nstg-20230930

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 September 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 November 2, 2023 there were 48,118,306 shares of registrant’s common stock outstanding.

Table of Contents

NANOSTRING TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED September 30, 2023

TABLE OF CONTENTS


		PAGE
PART I - FINANCIAL INFORMATION
ITEM 1:	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Operations — Three and nine months ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Comprehensive Loss — Three and nine months ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) — Three and nine months ended September 30, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2023 and 2022	8
	Notes to Condensed Consolidated Financial Statements	9
ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3:	Quantitative and Qualitative Disclosures about Market Risk	28
ITEM 4:	Controls and Procedures	29
PART II - OTHER INFORMATION
ITEM 1:	Legal Proceedings	30
ITEM 1A:	Risk Factors	31

ITEM 5:	Other Information	58
ITEM 6:	Exhibits	58
SIGNATURES		59

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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 future capital needs are uncertain and we will need to raise additional funds in the future.

•Involvement in lawsuits to protect or enforce our patent 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.

•Servicing our Secured Notes and our Convertible Notes may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under the Secured Notes and Convertible Notes, and our current and future indebtedness may limit our operating flexibility or otherwise affect our business.

•Provisions of our existing and any future debt instruments may restrict our ability to pursue business strategies.

•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.

•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.

•For medical devices we manufacture for third parties, 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)


	September 30, 2023		December 31, 2022
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	93,802	$	112,250
Restricted cash and equivalents	296		898
Short-term investments	3,299		84,282
Accounts receivable, net	48,352		31,506
Inventory, net	55,159		43,273
Prepaid expenses and other	10,899		14,565
Total current assets	211,807		286,774
Property and equipment, net	44,991		44,457
Operating lease right-of-use assets	14,420		17,581
Other assets	3,495		4,600
Total assets	$	274,713	$	353,412
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	33,335	$	16,619
Accrued liabilities	9,573		7,884
Accrued compensation and other employee benefits	14,545		17,494
Customer deposits	1,653		1,757
Deferred revenue, current portion	12,848		9,588
Operating lease liabilities, current portion	5,578		5,518
Total current liabilities	77,532		58,860
Deferred revenue, net of current portion	5,623		3,754
Long-term debt, net	227,764		226,622
Operating lease liabilities, net of current portion	14,360		18,362
Total liabilities	325,279		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; 48,108 and 46,719 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	5		5
Additional paid-in capital	881,038		855,694
Accumulated other comprehensive loss (income)	4		(589)
Accumulated deficit	(931,613)		(809,296)
Total stockholders’ equity (deficit)	(50,566)		45,814
Total liabilities and stockholders’ equity (deficit)	$	274,713	$	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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue:
Product	$	41,905	$	24,605	$	111,937	$	78,561
Service and other	6,184		4,936		16,114		14,279
Total revenue	48,089		29,541		128,051		92,840
Costs and expenses:
Cost of product revenue	25,668		10,159		68,363		33,592
Cost of service and other revenue	5,018		3,564		14,951		10,761
Total cost of revenue	30,686		13,723		83,314		44,353
Research and development	17,115		16,992		51,447		51,755
Selling, general and administrative	36,755		33,767		113,197		106,234
Total costs and expenses	84,556		64,482		247,958		202,342
Loss from operations	(36,467)		(34,941)		(119,907)		(109,502)
Other income (expense):
Interest income	1,355		774		4,167		1,331
Interest expense	(1,897)		(1,887)		(5,677)		(5,650)
Other expense, net	(451)		(579)		(669)		(1,286)
Total other expense, net	(993)		(1,692)		(2,179)		(5,605)
Net loss before provision for income tax	(37,460)		(36,633)		(122,086)		(115,107)
Benefit (provision) for income tax	49		(57)		(231)		(322)
Net loss	$	(37,411)	$	(36,690)	$	(122,317)	$	(115,429)
Net loss per share — basic and diluted	$	(0.78)	$	(0.79)	$	(2.58)	$	(2.49)
Weighted average shares used in computing basic and diluted net loss per share	47,715		46,529		47,341		46,320

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net loss	$	(37,411)	$	(36,690)	$	(122,317)	$	(115,429)
Other comprehensive income (loss):
Change in unrealized gain (loss) on available-for-sale debt securities	—		149		593		(983)
Comprehensive loss	$	(37,411)	$	(36,541)	$	(121,724)	$	(116,412)

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

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NanoString Technologies, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	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		—		—

SEC Form 10-Q filed by NanoString Technologies Inc.