Quantum-Si: Unlocking the Proteome's Potential Amidst Market Shifts (QSI) - QSI Stock Research Report

## Executive Summary / Key Takeaways * Pioneering Next-Gen Protein Sequencing: Quantum-Si (QSI) is at the forefront of proteomics, developing a proprietary single-molecule detection platform for Next-Gen Protein Sequencing (NGPS), aiming to democratize access to critical biological insights. * Strategic Pivot to Installed Base Growth: Facing U.S. academic capital sales headwinds, QSI is strategically shifting focus to expand its installed instrument base through new acquisition models (e.g., reagent rentals), prioritizing long-term consumable revenue and scientific validation over immediate capital sales. * Accelerated Innovation Roadmap: The company is executing an ambitious innovation roadmap, including the upcoming Proteus platform (H2 2026 launch) designed for significantly higher throughput, and leveraging AI for accelerated amino acid recognizer development, reinforcing its technological leadership. * Fortified Financial Position: Proactive capital raises in early 2025 have extended QSI's cash runway into Q2 2028, providing ample liquidity to fund its innovation pipeline and commercial expansion despite current revenue challenges. * Navigating Macroeconomic Headwinds: While NIH funding uncertainties impact short-term U.S. academic capital sales, QSI is mitigating risks by emphasizing growth in biopharma and international markets, alongside disciplined cost management, as evidenced by a revised 2025 adjusted operating expense guidance of $98 million or less. ## The Dawn of Next-Gen Protein Sequencing: QSI's Foundational Vision Quantum-Si Incorporated (QSI) is a life sciences company dedicated to revolutionizing proteomics research through its proprietary universal single-molecule detection platform. This technology enables Next-Gen Protein Sequencing (NGPS), a method designed to sequence proteins in a massively parallel fashion, offering a significant leap over traditional, sequential approaches. The company's core mission is to transform single-molecule analysis and democratize access to the proteome, the complete set of proteins expressed within a cell. The proteomics market is large, important, and still in its relative infancy, presenting substantial long-term growth drivers. These include the increasing demand for large-scale screening studies that necessitate deeper characterization of clinically and therapeutically actionable proteins. Furthermore, the burgeoning adoption of artificial intelligence tools in drug development, protein engineering, and multiomics analysis requires vast amounts of data, which NGPS is uniquely positioned to generate. QSI's overarching strategy is built on three pillars: accelerating commercial adoption, delivering on its innovation roadmap, and preserving financial strength. QSI's journey began with the founding of Q-SI Operations Inc. in 2013, culminating in the current Quantum-Si Incorporated through a business combination in June 2021. This history underscores a decade-long commitment to developing its foundational technology. The company initiated a controlled launch of its Platinum instrument in December 2022, moving to a full commercial launch in Q2 2024. This period saw QSI diversify its customer base beyond U.S. academic researchers to include biotech, pharma, government, and contract research organizations, alongside building an international distribution channel that now spans 23 partners. ## Technological Edge: The Core of QSI's Competitive Moat QSI's competitive advantage is deeply rooted in its differentiated technology, which offers distinct benefits over existing solutions like mass spectrometry (MS) and emerging nanopore-based approaches. The company's platform, including the Platinum and Platinum Pro instruments, aims to address the high instrument costs, complex data analysis, and infrastructure requirements associated with legacy proteomic tools. The Platinum line of instruments provides single-molecule amino acid level resolution with a streamlined workflow and automated data analysis. The newer Platinum Pro offers an enhanced user interface, flexible data analysis (on-board or cloud), and a "Pro mode" for custom application development. These instruments are designed with a "favorable cost to produce," enabling QSI to implement flexible acquisition models. QSI's innovation extends to its consumable kits and software. The upcoming Version 4 Sequencing Kit, expected in Q3 2025, will significantly increase proteome coverage through enhanced amino acid detection and a new enzyme engineered for high-efficiency cutting, particularly before proline. This kit will also introduce an expanded set of 24 barcodes, allowing customers to increase multiplexing levels while maintaining analytical performance. The Version 3 Library Preparation Kit, slated for late 2025, is projected to reduce sample input quantity by at least 100-fold, enabling analysis of a broader range of biological samples and lower-concentration proteins. These advancements directly address customer needs for deeper insights and broader applicability. The most ambitious technological leap is the Proteus platform, targeted for a second-half 2026 launch. Described as a "huge leap in capabilities," Proteus incorporates a new instrument and consumable architecture designed for significantly higher throughput and automation. While Platinum processes a single consumable with 2 million wells per run, Proteus is being designed to process two consumables simultaneously, each with up to 80 million wells, totaling 160 million wells per run. This expanded capacity can facilitate extremely deep analysis of single samples or process many more samples concurrently, aiming for billions of reads and enabling *de novo* protein sequencing. The development of Proteus is strategically derisked by leveraging existing commercially available technologies (e.g., surface chemistry, consumable fabrication) and incorporating advancements in optical detection from the DNA sequencing field. A key milestone for 2025 is the successful demonstration of protein sequencing on a Proteus prototype by year-end. Beyond sequencing, QSI is pushing the boundaries of its core technology. Its AI-based amino acid recognizer development program leverages a proprietary dataset of protein binding interactions to design new recognizers, achieving specifications within a single design cycle and significantly shortening development timelines. Furthermore, the company has demonstrated internal feasibility for Post-Translational Modification (PTM) detection, a combined method that allows Platinum Pro users to detect, quantify, and identify site-specific PTMs, even those deep within a peptide. This capability addresses a critical unmet need, as current technologies struggle with this type of analysis. QSI has also shown ultrasensitive protein detection on Platinum Pro, achieving low femtomolar sensitivity directly from serum in approximately two hours, without requiring PCR or NGS. These technological differentiators collectively form QSI's competitive moat, enabling it to offer lower instrument costs, greater automation, and more streamlined data analysis compared to traditional mass spectrometry, while addressing the inherent complexities of amino acid sequencing that challenge nanopore-based approaches. ## Financial Performance and Strategic Adaptation QSI's financial performance in recent quarters reflects both its early commercialization phase and the impact of macroeconomic headwinds. For the six months ended June 30, 2025, total revenue increased 32.8% year-over-year to $1.433 million, primarily driven by product sales. However, Q2 2025 revenue was $591,000, a 5.0% decrease from Q2 2024, and fell below expectations. This decline was "driven entirely by capital sales of new instruments" and attributed to a "near halt in capital purchases by U.S. academic labs" due to NIH funding uncertainties. Despite the capital sales slowdown, consumable purchases in Q2 2025 were slightly ahead of expectations, demonstrating consistent demand across market segments. Gross profit for Q2 2025 was $351,000, maintaining a gross margin of 59.4%, which included an approximate 13% benefit from inventory utilized that was carried at low or no value. The company anticipates gross margin variability in the foreseeable future due to the mix of instrument and consumable sales and inventory accounting adjustments.

Loading interactive chart...

Operating expenses reflect QSI's commitment to disciplined capital allocation. Adjusted operating expenses remained flat year-over-year, even as the company funded significant development for the Proteus platform. For the six months ended June 30, 2025, GAAP total operating expenses were $56.1 million, compared to $50.4 million in the same period of 2024. This includes a notable $3.4 million net expense in Q2 2025 related to a preliminary settlement of the Delaware stockholder litigation. The company reported a net loss of $48.0 million for the six months ended June 30, 2025, contributing to an accumulated deficit of $644.7 million.

Loading interactive chart...

## Liquidity, Outlook, and Risk Management As of June 30, 2025, QSI maintained a strong liquidity position with $214.2 million in cash, cash equivalents, and marketable securities. This was further bolstered by a $50 million registered direct offering that closed on July 8, 2025, providing approximately $46.9 million in net proceeds. This proactive capital raise extends QSI's cash runway into the second quarter of 2028, providing crucial financial strength to execute its long-term plans. Management describes its capital approach as "realistic and opportunistic," aiming to leverage market opportunities to strengthen its financial foundation.

Loading interactive chart...

The company's outlook is shaped by both market challenges and strategic responses. While providing specific top-line financial guidance remains challenging due to the ongoing NIH funding uncertainties and the early stages of new commercial models, management believes Q2 2025 revenue represents a "bottom." They anticipate Q3 revenue to be "a little lighter" but expect "better acceleration into Q4" driven by a growing installed base and potential cyclical capital spending. To counter the U.S. academic capital sales headwinds, QSI has launched expanded instrument acquisition options, including reagent rentals, third-party leasing, and selective placements. This strategy aims to grow the installed base of customers who consistently purchase consumables, viewing this as a "strategic moat" for long-term value creation, even if it means a slower short-term revenue ramp. The company is also intensifying its focus on the biopharma and international markets, which are less impacted by U.S. academic funding issues. QSI exited Q1 2025 with 23 international distribution partners and completed training for its North American partner, Avantor (TICKER:AVTR), expecting accelerated contributions in the second half of 2025. QSI has revised its 2025 adjusted operating expense guidance downwards to $98 million or less (from $103 million or less), while maintaining total cash use at $95 million or less (now inclusive of the legal settlement). This reflects "more efficient and effective use of funds" and "overall efficiencies in development projects," demonstrating a commitment to fiscal discipline without compromising critical innovation timelines, particularly for Proteus.

Loading interactive chart...

Key risks include the persistent NIH funding uncertainty, which could continue to impact U.S. academic capital sales. The lengthening sales cycles observed in Q3 2024 also pose a challenge, as a small number of delayed deals can significantly impact early-stage commercialization revenue. While tariff impacts on inventory acquisition costs have been minor, and import tariffs on scientific devices have historically been exempted, QSI continues to monitor these factors. Inflation risk could also impact supply and manufacturing costs. Despite these challenges, QSI's strong balance sheet and strategic flexibility position it to mitigate these risks and pursue its long-term vision. ## Conclusion Quantum-Si stands at a pivotal juncture, transforming the landscape of proteomics with its innovative Next-Gen Protein Sequencing platform. While short-term revenue has faced headwinds from U.S. academic funding uncertainties, the company's strategic pivot to expand its installed base through flexible acquisition models, coupled with a relentless pursuit of technological advancements, underpins a compelling long-term investment thesis. The forthcoming Proteus platform, with its promise of vastly increased throughput and *de novo* sequencing capabilities, represents a significant future growth driver, solidifying QSI's position as a technology leader in a nascent yet rapidly expanding market. The company's disciplined financial management, evidenced by revised operating expense guidance and a fortified cash runway extending into Q2 2028, provides the necessary capital to navigate current market dynamics and realize its ambitious innovation roadmap. Despite competitive pressures from established players with broader portfolios, QSI's unique single-molecule detection technology and focused R&D in areas like AI-driven recognizer design and PTM detection offer a differentiated value proposition. Investors should recognize QSI as a high-potential, technology-driven company playing the long game in a transformative scientific field, where its ability to convert technological leadership into widespread commercial adoption will be the ultimate determinant of its success.