Nanostring Technologies (NSTG) Q3 2019 Earnings Call Transcript

Nanostring Technologies (NSTG -29.03%)
Q3 2019 Earnings Call
Nov 04, 2019, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to NanoString's third-quarter 2019 operating results. [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, Doug Farrell, VP of investor relations. Please go ahead.

Doug Farrell -- Vice President of Investor Relations

Thank you, operator. Good afternoon, everyone. On the call with me today is our CEO and President Brad Gray, as well as, our CFO Tom Bailey. Earlier this afternoon, we released our financial results for the third quarter of fiscal year 2019.

If you have not seen that press release yet, you can find it on our website. During this call, we will make a number of statements that are forward-looking, including statements about 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 offerings. Forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, including those described from time to time in our SEC filings. Our results may differ materially from those projected on the call today, and we undertake no obligation to publicly update any forward-looking statements.

Later this week, we'll be attending the AMP Conference in Baltimore. Hope to see many of you there. And the week after that -- or sorry, two weeks after that, we'll be in New York for both Stifel and Canaccord. I know we've got a number of you in the line on our calendars there.

So with that, I'm going to turn the call over to Brad.

Brad Gray -- Chief Executive Officer and President

Thanks, Doug. Good afternoon, and thank you for joining us today. I'm happy to report that our third-quarter results reflect strong execution and continued commercial momentum across the business. During Q3, we grew our product and service revenue by 23%, driven by 48% growth in instrument revenue.

Our core nCounter business delivered its seventh straight quarter of double-digit growth with solid results across both academic and biopharma customers. Shipment of our first commercial GeoMx DSP systems accelerated our top-line revenue growth and generated resoundingly positive customer feedback. With our GeoMx DSP revenue tracking toward the top end of our previous range, we are updating fiscal year 2019 guidance for product and service revenue. In my prepared remarks, I'll provide an update on progress toward achieving our strategic objectives for 2019, before turning the call over to Tom to review the details of our operating results for the quarter and outlook for the balance of the year.

As we outlined back at the beginning of the year, our first strategic objective for 2019 is to sustain double-digit growth in our core nCounter business. We have consistently met this objective, and during Q3, delivered core nCounter revenue growth of 12%. nCounter instruments revenue grew 8% to $5.8 million, bolstered by particularly strong demand from biopharma customers. Oncology applications motivated about 60% of new nCounter placements with most of the balance coming from immunology and neuroscience.

Our installed base of nCounter systems increased to more than 820 systems during Q3, an increase of about 18% over the prior year. Our total consumable revenue for the third quarter was $15.3 million, an increase of 11%, as growth in life science consumables was partially offset by flat Prosigna revenues. On the life sciences side of our business, we continue to benefit from our expanded consumable sales team who once again delivered growth in both our panels and our custom code sets. The majority of consumable growth came from our portfolio of oncology panels, including the PanCancer and 360 families, as well as, newer offerings such as our CAR-T characterization panel.

In addition, product offerings outside of oncology are making important contributions to growth. Revenue from immunology and neuroscience panels increased by approximately 40% and 65%, respectively, over the prior year, and together, accounted for about one-third of our panel revenue. During the third quarter, we continued to expand beyond oncology by introducing two new immunology panels. In August, we launched a fibrosis panel to study pathogenesis and biomarkers of fibrotic diseases such as NASH and cystic fibrosis.

In September, we launched a human organ transplant panel that was designed in partnership with the Banff Foundation, a consortium of six leading transplant centers. This panel allows researchers to identify biomarkers of rejection, better understand the mechanisms behind tissue damage, as well as, to monitor toxicities of immunosuppressive drugs and opportunistic infections. We're getting strong interest from both researchers and commercial entities, and this panel generated the third-largest initial quarter of sales for any panel that we've ever offered. Turning now to diagnostics.

Our in vitro diagnostic consumable revenue was essentially flat over the prior year, as new guidelines on genomic testing in France temporarily stalled Prosigna's growth in Europe. That being said, growth in Europe is expected to return in 2020, benefiting from increased traction in the United Kingdom, as well as, a recent decision by the government of Norway to make Prosigna its only reimbursed genomic breast cancer test. Our second strategic objective for 2019 is to position our GeoMx Digital Spatial Profiler for long-term commercial success. The GeoMx DSP launch is an area of extraordinary progress over the past several months, during which, we have established strong momentum selling GeoMx DSP into translational medicine.

We are now beginning to lay the groundwork for our 2020 entry into discovery research and positioning our GeoMx franchise for continued growth. Q3 marks the first quarter of commercial GeoMx DSP shipments, which included 10 systems for $2.2 million of instrument revenue. Most of the customers who are currently receiving instruments were part of our GeoMx priority site program, and have waited for up to a year for their instruments to be delivered. The enthusiasm at these sites has been like nothing we've experienced previously.

These customers are hungry to begin new types of studies enabled by GeoMx, and they have been thrilled to see the technology in action. During our first on-site trainings, the speed and quality of the high-resolution scanning, and the intuitive user interface have created a palpable sense of excitement in these laboratories, and our service engineers and application scientists to install the systems and train those customers have returned with an infectious enthusiasm. With installation and training going as smoothly as we dared hope, we have geared up for even more shipments and installations in Q4. We expect to ship approximately 25 GeoMx systems in the fourth quarter, which would put us near the top end of our previously provided guidance of approximately $8 million in GeoMx revenue for the full year.

During the third quarter, we also generated orders for more than 15 additional GeoMx DSP systems, bringing our cumulative GeoMx orders to more than 70 systems as of September 30th. We are seeing a groundswell of interest in spatial biology that spans all customer segments and geographies. We're pleased with the sequential growth in GeoMx orders during Q3, and our overall volumes year-to-date are tracking ahead of our internal plans. Our Technology Access Program, or TAP, which gives customers an opportunity to generate spatial data from their own real-world samples remains an important element of our market development effort and a leading indicator of future GeoMx instrument orders.

To date, approximately half of GeoMx DSP instrument orders have come from customers who first experienced DSP through the TAP service. Our recent investments in scaling up our TAP service are paying off. And during the third quarter, both new orders and projects completed grew more than 30% sequentially. We completed more than 40 TAP projects, generating record TAP revenue of about $1.2 million while receiving orders for more than 40 new projects.

We're carrying a backlog of more than 50 projects, providing a growing funnel of future GeoMx instrument customers. A secondary benefit of our Technology Access Program is that it's helped expand the body of peer-reviewed literature that demonstrates the unique capabilities of GeoMx. Our cumulative TAP output now includes approximately 170 projects that have been completed for about 110 unique customers. These efforts have contributed to seven peer-reviewed publications to date, including an immuno-oncology paper from David Rimm at Yale University that included a high-resolution image generated by GeoMx that was featured on the cover of the September issue of the journal Clinical Cancer Research and was included in our press release today.

We are aware of a dozen more manuscripts that have been submitted to journals, and we are expecting this growing body of high-impact papers to continue to raise the profile of the GeoMx DSP. Later this week, we will engage with the potential translational research customers during the annual meeting of the Association of Molecular Pathology, or AMP, and the Society of Immunotherapy in Cancer, or SITC. On Wednesday, we'll be hosting several workshops at the AMP conference, including one in which Chris Corless from our DSP center of excellence at the OHSU Knight Cancer Center will present on the development of nCounter and GeoMx DSP assays for future CLIA lab applications. The SITC conference later this week will feature several studies with GeoMx DSP data, highlighting biomarker discovery in a variety of cancer types and describing how Bio-Techne's RNAscope reagents can be integrated into the GeoMx workflow.

To date, interest in GeoMx has come primarily from translational researchers looking for biomarkers of disease and reading out experiments using nCounter systems. Over the next year, we will begin marketing GeoMx to discovery researchers interested in studying more basic biology and reading out experiments using Next-Generation Sequencing, or NGS. We remain on track to enable several early access sites to begin reading out GeoMx on NGS later this quarter in preparation for the 2020 launch of NGS-compatible GeoMx instruments, software, and consumables. This morning, we announced two major initiatives that will lay the groundwork for successful expansion of GeoMx into the discovery market.

First, we're expanding our technology access program to include high-plex RNA assays, enabled by reading out GeoMx experiments on NGS. The first assay, we will offer is named the Cancer Transcriptome Atlas, a carefully curated panel that merges the content from our three most popular nCounter PanCancer panels and allows customers to simultaneously measure more than 1,600 genes with spatial context. Data from the Cancer Transcriptome Atlas will be featured in a poster at the SITC meeting later this week. By offering customers the opportunity to experience the NGS readout of GeoMx through our TAP service, we're making trial usage even easier than competing consumable-only platforms.

Our second initiative to reach discovery researchers is a partnership with the Human Cell Atlas, or HCA, consortium to provide preferred access to GeoMx to the 1,000-plus HCA member institutions. The HCA project is a global collaboration to identify, map and characterize the trillions of cells in the human body, and it has become the driving force behind the rapid growth of the single-cell biology market. HCA investigators have identified spatial biology as the next major focus of this audacious undertaking, and we're honored to have GeoMx become part of their landmark project. Our third strategic objective for 2019 is to advance our Hyb & Seq platform toward commercial launch.

We continue to make steady progress on the Hyb & Seq program and are increasingly focused on infectious disease applications. This is an area of high unmet need where a simple, fast workflow confers tremendous medical value and competitive advantage. We will provide an update on Hyb & Seq's potential within infectious disease later this week during the AMP conference, where we will present data demonstrating the ability to conduct blood-culture-independent pathogen identification, and rapid phenotypic antibiotic susceptibility testing using Hyb & Seq. We look forward to seeing many of you there.

Before turning the call over to Tom, I'd like to highlight some important additions we've made to the NanoString team over the past few weeks. In early October, we added Mark Winham as our senior vice president of operations. Mark spent a decade with Applied Biosystems and Life Technologies, where he was responsible for more than 40 manufacturing sites worldwide and more than 2,500 employees. I'm excited to have Mark join the team at a time when we're bringing online a second reagent manufacturing plant, and significantly expanding our portfolio of products.

We're in a great position to benefit from his decades of experience in scaling operations globally. Last week we added Don Kania to our board of directors. Many of you will remember Don from his successful run as the president and CEO of electron microscopy leader FEI, which was acquired by Thermo in 2016. Don's experience successfully scaling a life sciences company from $300 million to more than $1 billion will be a tremendous benefit to the company, as we continue to develop and commercialize leading-edge technologies, especially in the field of spatial genomics.

Now I'd like to turn the call over to Tom to review the details of our third-quarter results.

Tom Bailey -- Chief Financial Officer

Thanks, Brad. For the third quarter of 2019, we reported product and service revenue of $26.3 million, which was above the high end of our guidance. Product and service revenue grew approximately 23% year over year and included $8 million of instrument sales, $12.7 million of life sciences consumable sales, $2.5 million of Prosigna sales and $3.1 million of service revenue. Consumable pull-through was within our guided range at approximately $76,000.

As Brad noted earlier, our third-quarter instrument revenue included $2.2 million from 10 GeoMx DSP systems shipped during the quarter, representing average revenue per system of $220,000. Q3 revenue per GeoMx system reflects the instrument portion of the GeoMx priority site promotional bundle that we ran back in the fall of 2018, which for $295,000 included a TAP service product and a starter package of reagents. We expect revenue per system shipped in the fourth quarter will be approximately in line with Q3, and then, to rise over subsequent quarters as we fulfill the last of the GPS orders. In Q3, we also reported a 31% increase in service revenue driven by continued strong demand for our GeoMx Technology Access Program.

Collaboration revenue was $4.3 million, with our Lam Research partnership accounting for the majority. We received $4.5 million in cash from collaborators during the quarter. Gross margin on product and service revenue was 59%, compared to 57% in the prior year. Our gross margin for the quarter was positively impacted by a mix shift toward our MAX and FLEX nCounter instruments, as well as, sales of GeoMx DSP instruments.

Turning to operating expenses. Recent increases in stock-based compensation, which are primarily due to the rise in our stock price this year, have impacted comparisons of our GAAP reported expenses across periods. For the third quarter, total stock-based compensation expense was $4.7 million, which is up from $2.8 million, as compared to the prior year. R&D expense was approximately $17 million, an increase of 2% over the prior-year period.

Excluding the impact of stock-based compensation, R&D expense was in line with the prior year, which reflects the start of our transition to a sustaining level of R&D activity following the commercial launch of GeoMx. SG&A expense was $23.4 million, an increase of approximately 31%, as compared to the prior-year period. Excluding the impact of stock-based compensation, SG&A increased 26% driven by investment in our commercial team and market development activities for GeoMx DSP. We exited the quarter with approximately $129 million of cash, cash equivalents, and short-term investments.

Now turning to guidance. We have raised our GeoMx revenue guidance to the upper end of our previous range of $6 million to $8 million, and we updated our full-year guidance for product and service revenue accordingly. We also provided an updated full-year outlook for total revenue, gross margin, operating expenses and GAAP net loss in our press release. For the full-year 2019, we now expect product and service revenue of $100 million to $103 million, including approximately $8 million in revenue from GeoMx DSP, representing an annual growth rate range of 20% to 23%.

Gross margin to be in the range of 58% to 59%. Collaboration revenue of approximately $21 million and total revenue of $121 million to $124 million. For the fourth quarter, we expect product and service revenue to be in the range of $30 million to $33 million, including approximately $6 million in revenue from GeoMx DSP. This would represent growth of 27% to 40% over the prior year.

We expect approximately $3 million in collaboration revenue, resulting in a total revenue range of $33 million to $36 million. Now I'll turn the call back over to Brad for closing comments.

Brad Gray -- Chief Executive Officer and President

Thanks, Tom. In closing, our performance in recent months has increased our confidence in our growth outlook. Our core nCounter business has sustained double-digit growth while our GeoMx DSP launch has generated tremendous excitement among researchers. Multiple indicators of GeoMx momentum have increased sequentially quarter after quarter.

We are set up for a strong finish to 2019, and continued growth beyond. With that, I'll open up the line for your questions.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from Doug Schenkel with Cowen. Your line is open.

Doug Schenkel -- Cowen and Company -- Analyst

Hey, good afternoon, guys, and thank you for taking my questions. So for the second straight quarter, you added 15 new GeoMx orders, which is great. Last quarter, you indicated you were targeting 10 to 15 orders per quarter. Given you've seen orders come in at the high end of the range this quarter, and last, is that 10 to 15 target still intact? And given your robust funnel of interest, do you think this is going to increase at some point in 2020?

Brad Gray -- Chief Executive Officer and President

Yeah. Thanks for the question, Doug. So in Q2, we delivered about 12 systems -- sorry, we received orders for about 12 systems. And then in Q3, we received orders for more than 15.

So we've seen nice sequential growth in order volume from quarter to quarter, and we're very pleased with that. As I mentioned during my prepared remarks, this is actually running ahead of our internal plans, and we feel great about the momentum. As we go into the fourth quarter of the year, we're now expecting to end the year with about 85-plus orders, which implies about 15 new orders or more in the fourth quarter. As we look ahead to 2020, it's hard to know exactly what the seasonality will imply on a quarter-to-quarter basis.

But overall, we do expect the rate of new orders to increase both as our existing funnel of translational researchers who are considering GeoMx matures, and of course, as we begin to address the discovery research market by opening up the system to readout on NGS.

Doug Schenkel -- Cowen and Company -- Analyst

OK. That makes sense. Thanks for that Brad. And from a seasonality standpoint, recognizing you're not guiding 2020 today, Q1 revenue usually steps down a bit relative to Q4 due to normal seasonality.

That said, heading into next year, you're going to have GeoMx shipments rolling, and you're going to, at some point, be opening up the platform to use NGS as a detector, which should broaden demand. Is there anything you'd want to share with us that might be helpful in terms of just the tug of war between seasonality and GeoMx momentum as we attempt to balance these things in our model?

Brad Gray -- Chief Executive Officer and President

Sure. We'll obviously have a lot more to say about this on our call in February. But as you begin to model 2020, I would think of our business in two parts. The nCounter portion, the core nCounter portion of our business, I would expect to follow the same seasonality patterns that we've seen year after year, which includes the sequential step down from Q4 to Q1 in revenue terms that you mentioned in your question.

The GeoMx DSP orders should also be expected to follow some amount of seasonality, as we know that buying patterns are stronger in Q4 than they often are in Q1, though that -- exactly what the order pattern looks like remains to be seen. That being said, the GeoMx DSP revenue patterns will not follow the typical seasonality, and that's because we'll be carrying a substantial amount of backlog from 2019 into 2020. And we'll be looking to sustain a relatively robust installation rate during Q1 and Q2, as we continue to try to deliver systems that our research customers have been waiting for, sometimes up to a year in total length. So, do expect to see GeoMx revenue be relatively strong in Q1, probably stronger even than the order book.

Doug Schenkel -- Cowen and Company -- Analyst

OK. One last one. You guys have had some nice momentum this year with core nCounter revenue, this is both on the instrument and consumable side. On the consumable side, it seems pretty straightforward as to why that might continue over the next several quarters or would continue over the next several quarters.

On the instrument side, part of what's driven the resilience has been, I believe, customers buying GeoMxs who are also interested in using those with nCounter instruments. Do you think that that can keep up? Or is that something we should think may lose some steam as you open up GeoMx to use NGS as a detector on the back end?

Brad Gray -- Chief Executive Officer and President

Yeah. So, the resilience of the nCounter business have been strong this year. I mean, I'd point to a couple of different things for it. One is the effort that we put in place a couple of years ago to put -- to move beyond oncology.

And both instrument placements and panel sales into areas like immunology and neurology have been much more robust in 2019 than they ever have been in any previous year, and you're hearing that in my prepared remarks.

Doug Schenkel -- Cowen and Company -- Analyst

Yup.

Brad Gray -- Chief Executive Officer and President

Certainly, GeoMx as an application -- GeoMx readout as an application has breathed new life into nCounter and given a whole new category of customers a great reason to own an nCounter system. To date, I think about 20% of the nCounters that -- orders we've taken have been, in some way or another, associated with GeoMx, possibly as part of bundle or otherwise. We think that's a great thing. I don't think we believe that's going to curtail substantially in 2020 or even at all.

But we're not really focused on that as a question. We're focused overall on total revenue growth, and taking -- capturing the overall opportunity. As you know, the decision to open up GeoMx to readout on NGS was motivated by the tremendous market opportunity that we can then access among the 15,000 NGS systems. And because the GeoMx opportunity dwarfs the nCounter opportunity in totality, we're not really overly focused on any decrement that could come to the nCounter business by opening up GeoMx.

We're focused on capturing that enormous spatial genomics opportunity.

Doug Schenkel -- Cowen and Company -- Analyst

OK. That's really helpful Brad. Thanks for all that. I'll get back in the queue.

Operator

Your next question comes from Tycho Peterson with J.P. Morgan. Your line is open.

Tejas Savant -- J.P. Morgan -- Analyst

Hey, guys. This is Tejas for Tyco. Brad, just one housekeeping question to kick things off. Are you still expecting all GeoMx priority site customers to receive their systems by year-end '19? I feel like you alluded to this in the prepared remarks around the drag on ASP because of the promotional pricing.

Will that sort of gap up to sort of closer to that $295,000 starting 1Q next year? Or will that be a more gradual ramp?

Brad Gray -- Chief Executive Officer and President

Yeah. I think the ASP or the revenue recognition upon instrument shipment more precisely will be a gradual ramp over the next several quarters. Certainly, we're doing our best to prioritize the GeoMx priority site program sites for early shipment, but I don't believe we'll have every single one of those installed by the end of the year. So I do expect a more gradual ramp in the revenue recognized per system.

Tejas Savant -- J.P. Morgan -- Analyst

Got it. And then just on the point on pricing, I mean, would you be open to considering sort of a thread of pricing mechanism here just to reduce some of that upfront burden on your customers, particularly as some of the competitors start getting their solution out into the market? And if so, what sort of an impact do you see that having on that six-month sales cycle that you've spoken of in the past?

Brad Gray -- Chief Executive Officer and President

Yeah. So I mean, I think, first, to respond to the idea that the $300,000 approximately what we charge for GeoMx is an impediment. So far, we've really seen little or no pushback on the capital expenditure that's required to access GeoMx. You know, we've been carrying, as you know, a tremendous backlog of interest.

We've been accruing orders at a pace that exceeds our internal plans. And really $300,000 for the types of customers that we're addressing is not an enormous capital expenditure. For people who are accustomed to pathology equipment, it's more or less on par with high-resolution scanners that are used to readout things like immunohistochemistry. And certainly, for the genomics community, $300,000 is less than they pay for next-generation sequencers on a regular basis.

So, we really do not see the capital expenditure required for GeoMx to be an impediment. In fact, we see the automation and the workflow and the ability to interact with the data and the sample, as a tremendous benefit of our system. And some of the feedback we've received from our customers who've received the first systems, who are delighted with the ability to select regions of interest using sophisticated software, who we're delighted with the high-resolution scanning they're getting off the system, have really underscored that. Of course, if we believe that we can grow our business much more rapidly or we can better serve the needs of our customers through a more flexible pricing approach that may lower the price of acquiring the equipment exchange for a very robust consumable stream, we're going to do the rational thing.

And of course, we remain -- we retain the flexibility to do that. But I guess, at this stage, we really don't see the need to execute that kind of tactic.

Tejas Savant -- J.P. Morgan -- Analyst

Got it. And then one final one for me here on GeoMx. I mean, in the past, Brad, you've spoken of 2,500 or so leads, half of which are qualified. And I'm sure a bunch of those have translated into orders, but even greater numbers have been absorbed into your TAP program backlog.

How long do you expect the TAP program to remain on offer? And is there a point where you'd rather that smaller customers send their samples to DSP, sort of power users with multiple instruments? Or will you sort of continue offering this as a service for the foreseeable future?

Brad Gray -- Chief Executive Officer and President

I think what we've learned about TAP is that it really provides a very convenient and compelling test drive of the GeoMx DSP instrument. We intend to maintain the TAP service really in perpetuity at this standpoint -- at this point, not as a driver of revenue growth or as a substitute for contract research organization, but as a way of providing simple, easy to access experience of the GeoMx DSP technology as part of the evaluation process that leads to an instrument purchase. So, we have -- in the last quarterly call that we held at the end of July, I talked about an investment in additional capacity in terms of staff and weekend shifts, so that we could continue to provide rapid turnaround times, and its respond to expanding demand on TAP. We're continuing that.

This morning, we added next-generation sequencing-based readout to our TAP program so that we can begin to address those discovery customers. So, we think TAP will be around for a long time. That being said, over that period, TAP is going to shift from providing a service for very large studies to academic and biopharma customers to one that provides very small, convenient test drive-type experiments to prospective customers. And we will be redirecting those large experiments to a set of contract research organizations, some of whom have been among the wave of customers that we've enabled early on.

In fact, as we installed one of the first GeoMx systems at a major international CRO just a few weeks ago, we learned that they already had at least one biopharma project that was queued up to run on that system, and that's great. That's the kind of thing that we want to have happen outside of NanoString in CROs that we can use our TAP capacity to cultivate instrument customers.

Tejas Savant -- J.P. Morgan -- Analyst

Got it. Thanks so much guys.

Operator

Your next question comes from Catherine Schulte with Baird. Your line is open.

Catherine Schulte -- Robert W. Baird -- Analyst

Hey, guys. Thanks for the questions. I guess, first, can you just remind us where you are in terms of instrument reps and GeoMx specialists? And any plans to expand that team, particularly, as you open up the sequencer readout capability?

Brad Gray -- Chief Executive Officer and President

Yeah. We've -- we're in a good place, both in terms of the number of instrument reps and the number of GeoMx sales specialists. I believe today, we're maybe at about 40 quota-carrying instrument reps and about 10 GeoMx sales specialists. That's the right order of magnitude at least.

Those groups are being highly effective at driving the order uptake and continuing to build the sales funnel. We do not expect to invest more in that on-the-street sales capacity. That being said, we are making some investments in our sales channel on the inside sales front. Our experiment with consumable sales from telephonic inside sales reps has been such a resounding success that we're continuing to scale up that sales channel and adding to it a telephone-based market development capability focused specifically on GeoMx.

These will be the people who are tasked on following-up on the enormous numbers of leads that we're generating at major meetings and through participation in roadshows and webinars, understanding and qualifying their interest before those leads are passed into our sales funnel. So, that is an area where we are making an investment, and that's, I think, a very cost-effective one.

Catherine Schulte -- Robert W. Baird -- Analyst

OK. And then, there have been some developments in the competitive landscape in the spatial genomics industry recently. Have you sensed any customers holding off on ordering GeoMx to evaluate competitive technologies? Or are you seeing any of that noise play out within the customer base?

Brad Gray -- Chief Executive Officer and President

Yeah. I'll say the competitive noise has been a great deal louder within the investment community than it has been in the actual research customer community. To date, we have not seen major competition or consideration of other offerings that would have, in any way, slowed down the order pace of GeoMx system. So, we're very pleased with the unique positioning of the GeoMx system for translational research, where it's really the only system that's both compatible with formal and fixed paraffin-embedded tissue, capable of reading out both RNA and protein and, which provides the throughput required to process entire clinical trials worth of samples.

We really have seen little or no competition from new entrants in that segment. And now that we're entering the discovery research market, we feel really great about our offering. You know, we have data coming out at major meetings now with our new high-plex RNA Atlas panel. And we'll be providing a very convenient way for discovery researchers to take a test drive of our capability via our TAP program.

Catherine Schulte -- Robert W. Baird -- Analyst

OK. And then last one for me. For the Human Cell Atlas initiative, what's the magnitude of the preferred pricing for that customer base? And is there a time limit to that pricing opportunity?

Brad Gray -- Chief Executive Officer and President

Yeah. I would call the preferred pricing sort of within the realm of customary discounts. I think through the partnership we have with HCA, we'll be taking a few kinds of negotiation cycles out of the sales process, giving those HCA members discounts that we may have offered on a customary basis, but doing it automatically because of their commitment to the very important scientific endeavor. So, I don't think that it's something that we view as, either transient or below market in terms of the economics, but rather a long-term commitment to a base of customers who will provide an enormous market potential for GeoMx in the future.

Catherine Schulte -- Robert W. Baird -- Analyst

All right. Great. Thank you.

Operator

And your last question comes from Dan Brennan with UBS. Your line is open.

Dan Brennan -- UBS -- Analyst

Great, thanks. Thanks for taking the question, guys. Did I hear you correctly, Brad, I think in the prepared remarks, was it $220,000 annualized pull-through on GeoMx in the first quarter -- or in this quarter so far?

Brad Gray -- Chief Executive Officer and President

No, I'm so glad you asked, Dan. No, $220,000 in the prepared remarks referred to the average revenue recognized upon GeoMx DSP instrument shipment.

Dan Brennan -- UBS -- Analyst

Got it.

Brad Gray -- Chief Executive Officer and President

And as Tom explained, the reason that's substantially less than the list price of $295,000 is that so far, the instruments that we have been shipping have been to GeoMx priority site customers who were offered bundles that also included Technology Access Program, service, and consumables, so that the amount of revenue recognized from the instrument alone, per the accounting rules, is less than the normal list price.

Dan Brennan -- UBS -- Analyst

Got it. Thanks, Brad.

Brad Gray -- Chief Executive Officer and President

We don't have, at this time, any update with respect to the consumable sales expectations for GeoMx, as we guided in the past, we -- our first order expectation is that it will yield $75,000 to $80,000 per system per year in recurring consumable revenue, and we don't have an update to that number at this time.

Dan Brennan -- UBS -- Analyst

Great. And then, I think someone asked earlier. Maybe I think the last time you updated the number of leads that you had qualified. Where does that number stand today? I know you had a bolus north of 2,000 AACR, but then, you since qualified that.

So where do those leads stand today?

Brad Gray -- Chief Executive Officer and President

Yeah. We've continued to qualify those leads. We've invested and actually staff dedicated to that effort, as I mentioned in the answer to one of the previous questions. I'd say that we've worked our way through the majority of those leads at this stage.

And we're now kind of going back to meetings like AMP and SITC this week and generating a whole new round of leads. We're very pleased with the growth in our genomic instrument sales funnel that has resulted from all that lead processing, and we feel really confident in the outlook for continued growth in GeoMx instrument sales.

Dan Brennan -- UBS -- Analyst

And in terms of the north of 15 orders, you got this quarter, it's a bit above, I think, where you were guiding to. Any -- I mean -- again, a few instruments can drive that, so could just be, obviously, a little bit of timing. But any qualitative color, what you think is driving a bit of a faster uptick that you're seeing in terms of orders?

Brad Gray -- Chief Executive Officer and President

Well, I mean, I think it's all the usual things. It's the tremendous tailwind of the great science that's coming out in the peer-reviewed literature, showing what GeoMx is capable of. It's the tremendous latent demand of -- for spatial biology solutions. I'm pleased to say it's really good execution among our sales and commercial team.

So, we've continued to always just be positively surprised about the reaction and response we're getting to this offering. And that's allowing us to guide up the expectations for how many orders we expect to book in Q4, and to guide the instrument installation numbers toward the top end of our previous range also for Q4.

Dan Brennan -- UBS -- Analyst

And I forget if you've commented on this previously, but when you think about the ramp as we get into 2020, obviously you're not going to guide. But when you think of the nCounter as a predicate, obviously, it's a different-priced instrument, but also GeoMx sounds like it's much more disruptive, novel. So is the nCounter as a predicate, is that fair that you would expect either -- can you comment the GeoMx ramp versus the nCounter?

Brad Gray -- Chief Executive Officer and President

Well, the GeoMx ramp to date has vastly outpaced the adoption of nCounter. At 70-plus systems for orders to date, we have achieved a level of adoption it took several years of nCounter sales to achieve. So, I don't think nCounter is a good analog in that sense. You remember, when we launched nCounter, into the gene expression market, we were really carving out a whole new niche in the mid-plex of the gene expression market that had existed for a long time.

I'm very proud of what we have achieved there. And I think we've made nCounter an indispensable tool for translational research, but we were really a new market -- an entrant into a pretty crowded market when we launched that technology. In contrast with GeoMx, we're at the bleeding edge of an exciting new market, probably the first company with a very robust solution of strong automation and flexibility to enter this market, and that puts us in a position for potential leadership that we simply did not have at the time of nCounter. And so, as I said earlier, I think the total market opportunity size for GeoMx and NanoString's potential market share in that market both vastly outstrip what we have experienced with nCounter.

Dan Brennan -- UBS -- Analyst

Maybe last one. So, in terms of the RNA opportunity, I don't know if you've addressed it before, but when we think about the ramp in 2020. Should it follow a similar -- is looking at the first year of the protein ramp, is that a similar kind of predicate, do you think? In terms of the order pace and kind of placement pasting like that?

Brad Gray -- Chief Executive Officer and President

I think it's a little too early to say, Dan. I think we will not have a GeoMx instrument software package and consumable offering immediately, right? Sometime in 2020, we will begin to ship those systems. But we're following a similar playbook to what we used at the time of the original nCounter-enabled GeoMx launch, which was to start by offering a technology access program to build a funnel of potential customers, and then, to enable those customers through instrument shipments when the product was ready to go and was sufficiently robust. It's hard to know if that will translate into something that looks numerically identical to what we achieved but I'm confident in the overall long-term success because we've seen that playbook work so well in the launch to date.

Dan Brennan -- UBS -- Analyst

Great. Thanks, Brad.

Operator

There are no further questions. I'll turn the call back to Doug Farrell for any closing remarks.

Doug Farrell -- Vice President of Investor Relations

Thank you very much for joining us today, everybody. If you did miss any portion of the call, there will be a replay available in the next 60 to 90 minutes or so, to access that, please dial 1-800-585-8367. International callers please dial 416-621-4642. The conference call ID is the same for both, 9358402.

Thanks, again, for your time, and I look forward to talking with everybody soon.

Operator

[Operator sign-off]

Duration: 45 minutes

Call participants:

Doug Farrell -- Vice President of Investor Relations

Brad Gray -- Chief Executive Officer and President

Tom Bailey -- Chief Financial Officer

Doug Schenkel -- Cowen and Company -- Analyst

Tejas Savant -- J.P. Morgan -- Analyst

Catherine Schulte -- Robert W. Baird -- Analyst

Dan Brennan -- UBS -- Analyst

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