NanoString Technologies Inc (NSTG) Q3 2021 Earnings Call Transcript

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NanoString Technologies Inc (NSTG 33.84%)
Q3 2021 Earnings Call
Nov 9, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day. Thank you for standing by, and welcome to the NanoString Third Quarter 2021 Operating Results. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Doug Farrell, Vice President of Investor Relations. Thank you. Please go ahead.

Douglas S. Farrell -- Vice President of Investor Relations and Corporate Communications

Thank you, operator. Joining me on the call today is Brad Gray, our President and CEO; and Tom Bailey, our CFO. Earlier today, we released our financial results for the third quarter of 2021. During this call, we may make statements that are forward-looking, including statements about financial projections, the impact of the COVID-19 pandemic, future business growth trends and related factors, prospects for expanding and penetrating our addressable markets, our strategic focus and objectives and the development status 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 risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected, and we undertake no obligation to update any forward-looking statements. Later in the call, Tom will be discussing our financial results and 2021 guidance. We're prepared as a supplement to GAAP financial measures, selected non-GAAP adjusted measures, the calculation of which are described in detail in our press release. Throughout this call, all financial measures will be GAAP, unless otherwise noted. You can find reconciliations of GAAP to non-GAAP measures as well as the description, limitations and rationale for using such measures in afternoon's press release. Analysts and investors in building their models, we have posted exhibits under the Financial Information tab with our Investor Relations home page that include a presentation of our non-GAAP or acetic measures and selected other financial data for the third quarter of 2021 as well as for each quarter of the full year 2020. I'd like to remind everyone we'll be participating in the Stifel Virtual Healthcare Petcare Conference next week. We look forward to having the opportunity to speak with many of you there. Now I'd like to turn the call over to Brad.

R. Bradley Gray -- Chief Executive Officer, President and Director

Thanks, Doug. Good afternoon, and thank you for joining us today. Spatial biology is having a banner year, and NanoString continued to extend its lead in this exciting market. During the third quarter, we posted record GeoMx revenue as our whole transport film assays is a next-generation sequencing readout appeals to customers across both discovery and translational research. Earlier today, we unveiled our new CosMx Spatial Molecular Imager by publicly release made by data set and manuscript to describe the power of this platform to image the expression of almost 1,000 genes and biobank samples stored as formalin fixed paraffin-embedded tissue. Meanwhile, our internal franchise posted strong instrument placements while consumable revenue continued to be impacted by residual effects of the pandemic. Let me now review progress toward our 2021 strategic objectives before handing over the call to Tom Bailey to review our results and outlook. Our first strategic objective for 2021 is to extend our lead in spatial biology through the broad adoption of the GeoMx Digital Spatial Profiler. Three quarters through the year, our Spatial Biology business is right on track with the GeoMx franchise performance trending toward the top end of our guidance range for both instrument orders and overall GeoMx revenue. During the third quarter, GeoMx instrument orders grew 40% and are now on track for the full year GeoMx instrument order growth of about 50% compared to 2020.

Customer interest in using next-generation sequencing readout for GeoMx experiments is a key growth catalyst and about 75% of GeoMx instruments ordered during the third quarter were purchased for use with GeoMx readout. GeoMx consumable pull through remained strong at an annualized rate of about $95,000 per system. Our GeoMx Transcriptome Assays or WTA assays, were introduced during the first half of the year, leveraging VS readouts and are the first systemwide products that we've ever offered. In Q3, our assays for NGS readout accounted for about 75% of GeoMx consumable orders as revenue from our human Transcriptome Assays increased 70% sequentially from the second quarter. Repeat orders were strong with about half of our WTA customers already placing follow-up orders. NanoString has a strong history of serving translational researchers who are focused on disease research, and our Whole Transcriptome Assay is really no exception. In fact, about half of the translational researchers who originally adopted GeoMx to use with protein assays using any counter rebound are now also using ultimate crypto assays with NGS readout. The WTA assays are also getting traction in the large market for basic discovery research, helping us expand beyond the translational research market that has historically represented our core focus. Mice are the most important model system for Discovery Research and researchers with interest and diverse as immunology, neuroscience, infectious disease and development mill biology have embraced our Whole Transcriptome Assay. In the third quarter, about 20% of our GeoMx instrument orders came from customers who adopted DSP, specifically from Mouse Whole Transcriptome research.

We're also seeing strong leading indicators of demand from discovery researchers via our technology access program, which delivered results from a record number of projects completed in the third quarter as we continue to work through a large backlog of projects that were committed earlier in the year. A full 90% of new projects were for NGS-based products and Mouse Whole Transcriptome Assays accounted for about 25% of new projects. In October, we have built a first Spatial Morgan Atlas which includes Whole Transcriptome images of key functional tissue structures for five human organs, including the human brain, kidney, colon, pancreas and lymph nodes as well as the mouse brain. Much like the Cancer Genome Atlas and the Human Cell Atlas efforts, we expect our Organ Atlas to become a reference database for spatial gene expression by organ, including both healthy and diseased tissue. We reduced the spatial organ Atlas during the American Society of Human Genetics, or [Indecipherable] last month and have been taking it on a road show ever since. These data sets can be found on the spatial Organ Atlas page of the GeoMx DSP section of our website, and interest has already driven meaningful bump in website traffic and desertion, as well as commitments from several external groups to extend the Atlas to additional order types. Overall, GeoMx continues to drive rapid growth of our leading spatial biology franchise, and we're excited by how quickly this opportunity is unfolding.

Our second strategic objective for 2021 is to expand our spatial biology franchise with high resolution offerings by advancing the development of our spatial molecular imager and seeding the market for the commercial launch is planned for next year. Molecular imaging is shaping up to give important new category in spatial biology. Imaging platforms measure expression of a targeted number of RNAs or proteins at a single cell or sub cell resolution. Our Spatial Molecular Imager provides the perfect complement to Whole Transcriptome analysis using GeoMx DSP, prospect held by numerous genomics customers who already expressed interest in acquiring [Indecipherable] and further collaborated and collaborated by several recent customer surveys published by sell side analysts. We are in an exciting period as we're beginning to reveal more details about our Spatial Molecular Imager. Let me focus on three key developments outlined in our press release that we issued this morning. First, we've unveiled a brand name for our imager, which is CosMx SMI, chosen to provide a Celestial complement for GeoMx DSP brand. The CosMx brand is aspirational, captures the imagination and in focus our mission to map the universe of biology. Second, we publicly released a high-resolution data set generated using CosMx SMI, highlighting the unique performance characteristics that set CosMx apart from competing imagers and allow researchers to see for themselves the power of this new platform.

This focus data set includes RNA expression, attain resolution with an eight non-small cell lung cancer sponsors. Two key attribute this data set contract with data released by others in the past. First, the CosMx SMI data set maps RNA from almost 1,000 genes approximately twice the number of genes covered by competing platforms. Second, this was generated in formalin-fixed paraffin-embedded or FFPE tissue samples. The compatibility of CosMx SMI with challenging FFPE samples centered apart from competing imagers, allowing researchers to unlock value in our tile samples as well as to apply the platform to clinical samples. The CosMx SMI data set can be accessed through NanoString's website and analyzed by the research community. The complete data set consisting of over 800,000 single cells, 260 million transcripts and a spatially resolved cell type map of non sponsored cancer tissue across 150 square millimeters. The data can be explored for an interactive fear and downloaded for analysis it opens work of third party informatics packages. Early feedback from luminaries in the field is at a state peak at the data prior to release has been overwhelmingly positive. And we look forward to discussing it with the broader research community in the months ahead. Our third major revelation regarding CosMx SMI is the release of a manuscript providing details of the chemistry that powers the platform and the performance that it achieves. This manuscript, which can now be used in the online Journal BioRise will serve as a reference for customers considering a CosMx SMI purchase.

This describes the performance of CosMx FFPE tissue, including resolution, sensitivity and reproducibility as well as key application of the platform such as identifying cell types and measuring cell to cell interactions. In addition to porting details on the RNA expression capabilities of SMI, the print paper provides the teaser of caustic protein capabilities, showing 81 less expression data in FFPE further differentiating capex from competing molecular imagers powered by genomic [Indecipherable]. Together, the CosMx SMI and GeoMx DSP represent a compelling product suite that will expand the continuum of applications in spatial biology. The next major event to highlight the portfolio will be our fourth annual spatial summit, which we will host on Monday, February 28 at the Advances in Genome Biology and Technology, or G, meaning in Orlando, Florida. This half-day session will provide more details on CosMx SMI and will showcase early work from outside groups coming out of our SMI technology access program. This session will be open to the investment community and we do not need to be registered for AGBT to attend. We hope to see many of you there. Our third strategic objective is to return our nCounter business to the growth dynamics seen prior to the COVID-19 end. During the third quarter, our nCounter performance was mixed, with strong instrument sales, offset by a slower than expected recovery in consumable sales. Our strong nCounter instrument sales demonstrate the continued demand for nCounter unique combination of simplicity, power and robustness.

The sales of nCounter instruments during the quarter exceeded consensus estimates for instrument sales by 25% at roughly $6 million. Year to date, our instrument revenue was similar to the first three quarters of 2019. indicated that we are returning to pre-pandemic levels on the instrument side of our business. We continue to diversify our nCounter into new areas in oncology. As about half of our nCounter systems were sold for non-oncology applications in the third quarter, including immunology and infectious disease. Meanwhile, the pace which our customers are publishing papers using account has never been high. Over the past 12 months, our customers have more than 1,000 new nCounter papers, bringing the total publications enabled by our technologies to over 5,000 papers to date. Our internal franchise remains healthy and our customer base, vibrant. That being said, slower than expected nCounter consumable sales during Q3 illustrate the lingering impact of COVID-19 on one particular segment of our nCounter customers, that is biopharma companies focused on oncology biomarker studies. An estimated 70% of nCounter users pursue oncology research, while about 25% in nCounters are owned by biopharma companies and CROs. These customers typically analyze and have been collected during clinical trials. As the COVID-19 pending began, oncology clinical trial enrollments slowed. The downstream consequence of this slowdown was lower volumes for biomarker discovery studies today, which translates into slower sales of nCounter oncology panels.

Let me illustrate how this phenomenon impacted nCounter consumables in the third quarter. During the third quarter, sales to advent researchers returned to more than 90% of pre-pandemic levels in North America and to approximately 80% in both EMEA and APAC. In contracts, consumable utilization by biopharma companies remain simply suppressed at about 60% of pre-pandemic levels. The specific nCounter consumables that were most impacted were our immuno-oncology panels that are used extensively and supporting clinical trust. Pharma pull-through has not improved thus far in Q4, and it's difficult to project when pharma biomarker studies will resume at full pace. On this basis, we expect the nCounter pull-through will remain below pre-pandemic averages in Q4, recovering further in 2022. To summarize, we continue to see healthy demand in spatial biology with solid momentum in translational research and increased penetration of the discovery market. Our CosMx SMI is on track to begin shipping in the second half of 2022 and has demonstrated best in class RNA flex capability and unique compatibility with FFPE samples. Lastly, nCounter business continues to generate strong instrument sales, offset by slower recovery than we had previously anticipated on the consumable side of the business. Now I'd like to turn the call over to Tom to review the details of our operating results.

K. Thomas Bailey -- Chief Financial Officer

Thanks, Brad, and thanks all for joining us today. For the third quarter of 2021, product and service revenue was $36.9 million at the middle of our Q3 guidance range, representing year over year growth of 23%. Q3 GeoMx revenue was $13 million, up 47% as compared to Q3 '20 and at the high end of the guidance we provided in August. $8.5 million was from approximately 35 instruments ships and $4.5 million was from consumable sales. Annualized GeoMx consumables pull-through was about $95,000 per installed system in Q3. nCounter delivered a solid quarter for instrument sales with $6 million posted in Q3, 11% year over year growth and the second highest Q3 total ever for nCounter instrument sales. In contrast, nCounter consumables continue to be impacted by residual effects of COVID-19 pandemic. Q3 nCounter consumables revenue was lower than expected at $13.5 million or year over year growth of 10% and nCounter utilization during the quarter impacted most materially in our pharmaceutical industry customers. Annualized consumable pull-through was about $53,000 in Q3. Service revenue was about $4.4 million for the quarter, representing 24% year over year growth and was driven by GeoMx DSP TAP and increased service contract revenue from our growing instrument installed base. Turning to margins and expenses. I'll provide results on a non-GAAP or adjusted basis, which removes the impact of stock-based compensation, depreciation and certain one time items. Please refer to our press release on the exhibits we have posted to our Investor Relations web page for detailed information on how our non-GAAP or adjusted measures are prepared. Q3 adjusted gross margin was 56%, consistent with our annual guidance range and about a 100 basis point improvement compared to Q3 of last year. The improvement was driven primarily by growth in GeoMx DSP revenue and was partially offset by additional investments made in our manufacturing capacity and increased costs associated with providing our cap service. Adjusted R&D expense was $16.6 million, an increase of 31% year over year. R&D was higher compared to the prior year period due primarily to increased personnel and product development costs related to our CosMx SMI development program.

We expect R&D expense will increase through the balance of the year as CosMx SMI development continues. Adjusted SG&A expense was $23.8 million, an increase of 43% year over year. The Q3 SG&A expense increase was due primarily to investments made in our spatial biology related commercial initiatives, including investments to expand our sales force and our service and customer support groups while the costs related to licensing and implementation of new information technology solutions to support our commercial operations and finance options. Adjusted EBITDA loss was $19.7 million, and we exited the quarter with approximately $370 million of cash, cash equivalents and short-term investments. Turning to guidance. three quarters through 2021, the full year outlook for our GeoMx and nCounter franchises have trended in different directions. Our spatial biology franchise continues to be our major growth driver with GeoMx system orders and revenue trending toward the top end of our guidance range. We now expect full year 2021 GeoMx revenue will be in the range of $49 million to $50 million, driven by instrument order growth of approximately 50% for the full year at the upper end of our annual guidance range.

Our updated annual income revenue guidance range of $91 million to $94 million is based on a continued expectation of instrument sales of approximately pre-pandemic levels and an updated 2021 full year consumables pull-through expectation of approximately $55,000 per installed system. Our updated nCounter pull-through guidance range reflects the potential impact of residual pandemic-related issues on consumables utilization similar to what was observed in Q3. At this time, we believe these residual issues could continue to impact nCounter consumables pull-through into 2022. We will offer further updates when we report fourth quarter results and provide our 2022 outlook in March. For Q4, we expect product and service revenue to be in the range of $38 million to $42 million, representing year over year growth of 6% to 18%. This range includes $15 million to $16 million of GeoMx revenue, driven by what we expect will be about 40 new GeoMx instrument orders in Q4. Our guidance range also includes $23 million to $26 million of nCounter revenue with annualized and tenor consumables pull-through in Q4 expected to be approximately $55,000 to $60,000 per installed system. Now I'll turn the call back over to Brad for our closing comments.

R. Bradley Gray -- Chief Executive Officer, President and Director

Thank you, Tom. In closing our spatial biology franchises having a banner year as we continue to extend our lead in this dynamic market and fulfill our mission to map the universe of biology. GeoMx DSP instrument orders are growing 50% year on year, and we're successfully expanding beyond our core strength in translational research and into basic discovery. As we reveal more details about our CosMx Spatial Molecular Imager, it's market-leading flex and unique FFPE simple compatibility are capturing the attention of the research community. Together, GeoMx and CosMx create the most compelling product suite and spatial biology and promise to drive strong top line growth for years to come. With that, we'd like to open up the line for your questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Tycho Peterson from JPMorgan.

Tycho Peterson -- JPMorgan -- Analyst

This is Julia on for Tycho. Starting with nCounter. I know you're not expecting any meaningful recovery in your 4Q guidance. But like so far into Q4 we observed in terms of trial activities, just to give us a sense. And just to confirm that the entire weakness in 3Q is due to pandemic impact, meaning there is no incremental impact from the NGS that are made out for GeoMx.

R. Bradley Gray -- Chief Executive Officer, President and Director

Thank you, Julia, for the question. You were coming through a little garble. So I'm just going to repeat back what I heard. I think you asked about whether we have seen any recovery so far in Q4 for our nCounter consumable demand and clinical trial activities from biopharma and whether how we're confident that this is a pandemic related impact rather than some of the competitor. So first, clinical trial activity truly did slowdown in, during the pandemic. I know one research study that we saw has talked about 1,000 trials plus being slowed or paused in enrollment during the pandemic. And the downstream effect to that, of course, is fewer biopsy samples collected and fewer biomarker studies being run now in 2021. We have not seen a change to the actual number of biomarker studies that are being run in Q4 so far, but we do expect clinical trial activity start picking up. But remember, biomarker work is kind of a downstream lagging indicator of clinical trial activity. People who haven't followed the company too long, may not appreciate the extent to which our biopharma customers are an important driver of consumable pull-through.

There have been many quarters over time with that 25% of our customer base in nCounter has accounted for about 40% of our pull-through. So it's not to say that our biopharma customers are not doing a lot of business still with us. In fact, their pull-through on average during the third quarter was $70,000 per system higher than our overall average. But given that in a typical pre-pandemic quarter, they may have done $100,000 to $115,000 of average consumable pull-through even that $70,000 per system annualized in the third quarter represents not quite a full recovery to their pre-pandemic level. So that really was, we believe, the primary driver of the pull-through drop in Q3. Now how do we know it's not a competitive issue or one, we continue to place a large number of nCounter systems. In fact, the third quarter of 2021 was the second highest Q3 instrument demand for nCounter ever. Two is there hasn't been any meaningful change in RNAC pricing or offerings out there in recent time frame. So we do not believe anything about the competitive dynamic has changed. And it really is, we believe, related to clinical trial activity.

Analyst

Got it. That's super helpful. And then on SMI, could you guys give more color on the current TAP program order book? How many projects they're working on and what the funnel looks like and the first data set are you expecting to see any significant uptick going forward? And have got any customer feedback so far that we may estimate our launch in the second half of next year?

R. Bradley Gray -- Chief Executive Officer, President and Director

Thank you for the question, Julia. Again, you were a bit garbled, but I think you're asking overall about SMI TAP order book and some of the path from now until full commercial launch. So as we've said in past calls, the demand for SMI, CosMx SMI now projects, has exceeded our capacity to manage those projects. We've so far signed up between 10 and 20 projects. We expect to end the year with more than 20 projects in motion, and that really is the entire capacity that we have. Now some of those projects are beginning to yield results. We have a few posters being presented this week at the Society of Immunotherapy and Cancer meeting. We had some on the books for the AMP meeting that is scheduled for next week. And of course, we'll have a lot to show at the AGBT meeting in February. So we're really excited to get more information out there. In terms of what's left for us to do between now and the commercial shipments in the second half, it's really taking the chemistry that we've described now in the paper and wrapping up a bulletproof instrument and automation system around that chemistry as well as the software tools that are required to process and visualize and get insights from the tremendously large data sets that this instrument can produce. So really, it's instrumentation and software. We look forward to having a beta program where we place some instruments at customer sites in the first half of next year and then beginning shipping both commercial systems in the second half.

Operator

Your next question comes from the line of Dan Brennan from Cowen.

Dan Brennan -- Cowen -- Analyst

Just on GeoMx, Brad, starting there, you raised the order outlook of 50%. Orders were a bit stronger than we expected here. So I know you gave some color in the prepared remarks. Maybe just a little color on who's ordering. And then B, as you look at our model for '22, we've got 20% increase in placements in GeoMx. I'm just wondering with the strength of this order book, any way to think through like how the early look is for '22 because of replacement opportunity? And related to that, like are you gated in terms of the placement like rate that you could achieve? I know early on, you guys wanted to delight customers you were limited. So maybe multipart question, who is ordering and kind of any early color on '22?

R. Bradley Gray -- Chief Executive Officer, President and Director

Thank you for the question, Dan. So GeoMx, as you said, the GeoMx order book has been strong. We covered at about 30 instruments per quarter for a few quarters and we broke through in Q3 to 35, and we expect to deliver about 40 in the fourth quarter. This wave of new orders is really driven by the Whole Transcriptome Atlas and the NGS readout capability, which together are driving 75% of new instrument placements. Academic customers who span translational biology and now discovery biology represent the largest group, the vast majority of new instrument orders the Mouse Whole Transcriptome Atlas, motivated about 20% or 25% of new orders in the third quarter, that is truly a pure discovery set of customers. So we're delighted with the growing demand for the instruments. In terms of 2022, expectations, this year, we will have grown 50% in terms of total instrument orders. Of course, we'll enter the year with a much stronger base. We're comfortable with where the street models are now at 20%.

There is potential upside to that, but we would encourage you to kind of keep the models in place for now. And of course, we'll be providing guidance in the February time frame. In terms of whether there's anything that's gating our ability to fill orders, the answer right now is no. I mean we have the inventory to ship instruments. We have had no supply chain challenges. That being said, we are with the ongoing pandemic precautions that are being taken at many customer sites. We are a little slow to bring some sites up. So it does take a while for us to get those instruments installed and train sometimes as much as a couple of three months to get through all of that work while still respecting the protocol that many of our customers have in place for having NanoString employees on site. But there's really nothing in terms of our own human capital or our supply chain that's limiting our ability to fulfill GeoMx demand at this time.

Dan Brennan -- Cowen -- Analyst

Great. And then maybe as a follow-up, kind of the two parter, one related to the competitive landscape. Obviously, it looks like you guys are achieving some really strong growth. So just wondering kind of what you're seeing on the front line there in terms of competition; and then B, you mentioned supply chain has been a concern. You guys are kind of toward the tail end of the reporting season, but was there any impact at all that you had on supply chain issues that are in the quarter that was kind of baked into your guidance?

R. Bradley Gray -- Chief Executive Officer, President and Director

Dan. So the second question first. No issues from a supply chain perspective that impacted during the quarter, and we do not foresee any limitations on our ability to fulfill demand based on the supply chain. The competitive landscape, I think we feel increasingly confident in our competitive position in spatial biology. Within translational research, we remain, I think, the leader in, with GeoMx with it not only it's FFP compatibility, but it's automation, its ability to process large numbers of samples in short periods of time, the ability to focus the power of the system on regions of the tissue that translational researchers are focused on like the tissue microenvironment and of course, our distinctive protein capability which many translational researchers appreciate. So despite the fact that there is increasing competition out there who have FFP compatible products, we really haven't seen any slowdown or competitive impact from that at this stage. On the imager side, I really think the announcements today position CosMx as the imagery to be. I think we have market leading 1,000 plex RNA capability we've shown that we'll have 100-plex protein capability. We've shown that we're compatible with the most important tissue type which is FFPE, I feel really good about our positioning relative to some of the other players who will be bringing imagers to market around the same time.

Operator

Your next question comes from the line of Dan Arias from Stifel.

Dan Arias -- Stifel -- Analyst

Brad, just to go back to the question on nCounter performance. I understand the point on business, not looking like it's going to competitive platform. So what about just work that's staying inside NanoString, but it's going to GeoMx discovery work that just happened to have an NGS back end? Is that something that could be in the mix?

R. Bradley Gray -- Chief Executive Officer, President and Director

I think your question really, Dan, is asking, are we cannibalizing nCounter consumable sales with GeoMx consumable sales and bar SP-2 Is that your question, Dan?

Dan Arias -- Stifel -- Analyst

More or less, yes.

R. Bradley Gray -- Chief Executive Officer, President and Director

Yes. No, I don't think there's any reason to believe that's the case because, and I think we can see that because we know what our GeoMx pull-through is within our biopharma accounts. And biopharma accounts have been relatively slower adopters of the Whole Transcriptome Atlas Assay compared to academic researchers. And so we have not, if we were seeing cannibalization, we'd be seeing that directly in terms of who was buying the Whole Transcriptome Atlas. And that's really not what we're seeing. In fact, if you look at GeoMx consumable pull-through within biopharma customers, right now, it's less than we're seeing on the average academic account, which kind of corroborates the fact that biomarker research is a little slower than you'd expect it to be, and I think it just proves the hypothesis that we're seeing a cannibalization effect.

Dan Arias -- Stifel -- Analyst

Okay. And then maybe on the CosMx system and the data that you released today, I imagine you're hoping that, that sort of steps up interest in the platform. I know commercialization is the second half of 2022 thing, but when do you expect to start taking orders there as we sort of look ahead to getting the instrument in the market, are there any production streams that we should sort of think about when you get to the back half of the year, not necessarily supply constraints, more just manufacturing.

R. Bradley Gray -- Chief Executive Officer, President and Director

Sure. So we're following the GeoMx playbook in the launch of the CosMx. And as you may recall, we had a really successful priority site program for GeoMx that took pre orders ahead of the actual commercial shipments. That is something that we'll begin to initiate in the first half of next year. And the data that we released, I expect will start to build the interest in that program, which we'll be unveiling probably around the AGBT time frame next year. Certainly, by the time we into the second half of next year, and we're shipping our first wave of instruments. I do expect that there will be a very careful rollout of those instruments just as we did with GeoMx where we're, of course, going to be having the first instruments rolling off a new manufacturing line. We'll be going through our first training procedures. We'll be going through our first customer experiences with the instruments in their hand at scale. So we will have a controlled release of the actual system. And as a result, to the extent you're updating your 2022 models, I would not build much in the way of CosMx revenue into the second half the pace at which will actually be placing instruments and revenue recognize that we'll be controlled, then we'll have more to say about that in the February time frame when we issued guidance.

Operator

Your next question comes from the line of Catherine Schulte from Baird.

Catherine Schulte -- Baird -- Analyst

I guess, first, maybe just sticking on CosMx. what additional development or optimization is there left to do from a platform perspective before next year's launch? And at the spatial summit at AGBT, should we expect to get pricing and pull-through estimates there?

R. Bradley Gray -- Chief Executive Officer, President and Director

Yes. So the work that we have left to do, Catherine, is really focused on the instrumentation and making it an overall bulletproof experience for customers. That means making it simple to use, so that it works every time and the data that comes out has the software and informatic back in to allow you to draw insights out of the data you're generating. And that's, so that's a good bit of engineering work, and it's a good bit of software work for us still to do. But none of it is high risk in the sense that we have to do anything inventive. It's just good, solid engineering work. In terms of what to expect at the spatial summit in the February time frame of AGTB, I think will be focused primarily on continue to educate the research customer community about the capabilities of the system. So expect to see some of our early technology access program customers present their data and their experience expect to load a little bit more about the detailed specifications of the system. I don't know that we'll be focused on providing much in the way of economic or financial guidance to Wall Street at that time in terms of pricing or pull-through estimates. But if you really want to understand what the system can do and why we think it will be the market leader in what will undoubtedly be a competitive imager marketplace, then I think you'll get a chance to really see that there.

Catherine Schulte -- Baird -- Analyst

Okay. Great. And then I think you added about 100 people to your commercial team this year and believe most of those are focused on GeoMx for now. Have you started to see the impact from that added head count? And how do you think that expanded team sets you up for GeoMx growth in '22?

R. Bradley Gray -- Chief Executive Officer, President and Director

Yes. So we have, our higher range for our commercial expansion has gone well. The overall team today is about 1/3 larger than it was at the beginning of the year, and we still have some positions still to fulfill. I think we've filled about 85% of our open commercial positions at this time. It takes time for new sales reps to come up the curve and begin to contribute. So I would not say that the third quarter reflects any impact, I think material impact from that sales force expansion yet, most of the hiring was done in the second quarter and people really found, we're kind of finding their sea legs during the third quarter. I hope that the fourth quarter will provide an opportunity for some of those new professionals and here at NanoString to show us what they can do and what they can deliver, and I think we've built some of that into the guidance that you heard Tom outlined.

Operator

[Operator Instructions] Your next question comes from the line of Tejas Savant from Morgan Stanley.

Tejas Savant -- Morgan Stanley -- Analyst

This is Edmund on for Tejas. First, on your WCA, the traction seems to be really strong for the human and both, both human and [Indecipherable].But are you seeing customers transitioning from an initial pilot study phase to larger-scale experiments? And given that there's been a couple of months with this product on the market. Are you better able to quantify what you expect the utilization rates would be at a same state?

K. Thomas Bailey -- Chief Financial Officer

Thanks for the question, Edmund. So most customers are getting their first experience for the Whole Transcriptome Atlas right now, as we speak. As I mentioned in my prepared remarks, I think about half of our WTA customers have done their first experiment and now ordered their second batch of Whole Transcriptome Atlas assays. So we are beginning to see a repeat utilization, but it's still pretty early in the adoption cycle. I know we have at least one example of our study planned and substantial scale on WTA, but I think there's a lot more of that still to come. I think there'll be more of that as time goes on. In terms of utilization rates, we did raise during our August call, our overall consumable guidance on the strength of the early demand for Whole Transcriptome Atlas assays. Our guidance right now is from $95,000 to $100,000 per system per year in consumable utilization that is up materially, both from where it was this time last year and where it was in our initial guidance that we initiated with earlier this year. So I would continue to use that number for now. I think that's a good number to model off of.

Analyst

And then in terms of your COVID recovery trends that you're seeing, I know you previously called out for recovery in EU and APAC regions, particularly since you rely on distributors. Can you talk about some of the trends you see from a geographic perspective? And then in terms of the sample collection and slower biomarker biopharma utilization of nCounter, is there a geographic discrepancy that you're seeing?

R. Bradley Gray -- Chief Executive Officer, President and Director

Yes. Our biopharma customers really operate as global entities, right? Swiss biopharma companies has huge U.S. operations and U.S. biopharma companies at big European operations. So we don't really see geographic trends within our biopharma customer segment. They tend to behave kind of as a global segment. Academics, though, do vary from region to region, I'd say the strongest performance among our academic researchers and the strongest recovery has been here in North America. But both Europe and Asia have improved since our August call. They have, we did see improvement in the academic markets ex U.S. from Q2 to Q3. But really, with that biopharma group who has kept us from fully realizing pre-pandemic recovery.

Analyst

Got it. Got it. And on your academic end market, in light of the robust academic funding environment, are you expecting any sort of abnormal fourth quarter budget flush or seasonality of any sort?

R. Bradley Gray -- Chief Executive Officer, President and Director

Well, we do see seasonality every fourth quarter as people tend to use budget that they may have left over the form of the year-end deadline. But we do not guide for a major budget flush in the fourth quarter. So I'd say that our fourth quarter guidance assumes just a typical pattern of seasonality in the fourth quarter, but nothing extraordinary.

Operator

There are no further questions at this time. I would now like to turn the conference back over to Doug Farrell.

Douglas S. Farrell -- Vice President of Investor Relations and Corporate Communications

Excellent. Thank you very much for joining us today. If you did miss any portion of the call, there will be a replay available in the next hour or two. To access that, please dial 1-800-585-8367. International callers, please use (416) 621-4642. The conference ID number for both is the same, 2826727. Thank you again for your time, and have a great day.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Douglas S. Farrell -- Vice President of Investor Relations and Corporate Communications

R. Bradley Gray -- Chief Executive Officer, President and Director

K. Thomas Bailey -- Chief Financial Officer

Tycho Peterson -- JPMorgan -- Analyst

Analyst

Dan Brennan -- Cowen -- Analyst

Dan Arias -- Stifel -- Analyst

Catherine Schulte -- Baird -- Analyst

Tejas Savant -- Morgan Stanley -- Analyst

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