Bionano Genomics, Inc (BNGO) Q4 2021 Earnings Call Transcript

Bionano Genomics, Inc (BNGO -0.28%)
Q4 2021 Earnings Call
Mar 01, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Bionano Genomics fourth quarter and full year 2021 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Amy Conrad from investor relations. Please go ahead.

Amy Conrad -- Investor Relations

Thank you, Gigi, and good afternoon, everyone. Welcome to the Bionano Genomics fourth quarter and full year 2021 financial results conference call. Leading the call today is Dr. Erik Holmlin, CEO of Bionano.

He is joined by Chris Stewart, CFO of Bionano; and Rich Shippy, CBO and head of global sales of Bionano. After market closed today, Bionano issued a press release announcing its financial results for the fourth quarter and full year 2021. A copy of the release can be found on the Investor Relations page of the company's website. I would like to remind everyone that certain statements made during this conference call are forward-looking, including statements about Bionano's strategic and commercialization plans, sales pipeline, anticipated benefits or improvements to the Saphyr system, goals and anticipated milestones for 2022, the advantages of the Saphyr system over current technologies, the anticipated benefits of recent acquisitions, expectations regarding timing and content of study results, and anticipated benefits of these studies in driving adoption of the Saphyr system.

Such forward-looking statements are based upon current expectations, and there could 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. These forward-looking statements are based on information available to Bionano today, and the company assumes no obligation to update statements as circumstances change. In addition, to supplement Bionano's financial results reported in accordance with U.S.

generally accepted accounting principles, or GAAP, the company is reporting non-GAAP operating expense. This non-GAAP financial measure is not meant to be considered in isolation or as a substitute for comparable GAAP measures, should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP, has no standardized meaning prescribed by GAAP and is not prepared under any comprehensive set of accounting rules or principles. A description of non-GAAP operating expense and reconciliation of non-GAAP operating expense to GAAP operating are included at the end of the company's earnings release issued earlier today, which has been posted on the IR page of the company's website. An audio recording and webcast replay for today's conference call will also be available online in the Investors section of the company's website.

With that, I will turn the call over to Erik.

Erik Holmlin -- Chief Executive Officer

Thank you, Amy, and good afternoon, everyone, and thanks for joining us today. I want to start out by saying that 2021 was simply a spectacular year for Bionano. Commercially, the results were very strong. We grew the installed base of our Saphyr systems in the world to 164, which represents 69% growth over the installed base on December 31, 2020, and exceeded our goal of 150 by nearly 10% with optical genome mapping being adopted at several notable cytogenetics laboratories and academic medical centers in the United States, across Europe, Australia, China, Taiwan, and Japan.

We also sold 3,204 flow cells during the fourth quarter of 2021, which represents 29% growth over the same period in 2020 and brings the total for 2021 to 12,500 flow cells sold. And that represents 96% growth over the 6,311 flow cells sold in 2020. Now please remember that the flow cell is the unit consumable in our nanochannel arrays for analyzing one human genome. The more of these flow cells that are purchased in the market indicate more utilization in the field, which in turn leads to more data, more publications, more presentations and, we believe, more demand for optical genome mapping.

So this is outstanding progress. And our revenues in the fourth quarter of 2021 were $6.3 million, which is up 58% versus the same period in 2020. And revenues for the full year 2021 were $18 million, which represents 111% growth compared to 2020. Now in clinical development and Bionano laboratories, we also made tremendous progress.

The sites conducting our postnatal study published their interim technical performance readout of the study. And the data gave an incredibly positive view of the utility and robustness of optical genome mapping across these sites. The interim results showed that optical genome mapping is consistently performing as well or better than traditional methods used in cytogenetics and for the analysis of chromosomal aberrations and structural variations. The data also showed that optical genome mapping can be performed reliably, reproducibly across multiple sites, multiple sample types and multiple different operators.

Enrollment for our postnatal study reached 113 subjects, while enrollment in the prenatal study received IRB approval and reached 132 subjects. 2022 will be a significant year for progress in these studies, and I'll say more about that when I cover the 2022 strategy and goal. Now Saphyr sites in Europe reported receiving accreditation for their OGM workflows beginning in Q2 2021. And these accreditations unlock the potential for menu expansion and reimbursement.

While in the U.S., during 2021, several sites validated OGM in laboratory-developed tests, and they submitted applications for reimbursement codes, including Z codes and proprietary laboratory analysis or PLA codes. These codes are what enable them to get paid for the OGM tests that they performed. And in our own Bionano laboratories, during the fourth quarter of 2021, we analyzed 341 samples. And you can compare that to 117 samples that were analyzed in the same quarter in 2020.

The total number of samples analyzed in 2021 was 1,067 samples, and that compares to 694 for the year 2020. Now we believe these services projects can provide critical proof of principle for newcomers to optical genome mapping as they evaluate it in their research with their own samples. The data provide them with the ammunition they need to convince their institutions to bring optical genome mapping in-house. And when we see growth in these services samples being processed, we view it as a good leading indicator of demand for optical genome mapping.

In product development, we had tremendous progress as well. We released important assays in the third quarter for optical genome mapping with Saphyr that enable different applications, including ones for cultured amniocytes and chorionic villi samples, which enable our prenatal studies and customer applications in that area as well as other applications in prenatal analysis and product-of-conception analysis. We released version 6.1 of our NxClinical software in the fourth quarter, which was developed by BioDiscovery. Version 6.1 has expanded capabilities for analysis of next-generation sequencing in genetic disease and cancer and supports novel assays in these disease areas.

And importantly, in the fourth quarter, we completed the prototype of the next version of optical genome mapper that we are working on. This new instrument is expected to enable optical genome mapping analysis at substantially higher throughputs than the Saphyr system currently supports and should improve many aspects of the optical genome mapping workflow. And financially, we strengthened the balance sheet with equity financings in the first quarter of 2021, which were significant then. But given today's environment, they represent highly important steps, enabling the company's ability to continue growing and achieving these outstanding results.

Lastly, I want to mention an important step we took in corporate development, which was the acquisition of BioDiscovery that we completed in October of 2021. And this move brings in their software products for visualization, interpretation and reporting of sequencing in microarray data as well as their team of world-class software engineers, including Dr. Soheil Shams, who is their founder and CEO and has become our chief informatics officer. Dr.

Shams leads our genome informatics team, including software development and bioinformatics. And it's motivated by accelerating the importance of optical genome mapping as a unique and valuable tool for all sorts of genome analysis. We were looking to accelerate the development of our own software for this type of visualization interpretation and reporting but focused on optical genome mapping data. And so acquiring BioDiscovery gave us the team and the platform into which we can incorporate optical genome mapping quickly.

NxClinical is industry-leading for these applications in analyzing structural variation. And it gives us a tool that integrates optical genome mapping alongside these commonly used data types in the industry. And so when we look back over the year as a whole, what we really conclude is that we exceeded the goals and expectations for all of our planned milestones across the whole year. But we also advanced the company across our strategy, products and finances in ways that we really feel exceeded our plan overall.

In fact, we view 2021 as being a complete transformation of Bionano from a life sciences instrumentation company, where we began, into a global genomics company that's focused now on elevating the health and wellness of all people with a suite of products and services that have the potential to transform the way the world sees the genome. So I'm very proud of 2021, the momentum that we've built there, but I'd like to turn the page on 2021 and begin focusing on 2022. We see 2022 as representing a key time of inflection for us. We want to elevate the company commercially.

We want to improve the product and the services that we provide across the industry, and we want to change the way in which they're accepted. In fact, we called the strategic road map for 2022, ELEVATE!. And ELEVATE! has five major strategic pillars. First and foremost, we want to continue the amazing progress that we've made in expanding our commercial traction and validation of optical genome mapping.

We want to delight our customers with our products. And something that we need to recognize about the level and size of our installed base is that robustness becomes incredibly critical as well as the use of the products for industrial applications at scale. We want to clear the path for optical genome mapping reimbursement or market access across our target markets on a global basis. We want to continue advancing our products in a way that enables market expansion and penetration into new markets, and we want to make software a strategic driver of Bionano solutions.

I've got some milestones to summarize for you in connection with 2022 and ELEVATE! Before doing that, though, I want to turn the call over to Chris Stewart, our CFO, for him to walk you through an overview of our financials. Chris?

Chris Stewart -- Chief Financial Officer

Thanks, Erik. The fourth quarter of 2021 was an outstanding quarter for us, which capped off a great year where we achieved impressive year-over-year revenue growth, and we're able to leverage our strong balance sheet to grow our business through strategic moves like the acquisition of BioDiscovery. I'll begin with a review of our revenues. Revenue in the fourth quarter of 2021 was approximately $6.3 million, slightly above the high end of the preliminary range of $5.8 million to $6.2 million that we've provided back on January 12 of this year.

This is an increase of $1.6 million or 35% over the third quarter of 2021. Revenue for the full year was $18 million, representing 111% increase over 2020. The fourth quarter includes revenue of $1.1 million from BioDiscovery since the October 2021 acquisition date. Revenue from BioDiscovery is included in the service and other revenue line in our P&L.

The year-on-year and quarter-on-quarter increases were driven largely by demand for Saphyr optical genome mapping solutions and, of course, the addition of BioDiscovery. We saw a good balance of growth across all product categories and geographies. I now want to spend a minute talking about gross margins. Gross margin for the fourth quarter came in at a disappointing 4% compared to 25% in the third quarter of 2021 and 30% from the fourth quarter of [ 2020 ].

The decrease was primarily due to low manufacturing yields on our chip consumables produced at one of our contract manufacturers and a resulting $1.2 million write-off of inventory in the fourth quarter. Full year 2021 gross margin was 22%, down from 33% in the prior year. Largely because of COVID disruptions and personnel turnover at a key supplier, manufacturing yields of commercial-grade chips fell during 2021. These wafers passed quality control specifications at the foundry, but failed to meet our final commercial quality specifications, and therefore, we would not ship to customers.

In Q4, continued low yield led to the excess inventory and the write-off of about $1.2 million of inventory. We are actively working with our supplier to get yields back to where they have historically been. This is a transient issue, but it may take a few quarters for gross margin to recover to prior levels. Regarding expenses, this quarter, we're updating the way we report our operating expense to include both GAAP and non-GAAP numbers.

The acquisition of BioDiscovery resulted in additional stock-based compensation as well as amortization of intangibles expense. These are both noncash expenses, And we believe that providing our operating expense, excluding these ongoing noncash expenses and as well as certain other onetime expenses, will provide a more useful measure of our performance. Fourth quarter 2021 GAAP operating expense was $29 million compared to $12.3 million in the prior year. The year-over-year increase was primarily due to headcount-related spending, increased R&D expense and transaction costs associated with our acquisition of BioDiscovery.

Fourth quarter non-GAAP operating expense was $22.1 million compared with $11.4 million in the fourth quarter of 2020. Non-GAAP operating expense excludes $4.8 million in stock-based compensation, $1.2 million in amortization of intangibles and $1.2 million in transaction-related costs. Full year 2021 GAAP operating expense was $81 million, and non-GAAP operating expense was $68.4 million. Non-GAAP operating expense for the year excludes $9.7 million of stock-based compensation, $1.4 million in amortization of intangibles and $1.5 million in transaction costs.

At December 31, 2021, Bionano had cash, cash equivalents and short-term investments of $250.6 million compared to cash and cash equivalents of $38.4 million at December 31, 2020. The increase is primarily due to the equity raises that were completed in the first quarter of 2021. As we begin 2022, we're in our strongest position yet. We expect Q1 2022 revenue to be in the range of $5.5 million to $5.8 million, representing normal seasonal declines from the prior fourth quarter.

We expect full year revenue to be in the range of $24 million to $27 million, which would be a 33% to 50% growth over the full year 2020. I'm really pleased about what we've achieved and where we're headed. And with that, I'll turn the call back over to Erik to discuss ELEVATE! and our upcoming milestones before we take your questions.

Erik Holmlin -- Chief Executive Officer

Great. Thank you, Chris. And I want to say that we couldn't really be more excited about the year ahead. We have challenges to address, and the impact of COVID on production quality and supply chain remain concerns.

And we are cautious about the macro environment beyond COVID given current global events. Nevertheless, we believe we can make significant progress through ELEVATE! And here are the key value-driving milestones in 2022. In the first half, we're going to be focused on making progress in our clinical studies, getting IRB approval for our hematologic study and progressing in other areas of those clinical trials. We are also going to be addressing market access through applications for a CPT code for optical genome mapping.

In the second half, we're going to be adding additional laboratory-developed tests to Bionano laboratories, these will be optical genome mapping-based tests; continue progression in our studies through completion of our postnatal study. We would expect to have an interim publication on our prenatal study. We will also advance the product by releasing new labeling protocols and DNA isolation protocols that will have the effect of simplifying and accelerating, streamlining the OGM workflow. We will have what we're calling a pre-commercial version of this new high-throughput imaging system for optical genome mapping.

That's going to be running in the field. So we'll be transitioning from the prototype to this pre-commercial system over the course of the year. And what we expect to achieve in terms of installed base growth is 240 Saphyr systems installed around the world, which is an increase from the 164 systems that we finished 2021 with. In closing, I want to reiterate that we are very proud of 2021 and what we achieved.

We are extremely excited about 2022. And what we see is the increasing interest and adoption in optical genome mapping, and that's consistent with our objective to make optical genome mapping really a mainstream analytical tool. But now in expanding beyond just offering optical genome mapping, we recognize that software plays a critical role in driving forward toward the adoption of Bionano solutions across genomics. And we believe that, that's going to be transformational for us.

And so we look forward to updating you soon about our progress this quarter, the first quarter of 2022, and of course, throughout the year. With that, operator, we are ready to take questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Sung Ji Nam from BTIG. Your line is now open. 

Sung Ji Nam -- BTIG -- Analyst

Hi. Thanks for taking the questions. Congratulations on the quarter and the year. Starting out with your gross margins and the contract manufacturing issues, could you talk about whether you might -- I don't know if you might be able to comment, but are there alternative options in terms from a supplier standpoint? And do you expect to use the same supplier for the next-generation platform?

Chris Stewart -- Chief Financial Officer

Well, looking at our supply chain, making it as robust as possible is something we're always looking at, but we're not talking at this point about specific changes, any specific changes that we'll make, but it is something we're always looking at and working on it.

Sung Ji Nam -- BTIG -- Analyst

OK. Gotcha. And then in terms of the BioDiscovery acquisition, I believe you guys had mentioned that there is going to be some sort of OGM integration into the software offering sometime this year or some interim development happening sometime this year. Am I missing? Did I hear that correctly? Or just kind of curious what are the updates as far as the OGM integration there.

Erik Holmlin -- Chief Executive Officer

I apologize, I should have mentioned that on the -- that's a key milestone for the second half will be the release of NxClinical featuring OGM. So that was an omission on my part.

Sung Ji Nam -- BTIG -- Analyst

No worries. Gotcha. And then lastly for me...

Erik Holmlin -- Chief Executive Officer

Second half.

Sung Ji Nam -- BTIG -- Analyst

OK. That makes sense. And then for Chris, again, could you kind of give us guidance in terms of your opex spending expectations for the year? Do you think it's kind of the spending in the fourth quarter is a good starting point in terms of the mapping forward for the full year?

Chris Stewart -- Chief Financial Officer

Yes. And again -- yes, so from a non-GAAP perspective, yes, we think Q4 is a good starting-off point. And we are continuing to add headcount in strategic areas of the organization. But it certainly won't be the magnitude of the hiring that we did in 2021.

So if we start with Q4 and modest growth throughout the year, you'd be in the right ballpark.

Sung Ji Nam -- BTIG -- Analyst

OK. Gotcha. Thank you so much. 

Operator

Our next question comes from the line of Jeffrey Cohen from Ladenburg Thalmann. Your line is now open. 

Destiny Buch -- Ladenburg Thalmann and Company Inc. -- Analyst

Hi, everyone. This is actually Destiny on for Jeff. Thank you for taking my questions. I'd like to start with some of these new LDTs and the pre-commercial rollout of your next-generation system.

For the LDTs, what should we -- or what could we think about in terms of what that would include? And then with your pre-commercial rollout, how do you plan to approach that? Are you starting with five to 10 accounts? Some of your largest accounts? How should we think about that?

Erik Holmlin -- Chief Executive Officer

With regard to the LDTs, they'll be focused on both SNP diseases and hematologic malignancies. And the initial menu will include FSHD on the genetic diseases side. And I don't think we have completely locked down the heme application, but it will be one of the leukemias. And it's important to kind of emphasize the role of these LDTs that we're developing.

These are not revenue drivers for us, but they are strategic products that we will use to continue to expand demand for optical genome mapping-based assays. But importantly, we will leverage them to engage with third-party payers such as insurance companies and others to reimburse for optical genome-mapping assays. Now with regard to the pre-commercial rollout, we will start with sites that are designed to implement and evaluate these pre-commercial versions of instruments in a way that gives us useful feedback as we transition to the final development of the actual commercial system for release. And so these tend to be sites that have adequate volume, but also are familiar with new technologies and new instruments that haven't yet been released to the market.

And we have a whole host of sites to choose from that have expressed interest, and we haven't picked those sites yet.

Destiny Buch -- Ladenburg Thalmann and Company Inc. -- Analyst

Got it. OK. Yes, that's a good problem to have, definitely. I'm curious about your commentary around accreditation in Europe.

How might that impact your commercial strategy OUS? And then any top line impact you think in 2022?

Erik Holmlin -- Chief Executive Officer

Well, accreditation is a process that's not unlike -- first of all, it's unique to each region in which it's happening, which can be organized at the country level or, in some countries, can be organized at the regional level comparable to state-level organizations in the United States. But accreditation is similar to the validation of a laboratory-developed test. In the U.S., it meets certain quality criteria that a laboratory is taking responsibility for, and therefore, qualifies them to bill their healthcare systems for reimbursement. And the way in which it impacts top line, I wouldn't say that it's something that necessarily increases the top line, but it's part of the overall adoption strategy.

And so once a site is accredited, it gives them the ability to run the assays and then increase the menu. And so we have an expectation that the pull-through on a per-site basis will continue to grow from the average that it's at now to higher levels over time. And that assumes that there will be the necessary compliance in each region to expand the menu to look at more and more assays, which will, in turn, drive more and more consumables utilization. So the models that we have and that we've seen out there, looking at our revenues, I think reasonably assume that these accreditations are taking place, and we're informing everyone that they have taken place.

Destiny Buch -- Ladenburg Thalmann and Company Inc. -- Analyst

OK. Got it. Thank you. And then I guess lastly for me.

In the near term, do you have any presentations at any scientific conferences that we should be aware of? Thank you so much for taking the questions.

Erik Holmlin -- Chief Executive Officer

Yes. We'll -- thank you, Destiny. We'll always keep everyone apprised. We have an active calendar across all of the major scientific meetings that happen over the course of the year, and we tend to announce those in advance.

So we will be keeping you posted there.

Destiny Buch -- Ladenburg Thalmann and Company Inc. -- Analyst

Got it. Thanks again.

Operator

Our next question comes from the line of Kevin DeGeeter from Oppenheimer. Your line is now open. 

Susan Chor -- Oppenheimer and Company -- Analyst

Hi. This is Susan on for Kevin. Just a couple of questions on reimbursement. The first one, can you comment on the process on applying for category 1 CPT? And do you have any idea what the turnaround on that is?

Erik Holmlin -- Chief Executive Officer

So the process involves a submission to -- the AMA has part of the CPT code evaluation and assignment function that they provide. And the application is reviewed by a committee, and that committee will look at all of the applications that are submitted in a given period. And their process would be to evaluate the need for such a code, and that need is based on the existence of, let's call it, a critical mass of utilization in the United States. Evidence for that critical mass are LDTs that have been developed by different labs, the applications for different laboratory-specific codes such as PLA codes.

And so we know we've seen that. And so there's a good amount of evidence for utilization, and the committee determines whether it's appropriate to issue a specific code connected to the methodology. And that process unfolds over roughly the first half of the year. And the outcomes could be that the code is denied, for any reason, and we would have the chance to reapply.

The code could be approved. And in the event that's approved, then there's a process that happens that's connected to development of recommended pricing for the code. And so we're obviously at the beginning of that. The applications are due, and we'll be submitting it.

And we're excited that we feel that we've reached the level of utilization, adoption and need in the market that we believe could potentially reflect favorably on the need for this category 1 CPT code, but it's up to the committee to decide.

Susan Chor -- Oppenheimer and Company -- Analyst

Yes. No. I agree that's a really important milestone. Just staying on the topic of reimbursement.

Do you guys have an idea what the next steps are following the postnatal study in the fourth quarter? I know that was a pretty big deal on whether or not you get reimbursement.

Erik Holmlin -- Chief Executive Officer

Yes. So these studies factor into reimbursement. And I would say something about -- we are talking about a category 1 CPT code. And the process of reimbursement, I think, can be reasonably described as a combination of coding and coverage.

And there are a variety of ways in which an assay can be coded, and so we've talked about them. Of course, a category 1 CPT code is one of the more general ones, and that's why we're enthusiastic about going for it. But coverage is the process that payers go through to determine whether the assay itself warrants their reimbursement. Coding is important and, in some respects, clerical, but coverage is key.

And coverage decisions are made by a number of factors, again, critical massive adoption and utilization. But they rely heavily on where medical societies come out on the utility and value of a particular methodology or assay or workflow or technology. In our case, of course, that's optical genome mapping. So medical societies weigh in greatly on that, as do various demonstrations of this utility.

And so the completion of the postnatal study will entail the evaluation of all of our primary endpoints. So we've looked at just those technical performance endpoints so far in the interim release, but the completion will entail looking at this critical endpoint like turnaround time, overall success rates or diagnostic yields, if optical genome mapping were to be used as a diagnostic assay, health economic impacts. And then over time, we'll, of course, be looking at patient outcomes. But these primary endpoints, health economic, turnaround time, workflow simplification and overall diagnostic yields will factor in prominently and in coverage decisions that will be coming over the course of this year and into next year.

And so that's why that's such a key study for us to reach completion on.

Susan Chor -- Oppenheimer and Company -- Analyst

Just one last question. So you have several study time lines in 2022, really exciting. How confident are you about these time lines? Some of that -- what are some of the risks that you maybe foresee?

Erik Holmlin -- Chief Executive Officer

So we try to be cautious and careful about committing to these milestones. And so we have enough confidence to put them out there, and we believe strongly that we'll be able to hit them. The risks that we face, like anybody conducting a clinical trial, tend to be primarily around enrollment. But for us, it's a process of data generation, data analysis, reporting, interpretation and then ultimately, the publication.

If we can get the enrollment, we have a good shot at seeing the other things go reasonably smoothly according to time line. The risk in enrollment is related to COVID and other aspects of staffing shortages and any closures that might happen. We're not seeing closures anymore. And I don't know if other companies are talking about that, but we have seen, through the omicron surge and maybe that's behind us, but we're still feeling the ripple effects of it, where a lot of staffing shortages have occurred.

And as a result, sites are focused on critical activities, essential activities. And so some of these research studies take a backseat. So that's probably the biggest risk. But staffing shortages also impact our ability to generate and analyze data.

So we have to be mindful of those. But it's our job to manage the studies and do the best we can to drive them forward because of the critical role they play in influencing medical societies that are setting guidelines and these coverage decisions that we've talked about.

Susan Chor -- Oppenheimer and Company -- Analyst

Got it. Congratulations on the quarter, and that's all for us. Thank you.

Operator

Our next question comes from the line of Jason McCarthy from Maxim Group. Your line is now open.

Michael Okunewitch -- Maxim Group -- Analyst

Hey, guys. This is Michael Okunewitch on the line for Jason. Congrats on a really great quarter. Just two, well, actually just start out on the revenue line.

If you could provide a bit more granularity in terms of how much of that growth was organic driven by increased Saphyr utilization. And then if you could give a bit more in terms of how much of that was consumables versus unit placement and rental income.

Chris Stewart -- Chief Financial Officer

Yes. So first of all, we did mention or I mentioned that there was a $1.1 million contribution from BioDiscovery. That was most of Q4. The acquisition closed October 18.

So that was absent. So from Q3 to Q4, organically, we grew about $0.five million, and that was balanced across both instruments and consumables revenue. So Saphyr, the OGM business drove most, if not all, of that growth. And it was almost like equally -- well, it was -- yes, it was geared toward instrument and a little bit less growth on the consumable side in Q4.

Michael Okunewitch -- Maxim Group -- Analyst

All right. And then I'd also like to follow up on the question regarding the postnatal study. From a commercial perspective, what would a covered postnatal assay look like? Would this primarily be a driver of adoption among diagnostic labs? Or is there a potential to get a more direct revenue stream from the assay?

Erik Holmlin -- Chief Executive Officer

It's the former. I mean, I think that we're not really in the testing services business broadly. We are in it. And as you know, we sell diagnostic tests in the pediatric neuro-developmental disorder space, and that's a strategic set of products for us and revenue line for us.

But we believe that we are much better off enabling multiple labs to run multiple assays per lab than trying to drive revenues by selling a diagnostic test. And I think we can point to probably many examples of companies that have taken that route, but Illumina has built their business primarily on the proliferation of next-generation sequencing. And so we want to follow in their path. It doesn't mean that we can't develop high-value proprietary assays over time, and we look at that, and we have some ideas around that.

But we're better off driving the adoption of optical genome mappers, our software and being a solution provider to the genome analysis community, whether that's people working in clinical applications because that's what they're working on or discovery research or however they choose to apply the technology. Now when it comes to applications in genetic diseases and genetic disorders, we were very excited to announce our strategic initiative around rare undiagnosed genetic diseases yesterday and recognition of rare diseases today. Rare diseases, you may know, is a name that's completely wrong for the condition as a whole. There are some 350 million people in the world who are impacted by a so-called rare disease.

75% to 80% of those have a genetic cause, and optical genome mapping can play an important role in answering puzzling questions as to why somebody may be sick or puzzling questions as to there is a disease out there, but we don't know what the genetic cause is. And so this is an example of where completing our postnatal study will really position optical genome mapping to be a go-to solution in areas like rare undiagnosed genetic diseases or the RUGD field, as we call it.

Michael Okunewitch -- Maxim Group -- Analyst

All right. Thank you very much, and again, congrats on the quarter.

Operator

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Erik Holmlin for closing remarks.

Erik Holmlin -- Chief Executive Officer

Great. Thank you, Gigi. I want to thank everybody for joining and participating and the good questions. And we look forward to speaking to you again about Q1, which will be a call just right around the corner.

So thank you very much.

Operator

[Operator signoff]

Duration: 46 minutes

Call participants:

Amy Conrad -- Investor Relations

Erik Holmlin -- Chief Executive Officer

Chris Stewart -- Chief Financial Officer

Sung Ji Nam -- BTIG -- Analyst

Destiny Buch -- Ladenburg Thalmann and Company Inc. -- Analyst

Susan Chor -- Oppenheimer and Company -- Analyst

Michael Okunewitch -- Maxim Group -- Analyst

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