Q2 2022 Bionano Genomics Inc Earnings Call
Okay.
Good day and welcome to the bio nano genomics second quarter 2022 earnings Conference call Today's conference is being recorded.
This time I would like to turn the conference over to Amy Conrad from Investor Relations. Please go ahead.
Thank you Victor and good afternoon, everyone.
[laughter].
Okay.
Leading the call today is Dr. Eric Wiseman.
Yeah.
Yes.
Got it.
After market close today I Havent had issued a press release announcing its financial results for the second quarter of 2022.
A copy of the press release can be economy 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.
Okay.
Okay.
Yeah.
Yes.
[laughter] clinical software and.
Dissipated my iPhone for 2022, including progress on elevate in each pillar of elevate vintages of the Sapphire system over current technologies and <unk>.
Bond analyst expectations regarding study results and anticipated benefits of these studies in driving adoption of Auryxia.
Such forward looking statements are based upon current expectations and that 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 bio and in our press release and financial reports filed with the SEC.
These forward looking statements are based on information available to finally know today and the company assumes no obligation to update statements as circumstances change.
In addition to supplement that in our financial results reported in accordance with U S generally accepted accounting principles or GAAP.
He is reporting non-GAAP operating expense.
This non-GAAP financial measure is not meant to be considered in isolation or as a substitute for comparable GAAP measures should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP has no standardized meaning prescribed by GAAP and is not prepared under any comprehensive set of accounting rules or principles in.
A description of non-GAAP operating expense and reconciliation of non-GAAP operating expense to GAAP operating expense are included at the end of the company's earnings release issued earlier today, which has been posted on the IR page of the company's website.
An audio recording and webcast replay for today's conference call will also be online on the company's Investor Relations page with that I will turn the call over to Eric.
Thanks, Amy and thanks to everyone for joining the call today.
We had an outstanding second quarter.
And Chris and I are excited to talk to you about our key results and analysis for the quarter and we also want to continue the deeper discussion of our growth strategy elevate.
Which we began our last call.
But first I would like to talk about what we view as an absolutely spectacular publication on optical genome mapping or AGM, which appeared in the peer reviewed journal leukemia on Monday.
It describes the study that was conducted by leading oncologists and Hematologists and which they used optical genome mapping and next generation sequencing or Ngls.
To determine the complete array of single nucleotide variance and structural variance for 101 subjects that had been diagnosed with myelodysplastic syndrome or Mds.
Which is a hematologic malignancy malignancy that effects bones blood cell production.
Now the results show that when optical genome mapping was used instead of carrier typing that 28% of the subjects in the study had either a different prognostic risk score or additional structural variations that were not found by carrier typing.
Or both.
And when the results then 81 gene NGF panel and those of optical genome mapping where combined.
The findings indicated that at least one clinically significant corner abnormality was found in 97 now.
Of the 101 subjects.
This research demonstrates that among the modalities tested optical genome mapping and next generation sequencing taken together provide the most comprehensive set of genome variance for Mds analysis in this study and therefore suggests the potential.
For our new standard insider genetic and molecular analysis for heme malignancies.
Altogether.
Now I'd like to talk a little bit about the second quarter results and Chris will go into some more detail about them.
Total revenue for the quarter was $6 $7 million, which is another record for us and represents.
Growth of 73% over the revenues from the second quarter in 2021, we sold 3394 flow cells and the second quarter, which represents 24% growth over the second quarter of 2021, and we analyzed 373.
<unk> in our.
Laboratories, which represents 96% growth over Q2 2021.
Finally, we ended the quarter with an installed base of 196, Sapphire systems, which represents 62% growth over the 121 systems installed at the end of the second quarter of 2021.
Now at this point I'd like to turn the call over to Chris. So he can go a little deeper into the financials for the second quarter and after Chris's remarks, I'll discuss our growth strategy elevate and provide some updates across its five strategic pillars, Chris. Thanks.
Thanks, Eric the second quarter of 2022 was another outstanding quarter for bio nano as Eric mentioned, we recorded significant year over year revenue growth and continued growth in the installed base of our Sapphire AGM systems. We believe this reflects the building excitement in the market about the capabilities of <unk> that is.
Giving the momentum we are seeing.
We couldnt be more pleased with the execution of our team demonstrated despite the ongoing headwinds in the overall market and we remain on track to achieve our full year 2022 revenue instrument placement guidance.
Revenue in the second quarter of 2022 was $6 $7 million, representing an increase of 73% over the second quarter of 2021, and our highest quarterly revenue to date, we came in above our previous guidance range of six <unk> to $6 5 million for the quarter, mainly due to.
Longer than expected instrument sales in Europe , and China, and improved reimbursement and our clinical services business.
Our gross margin in the second quarter came in at 22% compared to 37% in the second quarter of 2021 and 15% in the first quarter of 2022.
As we have mentioned previously the year on year decrease was primarily due to low yields on our chip consumables produced at one of our contract manufacturers.
We are making good progress on improving yields and we expect to see continued improvement in our gross margins coming quarters.
Second quarter 2020 to GAAP operating expense was $33 6 million compared to $17 9 million in the second quarter of the prior year.
For Q2, 2022, non-GAAP operating expense was $26 4 million compared to $6 <unk>.
$16 1 million in the second quarter of 2021.
Q2, 2022, non-GAAP operating expense excludes $5 8 million in stock based compensation and $1 4 million in amortization of purchased intangibles.
The year over year increase in Opex was primarily due to increased head count related spending increased R&D expense and increased marketing expenses.
Our capitalization remains strong with $187 3 million in cash cash equivalents and available for sale securities as of June 32022.
And as I mentioned in the beginning of my remarks, we are on track to achieve our full year revenue guidance in the range of $24 million to $27 million.
We expect Q3 revenue to be in the range of $6 7 million to $7 1 million.
With that I'll turn the call back over to Eric.
Great. Thank you, Chris and great job.
In addition to a generally improving macro environment in our target markets. We believe our elevate strategy is working well the.
The optical genome mapping story is continuing to build showing that not only can <unk> be a powerful tool for identifying structural variance, but then when combined with next generation sequencing. The two methods have the potential to address a number of challenges that cider genetic and molecular pathology labs have been facing.
For decades.
I'd like to spend the remainder of the call discussing our growth strategy, which we call elevate by drilling down into its strategic pillars and highlighting some of the key progress we've made.
The first pillar is expanding the commercial traction and validating.
Optical genome mapping with Sapphire.
Our goal for <unk> is for it to become a standard tool used routinely for genomic applications and clinical.
Research and industrial settings to meet that goal, we need labs, using ODM and talking about it.
We believe expanding the installed base of our SaaS our system gets that done.
This quarter, we grew the install base to 196 systems.
Which puts us on track to hit our year end goal of 240.
And the addition of <unk> systems in the second quarter is 67% higher than the 12 systems that were added in the first quarter of 2022.
We believe the growing number of labs around the world with Sapphire systems is creating a community of <unk> users that can help propel the methodology forward through their presentations and publications and workshops.
Advocacy throughout consortium and medical policy working groups.
During the second quarter of 2022, Ogn was part of the agenda and content.
At a number of conference events across the United States.
And Europe , we saw our first Spanish optical genome mapping user group meeting with over 100 participants co hosted by wholesale Caridad US Institute and hospital del Mar in Barcelona, We have eight sapphire systems installed in <unk>.
Pain, and we are starting to see momentum there and believe others across Europe are watching closely.
With all of the growth in installed base and the additional utilization that happens with it there is more ODM data in the world.
Those data get presented at meetings and eventually published.
And we're really happy with the number of papers that have come out year to date.
We appear to be on track to beat the number of 184 papers published last year, but something that really stands out to us.
In 2022, so far.
Is the significant shifts.
And the distribution of topics.
Contained within these publications over the course of 2021.
About 60% of papers that were published covered nonhuman applications of ODM and 40% covered human applications.
While that picture has flipped.
In a year and so now when we look at 2022 publications to date, it's actually 60% human.
It's a really significant shift in the overall focus of ODM much toward more towards human translational and human clinical research.
And what we believe is that this shift is significant because we believe that.
These areas will drive more consumers consumables utilization in the long run.
And I also want to make a comment about what looking at publications really means publications are our leading indicators, leading indicator of future potential adoption, but they are a lagging indicator of the work that was happening.
At the time that they were published so this picture that we're seeing now probably represents the distribution of utilization thats been happening over the last couple of years and so when we think about the future that distribution is going to shift a lot more towards human because thats where.
Optical genome mapping is being adopted today now the second pillar of elevate us to delight, our customers with robust products, we strive to learn from our customers and what might be done to improve the sapphire system. Our product development pipeline. Currently includes a number of.
Products that are designed to either simplify the optical genome mapping workflow make it faster or make it perform better one exciting advance was the announcement in June of the long stream vantage system by us in Hamilton This product would be the <unk>.
World's first walkaway automation solution for ultra high molecular weight DNA extraction, we expect it to significantly reduce time to results.
More ODM reduce hands on time and to improve ogn performance by standardizing the process connected to the DNA isolation.
We have additional products planned for release later this year, including updates to our DNA isolation protocols.
And to our labeling chemistries as well as the integration of optical genome mapping data into our Nx clinical software platform. We believe all of these products will be transformative for our workflow and truly delight customers.
Now the third pillar centers on clearing the path to reimbursement of optical genome mapping and changing medical practice to include optical genome mapping into medical Society guidelines, our labs in San Diego, which are part of the bio nano labs business.
<unk>, which also includes lineage and is planning to develop laboratory developed tests or <unk> for optical genome mapping in genetic disorders and hematologic malignancies. We are working towards CLIA certification and plan to begin releasing ltte's once that process is completed.
For this year.
We believe that these <unk> can help us work with third party payers to obtain coverage for optical genome mapping assays the path to reimbursement of <unk> by Payors requires.
Several key steps.
We believe that an important step is obtaining a category one CPT code in the first quarter of this year, we submitted our application for a category one CPT code for <unk>.
We received helpful feedback on the application, which was that firstly, the American Medical Association would like us to resubmit the application and break it into two separate codes one code for genetic disorder testing and one code for cancer and I would like to add.
This is hal codes for other.
Solutions like micro arrays and sequencing have gone through the process.
Secondly, they are looking to see more peer reviewed publications on optical genome mapping, which is why we're so excited about publications like the one I talked about coming from MD Anderson.
And specifically they are looking for more publications that are coming from U S sites as well as additional adoption of optical genome mapping and so based on that feedback, which we thought was very constructive and positive we decided to withdraw the application while we address these points and we plan to resubmit the application.
<unk> in early 2023.
Now, while we were hopeful that we could get the code approved on this first attempt we understand that's very common in this process for it to take more than one round of applications and in the meantime, we know of labs with <unk>.
<unk> that are based on ODM that of a team.
So-called TLA codes or proprietary laboratory analysis codes and they are now going through the process of establishing pricing for these codes and we know of other labs that are using existing CPT codes and getting reimbursed for that.
So this process will continue and be ongoing for us now.
Now to achieve change in medical practice by getting optical genome mapping included into medical guideline it.
It is clear that we need data on thousands of samples showing the benefits of optical genome mapping over standard of care.
Were actively building that data and have been through our family of clinical studies. We believe that the results of these studies are compelling that they could provide sufficient evidence to support optical genome mapping being.
Incorporated into medical Society recommendations and guidelines, which would make opposite make optics.
Adoption of optical genome mapping even easier for labs that are following guidelines very closely.
We've been making great progress in these clinical studies throughout the first half of 2022.
As you May know they are directed at four major areas pre and post Natal genetic analysis, hematologic malignancies, which includes leukemias and lymphomas and solid tumors.
Now. These studies are designed to demonstrate the utility of optical genome mapping as an alternative.
Two traditional side of genomic methods.
We're evaluating.
These primary endpoints.
Number one is concordance with standard of care and Theres a lot of evidence that's been demonstrating this concordance, but we're hopeful that these studies will demonstrate that through close to 1000 patients.
Each of the arms.
Number two.
Is to increase the success rates for finding pathogenic variance and so while we know is that traditionally and laboratories practicing cytogenetics.
50% or more of the time samples are returned with no findings of pathogenic events and so if we can improve upon that we think that it's going to be an important factor in inclusion in these guidelines.
Thirdly, we are evaluating the health economic impact of optical genome mapping, we know that it streamlines workflows and we believe that that streamlining process reduces cost, but we will also look at the efficiency of performing optical genome mapping and its success rates compared to other.
Platforms and technologies that are in use routinely and fourth.
We will be looking at the potential for revising protocols for patient management and that type of outcome is something that was measured in the MD Anderson study and so we know that we have the potential to make significant progress there now three of the four studies.
In our portfolio are underway in the fourth which will cover solid tumors will begin initially in the fourth quarter of this year.
Two key milestones that were anticipated and previously announced for the second half of 2022.
To complete our postnatal study and start the interim publication on our prenatal study and we believe we're on track with both of those anticipated milestones.
Now the fourth pillar of elevate is to advance our product to support it.
Higher market adoption and entry into new markets.
We've been working on new products, two very important ones. One is a version of our Nx clinical software.
Which was developed by Bayou discovery.
And our new version will integrate optical genome mapping alongside the other data types that are in use today and I can tell you that when we've been talking about this capability.
At conferences, including at <unk>.
Very productive.
Meeting, we had recently at the cancer Genomics consortium annual meeting.
That users see this single view for data analysis as being something that has a lot of power for them and so they're very excited about it we've been making progress with the software.
It's begun and evaluation process with our clinical team.
As they use it to start analyzing their clinical studies data, we expect that team's feedback to propel additional development in this.
Release of software.
And we believe that that releases on track for the end of this year.
Another very significant product that we're working on is the next generation version of our SaaS fire system.
We are pleased with the progress on this system that we've made so far and we look forward to placing pre commercial version of that platform by the end of this year.
In addition to the higher throughput that that system offers it will include random sample access that should allow for short turnaround time or stat processing and the ability.
To scale from one to six systems working in unison, which would bring about another dramatic increase in throughput overall.
We also expect that to be part of an integrated workflow with automation of sample preparation and this new version of the Nx clinical software.
So our product development pipeline is robust and there are a number of catalysts that will be released into the market going forward.
And finally as the fifth pillar.
<unk> elevate.
We're focused on making software a strategic driver.
Of our business.
In addition to working on.
Integrating optical genome mapping within Nx clinical.
The software itself is a very powerful platform that can be used.
Broad array of genomics applications, even if it doesn't involve opt.
Optical genome mapping such as applications with micro arrays or next generation sequencing. In fact, we believe anyone using micro arrays or whole genome sequencing or mgs panels with benefit from using Nx clinical software.
For a number of applications, including detection of copy number variations.
Their analysis together with the analysis of single nucleotide variance. We also believe many of these labs will have an interest in <unk>.
And in Q1, we launched a version of Nx clinical with an integrated genomics scar analysis for homologous recombination deficiency or HRD.
And this feature provides comprehensive consistent and automated analysis of Biomarkers from Ngls as well as micro array and in fact, we'll be able to determine HRD scores using <unk> as well.
And all of this will help clinical researchers stratify therapeutic response across across multiple <unk> multiple tumor types and so what I hope you will see is that this software platform is something that can really open doors independently of its.
<unk> to analyze optical genome mapping data and we see that as a driver of future growth for bio nano.
And so in closing I want to reiterate that we are really excited about our continued growth in 2022.
As I mentioned earlier, we are on track with all of our outlined elevate milestones and we look forward to updating you on our progress going forward. We would also like to share that we are in the early stages of planning for an investor event that we will hold in the first quarter of <unk>.
2023, and there will be more information to come about that.
So with that operator, I would like to turn it over to you and open the floor to questions.
Thank you, ladies and gentlemen, if you would like to ask a question. Please press star one one on your telephone keypad.
Using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment again press star one wanted to ask a question.
One more for questions.
Our first question comes from the line of Jason Mccarthy from Maxim Group. Your line is open.
Yes.
Hey, guys, Michael <unk> on the line.
Thank you for taking my question and congrats on the quarter.
Thank you thank you Michael.
No.
Firstly, I guess or.
Touch a bit more on the data from that.
MD Anderson study.
And if you could talk about what sort of varian for detected by SaaS fire that were missed by.
Headaches and how having this new information.
Could potentially your extra data in the study change physician treatment decisions.
Yes.
It's.
Pretty darn interesting and.
I like that you picked up on it because.
MD Anderson is just a household brand name in cancer and so when these researchers take on a project.
<unk> do it knowing that.
There'll be an expectation of significant impact and I think this study.
Is really compelling on a number of different levels and so.
Some of the results that we called out and talked about our connected to earlier, the workflow and analyzing Mds patients, which as you know and I want to say to everybody who is listening in can be thought of as really.
Pre leukemia, and so the chances of.
A good outcome if Mds is caught early.
<unk> properly.
Stratified are good.
And so what.
Dr.
Shamina.
Carnival showed in this paper was that.
When they use carrier typing they were able to classify patients. According to what medical guidelines recommended into risk categories so-called prognostic risk categories, low medium and high and there are some finer grades to that rich.
Stratification.
And they compared that prognostic risk score or stratification.
When carrier typing was used to the score that they obtained when optical genome mapping was used and there are a couple of different scoring systems that exist in the community one as cc SaaS, abbreviated one is <unk>.
And.
Remarkably for one of those scoring systems, 21% of the study subjects had a different prognostic score.
<unk> was used compared to win.
Carrier typing was used in one of the other scoring systems.
17%.
Study subjects had a different score and so think about what that means.
Your oncologist thinks that you have Mds and is trying to figure out how to manage you and they rely heavily on these risk scores and so when the standard of care is used.
You get one risk score optical genome mapping is usually get another one now importantly, these researchers rigorously used orthogonal methods to confirm that all of the findings by ODM were validated and accurate and so it means that the standard of care is lumpy.
<unk> people into these risk categories incorrectly, which in turns means that they're not being treated or managed correctly and so I can't really think of a more impactful finding for <unk> and if there was one patient out of 100 or something like that that would.
Still be noteworthy, but we're talking about up to 20% now in addition to those.
We're up to 21% actually so in addition to those 21%.
There's another segment of patients for whom additional structural variance were identified that again the traditional methods did not picked up and I think that that number was also significant.
Like about 13%.
Patients so and so when you add all of the unique study subjects together, who had findings that were different from the standard of care. It adds up to 28%. So it just means that.
28% all patients in this study certainly and maybe you might extend that too.
Two others.
But certainly this study showed that for 28% of subjects.
The standard of care is not not giving the same answer as ODM and it's reasonable to conclude that the <unk> answer is the correct answer based on a rigorous validation that was conducted.
I think that Thats pretty earth shattering insignificant.
Yes, that's certainly a profound results.
Okay.
As a follow up I'd like to shift gears and just ask a bit about.
You mentioned improving macro factors for.
Where the business could you expand a bit on.
What you mean by that is largely COVID-19 related stuff or are there other factors at play here.
Yes, I mean, so we talked during the first quarter about.
That we were able to install grow the installed base by 12 systems in the first quarter and that we had some systems waiting to be installed and we felt that one of the factors that might've been giving us a little bit of headwind. There. We knew was with COVID-19 and some of the staffing shortages.
And so.
Yes.
We've seen access to labs improves in general, but there are a number of factors.
That are broader.
<unk> supply chain shortages and Covid overall that are still in play, but our access to laboratories.
<unk> has opened up and Thats allowed us to.
Get back to I think a more typical cadence we grew the number of.
<unk>.
The growth of the installed base was 60%, 67% higher in the second quarter than it was in the first quarter. So access to labs helped that.
Alright, Thank you very much and just one more if you don't mind I wanted to ask about the health economic.
Analyses in your clinical program and specifically how important those are when talking about securing reimbursement not just for <unk>.
<unk>, but also for some of the third party <unk> many of the <unk>.
Developers of those <unk> as you've mentioned currently have pls closing or looking into pricing could you just comment on that a bit.
Yes, I mean health economic analysis is kind of a standard endpoint.
And driving guidelines and so.
I I know that these clinical studies that we're conducting are going to benefit the process.
Clearing the path for reimbursement.
But I do want to be clear that their design is really intended to provide the evidence necessary for the key opinion leaders and others who are involved in these medical societies to.
It really develop recommendations and integrated optical genome mapping into the standard of care and we're hopeful that one day it would become a first year.
Platform that is recommended for us but.
Health economic factors will also play into the stance that payers take in terms of how they cover the.
The assay and a number of factors connected to broader adoption of of optical genome mapping now with regard to labs that are.
Seeking coverage and reimbursement for their Pls codes. This is something that they conduct on their own.
And we don't get.
Directly involved in it because.
Because as you know optical genome mapping with the Sapphire system. As you know this is a research use only platform, but what I know about that process is that it tends to follow gap filling.
So the labs will work out a detailed cost analysis of what it takes them to perform the to generate the test result, including the cost of reagents and instruments, but really the all in fully burdened cost and.
And so that's going to have a large factor in the crosswalk process and the pricing of these these PLL codes and.
No that that.
The process is ongoing for labs, and I expect that we'll be hearing more about it I'd like to say that it is going to happen. This year and I believe it will but we don't have a definitive sense of that timeline. So we're not going so far as to to commit to anything like that and it's it's really out of our hands, but health economic factors will really influence.
Fluids the guidelines.
And they can begin to drive value based pricing PLE, because it will be priced in a crosswalk process.
Alright, Thank you very much I really appreciate the additional color.
Thank you.
Thank you I'm not showing any further questions in the queue I'd like to turn the call back over to Eric for any closing remarks.
Well, thank you Victor and thank you to everyone, who joined the call. We look forward to updating everyone on our Q3 results.
And this concludes the conference call for today. Thank you for participating you may now disconnect everyone have a great day.
Thank you.
And this concludes the conference call for today. Thank you for participating you may now disconnect everyone have a great day.
Thank you.
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