nstg-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023 OR


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number 001-35980

NANOSTRING TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware						20-0094687
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

530 Fairview Avenue North

Seattle, Washington 98109

(Address of principal executive offices)

(206) 378-6266

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	NSTG	The Nasdaq Stock Market LLC
		(The NASDAQ Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of July 27, 2023 there were 47,545,550 shares of registrant’s common stock outstanding.

Table of Contents

NANOSTRING TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED June 30, 2023

TABLE OF CONTENTS


		PAGE
PART I - FINANCIAL INFORMATION
ITEM 1:	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets at June 30, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Operations — Three and six months ended June 30, 2023 and 2022	4
	Condensed Consolidated Statements of Comprehensive Loss — Three and six months ended June 30, 2023 and 2022	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) — Three and six months ended June 30, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2023 and 2022	7
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3:	Quantitative and Qualitative Disclosures about Market Risk	24
ITEM 4:	Controls and Procedures	25
PART II - OTHER INFORMATION
ITEM 1:	Legal Proceedings	26
ITEM 1A:	Risk Factors	27

ITEM 5:	Other Information	52
ITEM 6:	Exhibits	53
SIGNATURES		54

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Risk Factor Summary

Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report titled “Risk Factors.” The following is a summary of the principal risks we face:

•We have incurred losses since we were formed and expect to incur losses in the future. We cannot be certain that we will achieve or sustain profitability.

•Our financial results may vary significantly from quarter to quarter which may adversely affect our stock price.

•If we do not achieve, sustain or successfully manage our anticipated growth, our business and growth prospects will be harmed.

•Our future success is dependent upon our ability to expand our customer base and introduce new applications and products.

•The life sciences research market is highly competitive. If we fail to compete effectively, our business and operating results will suffer.

•New product development involves a lengthy and complex process, and we may be unable to commercialize on a timely basis, or at all, any of the products we develop.

•New market opportunities may not develop as quickly as we expect, limiting our ability to successfully market and sell our products.

•We face risks related to health epidemics and other outbreaks, such as COVID-19, which could significantly disrupt our operations and could have a material adverse impact on us.

•Our business depends on levels of research and development spending by academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our products and adversely affect our business and operating results.

•Our sales cycle is lengthy and variable, which makes it difficult for us to forecast revenue and other operating results.

•Our reliance on distributors for sales of our products outside of the United States could limit or prevent us from selling our products and impact our revenue.

•If we are unable to protect our intellectual property effectively, our business would be harmed.

•Involvement in lawsuits to protect or enforce our patents and proprietary rights, to determine the scope, coverage and validity of others’ proprietary rights, or to defend against third-party claims of intellectual property infringement, could be time-intensive and costly and may adversely impact our business or stock price.

•Our future capital needs are uncertain and we may need to raise additional funds in the future.

•We may not be able to develop new products, enhance the capabilities of our systems to keep pace with rapidly changing technology and customer requirements or successfully manage the transition to new product offerings, any of which could have a material adverse effect on our business and operating results.

•We are dependent on third-party manufacturers, service providers and single source suppliers for some of the components and materials used in our products, and the loss of any of these suppliers, or difficulties or delays in securing components or materials, could harm our business.

•We may experience manufacturing problems or delays that could limit our growth or adversely affect our operating results.

•We expect to generate a substantial portion of our revenue internationally and are subject to various risks relating to our international activities, which could adversely affect our operating results.

•Undetected errors or defects in our products could harm our reputation, decrease market acceptance of our products or expose us to product liability claims.

•If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.

•We are subject to ongoing and extensive regulatory requirements, and our failure to comply with these requirements could substantially harm our business.

•The price of our common stock may be volatile, and you could lose all or part of your investment.

•Macroeconomic conditions, inflationary pressures and the political climate could adversely affect our operating results and growth prospects.

•Complying with the laws and regulations affecting public companies increases our costs and the demands on management and could harm our operating results.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

NanoString Technologies, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)


	June 30, 2023		December 31, 2022
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	114,305	$	112,250
Restricted cash and equivalents	625		898
Short-term investments	3,297		84,282
Accounts receivable, net	42,982		31,506
Inventory, net	48,849		43,273
Prepaid expenses and other	11,387		14,565
Total current assets	221,445		286,774
Property and equipment, net	47,939		44,457
Operating lease right-of-use assets	15,458		17,581
Other assets	4,148		4,600
Total assets	$	288,990	$	353,412
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	20,868	$	16,619
Accrued liabilities	8,649		7,884
Accrued compensation and other employee benefits	13,110		17,494
Customer deposits	2,079		1,757
Deferred revenue, current portion	12,287		9,588
Operating lease liabilities, current portion	5,440		5,518
Total current liabilities	62,433		58,860
Deferred revenue, net of current portion	4,836		3,754
Long-term debt, net	227,379		226,622
Operating lease liabilities, net of current portion	15,803		18,362
Total liabilities	310,451		307,598
Commitment and contingencies (Note 10)
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value, 15,000 shares authorized; none issued	—		—
Common stock, $0.0001 par value, 150,000 shares authorized; 47,526 and 46,719 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	5		5
Additional paid-in capital	872,732		855,694
Accumulated other comprehensive loss (income)	4		(589)
Accumulated deficit	(894,202)		(809,296)
Total stockholders’ equity (deficit)	(21,461)		45,814
Total liabilities and stockholders’ equity (deficit)	$	288,990	$	353,412

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NanoString Technologies, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue:
Product	$	38,886	$	27,385	$	70,032	$	53,956
Service and other	5,271		4,834		9,930		9,343
Total revenue	44,157		32,219		79,962		63,299
Costs and expenses:
Cost of product revenue	25,090		11,961		42,695		23,433
Cost of service and other revenue	4,667		3,891		9,933		7,197
Total cost of revenue	29,757		15,852		52,628		30,630
Research and development	18,214		17,346		34,332		34,763
Selling, general and administrative	39,076		36,112		76,442		72,467
Total costs and expenses	87,047		69,310		163,402		137,860
Loss from operations	(42,890)		(37,091)		(83,440)		(74,561)
Other income (expense):
Interest income	1,527		406		2,812		557
Interest expense	(1,889)		(1,880)		(3,780)		(3,763)
Other income (expense), net	(211)		(490)		(218)		(707)
Total other expense, net	(573)		(1,964)		(1,186)		(3,913)
Net loss before provision for income tax	(43,463)		(39,055)		(84,626)		(78,474)
Provision for income tax	(205)		(184)		(280)		(265)
Net loss	$	(43,668)	$	(39,239)	$	(84,906)	$	(78,739)
Net loss per share — basic and diluted	$	(0.92)	$	(0.85)	$	(1.80)	$	(1.70)
Weighted average shares used in computing basic and diluted net loss per share	47,365		46,427		47,151		46,201

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NanoString Technologies, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(43,668)	$	(39,239)	$	(84,906)	$	(78,739)
Other comprehensive income (loss):
Change in unrealized gain (loss) on available-for-sale debt securities	59		(158)		593		(1,132)
Comprehensive loss	$	(43,609)	$	(39,397)	$	(84,313)	$	(79,871)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NanoString Technologies, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(in thousands)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance at January 1, 2022	45,729	$	5	$	827,028	$	(318)	$	(649,753)	$	176,962
Common stock issued for stock options and restricted stock units	624	—		1,035		—		—		1,035
Common stock issued for employee stock purchase plan	49	—		1,502		—		—		1,502
Tax withholdings related to net share settlements of restricted stock units	—	—		(1,505)		—		—		(1,505)
Stock-based compensation	—	—		7,785		—		—		7,785
Net loss	—	—		—		—		(39,500)		(39,500)
Other comprehensive loss	—	—		—		(974)		—		(974)
Balance at March 31, 2022	46,402	$	5	$	835,845	$	(1,292)	$	(689,253)	$	145,305
Common stock issued for stock options and restricted stock units	76	—		264		—		—		264
Stock-based compensation	—	—		6,493		—		—		6,493
Net loss	—	—		—		—		(39,239)		(39,239)
Other comprehensive loss	—	—		—		(158)		—		(158)
Balance at June 30, 2022	46,478	$	5	$	842,602	$	(1,450)	$	(728,492)	$	112,665


Balance at January 1, 2023	46,719	$	5	$	855,694	$	(589)	$	(809,296)	$	45,814
Common stock issued for stock options and restricted stock units	437	—		20		—		—		20
Common stock issued for employee stock purchase plan	172	—		1,354		—		—		1,354
Tax withholdings related to net share settlements of restricted stock units	—	—		(490)		—		—		(490)
Stock-based compensation	—	—		7,626		—		—		7,626
Net loss	—	—		—		—		(41,238)		(41,238)
Other comprehensive gain	—	—		—		534		—		534
Balance at March 31, 2023	47,328	$	5	$	864,204	$	(55)	$	(850,534)	$	13,620
Common stock issued for stock options and restricted stock units	198	—		92		—		—		92
Stock-based compensation	—	—		8,436		—		—		8,436
Net loss	—	—		—		—		(43,668)		(43,668)
Other comprehensive gain	—	—		—		59		—		59
Balance at June 30, 2023	47,526	$	5	$	872,732	$	4	$	(894,202)	$	(21,461)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NanoString Technologies, Inc.

Condensed Consolidated Statements of Cash Flows (in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023		2022
Operating activities
Net loss	$	(84,906)	$	(78,739)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	16,062		14,125
Depreciation and amortization	7,442		3,504
Amortization of deferred financing costs	757		732
Amortization of premium on short-term investments, net	102		1,200
Non-cash operating lease cost	2,207		1,954
Allowance for inventory obsolescence and accounts receivable credit loss	4,912		1,708

Changes in operating assets and liabilities:
Accounts receivable	(11,496)		7,920
Inventory	(11,036)		(11,531)
Prepaid expenses and other assets	3,495		(1,827)
Accounts payable	4,884		2,063
Accrued liabilities	3,164		682
Accrued compensation and other employee benefits	(4,414)		(3,453)
Customer deposits	322		310
Deferred revenue and other liabilities	3,907		1,026
Operating lease liabilities	(2,599)		(2,397)
Net cash used in operating activities	(67,197)		(62,723)

SEC Form 10-Q filed by NanoString Technologies Inc.