Q2 2021 Bionano Genomics Inc Earnings Call

August 4, 2021

[music].

Good day and welcome to the bio nano genomics second quarter 2021earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Amy Conrad from Investor Relations. Please go ahead.

Thank you and good afternoon, everyone welcome to the bio Nanos genomics second quarter 2021, the financial results Conference call.

Leading the call today is Dr. Eric Colson CEO of Eylea is the.

The owned by Chris Stewart, CFO of bio Nina and Dr. Arko childhood CMO of violence.

After market closed today.

Issued a press release announcing its financial results for the second quarter of 2021.

A copy of the really can be found on the Investor Relations page of the company's website.

I would like to remind everyone that certain statements made during this conference call maybe forward looking including statements about bio net on strategically of commercialization plan.

Sales pipeline anticipated benefits of our improvements of the Sapphire system anticipated milestones for 2021, and the advantages of the Sapphire system over current technologies, our expectations regarding timing and content of the study results and anticipated benefits of the studies and driving adoption of the Sapphire system.

Such forward looking statements are based upon 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 borrowing on our press release and bio Nanos reports filed with the SEC.

The forward looking statements are based on information available at the biomass today and the company assumes no obligation to update statements as circumstances change.

An audio recording of the webcast replay for today's conference call will also be available online in the investors section of the company's website.

With that I will turn the call over to Eric.

Thank you Amy and good afternoon, everyone. We had a really great quarter to cap off this first half of 2021, which we believe has been 1 of the most transformational periods in our history.

Total revenue for Q2, 2021 was $3.9 million, which is up 226% versus Q2 of 2020.

And that's a record for any Q2 in the history of the company.

We also had great performance in many areas of execution, including seeing customers develop the laboratory developed tests or <unk> based on optical genome mapping or ODM with sapphire and obtaining the accreditation for Sapphire based Leds in certain European markets, which 1.

As an important milestone for Q2.

I also want to welcome to the team 2 outstanding executives, who joined US this quarter adjacent Pryor, who became our chief commercial officer, and Rich Shippy, who became our chief business Officer.

Jason and rich our experienced leaders with Jason having held previous leadership positions at Perkin, Elmer and gene Dx among other companies.

And rich having held previous leadership positions at Alpha metrics and alumina, So welcome to Jason and rich.

To start out of our update today by outlining our strategy, which is focused on execution in 3 key areas.

First is growing the installed base of the Sapphire systems and their consumables used in 2 markets. The clinical research market were ODM provides an alternative to traditional methods that are outdated slow and have low success rates for finding the variance the drive biology in pathology.

The other market as of the discovery research market, where O G. M empowers researchers looking for novel therapeutic targets and biomarker signatures.

The.

The second area of execution focus for us is continuously innovating so.

So we can bring new capabilities of that accelerate the throughput of ODM accommodate more sample types and simplify data analysis and interpretation.

Third is supporting the development of validation data through pivotal clinical research studies to show the efficacy of O G M.

The following key opinion leaders as they showcase the prowess of our south of our system in their presentations and publications.

And also while the aim to gain third party payer support through development and validation of their own the L. D Ts to be applied in cytogenetics inside of genomics.

Here's how we're tracking against these objectives regarding the sapphire installed based on utilization Sapphire systems.

<unk> completed in the quarter brought the total number of installed south of Ars 2.121 as of June 32021 versus 107 as of March 30 at the end of the first quarter.

We shipped 13 Sapphire systems, this past quarter compared to 6 systems shipped in the same quarter in 2020.

Our goal for 2021 is to reach 150 Sapphire systems installed worldwide and we believe we are on track to meet that goal.

During the quarter, we sold 2742 nano channel array of flow cells.

Let me remind you that the flow cell is the unit consumable for analysis of <unk> human genome.

More flow sales sold leads to more utilization of optical genome mapping in the field and more data to support it.

The increase represents 93% growth over the second quarter of 2020.

And also represents the most flow sales sold ever in the single quarter and so we're really proud of our progress in growing the installed base.

And seeing the utilization, which is measured by the number of flow cells that are going out into the field now several notable cytogenetics laboratories in the U S, including children's hospital of Cincinnati, which is using optical genome mapping to identify structural variations in pediatric leukemias.

Have adopted the south of our system.

Outside the U S. Sapphire was adopted enthusiastically in places like Korea, Europe Africa, and China, Inc.

Including at Medi cover in Germany, which is 1 of the largest commercial diagnostic companies in Europe, and new probe in China, which is the leading edge company developing cancer.

Diagnostic assays.

In the United Kingdom Sapphire was adopted by 2 large laboratories that belong to the National health system of the U K the.

Those are of King's College hospital in London, and the NHS Regional Genomics laboratory in Belfast City Hospital, and so that actually gives us sapphire systems at all of the most significant sites in the United Kingdom doing cytogenetics.

And molecular pathology analysis.

Regarding our progress and the innovation, we continued to improve optical genome mapping with sapphire by making it easier faster and more cost effective to operate.

So this quarter, we released new protocols for isolating ultra high molecular weight DNA.

And that allows us to commercially support.

Lower sample of inputs, meaning smaller quantities of of sales coming from a particular sample. It allows us to get down to as few as 5 hundreds of thousands of cells from a single sample which is really impressive.

Our instrument control software has been updated to include the newest version of what we call Sapphire of sure.

And this is designed to enable system monitoring for predictive failure analysis and prevention to maximize Sapphire uptime and this is critical as the install base grows. So we can monitor it and make sure that our.

Customers product is performing as it is intended.

We are on track now to release in Q3 novel assays that will expand into different sample types for genetic disease and cancer analysis and we are on track to release, a significant update to our analysis software, which will streamline cytogenetics.

Data analysis for clinical research and assay development and so we'll look forward to updating you on that progress in our next call.

Our project to build the next generation Sapphire system, which we expect to have the ability to run up to 70000 samples per year by the end of 2023 is on track and we anticipate completing the first prototype system.

By the end of 2021.

And lastly in innovation on May 4th we were issued a patent entitled methods and devices for single molecule whole genome analysis, which covers novel labeling methods. The complement our whole genome approach they allow us to target certain areas of the genome and provide a higher level.

All of resolution below of the typical of 500 base for a cutoff of ODM with Sapphire and so this was an important IP for us to get.

Lastly, I want to talk about the progress we've made in proliferating data that validate optical genome mapping and demonstrated its incredible scope of utility.

And this is not only our own work, but its work by customers for using the Sapphire system and they in turn influence prospective customers, who are seeking to adopt the technology and so it's really important to see this progress at conferences in the literature, because that's a precursor to adoption and sales.

We had the largest presence.

To date at the 2021 annual clinical genetics meeting of the American College of medical genetics, and genomics, which is known as the ACM Gee that was held in April. It featured 16 presentations by staff, our customers and bio nano scientists, which is nearly triple.

The number of presented last year and based primarily on work done in the United States and so that's really exciting progress for us our users delivered overall of record number of presentations featuring optical genome mapping out the 2021 European Siloed genomics conference in the data presented there.

By leading key clinicians.

And in their posters showcase optical genome mapping as a superior solution for genomic analysis and leukemia and genetic disease..1 presentation in particular from Doctor Barbara Diwali at Louvain in Belgium outline their implementation of optical genome mapping and of new workflow.

Low focused on pediatric.

L. L patients that was 21 days faster with ODM compared to the traditional method so the.

Imagine a patient who is being evaluated for blood cancer.

And then being able to get the results 3 weeks faster than they can with the traditional methods and how that can impact and change management.

Management of these patients it's really incredible.

And then just this week at the 2021 annual cancer Genomics consortium.

Meeting, which is 1 of the most important cancer genetics meetings in the world our customers delivered 10 presentations that highlight the benefits of optical genome mapping for.

Clinical research applications, ranging from solid tumor analysis, the hematologic malignancies.

Alex of conception, pre and post Natal genetic analysis. So you can see that the scope of optical genome mapping is being defined and it's very broad.

And these customers have spoken about the incredible.

Enthusiasm they have for bringing in this technology over the traditional methods and they are also also emphasize that <unk> been waiting for this kind of solution for a long time and so we're really excited about the progress there now overall with regard to publications, which is an incredible leading indicator of interest and utilization of the <unk>.

<unk> year to date, there have been a 111.

And that includes 49, new publications in the second quarter and I would note that that's the most of <unk>.

<unk> on ODM ever in a single quarter and so those of the kinds of metrics that we want to see.

And we're very proud of the progress there now the lineage and business also had a good quarter with samples received for analysis across their suite of assays for pediatric Neurodevelopmental disorders revenues for these diagnostic services are included with all service and other revenue on our.

The financial statements.

Lineage and is also a key element on our strategy to develop our own menu of laboratory developed tests based on Sapphire and leverage lineage of net lineage and the network of ordering physicians.

And contracts with third party payers, they provide us with a clinical team of cytogenetics and genetic counselors, along with the direct channel the physicians and patients and we see that as a key element.

Of accelerating adoption of the Sapphire system.

Finally, we've seen significant progress in the field for the development of laboratory developed tests and accreditation in Europe, including in Belgium.

There are many in Spain, and the U S..2 sites Augusta University and practice genomics received proprietary analysis or TLA codes, which are anticipated to be used by these institutions to bill third party payers for reimbursement of <unk> test and we expect pricing for those codes to.

Determined and released by the end of this year. This is again incredible progress to support the.

The adoption and utilization of optical genome mapping in our target markets.

I would like to now turn the call over to our CMO. Dr. Alcoa Tshombe. So you can get an update from her on the pivotal studies, we are conducting to demonstrate utility of <unk> as an alternative to cytogenetic methods with higher overall slightly success rate.

Thank you Eddie.

Alright studies.

On our 4 major growth market.

Unfortunately, the genetic analysis came at the low.

Article malignancies, including the team here of the lymphomas and solid tumor analysis.

The endpoints of the study are the same namely demonstrating the utility of optical genome mapping by showing number 1 concordance against the standard of care method, such as karyotyping fish and microwave.

Number 2 a higher success rate of optical genome mapping and finding pathogenic variance compared to the standard of care method.

Number of key significant improvement compared to standard of care method, including shorter time to actually ability of that and consolidation of market. The lassi is interesting the last day based on observation on mapping.

And number for showing an overall health economic benefit of optically genome mapping versus the standard of care method.

Good day, we have the important key opinion leaders.

<unk> been simple investigators of the study sites the cros each endpoint.

Among the 16 site, who have agreed to participate in all of the studies, we have signed contracts with 11, and we ultimately expect that over the last 19 site.

Do you have the for studies P&A sales force needle in heme malignancies are being conducted independently by the <unk>.

Solid tumor studies will begin in parallel next year.

For the fourth day, the study, which was the first or just the IRB approval at total of 300 out of the total of 1000 subjects have been enrolled and sample analysis has been ongoing throughout the second quarter for.

For the pivotal studies.

The approval has been obtained and sites could make on training are in progress.

Data generation is expected for the clinical studies to begin by the end of the current market.

For the Hematological malignancies program, Richard recoverable team Hasnt lymphomas, we are finalizing the contract for the site and we expect the IRB approval process to begin by the end of the fourth quarter.

We believe in the relatively near term debt. These data will play an important role in driving adoption of optical mapping across the spectrum of application and ultimately supporting potential reimbursement by current back of Baird.

Also over the peak of 5 year period, we believe this data can serve as the basis.

The board changes in the guidelines of medical societies that recommend the use of technologies for the analysis and these clinical indications.

Overall, we are very happy with the progress so far and our key opinion leaders are very excited about the impact in this ethane.

Eric.

Thank you Alethia and congratulations on your progress in these important programs I will now turn the call over to Chris Stewart for an overview of our financials Chris.

Thanks, Eric.

Eric mentioned total revenue in Q2 was approximately $3.9 million up 226% from the $1.2 million, we reported in the same period of 2020.

Year over year revenue was up in all geographies and across both product and service revenues for the 3 and 6 months periods ending June 32021, as compared to those same periods in 2020.

The increase in global product sales was driven by increased demand for our sapphire instrument and consumables, while the increase in service revenue was primarily driven by our lineage and subsidiary.

Our gross margins for the second quarter came in at 37% up from 33% in Q1 of 2021, primarily due to improved margins on our instruments and service revenue.

This was down 12 Q2 gross margin was down 12% from the same period last year, mainly due to a substantial increase in the revenue contribution from instrument sales off of the Q2.2020, Covid driven low.

Of instrument sales.

Second quarter operating expense was $17.9 million compared to $12.2 million in the first quarter of 2021 and $8 million in the second quarter of 2020.

The year over year increase was primarily due to expenses from the lineage of acquisition and increased head count in head count related spending as we build out all facets of the organization to support our expected commercial progress.

In addition.

In the second quarter of 2020, the second quarter of 2020 was affected by Covid driven cost saving measures, including an across the board salary reduction. So Q2 was the very low baseline Q2 of 2020 was the low baseline to compare against.

The sequential increase in Opex from Q1 was mainly due to $3.8 million and increased head count and related expenses, including a $1.4 million increase in non cash stock based compensation expense, mainly driven by our Q2 employee equity grants, which were amplified by the impact of our higher stock price.

Yes.

In other income and expenses, we recorded a net expense of $2.3 million.

Which was largely associated with the end of term fees and accrued interest as we paid off the $16 million outstanding balance on our term loans $1.2 million of those expenses were noncash accelerated amortization of accrued interest.

Finally as of June 30 of 2021, our cash and cash equivalents balance was $333 million.

On June 28, we were added as a member of the U S. Small cap Russell 2000 index, which means by the end of share performance is now included in our leading benchmark for institutional investors inclusion in the Russell index enhances the visibility of our company as we continue to grow the installed base of Sapphire systems and strive to build the next.

<unk> genomics company.

I'm really excited about our achievements this quarter and look forward to carrying this momentum through the second half of the year going forward. We will of course remain focused on clearing the barriers to widespread adoption of optical genome mapping.

With that I will turn the call back to Eric to discuss upcoming milestones for the year and then we will open up the call for Q&A Eric.

Thanks, Chris we are progressing nicely against our objectives on this last slide.

You can see our anticipated milestones for 2021.

Which include the milestone.

That was achieved in the second quarter and the first quarter and we believe we're making great progress against our goals in Q3 and Q4.

I look forward to updating you on that progress in our next call.

With that operator, we're ready to take questions.

Ladies and gentlemen, if you would like to ask the question. Please press star 1 on your telephone keypad.

You are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star 1 to ask the question 1 moment, while we poll for questions.

Our first question comes from the line of Sanjay <unk> with BTG. You May proceed with your question.

Hi, Thanks for taking the questions and congratulations on a quarter.

Maybe starting out with the we'd love to hear your kind of what are the next steps in terms of gaining reimbursement in the U S. For the cytogenetic methodology. Obviously you guys are approaching it from many different angles, so would love to kind of gear.

To the extent that you can share kind of what could we anticipate over the next 12 months for example.

Yes.

The pathway to seeing third party reimbursement goes along a few different lines as you mentioned.

The first line is to ensure that there is widespread adoption and utilization.

The third party payers are willing to support.

A shift in technology like the 1 that we're driving.

But they only want to do it if thats.

Got significant commercial demand and need and so widespread adoption as the number 1 key.

Beyond the widespread adoption sites need to develop LD Ts.

And begin the process of obtaining codes like TLA codes or interacting through their channels of reimbursement to put optical genome mapping on the radar screens of their network of payers.

So it's really creating this.

Critical mass of voice of support for optical genome mapping in need.

And our role in that process is to in parallel and completely independently. We don't we don't support sites and the development of their all of the cheese or their validation, but we make sure that optical genome mapping performs according to their needs. What we can do is develop the laboratory developed tests on our own so.

We have a program here in San Diego to establish our own CLIA lab.

And thats underway and so we will establish that CLIA lab within it and with lineage <unk> help we will develop laboratory developed tests based on optical genome mapping ourselves.

And we will put those out into the field and begin negotiating with payers ourselves around coverage.

And coding associating with those assays.

And we can make that information available publicly and so as the field progresses down its own path of getting reimbursement, we will progress down our path and we can share that information along the way.

And then lastly, the most important aspect of not so much coding, but coverage and pricing at a good level is for there to be a critical mass of data in support of the.

True value of optical genome mapping as an alternative workflow and so thats, where alcoa's clinical studies program comes in.

And.

I think you should think about in the context of this type of program.

Is something like the genomic health team.

<unk> Rx trials, which.

We're obviously ongoing for a long time and we have a.

A long term view here, but Taylor Rx produced a number of important inflection points over its course and that's that's what we intend for this program is for it to generate data in support of converting workflows over by demonstrating first.

Concordance with the standard of care.

Second an increased success rate. So we know that the standard of care is able to detect of certain fraction of pathogenic variance in subjects that are <unk>.

<unk> analyzed and we have an expectation that optical genome mapping should be able to do better and so we will establish that as part of our clinical trial programs and then in addition to concordance and higher success rate, we want to demonstrate.

The faster time to result.

And as a result of better health economic outcome for the labs and physicians that are utilizing the technology and the information and so it's really a 3 pronged strategy of making sure the.

Market.

As a critical mass of adoption and pursues reimbursement on its own will do the same in our own CLIA lab.

And then we will provide the data that support the claims around the value in the utility of the technology on those programs are all ongoing in parallel and we expect to see results.

Clearly over the next 12 months just this this period, we saw 2 sites Augusta University and practice genomics getting PLE codes for optical genome mapping assays.

Praxis genomics also has Z codes, which they obtained through Palmetto on the multi X program that they can apply for reimbursement and so.

This is a process is ongoing and we expect to see a lot of progress in the next 12 months.

Great. That's Super helpful. And then just along the same lines I guess on the accreditation in Europe of DCF of <unk> congratulations on that.

Is this something where we can anticipate.

Routine usage of.

Optical genome mapping work for.

And also the placement of.

The conventional technology platforms or how should we think about how these laboratories.

Yes.

Yes, so the sites that have been accredited have moved optical genome mapping into their routine use into their production workflows.

And completely transformed those workflows.

On.

As we mentioned in the in our remarks, but Theres also a very nice press release about the.

European Conference the ECA conference and the to go through it we detail the.

The progress that the.

The site in Europe, and in Belgium was able to make by implementing optical genome mapping.

Among the progress there is a significant savings in turnaround time. So it goes from a 4 week assay for pediatric allo patients 2 of 1 week assets of 21 days shorter.

But they also dramatically transform the technologies. They use they went from using 10 fish probes to just 1 that's PCR able you get the results in 2 hours makes sense.

And they eliminated 1 assay the multiplex litigation play Morphism or MLP assay, they don't use that anymore.

Bill using carrier typing, but they don't use carrier typing upfront the rig.

Steve the assays from this new the results from this new workflow in 1 week.

And the allow carrier typing to progress and they use it for a confirmatory analysis. When that result is ready and we are seeing similar type of progress at sites in Spain.

And in Germany, and many other sites along the same path in Europe. So.

The progress there is very significant in the sites that have received accreditation of put the put the technology into their traditional workflows and so we expect.

Similar things to happen here in the U S. There are some sites running genetic diseases University of Iowa, Perkin Elmer our examples that look at <unk> and so they have them in routine use here as well.

Great. Thank you and then just if I could squeeze 1 more question, maybe 1 for Chris as we look at your gross margin in the quarter I recognize that it's down year over year, but it's up significantly sequentially.

So just was wondering if this level of gross margin for sustainable for the remainder of the year and beyond.

Yes, we certainly expect gross margins to stay at this level of if not improve a little bit going forward.

As we improve utilization and we see.

Continuing growth in consumables, which.

As has the higher gross margin than instrument sales. So we're comfortable with where we're at and expect some modest growth going going forward over the next.

For quarters or so.

Great. Thank you so much for taking the question.

The welcome stingy. Thank you.

Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. You May proceed with your question.

Oh, Hi, Christian I'll kind of how are you.

Alright, Great Hey, Jeff how are you doing.

For us so.

The 2 questions. So firstly on the commercial front.

So I'm curious in your extraordinary could you give us a little flavors for us for kind of growth in the organization you are anticipating over the coming quarters for us domestically as well as some of the internationally.

Got it so yes, so we as you know we added.

About 37 heads in the quarter that was a pretty substantial uptick where we're making a ton of progress we're going to continue to grow head count over the next.

The foreseeable future not quite at that pace.

Now that we have rich and Jason on board, they've kind of got their heads around the existing organizations that they had the plugs on key holes already and now we will continue to build out the commercial organization in support of the expected growth and that's both in commission sales people, but also in customer support.

The the types of customers that we're working with now require more support and we're putting that organization in place now so continued growth not quite at the same pace as Q2.

Little bit more measured on that going forward, but we will continue to build out that organization.

Okay got it and could you give us a sense I guess, maybe a question for Eric for all come the.

On the commercial channels out there.

On clinical research and discovery research can you talk a little bit about the terms and talk a little bit about the focus from the commercial strength standpoint. It looks like you are making strong progress on virtually all forms of commercial.

Yes, so what we see is that we are pursuing 2 markets, which.

Our addressable by optical genome mapping today. The first is that clinical research market, where optical genome mapping as an alternative to traditional cytogenetic methods and I think the best way to think about the market potential there is to think about.

On the 1 hand, the number of labs their iron on a worldwide basis about 2500 is our estimate but maybe more importantly is just the total number of samples that go through those labs on an annual basis and we've we've done some work to to measure of that and are.

Estimated based on quite a bit of effort is that it ranges somewhere between $4 million to $5 million.

Samples being analyzing these labs on an annual basis.

And so that's kind of the available.

A bowl of market for us in those areas and I would want to emphasize that thats hematologic malignancies, and genetic diseases, primarily blood samples were not including <unk>.

Solid tumor analysis in there.

We are not precluded from addressing that but clearly the low hanging fruit for us is for <unk>.

Analysis of blood samples and areas of genetic diseases, and leukemias and lymphomas and solid tumors as expansion opportunity for us So that's that sort of cytogenetics side and.

When we when we estimate the size of that opportunity is.

Yes.

It's in the.

$2 billion to $3 billion range.

When we look at the.

The discovery research segment, we think about optical genome mapping as being a complement to.

Cutting edge research.

In genetics, so mostly the applications of sequencer.

But it could be other techniques single cell analysis.

<unk> AC gene expression, but basically areas in research, where optical genome mapping complements existing tools. So we're not trying to convert anything we're we're coming in and adding new capabilities and the way that we've kind of estimated that opportunity is to look at the total number of.

A sequencer is out there.

And then and then segment that a little bit by saying well such a sequencer is it's kind of like it's kind of like whole genome sequences of higher throughput sequencer. So anything that like Illumina has out there thats a net.

The next seek or higher throughput.

We feel we would complement so theres about 6000 of those sequencer is out there and so.

6000 sapphires.

<unk>.

75 to $150000 of of.

And it will consumables pull through that's another that's another couple of billion dollars. So we estimate that that market opportunity to be.

And broadly speaking in that $2 billion to $4 billion range and that does not include things like solid tumor analysis.

Any any forms of screening population genetics. These are all market expansion opportunities for us.

Got it that's Super helpful and then last for.

Any commentary is for.

Or is sort of any flavor on the sales of the on actual share insurers themselves as far as youre going.

Direct on sales or earn outs for leases and then any commentary on.

Throughput developments as far as you had spoken previously about some.

The increase as far as on a micro chairman of throughput.

Generally the weekly basis, yeah, yeah.

I got it correct you on his nano channel micro channels too easy nano channel is harder and Thats, we only take the difficult challenges, but with regard to the types of deals that we're doing I think it's pretty evenly.

Split between purchase and rental.

On.

Yes, there is some difference in the markets I would say that on that clinical research side in the in the cytogenetics transformation.

They would be majority rentals and on the discovery research, it's majority purchase but all together, it's probably pretty evenly split we don't break that out 1 of the reasons, we don't break it out as the rentals convert to purchases. So we don't want to confuse anybody right now.

We just talk about the install base, but its pretty evenly evenly split.

Got it the other channels thanks for.

Thank you thank you Jeff.

Our next question comes from the line of Jason Mccarthy with Maxim Group. You May proceed with your question.

Hey, there thanks for taking the question congrats on the quarter yes.

Yes, Thank you Jason.

So.

Wanted to see if you could give us an idea of how many customers have started using sapphire.

Routine diagnostic setting and what the typical processes for someone to move sapphire into routine use.

We don't count it so I don't have a number what I would say is that.

The substantial portion of the sites that are adopting optical genome mapping or bringing it in house.

For clinical research right on the edge of of.

A implementation for.

What they would do would be to create a laboratory developed test and to put it into production. So the majority are are headed in that type of of direction.

Want to make sure that people know we market the sapphire system in optical genome mapping for research use and we support people doing that research application. They certainly go down this path of implementing it for routine use.

But but the majority are using it in that direction. We have seen several several have reported to us and presented at conferences that they have put it in routine use it's more common in Europe because of the reimbursement landscape is a little bit more favorable there and so we've seen.

We're probably into the double digit range is that's an estimate right now, but but I would I would estimate more than 10 have reached that level of our very close.

And there are a handful of fewer than 10 here in the U S.

And.

Single digit numbers and any other.

The geography that we're in but but the progress is certainly there and everybody is using sapphire almost exclusively for clinical research.

And as an alternative to the cytogenetic methods for sure.

With regard to the process.

It again varies because of that process is regulated and the customers have too.

The comply with the regulations that are relevant and they're in their jurisdiction in their geography.

Here in the U S, which is the which is the.

The geography that I'm, most familiar with it as the process of.

Starting first with assay development, so we sell a platform for research use.

And that's.

That's how we market it and support it and so we have a set of qualification criteria that we make sure of the system adheres to and it's really up to the labs to have their plan to develop an assay, which involves picking an indication some some labs of gone after.

<unk> that earn genetic diseases like sshd, others have been pursuing hematologic malignancies to talk about <unk>.

The CLC ml in other areas of significant need we know that MD Anderson is working in Mds. So these are areas of great interest and they develop an assay which means they.

Detect the structural variance that are of interest to them in their clinical population. They develop that panel, it's completely up to them. They set up set the cut offs for on what determines a positive or negative result in the assay and they determine how they're going to report that to their ordering physicians.

And then they validate that assay by running known samples against a gold standard which is typically the traditional methods carrier typing fish and micro arrays and once they determine that they've met the validation criteria then the.

Hey.

Can make that assay available on their test menu. The validation criteria. Typically you include some type of reproducibility analysis, multi operator analysis, and so forth and so once they've met those validation criteria. They can make the assay available on their on their test menu.

And ordering begins at that point.

Alright. Thank you and then I would also like to ask the is probably you know.

A bit early to really be thinking about but.

With your clinical program getting up and running across those 4 key market.

Dr Shao Lee mentioned that.

Down the line 1 of the goals would be to eventually get on get included in the.

In the diagnostic guidelines, so I'd like to see if you can give me an idea of what the process for getting into the guidelines would be and what you would really have to show in order for them to.

Consider integrating optical genome mapping and the standard guidelines.

That process involves.

No.

Multifaceted.

And I would say at the end of the day, the society guidelines and the folks that that right and modify those are seeking better solutions.

For the communities that follow those guidelines and so by better Theyre looking for.

Better outcomes, so we need to measure of these outcomes.

And Theyre looking for.

And the increase in success rate so the.

They would like to see technologies that result in actionable results for.

For more people who are getting tested.

When they would like to see those action of our results turn into better patient outcomes, whether thats treatment selection management of genetic diseases by a variety of methods that are available, but I think that the primary endpoint that would infer.

Influenced them to consider revising their guidelines as the higher success rate for the patient population that's being tested in.

On the reason that we can say that is that we followed the changes in society guidelines for other technologies and Thats the primary.

The metric now.

They want to see that on a large scale. So that's why we have set our studies up to be.

The 1000 patients.

The 30 patients is interesting of 100 patients is nice.

Patience is compelling.

And they want to see that key opinion leaders, who have been involved in influencing those guidelines time and time again are embracing this new approach and so that's why alka and her team have worked incredibly hard.

To recruit the thought leaders across the industry to be involved in these trials and I don't want to yet stay in support of optical genome mapping the success of the trials will gain their support but their involvement shows you that they have a.

The strong belief that this is a technology that can transform the workflow and they want to be involved and once they are involved in the trials proved to be successful. We will have the things that the society guidelines need and we set for ourselves a 3 to 5 year timeline, let's say from the beginning of this year.

For for those transformations to happen.

Alright. Thank you and then just 1 more of just as we're looking forward towards the rest of 2021.

Right now of the story is largely.

Data driven out of the state data readouts to come out.

You get more awareness more awareness leads to adoption, so I'd like to see.

You could point to any particular data readouts that we should be looking for in the second half of 2021.

Yes, we expect in our clinical program for the.

Post Natal of study so paediatric genetic disorders to have a preliminary readout.

And and.

Certainly presentations of those data.

Very likely a pre print publication.

Submitted by the end of this year and we're on track. We are as you see we already have hundreds of subjects enrolled in those studies and so we'll have a solid preliminary readout by the end of this year for the postnatal study.

And our prenatal will follow that probably early next year hematologic malignancies. After that later in 2022 and so forth.

Alright, Thank you very much and congratulations on the quarter.

Thank you guys. Thank you.

Our next question comes from the line of.

Kevin <unk> with Oppenheimer. You May proceed with this question.

Hi, This is Susan calling on for Kevin. Thank you Sir.

Great quarter, guys I just have a for your question.

Can you comment on why demand for instruments, So high this quarter the.

And if you think that's the.

Run rate is sustainable for the second half of the year.

So I mean I think that.

It's a great question because.

The demand is a function of.

An incredible amount of work and I'm sure that folks recognize that sales are a lagging indicator.

They tell you.

Hi, good demand like you've referenced tells you about things that you've done well some time in the past. So if we look to the past what have we seen.

Examples of record publications in the quarter, but this has been consistent for quarter after quarter after quarter. We had this year in January.

1 of the most epic displays of optical genome mapping utilization that's been given in our next generation <unk> genomics symposium.

And that just.

Cause the awareness to explode.

As of awareness has increased we've been able to back that up with success at customer sites. So word of mouth of the utility.

And robustness of optical genome mapping has gotten around that in turn leads people to seek to adopt the system..1 other function here has been our own go to market model. So we have worked to reduce the barriers to adoption.

Across the board.

To make sure that people have the day to day need to get funding that's the role of our services lab.

And.

And sites have applied for funding within their institution. So there they're increasingly funded but we've also created this reagent rental opportunities so that for as little of $66000 of lab can rent.

Sapphire system through a consumables commitment.

And we will put it on site. So it's a combination of data supporting the utility and robustness of the system word of mouth and publications and then our own.

You could call. It promiscuous commercial go to market model that encourages people to adopt quickly and to the second part of your question.

We believe that this momentum is.

Is going to continue to build and that we would see continued.

<unk> progress in in future quarters, we we have not given revenue guidance and we're not we're not doing that here, but we see what.

Your Guys's model and others, who have been on the call today kind of forecast for the second half and we were very proud of the inline quarters that we've had so far and we're expecting inline quarters through the through the remainder of the year.

Great. Thank you for all of that that day.

Detail.

And just follow up on understanding net check.

Are you guys able to.

Good day.

If containerboard are sustainable or is it still too early.

Wonderful.

I would say that the safe answer is that it is still too early because we the installed base has just grown massively in the past few quarters and.

We expect it to continue to grow that way.

And there is always a lag between somebody getting their system getting up to speed and then really determining their steady state utilization. So it is early to tell but what we know is the sites that are adopting certainly under a reagent rental contract or making commitments to.

$132000 of annualized consumables purchases to retain the system on site. So.

As long as they maintain that that commitment, we'll see we will see this consumables revenue.

As being stable and so give us a few quarters too.

Determined what that what that steady state is and we'll be able to say better, but the signs point to robustness going forward.

That's really helpful and just 1 last question.

Do you expect the commercial release.

Training at all.

Thanks for expansion of pediatric assets here.

Meaningfully to revenue.

And this of the next quarter sounds coming up fairly soon.

I would say is that it's not a it's not a it's not a direct driver of of revenues per se. It's a driver of adoption, which adoption is revenue related.

But what it does is really expand expand the the.

The.

The applicability of the technique to drive future adoption. So we don't we don't see it as something thats going to be a significant driver of uptake in the third quarter, but in subsequent quarters. It opens a completely new market for us and so it will be over.

Over time.

The revenue driver.

There is of all the questions for now thank you.

Thank you.

Okay.

Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to the Doctor Eric Cohen for closing remarks.

Thank you Laura I just want to stay here at the end debt. We are really pleased at our progress I want to thank everybody who's joined the call today, especially those who asked is incredibly important and insightful questions and we look forward to.

Speaking to you again on our Q3 call. Thank you very much.

Thank you for joining US today. This concludes today's conference you may disconnect your lines at this time.

Okay.

Sure.

[music].

Okay.

[music].

Okay.

Sure.

Yes.

Okay.

Thanks.

Yes.

On.

Okay.

[music].

Okay.

[music].

Yes.

Sure.

Okay.

Yes.

Sure.

Okay.

Thanks.

Sure.

Okay.

Yes.

Okay.

Yes.

Okay.

Yeah.

<unk>.

The.

Okay.

[music].

Okay.

Yes.

Okay.

Inc.

Okay.

Alright.

The.

Okay.

The.

Okay.

Yes.

For us.

Yes.

Okay.

[music].

Okay.

Yes.

Okay.

The.

Sure.

Yes.

[music].

Yes.

[music].

Okay.

Sure.

Okay.

Yes.

Sure.

Yes.

Okay.

Sure.

Yes.

Okay.

The.

Okay.

Inc.

Sure.

Okay.

Sure.

Yes.

Okay.

The.

Okay.

And the.

Moving.

Sure.

Thanks.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

The.

Yes.

Okay.

Thanks.

Okay.

Yes.

Okay.

Yes.

The team.

Okay.

Yes.

Okay.

The.

Thanks.

Yes.

Sure.

Okay.

Yes.

Okay.

Yes.

True.

Yes.

Okay.

Sure.

Okay.

[music].

Thanks.

Okay.

The.

Thank you.

Sure.

Yes.

Okay.

Thank you.

Okay.

Sure.

Okay.

Yes.

Okay.

Sure.

Thank you.

Yes.

Sure.

Okay.

Good day and welcome to the bio nano genomics second quarter 2021 earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Amy Conrad from Investor Relations. Please go ahead.

Thank you, Mike and good afternoon, everyone.

Looking to the bio nano genomics second quarter 2021 financial results Conference call.

Leading the call today is Dr. Eric Cohen CEO of iron in them.

John by Chris Stewart, CFO of <unk> and Dr. Arko Chavez CMO of volume.

After market closed today.

The issued a press release announcing the financial results for the second quarter of 2021.

A copy of that relate to the found on the Investor Relations page of the company's website.

I would like to remind everyone that certain statements made during this conference call maybe forward looking including statements about buy on an on strategic and commercialization plans.

Sales pipeline anticipated benefits of our improvements of the Sapphire system anticipated milestones for 2021 on the advantages of the Sapphire system of our current technology.

Expectations regarding timing and content of study results and anticipated benefits of the studies in driving adoption of the Sapphire system.

Such forward looking statements are based upon current expectations and there can be no assurances that the results contemplated in these statements fully realized.

Actual results may differ materially from such statements due to a number of factors and risks some of which are identified and borrowing on the press release by the analyst reports filed with the SEC.

These forward looking statements are based on information available at the bottom end of today and the company assumes no obligation to update statements as circumstances change.

And audio recording of webcast replay for today's conference call will also be available online in the investors section of the Companys website.

With that I will turn the call over to Eric.

Thank you Amy and good afternoon, everyone. We had a really great quarter to cap off this first half of 2021, which we believe has been 1 of the most transformational periods in our history.

Total revenue for Q2, 2021 was $3.9 million, which is up 226% versus Q2 of 2020.

And Thats a record for any Q2 in the history of the company. We also had great performance in many areas of execution, including seeing customers develop the laboratory developed tests or <unk> based on optical genome mapping or ODM with sapphire and obtaining the accreditation for Sapphire.

Based on <unk> in certain European markets, which was an important milestone for Q2.

Jason and rich our experienced leaders with Jason having held previous leadership positions at Perkin, Elmer and gene Dx among other companies.

And rich having held previous leadership positions at Alpha metrics and alumina, So welcome to Jason and rich.

I wanted to start out of our update today by outlining our strategy, which is focused on execution in 3 key areas.

On the other market as the discovery research market, where ODM empowers researchers looking for novel therapeutic targets and biomarker signatures.

The second area of execution focus for us is continuously innovating. So we can bring new capabilities of that accelerate the throughput of ODM accommodate more sample types and simplify data analysis and interpretation.

Third is supporting the development of validation data through pivotal clinical research studies to show the efficacy of ODM.

While following key opinion leaders as they showcase the prowess of our sapphire system in their presentations and publications.

And also while the aim to gain third party payer support through development and validation of their own the LD Ts to be applied in cytogenetics inside of genomics.

Here's how we're tracking against these objectives regarding the sapphire installed based on utilization Sapphire systems.

Installations completed in the quarter brought the total number of installed sapphires to 121 as of June 30 of 2021 versus 107 as of March 30 at the end of the first quarter.

We shipped 13 Sapphire systems, this past quarter compared to 6 systems shipped in the same quarter in 2020.

Our goal for 2021 is to reach 150 of Sapphire systems installed worldwide and we believe we're on track to meet that goal.

During the quarter, we sold 2742 nano channel array of flow cells.

Let me remind you that the flow cell is the unit consumable for analysis of <unk> human genome.

More flow sales sold leads to more utilization of optical genome mapping in the field and more data to support it.

The increase represents 93% growth over the second quarter of 2020.

And also represents the most flow sales sold ever in the single quarter and so we're really proud of our progress in growing the installed base.

Have adopted the south of our system.

Outside the U S. Sapphire was adopted enthusiastically in places like Korea, Europe Africa and China.

Including at Medi cover in Germany, which is 1 of the largest commercial diagnostic companies in Europe, and new probe in China, which is of leading edge company developing cancer.

Diagnostic assays.

In the United Kingdom Sapphire was adopted by 2 large laboratories that belong to the National health system of the U K.

Molecular pathology analysis.

Regarding our progress and the innovation, we continue to improve optical genome mapping with sapphire by making it easier faster and more cost effective to operate.

So this quarter, we released new protocols for isolating ultra high molecular weight DNA and that allows us to commercially support.

Our instrument control software has been updated to include the newest version of what we call Sapphire of shore.

Customers product is performing as it is intended.

We are on track now to release in Q3 novel assays that will expand into different sample types for genetic disease.

Cancer analysis, and we are on track to release, a significant update to our analysis software, which will streamline cytogenetics.

Data analysis for clinical research and assay development and so we will look forward to updating you on that progress in our next call on.

The project to build the next generation <unk> system, which we expect to have the ability to run up to 70000 samples per year by the end of 2023 is on track.

We anticipate completing the first prototype system.

By the end of 2021.

The areas of the genome and provide a higher level of resolution.

Below the typical 500 base for a cutoff of AGM with Sapphire and so this was the important IP for us to get.

Lastly, I want to talk about the progress we've made in proliferating data that validate.

Optical genome mapping and demonstrated its incredible scope of utility.

And this is not only our own work, but it's worked by customers who are using the sapphire system and they in turn influence prospective customers who are seeking to adopt the technology and so it's really important to see this progress at conferences in the literature, because that's a precursor to adoption and sales.

We had the largest presence to.

To date at the 2021 annual clinical genetics meeting of the American College of medical genetics, and genomics, which is known as <unk> that was held in April. It featured 16 presentations by staff of our customers and bio nano scientists, which is nearly triple.

The number of presented last year and based primarily on work done in the United States and so that's really exciting progress for us our users delivered overall of record number of presentations featuring optical genome mapping at the 2021 European Silo Genomics conference and the data presented there.

By leading key clinicians.

And in their posters showcase optical genome mapping as a superior solution for genomic analysis and leukemia and genetic disease..1 presentation in particular from Doctor Barbara the Wally It Lubin in Belgium outlined their implementation of optical genome mapping and of new workflow for.

<unk> on pediatric.

ALLL patients.

That was 21 days faster with ODM compared to the traditional methods. So.

Imagine a patient who is being evaluated for blood cancer.

And then being able to get the results 3 weeks faster than they can with the traditional methods and.

And how that can impact in change.

The management of these patients it's really incredible.

And then just this week at the 2021 annual cancer Genomics consortium meet.

Meeting, which is 1 of the most important cancer genetics meetings in the world our customers deliver 10 presentations that highlight the benefits of optical genome mapping for.

Clinical research applications, ranging from solid tumor analysis, the hematologic malignancies.

The products of conception pre and post Natal genetic analysis. So you can see that the scope of optical genome mapping is being defined and it's very broad.

And these customers have spoken about the incredible.

<unk> year to date, there have been 111.

And that includes 49, new publications in the second quarter and I would note that thats the most of <unk>.

<unk> is on OEM ever in a single quarter and so those of the kinds of metrics that we want to see.

And we're very proud of the progress there now of of lineage and business also had a good quarter with samples received for analysis across their suite of assays for pediatric Neurodevelopmental disorders revenues for these diagnostic services are included with all service and other revenue on our.

The financial statements.

Lineage and is also a key element on our strategy to develop our own menu of laboratory developed test based on Sapphire and leverage lineage of net lineage of network of ordering physicians.

The accelerating adoption of the Sapphire system.

Finally, we've seen significant progress in the field for the development of laboratory developed tests and accreditation in Europe, including in Belgium, Germany and Spain.

In the U S..2 sites Augusta University and practices genomics received proprietary analysis or TLA codes, which are anticipated to be used by these institutions to bill third party payers for reimbursement of ODM tests, and we expect pricing for those codes to be determined and released by the end of the.

This year. This is again incredible progress to support the.

The adoption and utilization of optical genome mapping in our target markets.

I would like to now turn the call over to our CMO Dr. The Alco Tshombe. So you can get an update from her on the pivotal studies, we are conducting to demonstrate utility of <unk> as an alternative to cytogenetic methods with a higher overall slightly success rate.

Thank you Ed.

Alright studies within the span.

On our 4 major growth market of.

Unfortunately, the genetic analysis him at the law.

Article of malignancies, including the team Anthony in for Mark and solid tumor analysis the.

The endpoints of the study at the same namely demonstrating the utility of application on mapping by showing number 1 concordance against the standard of care method.

Karyotyping fish and micro <unk>.

The 2 are higher success rate of optical the genome mapping and finding pathogenic variance compared to the standard of care method.

A number of key significant improvement compared to standard of care method, including shorter kinds of accident results and consolidation of market. The last day is interesting the last day based on observation on mapping.

And number for showing an overall health economic benefit of uptick of genome mapping vs.

The standard of care method.

Good day, we have the crew the important key opinion leaders to be principal investigators of the study sites the cros each endpoint.

On the 16th.

We have agreed to participate in all of the studies, we have signed contracts with 11, and we ultimately expect the total of 19 site.

Do you have the forward study P&A the fourth needle on heme malignancies are being conducted independently by the <unk>.

Solid tumor studies will begin in parallel next year.

For the fourth made on study, which was the first you received IRB approval at the total of 300 out of the total of 1000 subjects have been enrolled and sample analysis has been ongoing throughout the second quarter for.

For the pivotal studies.

The approval has been obtained and sites of crude make on training on income.

The data of the integration is expected for the clinical study to begin by the end of the current market.

For the Hematological malignancies program, Richard recoverable of can team Hasnt lymphomas. The are finalizing the contract for the <unk> and we expect the IRB approval process to begin by the end of the fourth quarter.

We believe in the relatively near term debt. These data will play an important role in driving adoption of our genome mapping across the spectrum of applications and ultimately supporting potential reimbursement by current package of Baird.

Also over the peak of 5 year period, we believe this data can serve as the basis.

The board changes on the guidelines of medical societies that recommended the use of technologies for the analysis and the clinical indications.

We're on we're very happy with the progress so far and our key opinion leaders are very excited about the impact in this ethane.

Theoretically.

Thank you Alethia and congratulations on your progress in these important programs I will now turn the call over to Chris Stewart for an overview of our financials Chris.

Eric.

Eric mentioned total revenue in Q2 was approximately $3.9 million up 226% from the $1.2 million, we reported in the same period of 2020.

Year over year revenue was up in all geographies and across both product and service revenues for the 3 and 6 months periods ending June 32021, as compared to those same periods in 2020.

Our gross margins for the second quarter came in at 37% up from 33% in Q1 of 2021, primarily due to improved margins on our instruments and service revenue.

Of instrument sales.

Second quarter operating expense was $17.9 million compared to $12.2 million in the first quarter of 2021 and $8 million in the second quarter of 2020.

The year over year increase was primarily due to expenses from the lineage and acquisition and increased head count in head count related spending as we build out all facets of the organization to support our expected commercial progress.

In addition.

The sequential increase in Opex from Q1 was mainly due to $3.8 million and increased head count and related expenses, including a $1.4 million increase in non cash stock based compensation expense, mainly driven by our Q2 of employee equity grants, which were amplified by the impact of our higher stock price.

Yes.

In other income and expenses, we recorded a net expense of $2.3 million, which was largely associated with the end of term fees and accrued interest as we paid off the $16 million outstanding balance on our term loans.

1.2 million of those expenses were noncash accelerated amortization of accrued interest.

On June 28, we were added as a member of the U S. Small cap Russell 2000 index, which means by the end of share performance is now included in the leading benchmark for institutional investors inclusion in the Russell index enhances the visibility of our company as we continue to grow the installed base of Sapphire systems and strive to build the next great.

<unk> company.

I am really excited about our achievements this quarter and look forward to carrying this momentum through the second half of the year going forward. We will of course remain focused on clearing the barriers to widespread adoption of optical genome mapping.

With that I will turn the call back to Eric to discuss upcoming milestones for the year and then we'll open up the call for Q&A Eric.

Thanks, Chris we are progressing nicely against our objectives on this last slide.

You can see our.

Our anticipated milestones for 2021.

Which include the milestone.

That was achieved in the second quarter and the first quarter and we believe we're making great progress against our goals in Q3 and Q4.

I look forward to updating you on that progress in our next call.

With that operator, we're ready to take questions.

Ladies and gentlemen, if you would like to ask the question. Please press star 1 on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star 1 to ask the question 1 on line, while we poll for questions.

Our first question comes from the line of Xinjiang Numb with BT AIG you May proceed with your question.

Hi, Thanks for taking the questions congratulations on the quarter.

Maybe starting out with the we'd love to hear your kind of what are the next steps in terms of gaining reimbursement in the U S for the cytogenetic methodology.

Obviously, you guys are approaching it from many different angles, so would love to kind of hear.

To the extent of you can share kind of what could we anticipate over the next 12 months for example.

Yes.

Pathway to seeing third party reimbursement goes along a few different lines as you mentioned.

The first line is to ensure that there is widespread adoption and utilization.

The third party payers are willing to support.

Shifts in technology like the 1 that we're driving.

But they only want to do it if thats the.

<unk> got significant commercial demand and need and so widespread adoption as the number 1 key.

Beyond the widespread adoption sites need to develop <unk>.

And begin the process of obtaining codes like pele codes or interacting through their channels of reimbursement to put optical genome mapping on the radar screens of their network of payers.

So it's really creating this.

Critical mass of voice of support for optical genome mapping in need.

And our role in that process is to in parallel and completely independently. We don't we don't support sites and the development of their all the cheese or their validation, but we make sure that optical genome mapping performs according to their needs. What we can do is develop the laboratory developed tests on our own so.

We have a program here in San Diego to establish our own CLIA lab.

And thats underway and so we will establish that CLIA lab within it and with lineage <unk> help we will develop laboratory developed tests based on optical genome mapping ourselves.

And we will put those out into the field and begin negotiating with payers ourselves around coverage.

And coding associating with those assays.

And we can make that in the information available publicly and so as the field progresses down its own path of getting reimbursement, we will progress down our path and we can share that information along the way.

And then lastly, the most important aspect of not so much coding, but coverage and pricing at a good level is for there to be a critical mass of data in support of the.

True value of optical genome mapping as an alternative work flow and so thats, where alcoa's clinical studies program comes in.

And.

I think you should think about in the context of this type of program.

Is something like the genomic health team.

<unk> Rx trials, which we.

We're obviously ongoing for a long time and we have a.

Concordance with the standard of care.

Second an increased success rate. So we know that the standard of care is able to detect of certain fraction of pathogenic variance in subjects that are <unk>.

Analyzing and we have an expectation that optical genome mapping should be able to do better and so we will establish that as part of our clinical trial programs and then in addition to concordance and higher success rate, we want to demonstrate.

A faster time to result.

And as a result of better health economic outcome for the labs and physicians that are utilizing the technology and the information and so it's really a 3 pronged strategy of making sure the.

Market.

As a critical mass of adoption and pursues reimbursement on its own will do the same on our own CLIA lab.

And then we will provide the data that support the claims around the value and the utility of the technology and those programs are all ongoing in parallel and we expect to see results.

Clearly over the next 12 months just this this period, we saw 2 sites Augusta University and practice genomics getting PLE codes for optical genome mapping assays.

Praxis genomics also has Z codes, which they obtained through Palmetto on the multi X program that they can apply for reimbursement and so.

This is a process is ongoing and we expect to see a lot of progress in the next 12 months.

Great. That's Super helpful. And then just along the same lines I guess on the accreditation in Europe of destock or the <unk>.

Congratulations on that.

Is this something where we can anticipate.

Routine usage of.

Optical to the map.

And also replacement of.

Congrats on all technology platforms, or how should we think about how these laboratories.

Yes.

Thank you Jason.

Yes, so the sites that have been accredited have moved optical genome mapping into their routine use into their production workflows.

And completely transformed those workflows.

And.

As we mentioned in the in our remarks, but Theres also a very nice press release about the.

European.

Conference The ECA conference.

Through it we detail the.

Progress that.

The site in Europe, and in Belgium was able to make by implementing optical genome mapping.

Among the progress there is a significant savings in turnaround times. So it goes from a 4 week assay for pediatric <unk> patients 2 of 1 week assays for 21 days shorter.

But they also dramatically transform the technologies. They use they went from using 10 fish probes to just 1 at PCR able you get the results in 2 hours makes sense.

They are still using carrier typing, but they don't use carrier typing upfront.

The received the assays from this new the results from this new workflow in 1 week.

And the allow carrier typing to progress and they use it for a confirmatory analysis.

When that results is ready and we are seeing similar type of progress at sites in Spain.

And in Germany, and many other sites along the same path in Europe. So.

The progress there is very significant and these sites that have received accreditation of put the put the technology into their traditional workflows and so we expect similar things to happen here in the U S. There are some sites running genetic diseases University of Iowa Perkin Elmer are examples of that look at <unk> and so they have them in routine use.

Here as well.

Great. Thank you and then just if I could squeeze 1 more question, maybe 1 for Chris as we look at your gross margins in the quarter I recognize that it's down year over year, but it's up significantly on sequentially and so just was wondering if this level of gross margin for sustainable for the remainder of the year and beyond.

Yes, we certainly expect gross margins to stay at this level of if not improve a little bit going forward.

As we improve utilization and we see.

Continuing growth in consumables, which.

As you know has a higher gross margin than instrument sales. So yes, we're comfortable with where we're at and expect some modest growth going going forward over the next.

For quarters yourself.

Great. Thank you so much for taking the question.

Welcome to <unk>. Thank you.

Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. You May proceed with your question.

Oh, Hi, Eric Christian I'll kind of how are you great.

All right, Great Hey, Jeff how are you doing.

Caring for and so.

2 questions. So firstly on the commercial front.

And congrats on the cherish and in the grid extraordinary could you give us a little flavors for us for kind of growth in the organization.

Anticipating over the coming quarters for us domestically as well as some of the internationally.

Got it so yes, so we as you know we added.

37 heads in the quarter that was a pretty substantial uptick where we're making a ton of progress we're going to continue to grow head count over the next for.

Foreseeable future not quite at that pace.

The.

The the types of customers that we're working with now require more support and we're putting that organization in place now so continued growth not quite at the same pace of Q2.

A little bit more measured on that going forward, but we will continue to build out that organization.

Okay got it and could you give us a sense I guess, maybe a question for Eric on the.

On the commercial channels out there.

On clinical research and discovery research can you talk a little bit about the tech.

And talk a little bit about the focus from the commercial standpoint, it looks like Youre, making strong progress on virtually all forms of commercial.

Yes, so what we see is that we are pursuing 2 markets, which.

On the 1 hand, the number of labs there are on a worldwide basis about 2500 is our estimate but maybe more importantly is just the total number of samples that go through those labs on an annual basis and we've we've done some work to to measure of that and are.

Estimate.

Just on quite a bit of effort is that it ranges somewhere between $4 million to $5 million.

<unk> being analyzing these labs on an annual basis.

And so that's kind of the available market for us in those areas and I would want to emphasize the thats hematologic malignancies, and genetic diseases, primarily blood samples were not including <unk>.

Solid tumor analysis in there.

We are not precluded from addressing that but clearly the low hanging fruit for us is for <unk>.

Analysis of blood samples and areas of genetic diseases, and leukemias, and lymphomas and solid tumors as expansion opportunity for us.

So thats sort of cytogenetics side and.

When we when we estimate the size of that opportunity is.

Yes.

It's in the.

$2 billion to $3 billion.

<unk>.

When we look at the.

The discovery research segment, we think about optical genome mapping as being a complement to.

Cutting edge research.

In genetics, so mostly the applications of sequencer.

But it could be other techniques single cell analysis.

Of sequence there is out there.

And then and then segment that a little bit by saying well such as sequencer is it's kind of like it's kind of like whole genome sequences of higher throughput sequencer. So anything that like Illumina has out there thats a net.

The next seek or higher throughput.

We feel we would complement so theres about 6000 of those sequencer is out there and so.

6000 sapphires.

<unk>.

75 to $150000 of of.

Annual consumables pull through that's another that's another couple of billion dollars. So we estimate that that market opportunity to be.

And broadly speaking in that $2 billion to $4 billion range and that does not include things like solid tumor analysis.

Any any forms of screening population genetics. These are all market expansion opportunities for us.

Got it that's Super helpful. And then last on briefly on any commentary as far as sort of any flavor on the sales of the.

The actual share insurers themselves as far as Youre going to go.

The direct <unk> sales or earn outs for leases and then any commentary on.

Throughput developments as far as you had spoken previously about some.

The increase as far as on micro chairman of the throughput.

Generally the weekly basis, yeah, yeah.

I got to correct you on his nano channel micro channels too easy nano channel is harder and Thats, we only take the difficult challenges, but with regard to the types of deals that we're doing I think it's pretty evenly.

The split between purchase and rental.

On.

Yes, there is some difference in the markets I would say that on that clinical research side and the cytogenetic transformation.

They would be majority rentals and on the discovery research, it's majority purchase but altogether, it's probably pretty evenly split we don't break that out 1 of the reasons, we don't break it out as the rentals convert to purchases. So we don't want to confuse anybody right now.

And we just talk about the installed base, but its pretty evenly evenly split.

Super I got it.

The other channels thanks for.

Thank you thank you Jeff.

Our next question comes from the line of Jason Mccarthy with Maxim Group. You May proceed with your question.

Hey, there thanks for taking the question and congrats on the quarter yes.

Thank you Jason.

So.

Wanted to see if you could give us an idea of how many customers have started using sapphire in of.

The routine diagnostic setting and what the typical processes for someone to move sapphire into routine use.

We don't count it so I don't have a number what I would say is that.

The substantial portion of the sites that are adopting optical genome mapping or bringing it in house.

For clinical research right on the edge of of.

A implementation for.

But they would do would be to create a laboratory developed test and to put it into production. So the majority are are headed in that type of of direction.

Want to make sure that people know we market to staff our system in optical genome mapping for research use and we support people doing that research application. They certainly go down this path of implementing it for routine use.

We're probably into the double digit range is that's an estimate right now but.

I would I would estimate more than 10 have reached that level of our very close.

And there are a handful of fewer than 10 here in the U S.

And.

The single digit numbers and any other.

Geography that we're in but but the progress is certainly there and everybody is using sapphire almost exclusively for clinical research.

And as an alternative to cytogenetic methods for sure.

With regard to the process.

It again varies because of that process is regulated and the customers have too.

The comply with the regulations that are relevant and they're in their jurisdiction in their geography.

Here in the U S, which is the which is the.

The geography that I'm, most familiar with it's a process of.

Starting first with assay development, so we sell a platform for research use.

On that.

Thats, how we market it and support it and so we have a set of qualification criteria that we make sure of the system adheres to and it's really up to the labs to have their plan to develop an assay, which involves picking an indication some some labs of gone after indications.

Net earned genetic diseases like Sshd, others have been pursuing hematologic malignancies to talk about <unk>.

The CLC ml in other areas of significant need we know that MD Anderson is working in Mds. So these are areas of great interest and they develop an assay which means they.

Detect the structural variance that are of interest to them in their clinical population. They develop that panel, it's completely up to them. They set up set the cutoffs for what determines a positive or negative result in the assay and they determine how they're going to report that to their ordering physicians.

Can make that assay available on their test menu. The validation criteria. Typically you include some type of reproducibility of analysis, multi operator analysis, and so forth and so once they've met those validation criteria. They can make the assay available on their on their test menu.

And ordering begins at that point.

Alright. Thank you and then I'd also like to ask probably you know.

A bit early to really be thinking about but.

With the clinical program getting up and running across those 4 key market.

Dr Shao Lee mentioned that down.

Down the line 1 of the goals would be to eventually get on get included in the <unk>.

On the diagnostic guidelines, so I'd like to see if you could give me an idea of what the process for getting into the guidelines would be and what you would really have to show in order for them to.

<unk> integrating optical genome mapping and the standard guidelines.

That process involves.

It's multifaceted.

And I would say at the end of the day, the society guidelines and the folks that.

Debt right and modify those are seeking better solutions.

For the communities that follow those guidelines and so by better Theyre looking for.

Better outcomes, so we need to measure of these outcomes.

And they're looking for.

And the increase in success rate so.

They would like to see technologies that result in actionable results for more people who are getting tested.

When they would like to see those actions of our results turn into.

Better patient outcomes, whether thats treatment selection management of genetic diseases by a variety of methods that are available, but I think that the primary endpoint that would <unk>.

Influenced them to consider revising the guidelines is the higher success rate for the patient population that's being tested.

And the reason that we can say that is that we followed the changes in society guidelines for other technologies and that's the primary metric now.

They want to see that on a large scale. So that's why we have set our studies up to be.

1000 patients.

The 30 patients is interesting of 100 patients is nice.

Patients is compelling.

And they want to see that key opinion leaders, who have been involved in influencing those guidelines time and time again are embracing this new approach and so thats why alka and her team have worked incredibly hard.

Our strong belief that this is a technology that can transform the workflow and they wanted the involved and once they are involved in the trials proved to be successful. We will have the things that the society guidelines need and we set for ourselves a 3 to 5 year timeline, let's say from the beginning of this year.

For for those transformations to happen.

Alright. Thank you and then just 1 more of just as we're looking forward towards the rest of 2021.

Obviously right now the story is largely.

Data driven out of the state data readouts to come out.

You get more awareness more awareness leads to adoption, so I'd like to see.

You could point to any particular data readouts that we should be looking for in the second half of 2021.

Yes, we expect in our clinical program for the.

Post Natal of studies, so paediatric genetic disorders to have a preliminary readout.

And and.

Yes, certainly presentations of those data.

Very likely a pre print publication.

The submitted by the end of this year and we're on track. We are as you see we already have hundreds of subjects enrolled in those studies and so we'll have a solid preliminary readout by the end of this year for the postnatal study.

Prenatal will follow that probably early next year hematologic malignancies. After that later in 2022 and so forth.

Alright, Thank you very much and congratulations on the quarter.

Thank you guys. Thank you.

Our next question comes from the line of.

Kevin <unk> with Oppenheimer. You May proceed with this question.

Hi, This is Susan calling on for Kevin. Thank you Sir.

Great quarter, guys I just have a for.

For your question.

Can you comment on why the demand for instruments, So high this quarter the.

And if you think that the.

Run rate of sustainable for the second half of the year.

So I mean I think that.

It's a great question because.

The demand is a function of.

An incredible amount of work and I am sure that folks recognize that sales are a lagging indicator.

They tell you.

Hi, good demand like you've referenced tells you about things that you've done well some of time in the past. So if we look to the past what have we seen.

Examples of record publications in the quarter, but this has been consistent for quarter after quarter after quarter. We had this year in January.

1 of the most epic displays of optical genome mapping utilization that's been given in our next generation <unk> genomics symposium.

And that just.

Cause of awareness to explode.

As awareness has increased we've been able to back that up with success at customer sites. So word of mouth of the utility.

Across the board.

To make sure that people have the day to day need to get funding that's the role of our services lab.

And and sites have applied for funding within their institution, so they're they're increasingly funded but we've also.

<unk> this reagent rental opportunities so that for as little of $66000 of lab can rent of <unk>.

<unk> of our system through a consumables commitment.

And we'll put it on site. So it's a combination of data supporting the utility and robustness of the system word of mouth and publications and our own.

You could call. It promiscuous commercial go to market model that encourages people to adopt quickly and to the second part of your question.

We believe that this momentum is.

Is going to continue to build and that we would see continued.

The progress in in.

In future quarters, we we have not given revenue guidance and we're not we're not doing that here, but we see what.

Your Guys's model and others, who have been on the call today.

Kind of forecast for the second half and we were very proud of the inline quarters that we've had so far and we're expecting inline quarters through the through the remainder of the year.

Great. Thank you for all of that detail.

And just follow up on understanding net check.

Are you guys able to.

Good day.

The tangible.

Our sustainable or is it still too early.

What.

I would say that the safe answer is that it is still too early because it's we the installed base has just grown massively in the past few quarters.

<unk>.

We expect it to continue to grow that way.

And there is always a lag between somebody getting their system getting up to speed and then really determining their steady state utilization. So it is early to tell but what what we know is the sites that are adopting certainly under a reagent rental contract or making commitments to.

$132000 of annualized consumables purchases to retain the system on site. So.

As long as they maintain that that commitment we'll see we'll see this consumables revenue.

As being stable and so give us a few quarters too.

Determined what that what that steady state is and you will be able to say better, but the signs point to robustness going forward.

That's really helpful and just 1 last question.

Do you expect the commercial for Lisa.

And I'll add.

Expansion of pediatric assay.

Here again meaningfully to revenue.

And this is the next quarter sounds coming up fairly soon.

What I would say is that it's not a it's not a it's not a direct driver of of revenues per se.

It is a driver of adoption, which adoption is revenue related.

But what it does is really expand expand the the.

The.

For time.

Revenue driver.

Those are all the questions for Matt. Thank you.

Thank you.

Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to the Doctor Eric Cohen for closing remarks.

Thank you Laura I, just want to say here at the end that we are really pleased at our progress I want to thank everybody who has joined the call today, especially those who asked the is incredibly important and insightful questions and we look forward to.

Speaking to you again on our Q3 call. Thank you very much.

Thank you for joining US today. This concludes today's conference you may disconnect your lines at this time.

Q2 2021 Bionano Genomics Inc Earnings Call

Request a DemoDemo

BNGO

BioNano Genomics

Earnings