Q3 2023 Bionano Genomics Inc Earnings Call
Speaker 1: Good day and welcome to the BionNano 3rd Quarter 2023 Earnings Conference Call. Today's conference is being recorded.
Good day, and welcome to the buyer in that or a third quarter, its one or two or three year earnings conference call.
Today's conference is being recorded.
Speaker 1: At this time, I would like to turn the conference over to David Holmes from Investro.
At this time I would like like to turn the conference over to David Holmes.
From Investor Relations.
Please go ahead.
Speaker 2: Thank you operator and good afternoon everyone. Welcome to the BioNano third quarter 2023 financial results conference call. Leading the call today is Dr. Eric Homeland, CEO of BioNano.
Thank you operator, and good afternoon, everyone welcome to the bio nano third quarter of 2023 financial results conference call leading.
Leading the call today is Dr. Erik <unk> CEO of bio nano.
Speaker 2: He is joined by Golsan Kama, CFO of Fireman.
I'm joined by Gulfstream comment CFO upon now.
Speaker 2: After market closed today, Bionano issued a press release announcing its financial results for the third quarter of 2023. A copy of the release can be found on the investor relations page of the company's website.
After market closed today bio nano issued a press release announcing its financial results for the third quarter of 2023, a copy of the release can be found on the Investor Relations page of the comp.
<unk> web site.
Speaker 2: I would like to remind everyone that certain statements made during this conference call may be forward looking, including statements about BioNano's annual and quarterly revenue outlook. Profitability, cash runway, commercialization and product plan.
I would like to remind everyone that certain statements made during this conference call may be forward looking including statements about bio nanos annual and quarterly revenue outlook profitability cash runway commercialization and product plan, a strategic pillars and associated publicly announced milestones.
Speaker 2: strategic pillars and associated publicly announced milestones, the anticipated benefits and the timings of those benefits from the announced reduction in force and other cost savings initiatives, advances in obtaining reimbursement and FDA clearance for OGM and bio-nano-fexpectations regarding study results and publications and anticipated benefits of these studies and publications in driving adoption of OGM.
Dissipated benefits and the timing of those benefits from the announced reduction in force and other cost savings initiatives.
<unk> been obtaining reimbursement and FDA clearance for ODM and bio nanos expectations regarding study results and obligations and anticipated benefit.
These studies and publications and driving adoption of LTE M.
Speaker 2: Such forward-looking statements are based on current expectations, and there can be no assurances that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks.
Such forward looking statements are based on current expectations and there can be no assurances that the results contemplated in these statements will be realized actual results may differ materially from such statements due to a number of factors and risks.
Speaker 2: Some of which are identified in BioNano's press release and BioNano's reports filed with the FCC. These forward-looking statements are based on information available to BioNano today, November 8, 2023. And the company assumes no obligation to update statements as circumstances change.
Some of which are identified by announced press release and <unk> reports filed with the SEC. These.
These forward looking statements are based on information available to buy R&R today November eight 2023, and the company assumes no obligation to update statements as circumstances change.
Speaker 2: In addition to supplement Bionam financial results reported in accordance with US Generally Accepted Accounting Principles, or GAP, the company is reporting non-GAAP operating expense and non-GAAP gross margin.
In addition to supplement pyoderma financial results reported in accordance with U S. Generally accepted accounting principles or GAAP. The company is reporting non-GAAP operating expense and non-GAAP gross margin.
Speaker 2: These non-GAAP financial measures are 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, have no standardized meeting prescribed by GAAP, and are not prepared under any comprehensive set of accounting rules or principles.
These non-GAAP financial measures are 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 have no standardized meaning prescribed by GAAP and are not.
Not prepared under any comprehensive set of accounting rules or principles. Our description of both non-GAAP operating expense and non-GAAP gross margin and reconciliations of non-GAAP operating expense to GAAP operating expense and non-GAAP gross margin to GAAP gross margin are identified at the end of the company's earnings.
Speaker 2: A description of both non-GAP operating expense and non-GAP gross margin and reconciliation of non-GAP operating expense to gap operating expense and non-GAP gross margin to gap gross margin identified at the end of the company's earnings release issued earlier today, which has been posted on the investor relations page of the company's website.
The release issued earlier today, which has been posted on the Investor Relations page of the company's website.
Speaker 2: And audio recording and webcast replay for today's conference call will also be available online on the company and company's investor relations page. And with that, I'd like to try.
An audio recording and webcast replay for today's conference call will also be available online on the company and the company's Investor Relations page.
And with that I'd like to turn the call over to Eric.
Speaker 3: Thank you, David, and good afternoon, everyone. We accomplished a lot in Q3, and we look forward to discussing the progress in detail. Importantly, we took significant steps to reduce operating expenses and to extend our cash runway, which together helps shorten the potential.
Thank you David and good afternoon, everyone.
Accomplished a lot in Q3, and we look forward to discussing the progress in detail importantly, we took significant steps to reduce operating expenses and to extend our cash runway, which together helps shorten the potential path to profitability the focus on managing expenses and driving towards profitability.
Speaker 3: to profitability. The focus on managing expenses and driving toward profitability is in part facilitated by the change in financial leadership of the company with the appointment of Wilson, to the role of CFO , which was effective September 11th, 2023.
Ability is in part facility by facilitated by the change in financial leadership of the company with the appointment of Wilson comment to the role of CFO, which was effective September 11 2023.
Speaker 3: Wilson is going to open the call today by walking you through our financial results for the quarter and explaining how some of the initial steps in our streamline operational plan will reduce costs.
Wilson is going to open the call today by walking you through our financial results for the quarter and explaining how some of the initial steps in our streamline operational plan will reduce cost Wilson.
Speaker 4: Thanks Eric. I'm pleased to be on board at BioNano and to join the effort to help expand the adoption and utilization of OGM around the world.
Thanks, Eric.
I'm pleased to be onboard at fire nano and to join the effort to help expand the adoption and utilization of OEM around the world.
Speaker 4: To achieve that goal, we have to be financially disciplined as we seize the opportunities ahead of us.
Cheap that goal, we have to be financially disciplined as we seize the opportunities ahead of us.
Speaker 4: With that, let me share our results for the third quarter of 2023 with.
With that let me share our results for the third quarter of 2023 with you.
Speaker 4: Revenue was $9.3 million, representing a 29% year-over-year increase to the same period of 2022.
Revenue was $9 $3 million, representing a 29% year over year increase to the same period of 2022.
Speaker 4: which exceeded our original guidance of $8.8 to $9.2 million, provided on our second quarter earnings call and is in line with our earnings preview.
Which exceeded our original guidance of 8.8 to $9 $2 million provided on our second quarter earnings call and is in line with our earnings release.
Speaker 4: The Sapphire installed base grew to 301 systems during Q3, which represents an increase of 20 systems in the quarter, and 39% growth over the installed base of 217 at the end of Q3 2022.
The Sapphire installed base grew to 301 system during Q3, which represents an increase of 20 systems in the quarter and 39% growth over the installed base of 217 at the end of Q3 2022.
Speaker 4: We sold 6,176 flow cells in Q3 2023, which represents a 55% year-over-yearing.
We sold 6176 float cells in Q3, 2023, which represents a 55% year over year increase over the 3975 blocks out salt in the same period last year.
Speaker 4: Over the 3,975 flow-celled, sold in the same period left.
Speaker 4: Gap growth margin for the third quarter was 30%. Compared to 25% during Q3 2022, and non-gap growth margin was 32%, compared to 25% in the same quarter last year.
GAAP gross margin for the third quarter was 30%.
Paired to 25% during Q3 2022.
non-GAAP gross margin was 32% compared to 25% in the same quarter last year.
Speaker 4: Third quarter 2023 non-GAAP gross margin excludes $0.2 million in stock-based comp.
Third quarter 2023, non-GAAP gross margin excludes $2 million and stock based compensation.
Speaker 4: Third quarter 2023 gap operating expense was $116 million Compared to 34 million dollars in the same period in 2022
Third quarter 2023, GAAP operating expense was $116 million compared to $34 million in the same period in 2022.
Speaker 4: Non-GAP operating expense in Q3 2023, which excludes 84.1 million in gap charges as described in our press room.
non-GAAP operating expense in Q3, 2023, which excludes $84 1 million in GAAP charges as described in our press release, mainly comprised of a one time impairment charge of $77 $3 million.
Speaker 4: Mainly, comprised of a one-time impairment charge of $77.3 million related to revaluation of Goodwill, was $31.8 million compared to $26.3 million in Q320. $1.2 million in Q320.
<unk> two revaluation of goodwill was 31 $8 million compared to 26 $3 million in Q3 2022.
Speaker 4: The increase was driven by higher headcount, R&D, and marketing expenses related to products.
The increase was driven by higher head count.
And marketing expenses related to product launches.
Speaker 4: Non-gap operating expense in the third quarter went down $2.8 million compared to $34.6 million in Q2 2023. Mainly as a result of headcount reductions implemented in May of this year.
non-GAAP operating expense in the third quarter went down to $8 million compared to $34 $6 million in Q2 2023, mainly as a result of head count reductions implemented in may of this year.
Speaker 4: We raise net proceeds of $12.7 million on our ATM facilities.
We raised net proceeds of $12 $7 million on our ATM facility.
Speaker 4: selling on a split adjusted basis 2.11 million shares at an average price of $6.16 per share.
Following on a split adjusted basis, two point 11 million shares at an average price of $6.16 per share.
Speaker 4: Our cash, cash equivalents, and available for sale securities as of September 30th, 2023, was $63.6 million.
Our cash cash equivalents and available for sale Securities as of September 32023 was $63 $6 million.
Yeah.
Speaker 4: Now I want to discuss the steps we have taken since the end of the quarter to streamline operations and to extend our cash run-wide.
No I wanted to discuss the steps we have taken since the end of the quarter to streamline operations and to extend our cash runway.
Speaker 4: On October 9th, we implemented additional cost reductions in continuation of the reductions initiated in May of 2020.
On October nine we implemented additional cost reductions and continuation of the reductions initiated in may of 2023.
Speaker 4: These cost savings initiatives include reduction in force and steps to reduce the facility cost and discretionary spending unrelated to head.
These cost savings initiatives, including reduction in force and that's to reduce facility costs and discretionary spending unrelated to head count.
Speaker 4: When taken together with the cost savings, realized from the reduction in force, the company announced it.
When taken together with the cost savings realized from the reduction in force the company announced in May.
Speaker 4: We expect to see an annual cost savings of approximately $33 million starting in.
We expect to see an annual cost savings of approximately $33 million starting in 2024.
Speaker 4: We also announced the completion of an 80 million registered offering and concurrent private place.
We also announced the completion of an 80 million registered offering and concurrent private placement.
Speaker 4: Our objective with this financing was to obtain enough capital to provide a meaningful extension in the cash runway while also managing the diluted impact.
Our objective with this financing was to obtain enough capital to provide a meaningful expansion in the cash runway, while also managing the dilutive impact.
Speaker 4: We believe we found a good balance in achieving both objectives through this financing.
We believe we found a good balance and achieving both objectives through this financing back to you Eric.
Speaker 3: Thanks, Wilson, and welcome aboard. Great results and congratulations on your first earnings call.
Thanks, Sandra and welcome aboard.
Great results and congratulations on your first earnings call.
Speaker 3: Replace to have your energy and skills as we navigate and important phase for Bionanus.
We are pleased to have your energy and skills as we navigate an important phase for bio nano.
Speaker 3: I would now like to talk to everyone on the call about our plan going forward.
I would now like to talk to everyone on the call about our plan going forward.
Speaker 3: I've just returned from the annual meeting of the American Society of Human Genetics in Washington, DC, where thousands of clinical researchers, lab directors, and physicians meet to discuss the latest advances in human genetics.
Returned from the annual meeting of the American Society of Human Genetics, and Washington, D C, where thousands of clinical researchers lab directors and physicians meet to discuss the latest advances in human genetics based on the overwhelming number of talks posters publications and mentions of optical genome mapping.
Speaker 3: based on the overwhelming number of talks, posters, publications, and mentions of optical genome mapping. I and my whole team believe that OGM is now widely recognized as a powerful alternative to traditional cytogenetics with the potential to have a tremendous impact on health outcomes and health economics. Our strategy moving...
And my whole team believe that <unk> is now widely recognized as a powerful alternative to traditional cytogenetics with the potential to have a tremendous impact on health outcomes and health economics.
Our strategy moving forward is straightforward.
Speaker 3: We need to accelerate revenue growth and operate efficiently to reach profitability. When we first established the elevate strategy was based on six pillars. We now see it's more important than ever to be focused on those strategies that will result in achieving our goals in as expeditious as a manner as possible.
We need to accelerate revenue growth and operating efficiently to reach profitability. When we first established the elevate strategy was based on six pillars. We now see its more important than ever to be focused on those strategies that will result in achieving our goals.
As expeditious as Matt a manner as possible.
Speaker 3: Therefore, moving forward, Elevator will be based on four pillars.
Therefore, moving forward elevate will be based on four pillars.
Speaker 3: Number one, expand global adoption and utilization of OGM in hematologic malignancies, cell and gene therapy and rare diseases with a robust end-to-end workflow as an alternative to traditional cytogenetic techniques for efficient detection analysis and reporting of structural variance.
Number one expand global adoption and utilization of <unk> in hematologic malignancies.
Well in gene therapy, and rare diseases with a robust end to end workflow.
As an alternative to traditional cytogenetics techniques for efficient detection analysis and reporting of structural variance.
Speaker 3: Number two, clear the path for value-based reimbursement of OGM and inclusion of OGM analysis into medical society guidelines by addressing the need for large data sets showing clinical and health economic value of OGM.
Number two <unk>.
The path for value based reimbursement of <unk> and inclusion of OEM analysis into medical society guidelines by addressing the need for large datasets, showing clinical and health economic value of <unk>.
Speaker 3: Number three, obtain regulatory clearances in the United States and the European Union to make adoption of OGM easier for labs that require such clearances. And number four, drive operational efficiency. To. And number four, drive operational efficiency.
Number three.
Clean regulatory clearances in the United States and the European Union to make adoption of AGM easier for labs that requires such clearances.
And number four drive operational efficiency to shorten the path to profitability.
Speaker 3: We're making great progress along these strategic colors. In addition to strong revenue this quarter, we saw growth in the adoption and utilization of optical genome mapping with increases in the install base of staff our systems and growth in flow cells sold.
We're making great progress along these strategic pillars. In addition to strong revenue this quarter, we saw growth in the adoption and utilization of optical genome mapping with increases in the installed base of Sapphire systems and growth in flow cells sold installations.
Speaker 3: Installations of our newly released VIA software as a critical component of the end-to-end workflow, first for HIEM, began at the end of July . Many laboratories are now in various stages of integrating VIA for visualization, interpretation, and reporting of OGM data.
Installations of our newly released via software as a critical component of the end to end workflow first Rahim began at the end of July. Many laboratories are now in various stages of integrating via for visualization interpretation and reporting of OEM data.
Speaker 3: The response to the early access program for the Stratus system has really exceeded our expectation. Stratus systems are now in the field and installation and testing have begun.
The response to the early access program for the Stratasys.
Has really exceeded our expectation Stratus systems are now in the field and installation and testing have begun.
Speaker 3: Full commercial availability of Stratus is expected early in 2024 based on our ability to ramp production.
Full commercial availability of Stratus is expected early in 2024.
Based on our ability to ramp production.
Automated sample preparation is an important.
Speaker 3: component to the front end of the OGM workflow as VIA is to streamlining the back end. Our development work to adapt isotachyphoresis or ITP for the isolation of ultra-high molecular weight DNA for OGM on the ionic system is progressing well and we're on track to have a pre-commercial version of that capability in the field by the end of this year.
Component to the front end of the AGM workflow.
As to streamlining the back yet our development work to adapt isotach of resets or <unk> for the isolation of ultra high molecular weight DNA for AGM on the ion X system is progressing well and we're on track to have a pre commercial version of that capability in.
The field by the end of this year.
Speaker 3: Hamilton, which offers the long-string STARV system for isolating DNA for OGM, presented data at the ASHG conference showing their systems perform well. They also discussed their plans to automate the DNA labeling step for OGM.
Hamilton.
Which offers the long stream star IV system for isolating DNA for Ogn presented data at the <unk> conference showing their systems performed well there.
Also discussed their plans to automate the DNA labeling step for <unk>.
Speaker 3: Automating as much of this workflow as possible is really important to driving maximum utilization of the higher throughput that Stratis brings to market.
Automating as much of this workflow as possible is really important to driving maximum utilization of the higher throughput that stratus brings to market.
We also saw.
Speaker 3: amazing progress around reimbursement of OGM-based tests, as two labs, Praxis Genomics and Augusta University, received an approval from CMS of $1,863.22 for their proprietary analysis or PLA codes for hematologic malignancy testing after going through the gap fill process with CMS.
<unk> progress around reimbursement of ODM based test as two labs practice genomics in Augusta University received an approval.
From CMS.
One $863.22 for their proprietary analysis or poa codes for hematologic malignancy testing after going through the gap fill process with CMS.
Speaker 3: Regarding the critical mass of data in the field that's required to influence third-party payers and impact medical societies as they're evaluating the inclusion of OGM into their guidelines, I'd like to highlight the terrific growth we saw this quarter in the number of publications.
Regarding the critical mass of data in the field Thats required to influence third party payers and impact medical societies as they're evaluating the inclusion of <unk> into their guidelines I'd like to highlight the terrific growth. We saw this quarter and the number of publications or.
Speaker 3: Overall publications featuring OGM were up 61% from Q3 2022 to Q3 2023.
They're all publications featuring AGM were up 61% from Q3 2022 to Q3 2023.
Speaker 3: including a total of 47 human focused publications.
Including a total of 47 human focused publications.
Speaker 3: which demonstrates the utility of OGM in clinical research. The number of publications on rare diseases grew a remarkable 172% from 2022 to 2023.
Which demonstrates the utility of <unk>.
In clinical research the number of publications on rare diseases grew a remarkable 172% from 2022 to 2023.
Speaker 3: with increasingly large average numbers of samples per study.
With increasingly large average numbers of samples per study.
Speaker 3: Now, we have also formally engaged with the FDA around a future FDA cleared assay to be run on the Stratis system, and we've received positive initial feedback, and that process will continue into 2024.
Now we are also formally engaged with the FDA around a future FDA cleared assay to be run on the Stratus system and we've received positive initial feedback and that process will continue.
<unk> 2024 looking ahead at strategic milestones, we've previously outlined for the second half of 2023, we remain on track to meet our goal of install the installing 325 optical genome mapping systems by the end of 2023.
Speaker 3: Looking ahead at strategic milestones we've previously outlined for the second half of 2023, we remain on track to meet our goal of installing 325 optical genome mapping systems by the end of 2023.
Speaker 3: our prenatal and postnatal and he malignancy studies remain on track to meet the associated milestones planned for the end of this year and finally
Our prenatal and postnatal and heme malignancy studies remain on track to meet the associated milestones planned for the end of this year and finally.
Speaker 3: I want to reiterate our full year 2023 revenue guidance, which we originally provided at the outset of the year of $35 to $38 million in top line revenue.
I want to reiterate our full year 2023 revenue guidance, which we originally provided at the outset of the year.
35% to $38 million in topline revenue.
Speaker 3: We look forward to updating you on our QFOR call regarding the progress toward the remaining 2023 milestone.
We look forward to updating you on our Q4 call regarding the progress toward the remaining 2023 milestones.
Speaker 3: Operator, please go ahead and open the line for questions.
Operator. Please go ahead and open the line for questions.
Speaker 1: Thank you, and as a reminder to ask a question, please press star one one on your telephone and wait for a name to be announced.
Thank you and as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced so would you already a question. Please press star one one together.
Speaker 1: To withdraw a question, please press star one one again. Please stand by while we.
Please stand by while we compile the Q&A roster.
Speaker 1: For our first question, it comes from the line of Jason McCarthy from Maxim Group. If your line is open, please ask your question.
For first question. It comes from the line of Jason Mccarthy from Maxim Group. Your line is open. Please ask your question.
Speaker 5: Hey guys, thank you for taking the question. This is Michael Kuhnich on the line for Jason.
Hey, guys. Thank you for taking the question. This is Michael <unk> on the line for Jason.
Speaker 5: So, I guess to kick off, I'd like to see if you could just give a little bit more of more clarity on what the pathway is to gaining FDA approval for the, the assay on the strata system. What sort of data do you need to produce for that?
So I.
I guess to kick off I'd like to see if you could just give a little bit more of more clarity on what the pathway is to gaining FDA approval.
The assay on the Stratus system, what sort of data do you need to produce for that.
Yeah, Hey, Thanks, Michael.
<unk>.
Speaker 3: So, the process involves a series of engagements with FDA, followed by a clinical study. The clinical study is relatively small.
So the process involves.
A series of engagements with FDA, followed by a clinical study the clinical study is relatively small.
Speaker 3: and can be conducted within a reasonably short period. We'll likely do that trial later in 2024, and we would be seeking to establish substantial equivalence to existing standard of care methodologies, and part of the discourse that's ongoing with the FDA right now is the specific clearance path that we choose. We're fairly convinced, although.
And can be conducted within a reasonably short period will likely do that trial later in 2024.
And we would be seeking to establish substantial equivalence to existing standard of care.
Geez.
And part of the discourse that's ongoing with the FDA right now is the specific clearance path that we choose we are fairly convinced although.
Speaker 3: It remains to be something that the FDA and we agree upon, but we're fairly convinced that pre-market approval won't be required, but there are other paths around.
It remains to be something that the FDA and we agree upon but we are fairly convinced that pre market approval won't be required but there are other paths around five 10-K clearance that we would need to decide to follow and then get support with the FDA. So we're engaged in those discussions now.
Speaker 3: 510k clearance that we would need to decide to follow and then get support with the FDA. So we're engaged in those discussions now. And there are certain aspects of product development ongoing to support that trial around the proper documentation in connection with the development of the product.
Al.
And there are certain aspects of product development ongoing to support that trial around the proper documentation in connection with the development of the products the software and the assay as one integrated system, but we'll be in a position. We currently hope too.
Speaker 6: software and the assay as one integrated system, but we'll be in a position we currently hope to
Speaker 6: conduct that clinical trial sometime later in.
Conduct at clinical trial sometime later in 2024.
Speaker 5: All right, thank you. And then I would like to just follow up and see if you could provide a bit more color on the financing. And in particular, in the context of trying to understand your cash balance and how that looks going forward. Could you explain a bit more about how the redemption feature works that was utilized on November 1st? And then.
Alright, Thank you and then.
I would like to just follow up and see if you could provide a bit more color on the on the financing and in particular in the context of trying to understand your cash balance and how that looks going forward.
Could you explain a bit more about how the redemption feature works.
That was utilized on November 1st and then.
Speaker 5: Do the redemptions include the full amount of interest on the amount redeemed or is that prorated to the amount of time elapsed until maturity?
Due to the redemptions include the full amount of interest on the amount redeemed or is that pro rated to the amount of time elapsed until maturity.
So.
With regard to the.
Speaker 6: Convertible debt deal overall. I think as you know, there's a portion of it, which is unrestricted and a portion of it, which is restricted the restricted portion is released upon paying down the initial unrestricted portion and then meeting other financing conditions and so the process of retiring that initial restricted portion includes the
Convertible debt deal overall I think as you know there is a portion of it which is unrestricted and a portion of it which is restricted.
The restricted portion is released upon paying down the.
Initial unrestricted portion.
And then meeting other financing conditions and so the process of retiring that initial restricted portion includes the <unk>.
Speaker 6: retirement through the redemption, and the redemption feature does include the
Retirement through the redemption and the redemption feature does include.
The.
Speaker 6: you're financing charges and interest on top of that.
Financing charges and interest on top of that.
Speaker 5: All right, thank you for that. And then just 1 last 1, I'll hop back in the queue regarding the gap fill rate that. That you got that practice and Augusta got.
Alright. Thank you for that and then just one last one I'll hop back in the queue regarding the gap fill rate that.
That you got that practice in Augusta.
Speaker 5: How does that compare to the actual cost of the materials for running that test?
How does that compare to the actual cost of materials from running that test.
So these are.
Speaker 6: rates and codes that have been obtained by those labs. And so we actually don't know, right? They submitted the application and drove the gap fill, but the standard process is to fully burden their costs and include.
Rates and codes that have been obtained by those labs and so we actually don't know rate data.
Submitted the application and drove the gap fill but the standard processes too.
Fully burden their course and includes.
Speaker 6: What would be considered a fair margin? So I suspect that they have a good margin at that rate.
What would be considered a fair margin so I suspect that they have a good margin at that rate.
Yeah.
Speaker 5: All right, thank you very much for answering my questions and congrats on the progress this quarter.
Alright. Thank you very much for answering my question and congrats on the progress this quarter.
Thanks, Michael.
Speaker 1: Thank you. And for the next question, it comes from the line of Sungjin Nam from Scotiabank. Please go ahead.
Thank you Andrew next question. It comes from the line of <unk> <unk> from Scotia Bank. Please go ahead.
Speaker 7: Hi, thanks for taking the questions. Maybe, let's see here. Kicking off with Stratus, we'd love to hear any feedback you're getting from the early access users, including kind of what type of, you know, if you're seeing utilization on the system, kind of, you know, tracking in line with your expectations there. And then do you expect significant buildup of backlog heading into next year for the full commercial launch?
Hi, Thanks for taking the questions.
Maybe let's see here kicking off with charter.
We'd love to hear any feedback you're getting from the early access users.
Including kind of what type of you know if youre seeing utilizations on the system kind of tried and.
Tracking in line with your expectations. There and then do you expect a significant buildup of backlog heading into next year for the full commercial launch.
Speaker 6: Thanks, Sengji. So it's a little bit early to have concrete feedback from users, so the installation to just begun and
Thanks, Angie so it's a little bit early to have concrete feedback from users. So the installations have just begun and.
Speaker 6: You know, given that it's a brand new instrument, it takes some time for us to even qualify it on site. So that process is ongoing. And, you know, what I can tell you about, though, is that your labs are really focused on bringing on that product in that they have identified a variety of use cases that
Given that it's a brand new instrument. It takes some time for us to even qualify onsite so that process is ongoing.
And.
What I can tell you about though is that labs are really focused on bringing on that product in that they have identified a variety of use cases that.
Speaker 6: indicate to them that they need the higher throughput that Stratus offers and so excitement is high
Indicate to them that they need the higher throughput that stratus offers and so excitement is high.
Speaker 6: And let's hope that Stratis delivers. And we, of course, believe very confidently that it will. And we're excited to have it out in the field. With regard to a backlog into 2024, I.
And let's hope that Stratus delivers.
We of course believe very confidently that it will and we're excited to have it out in the field with regard to a backlog into 2024.
Hi.
Speaker 3: You know, only want to say sort of anecdotally that we've had, you know, a tremendous response to stratus that, and I think many respects is sees our expectations towards the early access program. So quite a number of labs have raised their hand and asked to be a part of that.
Only want to say sort of anecdotally that.
We've had a tremendous response to stratus.
Got it.
And I think many respects exceeds our expectations towards the early access program. So quite a number of labs have raised their hand, and ash to be a part of that.
Speaker 6: You know, in the event that those requests exceeded the sort of number of early access systems that we have available, which is 10, we believe that they would
In the event that those requests exceeded the sort of number of early access systems that we have available which is churn.
We believe that they would.
Speaker 6: still be interested in adopting the full commercial model of Stratus. And what we're doing now is managing that transition between
Be interested in adopting the full commercial model of Stratus and what we're doing now is managing that transition between.
Speaker 6: One product, the Sapphire system, into an environment where we have two products, Sapphire and Stratus. And this is one of the...
One product the SaaS fire system into an environment, where we have two products Sapphire and Stratus and this is one of the.
Speaker 6: more tricky paths that a leadership team, especially a commercial team in this industry has to traverse. And, you know, so we're making sure our principal focus is that.
More tricky pass that leadership.
Our leadership team, especially a commercial team in this industry has to reverse and.
So we're making sure our principal focus is that.
Speaker 6: Customers are excited about adopting optical genome mapping and they get the system that's best for them, whether that's sapphire or stratus. And so far, and based on the guidance that we've provided, we think that we are navigating that transition smooth.
Customers are excited about adopting optical genome mapping and they get the system, that's best for them, whether thats sapphire or stratus and <unk>.
So far based on the guidance that we provided we think that we are navigating that transition smoothly.
Speaker 7: Great, that's super helpful. And then just on the DS software launch, just kind of curious if you expect all the customers, you know, currently doing hematological research on hematological malignacies to convert over to that. Just kind of curious kind of what you expect from a penetration standpoint.
Okay.
Great. That's Super helpful. And then just on the via software launch just kind of curious if you expect all the customary.
Currently.
Doing hematological research on hematology, Hematological malignancy Q convert over to that.
Curious kind of what you expect from a penetration standpoint.
Speaker 6: Yes, so I think it's reasonable to expect that the vast majority, I mean,
Yes.
Think it's reasonable to expect that the.
Vast majority I mean substantially all.
Speaker 6: There's going to be that one lab that doesn't want to do it, but substantially, all the labs will convert the timing of the conversion is a little bit dependent on.
There's going to be that one lab that doesn't want to do it but.
Substantially all of the labs will converts.
The timing of the conversion is a little bit dependent on.
Speaker 6: you know, their progress because a new software would need to be revalidated in some cases, depending on how they're using the platform. And so they will pick the right point in time and perhaps align that.
Their progress because our new software would need to be re validated in some cases, depending on how they are using the platform and so they will pick the right point in time, and perhaps align that three validation with bringing on.
Speaker 6: free validation with bringing on other menu items or other applications that they would be running.
Other menu items or other applications that they would be running but.
Speaker 6: you know for us the expectation is that everybody adopts and you know so we believe that that would be
For us the expectation is that everybody adopts and.
So we believe that that will be the case.
Speaker 7: Got it. And then lastly from me on China, great to see a lot of your OEM customers gaining traction there.
Got it and then lastly from me on China, Great to see a lot of your OEM customers gaining traction there.
Speaker 7: just kind of curious, you know, given the environment, the macro environment, and kind of a lot of the larger cap.
Just kind of curious given the environment, the macro environment and kind of a lot of the larger cap.
Speaker 7: To those companies, and seeing increasing headwind in China, just kind of curious, it would love to hear your perspective from bio-nanostampoint, kind of what your expectations are kind of heading into next year in China.
So as a company.
Seeing increasing headwind in China, just kind of curious and we'd love to hear your perspective from bio.
<unk> standpoint kind of what your expectations are kind of heading into next year in China.
Okay.
Speaker 6: Yes, it's a good question and we're watching with great interest the reports of other companies in the space. What I can tell you is that we reiterated guidance, full year guidance and that includes fails to China. We've been progressing well. And so we're not seeing.
Yes, it's a good question, we're watching with great interest the reports of other companies in this space what I can tell you is that.
We reiterated guidance full year guidance and that includes sales to China, we've been progressing well.
And so we're not seeing.
Speaker 6: pressure that would cause us to come off of those numbers, but it's clear that spending on research has seen some headwinds in China. And...
Pressure that would cause us to come off of those numbers, but it's clear that spending on research has seen some headwinds in China.
Speaker 6: You know, one of our rationalizations for us thinking that we're going to continue to progress there is that
<unk>.
One of our rationalizations for us thinking that we're going to continue to progress there is that.
Speaker 6: The applications that optical genome mapping get used for there are very, very close to healthcare applications
The applications that optical genome mapping get used for there are very very close to.
Health care applications clinical research.
Speaker 6: clinical research as opposed to academic and basic research. And so that's why we were comfortable reiterating guidance. Of course, there's a you know global aspect to the whole revenue mix but
As opposed to academic and basic research.
And so that's why we were comfortable reiterating guidance of course there is.
Global aspect to the whole revenue mix, but.
Speaker 6: We're mindful of the sort of headwinds that others are facing. And we're going through China carefully.
We're mindful of the.
Of the the sort of headwinds that others are facing.
We're going through.
China carefully this quarter.
Sounds great. Thank you so much.
Speaker 1: Thank you. And for a next question, a constant align of Jeffrey Cohen from Layton Birdtelman. Jeffrey, your line is open. Please ask a question. Oh, hi, Eric and Goulson.
Thank you Sanjay.
Thank you and your next question comes from the line of Jeffrey Cohen from Ladenburg Thalmann. Jeffrey Your line is open. Please ask your question.
Hi, Eric and Golfs in how are you.
Well Jeffrey.
Speaker 8: So, a few questions from her. And so, firstly, could you maybe talk about the newer systems that have been placed for SAFIRE? Could you tell us what you're seeing as far as sales or leases or preuse arrangements as far as any flexibility that you have on the sales front and is a right purchase becoming more or less of an obstacle from more recent quarters? So, Jo.
So two questions from our end so firstly could you maybe talk about.
The newer systems that have been placed for safer.
Could you tell us what youre seeing as far as sales or leases or per use arrangements as far as any flexibility that you have on the sales front.
Alright purchase becoming more or less of an obstacle from more recent quarters.
So the go to market model.
Speaker 6: for the early access systems, mirrors and mini respects, what we do for the staffires system. And so there's a flexible rental program and the purchase. Moss.
For the early access systems mirrors in many respects, what we do for the SaaS our system.
And so there is a flexible rental program and the purchase.
Model and.
Speaker 6: The pricing on the purchase is higher.
The pricing on the purchase is higher.
Speaker 6: But what we're seeing in terms of the distribution, and again, it's early, so the statistical significance of the observations is probably not really well established. But what we're seeing in terms of the distribution is that it's comparable to what we see for the SAFAR system. So some rental and some purchase.
But what we're seeing in terms of the distribution and again, it's early so the statistical significance of the observations is probably not.
Not really well established but what we're seeing in terms of the the distribution is that it's comparable to what we see for the Sapphire system. So some rental and some purchase.
Speaker 8: Okay, got it. And then, Kosen, can you perhaps walk us through some of the commentaries as far as the 33 million savings expected for 24? I mean, I guess how we're looking at it, you're talking about a 20% reduction off of SGA and R&D when to get outline perhaps for us where you're gonna see some of those savings and perhaps which line I'd at least see a more pronounced reduction than the other. Thank you. Okay.
Okay got it and then coastal can you, perhaps walk us through some of the commentary as far as the $33 million in savings expected for.
24.
How we're looking at it youre talking about a 20% reduction off of.
SG&A and R&D.
You outlined perhaps for us where youre going to see some of those savings and perhaps which line item.
A more pronounced reduction than the other.
Thank you.
Thank you Geoffrey.
Speaker 4: So in terms of the $33 million,
<unk>.
So in terms of the $33 million.
Savings.
Speaker 4: It is actually, some of it is coming from the cost of goods sold area, relatively small.
It is actually some of it is coming from the cost of goods sold area.
Relatively small proportionally small and as you said most of it is in R&D and SG&A.
Speaker 4: And as you said, most of it is in R&D and...
Speaker 4: And big part of the savings, it was actually in our pre-release. We talked about the...
And big part of the savings it was actually in our announced.
In our pre release, we talked about.
Head count reductions.
So you can and combined with the one that we did back in May.
Speaker 4: combined with the ones that we did back in May.
Big portion of the savings will come.
That area now we have looked through every line item.
Speaker 4: Now we have looked through every line item on the P&L.
On the on the P&L to see where else we can achieve savings. So it varies but I don't think theres anything that was untouched.
Speaker 4: So, you know, it varies, but I don't think there's anything that was untouched. So, hard for me to give you the exact guidance.
Hard for me to give you the exact guidance, but <unk>.
Certainly the majority from head count reduction.
Speaker 9: Okay, got it. And then lastly, first, could you give us a sense of a pro forma?
Okay got it and then lastly for US could you give us a sense of.
Pro forma.
Speaker 9: Shares and cash please. I see the queue just hit us
Shares and cash please see the Q just hit as well.
Speaker 6: Yeah, I mean, I think it's best if you refer to the
Yes, I think it's.
Best if you refer to the.
Speaker 6: cover of the queue and I think we described the cash balance as 930 which was 63.6.
The cover of the Q and I think we describe the cash balance as of 930, which was 63 six.
Yeah.
Perfect. Okay. Thanks for taking our questions.
Thank you Geoffrey.
Speaker 1: Once again, if you'd like to ask a question, please press star one on your telephone keypad. And for the next question, encounter the line of Frank Brieswaw from Openheimer. Your line is open, please ask your question.
Once again, if you'd like to ask a question. Please press star one on your telephone keypad and for our next question comes from the line of Frank <unk> from Oppenheimer. Your line is open. Please ask your question.
Speaker 10: Hi, this is Dan on for Frank. Thanks for taking my question. Just a quick one regarding stratus. I know you mentioned that it's too early to talk about feedback, but just in terms of the early access program, is currently all 10 systems out in the field and also are all 10 of those users currently where they already sapphire users or are also users who are not.
Hi, This is Dan on for Frank Thanks for taking my question just a quick one regarding stratus.
You mentioned that it's too early to talk about feedback but.
And just in terms of the early access program is currently all 10 systems out in the field and also.
Are all 10 of those users currently where they already sapphire users are they also users who are not.
Speaker 6: So, hi, Dan. What I can see is that...
So.
Hi, Dan.
What I can say is that.
Speaker 6: We, all 10 are not out in the field, and that's not a demand issue. It's just based on our production timeline. So when we produce them, they go out.
Not a demand issue, it's just based on our production.
Timeline.
So when we produce them they go out.
Speaker 6: with regard to the sort of composition of users, what we see now, and this is actually really important.
With regard to the sort of composition of users what we see now in this this is actually really important.
Speaker 6: is that the majority of folks who are coming on board to adopt status are new customers.
Is that the majority of folks who are coming onboard to adopt stratus are new customers.
Speaker 6: And I think that that's a little bit of a unique complex.
And.
I think that that's a little bit of a unique.
Component in.
Speaker 6: you know, this kind of a product cycle within the industry and it's good. We.
This kind of a product cycle within the industry and.
It's good.
We introduced.
<unk> develops.
Speaker 6: the stratus to address a segment of the market that was
The stratus to address a segment of the market that was excited about optical genome mapping and the value that it brings to them, but unable to really implement it because of the throughput limitations that the current SaaS fire has and so when we start to see folks raising their.
Speaker 6: Excited about optical genome mapping and the value that it brings to them, but unable to really implement it because of the throughput limitations that the current sapphire has. And so when we start to see folks raising their hands to adopt stratus and that they're new.
Hands to adopt stratus and that their new new.
Speaker 6: new customers, the connection there is that they actually have higher volume utilization plans for OGM and their labs. So I think that that indicates that...
New customers what the connection there is that they actually have higher volume utilization plans for ODM in their lab. So I think that that indicates that.
Speaker 6: We developed the right product for a segment of the market that we're not yet penetrating. Now, over time, I think we will see the conversion of staffires to stratus systems.
We develop the right product for a segment of the market that we're not yet penetrating now over time I think we will see the conversion of SaaS fires to stratus systems, but.
Speaker 6: The purpose of Stratus is to really bring in new...
The purpose of Stratus is to really bring in new.
Speaker 6: customers, new users who are currently on the side.
Customers New users who are currently on the sidelines.
Speaker 10: Okay, and a last one for me, you started the call highlighting the human genetics conference that you attended. Could you give us a sense of the feedback from that compared to say a year ago, would you say there's a notable increase in the labs, presentations that included OGM this time around, and also related to that.
Okay and a.
Last one for me you started the call highlighting the human Genetics conference that you attended could you give us a sense of the feedback from that compared to say a year ago would you say there was a notable increase in the labs presentations that included ODM. This time around and also related to that any any.
Speaker 10: Any particular area that you are noticing
Particular area that you are noticing increased ODM adoption application say rare diseases, where you are seeing an increase in publications basic versus clinical research any color there.
Speaker 11: Yeah, so, ASHG is...
Yes so.
Asap.
As.
Speaker 11: You know, really one of the premier meetings, conferences around the world takes place every year around this time in the fall.
Really one of the premier meetings conferences around the World takes place every year around this time in the fall.
Speaker 6: and ADHD is somewhat differentiated from others in that it has a, you know, heavy...
And <unk> is somewhat.
Differentiated from others in that it has a.
Heavy.
Speaker 6: orientation towards research, but there's a lot of clinical folks there as well. And I would say that if we compare the presence of optical genome mapping in that environment this year to that of last year, what I think is, and of course, this is anecdotal based on my observations, but I've reviewed those observations from all of our folks who are there. The observation is that...
Orientation towards research, but theres, a lot of clinical folks there as well and I would say that if we compare the presence of optical genome mapping in that environment. This year to that of last year. What I think is and of course this is anecdotal.
So based on my observations, but I've reviewed those observations from all of our folks who are there.
Observation is that.
Speaker 6: We are really in the regular conversation of techniques that are intended to be used throughout clinical translational research.
We are really in the regular conversation of techniques that are intended to be used throughout clinical translational research.
Speaker 11: And the kinds of clinical translational research that we're talking about here are the understanding of genetic diseases. Now that may be in a workflow where a patient gets tested and subsequently enrolled in a research program because
And the kinds of clinical translational research that we're talking about here are the understanding of genetic diseases now that may be in a workflow where a patient gets tested and subsequently enrolled in a research program because the standard of care didn't really revealing a useful information that happens.
Speaker 6: standard of care, didn't really reveal any useful information. That happens about half the time, by the way. So that's the kind of research that's going on. The other kind of research that's going on is to really use optical genome mapping to explain.
About half the time by the way so that's the kind of research that's going on the other kind of research that's going on is to really use optical genome mapping to explain very complex disorder is an example that came up in our meeting was neural tube defects things like spine, a visitor and other.
Speaker 6: Very complex disorders. An example that came up in our meeting was neural tube despects, things like spine abyspida.
Speaker 6: disorders and the genetics of these diseases are incredibly poorly understood and what's amazing is that optical genome mapping is unlocking an incredible new understanding Why is that important? therapeutic application so treatment of these disorders can be developed on the basis of this new information and so you know an abundance of these types of presentations posters
Disorders and <unk>.
The genetics of these diseases are incredibly poorly understood and what's amazing is that optical genome mapping is unlocking an incredible new understanding why is that important therapeutic applications. So treatment of these disorders can be developed on the basis of this new information and so.
An abundance of these types of.
Presentations posters talks some of them and <unk> sessions that we organized but amazingly as part of the regular program. We see optical genome mapping featured very prominently so our observation is that with regard to that community optical.
Speaker 6: Some of them in bionanos sessions that we organized.
Speaker 6: But amazingly, as part of the regular program, we see optical genome mapping.
Speaker 6: featured very prominently. So our observation is that with regard to that community, optical genome mapping is really part of the mainstream. And if you compare that to a year ago, it was just beginning. I think a year ago, there was a dedicated session in the regular program to optical genome mapping.
Mapping is really part of the mainstream and if you compare that to a year ago. It was just beginning I think a year ago. There was a dedicated session in the regular program to optical genome mapping, but it was something that was really new and the last thing that I'll comment on is that there were a number of important.
Speaker 6: But it was something that was really new. And the last thing that all comments on is that there were a number of important...
Speaker 6: publications that are intended to represent industry-wide views. So the Thompson and Thompson genetics and genomics manual, which came out earlier in the year, this was something that we were able to talk about, and the inclusion of optical genome mapping into that addition, the ninth edition.
<unk> publications that are intended to represent industry wide view, so the Thompson and Thompson genetics, and genomics manual which came out earlier in the year. This was something that we were able to talk about and the inclusion of optical genome mapping into that.
Addition, the ninth edition.
Speaker 6: is really a step forward around the awareness of what we're doing. And then there was a rather significant review publication that came out right around the time of the start of the meeting. And it was written by many, many,
It was really a step forward around the awareness of what we're doing and then there was a rather significant review publication that came out right around the time of the start of the meeting and it was written by many many.
Speaker 6: preeminent scientists and researchers who really stepped a tone for that entire community. And this is an extensive publication that covers not only optical genome mapping, of course, but all of the different methods.
Pre eminent scientists and researchers who really set the tone for that entire community and this is David.
An extensive publication that covers not only optical geomapping of course, but all of the different methods and when you look at publications like that Theyre starting to spell out algorithms that discussed the use of optical genome mapping alongside all the other tools. So the reason that that kind of advanced.
Speaker 6: And when you look at publications like that, they're starting to spell out algorithms.
Speaker 6: that discuss the use of optical genome mapping alongside all the other tools.
Speaker 6: So the reason that that kind of advancement is so incredibly important is that when Bionanto commercial teams goes to a lab and says, hi, I'm here to talk about optical genome mapping. A year ago, the question that they would get is
<unk> is so incredibly important is that wind bio nano commercial teams goes to a lab and says hi, I'm here to talk to you about optical genome mapping a year ago. The question that they would get is.
Speaker 6: Where does optical genome mapping fit in my lab? And what should I do with it? But now after all these publications, they understand the answers to those questions before we meet them. It's a huge leap forward for us. So thanks for giving me a chance to talk about it. Thanks.
Where does the optical genome mapping fit in my lab, and what should I do with it but now after all these publications they understand the answers to those questions before we meet them. It's a huge leap forward for us. So thanks for giving me a chance to talk about it.
Thank you that's very encouraging thanks for taking my questions.
Speaker 1: Thank you, and our no-ford questions at this time. I would not like to turn a conference back to Aaron Holman, CEO for closing remarks.
Thank you and there are no further questions at this time I would now like to turn the conference back to Aaron Hoffman.
CEO for closing remarks.
Speaker 6: Thanks Kyle. I appreciate everyone joining here today. We're excited to finish out this fourth quarter and then share with you the results after the end of the year and our full year call. So thank you very much for joining.
Thanks, Kyle I appreciate everyone. Joining here today, we're excited to finish out this fourth quarter and then share with you. The results. After the end of the year and our full year call. So thank you very much for joining today.
Speaker 1: This concludes today's conference call. Thank you for participating. You and me now disconnect.
Sure.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Okay.
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Okay.
Yes.
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Yes.
Okay.
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