Q3 2022 Bionano Genomics Inc Earnings Call
Please standby good.
Good day and welcome to the bio nano genomics third quarter 2022 earnings Conference call Today's conference is being recorded.
Time, I would like to turn the conference over to Amy Conrad from Investor Relations. Please go ahead ma'am.
Thank you Cynthia and good afternoon, everyone welcome to the bio nano genomics third quarter 2022 financial results conference call, leading the call today is Dr. Eric Cohen CEO of bio now.
He is joined by Chris Stewart CFO of Biomet or.
After market close today <unk> issued a press release announcing its financial results for the third quarter of 2022.
A copy of that release 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 five minutes revenue outlook strategic in commercialization plan anticipated benefits or improvements to bio nanos product, including the Sapphire system and our next clinical software anticipated milestones for 2022, including progress on.
And each pillar of elevate.
The advantages of the Sapphire system over current technologies.
Expectations regarding anyway.
And anticipated benefits of these studies and their ability to drive adoption of Odeon.
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.
Results may differ materially from such statements due to a number of factors and risks some of which are identified and buy it in a press release and buy them in its reports filed with the SEC.
These forward looking statements are based on information available found enough today and the company assumes no obligation to update statements as circumstances change.
In addition to supplement found in its financial results reported in accordance with U S. Generally accepted accounting principles or GAAP. The company 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.
A description of non-GAAP operating expense and reconciliation of non-GAAP operating expense to GAAP operating expense.
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 made available online on the company's IR page with that I will turn the call over to Eric Eric.
Thank you Amy and thank you everyone for joining the call today, we had another outstanding quarter third quarter for 2022, and Chris and I are excited to provide you with.
Key results and an overview of the quarter as well as to give you an update on our growth strategy elevate that.
And we want to take this opportunity to also talk to you a little bit more about the market areas, where we see the highest potential.
For the adoption of optical genome mapping.
Now turning to our third quarter results total revenue was $7 2 million for the quarter, which represents another record revenue for the company and an increase of 55% over the third quarter in 2021, we've seen revenue growth compared to the same time last year across APAC.
Europe , Middle East Africa, and Americas, and so we're very pleased with this progress.
We sold 3975 flow sales in the quarter, which is a record for the number of <unk> sold in any quarter in the Companys history and that represents a 17% sequential increase over the second quarter of this year that is comparable to the $3 969.
For ourselves we sold.
A year ago in 2021.
Percent sequential increase over the second quarter of this year.
An area another area, where we saw significant progress was in bio nano laboratories, which officially launched this quarter bio nano labs as a new organization that combines.
Sure optical genome mapping data services with the clinical testing services that were previously known as linear gym.
We've also launched the first optical genome based mapping based laboratory developed test out of bio Nano labs, and we received CLIA certification for the San Diego Lab. Now. This certification is important because it enables bio national laboratories to offer services to customers.
Who seek to implement optical genome mapping into there.
Clinical routines and for research applications with hospitals pharmaceutical companies and other groups that require a more robust regulatory structure for their projects.
At this point I would like to turn the call over to Chris. So he can go a little deeper into the finances for the quarter. After Christmas remarks, I'll will provide updates to the five strategic pillars in the growth strategy and then discuss the market potential.
We see for optical genome mapping in key areas, including Cytogen Omics discovery research and something we haven't been talking a lot about but is really exciting.
Sell Bioprocessing QC Chris.
Thanks, Eric.
The third quarter of 2022 was another outstanding quarter for Bayern Anna is Eric mentioned, we recorded significant year over year revenue growth and continued growth in the installed base of our Sapphire systems. We believe the building excitement in the market about the capabilities of our products is driving the revenue momentum we are seeing.
Revenue in the third quarter of 2022 was $7.2 million, representing an increase of 55% over the third quarter of 2000, 2000, 22021, and our highest quarterly revenue to date, we came in just above our previous guidance range of $6 $77.1 million, mainly due to stronger than expected sales of ethics clinical soft.
Where.
Gross margins for the third quarter came in at 25% in line with the third quarter of 2021, and a 3% improvement over the 22%. We saw in the second quarter of 2022 due to improvements in chip production yields and the favorable product mix in the corner.
We are making good progress on improving yields and we expect to see continued gross margin improvements in the coming quarters.
Third quarter of 2022 gap operating expense was $34 million compared to $21.8 million in the third quarter of the prior year.
Q3, 2022, non-GAAP operating expense was $26.4 million compared to $18.7 million in Q3 of 2021 and roughly flat till the $26.3 million in Q2 2022.
Q3, 2022, non-GAAP operating expense includes $6 $1 million in stock based compensation $1.4 million and amortization of intangibles and 100000 of transaction related expenses.
The year over year increase in Opex was primarily due to increased head count and related spending.
R capitalization remains strong with $182 million in cash cash equivalents and available for sale securities as of September 30th 2022.
That includes $22.5 million in net proceeds raised through the sale of $6 6 million shares in Q3 2022 under our ATM facility.
Looking forward, we expect revenues in the fourth quarter to be in the range of $7.5 million to $8 million, which would imply full year revenue in the range 27, 1 million 27 $6 million. This.
This number is slightly above the top end of our prior for your guidance range of $24 million to $27 million.
Before I turn it back over to Eric I Wanna quickly mentioned that we plan to hold our first strategy day this coming February .
More information will be forthcoming in the near future with that I'll turn it back to Eric.
[noise] Thanks, Chris.
Our strategy for growth, which we call elevate is.
Is based on five key pillars.
To expand commercial traction invalidation of optical genome mapping with Sapphire.
To delight, our customers with robust products.
To clear the path for reimbursement of ODM based tests and.
Change medical practice to include optical genome mapping in medical Society guidelines.
To advance our products to enable as support higher market adoption and entry into new markets.
And lastly to make software a strategic driver of our solutions.
Now recently, we've added a sixth pillar.
And that's that we focus on doing all of these things in a way that scalable to meet the demands of our growth environment.
We have seen great momentum and the adoption of <unk> and its validation for use this last quarter.
Last week.
At the association of the society for human genetics or as HG conference.
They featured the first dedicated scientific session on genome mapping technologies, where researchers.
From around the world highlighted optical genome mapping as a technique that has the potential to revolutionize molecular and side of genetic research.
And Bayern Anno recently held his first scientific meet the user that in the company's history, where we brought together.
Over 50, researchers who were curious about optical genome mapping seeking to find out where it fit into their lab and what applications. They could run on it.
These folks came to San Diego from all around the World and visited bio National Laboratories, which is now a showcase for excellence and optical genome mapping.
And they were able to see demonstrations of the bio nano sapphire system and its workflow as well as our annexed clinical software.
We've continued our previously announced collaboration with Hamilton.
To release, an automated sample prep solution for customers and supported this effort, we've been developing new chemistries, which will be part of the world's first walk away automation for ultra high molecular weight DNA extraction with the Hamilton long string vantage system.
That system has the potential to double throughput and deliver increased confidence in sample yields and DNA quality, making it easier than ever to adopt optical genome mapping at scale.
And last week at Asa's G. We were excited to announce together with the Appleton.
That.
This platform will be shipping commercially in early 2023.
Now regarding the progress in reimbursement are plans for a category one CPT code re application remain on track.
And we have seen significant progress in the field for sites with laboratory developed test or <unk> that are based on optical genome mapping, who have gone and applied for reimbursement codes known as purely codes or proprietary laboratory analysis codes.
They have been reporting that these codes now have established pricing.
2022, Gasfield recommendations were released by the center for Medicare and Medicaid services or CMS.
For Houston constitutional genetic testing.
With <unk> and they include reimbursements of $1263.53 for two purely codes.
And a.
And reimbursement for $6739.33 for another Paw code the.
The first two codes that I mentioned are for use of <unk> and.
Whole genome analysis for constitutional genetic disease and.
And the second one that I mentioned is for the combination of optical genome mapping and next generation sequencing and so we're very gratified to see.
That reimbursement for optical genome mapping.
Is now possible and we see optical genome mapping on the clinical diagnostic laboratory fee schedule. This is very significant progress for us.
The clinical studies that we are working on remain the backbone of our evidence to support <unk>.
In changing medical practice through revising medical guidelines, we remain on track to meet our previously outlined milestones for this year.
And we have made progress on a new version of our Nx clinical software, which will integrate optical genome mapping data alongside other data types.
And then finally, we.
We remain on track to have a pre commercial version.
The next generation mapping instrument in the field.
Before the end of this year.
Now during this quarter, so he'll shams who has been our chief commercial sorry, Chief Informatic software since officer since the acquisition of bio discovery.
Transitioned out of his day to day activities and became the C. I O of marriages, which means that he is a consultant to the company for assistance and guidance and software development.
During the 25 years since forming by the discovery. So Hill has established himself and his team as global thought leaders in genome analysis, the products and services they created including Nx clinical are recognized around the world is providing powerful solutions for visualization interpretation and report.
<unk>.
Genome variation in now and bio nano will take it forward.
To finalize the addition of structural variation and create a tool.
That will really transform the way the world sees the genome.
Now in closing I would like to spend some time discussing the market opportunities for optical genome mapping, which we see is approximately.
Valued at about $8 billion across the areas of.
Cytogen Omics <unk>.
Discovery Research Q.
Q C four cell bioprocessing and a handful of other applications.
We estimate the number of cytogenetic labs on a worldwide basis to be approximately 6000, and the number of samples that they are analyzing to be approximately $4.2 million per year.
We also know that there are about 15000 sequencers installed worldwide and so we think when we think about the opportunity to <unk>.
Transformed the cytogenetic workflow by adding Sapphire and <unk> as well as complimenting sequencing with optical genome mapping we estimate that these two opportunities.
Amount to a market potential of about $4 billion.
Inside of genetics, and molecular palynology optical genome mapping is not only supported by emerging reimbursement, but now by a number of studies that validate it's used as a replacement for traditional methods like karyotyping.
Fluorescents in situ hybridization or fish.
Chromosomal microarray or as a complement to the next generation sequencing we.
We believe that this ability to detect structural variations as well suited and cancer and genetic disease applications. This quarter. We saw several research studies validating odm's used in solid tumor and hematologic malignancy applications.
And they all indicated that optical genome mapping workflows.
Could lead to changes in.
Important information used in patient management, like prognostics, scoring and treatment recommendations and a variety of areas, including leukemias lymphomas Myelodysplastic syndrome, and others. We believe the use of optical genome mapping may provide cancer Reese.
Searchers for a better understanding of the causes of cancer, which could lead to new diagnoses.
And therapies.
Evidence for these views has been published for peer reviewed studies in the third quarter from researchers at sites, including MD Anderson Cancer Center.
Augusta University as well as a multi site study in Europe , all validated optical genome mapping ability to not only see what traditional method C, but find additional pathogenic variants.
In Mds acute myeloid leukemia, chronic lymphocytic leukemia, as well as myeloid malignancies, suggesting that the identification of these previously undetected variance may impact Prague.
Prognosis and offer improved insight into the genomic architecture of hemolytic Macy's and tumors in a way that would provide for better classification risk stratification and therapy selection.
Genetic diseases, well, we see growing support for O G M. Two.
Two recent studies from researchers in China showed progress in this area. One study this quarter used optical genome mapping to detect balanced chromosomal rearrangements that were not detected by traditional methods by a found in subjects, who had experienced recurrent pregnancy loss.
A recent study successfully evaluated optical genome mapping for investigation of abnormal noninvasive prenatal testing, suggesting that optical genome mapping could be used as a reflex tests for positive <unk> test as well as ambiguous ones.
And these are very powerful applications for optical genome mapping and genetic disease.
We also saw the publication of the first study to evaluate or G. M and the analysis of certain repeat expansion disorders, where researchers successfully use optical genome mapping to replace southern blot, which has been the gold standard for sizing these repeat expansion historically.
Repeat expansion disorders or class that impact approximately one and 3000 people.
And so they have a significant incidents in the population.
Oh Gee I'm also has great potential in discovery research as we've been talking about either as a standalone tool or with sequencing we.
We believe discovery research as an area of such enormous potential because.
Structural variations are highly biologically and clinically relevant.
But historically there hasn't been a tool capable of the kind of comprehensive and sensitivity.
For detection of structural variations that optical genome mapping offers.
With such a tool we believe that optical genome mapping can become a new gold standard for structural variation detection 500 base pairs and bigger throughout genome analysis.
I wanted to talk about an area of the market that is increasingly significant and interesting as well as one that's pretty unique to optical genome mapping and that's this area that we call sell bioprocessing QC or quality control.
And this methodology in Vale entails evaluating intended and unintended modifications to genes in cells used for therapeutic applications, such as immune cell therapy stem cell therapy, and other areas, where Jean editing has a therapeutic better.
Fit.
Two studies. This shorter showed this quarter showed odm's utility involving induced pluripotent stem cell lines, one with potential application for autologous cell therapy, and one for allogeneic cell therapy autologous cell therapy uses and individuals cells <unk>.
Cultures them engineers.
To transform and modify them. There then expanded in vivo and introduce back into the patient allogeneic follows a similar similar process, but based on universal cell lines. One study validated odm's ability to detect sve's that had not been seen by traditional methods now this.
Is really important because these off target or spurious.
Events may impact the genome integrity of these cells that are used in therapy and bring about.
Poor performance or poor safety.
The other study used optical genome mapping as part of a quality control workflow to evaluate Ips see quality in genomic integrity and allogeneic therapies again to minimize the potential for immune rejection.
Of donor cells by the recipient.
We're excited to see the support for ODM as a new method in this space and we believe this validation helps bio nano expand beyond the research.
Clinical diagnostics areas into uses of O G M for drug development and cell therapy applications.
Now in closing I'd, just Wanna reiterated that we are excited about our continued growth in 2022.
I want to emphasize that we are on track to meet all of our outline elevate milestones.
And we look forward to updating you on our progress during the queue for a call.
As Chris mentioned and I want to reiterate that we would also like to share that we will be hosting an investor and analysts to vet in February of 2023. This is what we call our strategy day, and we'll give you more specifics on that in due time and so with that operator, we are now ready to.
You open the floor for questions.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure your mute function is turned off.
To reach our equipment again, if you would like to ask a question at this time. Please press star one will pass or just a moment.
Teach a signal for questions.
Maybe we'll take our first question from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.
Oh, Yeah, we can Chris how are you.
Hey, Jeff Jeff.
So Christian transfer Street on the on the services and other number which was strong for the quarter very strong so I assume that that includes some.
Money from the San Diego clear loved.
Yeah that that number does include all of our services, which asked includes revenue from the San Diego clear lab, which which is continuing to process samples as we have for the last several years now.
Got it Okay, and then talk a little bit about animal.
<unk> and <unk> and <unk> to launch this new product and I understand that.
You'll be supporting <unk> could you talk about.
Perhaps the the size of a marketing <unk> and some of the.
To the competitive advantages sent to you I hope your system hash out there in the marketplace.
Yeah sure happy too.
So a couple of things as you know Hamilton as well.
One of the handful or.
Very very small number of global leaders and work flow automation and for them to create this program and invest in it I think is really.
Significant validation of the emergence of optical genome mapping as.
Ah mainstream technique throughout genomics I don't think that they would put the resources behind this project that they didn't see the potential and so we're excited about that.
If you think about the market size for ultra ultra high molecular weight.
DNA isolation, which this robot is.
Expressly developed for.
We talked about these six side of genetic labs worldwide, we talked about 15000 sequences worldwide and so I've got to believe that.
Hamilton views the potential of putting automation in many.
Those labs as we view the potential for putting sapphires and all of those labs.
Not every lab is going to need automation.
But it's.
It certainly simplifies the workflow <unk>.
Makes it more consistent and more robust.
And what we see in labs is that there are throughput is beginning to consistently ramp up, especially in Europe , where they've been going through a phase of validation and beginning to build a menu of applications and so automation at this time makes a lotta sense.
If you asked me.
Do I think every.
Site is going to want to have automation I think that there will be sites that continue to process samples manually, but the opportunity is is very significant otherwise Hamilton Hamilton wouldn't get behind it.
Got it and then secondly from US congratulations on the news with sheer Ministry dispute. The the capsule form of recommendations how's that going into effect or when does that go into effect for the two codes you all orange.
There's three of them too and constitution genetic disorders, and then one while they're all in constitutional but one is two of them are for ODM alone and then one is for the combination of optical genome mapping and sequencing.
They are in effect now.
And I think that's in the last week or so and now you got to keep in mind and this is.
Important for everybody to be clear about these are what we call for what.
CMS calls proprietary laboratory analysis codes and they are unique to the lab that has developed the LDP and applied for the code.
But I will tell you that.
I mean it.
CMS go through the process to.
[noise] study and analyze and discuss at the panel level and then go through a process of gap fill to price these codes that.
The next steps for other labs. Following the same path will be more straightforward and so I think I think we're finally in a period, where we can say that there is reimbursement for ogn early days, but.
It exists.
Fantastic I know you've been working on that for a moment of your solo vacation for us. Thanks for taking my questions.
Thank you Jeff.
Maybe we'll take our next question from our friends.
Please go ahead.
Hi, Thanks for taking the questions just yeah. So congrats again M. S M S and the the reimbursement.
Progress and and kind of you know hope or or just the fact that it's it's out there and after O G M. A little more here. So I was just wondering in terms of practice is changing you know.
What they do is reimbursement is that probably the main driver a potential hockey stick kind of growth in terms of top line or is it more of a combination of publications and more validation getting the word out or was this really kind of one of the the key drivers here.
Well I think that.
You really do need to think in terms of a combination are multifactorial.
The process of demand creation through.
Illustration of utility that's validated in the publications.
Combined with.
Pulling down barriers to adoption such as reimbursement and so all of these things are ongoing in parallel.
But they accelerate.
Continuously so <unk>.
<unk>, we are here at the.
Association for molecular pathology meeting ANP in Phoenix and.
We were talking about the number of human genomes that had been analyzed and published.
And the last year, or so and it's a little over a thousand.
At this point last year in the history of the company it.
Was 300.
Alright, So 300 for the history of the company up until October of 2021 from October of 2021 until October of 2022.
Triple that in one year. So these things accelerate.
As we're moving through time and pushing forward on all of these different fronts and as a result, that's what really drives the.
The revenue growth you said hockey stick I'll, just say the revenue growth.
And.
I noted that down the road, you're going to expect us to continue the revenue growth and so when we see.
This initial reimbursement that's going to pull some folks and who were on the sideline. When we see this automation that comes out we'll see some people come in from the sidelines, who were waiting for the automation. They will do work and published papers, which will in turn drive some additional folks in from the sidelines then we'll see things like.
We hope are we believe we will see things like private payers coming on board so on and so forth. So it really is multifactorial, but I can tell you that the process is accelerating on all fronts.
Okay now that that's very helpful. And then maybe you just touch on did you see any seasonality in the business or is it is it not now it does it not affect the business as much as maybe others in summer months and then also maybe just touch on it you know in the press release. There's a couple of publications that are that are mentioned and talked about.
I'm just wondering in terms of the the research if there's one in particular or again, it's kind of multifactorial, where all of these are extremely helpful or some more important than others. Thank you.
Yeah I'll start by answering this seasonality question, then let let Eric on publications.
We have seen over the past several years typically we're stronger in the second half of the year as as companies get their arms around their budget and then in queue for typically they're they're spending spending their budgets before they lose it.
Seasonality is a little bit slower in Q1.
With among other things Chinese new year, and then you know people kind of getting slow back to work after the holidays. So.
Yeah, that's what we have seen typically seasonal strength in the second half of the year little bit seasonal seasonally weaker in the first half of the year.
Or if you want to talk about their publications.
Yeah I think.
We have seen a number of significant publications that have come out.
Certainly in the third quarter.
I think one of the most impactful wines and we talked about it during our last cause I don't want to seem like I'm.
Diminishing the impact of the others, but the.
The paper from Dr. Rush May Carnival shaman are from MD Anderson Cancer Center, I don't think that we can really.
Under state.
Overstate, how significant that is because.
She touched on a number of different areas in that publication, where optical genome mapping.
Really dramatically impacts the patient management workflow and Myelodysplastic syndrome, which was the topic of her paper, but I think it's reasonable to extend that hematologic malignancies.
There are other aspects of that publication, which go into depth about.
The relationship between new findings that optical genome mapping revealed an existing clinical trials for treatment. So when you begin to put together and kind of connect all the dots in that paper you realize that that.
A seminal work that <unk>.
Really highlights.
Number one with the impact of optical genome mapping, but number two the importance of driving these new methods forward of course, we're doing this here and buy a nano genomics because we have an incredible platform and we know we can build a great company behind it.
But we really have to be focused on the importance of innovation in health care because at the end of the day. This this changes People's lives and is certainly helps them in some of their most desperate time. So I think that's the most significant paper that really was published this quarter.
Okay, great. Thank you very much.
Thank you.
There are no further questions at this time, Dr. Homeland I will turn the conference back to you for any additional for closing remarks.
Okay Cynthia I.
Wanna, Thank everybody for joining the call and we look forward to updating you.
On the fourth quarter call. After the first of the year. Thank you very much.
This concludes today's call. Thank you for your participation you may now disconnect.
Mmm.
[music].
Mmm.
[music].
Mmm.
[music].
Mmm.
Mmm.
Mmm.
Mmm.
[music].
Mmm.
Mmm.
[music].
Mmm.
[music].
Mmm.
[music].
The.
[music].
Okay.
[music].
Okay.
[music].
Okay.
[music].
Okay.
[music].
Okay.
[music].
Okay.
[music].
Okay.
[music].
Okay.
[music].
Okay.
Okay.
Okay.
[music].
Okay.
Okay.
Okay.
Mhm.
Okay.
Uh-huh.
Okay.
[music].
Okay.
[music].
Okay.
[music].
Okay.
Okay.
Uh-huh.
Okay.
Mhm.
Okay.
[music].
Uh-huh.
Okay.
Okay.
[music].
Okay.
[music].
Yeah.
[music].
And.
Okay.
[music].
Okay.
[music].
Mmm.
Okay.
Okay.
Okay.
[music].
Okay.
Okay.
[music].
Okay.
[music].
Hum.
Uh-huh.
Okay.
Okay.
Uh-huh.
Mhm.
[music].
Okay.
Mhm.
[music].
Mhm.
Okay.
Mmm.
Okay.
[music].
Yeah.