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Bionano Genomics (BNGO -4.63%)
Q4 2022 Earnings Call
Mar 09, 2023, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day and welcome to the Bionano fourth-quarter and full-year 2022 earnings conference call. At this time, all participants are in a listen-only mode. [Operator instructions] Please be advised that this 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, Michelle, and good afternoon, everyone. Welcome to the Bionano Genomics fourth-quarter and full-year 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 fourth quarter and full-year 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 are forward-looking, including statements about Bionano's strategic and commercialization plans, sales pipeline, future fundraising activities and prospects, anticipated benefits or improvements to the Saphyr system and Ionic purification system, goals and anticipated milestones for 2023, and achievement of our ELEVATE! growth strategy, our anticipated compound annual growth rate, the size and our ability to access our estimated target markets, the advantage of the Saphyr system and Ionic purification 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 and Ionic purification system.

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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, to 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 in the Investor section of the company's website.

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

Erik Holmlin -- Chief Executive Officer

Thank you, Amy, and good afternoon, everyone. Thank you for joining us today. I want to start off by saying that 2022 was simply a spectacular year for Bionano. We really couldn't be happier with the results.

And in fact, we're just blown away with what we see as progress around the world in adopting optical genome mapping. We started 2022 in a pretty difficult macro environment. There was continued uncertainty around COVID, which was limiting our access to laboratories and impacting our ability to install the Saphyr system. We faced challenges with chip suppliers, and production yields were lower than anticipated.

And I'm happy to report that, over the course of the year, we were able to get production yields back up and restore them to levels that they were previously and that we hit our installed base milestone for Saphyr systems for the year. And never once did we face any backlog or any inability to ship product to customers based on supply chain issues. And that's a credit to so many incredible employees across our company who battled through difficult conditions to produce a great result. And I'm thankful to them.

We kicked off our strategy for growth, which we named ELEVATE! at the start of 2022, and we delivered against all of our ELEVATE! milestones for the year. We met or exceeded our guidance for revenues on both a full-year basis and in each quarter over the course of the year. I'd like to take a little bit of time to share with you some highlights from our 2022 achievements, including those in the fourth quarter. To begin, we grew the installed base of Saphyr systems in the world to 240, which represents a 46% increase over the 164 systems that were installed at the end of 2021.

In the fourth quarter of 2022, we sold 4,781 flowcells, which represents 49% growth over the same period in 2021, and brought the total for 2022 to 15,375 flowcells sold. That represents a 23% growth over the 12,518 flowcells sold in 2021. And that's just tremendous progress. You have to remember that the flowcell is the unit consumable that really connects most closely to the number of human genomes that are being analyzed by optical genome mapping.

And so, this growth is truly impressive. We continue to process a substantial number of samples for optical genome mapping through Bionano Laboratories. And this is a vehicle that we leverage to introduce people who are interested in OGM to how powerful that data is on their samples. Revenues for the fourth quarter of 2022 were $8.2 million, which is up 30% versus the fourth quarter of 2021.

Revenue for the full year was -- 2022 was $27.8 million, which represents year-over-year revenue growth of 55%. And we're incredibly impressed by the performance on the top line in the fourth quarter. And we believe it really shows what we're capable of doing in this business, both from an absolute standpoint, but on an ongoing growth basis. And so, it's an outstanding outcome for our team selling optical genome mapping and our other products, clinical services, and software.

In fact, we exceeded the goals and expectations for all of our planned milestones over the course of the year and advanced the company strategy, as well as our products. I'd like to share some of those key highlights from the full year. We made significant progress toward streamlining the optical genome mapping workflow with our acquisition of Purigen Biosystems, which closed in November of 2022. That acquisition brings their Ionic system, which uses isotachophoresis technology into our optical genome mapping workflow, and we believe that it really completes the assembly of the extremely streamlined end-to-end workflow for optical genome mapping once we launched the Ionic system and its consumables for OGM.

We developed and released enhanced kits for DNA isolation and labeling in our OGM workflow, the SP-G2 labeling kit and the Bionano Prep Direct Label and Stain-G2 DNA isolation and labeling kits. These enable sample to results in as little as three days for cancer samples, and they are proving to dramatically increase the reliability of the workflow in customers' hands. And it's always been a key pillar of our strategy to delight customers with robust products, and these new kits do exactly that. We also released an automated version of our DNA isolation chemistry, which has been done in partnership with Hamilton and is linked to their Long String VANTAGE DNA isolation robot.

We launched a number of optical genome mapping laboratory-developed tests, or LDTs, through Bionano Laboratories. One is for hematologic malignancies and another is for the genetic disorder, FSHD1. We believe these allow healthcare providers to explore the clinical utility of optical genome mapping-based assays through these LDTs, and we believe that this utilization will support efforts to gain coding and coverage for reimbursement by third-party payors. We also met all of our milestones in our clinical studies for prenatal and postnatal and hematologic trials, including study enrollment targets, completion of our postnatal study which has now been published as a preprint, as well as the interim publication of the prenatal study which was published in December of 2022.

We also initiated our solid tumor trial. These trials are critical to providing the critical mass of data that will be used to drive medical societies to support the inclusion of optical genome mapping in their recommended first-line tests. Several sites across the United States and Europe validated laboratory-developed tests, and in the United States, they submitted applications for reimbursement codes, including Z codes and proprietary laboratory analysis, or PLA, codes which enable them to get paid for optical genome mapping tests. And they have been very pleased with the level of reimbursement that's been assigned to these codes, ranging in the area of about $1,300 for constitutional genetic disorder testing, which is comparable to reimbursement rates available in the market today.

NxClinical software version 7.0, which is the version of that software enabled for OGM data analysis, is being used in the field. And we are planning a full commercial release for applications in hematologic malignancies in the first half of 2023. A pre-commercial version of our next-generation high-throughput Saphyr system has been running in the field with excellent results, and we plan to launch that new instrument into the field this year. Initial launch will be in the first half of 2023, and we'll see adoption and installation toward the second half of the year.

We expect this instrument to enable optical genome mapping analysis at substantially higher throughputs compared to the Saphyr system and that it will support labs that are running much higher volumes. Finally, there were a number of amazing publications that were published in 2022, and we believe they tell the story of optical genome mapping and how the future of the company will unfold. Five groundbreaking publications that I want to outline for you today are as follows. You may remember that we talked about an incredibly powerful publication from a number of scientists at The University of Texas MD Anderson Cancer Center, where they describe the use of optical genome mapping and evaluation of myelodysplastic syndrome, or MDS, prognostication.

And what was incredible about this paper as it showed that up to 21% of study subjects had a different prognostic risk score when optical genome mapping was used to evaluate them compared to the standard of care. That's 1 in 5 people. So, the impact of OGM cannot be denied. This publication really underscores it.

Researchers from Necker Hospital in France found that optical genome mapping detected more clinically relevant variants in 33% of MDS patients and 54% of acute myeloid leukemia samples, which is a critical demonstration of the utility of optical genome mapping to go above and beyond the standard of care. Researchers from eight different institutes analyzed OGM's utility for cytogenetic abnormalities in, again, AML samples. And here, they found that 12% of the cases had different risk levels and were eligible for clinical trials as a result of these new findings. This inclusion in clinical trials is incredibly meaningful because it connects these patients to potentially lifesaving therapeutics that they otherwise would not have had access to without the findings of OGM.

So, you can imagine the impact of these findings. Researchers from Augusta University published the first validation study to evaluate the performance of optical genome mapping versus traditional methods for hematologic neoplasms, which showed an incredibly high technical performance and concordance rate with, importantly, 100% first-pass rate, meaning that the reliability of optical genome mapping in these workflows is highly reliable and does not require repetition of the test, which drives up costs for payers and delays results to patients. Finally, researchers from a foundation at Kyoto University demonstrated the utility of optical genome mapping as part of a workflow to evaluate hypo immunogenic induced pluripotent stem cells, iPSCs, and that this workflow could be used in regenerative medicine, showing OGM's ability to detect off-target effects or areas where genome modification has gone awry and reveals that these modified stem cells may or may not be useful in a particular patient setting. And this is an area of significant interest in the adoption of optical genome mapping for various applications in cell therapy.

At the close of this call, I want to go through our milestones planned as part of ELEVATE! for 2023. But before doing that, I want to turn the call over to Chris Stewart, our CFO, who will review the financials for the year. Chris.

Chris Stewart -- Chief Financial Officer

Thanks, Erik. The fourth quarter of 2022 was another outstanding quarter, which capped off a great year where we achieved impressive year-over-year revenue growth and diversified our revenue across product lines and geography. With the acquisition of Purigen, we now control the end-to-end OGM workflow and expect to expand our target markets. Now, to get to the numbers.

Revenue in the fourth quarter of 2022 was approximately $8.2 million, a 30% increase over the fourth quarter of 2021 and within the preliminary range of $8.1 million to $8.4 million that we provided on January 5th of this year. Revenue for the full year was 27.8 million, representing a 55% increase over the full-year 2021. This year-over-year increase was driven by strong performance in all three of our core businesses, OGM, Bionano Labs, and software, and across all three major geographies. Gross margin for the fourth quarter of 2022 was 22%, compared to 4% in the fourth quarter of 2021.

For the full year, gross margin was 21%, compared to 22% in 2021. The slight decrease from 2021 was mainly due to the yield challenges that we experienced beginning in late 2021. As Erik mentioned, yields on product being produced today is now back to the levels we saw pre-COVID. So, we expect that that issue is now behind us.

Regarding operating expense, we report both GAAP and non-GAAP numbers. We believe that providing our operating expense, excluding certain ongoing noncash expenses and other one-time expenses, provides a more useful measure of our performance. Fourth-quarter 2022 GAAP operating expense was $39.3 million, compared to $29 million the prior year. Full-year 2022 GAAP operating expense was $137.6 million, compared to $81 million in 2021.

The increase for the quarter and the year was primarily due to increased headcount and headcount-related expenses and an increase in marketing and R&D expense. Full-year 2022 non-GAAP operating expense was $107.7 million and excludes $22.4 million in stock-based compensation, $5.8 million in amortization of intangibles, and $1.8 million in acquisition-related transaction costs. Fourth quarter non-GAAP operating expense was $30.6 million, compared to $21.8 million in the fourth quarter of 2021. Fourth-quarter non-GAAP operating expense excludes $5.5 million in stock-based comp, $1.5 million in amortization of intangibles, and $1.7 million in expenses related to our acquisition of Purigen.

We ended the fourth quarter with $113.2 million in cash, cash equivalents, and available-for-sale securities, compared to $180 million at the end of Q3. During the quarter, we incurred costs of approximately $34 million related to the Purigen acquisition, and we increased our safety stock of inventory by about $4.7 million to ensure supply to our customers. We have been and will continue to be proactive and opportunistic in terms of raising additional capital in order to position the company to capitalize on the promise of OGM. Since the start of the year -- of this year, we've been active on our ATM facility, raising $14.8 million so far in Q1 of 2023.

This morning, we filed an amendment to our current S-3, placing a cap on the total amount of capital that can be raised under existing shelf to $400 million, of which $200 million can be raised under the ATM. This is a reduction to the $350 million under our previous ATM agreement. Tomorrow, we will file a new S-3 with the same capital limits that will replace our current S-3 once declared effective by the SEC. Looking forward, as we begin 2023, we expect Q1 2023 revenues to be in the range of $7 million to $7.5 million, in line with the typical seasonal softness that we see in Q1.

We expect full-year 2023 revenue to be in the range of $35 million to $38 million, which, at the midpoint, would be 31% growth over 2022 revenue. I'm really pleased about the progress we're making across all aspects of the business and very excited about where we're headed. With that, I'm going to turn the call back to Erik to discuss our anticipated business plans before we take your questions. Erik.

Erik Holmlin -- Chief Executive Officer

Thanks, Chris. Congratulations on the incredible results. I'd like to close out today by diving into the 2023 milestones that will be tied to our growth strategy. Before doing that, I want to remind everyone that we held our first-ever strategy day at NASDAQ in New York, where this whole team went through an in-depth review of our strategy, growth drivers, financial objectives, key initiatives related to clinical trials, and new product advancements, as well as in-depth discussions with six current users of the Saphyr system who are regarded as world leaders in their fields, who gave incredible testimonials about the utility of that platform and its positioning.

And so, I encourage everyone to check out the recording of the event, which can be accessed on the Investor side of our web page. As we reviewed in depth during Strategy Day, we're focused on driving what we believe is a cytogenetics revolution. ELEVATE! is our growth strategy. ELEVATE! is based on six strategic pillars.

The first one is to expand commercial traction and validation of optical genome mapping and really all of our solutions to delight customers with robust products; clear the path for OGM reimbursement in our target markets; continue to advance the product to enable further penetration of our existing markets, as well as expand the market for penetration into new ones; make software a strategic driver of Bionano solutions; and with the acquisition of Purigen Biosystems, we'll extend that to include making sample prep solutions for DNA isolation; another strategic driver; and then, finally, the sixth pillar and one that's really important on a go-forward basis is that we need to execute these pillars with operations and strategies that will scale with this growing business. And so, we have a number of key milestones that are planned in 2023. They cover areas, product developments, our ongoing clinical studies, milestones in reimbursement, milestones around expanding the base -- installed base of optical genome mapping systems, and important regulatory developments with the FDA. I want to run through a few of these, and you'll be able to review them through the recording of this call, which will be archived on our website.

But we intend to expand the OGM system installed base to 325 systems by the end of 2023. We intend to add to our menu of LDTs at Bionano Labs with one for whole genome evaluation of structural variations in constitutional genetic disease. We're going to be inspected by the College of American Pathologists at Bionano Laboratories in connection with our application for accreditation by CAP. In the first half of 2023, we'll be launching the high-throughput Saphyr system, which we believe will increase throughput substantially and will be connected to the new Saphyr compute, which has been developed in collaboration with NVIDIA.

We're going to have important pre-submission discussions with the FDA that are leading up to a pre-submission in connection with the high-throughput Saphyr system later on. We plan to submit an important dossier to Medicare for something called a local coverage decision in 2023, and we will advance our clinical studies. There are a number of milestones in connection to these studies, including ongoing enrollment of our prenatal study, as well as ongoing enrollment of the heme study, around which we expect to achieve about 50% enrollment. We are continuing to pursue our Category I CPT codes for heme and constitutional use of optical genome mapping, and we expect to have pre-commercial versions, at a minimum, of our OGM kits for isotachophoresis that will run on the Ionic purification system in the field by the end of the year.

And lastly, we will be launching and having a full commercial release of VIA, which is the newly named software for data analysis based on what we acquired from BioDiscovery, and VIA includes the ability for optical genome mapping analysis and it will target heme applications in the first half of 2023 and then a whole genome analysis version available in the second half of the year. And so, these are incredibly important milestones that we expect to achieve this year. And the whole driver behind them is to provide catalysts that will enable ongoing revenue growth and the development of a very robust P&L. And so, as we continue to execute on these core elements of the strategy, we expect to grow revenue for the next few years at a healthy compound annual growth rate ranging from 30% to 50% through 2025.

We believe that we're building a business that will eventually scale into this enormous market opportunity that we're pursuing and deliver exceptional financial results. And so, in closing, I want to say that we are really excited about what we can achieve this year, and we look forward to updating you soon about the first quarter and throughout the year going forward. With that, Michelle, we are ready to take questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from the line of Jeffrey Cohen with Ladenburg. Your line is open. Please go ahead.

Jeffrey Cohen -- Ladenburg Thalmann and Company -- Analyst

Hi, Erik and Chris. How are you?

Erik Holmlin -- Chief Executive Officer

Good. Hi, Jeff. Doing great.

Jeffrey Cohen -- Ladenburg Thalmann and Company -- Analyst

So, I guess, first, just a quick one for Chris as far as the inventory and inventory build from Q4. You did call out a couple things. Was there some relationship there to your new high-throughput instrument, or was the buildup with flowcells or existing Saphyr instruments?

Chris Stewart -- Chief Financial Officer

It was existing Saphyrs and flowcells. And basically, you know, when -- in the height of the supply chain challenges, we wanted to ensure that we wouldn't be constrained on demand. So, we started building safety stock. And I guess the key point is we're just about done with that in Q4, a little bit in Q1, and then we'll start bringing that safety stock down as we bring up the new instrument and consumables later in the year and into next year.

Jeffrey Cohen -- Ladenburg Thalmann and Company -- Analyst

OK. Got it. That's helpful. So, it's not necessarily going to increase along with your revenues, but it may have peaked for the shorter term.

Chris Stewart -- Chief Financial Officer

Correct.

Jeffrey Cohen -- Ladenburg Thalmann and Company -- Analyst

OK. Got it. And, Erik, you just called out the two LDTs thus far. Would you expect others to be introduced during 2023 as well?

Erik Holmlin -- Chief Executive Officer

Yes, we're going to continue building that menu. So, in 2023, for sure, we're going to release a LDT for constitutional genetic disorders that's looking at the whole genome and revealing structural variations that may be connected to a variety of indications such as intellectual disability, developmental delay, and so forth.

Jeffrey Cohen -- Ladenburg Thalmann and Company -- Analyst

Got it. And then, as far as the new instrument introduction in the first half this year, you expect that will replace Saphyr's at high-throughput facilities and centers, or would it be adjunct at high-throughput centers?

Erik Holmlin -- Chief Executive Officer

I believe it's going to be incremental adjunct because the Saphyr system operates well and performs just as well as its high-throughput version will. But it can be used in a setting like that for the development of new assays and other techniques that a laboratory or customer may want to work on or evaluate. And so, I really do expect that to be -- that the new system would be adjunctive to what they already have.

Jeffrey Cohen -- Ladenburg Thalmann and Company -- Analyst

Got it. And then, lastly, one more, if I may. As far as the margins and looking forward into '23, would you expect that they grow from '22 levels? And if so, where are the levers? Is it on the product side or the service and other side?

Chris Stewart -- Chief Financial Officer

So, we do expect it to trend up from here. You know, we're not providing any more guidance on exactly how much. But the reason is that we've now worked through the inventory of chips that were produced during the time when we were struggling with our yields. And so, you know, we built up a lot of inventory during that time to -- again, to make sure that we can service our customers.

As Erik mentioned, thankfully, we didn't miss any deliveries to any of our customers. But, you know, we did that by virtue of having this inventory. So, we've now worked through that, and we're back to production at kind of the yield levels that we were at prior to -- early 2020. So, that's what's really going to drive it up.

Jeffrey Cohen -- Ladenburg Thalmann and Company -- Analyst

OK. And one more quick one for Erik. As far as the payor environment, both the payors and Medicare, what's your sense on their receptiveness more recently to the overwhelming body of data that you're delivering to them and how they're thinking about the economics on the -- in the space now?

Erik Holmlin -- Chief Executive Officer

I mean, I think the progress that we're seeing is very positive. And, you know, we have a function in the company, market access led by a real veteran in the industry, and she's in the process of putting these data in front of these payors. And so, while you and I follow Bionano's communications and press releases and publications incredibly closely, the payors are still catching up. And so, Donna is going to make it an issue for them and put it in front of them.

But we have a lot of discussions ongoing already and payors get it. There's just a process that we have to go through, you know, to satisfy them. And, you know, Donna is developing a multi-pronged strategy, and we'll be able to say more about that in the future as we start delivering against some of these key milestones. But, you know, I think the fundamental answer is that they like what they see.

And we have to make sure that all of them see it and then continue to see more and more and more and more.

Jeffrey Cohen -- Ladenburg Thalmann and Company -- Analyst

Got it. OK. Super. Thanks for taking our questions.

Erik Holmlin -- Chief Executive Officer

Thanks, Jeff.

Operator

Thank you. And one moment for our next question. Our next question comes from the line of Sung Ji Nam with Scotiabank. Your line is open.

Please go ahead.

Sung Ji Nam -- Scotiabank -- Analyst

Hi. Thanks for taking the questions. So, I was wondering about the completion of the postnatal study and the publication there. Kind of what are the next steps? Is it something where you kind of wait for all the other studies to be completed, you know, in terms of beginning your conversations with, you know, the guideline bodies or whatnot? Or just kind of curious what the next steps might be.

Erik Holmlin -- Chief Executive Officer

I think that the principal next step is to finalize the preprint which has been published and then submit it for peer-reviewed publication. I think that that's the key next step for that body of data. But there are some 1,047 data sets associated with this study, and they all contain within them multiple publications that will be able to dive deeply into and highlight some of the key endpoints that we've been seeking to measure. The preprint goes into a couple of subpopulations, one with autism spectrum disorder, another which was a prospective cohort that was collected, and it already shows almost an increase of 20% in pathogenic findings compared to the standard of care for both of those populations.

But it also reveals that there were a substantial number of, presumably, reportable findings that have a high likelihood of being pathogenic. And so, we need to sort that out by looking deeply into the nature of those events. And so, I think the way to think about it is that this preprint has been published, and we'll get that out. It's going to cover 1,047 data sets, which is an incredibly impactful number that nobody can run from.

We show 100% concordance with the standard of care and substantial increase in performance overall, so it's very powerful. But there are many, many more publications that will dig out of that data set and proliferate. And so, you should expect there to be just more and more information coming out, highlighting the incredible importance of optical genome mapping. And those publications will support our efforts to convince guideline agencies, medical societies to embrace optical genome mapping, right, things like consensus statements that ultimately results in the medical societies recommending optical genome mapping as first-line testing.

Sung Ji Nam -- Scotiabank -- Analyst

Got you. That's super helpful. And then, I'm just curious about the HRD detection publication that came out. Obviously, very interesting there.

Is that something that you could -- you might be able to incorporate into your solid tumor studies? Or is that just kind of something that you think the customers will continue to potentially, you know, develop on their own?

Erik Holmlin -- Chief Executive Officer

We -- so, Bionano is a player in HRD at two levels. Number one, we have what we believe is the most robustly performing approach to calling HRD and scoring HRD from existing data types like sequencing, next-generation sequencing, and other data types, microarrays. And that's commercially available now, and labs are adopting it and utilizing it. In addition, optical genome mapping is now been shown to be as good as sequencing, if not substantially better.

There was a paper, and maybe this is the one that you're referring to, that was published from the Curie Institute in Paris, and it showed that optical genome mapping way outperformed whole genome sequencing for identifying patients in the study who were, in fact, qualified for PARP inhibitors. But if they only use sequencing to pick up those patients, they wouldn't have picked up as many. And so, optical genome mapping appears to be more powerful. And so, that's a long way of saying, yes, we expect optical genome mapping to feature prominently in HRD scoring and that that will be something that we will measure as part of these studies.

Now, I've got to, you know, be fair and point out that the vast majority of solid tumor specimens that are collected and analyzed throughout oncology today are in formalin-fixed, paraffin-embedded tissue, and that's not something that we have an assay for optical genome mapping on yet. We expect to be able to work on that eventually using isotachophoresis. But what I can tell you is that the results that Curie is getting are so incredibly impactful that their institution is now advocating the collection of and preservation of frozen fresh tissue in breast cancer because it seems that optical genome mapping is so powerful that it warrants a change in practice of sample collection and sample utilization. And so, maybe that's something that can influence -- be an influence on practices here in the United States.

Sung Ji Nam -- Scotiabank -- Analyst

Great. And then, lastly, from me, on your 2023 guidance, for the 325 OGM system guidance, I was wondering if that's including the new high-throughput systems. And also, are you seeing maybe some of your potential customers or existing customers kind of waiting or holding off in terms of adopting OGM systems in the -- you know, currently or in the first half of the year in anticipation of the launch in the second half of the year?

Erik Holmlin -- Chief Executive Officer

We don't see that. And, you know, the availability of this new high-throughput system will be relatively limited in the second half of this year, and that's somewhat by design to protect against any hesitation in the market. We also will have different commercial terms and will continue to make it very attractive to bring Saphyr in and, you know, adopt and get up and running with it, whereas the commitment for the high-throughput system will be a little bit higher. So, we're working on ways in which we can really engineer the demand and make sure that there isn't a pause.

You know, having said that, I'm sure that there will be some sites that will be, you know, go ahead and wait on the sidelines. We know that there are sites that are waiting on the sidelines today, but we're not thinking that it's going to pause substantially existing opportunities in the sales pipeline. But, you know, we have to see there is that risk. And with regard to the first question, the 325 is inclusive of both Saphyr systems and the new high-throughput system.

Sung Ji Nam -- Scotiabank -- Analyst

Great. Thank you so much.

Erik Holmlin -- Chief Executive Officer

Thanks, Sung Ji.

Operator

Thank you. And one moment for our next question. Our next question comes from the line of Jason McCarthy with Maxim Group. Your line is open.

Please go ahead.

Michael Okunewitch -- Maxim Group -- Analyst

Hey, guys. Thank you for taking my question. This is Michael Okunewitch on the line for Jason. And I want to congratulate you on the fantastic progress, not just over this most recent quarter, but really over 2022 overall.

Erik Holmlin -- Chief Executive Officer

Thanks, Michael. That's great. Love it. Appreciate it.

Thank you.

Michael Okunewitch -- Maxim Group -- Analyst

Yeah. So, I actually wanted to ask a follow-up question on the publications that you just released recently from the postnatal study. There are two real key takeaways. Obviously, you had the high technical performance and that's key.

But there was also a 30% to 40% increase in diagnostic yields in some of those data sets. So, could you talk a little bit about how the -- how both payors and guidelines assign importance to demonstrating full concordance within a simplified and streamlined workflow versus the increases in diagnostic yield?

Erik Holmlin -- Chief Executive Officer

Well, I think that it's obviously the name of the game. That's what we're aiming for. We believe that we would be seeing these kinds of outcomes, and we went for it. Or I should say that Alka Chaubey, our chief medical officer, believed it so strongly that she left PerkinElmer to come here and make these things happen.

And, you know, she's been right, right on target. And when it comes to talking about -- pontificating, if you will, on how medical societies and payors and so forth will respond, of course, it's speculation. We don't know, but we have history to look at. Karyotyping was once the recommended first-line method of analysis in constitutional genetic testing.

And its overall diagnostic yield was pretty poor, low single digits. And microarrays offered the same kind of concordance that we're seeing with optical genome mapping relative to the standard of care but an incremental improvement. And if you look at the performance of microarrays, it's anywhere between 10% and 20% or so diagnostic yield, on average, across all labs that are performing it. And so, when we are -- you know, when microarray studies were conducted and this increase in diagnostic yield was reported, we saw the medical societies and payors come on board enthusiastically and make recommendations for microarrays to be considered as the first-line test.

And that's how those guidelines are written on a global basis. And so, when we bring the level of performance against the standard of care, so now, we're 100% concordant, not to karyotyping, but to the newly increased standard set by microarrays and karyotyping combined. And by the way, in many cases, in constitutional genetic disorders, it was -- additional modalities were used as well, FISH, Southern blot. And so, we compare it against the whole kitchen sink that's available today, 100% concordance.

And then, when you look at this incremental performance, it's really outstanding. So, we feel like the medical community would see this as an incredible advancement in the performance alone. But then, when you add, as you did, the fact that it's coming from a single assay, which shrinks the time to results, which is incredibly impactful for these families who are waiting to hear the answers, you know, we think it's kind of very clear the path forward in this case. The work remains, though, to continue the studies, to continue the analysis, to drive the publications, and to get this in front of these societies.

We have a little bit of a head start because many of the PIs on this study are involved in these societies, and so, they're certainly aware. But it's incredible results, and I think it's just the beginning.

Michael Okunewitch -- Maxim Group -- Analyst

All right. Yes, thank you so much for that. I also wanted to touch on NxClinical 7.0. Now that that's out in the field.

have you gotten any feedback from the early adopters on that new software solution?

Erik Holmlin -- Chief Executive Officer

We have. They're enthusiastic about it. And, you know, they love our current systems, which is great because I think, you know, our team has worked for years in developing analytical platforms for OGM data, and it's a brand-new data type. And everybody was excited to develop methods for sequencing out in the world academically, but we were on our own with OGM.

And Mark Oldakowski, the leader of product development, chief operating officer, assembled a team, and they built an incredibly powerful platform that's being utilized. But there are elements of that platform that these KOLs and customers had been asking for around reporting. They want to look at a report that tells them whether a variant was detected or not detected. They want that report to be driven by the medical guidelines.

This is a critical step in their workflow. They want to be able to immediately interpret the structural variation findings that they see, either through Access or what we call VIA, that's NxClinical 7.0. We shortened that name to VIA, which stands for variant intelligent application. So, they're able to visualize it either way, Access or VIA, but the interpretation is something that we've now built into and is clinical for structural variations.

And we're delivering these reports. These are incredibly powerful. Why are these reports important? Because, of course, they're customized and validated in customers' hands. Remember, this product is research use only, so customers have to select the panels that they want to have reported out.

But once they select that, they're able to put these incredibly actionable reports in the hands of clinicians, and oncologists can interpret them immediately. So, it's incredibly powerful. And what they tell us is that they love this workflow and that it really simplifies their life incredibly because, today, even with optical genome mapping and Access that's an incredible power, they're having to deal with multiple different software platforms. And so, this kind of advancement is something that they've been waiting for.

And I want to underscore, and it's the reason that making software a strategic driver of business for us as one of our pillars, is that VIA is not only a solution for optical genome mapping but it integrates these other data types. And when you look at the sequencing landscape out there and you see all of these companies that are introducing next-generation sequencing solutions, we have talked to them and we're enthusiastic about working with them. We all see them bringing value to the end user. But what the end user sees is that they need a solution that integrates this information all together for one-stop reporting, and our VIA provides that.

So, we're only at the beginning of the power of this software. We believe software is going to be a strategic driver of our solutions and customer adoption going forward. So, we're excited to roll out the full commercial release of the heme -- hematologic malignancy application in the first half of this year and really keep that ball rolling on an ongoing basis.

Michael Okunewitch -- Maxim Group -- Analyst

All right. Thank you very much for taking my questions. I'll hop back in the queue.

Erik Holmlin -- Chief Executive Officer

Thanks, Michael.

Operator

Thank you. And one moment for our next question. And our next question comes from the line of Francois Brisebois with Oppenheimer. Your line is open.

Please go ahead.

Unknown speaker

Hi, this is Dan on for Franc. Congrats on the quarter and thanks for taking our questions. First, we just want to start with if you could add some color on the -- how the integration of the Purigen Ionic system has been going. Have the development team and commercialization team all been completely onboarded? And in terms of the market, are you starting to see renewed interest from those customers who are on the sidelines? And also, related to that, how are you thinking about the additional markets you could expand into?

Erik Holmlin -- Chief Executive Officer

Yeah. Thanks, Dan. Appreciate the comments and great questions. So, with regard to the acquisition, integration is, to a certain degree, ongoing.

But this one was very straightforward. We had an outstanding product which we have integrated into our commercial teams in Europe and in the United States, and then our channel partners or distribution partners around the world are being onboarded to sell the Ionic system. And we think that, as a stand-alone business, it has a lot of great potential. It's going to take some time to really figure out how much of the market we can penetrate with it, but we know it's outstanding technology and that the current users love the system.

We think we can multiply it. But that team has been fully integrated under the sales leadership that we have in place and marketing leadership that we have in place. From a development perspective, that team is led by Klint Rose, who is one of the co-founders of Purigen Biosystems and, you know, really one of the gurus of isotachophoresis. And what I can tell you is that Klint and his team are super fired up to be part of Bionano.

And if you want to learn something about isotachophoresis and its applications, I encourage everybody to look at the archived recording of our workshop at the Advances in Genome Biology and Technology, or ABGT, meeting which was held February 6th. And Klint gives a brilliant talk, and we're really pleased to have him on board here. And his team, as a stand-alone sample prep company, was focused on developing solutions for the entire spectrum of samples that might need to be used in genome analysis. And that's great, that's exciting, but it includes a lot of things that are tough to work on.

We have really taken them and said, "Listen, let's focus on human genome analysis stuff that's highly relevant for clinical translational work. You've done an incredible job in formalin-fixed paraffin-embedded tissue, FFPE, so far. Keep doing that. But now, let's start to work on the optical genome mapping workflow." Initially, they're focused on blood, bone marrow, frozen tissue, and that really complements what's currently available in the market in manual workflows.

So, you want to automate that as quickly as possible using isotachophoresis, which will be a complement to what Hamilton has out in the field. But then, we're going to expand the menu, as you say, start to go into new markets, looking at prenatal sample prep; all sorts of sample types that are very minute, such as punch biopsies; and sample types that are very common in genetic disease, including buccal, or cheek swabs, where the cells of interest are present in a very dilute concentration. And so, isotachophoresis looks to be the perfect solution to making those samples compatible with optical genome mapping and gives us the opportunity to penetrate these new markets within our, you know, kind of addressable TAM overall. And, you know, with regard to customers sitting on the sidelines, I think, you know, really, obviously, these new markets would represent an opportunity to bring new customers in.

But the reality of it is that the degree to which anybody's waiting to adopt optical genome mapping, they're more waiting on us addressing their throughput needs in hematologic malignancies, which we already have supported sample prep solutions for and will be integrating onto ITP going forward and reimbursement. So, you know, ITP is key to advance the workflow, and then bring in these new sample types to expand the workflow. But a lot of the customers that already have optical genome mapping will add isotachophoresis, and their volume -- their utilization volumes will grow as opposed to customers coming in from the sidelines.

Unknown speaker

Thanks for that. And just, finally, a quick one for me. You highlighted some COVID-related challenges at the start of the year. Are you now seeing production yield sort of normalized to pre-pandemic levels, or is it more of a gradual return?

Erik Holmlin -- Chief Executive Officer

It was a gradual return that unfolded over the course of the year. And the actual production yield, which had basically tanked in the fourth quarter of 2021, we've reached those levels. However, the impact of that reduced yield translated into the need to build more inventory because we just needed to recover more chips, you know, from -- you know, as a result of the lower yield. And so, the production of those chips came at a higher cost.

And so, we're burning through that inventory. So, the yield -- the production yield itself has been restored. We've got to work hard to keep it there. There's no guarantee that it stays there, but we believe it's stabilized for now.

But we need to work through the chips that were built at a higher cost overall. So, it's going to take some time now for the margin to recover.

Unknown speaker

Great. Thanks for taking my questions. Congrats again on the quarter.

Erik Holmlin -- Chief Executive Officer

You're welcome, Dan.

Operator

Thank you. One moment. And our last question comes from the line of Mark Massaro with BTIG. Your line is open.

Please go ahead.

Mark Massaro -- BTIG -- Analyst

Hey, guys. Thanks for taking the questions. Congrats on a strong year and a nice Analyst Day and AGBT last month. I wanted to start off with the guidance.

I saw your Q1 revenue guide of $7 million to $7.5 million. That's down 10% to 15% sequentially. Just wanted to make sure that it's largely just a function of seasonality. You know, a lot of people may have exhausted budgets at the end of Q4.

Do you think that Q1 will mark the low point of the year and that we can have, likely, an acceleration from the Q1 level?

Chris Stewart -- Chief Financial Officer

That's certainly typically what we see, you know, combination of things, just getting a slow start with new budgets in the beginning of the year and, like you said, people kind of rushing to spend the remaining capital budgets at the end of the prior year. So, you know, we always see this kind of -- this level of drop from Q4 to Q1. And then, you know, at least for the last three years, we've seen growth off of that Q1 number steadily throughout the year. And that's certainly what we expect to see again this year.

Mark Massaro -- BTIG -- Analyst

OK, Excellent. I noticed in your 10-K, I think you broke out the software revenue from the service and other line, and I think you noted that software revenue is expected to even out. Should we expect, you know, flattish software? And then, when I think about the buckets, I think you grew instruments 46% in 2022, you grew consumables 16% in 2022. Is it likely that instruments will continue to outpace consumables in 2023? And maybe can you give us a sense for what type of contribution you might get from services.

And again, I assume software is flattish, but any additional color there would be helpful.

Chris Stewart -- Chief Financial Officer

Yeah. So, you know, software, you know, flattish is probably under-calling it a little bit. We'll see -- you know, we'll see modest growth. You know, the core economic engine of the company is OGM.

And so, that's where we'll see the bulk of the growth come from. But the software and services business, both will -- you know, are projected to be up from last year. Well, with the growth in the installed base, we should expect to continue to see growth in the consumables. And, you know, ultimately, the consumables will start to exceed the instrument revenue.

You know, that's certainly the goal and the expectation. So, we'll see that consumable revenue grow as a percentage of total revenue.

Mark Massaro -- BTIG -- Analyst

OK. That's helpful.

Erik Holmlin -- Chief Executive Officer

I think something to keep in mind -- yeah, well, Mark, I was going to say something to keep in mind is that, you know, the instrument revenues can be very lumpy. You know, the deals tend to be pretty big in size. And, you know, we had pretty significant instrument purchases coming from certain geographical regions. And, you know, so, we're going to see that for a little while where, you know, just a particular type of adoption is going to kind of skew the numbers a little bit.

But Chris is right, which is that, you know, we're seeing the consumables' growth on a year-over-year basis. From a unit perspective, the growth of units is significant. And so, you know, everything that we're seeing is pointing toward substantial growth on the consumables line. And I want to thank you for asking the question about the $7 million to $7.5 million guidance.

That is, as Chris said, but I want to underscore it for you and for everybody, that that's typical seasonality. I think, you know, we were five and change in the first quarter of 2022. So, typical seasonality.

Mark Massaro -- BTIG -- Analyst

All right, perfect. And then, I also wanted to ask about the next-gen Saphyr. I think, at the Analyst Day, you mentioned a 13x increase in throughput capacity. If I have it right, the Saphyr list price is 150,000.

Given the fact that this is higher throughput, can we assume maybe a higher list price? And I don't know if you can provide any specificity to that. And then as it relates to the cost per sample, I know that NGS has been dropping. I think you guys are at around 450 per sample. Can you give us a sense for where you think that might trend on a dollar basis exiting 2023 or 2024?

Erik Holmlin -- Chief Executive Officer

So, you know, with regard to, you know, consumables pricing, I mean, in -- over the course of the year, you know, I think that ASP -- and what we've seen historically for the last, you know, handful of quarters, you know, four quarters, maybe six quarters, is that we don't have a lot of pressure on price. The 450 is actually list price if you own a system. If you rent a system, it's a little bit higher. But we don't see a lot of pressure there.

We know that as we expand geographically, if we want to get the business, we're probably going to have to lower price. And so. a lot of our efforts around especially on the next-gen side development of consumables is to drive costs of development -- of production down so that, you know, we have more flexibility around price. I see maybe some erosion of the 450 overall this year in 2023 but not a substantial amount.

And, you know, it's healthy to imagine that going down over the subsequent years because of the price elasticity that exists out there. And we have said that we would expect to -- that it's kind of one of our goals, to be able, if we had to, to produce our consumables in such a way that if we ever had to get down to sub $200, we could do it and have good margins. So, you know -- but that's going to happen over time, and that's going to be driven by really, really substantial increases in volume. Now, turning to your question about the high-throughput Saphyr system, we haven't set pricing for it yet.

We certainly think that the value is there. I want to emphasize one thing, and that is that, yes, it's a 13-fold increase in throughput overall compared to Saphyr, but that goes stepwise. So, on a per-instrument basis, it's right around fourfold increase in throughput. But we have a scheme developed where we will leverage something called a work cell, which is very common in the industry, and enables us to link together multiple systems.

And so, that's where we get that second phase of throughput increase that gets us to the 13x or so, maybe even higher. And so, you know, that work cell will be available in 2024. Now, something that is an important lever that we are looking at, with regard to the commercialization of this high-throughput system, is whether or not it's going to be available in the reagent rental program. And I think that it will probably be a more demanding rental program than we have put out there for the Saphyr.

And so, I think what might happen, on average, is that you're going to see more purchases for the high-throughput system than you see for the Saphyr system. And so, that would have the effect of driving up revenues. You know, the costs of building that high-throughput system will enable us to have, you know, acceptable margins at the 150K level.

Mark Massaro -- BTIG -- Analyst

Yep. Makes sense. My -- thanks for all that. My last question is, can you expand a little bit on conversations you're having to obtain an LCD for OGM reimbursement? You know, is that with Palmetto MolDX or Meridian? And can you give us a sense for timing and, you know, perhaps what data you may need to submit?

Erik Holmlin -- Chief Executive Officer

So, those discussions have been ongoing with Palmetto for some time, actually. We talked with them in -- certainly in early 2021 about laying the groundwork. And, you know, something that they've been looking for is to see adoption of optical genome mapping and validation of laboratory-developed tests by users in the field because they don't want to work on something that only the manufacturer cares about. So, you know, I respect that.

And what we've seen now is a tremendous increase in the number of laboratory-developed tests and, importantly, in their jurisdiction, in Palmetto's jurisdiction. And so, they're starting to see, you know, submissions for reimbursement in their regions. And so, you know, our strategy is to be a facilitator in the market and, you know, work with Palmetto the degree to which we're allowed as a manufacturer researchers-only platform in connection with users, but also with what's going on at Bionano Laboratories, our own CLIA lab. And we want to work with them and other MACs to establish local coverage decisions.

And we're pursuing them all in parallel, I think you can say, in principle. There are some merits to going after Palmetto initially. But I think, you know, our view is that we need to be in conversations with all of them. And Palmetto and MolDX have pretty clear, you know, requirements for information that needs to be submitted around things like clinical utility, clinical validity, analytical validity, things like limit of detection and other forms of performance that establish that optical genome mapping workflow is robust, it's reliable, and it can be operated on, you know, a lab-to-lab basis.

And so, we've communicated with them. We have that list, and we're working against it into developing a dossier that we'll be submitting to them sometime this year.

Mark Massaro -- BTIG -- Analyst

Perfect. That's it for me. Thanks, guys.

Erik Holmlin -- Chief Executive Officer

Thanks, Mark.

Operator

Thank you. And I would like to turn the conference back over to Dr. Erik Holmlin for any further remarks.

Erik Holmlin -- Chief Executive Officer

Thank you, Michelle. And thank you to everyone for joining. Thanks to everyone who asked such incredibly insightful and penetrating questions. We look forward to updating you on our progress on the first-quarter 2023 call in short order.

Thank you very much.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Amy Conrad -- Investor Relations

Erik Holmlin -- Chief Executive Officer

Chris Stewart -- Chief Financial Officer

Jeffrey Cohen -- Ladenburg Thalmann and Company -- Analyst

Sung Ji Nam -- Scotiabank -- Analyst

Michael Okunewitch -- Maxim Group -- Analyst

Unknown speaker

Mark Massaro -- BTIG -- Analyst

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