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Good day, and thank you for standing by. Welcome to the Akoya Biosciences Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Priyam Shah, Head of Investor Relations. Please, go ahead.
Thank you, operator, and thank you to everyone who's joining us today on this call. I'm Priyam Shah, Head of Investor Relations at Akoya Biosciences. On the call today, we have Brian McKelligon, Chief Executive Officer; and Johnny Ek, Chief Financial Officer. Earlier today, Akoya released financial results for the fourth quarter ended December 31, 2023. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe harbor provisions for the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. For a list and description of the risks and uncertainties associated with the Akoya's business, please refer to the risks identified in our filings with the U.S. Securities and Exchange Commission, including in the Risk Factors section in the annual report on Form 10-K for the year ended December 31, 2023, to be filed today, March 4, 2024. We urge you to consider these factors and you should be aware that these statements are considered estimates only and are not a guarantee of future performance. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 4, 2024. Akoya disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. The audio portion of this call will be archived on the Investors section of our website later today under the heading, Events. With that, I'll now turn the call over to Brian.
Thank you, Priyam, and good afternoon or evening to everyone. We appreciate you joining us today. During today's conference call, I will begin by giving a broad overview of our performance in the fourth quarter and full year 2023. I will review our business advancements and provide insights into the latest developments in our product offerings. Following that, Johnny will go deeper into our financials, key trends and provide an outlook for the future of the business. As preannounced at the JPMorgan Healthcare Conference in January, Akoya had a strong fourth quarter in 2023, with record-breaking revenue of $26.5 million and full year 2023 revenue of $96.6 million, representing a 29% annual growth from prior year. We exited the year with gross margin of 62.7% in the fourth quarter. In parallel to a strong top line growth and margin expansion throughout the year, we made efforts to leverage our cost structure, limiting our 2023 operating expenses to only 4% growth from prior year, enabling a more substantial portion of revenue growth to fall to our bottom line. Within our 2024 forecast, we expect both strong top line growth and margin expansion while we continue to manage our costs and we are projecting operating cash flow breakeven by the end of this year. Johnny will touch upon this in greater detail later in the call. Our cumulative installed base now stands at nearly 1,200 instruments, the largest in the field and covers the entire spectrum of spatial biology markets from discovery to translational and ultimately to clinical. Throughout 2023, we invested in key strategic areas, including reagent menu expansion, throughput and workflow simplification and improved software capabilities, collectively contributing to meaningful reagent revenue expansion and increases in the pull-through across our platforms. In the fourth quarter, we saw continued signs of the return on these investments as reagent revenue grew 52% from the prior year period. We are pleased to report that we now have over 1,160 peer-viewed peer-reviewed publications citing Akoya's technologies as of year-end 2023, a 50% growth from the prior year period, demonstrating the widening adoption and utility of Akoya solutions by our customers. Akoya has achieved important milestones in a short period of time that has solidified our market leadership position and will continue to pay dividends. As noted, Akoya has the largest and an actively publishing customer base that will continue to highlight and scientifically promote the current and future capabilities of our offerings. Next, we provide complete end-to-end solutions with high throughput workflows that deliver high-quality spatial phenotyping at any level of multiplexing. And finally, our solutions span the entire continuum from discovery to clinical applications. The result, as noted, is a clear path to operating cash flow breakeven by year's end. Our R&D and operational efforts have been optimized to deliver enhancements and workflow efficiencies and drive an expanding menu of high-value applications. Let me briefly review our key recent product line improvements and 2 additional high-value partnerships. First, the recent rollout of the PhenoCycler-Fusion 2.0 represents a noteworthy milestone, setting a new industry standard in capacity, multiplexing and data quality. Customers can now process twice as many samples per week compared to previous capabilities, establishing the PhenoCycler-Fusion 2.0 as the highest throughput spatial discovery platform available in the market, providing multiplexing across a broad range from just a few proteins to up to 100. In parallel, we released our PhenoImager HT 2.0 upgrade for our translational and clinical research customers. Like the Fusion 2.0, this upgrade similarly represents a transformative enhancement, resulting in a 5-fold increase in workflow speed. More than half of our customers have received a 2.0 field upgrade across both platforms as of year-end 2023. These upgrades and the ongoing expansion of Akoya's PhenoCode content menu were the main drivers of the increases in consumable revenue in the fourth quarter. We also recently announced 2 groundbreaking partnerships. First, we announced our partnership with Thermo Fisher to deliver advanced spatial multiomic workflows by combining the Thermo Fisher ViewRNA technology with the Akoya's spatial biology solutions. Second, along with our partners at Enable Medicine, we announced the release of MaxFuse, an AI and reinforced learning-driven multimodal data integration algorithm on the Enable Medicine Cloud platform. This next-generation analytical methodology allows our customers to directly integrate into one analysis, Akoya's spatial proteomic data with single cell RNA data. As a result, our customers' single cell RNA-seq data, which is not spatial, is mapped to Akoya's spatial proteomic data, creating an informatically derived spatial multiomic data set. This transformative solution allows customers using Akoya's platforms and single cell RNA-seq platforms to leverage and integrate these independent data sets from different platforms to drive profound new multiomic discoveries. This is likely the first of many such AI-based analytical approaches to come. Our platform improvements and partnerships further strengthen our position to lead the market in offering powerful new spatial phenotyping solutions and we remain committed to continuing to lead the market, providing the industry's best end-to-end solutions across multiple market segments. While these new solutions certainly expand our discovery horizons, downstream, we are also witnessing a continued expansion and acceleration of the clinical utility of spatial technologies. Spatial phenotyping is becoming central to emerging clinical biomarker efforts in immuno-oncology and the rapidly growing antibody drug conjugate market. Our 78% growth in our services revenue compared to the prior year is a clear indication of this as we secure additional late-stage clinical trial partnerships. Our demonstrated organizational clinical expertise, the capabilities of the PhenoImager HT platform, our co-marketing partners with Agilent and our companion diagnostic partnership with Acrivon are all key drivers of the expansion of this part of our business. Now importantly, Acrivon also received Breakthrough Device designation on the ACR-368 OncoSignature assay run on our HT platform through CLIA lab and Fast Track designation for their therapeutic ACR-368, and we look forward to their Phase II clinical trial interim results in the near future. We continue to expand our qualified service provider network that includes the industry's top contract research organizations. Akoya qualifies these partners and provides ongoing white glove to support to help ensure their success in offering lab services on Akoya's platforms. The network serves as a valuable commercial amplifier and helps advance the adoption of our platforms in translational studies and clinical trials. We are humbled and appreciative that these successes and ongoing efforts have attracted preeminent global thought leaders in immunobiology to join our newly established Scientific Advisory Board. Dr. Garry Nolan, Akoya's founder and the inventor of the PhenoCycler and co-inventor of MaxFuse has transitioned from his role on the Board of Directors to serve as the new Chair of the Scientific Advisory Board. Accompanying him will be Dr. James Allison, 2018 Nobel laureate and the father of the immuno-oncology revolution, as well as Dr. Padmanee Sharma, a visionary physician scientist in the field of immuno-oncology and immunotherapy, both currently at MD Anderson. These 3 initial members of Akoya's Scientific Advisory Board will inform Akoya's strategic direction and provide expertise in translational, clinical and diagnostic applications of Akoya's spatial biology solutions. Lastly, like others in the industry, we observed some ongoing macro pressures impacting capital equipment purchases, prolonged instrument sales cycles and continued underperformance in our business in China. We anticipate these challenges to persist at least through the first quarter of 2024. In summary, our focus for 2024 revolves around 3 key initiatives. First, to expand applications and implement continued workflow efficiency improvements on the PhenoCycler-Fusion and the PhenoImager HT to drive the continued high growth of our reagent revenue resulting in increases in system pull-through. Second, achieve operating cash flow breakeven by year-end 2024 by focusing on improving efficiencies, cost effectiveness and gross margin expansion. And third, continue to drive our clinical partnerships to achieve our goal of delivering a menu of high-value companion diagnostics to advance patient care. With that, I will now turn the call over to Johnny to discuss our financial results. Johnny?
Thanks, Brian. As Brian highlighted, total revenue for the fourth quarter of 2023 was $26.5 million, a 25% growth compared to the same period in 2022. Full year 2023 revenue was $96.6 million, representing a 29% growth from the prior year. Our robust year-over-year growth was seen globally across our diversified revenue channels and strong portfolio of products and services. Product revenue, including instruments, reagents and software totaled $16.7 million for the fourth quarter. We sold 51 instruments, of which 15 were PhenoCyclers and 36 were from the PhenoImager portfolio, generating total instrument revenue of $9.2 million for the quarter. As Brian noted earlier, continued macro pressures and underperformance in China impacted our results and we expect this trend to continue in the near term. Our global installed base now comprises 1,183 instruments, including 342 PhenoCyclers and 841 PhenoImagers. A total of 230 Fusion instruments have shipped since the full commercial launch at the start of 2022, and we now have a total installed base of 205 for the combined PhenoCycler-Fusion system. The majority of PhenoCyclers are being sold in combination with the Fusion and we expect this combination could drive increased reagent pull-through with an expanding menu of panels and faster workflows from the ongoing 2.0 field upgrades. Approximately half of the installed base of PhenoCycler-Fusions and HTs in the field have been upgraded to 2.0 models as of year-end 2023, and we expect the majority of the remaining instruments in the field to upgrade throughout the remainder of 2024. All new PhenoCycler-Fusion and HT systems are being sold directly as a 2.0 model as of the start of 2024. We delivered $6.9 million in reagent revenue in the fourth quarter, reflecting a 52% increase from the prior year period. The annualized fourth quarter reagent pull-through applicable to both PhenoCycler and HT is now in the high $30,000 range. This is a notable improvement compared to the annualized pull-through per instrument in 2022, which was in the high $20,000 range to the low $30,000 range for both the PhenoCycler and the HT. This growth can be attributed to the increased utilization of PhenoCyclers paired with a Fusion, faster workflows and a growing utility of PhenoCode panels across the instrument portfolio. We are strategically positioning reagents to play a more significant role in our revenue mix with customers, increasing their utility and pull-through across our platforms as we pair more PhenoCyclers with Fusions in the field, enhance instrument portfolio through the 2.0 upgrades and refine our reagent manufacturing, operations planning and supply chain efforts. Services and other revenue totaled $9.8 million for the fourth quarter, an increase of 78% over the prior year period. Services have been a substantial growth segment for us as our instrument warranty and field service revenue have rapidly expanded in addition to our lab services business continuing to drive higher value studies through new and existing biopharma partnerships. Gross profit was $16.6 million in the fourth quarter, representing a 38% growth over the prior year period and gross margin was 62.7% for the fourth quarter versus 56.8% in the prior year period. The timing and contribution of revenue from our lab services business contributed approximately 250 basis points of margin to the strong fourth quarter gross margin results. As we drive increases in our reagent revenue mix, execute on our identified operation optimization efforts for reagents and leverage recent manufacturing investments, we expect to further drive the expansion of our gross margin in 2024 and beyond in the range of a couple of hundred basis points annually. Operating expense for the quarter totaled $26.1 million as compared to $29.6 million in the prior year period, indicative of a reduced spend pattern throughout 2023, while we continued our meaningful top line growth. Total OpEx for 2023 grew only 4%, while top line revenue grew 29% from the prior year and gross margin expanded further indicating that our efforts to leverage our cost structure have been very impactful throughout 2023. Through ongoing strategic efforts, we expect to further lower our operating costs this year, helping us achieve projected operating cash flow breakeven as we exit 2024. We ended the quarter with approximately $83.1 million of cash and cash equivalents. Common shares outstanding and fully diluted shares, including the impact of outstanding options and unvested restricted stock awards are 49.1 million as of December 31, 2023. In summary, we are pleased to report another exceptional quarter with record-breaking revenue of $26.5 million and full year 2023 revenue of $96.6 million, a 29% growth over the prior year. Akoya's installed base has now reached nearly 1,200 instruments, solidifying our position as an industry leader in spatial biology. Our strategic focus for 2024 remains on driving reagent revenue growth and increasing pull-through across our growing installed base to realize the scalability of spatial biology. We've also implemented important operational changes to enhance efficiency, drive gross margin improvement and achieve cost advantages, all while maintaining strong top line growth. As such, we are confident in our ability to sustain strong growth throughout 2024 and beyond and we project reaching our very important goal of operating cash flow breakeven as we exit 2024. At this time, we are providing a revenue guidance range of $114 million to $118 million for 2024. And back to you, Brian.
Thank you, Johnny. We're pleased to report a strong quarter and announced multiple exciting new developments across our product portfolio. We look forward to executing on our strategic objectives throughout the remainder of the year as we drive the business towards positive cash flow. We're thankful for the hard work of our fellow dedicated Akoyans as well as for the support of our customers and shareholders. Akoya remains very well positioned for growth and we're excited about the opportunities that lie ahead as we deliver new spatial solutions in discovery to the clinical markets. At this point, we will open the call for questions. Operator?
[Operator Instructions] Our first question comes from the line of Subbu Nambi from Guggenheim.
The first topic I want to cover is gross margins. How should we think about quarterly pacing for gross margin throughout the year? And as we think about puts and takes, a big one is your progress towards bringing a lot of these reagents manufacturing in-house. In the long term, how will this benefit gross margins? And in the near term, does this bring transitory pressure? And then I have one follow-up.
This is Brian. I'll let -- thank you, Subbu, for your question. I'll let Johnny maybe dig into some of the details. Largely speaking, the positive gross margins for the quarter were really a function of 2 things. Number one is the mix. You saw the reagent revenue number was -- we had a significant expansion of our reagent revenue in the fourth quarter as a result of a lot of the efforts that we've been putting in over the last year or so. That was one large contributor and obviously, those reagents are much higher in their margins. And the second one is our service revenue with the advancements of a lot of our clinical programs also took a significant step up. And now we're really at a place where we're able to leverage that infrastructure and that cost basis. So, as that revenue grows, it does start to contribute to the bottom line. In terms of bringing the manufacturing in-house, the facility is all built out, personnel are there, and we really are just now beginning to put on the shelf reagents that were manufactured internally. And that is really the other driver for longer-term gross margin contribution. And then I'll let Johnny maybe give some color on the specifics of the gross margin throughout the year.
As Brian mentioned, we had a couple hundred basis point contribution in Q4 from some milestones achieved in the ABS business, which, as you can see in Q4 lifted that margin to a healthy 63%. Our sort of operating, if you exclude that ABS and the operating gross margin, really the exit was sort of in the 60%, 61%. And so we expect that to sort of move ratably through the year. It will be a bit lumpy as events happen, certainly from any of the ABS revenue may move that. But from an operating gross margin, as Brian highlighted, we have begun the operation, some of the manufacturing in-house and it's really a factor of how much of that transitions in-house over time as we also scale and start to achieve more and more efficiencies through the year, which is -- so I would look at it as a pretty linear pacing. It will be impacted by mix, of course. As mix happens through the year, we happen to have a quarter where reagents are stronger than the instruments, et cetera, so maybe it will move. But generally, it's a relatively linear pacing to kind of get to our exit, which allows for movement of a couple hundred basis points from our baseline that we've established exiting '23.
Regarding, again the reagents, which is largely PhenoCode Signature and Discovery panels, I'm guessing, First, what is the expected contribution you embedded in the full year guidance? And then second, at what point in the year would you expect contributions to become more material? And lastly, do you expect an increase in penetration of these reagents in your CRO and large pharma accounts this year?
Yes, it's a good question. I think we're beginning to realize, Subbu some of the benefits of our content strategy. So, I think it's going to be -- it's going to continue to be an accelerant for us throughout the year. I don't -- we're now at a point where we're beginning to realize some of those benefits. With respect to your question on our content expansion efforts, your question on CROs and biopharma, yes, I do think our -- specifically our targeted signature panels that are really on -- to be run on the HT or within the field of immuno-oncology. Those ready-made panels, I think we really start to get to scaled studies, Subbu and around the second half where we're going to be doing some very large-scale studies. And I think that is one of the contributors why we expect to see continued reagent expansion throughout the year. One clarification when at least it may get lost. When we say ABS, we're referring there to our CLIA lab services, our Advanced Biopharma Solutions group. So, ABS really is lab services or synonymous. So, thank you, Subbu.
Our next question comes from the line of Kyle Mikson from Canaccord.
Congrats on the quarter. I want to kind of break down the guidance a little more, Brian and Johnny. So, some of these assumptions here, could placements slow down this year given the recent launches and the upgrades? And then on pull-through, could that increase by another like $10,000 by the end of this year, even though most of the tailwinds seem to be in '23 or at least the inflection point seem to be that year? At least that's what the communications seem to be. And then on services, it sounds like a great backlog there. Just talk about visibility that you have at this point? And then, of course, like China, obviously, going to be an issue until 1Q, but maybe how are you thinking about that in the second half of the year?
So, I think I got all those and if I don't Kyle, let me know. So, the 2.0 isn't going to slow down placements, those are field upgrades. I think they're just going to make those installs even more powerful in terms of their pull-through. It is those upgrades. It was a contributor to the reagent acceleration that we saw in the second half. And we do think -- as we course of the year, we do think quarter-over-quarter, we'll see that reagent number continue to climb. The services business is growing for your question, solely because of the nature of the partnerships that we're securing. They're much later stage. They're of a much higher value. And the 70-plus percent bump you saw in that portion of our business is probably the strongest indicator that one can see it externally of the type of projects that we're taking on of being later-stage, higher-value projects that really give us a lot of confidence that we will realize our clinical strategy of securing additional clinical trial assays and companion diagnostic deals. And we will achieve our goal of having CDx products in the queue, contributing a significant portion of our revenue in the near future. So that's sort of the commentary, I think, on everything -- I think I got everything you asked about, Kyle.
Yes. Just on China also if you have any sense on the back half of the year?
Yes. Look, I think consistent with many of our peers, we're going to assume that the first half is still pretty challenging. And if there is recovery, it's going to be incremental in second half. It's just not something you could count on. And as we look at our aim of achieving operating cash flow breakeven, we've got to do that within the context of a revenue goal that takes advantage of our diversified portfolio from cert lab services to reagents and instruments. But it's not so aspirational that we put that profitability goal at risk. So, we're trying to be very balanced in having a top line goal and a margin goal that doesn't require significant changes in the current business environment.
Just a quick one on MaxFuse algorithm with Enable, definitely differentiated from a clinical perspective. I heard Garry Nolan talking about that. Could you just maybe walk through that a bit more, just double click on the clinical side of that? And then just wondering if that's like the first of many kind of like unique one-off software solutions for the ecosystem that you kind of roll out with other partners too, like just in addition to Enable, you have other partners, right? So, just curious about that.
We do. Look, the way I look at that with my sort of simple brain, if you play with ChatGPT or some of those image creators, I think you have at least a qualitative sense of the kind of power that these sorts of approaches can bring. I would largely say, Kyle, in the near term, this is really a tool for your discovery researchers. And effectively, as I noted on the call, what it allows you to do and allows you to take single cell RNA-seq data and leveraging the MaxFuse algorithm and the PhenoCycler-Fusion high-plex protein data, you informatically make that non-spatial data spatial by using the MaxFuse algorithm. So, this allows our customers not to do a multiomic study one at a time, but rather leveraging the large data sets that exist for single cell, whether it's internally or with third parties to leverage that data set and your Akoya's PhenoCycler-Fusion data to make it spatial. I would encourage everybody to go read the 2 Nature papers that Dr. Nolan has done on this. It really is quite astounding and they validated it to a pretty deep extent. So, I do think this is many of additional approaches to come and we'll continue to look at partners like Enable or others as vehicles to implement these in a user-friendly manner knowing that a skilled informatician can do -- get our type of approaches regardless.
[Operator Instructions] Our next question come from the line of Tejas Savant from Morgan Stanley.
Brian, just to kick things off over here, placements came in a little bit light in the fourth quarter. Even on a sequential basis, I think in the third quarter, you've done almost, I think it was in the high-60s, if I remember, right. Can you just walk us through sort of that dynamic? Was it entirely driven by macro and some of those elongated purchase decision cycles that you called out in China as well? Or was there any shift in the competitive landscape here? Specifically, I mean, the one that we've been getting questions on is Lunaphore. So, just curious as to any -- if you could parse out that dynamic in the sequential step down in placements.
Tejas, thank you for the question. It's certainly the former that's driving it. I mean what we saw Tejas in Q3 and Q4 was quarters were becoming increasingly backloaded in month 3. So that's largely -- that is the largest dynamic, the largest driver there. I think the visibility of Lunaphore and the question is, I think, is largely a result of them sort of being integrated with Bio-Techne and having a lot more visibility on marketing power. And we'll see how that competitive dynamic shakes out over the coming quarters because I think they're really just getting going.
And then in terms of just the academic budget environment, last couple of weeks, you've had a few inbounds and just cracks over in European Horizon and some questions around the continuing resolution here in the U.S. as well. You guys are obviously over-indexed there, like a lot of your spatial peers. So, just curious as to what you're baking into the guide and what you're hearing from your academic customers at the moment?
Yes. I would say, Tejas, I think similar to my prior commentary to Kyle, what we've tried to bake into our guide is really a continuation of the existing market pressures that we were all feeling in Q3 and certainly Q4 on the capital side. So, I think that's going to be our approach. Feels like we've been living in continuing resolutions and questions on the NIH budget for over a decade. It's just perhaps a little bit more acute now. And so that's kind of how we're looking at it. What is Tejas in our control and I think where we're realizing some successes is in areas that are less prone to being impacted by macros, which is the reagent utilization on our platform and the advancing of our clinical opportunities, which are in the well-funded arenas of immuno-oncology, as I noted on the call. So, we're going to continue to focus on those areas. They are, again, less prone to some of these macro dynamics and the ROIs are significant for us. So that will be our key areas of focus to mitigate any instrument pressures.
And then one final one, one for you, Brian and one for Johnny. Brian, I know you've sort of like shifted the focus a little bit in '23 to optimizing existing solutions, driving consumables growth, et cetera. But how should we think about the product development road map, perhaps not in '24, but over the next couple of years here? And Johnny, obviously, people are pretty happy to see operating cash flow breakeven by year-end. But is it fair to assume that 2025 will be the first full year of cash flow breakeven for you guys?
So, I'll take the first part first and then Johnny, the second. So, you can think of our product development priorities, focused on workflow simplifications throughout this year and getting over the clinical finish line and getting additional partnerships, whether or not we speak to those publicly is to be determined. So that is the priority now. But you're correct, longer term in terms of platforms, there are really 2 areas that I think are opportunities for the company. Number one is ensuring that we have an IVD-grade system because we will have a menu of products. So, it's ensuring that, that road map is solidified. On the other extreme, in the upstream discovery market, we are going to -- we are already at a place where spatial biology is going to be done at scale, large-scale studies, large-scale database studies. So, getting the instruments to a place where they can do that, having the reagents at a place where they can support that and algorithms like MaxFuse to be able to leverage these large data sets, spatial is going to go the direction that we've seen all other powerful life sciences tools go, which is studies are getting larger and larger at scale. And there is true sample elasticity in this market. You make the systems faster, easier and more affordable to use and there will be more samples. So longer term, Tejas those are the 2 avenues of full additional platform development opportunities for us.
And Tejas to your question on 2025, certainly we haven't guided obviously to '25, but we don't expect to move top line or margin. We expect those to continue to be strong, continue to grow. And really, it's about maintaining a reasonable OpEx, which we absolutely expect to be able to do, which drives a full year sort of cash flow from ops, a good full year cash flow from ops in '25, that's positive. So -- and the building blocks sort of build themselves. If we continue to execute and maintain that OpEx where we expect it to, that's our target, absolutely.
Our next question comes from the line of John Sourbeer from UBS.
I was wondering if you could just talk a little bit more on the announcement with Thermo and the ViewRNA assays. I guess, any initial feedback from customers there? And what is the demand you're seeing on multiomic capabilities?
Yes. I think for us in kind of reverse order, John, thank you for the question and for your time, we look at RNA as something that's complementary to our high-plex protein technology platform on the PhenoCycler-Fusion. So, we really are focused on integrating an RNA solution that is at a plex level that's consistent with that theme. And the ViewRNA technology is perfectly suited to do that. It's really a high resolution amplified single cell resolution platform. And so we're just beginning to integrate and roll that stuff out. We just announced it. So, a lot of the hard work is happening right now. I think we'll probably be talking more about some of those details at AACR. And the demand for -- from our customers to have a complementary RNA technology is strong. I think both the ViewRNA implementation, but equally important perhaps, John, and we'll see how it plays out, I think algorithmic approaches like MaxFuse do represent a transformative addition on how people leverage not just their own data, but publicly available data to get informatically-derived multiomic solutions. So, I think both are important.
And as a follow-up, you have customers who started with opting Fusion in '22. Now, I guess you have 50% at 2.0 upgrade. What is the runway you think here that you have for some of these users to hit full utilization? And just talk about longer term where you think the pull-through could go?
I realize now Kyle asked a little bit about specifics on pull-through. So, we have right now, John, about 2/3 of all the PhenoCyclers are sitting with the Fusion. And we'll probably get through most of those upgrades kind of throughout this year. And as we look at pull-through on that system, like as Johnny noted, kind of in the high-30s as we exited the year. We exited last year somewhere around the high-20s or so. So, I think that trend line continues throughout 2024 and into 2025, doing 40, 50, 60s, I think we can easily get to that realm. Many of our high-end users are operating at 5x plus that average pull-through number. So, I think there's an opportunity for us to really raise the curve on all of them. What we're seeing, particularly with the 2.0 John, is a real pressing need amongst our PhenoCycler-Fusion users to really start to press the plex level even more. So, you're at 50, 60, 70 plex and they're doing that with more samples. And that's why the PhenoCycler-Fusion 2.0 users are the highest pull-through users. So, it's about moving all of those customers up to that 2.0.
[Operator Instructions] Our next question will come from the line of Mark Massaro from BTIG.
Congratulations on a strong 2023. I guess my first one is on the guidance. $114 million to $118 million, I think it calls for 18% to 22%. In your preannounced in January, you talked about 20%-plus. So obviously, you're in line with that. I'm just curious if the 18% somehow might be factoring in pressures related to macro or China or elongated sales cycles? And then maybe can you just give us a sense for the demand environment in the U.S.? Obviously, that's been a stronger territory for you with respect to other geographic regions. So, just give us a sense for perhaps anything you have on geographic growth? And how we should think about that this year?
Yes. I'll do those and thanks, Mark. I appreciate your question and your time. So, if you go through and look at our growth across the regions, North America, as you noted, was the strongest and we think it will continue to be the strongest. It was in the sort of high 30% realm. And I think it'll probably stay there. And I don't think these geographic trends change meaningfully in '24. EMEA was kind of in the low-20s, Mark, in terms of its year-over-year growth in '23. And then APAC was like high single-digits. And most of that was because the team was able to pivot to other regions, Japan, Australia, et cetera, Korea, South Korea to get -- to compensate for the contraction in APAC. I think those trends continue into '24. I think you're right in terms of the low end of the range is really intended to account for those pressures being even more pronounced. One thing though, if and when we do, Mark, secure more partnerships like Acrivon, those are largely additive to our guide. There may be a portion of those that's embedded within our expectations for continued growth of our services business. But additional large-scale CDx deals, like another Acrivon with a large biopharma, that would be additive to that range. And certainly, if and when those do occur, we'll clarify that. So hopefully, that answers your questions.
And then my last question, could you maybe zero in a little bit about what you're seeing in terms of customer demand for PhenoCode Discovery and Signature panels? And then any way to -- as we're tuning up our models, how should we think about reagent growth? Obviously, this is a year where you're coming into the year with about 1,200 systems. Just give us a sense for how you think reagent growth might track relative to prior years?
Yes. I'll let Johnny speak to how much detail we want to give because we don't guide on a product basis. But I would say, Mark, that reagents is going to be in terms of dollars are probably our largest growth driver because it's moving so quickly, as you saw from I think it was $5.7 million in Q3 and $6.9 million in Q4. So, you can see we're beginning to realize the benefits of many of the workflow solutions that we put on the market. And then we think those trends maybe not linearly continue throughout the year. So, that's how I would look at that. And Johnny, I don't know if you want to add any more color in terms of the specifics on reagents.
No. Only to say -- to highlight sort of what you said, which I think look back to '22, obviously, it was sort of in that $4 million range moved into the $5-plus million in '23 and really exited '23 in that is call it $7 million per quarter and we expect that to continue. It's sort of natural taking these steps. And certainly, will be an important focus that will help to drive the margin goals that we have as well in '24.
Actually, if I can sneak one more in. Great progress on getting to that operating cash flow breakeven by year-end '24, certainly a year ahead of expectations from recent comments. There's been a decent amount of M&A. Some of it's been larger, some of it's been smaller. But as you're about to turn the corner to cash flow breakeven, are there certain assets out there, even if they are of the tuck-in variety that might be enticing to you? And maybe just speak, if you will, about the M&A environment broadly.
Yes. I think you've got a couple of buckets of M&A, Mark. I think you've got some activity that's really driven around companies trying to find synergies as a way to continue to capitalize the business. And then you've got these larger deals like the Olink deal, I think they're kind of falling into those 2 buckets. I think for us, Mark, our #1 priority for '24, we have everything that we need in our technology stack. It's really just delivering on what we need to in terms of growth with the reagents at the center of that and then securing additional -- and then continue to expand our biopharma business. So, there's nothing that is of immediate need that would be better John with an M&A. That said, we are always keeping our head on a swivel and looking at opportunities and trying to do that kind of in a reasonable resource method.
[Operator Instructions] And our next question will come from the line of Rachel Vatnsdal from JPMorgan.
So, I want to follow-up on some of the earlier questions around placements. Can you just kind of walk us through what are your base case assumptions for placements this year in 2024? In the past, you talked about a run rate of a few hundred instruments per year. Should we model that for this year as well? And then what are the potential sources of upside and downside on that this year?
Yes. Thank you, Rachel. Your numbers are right. I think a couple hundred is fair. We probably wouldn't get more specific on that. And then I think the upside, I think we still have upside certainly on the reagents as we expand our content as we get the 2.0s fully utilized in the deal with their increased capacity as software solutions like MaxFuse become more prominent and our panels continue to roll out. So, I think there's certainly upside there. I also feel like we have opportunities to continue to advance our clinical partnership portfolio to hopefully to secure additional significant partnerships in that realm. And much of that would be additive to our top line, whether it's this year or next year. We've tried not to -- we have not baked into our base financial fundamentals and assumption around additional significant CDx deals. But when they do come, as I noted earlier, that would be a source of upside.
And then I just want to push on the macro backdrop a little bit more. You talked about how 4Q continued to have some of those macro pressures impacting capital equipment purchases. So can you talk about how that trend has continued into January and February, as customers have kind of had some of these budgets reset on Jan 1? And then you highlighted that China was an area of weakness from some of this capital purchase spending, but were there any other geographies that were notably impacted by the macro backdrop as well?
Obviously, you can have exchange rate issues that effectively drives up your ASP. But I would -- that's not to the point, I think, where beyond the macros, it's really impacting our top line. And I think as I noted earlier, it's really Rachel, just about some budget tightening, but also an increase in diligence and approval circles around many capital purchases, just like we do internally with our own capital purchases. So, those are the large-scale dynamics in play.
And then just on January-February trends, could you walk us through how some of those conversations trended in January and February so far?
Yes. I mean, I'm hesitant to give any specific guidance on Q1 other than to say, we have as an expectation in our full year guide, the market trends that we saw in second half and Q4 will continue into Q1 and the rest of the year.
Thank you. I'm not showing any further questions in the queue. I'd like to turn the call back over to Brian McKelligon for any closing remarks.
Yes. Well, thank you, Victor, for hosting us. Thank you. Thank you to everybody for your time. I think for Akoya, we have and we'll continue to demonstrate and realize the benefits of our strategy with ultimately that being, as we noted, hitting operating cash flow breakeven by the end of the year with our reagent growth and the margin expansion along with that being core contributors. But again, as I noted, we're also seeing real significant movement and opportunities for us to take that next leap as a company and continue to advance our portfolio from a research-based product to additionally a clinical-based product and we'll continue to share those successes with all of you as part of the future calls. So, I thank you for your time, and I look forward to following up with each of you soon.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
All right. Thank you.