Q2 2024 Bionano Genomics Inc Earnings Call
www.globalonenessproject.org www.globalonenessproject.org
Operator: Good day, and thank you for standing by. Welcome to the BioNano Q2 Financial Results Call.
Speaker Change: Good day and thank you for standing by. Welcome to the BioNano Q2 Financial Results Call.
Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Holmes, Investor Relations. Please go ahead.
Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Holmes, Investor Relations. Please go ahead.
David Holmes: Thank you, operator, and good afternoon, everyone. Welcome to the BioNano second quarter 2024 financial results conference call. Leading the call today is Dr. Eric Holmlin, CEO of BioNano. He's joined by Gulsen Kama, CFO of BioNano.
David Holmes: After the market closed today, BioNano issued a press release announcing its financial results for the second quarter of 2024. A copy of the release can be found on the investor relations page of the company's website. Certain statements made during this conference call may be forward-looking statements, including statements about BioNano's revenue outlook, profitability, cash runway, cost savings initiatives, and commercialization and product plan. Such statements are based on current expectations, and there can be no assurances that the results contemplated in these statements will be realized.
Speaker Change: and many more. Thank you. Thank you.
David Holmes: Thank you, operator, and good afternoon, everyone.
Eric Holmlin: Welcome to the BioNano Second Quarter 2024 Financial Results Conference Call. Leading the call today is Dr. Eric Holmlin, CEO of BioNano. He is joined by Gulsen Kama, CFO of BioNano.
David Holmes: Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in BioNano's press release and in BioNano's reports filed with the SEC. These forward-looking statements are based on information available to BioNano today, August 7, 2024, and the company assumes no obligation to update them as circumstances change. In addition, to supplement BioNano's financial results reported in accordance with U.S. Generally Accepted Accounting Principles, or GAP, the company reported certain non-GAAP financial measures.
Speaker Change: After market closed today, BioNano issued a press release announcing its financial results for the second quarter of 2024. A copy of the release can be found on the investor relations page of the company's website.
Speaker Change: Certain statements made during this conference call may be forward-looking statements, including statements about BioNano's revenue outlook, profitability, cash runway, cost savings initiatives, and commercialization and product plans.
David Holmes: Such statements are based on current expectations and there can be no assurances that the results contemplated in these statements will be realized.
David Holmes: Actual results may differ materially from such statements due to a number of factors and risks.
David Holmes: some of which are identified in BioNano's press release and BioNano's reports filed with the SEC. These forward-looking statements are based on information available to BioNano today, August 7, 2024, and the company assumes no obligation to update statements as circumstances change.
David Holmes: In addition, to supplement BioNano's financial results reported in accordance with U.S. Generally Accepted Accounting Principles, or GAP,
David Holmes: The company reported certain non-GAAP financial measures.
David Holmes: A description of these non-GAAP financial measures, as well as a reconciliation to the nearest GAAP financial measures, are included 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.
David Holmes: These non-GAAP financial measures are not meant to be considered in isolation or as a substitute to comparable GAAP measures.
David Holmes: 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 prepared under any comprehensive set of accounting rules or principles.
David Holmes: A description of these non-GAAP financial measures, as well as the reconciliation to the nearest GAAP financial measures, is included 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. 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 prepared under any comprehensive set of accounting rules or principles. And the audio recording and webcast replay for today's conference call will also be available online on the company's investor relations page. With that said, I would like to turn the call over to Eric.
terric: An audio recording and webcast replay for today's conference call will also be available online on the company's investor relations page. With that, I would like to turn the call over to Eric.
Eric Holmlin: Thank you, David, and good afternoon, everyone. Q2 2024 was significant for the progress made towards the worldwide acceptance of OGM. And it's also the quarter where the majority of staffing reductions connected to our cost savings initiative took effect, which means we're learning how to operate within a streamlined team. I also think it's important to acknowledge that in the midst of our solid execution, we are facing a challenging and volatile economic backdrop. This challenge includes broader equity, capital markets, and limitations to the financing options available to us. But I want to underscore that while management is frustrated by these challenges, our focus remains on moving OGM forward.
Terric: Thank you, David, and good afternoon, everyone.
Terric: Q2 2024 was significant for the progress made towards the worldwide acceptance of OGM.
Speaker Change: And it's also the quarter where the majority of staffing reductions connected to our cost savings initiative took effect.
David Holmes: which means we're learning how to operate within a streamlined team.
Speaker Change: I also think it's important to acknowledge that in the midst of our solid execution, we are facing a challenging and turbulent economic backdrop.
David Holmes: this challenge includes the broader equity capital markets and limitations to the financing and options available to us
Speaker Change: But I want to underscore that while management is frustrated by these challenges, our focus remains on moving OGM forward.
Eric Holmlin: And with that, I want to start off the call today by discussing the recent decision by the editorial panel of the American Medical Association, or AMA, to accept the application for a Category 1 CPT code for the use of optical genome mapping in cytogenomic genome-wide analysis to detect structural and copy number variations related to hematological malignancy. We believe the CPT code will enable the adoption and utilization of OGM to increase significantly.
Speaker Change: And with that, I want to start off the call today by discussing the recent decision of the editorial panel of the American Medical Association, or AMA.
Speaker Change: to accept the application for a Category 1 CPT code for the use of optical genome mapping in cytogenomic genome-wide analysis to detect structural and copy number variations related to hematological malignancies.
Speaker Change: We believe the CPT code will enable the adoption and utilization of OGM to increase significantly.
Eric Holmlin: It's a key component that labs can leverage to obtain reimbursement from insurance companies and Medicare when they use optical genome mapping for clinical testing. And that includes, of course, the reimbursement of OGM DX Team 1. Our lab developed tests offered by BioNano Laboratories.
Speaker Change: It's a key component that labs can leverage to obtain reimbursement from insurance companies and Medicare when they use optical genome mapping for clinical testing.
Speaker Change: And that includes, of course, the reimbursement of OGM-DX HEME1, our laboratory-developed test offered by BioNano Laboratories.
Eric Holmlin: And importantly, given that the criteria used by the AMA for Category 1 CPT code approval are rigorous and include input from stakeholders across the healthcare community, we view the decision to establish a code for OGM as indirectly reflecting OGM's increasing maturity and utility. It's a really significant milestone for us and for users of OGM, and we're very proud of the outcome, and we're seeing a positive benefit already. Now, I would like to give an overview of the quarter. Revenue for the quarter was 7.8 million dollars, and that included.
Speaker Change: And, importantly, given that the criteria used by the AMA for Category 1 CPT code approval is rigorous...
Speaker Change: and includes input from stakeholders across the health care community
Speaker Change: We view the decision to establish a code for OGM as indirectly reflecting OGM's increasing maturity and utility.
Speaker Change: It's a really significant milestone for us.
Speaker Change: and for users of OGM and we're very proud of the outcome and we're seeing a positive benefit already.
Eric Holmlin: $700,000 of revenues associated with clinical services which we have previously discontinued. The second quarter 2024 revenue represents a 10% year-over-year decrease compared to the same period of 2023, but keep in mind that includes a 53% reduction in revenues tied to these discontinued clinical services. The OGM installed base grew to 363 systems during Q2, representing a net increase of 16 systems and 29% growth over the installed base at the end of the second quarter of 2020.
Speaker Change: Now I would like to give an overview of the quarter.
Speaker Change: revenue for the quarter was seven point eight million dollars
Speaker Change: And that includes...
Speaker Change: $700,000 of revenues associated with clinical services, which we have previously discontinued.
Speaker Change: The second quarter 2024 revenue represents a 10% year-over-year decrease compared to the same period of 2023, but keep in mind that includes a 53% reduction in revenues tied to these discontinued clinical services.
Speaker Change: The OGM installed base grew to 363 systems during Q2, representing a net increase of 16 systems and 29% growth over the installed base at the end of the second quarter of 2023.
Eric Holmlin: We sold 6,165 flow cells in the second quarter of 2024, which represents a year-over-year decrease of 13% compared to the 7,062 flow cells sold in the same period last year. In fact, this quarter is the first in 20 consecutive quarters where flow cells sold declined on a year-over-year basis. Looking into that result a little bit more, we see that in Europe..., flow cell sales grew in the quarter, but in the Americas and in the Asia Pacific region.
Eric Holmlin: The number of flow cells sold declined. The decline relative to the second quarter of 2023 was most significant on a percentage basis in China, and that's been driven by our OEM partners and key customers falling behind on their committed or expected purchases in the quarter. We estimate that this shortfall was approximately 1,200 flow cells.
Speaker Change: And they are committed.
Speaker Change: Or expected purchases in the quarter.
Speaker Change: We estimate that this shortfall was approximately 1200 flow cells.
Eric Holmlin: This underperformance in China is a function of both the slowdown in funding for companies in the region, which has been well publicized and well known. It's also a function of the fact that our OEM partners are awaiting approval from the National Medical Products Administration, or NMPA, of China to evaluate SAFIRE systems there so that they can be sold directly into hospitals under a clinical intended use designation. We see the potential for this delay in China business to persist, and that's something that we factored into guidance for Q3 and for the full year.
Speaker Change: This underperformance in China as a function of both the slowdown in funding for companies.
Speaker Change: In the region.
Speaker Change: Which has been well publicized and well known.
Speaker Change: It's also a function of the fact that our OEM partners.
Speaker Change: We are awaiting approval from the National Medical products administration, our MTA of China.
Speaker Change: To evaluate sapphire systems, there so that they can be sold directly into hospitals under a clinical intended use designation.
Speaker Change: We see the potential for this delay and China business to persist and that's something that we factored into guidance.
Speaker Change: <unk> for Q3 and for the full year now.
Eric Holmlin: Now regarding the decline in the Americas region, we see two factors coming into play. One is for existing SAFIRE sites that have adopted Stratis, where we've seen a slowdown in their expected purchases, which we attribute to the process of transitioning from one system to the other. The other. This effect is something we think we can mitigate going forward with additional strata sites by helping them plan the transition in advance. The second is the impact of the reduction of force connected to our cost savings initiative, which has reduced the number of field sales and support teams that would normally shepherd these processes forward.
Speaker Change: Now regarding the decline in the Americas region, we see two factors coming into play one is for existing SaaS or sites that have adopted stratus, where we've seen a slowdown in their expected purchases, which we attribute to the process of transitioning from one system to the other.
Speaker Change: This effect is something we think we can mitigate going forward with additional stratus sites by helping them plan their transition.
Speaker Change: In advance.
Speaker Change: The second is the impact of the reduction of force connected to our cost savings initiative, which has reduced the number of field sales and support team that would normally shepherd these processes forward.
Eric Holmlin: Overall, for the first half of 2024, the total number of flow cells sold was up 17%, and we are expecting a strong third quarter as we adjust to these new staffing levels. Some key highlights in other areas of the business include a software marketing agreement that we entered into with Revity, under which Revity will market and commercialize our VIA software as part of its newborn sequencing research workflow. Publications grew. With 72 publications in Q2, the total number of publications from the first half of 2024 grew by 37 percent compared to the same period in 2023.
Speaker Change: Overall for the first half of 2024, the total number of flow cells sold were up 17%.
Speaker Change: And we are expecting a strong third quarter as we adjust to these new staffing levels.
Speaker Change: Some key highlights in other areas of the business include our software marketing agreement into which we entered with remedy.
Speaker Change: Under which <unk> will market and commercialize our via software as part of its newborn sequencing research workflow.
Speaker Change: [noise] publications group with 72 publications in Q2, the total number of publications from the first half of 2024.
Speaker Change: Grew by 37% compared to the same period in 2023.
Eric Holmlin: The total number of clinical research subjects covered in publications in the first half of 2024 has grown by 136% from the same period in 2020. And in July, a peer-reviewed publication on the first phase of our pre-NATO multisite study was published, which showed that for 200 samples, or 123 unique cases, that OGM's overall accuracy was 99.6 percent, and its sensitivity was 99.5 percent. Specificity was 100%, as was PPV at 100%, and the negative predictive value or NPV was 95.5%.
Speaker Change: The total number of clinical research subjects covered and publications in the first half of 2024 has grown by 136%.
Speaker Change: <unk> from the same period in 2023.
Speaker Change: And then in July a peer reviewed publication on the first phase of our prenatal multi site study was published which showed four 200 samples are 123 unit cases.
Speaker Change: Oh, Gm's overall accuracy with 99, 6%.
Speaker Change: Sensitivity was 99, 5% specificity was 100% as was PPV at 100% and negative predictive value or NPV was 95, 5%.
Eric Holmlin: Additionally, OGM was 100% reproducible between sites, operators, and institutions. We have continued to ship commercial production units of the Stratus system, and the ongoing feedback around Stratus continues to be positive. And we also released a series of major advancements to our entire suite of comprehensive analysis software tools for cancer, including version 7.1 of our VIA software. These advancements enhance the detection and interpretation of anosomies, which are important cancers, and improve the analysis, visualization, interpretation, and reporting of data types, including optical genome mapping, next-generation sequencing, or NGS, as well as microarrays. Before looking ahead to the remainder of 2024 and our expectations, I would like to turn the call over to Gulsen, who will walk you through the financial results. Gulsen? Thanks, Eric.
Speaker Change: Additionally, <unk>.
Speaker Change: <unk> was 100% reproducible between sites operators and instruments.
Speaker Change: We have continued to ship commercial production units of the Stratus system.
Speaker Change: The ongoing feedback around stratus continues to be positive.
Speaker Change: We also released a series of major advancements to our entire suite of comprehensive analysis software tools for cancer, including version seven one of our via software. These advancements enhance the detection and interpretation of annual Sony's.
Speaker Change: Which are important cancer.
Speaker Change: And improve the analysis visualization interpretation and reporting of data types, including optical genome mapping next generation sequencing, our ngls as well as micro arrays.
<unk>: Before looking ahead to the remainder of 2024 and our expectations I would like to turn the call over to <unk>, who will walk you through the financial results call Sir Thanks, Eric.
Gulsen Kama: As Eric mentioned, revenue for the quarter was $7.8 million. Gap growth margin for the second quarter was 33%, compared to 27% during Q2 2023, and non-gap growth margin was 35%, compared to 29% in the same quarter last year. Second quarter 2024 GAAP operating expense was $19.6 million, and non-GAAP operating expense was $18.8 million. In April 2024, we completed a $10 million registered direct offering, which resulted in $9.3 million of net proceeds to the company after deducting the placement agent's fees and other offering expenses.
Speaker Change: Eric mentioned revenue for the quarter was $7 $8 million.
Speaker Change: GAAP gross margin for the second quarter was 33% compared to 27% during Q2, 2023, and non-GAAP gross margin was 35% compared to 29% in the same quarter last year.
Speaker Change: Quarter 2024, GAAP operating expense was $19 $6 million and non-GAAP operating expense was $18 $8 million.
Speaker Change: This reflect decreases of 53% and 46% respectively from the second quarter of 2023.
Speaker Change: Our cash cash equivalents and available for sale Securities as of June 32024 were $33 million of which 11 $4 million was subject to certain restrictions.
Speaker Change: Regarding financing activity in the second quarter and subsequently we have completed two registered direct offerings and restructured our debt.
Speaker Change: In April 2024, we completed a $10 million registered direct offering which resulted in $9 $3 million of net net proceeds to the company after deducting the placement agencies and other offering expenses.
Speaker Change: In May we completed a private placement of senior secured convertible debentures due may 2026, which resulted in gross proceeds of $18 million concurrently. We retired the outstanding balance of the convertible debt, which we entered into in October of 2020.
Speaker Change: Great.
Speaker Change: As of June 32024, the aggregate principal amount of <unk>.
Speaker Change: On your secured convertible debentures outstanding was $20 million.
Speaker Change: The structure of the new deck provided us with significant financial flexibility by retiring near term debt maturities and deferring principal redemption payment.
Speaker Change: In July we completed and are the registered direct offering with upfront gross proceeds to the company of $10 million and a concurrent private placement of clinical milestones link series, a and series B warrants.
Gulsen Kama: Our warrants have potential additional gross proceeds of up to $20 million if exercised for cash and are exercisable only upon stockholder approval. We will be filing a proxy statement for a special meeting of stockholders that we expect to be held in early October. Back to you, Eric.
Speaker Change: Warrants have potential additional gross proceeds of up to $20 million, if exercised for cash and our XR exercisable only upon stockholder approval.
Speaker Change: We'll be filing our proxy statement for a special meeting of stockholders that we expect to be held in early October.
Speaker Change: To you Eric.
Speaker Change: Okay.
Speaker Change: Okay.
Eric Holmlin: Thanks <unk>.
Eric Holmlin: Looking ahead to Q3, to OGM, in addition to those initiatives, management, towards further streamlining our operations and extending these savings, has the potential to impact future results. And so that's something that we will pay close attention to and ongoing efforts in market development to support reimbursement. We have additional important advancements that are slated for this year, which is specific for the isolation of ultra-high molecular weight DNA, and we believe the enhancements to The Stratus Compute and Ionic will enable more samples to be processed, and support continuing publication of more pre- and post-natal study data from the constitutional trials, like the publication that The turnaround time of optical genome mapping from sample to report was four days, and the cost was lower than karyotyping alone, and so clearly lower than the combination of karyotyping and fish.
Eric Holmlin: Looking ahead to Q3.
Speaker Change: And so the remainder of the year.
Speaker Change: Our focus is on balancing the need on the one hand to reduce expenses and operate with few are there fewer employees with on the other they need to realize the full potential value in converting traditional cytogenetics to.
Speaker Change: <unk>.
Speaker Change: Regarding expenses, we began reducing them in may of 2023 and that continued in October of 2023, and then <unk>.
Speaker Change: In March of 2024.
Speaker Change: Our plan was to reduce annualized non-GAAP expenses relative to the annualized non-GAAP operating expense.
Speaker Change: In March of 2023 by a total of $65 million to $75 million.
Speaker Change: The savings are expected to be fully realized.
Speaker Change: In the first quarter of 2025, and we're progressing well towards this goal as is evident in the 46% or $15 $8 million reduction.
Speaker Change: And non-GAAP operating expenses in the second quarter of 2024 compared to the same period a year ago.
Speaker Change: In addition to those initiatives management.
Speaker Change: We will remain vigilant.
Speaker Change: Towards further streamlining our operations and extending these savings.
Speaker Change: And we recognize as we do this.
Speaker Change: It has the potential to impact future results and so that's something that we will pay close attention to.
Speaker Change: We are still in the process of adapting to our streamlined operational model and it may be partially to blame for.
Speaker Change: Not being able to overcome some of the challenges we faced in China.
Speaker Change: And other areas of the business this quarter, our management team continues to focus on shoring up any gaps in commercial execution and other areas of the business that might be coming from organizational change.
Speaker Change: Our efforts to continue driving growth include planned investments to the workflow.
Speaker Change: And ongoing efforts in market development to support reimbursement.
Speaker Change: We have additional important advancements that are slated for this year.
Speaker Change: In the fourth quarter, we plan to release improve.
Speaker Change: Improvements to the data analysis processing time on the Stratus compute system, which is a high performance.
Speaker Change: Computational workstation developed in collaboration with Nvidia.
Speaker Change: To support higher sample throughput for our customers.
Speaker Change: We are addressing the DNA isolation challenges that come with optical genome mapping using <unk> technology on the ion X system, we've completed pre commercial evaluation of AGM on the ion X system with a newly developed <unk>.
Speaker Change: <unk> cartridge.
Speaker Change: Which is specific for isolation of ultra high molecular weight DNA.
Speaker Change: At two different sites.
Speaker Change: And a third is currently underway feedback.
Speaker Change: Feedback on this new workflow.
Speaker Change: It's been positive.
Speaker Change: And it includes a validation of <unk> ability to reduce both GM sample to answer workflow.
Speaker Change: Two as few as two days.
Speaker Change: We're planning a full commercial release of the product.
Speaker Change: Later in the year likely in the fourth quarter.
Speaker Change: And we believe the enhancements to the.
Speaker Change: The stratus compute and Diotic will enable more samples to be processed.
Speaker Change: By labs.
Speaker Change: Using the same number of technicians.
Speaker Change: Our clinical studies program.
Speaker Change: It's really focused on advancing the heme trial.
Speaker Change: And supporting continuing publication of more pre and post Natal study data from the constitutional trials.
Speaker Change: Like the publication that appeared this July.
Speaker Change: In fact relating to the heme trial in a preliminary readout Dr. Philip Michaels from Harvard Medical School presented interim results. This week at the cancer Genomics consortium meeting in St. Louis.
Speaker Change: The data showed that optical genome mapping detected pathogenic findings.
Speaker Change: 42% of cases that were otherwise negative when they were evaluated by standard of care testing such as carrier typing in fluorescence in situ hybridization or fish.
Speaker Change: The turnaround time of optical genome mapping from sample to report was four days and the cost was lower than carrier typing alone.
Speaker Change: And so clearly lower than the combination of carrier typing in fish.
Eric Holmlin: So this is incredible progress that we're seeing, and we will continue to invest in the HEME trial going forward. And with regard to guidance for the remainder of the year, we remain on track to meet our goal of installing 381. We expect third-quarter revenues to be in the range of $7.9 to $8.9 million. And given the slowdown that we're experiencing in China, we expect our full-year revenues to end up at the lower end of the range given previously.
Speaker Change: So this is incredible progress that we're seeing and we will continue to invest in the heme trial going forward.
Speaker Change: And with regard to guidance for the remainder of the year, we remain on track to meet our goal of installing 381.
Speaker Change:
Speaker Change: Having an installed base of 381 to 401 ODM systems by the end of 'twenty.
Speaker Change: 2024.
Speaker Change: And this reflects some upgrades of sapphire to stratus in the process.
Speaker Change: We expect we expect the third quarter revenues to be in the range of seven nine to $8 $9 million.
Speaker Change: And given the slowdown that we're experiencing in China, we expect our full year revenues to end up at the lower end of the range given previously and therefore, we are adjusting our full year 2020 for revenue guidance to be $36 million to $40 million.
Eric Holmlin: And therefore, we're adjusting our full year 2024 revenue guidance to be 36 to 40 million, down from 37. But we believe that cash preservation and profitability are more important targets than growth at any cost. In closing, I'm pleased with the progress we have made in the first half of 2024, and we remain committed to disciplined cash management and running an efficient organization. And we continue to believe that we will transform the field of cytogenetics with optical genome mapping. And so, operator, with that, please go ahead and open the line for questions.
Speaker Change: Down from $37 million to $41 million.
Speaker Change: And we understand that we may see some slower growth in the adoption and expansion of optical genome mapping as a result of further expense reductions.
Speaker Change: But we believe the cash preservation and profitability are more important targets than growth at any cost.
Speaker Change: Yeah.
Speaker Change: In closing I am pleased with the progress we have made in the first half of 2024, and we remain committed to disciplined cash management and running an efficient organization.
Speaker Change: And we continue to believe that we will transform the field of cytogenetics with optical genome mapping and so operator with that please go ahead and open the line for questions.
Speaker Change: Thank you.
Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced.
Speaker Change: As a reminder to ask a question. Please press star one I'm wondering your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Speaker Change: And our first question will come from Jeff Cohen from Ladenburg Thalmann <unk> co. Your line is open.
Destiny: Hi, This is actually destiny on for Jeff I, just had a couple of quick questions.
Questioner: In regards to your lower guidance, is that mostly based on this lesser staffing? Or is it I guess what I want to know is what portion of that is really attributable to lower headcount? And what part of that is attributable to the transition to the stratus?
Speaker Change: In regard to your lowered guidance is that it.
Speaker Change: Is that mostly based on the lesser staffing.
Speaker Change: Or is it I guess, what I wanted to know is what portion of that is really attributable to lower head count and what what part of that is attributable to the transition to the strategy.
Speaker Change: Yes, I mean, I think we've shifted the range.
Destiny: Down by $1 million. Thank you destiny for the question.
Speaker Change: And.
Eric Holmlin: You know, if you kind of look at the underperformance of China, it probably accounts for that. So I think, you know, China's underperformance not catching up is probably the first and most definitive driver. I'm not really shifting guidance in connection with some of these full-year guidance changes in connection with some of these other effects because I feel like those are more transient and can be ironed out over the remainder of the year.
Speaker Change: If you kind of look at the underperformance of China, It probably accounts for that.
Speaker Change: That shift and so we're anticipating the possibility that China continues to.
Speaker Change: Underperform.
Speaker Change: Over the remainder of the year.
Speaker Change: So I think.
Speaker Change: The China underperformance not catching up.
Speaker Change: Probably the first and.
Speaker Change: Most definitive driver.
Speaker Change: Im not really shifting guidance.
Speaker Change: In connection with some of these are full year guidance in connection with some of these other.
Speaker Change: <unk>, because I feel like those.
Speaker Change: Are more transient.
Speaker Change: <unk> can be ironed out over the remainder of the year.
Questioner: Okay, all right, that makes sense. And then I just was wondering, what are some of the broader implications of the results from the multi-site study in multiple myeloma? And how would you say you're planning to leverage these findings to advance other product offerings and expand within the market, in general?
Speaker Change: Okay, Alright that makes sense and then I just was wondering what are some of the.
Speaker Change: Broader implications.
Speaker Change: The results from the multi site study in multiple myeloma.
Speaker Change: And how how would you say youre planning to leverage these findings to advance other product offerings and expand within the market in general.
Eric Holmlin: Yeah, okay, so I want to be clear on a couple of things. So there's a really outstanding publication that came out in the quarter covering multiple myeloma, and, you know, that's not something that I spoke about here in this script per se. I spoke about our multi-site study which is addressing, you know, hematologic malignancies across the board, but let me talk about multiple myeloma because it's a really important indication, and that publication that came out is key, and so Multiple myeloma is a significant form of hematologic malignancy, and one of its characteristics is that there are effective treatments for canonical multiple myel Cell growth is required to perform standard-of-care testing, such as karyotyping, for example.
Speaker Change: Yes, okay. So.
Speaker Change: I want to be clear on a couple of things. So there is a really outstanding publication that came out in the quarter covering multiple myeloma.
Speaker Change: And.
Speaker Change: That's not something that I spoke about here in this script per se.
Speaker Change: Poke about our multi site study which is addressing.
Speaker Change: Hematologic malignancies across the board.
Speaker Change: But let me talk about multiple myeloma, because it's been a really important indication.
Speaker Change:
Speaker Change: And that publication that came out is.
Speaker Change: Is key.
Speaker Change: And so.
Speaker Change: Multiple myeloma.
Speaker Change: There is a significant form of hematologic malignancy.
Speaker Change: And one of its characteristics is that.
Speaker Change:
Speaker Change: There are effective treatments for canonical multiple myeloma, but.
Speaker Change: B cell type tends to be refractory to cell growth.
Speaker Change: In the lab cell growth is required to perform standard of care testing carrier typing for example.
Eric Holmlin: And so multiple myeloma is an indication where an alternative that does not rely on cell growth and cell culture would be very powerful. And so when you look at this study in multiple myeloma, where the results are really significant, I think it means that there is the potential, and certainly we believe in this potential, that labs can not only adopt optical genome mapping for other leukemias like AML, ALL, CML, CLL, but also for multiple myeloma, and so it really expands the opportunity for adoption or for existing sites to grow their utilization.
Speaker Change: And so multiple myeloma is an indication where an alternative that does not rely on.
Speaker Change: On cell cell growth and cell culture.
Speaker Change: Would be very powerful and so when you look at this study in multiple myeloma, where the results are really significant I think it means that there is the potential and certainly we believe in this potential that labs can not only adopt optical genome mapping for.
Speaker Change: Other leukemias like AML ALLL CML CLO, but also for multiple myeloma and so it really expands the opportunity for adoption or four existing sites to grow their utilization, that's that's really significant.
Eric Holmlin: That's really significant in the multiple myeloma results because it's a new indication within hematology. When we look at the trial results that were presented on a preliminary basis at this conference, those trial results are significant because they start to get at the fundamental health economic and outcome benefits of optical genome mapping being used in a clinical setting. And so those benefits are being quantified in this study and are going to play key roles in insurance coverage decisions that will be made in the next.
Speaker Change: In the multiple myeloma results, because it's a new indication within hematologic malignancies, when we look at the trial results that.
Speaker Change: Were presented on a preliminary basis at this con.
Speaker Change: Conference those trial results.
Speaker Change: Are significant because they start to get at the fundamental.
Speaker Change: Health economic and outcome benefits of optical genome mapping being used.
Speaker Change: In.
Speaker Change: Clinical setting and so those benefits.
Speaker Change: Our being quantitate quantified in this study and are going to play key roles.
Speaker Change: Insurance coverage decisions that will be made in the next.
Eric Holmlin: We've seen that most of our trial study results have gone at things like, Does OGM work as well as standard of care? And now these trial results are getting to say, well, it works as well as, but how much better, and not only how much better, but how many study subjects or patients are impacted by those results. So both are very significant.
Speaker Change: 912, 18 months and so.
Speaker Change: We've seen that most of our trial study results have gotten that things like.
Questioner: You've got it. Okay. Thank you for all that detail. I appreciate it. And then, maybe I'll just finish up with the Ionic system.
Speaker Change: Does <unk> work as well as.
Speaker Change: The standard of care and now these trial results are getting to say well it works as well as but how much better and not only how much better but how many study subjects or patients are impacted by those results.
Speaker Change: Both are very significant.
Speaker Change: Got it okay. Thank you for all that detail I appreciate it.
Speaker Change: And then maybe I'll just finish up with the Ionic systems. I believe you noted you're still on track for full commercial launch in Q4 and is there anything there any other detail. There you can provide for us what is the backlog looking like in terms of interested parties et cetera. Thank you.
Eric Holmlin: I believe you noted you're still on track for full commercial launch in Q4. Is there anything else, any other detail, you can provide for us? What is the backlog looking like in terms of interested parties, et cetera? Thank you for taking the question. Yeah, you're welcome.
Speaker Change: For taking my questions.
Speaker Change: Yes Youre welcome.
Eric Holmlin: So, I mean, I think that if you recall, you know, Isotachyphoresis, and the ionic system, were brought into the company through the acquisition of Purigen Biosystems. And it really gives us a proprietary technology for the isolation of ultra-high molecular weight DNA with performance that exceeds any other options that are available today. And so we've been in the process of adapting that workflow to optical genome mapping, and the field testing that's going on with pre-commercial units has been very positive.
Speaker Change: So I mean I think that.
Speaker Change: That.
Speaker Change: If you recall.
Speaker Change: Isotach have reassessed the ion X system were.
Speaker Change: Brought into the company through the acquisition of periods <unk> Biosystems and it really gives us a proprietary technology for isolation of ultra high molecular weight DNA with performance that exceeds any other options that are available today and so we've been in the process of adapting that workflow to optical genome mapping.
Speaker Change: And the field testing that's going on with pre commercial units has been very positive and the key.
Eric Holmlin: And the key contribution or, sort of like, value proposition that customers enjoy is that they can get this ultra-high molecular weight DNA isolation done much more quickly, right, because it's the same every single time, so you get a reduction in errors. And so, you know, these are the benefits that I think everybody who is operating optical genome mapping at scale, which tends to be the customers who are adopting Stratis and many who have SAFIRE but now are increasing their volume, they are all showing a keen interest in bringing it on board.
Speaker Change: Contribution or it's sort of like value.
Speaker Change: Proposition that customers enjoy is that.
Speaker Change: They can get this ultra high molecular weight DNA isolation done.
Speaker Change: Much more quickly.
Speaker Change: Much less hands on time.
Speaker Change: A workflow that is really standardized and standardization of the workflow is critical for labs that are using any technique at high volumes right. Because it's the same every single time. So you get reduction in errors and so these are the benefits that I think everybody who is.
Speaker Change: Operating optical genome mapping at scale, which tends to be the customers who are adopting stratus.
Speaker Change: Many who have sapphire, but now are increasing their volume. They all are showing a keen interest in bringing it on board, but having said that.
Eric Holmlin: But having said that, until we have the product, we're conservative about, you know, really building a sales pipeline. We want to make sure that customer expectations, not only in terms of product performance but in terms of, I got it. Okay, thank you.
Speaker Change: Until we have the product we are conservative about.
Speaker Change: Really building a sales pipeline, we want to make sure that we can meet customer expectations not only in terms of product performance, but in terms of timing.
Speaker Change: Got it okay. Thank you so much Eric.
Eric Holmlin: Thank you.
Speaker Change: And as a reminder to ask a question. Please press star one one.
Speaker Change: And again, that's star one one if you'd like to ask a question.
Speaker Change: One moment for our next question please.
Speaker Change: And our next question will come from Eduardo Eduardo Martinez Montes from H C. Wainwright. Your line is now open.
Speaker Change: Hi, there. Thanks, so much for taking the question I had a question regarding the recent reimbursement with the CPT code that you guys announced and when you should expect to see changes in revenue and that would be forecasted in Europe.
Speaker Change: In your guidance.
Speaker Change: Yeah. Thanks, Thanks, Eduardo and thanks for the question.
Speaker Change: No.
Speaker Change: It's interesting when we talk with folks on the buy side they want to.
Speaker Change: Ask questions like what is the what's the question that your sales reps get most frequently.
Speaker Change: And the question that they get most frequently in the United States is is there a CPT code for this.
Speaker Change: So.
Speaker Change: With the acceptance of the application for a code we now have.
Eric Holmlin: an affirmative answer to that question, which is great, and it really helps in the sales process. And we, you know, it's anecdotal, but we've definitely seen The acceptance of the code and its publication have already turned some accounts and started to accelerate their purchase process. Now I want to be sort of careful about putting a lot of near-term emphasis on a CPT code driving revenues. Our revenue plan currently assumes that we'll have a code, but there are other steps that are required, and those other steps include first pricing for the code. So the code will become effective and appear on the clinical lab fee schedule in the beginning of 2025. But the question is, at what price?
Speaker Change: And affirmative answer to that question, which is great and it really helps in the sales process and we.
Speaker Change: It's anecdotal, but we've definitely seen.
Speaker Change: The acceptance of the code in its publication.
Speaker Change: <unk> already turned some accounts.
Speaker Change: And start to accelerate their purchase process now I want to be sort of careful about putting a lot of sort of near term emphasis on our CPT code driving revenues. Our revenue plan. Currently assumes that we will have a code, but there are other steps that are required.
Speaker Change: And those other steps include first pricing of the code. So the code will become effective and appear on the clinical lab fee schedule.
Speaker Change: In the beginning of 2025.
Speaker Change: And the question is at what price and so CMS is in the process of doing that and they've conducted a C.
Eric Holmlin: And so CMS is in the process of doing that, and they've conducted a series of meetings in connection with our application, and this is just their normal schedule. And so we'll see that pricing sometime soon. And I think what the code ends up getting priced at can have an impact. There are a number of PLA codes, proprietary laboratory analyte codes, that are out there.
Speaker Change: Series of meetings and.
Speaker Change: In connection with with our application and this is just their normal schedule and so we will see that pricing.
Speaker Change: Sometime soon.
Speaker Change: And I think what what the code ends up getting priced out can have an impact.
Speaker Change: There are a number of poa codes proprietary laboratory analyte codes that are out there and so.
Eric Holmlin: I think that that's hopefully a good marker for where we will see the pricing of the CPT code. So, it needs to get priced and then show up on this clinical lab fee schedule early next year. And then, you know, there needs to be coverage determinations made by payers. And so Medicare is working on it, and that's something that we will apply for at the end of 2023. So we expect those coverage determinations to be coming out probably in early 2025.
Speaker Change: I think that that's hopefully a good marker for where we would see the pricing of the CPT code. So it needs to get price and then show up on the clinical.
Speaker Change: <unk> lab fee schedule early next year.
Speaker Change: And then.
Speaker Change: There needs to be coverage determinations made by payers and so Medicare.
Speaker Change: Is working on it and Thats something that we applied for at the end of 2023. So we expect those coverage determinations to be coming out probably early 2025 other Medicare administrative contractors.
Eric Holmlin: Other Medicare administrative contractors will also be, you know, also evaluating OGM and making coverage determinations. So I think it's really a smooth gradient of going from the CPT code to pricing to coverage. And as that process unfolds, more and more customers will gain confidence and bring optical genome mapping in. And a lot of them are bringing it in now, and they're just getting ready to convert their existing pipelines and workflows over to OGM once this reimbursement is finalized. Certainly, adoption will be affected by it in the near term, and then utilization in the longer term as coverage unfolds in 2025.
Speaker Change: We'll be.
Speaker Change: Also evaluating ODM and making coverage determination. So I think it's really a smooth gradient of going from the CPT code to pricing to coverage and as that process unfolds.
Speaker Change: More and more customers will gain confidence and bring optical genome mapping in.
Speaker Change: A lot of them are bringing it in now.
Speaker Change: And they're just getting ready to convert their existing.
Speaker Change: Pipelines and workflows over to ODM once this.
Speaker Change: Reimbursement is finalized and so.
Speaker Change: Certainly adoption is affected by it in the near term and then utilization in the longer term as coverage unfolds in 2025.
Speaker Change: That's great that's really insightful and congrats again on getting the code.
Speaker Change: I had another question regarding the recent deal with <unk> and kind of if you guys envision more deals like this in kind of the role of that.
Speaker Change: And software as a service might play in your forecasting as well.
Speaker Change: So thank you and.
Speaker Change: I mean I think that.
Speaker Change: The <unk> deal and.
Speaker Change: I want to be clear about how it works.
Speaker Change: <unk> has a pretty comprehensive offering for.
Speaker Change:
Speaker Change: Newborn sequencing research.
Speaker Change: And there are a variety of analyses that they conduct.
Speaker Change: And our software the via software.
Speaker Change: Provides critical insights into the presence of certain variant types.
Eric Holmlin: from NGS data, from next-generation sequencing data.
Speaker Change: NGF data from next generation sequencing data.
Speaker Change: So that is highly complementary to what we're doing with optical genome mapping.
Speaker Change: And it's.
Speaker Change: It's not technically limited to just new screening so yes, we see that as being attractive for what <unk> is doing that's not a market that we would go after.
Speaker Change: But but it's significant and can drive significant utilization of the of our software and revenue Accordingly, but you can imagine that there are other examples of.
Speaker Change: And GFS analysis, where the VA software can provide a lot of value and so I would say that the answer to your question is that yes, we see the potential for other deals and.
Speaker Change: End user sales of the software for applications outside of ODM are meaningful revenue contributors to the top line today and and margin I mean, the software is a very high margin products. So.
Speaker Change: As a as a as a.
Speaker Change: Life Sciences solutions provider the software that we provide as a revenue driver of value driver and a source of significant growth potential going forward.
Speaker Change: Got it thanks, so much.
Speaker Change: Thank you and that does conclude our question and answer session for today's conference I'd now like to turn the conference back over to Eric Hoffman for any closing remarks.
Eric Holmlin: Thank you, Crystal, and thank you to everyone who has joined the call today, and we look forward to updating you on our next report.
Eric Hoffman: Thank you Crystal and thank you to everyone, who has joined the call today and we look forward to updating you.
Speaker Change: Our next.
Speaker Change: Report.
Speaker Change: Good afternoon.
Speaker Change: Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.