Bionano Genomics Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 8, 2024

There are 5 speakers on the call.

Operator

Good day, and welcome to the Bionano First Quarter 2024 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to David Holmes from Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Welcome to the Bionano First Quarter 2024 Financial Results Conference Call. Leading the call today is Doctor. Eric Holman, CEO of Bionano. He is joined by Gulsen Kamma, CFO of Bionano.

Speaker 1

After market close today, Bionano issued a press release announcing its financial results for the Q1 2024. A copy of the release can be found on the Investor Relations page of the company's website. Certain statements made during the 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. Such 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, some of which are identified in Bionano's press release and Bionano's reports filed with the SEC.

Speaker 1

These forward looking statements are based on information available to Bionano today, May 8, 2024, and the company assumes no obligation to update statements as circumstances change. In addition, to supplement Bionano's financial results reported in accordance with the U. S. Generally Accepted Accounting Principles or GAAP, the company reports certain non GAAP financial measures. A description of these non GAAP financial measures as well as the 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.

Speaker 1

These non GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, should be read 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. 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 will turn the call over to Eric.

Speaker 2

Thank you, David, and good afternoon, everyone. We accomplished a lot in Q1 and I look forward to discussing the progress in detail. I want to start off today's call, however, by sharing a remarkable story of medical advancement in which optical genome mapping played a significant role. I'm referring to the first successful kidney transplant from a genetically modified pig into a human patient, which was conducted at Massachusetts General Hospital on March 16. EGenesis, a Bionano customer and OGM user, provided the kidney from a pig donor that was genetically edited using CRISPR Cas9 technology to remove harmful pig genes and add certain human genes to improve its compatibility with humans.

Speaker 2

They also use gene editing to inactivate porcine endogenous retroviruses in the pig donor to eliminate any risk of infection in humans. The process of creating the cells that eventually grew into the pig donor followed multiple steps of genetic modification to eventually arrive at the cells that were used to grow the donor. Throughout the process, optical genome mapping was used as part of a regimen to confirm that desired gene edits were in place and that off target effects were not detected or those that were detected were not deleterious. Optical genome mapping was used as an alternative to g banding karyotype analysis because of its ability to detect genome variation that other methods commonly miss. We are seeing growth in our biopharma customer group and we believe it's because these customers see tremendous value in OGM's utility for the development of safe and innovative therapies.

Speaker 2

Our focus in 2024 remains on strengthening the company's long term growth profile. As part of our ongoing evolution, we are continuing to execute cost savings and strategic productivity initiatives that we began in May of 2023 and that are intended to allow us to be more agile, to increase efficiency across the company and to prioritize investing in opportunities where we see the greatest potential to drive adoption and utilization of optical genome mapping across multiple end markets. Golsan is going to open our call today by walking you through our financial results for the quarter and explaining how some of the steps in our streamlined operational plan have begun to positively impact our financial performance and cash runway. Ghulsen?

Speaker 3

Thanks, Eric. With that, let me share our results for the Q1 of 2024 with you. Revenue was $8,800,000 representing an 18% year over year increase compared to the same period of 2023. Excluding $1,400,000 in revenues from discontinued clinical services in the Q1 of 2024, Core revenues were $7,300,000 which represents a 21% year over year growth over the 6.1 $1,000,000 of core revenues for the same period in 2023. The OGM installed base grew to 347 systems during Q1, which represents an increase of 21 systems during the quarter and 34% growth over the installed base of 259 at the end of Q1 2023.

Speaker 3

We sold 8,249 full cells in Q1 2024, which represents a 58% year over year increase over the 5,226 full cells sold in the same period last year. GAAP gross margin for the Q1 was 32% compared to 28% during Q1 2023 and non GAAP gross margin was 34% compared to 30% in the same quarter last year. Q1 2024 non GAAP gross margin excludes $128,000 in stock based compensation and $11,000 of restructuring expense. Q1 2024 GAAP operating expense was $33,900,000 and non GAAP operating expense was $24,700,000 Non GAAP operating expense in the quarter excludes restructuring costs, stock based compensation and other adjustments as detailed in the reconciliation table accompanying the press release posted on the Investor Relations page of our website. In the same period in 2023, GAAP operating expense was $39,900,000 and non GAAP operating expense was $33,600,000 q1 2023 GAAP to non GAAP reconciliation can be found in the same table.

Speaker 3

Our cash, cash equivalents and available for sale securities as of March 31, 2024 were $53,200,000 compared to cash, cash equivalents and available for sale securities of $102,300,000 as of December 31, 2023. As of March 31, 2024, dollars 24,800,000 was subject to certain restrictions compared to $35,500,000 as of December 31, 2023. We raised $15,100,000 in net proceeds in the Q1 of 2024 through our ATM facility. The change in total cash balance from December 31, 2023 to March 31, 2024 consists of $19,000,000 cash burn from operating activities excluding interest and debt retirement fees, dollars 9,000,000 in interest and debt retirement fees, dollars 37,000,000 in repaid principal, offset by $15,000,000 in net ATM proceeds. Now I want to discuss the steps we have taken to continue to streamline operations, reduce expenses and to extend our cash runway.

Speaker 3

The non GAAP operating expenses in the quarter are consistent with our planned reductions announced in October 2023. In March, we expanded those initiatives to include further reduction in force and reductions to discretionary spending unrelated to headcount. Overall, since May 2023 through Q2 of 2024, we plan to have reduced headcount by over 200 people. Compared to the annualized non GAAP operating expense for the Q1 of 2023, these initiatives are expected to reduce annualized non GAAP operating expenses by about $65,000,000 to $75,000,000 by Q1 of 2025. We also announced the registered direct offering priced at the market under NASDAQ rules in April 2024 with gross proceeds to the company of approximately $10,000,000 before deducting the placement agents fees and other offering expenses payable by the company.

Speaker 3

We believe these activities will allow us to remain committed to our customers and partners and to be able to continue expanding the opportunity and availability of OGM. Back to you, Eric.

Speaker 2

Thanks, Ghosan. Our strategy moving forward is straightforward. We need to continue to accelerate revenue growth, operate efficiently and raise capital that will allow us to extend our cash runway on a path to profitability. Key updates to our product portfolio, which we believe will drive this growth include the Stratus system, which is now fully commercially available and early feedback by adopters has been positive. We're shipping commercial production units now and we have the capacity to meet the expected demand.

Speaker 2

We expect to announce later this week a series of major advancements to our entire suite of comprehensive analysis software tools for cancer, including version 7.1 of our Via software, which has AI enhanced capabilities for cancer research. In the second half of the year, we plan to release improvements to the data analysis processing time on the Stratus compute, which is a high performance workstation developed in collaboration with NVIDIA. We are addressing the DNA isolation bottleneck with isotachopheresis technology on the IONIQ system, which was acquired in our acquisition of Purigen Biosystems. We placed a pre commercial system in the field for optical genome mapping on the IONIQ system using a newly developed ITP cartridge for the isolation of ultra high molecular weight DNA in the Q4 of 2023 and we have recently added 2 more customer sites. We are on track for a full commercial release of the product in the Q3 of 2024.

Speaker 2

Now the objective in assembling this combination of solutions, high throughput data collection with Stratus, streamlined analysis and reporting with Via and automated DNA isolation with Ionic is to enable optical genome mapping at scale for routine use. We're pleased to announce and congratulate Doctor. Alexander Heuschen and his team at Radboud University Medical Center in the Netherlands on their award by the Research and Innovation Board at Radboud UMC of a grant of €900,000 for the translation of optical genome mapping to routine use in an academic medical center where they will focus on leukemias, solid tumors and constitutional genetic diseases. This work will leverage our high throughput end to end workflow. On progress in market development, the Q1 in 2024 saw the highest number of optical genome mapping publications in any quarter in our history.

Speaker 2

97 total publications, which is up 83% compared to the number of publications in the Q1 of 2023. Growth in publications has an influence on how all stakeholders view optical genome mapping from prospective customers to 3rd party payers and medical societies. So this growth is really outstanding. Our clinical studies are now streamlined based on our cost savings initiatives, and they are focused primarily on advancing the heme trial, while publishing more pre and postnatal study data from the constitutional trials. Finally, I'd like to comment briefly on an application that has been submitted to the American Medical Association for a Category 1 CPT code covering optical genome mapping.

Speaker 2

We understand that the application may be reviewed at the CPT editorial panel meeting, which starts tomorrow, May 9 at 9 a. M. Eastern Time. This application is the 3rd one that's been submitted for optical genome mapping. But in the previous two cycles, it was withdrawn prior to the editorial panel meeting.

Speaker 2

We view the fact that it will go now in front of that panel as a sign of progress and we are eagerly awaiting the outcome, which will be published publicly on or before June 6. Although we do understand that the meeting taking place will be public and it's possible that anyone who registers may be able to attend. A link to register for this meeting is listed on the AMA Association website. Looking ahead, we remain on track to meet our goal of installing 381 to 401 OGM systems by the end of 2024, which reflects some anticipated Saphyr to Stratus upgrades. We expect Q2 revenue guidance to be in the range of $7,800,000 to $8,200,000 and we are maintaining our full year 2024 revenue guidance of $37,000,000 to $41,000,000 Keep in mind that both of these ranges take into account the financial impact of discontinuing certain clinical services products as part of our cost reduction initiatives.

Speaker 2

In closing, I'm excited about the progress we have made in 2024. We acknowledge challenges we are facing due to the current state of capital markets and we need to continue the great momentum we have built. I am confident in optical genome mapping's ability to transform the field of cytogenetics. And with that, operator, please go ahead and open the line for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. And the first question will be from Sung Ji Nam from Scotiabank. Please go ahead.

Speaker 4

Hi, thanks for taking the question. Was curious if there were any Stratus placements in the Q1 or upgrades from Saphyr to Stratus in the Q1? And then Eric, you talked about the capital spending constraints. If you're seeing kind of the split between instrument sales versus reagent rentals, if you see that picking up on towards the reagent rental side in the current environment?

Speaker 2

Yes. Thanks, Sung Ji. So I think all of us in the space are feeling constraints around available funding. In our quarter, reagent rentals edged out capital sales, but I think that that's just kind of within the normal ranges of what we would expect. It is slightly elevated.

Speaker 2

That's a very attractive vehicle to bring a system in. And it's something that we're paying attention to going forward. But I don't think we've felt that pressure. And the reason is that optical genome mapping is something which is really new and unique. And the deals that are getting done, for example, in that Q1 and now, in this second quarter have been in the works for a while.

Speaker 2

And so we might see something creeping in perhaps later in the year as a result of that current environment. But we're being mindful of it and we recognize that our peers are definitely seeing it. With regard to Stratus uptake during the quarter, yes, we had several successful programs that involved Stratus. And for the time being, we're not really breaking out Stratus from the overall total number of growth of OGM systems in the space. And we'll see how important it is to do that going forward.

Speaker 2

But for right now, we're not breaking it out, but the progress continues to be solid. And just anecdotally, I don't think we've seen a conversion yet. There are several of them that are in discussions. So we expect that to probably be something that would drive some of the numbers and the dynamics of the installed base growth going forward. But anecdotally, I don't think we've seen a conversion yet.

Speaker 2

It's all been incremental addition of Stratus either to an existing customer or to a new customer.

Speaker 4

Got you. That's helpful. And then just the on the IONIQ purification system, great to see nice traction there from the early access site. Just curious how should we think about the potential ramp of that platform? Do you expect that to go to do you expect the early adopters to be kind of the Stratus customers purchasing Stratus systems as well?

Speaker 4

Or do you anticipate a significant portion of your existing Sapphire customers to also adopt? And also could this be used outside of OGM applications?

Speaker 2

Yes. Let me take the last question first. So the IONIQ system has been available for a couple of years now and we've actually even during the time that we've had that technology in house after the acquisition of Purigen Biosystems have gone through a kind of an upgrade cycle, not of the instrument, but of the reagents and consumables that are used. And the applications are for nucleic acid isolation, DNA and RNA from a variety of sample types, but the majority of uptake and utilization is for formalin fixed paraffin embedded or FFPE samples. And customers are using that for nucleic acid isolation prior to sequencing and they like isotachopheresis because it produces really pure sample much cleaner than they get off of typical column based methods.

Speaker 2

So this is something that we see as a very product for us and a source of revenues going forward. We're not able just in the current cost constrained environment to really put direct dedicated sales people on it. But we do offer it independently of OGM as part of what our sales reps are offering to customers. Now with regard to the adoption that we're expecting around optical genome mapping, generally speaking, we expect to see adoption by the higher volume routine users and those would include Saphyr existing sites. We have quite a number of sites that are running hundreds of samples per year.

Speaker 2

And so they would benefit from integrating the IONIQ system into their workflows. But we also expect Stratus users to be the more obvious adopters of isotachopheresis. And some of the reasons are that in one cartridge with isotachopheresis, we expect you'll be able to run 8 samples for ultra high molecular weight DNA isolation. And the process itself is completed in a matter of hours. Now it takes overnight for the nucleic acid to be ready to be labeled and then imaged.

Speaker 2

But the actual isotachopheresis process itself is incredibly rapid. And so I think what you're going to see is that the higher volume users are going to adopt it. And those are the ones that are driving consumables purchases now and will be the future.

Speaker 4

Great. Thank you. We'll get back in the queue.

Speaker 2

Thanks, Sung Ji.

Operator

Thank you. Ladies and gentlemen, showing no further questions, this concludes our question and answer session. I will turn the conference back over to Doctor. Eric Holmlin for any closing remarks.

Speaker 2

Thank you very much, operator. I want to thank everybody for joining, And we are looking forward to updating you on our progress on our Q2 call. Have a great day.

Operator

Thank you very much. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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