Si Q4 2021 Earnings Call. [Operator Instructions] Please be advised today's conference is being recorded. At this time, I would now like to turn the conference over to Juan Avendano, Head of Investor Relations for Quantum-Si. Juan, please go ahead.

Good evening, everyone. Thank you for joining us. Today, after market close, Quantum-Si released financial results for the fourth quarter and full year ended December 31, 2021. A copy of the press release is available on the company's website. Joining me today are Dr. Jonathan Rothberg, Interim Chief Executive Officer; Claudia Drayton, Chief Financial Officer; and Dr. Michael Mina, Board Member and Chair of Quantum-Si's new Scientific Advisory Board. Before we begin, I'd like to remind you that management will be making certain forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements of our press release. For a more complete list and description of risk factors, please see the company's filings made with the Securities and Exchange Commission. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, February 28, 2022. Except as required by law, the company disclaims any intention or obligation to update or revise any forward-looking statements. During this call, we will also be referring to certain financial measures that are now prepared in accordance with U.S. generally accepted accounting principles, or GAAP, including adjusted EBITDA. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the press release. With that, I will turn the call over to Dr. Jonathan Rothberg.

Thank you, Juan. Good afternoon, everyone. Thank you for joining us. We're excited to discuss the progress that Quantum-Si has made over the last 2 months as we work to commercialize our single molecule protein sequencing system. To summarize, in 2021, we more than doubled our employee base. We took proactive measures to secure our supply chain. Some of the best scientists in the world are using our instruments, and we ended the year with over $470 million in cash on our balance sheet providing us with sufficient runway to continue investing in the business. In today's call, we will review the previously announced CEO transition, our unique value proposition, opportunities in immunology and long COVID, provide a business update, and present our fourth quarter full year financial performance and outlook for 2022. We will then open the lines for questions. Quantum-Si has created a new generation of semiconductor technology to pioneer and enable next-generation protein sequencing. The next great frontier after next-generation DNA sequencing. Next-generation DNA sequencing provides insights by decoding our DNA. Quantum-Si's next-generation protein sequencing by decoding proteins will unlock a new understanding of disease and illuminate paths to health. As reported on February 14, the Quantum-Si Board of Directors appointed me as Interim CEO. I come back to this role well prepared after founding the company in 2013 and previously serving as its CEO from December 2015 through November 2020. While I'm excited to be back leading this productive and experienced team, I am an interim CEO and along with our Board of Directors, have initiated the search for a long-term CEO. We are looking for a strategic leader who can inspire our scientists and engineers, understand the commercial opportunities in proteomics and execute exceptionally well, a leader with an extraordinary ability to inspire, motivate and…

Good afternoon. As Jonathan mentioned, in addition to being a physician, I'm an expert in vaccine immunology and infectious disease immunology and epidemiology, recently a professor at the Harvard School Public Health Medical School, and I'm truly honored to chair Quantum-Si's Scientific Advisory Board. I want to discuss the value of single molecule detection sequencing and recognition of post-translational modifications to the field of immunology today. Immunology is the fastest-growing field of biosciences. It's obvious in how it touches the world of infectious diseases, along with better understanding infections, with the pandemic virus most relevant today, tools that enable deeper probing of the immune system will have some of the greatest benefits in developing treatments for cancer, chronic and autoimmune diseases or reversing allergies, increasing longevity and other physiological enhancements, all of which have underpinning in immunological surveillance responses and aberrations of those responses. Multiple sclerosis or MS is a debilitating disease where the immune system attacks the nerves that course through our bodies. Recently, we showed that MS results from an aberrant immune response to a prevalent viral infection. Discovering this required laborious deep profiling of the immune response using a multitude of immunological approaches in thousands of people. These approaches were slow because they had to be targeted based on a priority knowledge and assumptions. Had we had a digital single molecule detection in massively parallel protein sequencing, discovering the link between MS and Epstein-Barr virus infection would have been much simpler. It would have enabled us to forgo the multitude of targeted tools and instead sequencing quantify the molecules of the protein to quickly detect the differences between those with and those without this disabling disease. Quantum-Si's digital readouts will allow a more precise profiling of people's immunological responses that will inform clinical decision-making and therapeutics. Just…

Thank you, Dr. Mina. I will now discuss organizational updates and progress towards commercialization. We have continued to scale and expand the organization by attracting high-caliber talent and securing space for operations. We started 2021 with 72 employees and ended the year with 153. We've continued to access talent through our recently opened San Diego site. And later this year, we plan to move our Connecticut teams to new headquarters close to Yale University. We continue to focus on the entirety of our supply chain and are well positioned to fulfill product demand in 2022 and into 2023. The successful integration of Majelac Technologies brings critical chip assembly and packaging capabilities in-house. We have increased our chip packaging production rate to meet our research demands and are on path to support commercial launch. We are also working closely with our reagent vendors to scale up consumable supply ahead of the launch. Our launch applications are focused on the ability to decode tens to hundreds of proteins while simultaneously understanding their variations and modifications. This mirrors what we saw in DNA sequencing where the bulk of routine sequencing applications were and still are focused on set of genes, mutations or DNA modifications of interest. The power of Moore's Law, coupled with our technical advances will expand the scope of our applications in commercially addressable markets with each subsequent upgrade to our technology. The goal of proteomics is to identify and compare proteins under different conditions, study their interactions, decode their modifications and use this information to understand biology, develop drugs and create diagnostics. Other digital proteomic solutions rely on mass spectrometry or DNA sequencers. This equipment is expensive to acquire and operate, blind parts of the proteome and/or indirect. Quantum-Si's solution is an easy-to-use, affordable bench-top system. With ease of use…

Thank you, Jonathan. Hello, everyone. Let's discuss the details of our Q4 and full year 2021 financial performance. Research and development expenses in the fourth quarter of 2021 were $14.4 million compared to $6.4 million in the fourth quarter of 2020. The increase in R&D expenses was primarily driven by the increased number of employees, stock-based compensation expenses and product development activities. Selling, general and administrative expenses in the fourth quarter of 2021 were $13.4 million compared to $3.2 million in the fourth quarter of 2020. The increase in SG&A expenses was driven by additional employees and stock-based compensation associated with our scale-up in costs related to being a public company. In aggregate, total operating expenses in the fourth quarter of 2021 were $27.8 million compared to $9.5 million in the fourth quarter of 2020. Net loss for the quarter was $29.4 million compared to a loss of $9.5 million in the fourth quarter of 2020. Adjusted EBITDA for the quarter was a loss of $20.4 million compared to a loss of $9 million in the fourth quarter of 2020. For the year, adjusted EBITDA was a loss of $64 million for 2021 versus a loss of $33.9 million for the year in 2020. A reconciliation table of adjusted EBITDA to GAAP net loss is provided in our press release filed earlier today. As of December 31, 2021, we had $471.3 million in cash, cash equivalents and marketable securities. In summary, we have a strong cash position that allows us to continue investing in our technology, in our business and to prepare for commercialization. We believe that this cash position will support our operations through at least the year 2024. Given the recently announced CEO transition, we are not providing revenue guidance at this time. We plan to launch and commercialize our protein sequencing system in the second half of 2022. We continued hiring significant technical talent in Q1, but we expect hiring to slow down as we integrate new people into the organization. We are also ramping up investments in product development and supplier readiness initiatives. Later in the year, we expect the pace of hiring to pick up again as we prepare for commercialization. With that said, we expect non-GAAP operating expenses to grow about 70% to 80% year-over-year in 2022. And now I would like to turn the call back over to Jonathan for closing remarks.

Thank you, Claudia. In summary, Quantum-Si has unique team in terms of depth and breadth of their experience, bringing disruptive products to market. Quantum-Si operates at the intersection of chemistry, biochemistry, molecular biology, nanophotonics, semiconductor chips and AI to enable a digital transformation of the $50 billion proteomics market. Positioned to advance life science research and health care, Quantum-Si is motivated by the vision that the products we work on will save the life of someone we love and improve the lives of billions of people around the world. With the technology, opportunity, team and nearly $0.5 billion in the bank, Quantum-Si has a solid foundation for success. We continue to make progress needed to launch our first of its kind next-generation single molecule protein sequencing technology in 2022.

[Operator Instructions]. We will now take our first question from the line of Kyle Mikson of Canaccord Genuity.

So good to hear the launch is expected now in the second half of the year. That's good. Just wanted to confirm, though, how many orders you have right now for the system. And just given everything that's going on internally with the company, how likely is it that you'll be able to fulfill those orders in '22 and place those systems? And then how likely that the shipment number for '22 is substantially less than what was kind of previously provided?

This has really been an amazing few weeks as I've been working, Kyle, with the team. And one of the things that I want to highlight is this team is experienced and this team understands the supply chain. We literally are leveraging the supply chain that Apple established in the Far East. We've also brought in-house components for 500 of our first platinum units. So we're well positioned on the instrument side to deliver -- launch product. On the chip side, we literally took control of the supply chain by buying an assembler of chips. This puts us in a very unique position. I often comment on the breadth of skills we have from making our own semiconductor chips, the packaging, to lasers, to supply chain. And these both are examples. We were well aware of issues with supply chains in semiconductors and we've got a handle on it. So we're well positioned to deliver to our first customers. In terms of those customers, they'll all be 100% focused on protein sequencing. There's truly never been something like this, never before in an individual lab could you decode proteins and find those protein modification. As we've mentioned, we do have over 1,000 opportunities that we have identified. And 60% of them are directly related to protein sequencing. Our goal is to address the segment of those 600 that are most likely to be pioneers and lead to publications that will lead to mass adoption of this technology. So we have a pipeline of over 1,000 potential customers, 600 were -- are focused on protein sequencing, and we'll be delivering to those that we think will have the most pull-through in their applications and lead to the next adoption. Remember, we've done this many times before. This isn't the first time we've launched a complex system, instrument, chips, reagents and software. So we know these customers, we've identified 1,000 of them. We have parts for 500 builds. And this year, we'll deliver to those that we think will be the best in terms of future chip pull-through.

Great. Dr. Rothberg, that was actually encouraging. And I guess an early access launch would be first before the commercial launch at the end of the year, second half of the year. So maybe could you just walk through like the next steps before that early access program. And maybe like what's on the docket as it relates to like publications and conference presentations, things like that.

For us, this is deja vu all over again and not just because of Ion Torrent, but also 454, which was the first DNA sequencing -- next-gen DNA sequencing brought to market. So the key thing and our key focus now is to get white papers out, pioneering the use of next-gen massively parallel protein sequencing. So we're working with early adopters and others to identify problems, like working out the mTOR pathway, where you bring down one protein and you want to see how drugs affect that. So our goal, over the next 6 months, with early adopters and internal resources is to publish a series of 3 to 5 white papers that are prototypical of the problems people will face in identifying and understanding signal transduction and understanding neoantigen and understanding peptide hormones. And so the idea and the focus over the next 6 months is those 3 to 5 white papers that will summarize the big areas that will drive placements of future machines. So what you'll see from us is white papers, conferences, and we've submitted a paper which is available on the technology. So it's all about getting those early adopters, all about those white papers, all about establishing protein sequencing as the go-to tool, whether you're doing research or biomarker discovery. I will note that when we looked at modifications of DNA, it gave us companies like GRAIL because you could associate those modifications with cancers. As Dr. Michael Mina mentioned, oncology is driving us now, but now we have a much more powerful tool set. And you can look for modifications, whether they're external glycosylations of proteins in long COVID, or if you're studying how the protease inhibitors work for COVID, you'll be able to see those complexes and understand how they're modified and have a whole new generation of biomarkers. So all of the work over the next 6 months is focused on white papers demonstrating the promise of our technology across a range of applications that will really set the precedent for the future use of next-generation protein sequencing.

Okay. That's great. That's helpful. And maybe one for Dr. Mina actually. So Dr. Mina, you talked a lot about like the clinical diagnostic opportunity for the technology. I guess a few questions about that. I mean, first, like how long until that could really be realized? I mean, are we talking 5 years or 10 years? I'm just curious about that. And then also, I mean -- and maybe this isn't the best question for you, but if you could comment, it would be great. Obviously, you need a pretty solid throughput in dynamic range for that kind of application. I'm just curious if you could comment on those kind of attributes of the platform as it kind of stand and stay where it has to get to in the future.

Sure. Yes. Some of the early clinical applications, we don't have to wait until every amino acid is sequencable. And we're able to do massively parallel approach and continue the scale that we can do with NGS right now. Obviously, that took years to get to the NGS. And what we can do, for example, some of the earliest applications are going to be aptamer based. We can start to design probe that will be a readout based on their amino acid bar code using the sequencing platform that Quantum-Si is building, and those aptamer-based probes can essentially be then targeting different molecules that we're interested in. And the real benefit here is the massive sensitivity gains that we're seeing with Quantum-Si being able to really do digital quantification and get down to sort of what's normally just considered negative result on an ELISA, let's just say, in a normal -- even a high sensitivity ELISA. When we start really getting into the digital single molecule space, you start to see a whole new world of baseline levels. So when we can start probing those and really being able to use those to detect single proteins of interest using aptamers and other molecular identifiers that can be read out on QSI instruments, that will be, I think, where we start to see the very first clinical applications of this and really getting it into sort of highly parallelized NGS level throughput for proteins themselves. I think that, that's -- I don't want to necessarily surmise when exactly that's going to be brought into the clinic. It took years and years for us to really be -- it's still being adopted, frankly, for DNA sequencing as a clinical tool. But I do think that, that we'll start to see clinical applications that are very targeted in the coming few years, really for when we start creating the reagents that are going to be for very clear indications.

Okay. That was great. That was great. And Dr. Rothberg, I just want to go back to you. So I know you guys aren't providing guidance. But I mean, can you kind of speak to your expectation that you'll be able to generate $1 million in revenue in any given quarter in '22? I'm just -- as like a benchmark, I feel like that's a decent kind of bar to set for the end of the year.

Well, I think I should just roll Claudia under the bus. But very seriously, we're in a transition now. I'm interim CEO. We're bringing in a new CEO. This is going to be a super impactful technology. We have a team that have done this many times before. When we say we're going to commercially launch in 2022, we mean a significant launch. Again, this is the team that pioneers DNA sequencing. This is the team that put DNA sequencing on a semiconductor chip. We're looking really to change research globally. So launch means launch. We have a team that can do it. I have to be fair. We're hiring a CEO. We've brought in Spencer Stuart. I have Ruth Fattori, who worked with Indra Nooyi and is on our Board, spearheading it. Let's let the new CEO give you guidance. The guidance I can give you is this is transformational. We have $471 million in the bank. We have 200 experienced people and this is the greatest opportunity I have seen in my career.

Okay. No, I respect that and definitely appreciate it. It's fair. I'm going to leave that there for my questions. Congrats on success this year.

There are no additional questions waiting at this time. [Operator Instructions]. Our next question is from the line of Jeff Manookian [ph].

Just a couple of quick questions. First of all, once you place a machine, can you give an idea of how you would be targeting, say, reoccurring revenues with that customer, if any, if you can kind of give us an idea about that? And also, I know you're not obviously giving projections over the next year, but can you kind of give an idea of, let's say, within, say, 5 years from now where you might think the company might be in terms of sales?

Let's start with your first question. This is clearly a razor and razor blade model. We have our instruments, which we placed on the order of $70,000. We then have a disposable semiconductor chip, and we're looking to make placements initially in clinical labs -- I'm sorry, initially in research labs that are expected to run the machine 3 to 5 times a week. So that would entail the sale of that chip as well as the kit for sequencing the proteins on that chip. Historically, we've been able to have pull-through on instruments like this, where you expect that the pull-through in reagents over the first year becomes equivalent to the sale price of the instrument. So you'd like a $70,000 instrument within the first year to pull in $700,000 worth of reagents. In terms of placements, we ordered and have parts for 500 units at $70,000 each, and we expect those parts to supply of throughout this year and into next year. In terms of impact, it's clear to us that protein sequencing will be as big potentially as next-generation sequencing, and we've all seen how that market has grown quickly. And I see the next 3 to 5 years being a time of exponential growth as those early adopters from our first year of sales establish precedents that clinical labs can use and clinical labs have beautiful pull-through because they can use those machines to instead of running 3 or 5 chips a week, run 3 or 5 chips every 2 days. So our goal is to establish early adopters, establish people who will set the precedent for the use of protein sequencing across a range of applications and encourage those people doing clinical research to help pharmaceutical companies in their trials and then ultimately move into…

There are no additional questions waiting at this time. So I'm going to hand the conference back over to Juan for closing remarks.

Thank you all for your participation today. We look forward to updating you on our progress in the next quarterly earnings call. Have a good evening.

That concludes the Quantum-Si Q4 2021 Earnings Call. Thank you all for your participation. You may now disconnect your lines.