Bionano Genomics, Inc (BNGO) Q1 2022 Earnings Call Transcript

Bionano Genomics, Inc (BNGO 1.41%)
Q1 2022 Earnings Call
May 05, 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 first quarter 2022 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, Jess, and good afternoon, everyone. Welcome to the Bionano Genomics first quarter 2022 financial results conference call. Leading the call today is Dr. Erik Holmlin, CEO of Bionano.

He is joined by Chris Stewart, CFO of Bionano. After market closed today, Bionano issued a press release announcing its financial results for the first quarter of 2022. 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 may be forward-looking, including statements about Bionano's revenue outlook; strategic and commercialization plans; anticipated benefits or improvements to Bionano's products, including the Saphyr system and NxClinical software, anticipated milestones for 2022 and the advantages of the Saphyr system over current technologies; and Bionano's expectations regarding study results and anticipated benefits of these studies in driving adoption of OGM.

Such forward-looking statements are based upon current expectations, and there can be no assurances that the results contemplated in these statements will be realized. 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 expense 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. 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 Erik. Erik?

Erik Holmlin -- Chief Executive Officer

Thank you, Amy, and good afternoon, everyone. We are really thrilled with our Q1 results. The momentum that built over 2021 has continued into this first quarter of 2022. I want to begin today's call with a summary of some key business highlights.

So revenue was $5.7 million for Q1 2022, which represents an 80% year-over-year increase compared to the same period of 2021. In this first quarter of 2022, the revenue was a record for any first quarter in the company's history. Our Saphyr installed base grew to 176 systems as of March 31, 2022, which represents 64% growth over Q1 2021. In the quarter, we sold 3,225 flowcells.

That represents a 24% year-over-year increase compared to the same period in 2021. And we ran 329 samples in Bionano laboratories in the first quarter of 2022, and that's a 45% year-over-year increase from the same period in 2021. We counted some 42 publications on optical genome mapping or OGM in the quarter, and we announced publication of the first readout of our ongoing clinical study in postnatal genetic diseases, which reported strong data that we believe will allow completion of the study this year. Bionano Symposium, which is the quintessential event for the OGM community, kicked off this year with a 63% increase in average daily attendance over 2021, which was the first year that we hosted the symposium.

And this year, it included 31 presentations, 37 posters, all of which highlighted OGM's utility in a variety of applications across genetic diseases, cancer and analysis for bioprocessing and gene editing. Other events in the first quarter including -- included China Symposium, which was a version of symposium that was hosted entirely in Mandarin and featured many speakers who have experience with optical genome mapping in China. We were at ACMG, which is the College of Medical Genetics and Genomics. And that's where we launched our RUGD initiative, which focuses on the 350 million people with rare diseases.

We were at the AACR Annual Meeting and featured optical genome mapping in an additional 19 presentations and posters overall, which continue to expand the message of how optical genome mapping is utilized. Our customers are consistently excited about the capabilities of optical genome mapping, and they are working with us to evangelize optical genome mapping around the world. Now I want to take a moment to speak about the performance of our stock price. As you know, our sector of growth stocks in healthcare has experienced a greater impact than has the broader market.

While we are disappointed with the performance over the past several months, our focus as leaders of the company is on executing our long-term growth plan, hitting our milestones that we outlined during our last call and we will revisit today, which have been designed to drive value. We're pleased that we have achieved all of our anticipated milestones in 2021, and we expect to achieve those stated milestones for 2022. Looking ahead to the rest of this year. Our financial guidance remains on track, and the company expects full year 2022 revenues to be in the range of $24 million to $27 million, which would represent a range of 33% to 50% growth over full year 2021 revenue.

And we expect the second quarter 2022 revenues to be in the range of $6 million to $6.5 million. Now before handing over to Chris to cover some of the financials in a little more detail, I want to spend time to break down our plan for growth and long-term value, which is based on the five pillars that we set out during our last call. The first pillar is expanding commercial traction and validation of optical genome mapping with Saphyr. We want to drive optical genome -- adoption of optical genome mapping by targeting roughly 2,500 labs, comprising academic medical centers and regional reference labs that account for about half of the sample volumes processed in cytogenetics to date.

The applications driving adoption are genetic disease research, including Rare Undiagnosed Genetic Diseases or RUGD; and cancer. In RUGD, optical genome mapping is providing valuable information in diagnosing diseases that are challenging to diagnose using current techniques. In cancer, our primary focus initially is on blood cancers, leukemias and lymphomas. And if we are able to continue penetrating these segments and growing our installed base, we believe that we'll validate optical genome as a method that's gaining widespread traction in the field, which can play an important role in influencing the various agencies that evaluate, for example, applications for reimbursement of OGM-based tests or consideration of OGM in various guidelines set by medical societies.

We have set an ambitious goal of reaching 240 Saphyr systems installed worldwide by the end of 2022, and we are on track to achieve it. Another important component of validation that comes with increasing the installed base would be if OGM users develop their own assays and validate them as laboratory developed tests or LDTs or similar types of assays outside the U.S. The growing installed base and number of laboratory developed tests would provide agencies that evaluate the relevance of new medical technologies such as OGM, and those agencies include ones like the American Medical Association, Centers for Medicare & Medicaid Services, World Health Organization and others, with the evidence that there is an established need in the field that optical genome mapping could impact. So the first pillar is focused on expanding the installed base which drives validation.

The second is to delight our customers with robust products that are suitable for routine use at scale. We believe successful customers at this stage of our commercial ramp are incredibly important. Not only do we expect them to form a part of our base for consumables revenue growth, but we expect them to serve as a network of early adopters that advocate for the utility of OGM and for Bionano as a partner. One of the areas where our commercial head count has grown substantially is in customer solutions.

And this is the team that installs Saphyr systems, trains lab and data analysis personnel and supports them as they run and analyze their sample. We believe this investment is important to keep the installed base growing, productive and to keep them excited about the increasing capabilities of optical genome mapping. In addition to building and fielding a strong support team, we have a number of planned product updates, including updates to our DNA isolation and labeling chemistries, integration of optical genome mapping into our NxClinical software. All of these new advances should simplify product workflows and in turn, enhance the ease of use and eliminate certain aspects of product design that we have found to be challenging to either product shelf life or performance in the field.

So we're very focused on customer delight and product robustness. And the third pillar in our plan focuses on clearing the path for reimbursement of optical genome mapping-based tests. We are building a critical mass of OGM data through our family of clinical studies, and we've talked to you about these studies on a repeated basis. It's a significant investment that the company is making.

And these studies are designed to first evaluate optical genome mapping utility in a variety of indications: genetic diseases, hematologic malignancies and cancer, solid tumors. And as these studies progress, they provide the essential comparisons against the standard of care that could, if compelling, result in optical genome mapping being included into medical society recommendations such as those by College of Medical Genetics, World Health Organization and National Comprehensive Cancer Network or NCCN in cancer. These four studies are underway or getting underway. They provide this critical support and will further advance our ability to penetrate into our target markets and support potential third-party reimbursement by insurance companies and other agencies responsible for paying for healthcare.

These studies span our major markets and have been designed to demonstrate optical genome mapping as an alternative to traditional cytogenetic methods, and they emphasize key endpoints: concordance with standard of care, increase in the success rate for finding pathogenic variants, health economic impact and the potential for revising protocols for patient management that we hope results in better outcomes. The long-term goal of all of these studies is to provide critical data that support optical genome mapping as a standard of care in the field. As these studies progress, we believe the data will serve as a basis for applications of optical genome mapping on a go-forward basis. And we plan to keep you continuously updated, and you will be seeing more and more publications on these studies going forward.

Now the fourth pillar of our plan is to advance our products in a way that enables higher market adoption of current products and entry into new markets. In addition to rolling out enhancements that we believe improve the products in customers' hands, as we've talked about, centered on robustness, we are working on major new products that we believe will -- that we anticipate releasing over the course of this year and into 2023. Now the first of those products is version 7.0 of our NxClinical software, which we acquired through the acquisition of BioDiscovery. Now this version of NxClinical is being designed to fully integrate the structural variation visualization, interpretation and reporting capabilities that NxClinical already has for next-generation sequencing and microarray data.

We believe that this combination of data types in a single software environment with the capabilities that BioDiscovery software is widely known for across cytogenetics and cytogenomics can be that innovation that transforms the way the world sees the genome. We believe that adding these capabilities will also enhance the value of optical genome mapping and can be a significant driver of future adoption of OGM. The second key aspect of product advancement is the next version of genome mapping instrument. We completed a prototype of that system last year, and we're focused on bringing a pre-commercial version to the field this year before we finalize development in 2023 and release the new system commercially.

With our current Saphyr system, we believe we have a product that is suitable for most labs worldwide, but those labs account for only about half of the volume of samples. The balance of volume is concentrated in a smaller number of labs, we estimate to be fewer than 500, that run very high volumes around the world. Some of those institutions are currently evaluating the Saphyr system and establishing their plans for menu development, but we believe a higher throughput system will be important if we want to capture that volume. Other capabilities that this new system will have include sample random access allowing for staff processing, the ability to scale from one to six systems working in unison, and it will also be part of an integrated workflow supported with automation of sample preparation and integration of NxClinical software.

In addition to targeting these high-volume segments of the market, there are other segments, including those outside the U.S., that will benefit if that system is eventually taken through a process of FDA clearance. With this new generation of system, we intend to begin the process of taking it through the FDA after it's commercially released in 2023. It's important to note that with Saphyr, which doesn't have FDA clearance, we believe we can address the majority of labs and testing volumes in markets we are currently targeting. But we also believe having FDA approval for the next instrument can expand our total available market and accelerate global adoption.

So that will be a key advancement. Finally, as our fifth pillar, we intend to make software a strategic driver of Bionano solutions. We are using NxClinical and Nexus Copy Number, the two software products from BioDiscovery, to target the existing installed base of sequencers and arrays, which we estimate to be at least 10,000 systems installed worldwide. We believe our products -- software products have a strong value proposition for these customers today and increasing the number of NxClinical and Nexus Copy Number subscribers, meaning increasing the number of Bionano subscribers, will help us build relationships with these customers so that when they're ready to incorporate optical genome mapping into their labs, they will be familiar with Bionano, our team and our tools.

This quarter, we launched version 6.2 of NxClinical software with an integrated genomic scar analysis for homologous recombination deficiency or HRD. And this feature provides a comprehensive, consistent and automated analysis of biomarkers from next-generation sequencing and microarray data that can help clinical researchers stratify therapeutic response across multiple tumor types. This analysis allows cancer researchers to gain important insights from genetic data that they're already generating from arrays and sequencing, and we believe this product will be useful to next-generation sequencing users focused on oncology by providing them with a powerful tool for visualization, interpretation and reporting of their data. Now once NxClinical 7.0 is available, with the integration of optical genome mapping, we believe this capability will drive more adoption of OGM solutions, and we've already had data presented from Augusta University that shows the importance of combining sequencing and OGM analysis in this way, especially in hematologic malignancies.

Now all the time while we are executing the strategy, it's on the backdrop of a challenging environment. With the lasting impact of COVID and the global instability, we have faced potential challenges in staffing and supply. And so wherever possible, we believe we have anticipated these challenges. And while we believe that they represent an ever-present risk or concern, we have managed them now for several quarters and we will continue to be vigilant against them.

I'm very proud of what our team has done to operate the company, and I feel confident that if we maintain that vigilance, we have the opportunity to face the challenges that may come. Now at this point, I'd like to turn the call over to Chris, our CFO, for an overview of our financials. Chris?

Chris Stewart -- Chief Financial Officer

Thanks, Erik. The first quarter of 2022 is another great quarter for Bionano. We demonstrated strong performance in the face of our typical Q1 seasonal softness and the macro headwinds that Erik mentioned. We recorded significant year-over-year revenue growth and continued the steady growth in the installed base of Saphyr OGM systems.

Our revenue in the first quarter of 2022 was $5.7 million, in line with our previous guidance range of $5.5 million to $5.8 million. This result is an increase of $2.5 million or 80% over the first quarter of 2021. Compared to the fourth quarter of 2021, results were consistent with the typical seasonality that we see in our business. Gross margin for the first quarter came in at 15% compared to 33% in the first quarter of 2021 and just 4% in the fourth quarter of 2021.

The year-over-year decrease was primarily due to lower yields on our chip consumables produced at one of our contract manufacturers. We are making good program -- we are making good progress with our supplier and have started to see improvement to our yields. However, we expect it to take a few more quarters before our yields return to historic levels and gross margins significantly improve. First quarter 2022 GAAP operating expense was $30.8 million, compared to $12.2 million in the first quarter of the prior year.

Non-GAAP operating expense was $24.3 million, compared to $11.8 million in the first quarter of 2021. First quarter 2022 non-GAAP operating expense excludes $5.1 million in stock-based compensation expense and $1.4 million in amortization of intangibles. The year-over-year increase in opex was primarily due to increased head count-related spending, increased R&D expense and increased marketing expense. We ended the first quarter with 309 employees, up from 164 employees in Q1 of 2021.

Going forward, we expect the growth in head count and spending to moderate from the pace of growth we saw last year. We continue to be well capitalized with $216.5 million in cash, cash equivalents and available for sale securities as of March 31, 2022. As Erik mentioned, we remain on track to our full year 2022 revenue guidance to be in the range of $24 million to $27 million. Q2 revenue is expected to be in the range of $6 million to $6.5 million.

Before I turn the call back over to Erik, I'd like to take this opportunity to remind you that our annual meeting is coming up on June 9. You may have received your proxy and voting materials in the mail or online through your brokerage firm. Please vote your shares as soon as possible as this will help us get to a quorum for the annual meeting. Now I'll turn it back over to Erik for closing remarks.

Erik Holmlin -- Chief Executive Officer

Great. Thank you, Chris. And I want to close with a review of our milestones for this year. And we're on track to achieve our ELEVATE! 2022 milestones.

As we outlined on our last call, we have several milestones planned for this year across the five pillars of ELEVATE!, including in reimbursement, clinical studies, expanding awareness and product development. In the first quarter, we plan to receive IRB approval for our hematologic study and to apply for a Category 1 CPT code for optical genome mapping. And I'm pleased to say that both were completed. We're enrolling subjects in the heme study and gathering feedback from the CPT code application process.

And we, of course, look forward to updating you on the milestones that we're going to be achieving here in the second quarter and over the course of the remainder of the year. In closing, I just want to reiterate that we're really excited about the progress that we've made so far in 2022. And we look forward to updating you soon about this second quarter, as well as our progress for the remainder of the year. And with that, Jess, we are ready to take questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Michael Okunewitch at Maxim Group. Your line is open, please go ahead.

Michael Okunewitch -- Maxim Group -- Analyst

Hey, thanks for taking the questions. I'd like to start off, I guess, with a bit of a big picture kind of question, and I ask you for a bit of speculation here. Could you give kind of your idea of what you think of the application and utilization of Saphyr, the type of customer and what the addressable market looks like for Saphyr on the other side of the clinical programs, assuming that gets you reimbursement into the clinical guidelines? Essentially, how would a Saphyr system with validated and reimbursed diagnostic use in those four markets be used differently from how it is today?

Erik Holmlin -- Chief Executive Officer

Thanks, Michael. Good question. And I think that we kind of understand this road map because it's been followed before for other solutions such as microarrays and next-generation sequencing and certain applications. And so clearly, today, people who are applying optical genome mapping in their clinical research are using it to find more answers.

And increasingly, they're integrating the information they get from analysis with optical genome mapping together with sequencing analysis to provide really a comprehensive view of genome variation, which can answer questions about why a particular phenotype exists. But in many settings, they're being used for research applications that begin to investigate patients or subjects in a clinical research study who may have been negative by traditional methods and standard testing, and so they are enrolled in a clinical trial to explore why they are negative by standard of care and yet clearly exhibiting the symptoms and signs of a genetic disease or cancer. So the answer to those questions are powerful research findings that can define future tests or future interventions and maybe even pull in some existing interventions that were missed by the standard of care for some reason. So that's a good synopsis of current use in the RUO space.

Now as clinical adoption happens more frequently, especially on the heels of inclusion of optical genome mapping as a first-line test recommended by medical society guidelines, it becomes just that, the first line test. So it becomes the standard of care. And so when the sample is submitted to the laboratory, the laboratories typically follow these guidelines very closely. And so they will apply optical genome mapping first, and there will be other analyses that follow it after.

And so that's what we believe will be pretty much the -- that's our goal, let me say, in conducting these studies and hopefully influencing the medical society guidelines. But that's only part of our vision because, as you know, you're an expert on optical genome mapping, it doesn't detect sequence variance. But there is a solution out there that does that really well. It's next-generation sequencing.

And so what we believe as an outstanding future state and something that we believe the market recognizes as well and is working toward is that genome sequencing is recommended as a first-line analysis for sequence variance and optical genome mapping could potentially be recommended as a first-line analysis for structural variance and those two are used in combination. And that's the game changer. And so when you talk about the volume of samples that are going through cytogenetic analysis, now they're being sequenced and mapped every single time because those are the first-line recommended tests that medical societies advocate. There's a lot of work to be done between now and then.

And as you know, it's a competitive environment and there could be new technologies and new solutions, but that's the vision that we're driving toward.

Michael Okunewitch -- Maxim Group -- Analyst

Thank you. I really appreciate that answer. As just a general follow-up, I'd like to get a bit more into the finances and specifically on your revenues or on the unit placements. You had about 12 placements this quarter.

It's a bit of a decline from the fourth quarter. Does this track with the typical seasonality of the first quarter versus the end of the year that you would normally see in previous quarters?

Erik Holmlin -- Chief Executive Officer

Yes, so -- for sure. So like the business as a whole, and Chris mentioned this in his comments, that we're accustomed to a seasonality there, and Q4 was very solid for installations. And I want to be clear here. We're talking about systems that we've installed, and we're not measuring the definition of placement as variable in the field.

And so we're not actually talking about like deals that we did per se or POs that came in. We're just talking about systems that were installed and the growth in the installed base. That's the most objective metric. But one of the things that I can tell you about it is that we ended the quarter with several systems that were in a backlog for installation.

And that backlog was driven by some of the effects of Omicron and COVID, which reduced staffing and caused delays in installations. So I think the answer is we always expected a sequential decline. The overall demand and success on the business side was solid. Our ability to operationally install them was impacted by COVID, and we're catching up.

Michael Okunewitch -- Maxim Group -- Analyst

All right. Thank you very much. I really appreciate you taking the questions.

Erik Holmlin -- Chief Executive Officer

No problem. Thank you.

Operator

With no other questions holding, I'll turn the conference back to Dr. Holmlin for any additional or closing comments.

Erik Holmlin -- Chief Executive Officer

Well, thank you very much, Jess. Well, I appreciate everybody joining this call. And as I said already, we look forward to updating you on our progress during the second quarter in our next call. So thank you very much.

Operator

[Operator signoff]

Duration: 38 minutes

Call participants:

Amy Conrad -- Investor Relations

Erik Holmlin -- Chief Executive Officer

Chris Stewart -- Chief Financial Officer

Michael Okunewitch -- Maxim Group -- Analyst

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