Q4 2019 Earnings Call
Greetings and welcome to the bio nano genomics fourth quarter. After school year 29 chain conference call. At this time, all participants are in listen only mode.
Question and answer session will follow the formal presentation.
Anyone require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
I will now turn the conference over to your host Ashley Robinson from Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everyone welcome to the Bonino genomics fourth quarter and yearend 2019 financial results conference call, leading the call today, we'd be Dr., Eric Homeland CEO bio nano.
After the market close today, Brian Eno issued a press release announcing its financial results for the fourth quarter and year end 2019, a copy of the release can be found on the Investor Relations page of the company's website before we begin I would like to remind everyone that certain statements made during this conference call. It may contain forward looking statements, including statements about our strategic.
Commercialization plans 2020 sales pipeline anticipated benefits of improvements to the Sapphire system and the advantages of the Sapphire system over current technologies, our expectations regarding timing and content of study results and anticipated benefits of these studies in driving adoption of the software system such forward looking statements are based upon.
On current expectations and there can be no assurances that the results contemplated in these statements will be realized actual results may differ materially from such statements due to a number of factors and risks some of which are identified in our press release and our other reports filed with the S. You see these forward looking statements are based on information available to bio nano.
Today, and the company assumes no obligation to update statements as circumstances change and audio recording and webcast replay for today's conference call will also be available online in the Investor section of the company's website for the benefit of those who maybe listening to the replay or archived webcast. This call will be well just call. It was held and recorded on March 15, two.
That was in a 20 and for reference the webcast link provided in today's press release includes slides to accompany Eric's remarks with that I'll turn the call over to Eric Holmlund Eric.
Great. Thank you Ashley and good afternoon, everyone I'm pleased to hobby join us today for this update on our progress in the fourth quarter add over the course of 2019.
After the my remarks that I prepared well open the call for a question and answer session. As actually mentioned there are some slides to accompany my remarks, then you can follow along with those slides by accessing them through the the linked to the webcast. So.
Oh I won't go over to the third slide in this presentation and begin by saying the 2019 has been a year or significant progress for bio nano and the platform and its really a very exciting time for us we've had a record expansion in the installed base of our sapphire instead.
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Importantly, 2019 was also a year in which.
Our customers took the very first jobs <unk>.
Toward expanding their adoption beyond really the halls of academic research and into clinical applications for oncology, including solid and liquid tumors as well as inherited genetic diseases. We had a record number of publications with bio nano dating data they were 80 of them.
We're multiple presentations the given at conferences and scientific meetings, describing very innovative cutting edge use of Sapphire for research and importantly, we've been completing validation studies that demonstrate the utility of Sapphire for an application in cytogenetics, we call digital cytogenetic.
So.
I want to start before I go into some of the detail regarding our progress by reminding everybody about a remarkable capabilities up our platform to stop our system. It's the only.
System for genome analysis, this capable of an unbiased and genome wide analysis of structural variation and it does this with unparalleled sensitivities and false positive rates that we believe are the lowest in the industry.
And whats important is that the performance that I'm describing for you extends to very complex samples and so when a variance of interest as president and he heterogeneous sample like a tumor for example.
The shop, our system is able to find out.
Variant, even when the a wheel fraction is as low as 1% Sapphire can now collateral or.
[noise] corporate human genome on free samples in parallel for a total of 15 terabase pairs of data on a single Sapphire Chubb.
And we make this available to customers for less than $500 a sample and so this is really a remarkable capability.
The ability to detect the structural variations with sensitivities, reaching 99% down to this 1% or wheel fraction.
Enables our users to conduct comprehensive structural variation analysis.
Throughout oncology detect rare variants that may be responsible for genetic and inherited diseases as well as look yacht off target effects that maybe occurring during Christmas or based at gene editing, we also have enough coming [noise].
Sample prep kit for tissues that will allow scientist for the first time to isolate ultra high molecular weight DNA any work flow from solid tissue, that's faster than most standard DNA isolation methods and so.
As the capabilities of Sapphire have advanced our users are beginning to tackle increasingly complex problems in genomics as well as transitioning from the research setting into the clinical one and so if we look at the four slide here are the first slide sorry.
I wanted to describe a little bit about our target markets. We focus in two areas. One is the research arena where.
Our platform is intended to complement sequencing, we're not asking anybody to stop doing sequencing, but we love it when they conduct genome analysis on Sapphire alongside sequencing. There are thousands of sequencers out there and so the opportunity to place sapphires along them is significant and the other area of interest.
For us is and what we called digital cytogenetics, So cytogenetics and I'll I'll describe a little bit more of it in a couple of slides, but this is an area where.
Clinicians are analyzing patient samples looking for genomic re arrangements that are not detectable easily by sequencing and so.
We look on slide six we describe a little bit of what cytogenetic analysis is so we're looking for abnormalities at a genome that are not point mutations, but would be called translocations insertions deletions, another chromosome will rearrangements and cytogenetic.
This is a field of.
Analysis and clinical testing that is designed to look for these types of genomic structural abnormalities, but not the sequence abnormalities and it's important to know that.
Next generation sequencing because of its short reads art is not able to reliably the tucked. These structural variations and that creates a unique opportunity for sapphire and so if we look at the seven slide here, we see that Sequencers, which are amazing for detecting point mutations are essential.
The blind to these large chromosome altria range Vince.
They can be anywhere from hundreds of base pairs to millions of base pairs inside size and that's that's the sweet spot for the Sapphire system and so Barney I know and Sapphire are the only a system capable of reliably detecting these structural variations anywhere from a few hundred base pairs up to millions a base pairs.
In size.
So if we look at slide eight.
It describes for you our thinking about how cytogenetics will be adopted in this space.
Today traditionally cytogenetics lives rely on for technologies fish or fluorescence in situ hybridization.
Karyotyping micro raise.
And southern block analysis to look out a variety of solid liquid tumors as well as inherited diseases and the value proposition that sapphire brings is that it's capable of consolidating all of the testing that would be done on these four different.
Cumbersome and expensive workflows into a single workflows. So sapphire is attractive to cytogenetics labs, because it can replace.
For techniques with one of the Sapphire workflow.
No the opportunity on slide nine for establishing Sapphire is the digital cytogenetics platform is significant there are 2500 cytogenetics lab worldwide processing, some 2 million.
Samples and so if we're charging $500 per test for each of these.
Applications and patient samples, that's a billion dollar market in cytogenetics adoption alone and so that's why we're very focused on this opportunity.
Now over the course of 2019 on slide 10, we've been planting the seeds for Sapphire to drive a wide way a broad wave of adoption across cytogenetics as this replacement for the traditional methods and so key catalyst for this conversions has included.
Adoption by a variety of thought leading sites completion and publication of validation studies in various indications and laying the necessary groundwork for labs to obtain reimbursement through third party payers for tests that they develop and run on the staff our system and so you can see a handful of this.
Sites that have adopted sapphire and are validating it for applications in hematologic malignancies inherited diseases and other areas of cytogenetics, where they see.
Sapphire as a replacement for these traditional methods now one of those labs.
On Slide 11, Perkinelmer has developed an essay for a debilitating form of muscular dystrophy Fs HD, it's the second leading cause of muscular dystrophy.
And Perkinelmer has developed an assay for fsh de based on the Sapphire system.
In their validation studies they found that Sapphire was 100% can coordinate with the traditional method southern blot and poles.
Field gel electrophoresis as well as in comparison against multiple sites, there was 100% concordance, there as well and so this.
Progress led perkinelmer to release commercially.
This test based on the staff our system in their offering it to their global network of customers.
Now.
In addition to the work that Perkinelmer has done we have a number of.
Ongoing validation studies.
To prove that Sapphire is a replacement for the traditional methods and cytogenetics and that the workflow is more efficient and robust and what is currently being run and so on slide 12, we summarize handful of the sites and stuff.
Studies that are ongoing.
We recently reported that right about University Medical center in the Netherlands completed their study of 48 leukemia patients and demonstrated the Sapphire was 100% concordant with the existing standard of care and that clears the path for them to convert their existing workflows over to Sapphire in.
Due course.
And I want to point out it's very important that no. Other technology has the ability to conduct the simultaneous type of assessment that Sapphire did were at wrap out University. They looked at markers that would typically require at least three technologies fish micro.
Arrays and karyotyping, they completed that analysis in a single assay on Sapphire.
And no other technology has that capability, there's been no such demonstration in literature to date. So this is a very powerful advance for US co Shan Hospital in France has a similar study that they've completed that is being written up for publication and our North American study led by Dr., Brian Levy.
At Columbia University is progressing there had been a delay in enrollment but that is now accelerated and that study has more than 100 patients that have been enrolled and over 80 samples that have been tested to date and so we expect that to be wrapped up and published very soon.
Second study in North America got underway. This year at MD Anderson Cancer Center, where they are evaluating sapphire for use in testing in there.
Myelodysplastic syndrome work flow and they expect to complete their Rome and that study in the second quarter of this year.
So the list of studies that have been presented and or publish describing sapphires ability to go beyond the standard of care is growing as well. So sapphires unique power includes the ability to consolidate the existing workflows and really a four for one.
Trade.
But it also provides insight and information that goes well beyond that which any existing technology can assess and so some of the highlights of those studies that were presented included one completed and presented by scientists at mass General Hospital, who were analyzing.
Newborns with congenital diagrammatic, hernia, and which they revealed a much more complex story for patients than was ever seen.
Dr. Mark Ebert from the Mayo clinic presented his work in neuro degenerative diseases, where he demonstrated the ability of sapphire to count the individual number of repeated domains and see our one important Alzheimer's associated gene. This type of resolution is just simply impossible.
So with any other genome analysis technique, especially sequencing and so many other examples of work with Sapphire been published this year, including the effects of HPV integration in head and neck cancers.
Other studies of breast ovarian and endometrial cancers as well as work in using Sapphire as a tool to screen patients considering pregnancy for infertility.
And so we're very proud of all the in incredible progress that we've seen in the market, where we expect sapphire to gain significant adoption.
And we have seen a lot of progress in our financial results as well and so on slide 13, I'm going to summarize some of the key highlights for us.
First regarding the shipments to customers there were 11 sapphire shipped in the fourth quarter and 39 for the full year.
Which is a 22% increase over 2018 now we spoke over the course of the year, how our business model with shifting a little bit from being one that was almost a 100%.
[noise] focused on capital sales to one where we saw more and more reagent rental deals and so that does impact revenues because now the revenues are spread out over time over the three year period, let's say of a typical reagent rental but what's important is that there has been significant growth in the installed base of the Sapphire system.
As of December 31st 2019, there were 73 Sapphire systems installed worldwide, our revenues for the fourth quarter were 2.8 million and for the full year 10.1 million.
Consumables revenues importantly in the fourth quarter were 1.1 million and that was a record for US I think if that's very important because it shows that the growth in the installed base is starting to drive utilization of Sapphire chips and the reason that that's so important is it.
Begins to propagate the message of Sapphire utility throughout the market and lastly, our cash as of December 31st was 17.3 million.
So overall, we saw tremendous progress over the course of the year and we're thrilled with everything that we're seeing.
If we look on slide 14.
I summarize for you a number of Validations that are currently underway in several disorders cancer constitutional diseases different pediatric in development disorders, as well as a class of disorders, known as repeat expansion and deletion disorders, and we recently started to study in China tied to.
Genetic origin of infectious disease susceptibility.
And so we expect these studies to progress and provide all sorts of demonstrations of utility of the Sapphire system and we also expect other diagnostic labs to develop more laboratory developed test in the U.S. and follow similar pass around the world.
In Europe as well as in the Asia Pacific region.
And as a key revision to our existing go to market strategy, we have been taking steps to reduce barriers to.
Adoption of bio nano by offering a commercial services program and so.
If labs are unable to adopt a sapphire system for any reason, we accept their samples and process them here and our labs and bio nano or through our network of certified contract service providers and so this approach provides a revenue stream, but importantly, it makes sure.
That anybody seeking to utilize bio nano data in their study or their project will be able to get it no matter. What we've also committed to a program of expanding our sapphire leasing and reagent rental deals the reason that were more and more.
Our open to this approach is that.
It shortens the amount of time that a customer goes from being technically sold on a sapphire system to actually adopting it and operating it.
This is crucial to a crucial timeline to shorten because.
It accelerates the path to having bio nano data available in the market and it's the awareness of bio nano the trust in familiarity with us and the SAP our system in the publication of those data that's going to drive mass adoption. So for us. It's a very exciting time, we're thrilled to see the progress where.
So grateful to.
The very top tier thought leading customers, who have adopted the sapphire system and who are putting it through its paces as the.
Platform that will drive the transition from traditional cytogenetic methods to the digital cytogenetics as well as making it a go to platform for novel discoveries and finding new therapeutic targets and novel diagnostic biomarker signatures.
And so with that I will open up the call for.
You in a operator.
[noise] certainly at this time it'll be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
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One moment, please well be poll for questions.
The first question is from Jason Mccarthy of Maxim Group. Please go ahead.
Eric Thanks, Thanks for taking the questions just a couple of questions. The first touching on the revenue the Fourq you revenue.
Is it more of.
More representative of a shift in the commercial strategy to the lease rental versus buy with a large for said the of your user based really on the academic and research side.
The making it more amenable to them.
To to have been placed on a.
Lesser upfront.
Came in but then enticing them to use more of the consumables and how is that going to impact revenue do you think or the number of sapphire placements in 2020, particularly now that grants have reset for the new year.
Sure so.
With regard to the first question I think the impact of the shift in model.
Is the is felt on the revenue line. So what we would had in the past was that all of those 11 systems that went out would have brought in revenues tied to a capital purchase but that's not the case in this quarter. There was a mix of deals that went out and in fact out it was the case over the.
Pull course of the year I do believe that overtime that will begin to settle out but.
Our approach.
To make this type of deal available to the market is really to accelerate the time that people go from being technically sold to utilizing because that's that's the most in credit critical step for us and as they utilize chips. That's the long term profit driver for the company.
And so we're comfortable taking that short term hit if you will in the interest of long term.
[noise] progress and acceptance of the data type secondly, with regard to honor on on a go forward basis as we.
Go more and more into the.
Clinical arena, we see that this reagent rental model is very much the norm and so I think that.
Whether we had intended to make this transition or not we would have made it because.
That's how these labs adopt systems and our.
Distribution of academic research sites versus clinical is going to be more and more skewed toward clinical as as we go forward. So I do think that there will be are.
Reflection of that transition in 2020, but we do expect the installed base of sapphires too.
[noise] to continue to grow it grew 22% on a year over year basis, and we would expect that growth and maybe even a little bit more in 2020.
And then going over it more on the on the data side.
You had mentioned Mayo clinic is involved with that with the blood cancer work, but also.
On the narrow the generative disease side when do you think and then maybe it's up to then maybe it would we see any updates or data or publications because that space, particularly around some things like all fibers in the last year as you know.
Have become very very very active.
Once again, we saw some high profile fail that a lot of that may have been tied to.
Initial diagnostics.
How do you see.
The relationship at Mayo clinic in the narrative degenerative disease play out over the next year, maybe two years.
Yes, So importantly, there are.
Multiple Mayo sites, and we're working with both of them the Minnesota side Rochester, Minnesota site is participating in our trials around hematologic malignancies, and the Neurodegenerative work is being conducted in Jacksonville, Florida, and that's where Dr. Mark Ebert is leading the program.
And he has a very large study that is being designed and.
He is seeking funding for that of course, but I.
I understand that that process is progressing well and so once that study is designed they will begin to process.
Multiple hundreds of samples on the Sapphire system.
For the very specific games that you cited and that team is extremely excited about sapphire and its utility and the data that he presented at a SH t. We are representative of the pilot study conducted to justify the bigger study and so for him the justification is there.
Our and matter of kicking that study up.
Just last real quick question I feel like I have to ask it.
Just given the companys exposure to China.
And international markets, replacing Sapphire than business is there any impact with what's happening with brought up there.
Okay.
Yes, I mean, I think that that.
For for most companies they have felt a bit of a slowdown with regard to the China business overall, and we have seen that now as everybody should remember our business is highly seasonal and it's it's low in Q1 and in fact, China business is almost always slow in Q1 because of the.
Lunar new year.
We have experienced some friction in China that we believe to be due to corona virus. However.
Our contacts there are or.
You know progressing well and we expect things to pick up.
In addition to that the opportunity to do research in key areas, including this disease susceptibility has manifested as a result of Corona virus and so we're working with a number of hospitals and.
Commercial service providers in China to support those studies and so and the long run I think that there will be a benefit that we'll see as a result of this.
Okay. Thank you for taking the questions.
Welcome Jason Thank you.
This concludes the question answer session I will now turn the call back over to Eric Coleman for closing remarks.
Great well I want to thank everybody for dialing in and.
We hope to speak to again soon on our first quarter earnings call.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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