Bionano Genomics(BNGO) - 2022 Q4 - Annual Report

ITEM 1. BUSINESS Bionano Genomics is a global genomics company providing comprehensive optical genome mapping (OGM) solutions, aiming to establish OGM as the standard for genetic disorders and cancers Overview Bionano Genomics offers an end-to-end suite of optical genome mapping (OGM) solutions, including the Saphyr system, software, and services, enhanced by strategic acquisitions - Bionano Genomics offers an end-to-end suite of genome analysis solutions, including Optical Genome Mapping (OGM) with the Saphyr system, nucleic acid isolation (Ionic Purification system), genomic analysis software (NxClinical), and clinical testing services (Bionano Laboratories)[95] - The company's strategy involves transforming from an instrument company to a full genomic solutions provider through internal R&D and strategic acquisitions like Lineagen (molecular genetic clinical testing), BioDiscovery (software solutions), and Purigen (nucleic acid isolation)[95] - The Saphyr system is highlighted for its ability to detect all classes of structural variation (SV) with ultra-sensitivity and ultra-specificity, outperforming traditional cytogenetic tools and complementing gene sequencing[95] Recent Highlights In 2022, Bionano Genomics successfully achieved or exceeded all publicly stated ELEVATE! milestones, demonstrating significant commercial momentum through increased Saphyr system adoption and flowcell sales, alongside robust validation of OGM's utility in clinical research through scientific publications - Bionano executed on its 2022 ELEVATE! milestones, achieving or exceeding all publicly stated goals[52] 2022 Commercial Adoption & Milestones | Metric / Milestone | 2022 Achievement | | :----------------- | :----------------- | | Saphyr Installed Base | 240 systems (46% increase from 2021) | | Flowcells Sold (Q4) | 4,781 (49% increase YoY) | | Flowcells Sold (Full Year) | 15,375 (23% increase YoY) | | OGM CPT Code Application | Applied for Category 1 | | Hematological Study | IRB approval, site selection, enrollment commenced | | Prenatal Study | Data generation commenced, interim publication | | Postnatal Study | Completed | | NxClinical Software | Pre-commercial version 7.0 released | | Labeling Protocol | 2.0 released | | DNA Isolation Protocol | SP Next released | | Next-Gen OGM System | Pre-commercial version placed in field | | Bionano Laboratories | Launched OGM test menu for genetic disease & hematologic malignancies | - OGM's technical performance in hematological neoplasms showed 98.7% sensitivity, 100% specificity, and 99.2% accuracy compared to traditional methods, with studies demonstrating its utility in detecting cryptic and balanced SVs in CRISPR-edited cells[71] Macroeconomic and Geopolitical Developments The company acknowledges additional risks and uncertainties stemming from adverse macroeconomic and geopolitical developments, including the lingering effects of COVID-19, the ongoing conflict between Ukraine and Russia, and related sanctions, which could materially impact its business and financial results - The company is subject to additional risks from adverse geopolitical and macroeconomic developments, such as lingering COVID-19 effects, the Ukraine-Russia conflict, and related sanctions[100] - These factors could continue to have a material impact on the company's business and financial results, including inflation and supply chain disruptions[100] Industry Background The genomics industry relies on detecting structural variations (SVs) in genetic disorders and cancer, where OGM with the Saphyr system offers a superior, cost-effective solution - Genome structure and structural variations (SVs) are major factors in genetic disorders and cancer, but traditional DNA sequencing often fails to reliably detect them[100] - Optical Genome Mapping (OGM) with the Saphyr system is designed to offer a comprehensive, cost-effective, and efficient detection of all classes of SVs, aiming to replace antiquated cytogenomic methods[100] - The Ionic Purification system is crucial for OGM, as it isolates ultra-high molecular weight (UHMW) DNA, which is optimally required for OGM applications, addressing limitations of traditional DNA isolation methods[100] Our Solutions Bionano provides an integrated suite of genome analysis solutions, including OGM systems, nucleic acid isolation, and software, enhanced by recent acquisitions to simplify OGM adoption - The OGM workflow involves DNA isolation, labeling, mapping, data processing, and analysis, with Bionano developing or partnering for solutions at each step[101] OGM Systems Bionano's OGM systems, primarily Saphyr, utilize proprietary nanotechnology for massively parallel linearization and single-molecule imaging of UHMW DNA - The Saphyr system utilizes proprietary nanotechnology for massively parallel linearization and single-molecule imaging of UHMW DNA, along with specific DNA labeling chemistry and bioinformatic tools for SV analysis[105] Nucleic Acid Isolation and Purification Systems The Ionic Purification system, acquired through Purigen, uses isotachophoresis (ITP) to isolate high-purity, unfragmented nucleic acids for OGM workflow - The Ionic Purification system, acquired through Purigen, uses isotachophoresis (ITP) to isolate high-purity, unfragmented nucleic acids from various sample types, enhancing the OGM workflow[79][87] Software Solutions NxClinical software, acquired via BioDiscovery, offers comprehensive data analysis and interpretation for NGS and microarray data, integrating OGM data - NxClinical software, acquired through BioDiscovery, provides industry-leading data analysis and interpretation for NGS and microarray data, with ongoing development to integrate OGM data for a comprehensive genomic view[80][116] Testing and Laboratory Services Bionano Laboratories provides CLIA-certified genetic clinical testing services for neurodevelopmental disorders and hematologic malignancies, including OGM-based LDTs - Bionano Laboratories offers CLIA-certified genetic clinical testing services for neurodevelopmental disorders and hematologic malignancies, including OGM-based LDTs, and provides laboratory services for OGM data access[81][146] Market Opportunity The global genomics market is projected to reach $54.4 billion by 2025, with Bionano estimating a $10.0 billion annual economic potential for OGM in cytogenomics, discovery research, and cell bioprocessing quality control - The worldwide market for genomics products and services is projected to grow to approximately $54.4 billion by 2025, from $22.7 billion in 2020, representing a 19% compound annual growth rate[89] Estimated Annual Economic Potential for OGM | Market Segment | Estimated Annual Potential | | :--------------- | :------------------------- | | Total OGM Market | ~$10.0 billion | | Cell Bioprocessing QC | ~$3.0 billion | | Cytogenetics Labs (10,000 worldwide) | ~10.0 million samples/year | | Pharma/Biotech (1,400 companies) | Rely on cytogenetics for QC | - Key market drivers for Saphyr system adoption include consolidation of traditional cytogenetics, complementing NGS for comprehensive genome analysis, and cell bioprocessing QC applications[90] - Additional future market opportunities for OGM include newborn screening, population genomics, neurological and cardiological risk assessment, gene editing, precision medicine, biopharma, and oncology[90] Our Strategy Bionano's strategy focuses on driving OGM adoption by demonstrating its superiority, complementing NGS, accelerating reimbursement, and innovating products, including a high-throughput OGM system - The primary goal is to drive OGM adoption through the Saphyr system to streamline SV identification and enable new genomics research[119] - Key strategic pillars include demonstrating OGM as a superior alternative to traditional cytogenetics, complementing NGS for comprehensive genome analysis, and accelerating reimbursement and professional society guideline inclusion through multi-center clinical studies[119][120] - The company plans to continue innovating products, such as a new high-throughput OGM system expected to image nearly 820 Gbp per hour, significantly increasing throughput and lowering cost per sample[120] Sales and Marketing Bionano employs a commercial team of 168 individuals across North America, Europe, and China, utilizing a direct sales force and distributors in other regions. The sales process for its capital-intensive systems is lengthy, typically 9-12 months, involving extensive customer evaluations. Bionano Laboratories uses a physician-directed sales model focused on pediatricians and securing insurance reimbursement - As of December 31, 2022, the commercial team consisted of 168 individuals in sales, sales support, and marketing, primarily located in North America, Europe, and China[150] - The company uses a direct sales force in North America and Europe, and a network of distributors in the Asia-Pacific region and other markets[150] - The sales cycle for Bionano's systems is typically 9 to 12 months due to the capital investment required, in-depth customer evaluations, and institutional budget cycles[150] - Bionano Laboratories primarily sells its LDTs to pediatric physicians through an 'in-person' sales model, focusing on specialty pediatricians and establishing contracts with private and governmental insurance carriers for reimbursement[93] Manufacturing and Supply Bionano's manufacturing strategy involves outsourcing instrument and chip consumable production to single third-party manufacturers, while internally developing and assembling reagent kits. The company manages component obsolescence and maintains safety stock to mitigate supply chain risks, though reliance on single sources poses potential challenges - Bionano relies on a single third-party medical device manufacturer for its instruments and a single third-party manufacturer in the United States for its chip consumables[152][153] - OGM reagents are sourced from a limited number of suppliers, including certain single-source suppliers, while ITP reagents are from limited suppliers and also prepared in-house[153] - The manufacturing strategy is to outsource instrument and chip manufacturing and internally develop and assemble reagent kits, with active management of component obsolescence and safety stock to minimize disruptions[153] Software Bionano's long-term software strategy aims to make OGM ubiquitous by simplifying data interpretation and enabling seamless integration with NGS and array data for comprehensive genome analysis. The NxClinical software offers a pay-per-sample monetization model, expanding the customer network and facilitating OGM adoption - The fundamental long-term software strategy is to make OGM ubiquitous through simplified data interpretation and seamless integration with NGS and array data[154] - The NxClinical software offers a pay-per-sample monetization model, allowing direct participation in the NGS and array markets and expanding the Bionano customer network[154] - The software is designed to provide a comprehensive platform-agnostic genome interpretation solution, enabling OGM data to be integrated with NGS for a more complete view of the genome[154] Testing and Laboratory Services Bionano Laboratories performs OGM testing at its San Diego lab and partner labs, with CLIA certification for its San Diego facility. It also contracts with third-party laboratories for non-OGM LDTs to maintain flexibility and conserve capital, with plans to expand its OGM-based LDT menu - Bionano Laboratories performs OGM testing at its San Diego lab and partner labs in the United States and Europe, with the San Diego lab holding CLIA certification[155] - For non-OGM LDTs, Bionano Laboratories contracts with a network of four primary third-party laboratories to conserve capital and maintain flexibility, all of which are CLIA-certified[155] - The company plans to increase its testing capacity and expand its menu of OGM-based LDTs, with the first two already announced[155] Key Agreements Bionano holds key exclusive license agreements with Princeton University for its core OGM technology and with Stanford University (via Purigen acquisition) for ITP-based sample preparation. The company also has agreements with single third-party manufacturers for its instruments and chip consumables, highlighting reliance on these partners for critical components - Bionano has an exclusive license agreement with Princeton University for worldwide rights to OGM-related patents and inventions, requiring annual maintenance fees and mid-single digit royalty payments on net sales[156] - Through the Purigen acquisition, Bionano obtained an exclusive license agreement with Stanford University for ITP-based sample preparation technology, involving annual maintenance fees and low-single digit royalty payments on net sales[157] - The company relies on single third-party manufacturers for its instruments and chip consumables, with agreements based on purchase orders and automatic renewals for chip consumables[158][159] Intellectual Property Bionano possesses a global patent portfolio of over 160 issued patents or allowed applications across approximately 35 patent families, covering macromolecular analysis, isolation, purification, genetic testing, and software. The portfolio was recently expanded with ITP-related patents from the Purigen acquisition, and the company also protects its proprietary technology through trademarks, trade secrets, copyrights, and contractual agreements - Bionano has developed a global patent portfolio including over 160 issued patents or allowed applications across approximately 35 patent families, covering devices, systems, and methods for macromolecular analysis, isolation, purification, genetic testing, and computer software[160] - The company recently added a portfolio of patents and patent applications related to isotachophoresis (ITP) through the Purigen acquisition, which it plans to continue pursuing and developing[160] - In addition to patents, Bionano protects its intellectual property and proprietary technology through confidentiality agreements, intellectual property assignment agreements, trademarks, trade secrets, and copyrights[160] Government Regulation Bionano's business is subject to extensive and evolving US and international regulations, particularly concerning its Optical Genome Mapping (OGM) products, which are currently for research use only (RUO) but could be regulated as medical devices if used clinically. The company's Bionano Laboratories diagnostic services are subject to CLIA, HIPAA, and state-specific privacy laws, while international operations must comply with regulations like the EU IVDR and GDPR Optical Genome Mapping Bionano's OGM products, currently for research use only (RUO), face potential FDA regulation as medical devices if used for clinical diagnostics - Bionano's OGM products are currently labeled 'For Research Use Only' (RUO), but if used for clinical diagnostic purposes, they would be regulated by the FDA as medical devices, requiring 510(k) clearance or Premarket Approval (PMA)[132] - The FDA's RUO/IUO Guidance emphasizes a 'totality of circumstances' review to determine if RUO products are intended for clinical use, which could trigger regulatory requirements[132] Laboratory Developed Tests (LDTs) Bionano Laboratories' diagnostic services, including LDTs, are subject to CLIA, HIPAA, and state-specific licensure and privacy laws - Bionano Laboratories' diagnostic services are subject to federal regulations like CLIA (Clinical Laboratory Improvement Amendments of 1988) and HIPAA (Health Insurance Portability and Accountability Act of 1996), as well as state-specific licensure and privacy laws[170][202] Europe/Rest of World Government Regulation International operations are subject to foreign regulatory requirements, including the EU's IVDR and GDPR, imposing stringent medical device and data privacy rules - International operations are subject to foreign regulatory requirements, including the EU's In Vitro Diagnostic Medical Devices Regulation (IVDR) and the General Data Protection Regulation (GDPR), which impose stringent requirements for medical devices and data privacy[167][208] Other Governmental Regulation Bionano is subject to environmental, health, and safety laws, including OSHA and regulations for hazardous and biohazardous waste disposal - Bionano is subject to laws and regulations related to environmental protection, employee health and safety, and the handling, transportation, and disposal of medical specimens, infectious, hazardous, and radioactive materials[285] Coverage and Reimbursement Coverage and reimbursement for Bionano's new products and services, particularly those enabled by Saphyr technology and offered by Bionano Laboratories, remain uncertain. In the U.S., molecular testing often uses genomic sequencing procedure (GSP) codes, with private payors frequently following CMS guidelines. European coverage varies, and global cost containment initiatives pose ongoing challenges - Coverage and reimbursement for new products and services, including diagnostic tests based on Bionano's technology, are uncertain and vary significantly among third-party payors (government and private)[139] - In the U.S., molecular testing laboratories primarily use genomic sequencing procedure (GSP) codes, and private health plans often follow CMS coverage and reimbursement guidelines[139] - European coverage for molecular diagnostic testing is varied, with statutory health insurance countries generally more progressive than tax-based insurance countries[139] Diagnostic Services Bionano Laboratories operates CLIA-certified facilities in Utah and San Diego, holding state licenses in California, Pennsylvania, and Maryland. It adheres to HIPAA and HITECH for health information privacy and security, including breach notification, and complies with state-specific genetic testing and privacy laws, as well as international regulations like GDPR for EU/UK data - Bionano Laboratories' facilities in Salt Lake City, Utah, and San Diego, California, are CLIA certified, and the company holds out-of-state laboratory licenses in Pennsylvania and Maryland[170] - The company is subject to HIPAA and HITECH, which establish federal standards for the privacy and security of health information, including breach notification requirements, and maintains an active compliance program[171] - Bionano Laboratories must also comply with state laws regarding health information privacy and genetic testing, as well as the GDPR and UK GDPR for operations involving EU/UK data subjects, with potential significant penalties for non-compliance[171] Reimbursement and Billing Billing for Bionano Laboratories' diagnostic services is highly complex due to varying payor requirements, contractual rates, and audit processes. Approximately 90% of diagnostic service revenue comes from private third-party payors, but the company faces risks of claim denials, recoupment, and changing coverage policies, which can impact revenue and cash flow - Billing for diagnostic services is highly complex due to variability in coverage, information requirements, and disputes among various payors (private, state, federal)[203] - Approximately 90% of Bionano Laboratories' diagnostic service revenue is paid by private third-party payors[203] - The company faces risks of claims being denied, audits leading to recoupment of funds, and changes in coverage policies or reimbursement rates, which can adversely affect revenue and cash flow[275] Federal and State Fraud and Abuse Laws Bionano's operations are subject to stringent federal and state fraud and abuse laws, including the Anti-Kickback Statute (AKS), False Claims Act (FCA), Civil Monetary Penalties Law (CMP Law), and Stark Law (physician self-referral bans). Non-compliance with these complex laws, which are broadly interpreted and aggressively enforced, could result in severe penalties, including civil, criminal, and administrative sanctions, and exclusion from healthcare programs - Bionano is subject to federal and state fraud and abuse laws, including the Anti-Kickback Statute (AKS), which prohibits offering or receiving remuneration to induce referrals for services reimbursable by federal healthcare programs[204] - The federal False Claims Act (FCA) imposes liability for knowingly presenting false or fraudulent claims to the government, with qui tam provisions allowing private individuals to bring actions[176] - The Stark Law prohibits physician referrals of Medicare patients to entities providing designated health services if the physician has a financial relationship with the entity, subject to certain exceptions[284] - Non-compliance with these laws can lead to significant penalties, including civil, criminal, and administrative sanctions, fines, disgorgement, and exclusion from federal and state healthcare programs[178][280] Other Regulatory Requirements Bionano is subject to environmental, health, and safety laws, including OSHA requirements for workplace safety and regulations governing the handling and disposal of hazardous and biohazardous waste. The company typically contracts with licensed third-party vendors for waste disposal - Bionano is subject to laws and regulations related to environmental protection, employee health and safety, and the handling, transportation, and disposal of medical specimens, infectious, hazardous, and radioactive materials[285] - The company's operations involve hazardous and flammable materials, and it generally contracts with licensed third-party vendors for their disposal[285] Healthcare Reform The healthcare industry is subject to ongoing legislative initiatives, including the Affordable Care Act (ACA) and recent modifications like the Inflation Reduction Act (IRA), which impact health insurance access, spending, and fraud remedies. The Protecting Access to Medicare Act (PAMA) has also altered Medicare Clinical Laboratory Fee Schedule payments, with future reforms expected to influence product and service pricing and coverage - The Patient Protection and Affordable Care Act (ACA) and subsequent legislative changes, such as the Inflation Reduction Act (IRA), aim to broaden health insurance access, constrain spending, and enhance fraud remedies[181][309] - The Protecting Access to Medicare Act of 2014 (PAMA) significantly altered Medicare Clinical Laboratory Fee Schedule (CLFS) payment methodology, requiring laboratories to report private payor pricing to CMS[181][309] - Future state and federal healthcare reform measures are expected, which could limit payments for healthcare products and services and impact the commercialization of Bionano's offerings[181][310] Acquisitions Bionano Genomics completed the acquisitions of BioDiscovery in October 2021 and Purigen in November 2022, integrating their respective software and nucleic acid isolation technologies into its genomic solutions portfolio - Bionano acquired BioDiscovery in October 2021 and Purigen in November 2022[182] Human Capital Management As of December 31, 2022, Bionano had 405 employees, with a focus on identifying, recruiting, retaining, incentivizing, and integrating personnel. The company utilizes equity incentive plans to attract talent and is committed to diversity, equity, and inclusion initiatives - As of December 31, 2022, Bionano had 405 employees, with 168 in sales/marketing, 130 in R&D, and 107 in general/administrative roles[183] - The company's human capital objectives include identifying, recruiting, retaining, incentivizing, and integrating employees, advisors, and consultants[184] - Equity incentive plans are maintained to attract, retain, and reward personnel, aligning with the company's success and stockholder value[184] Corporate Information Bionano Genomics, Inc. was formed in 2003 as BioNanomatrix LLC, changing its name multiple times to its current form in 2018. Its principal executive offices are in San Diego, California, and its website provides access to SEC filings - Bionano Genomics, Inc. was founded in January 2003 as BioNanomatrix LLC and changed its name to Bionano Genomics, Inc. in July 2018[185] - The company's principal executive offices are located at 9540 Towne Centre Drive, Suite 100, San Diego, California 92121[185] - SEC filings, including Annual Reports on Form 10-K, are available on the company's website (www.bionanogenomics.com) and the SEC's website (www.sec.gov)[214](index=214&type=chunk) ITEM 1A. RISK FACTORS Bionano faces significant risks related to its financial condition, business operations, regulatory compliance, intellectual property, and securities ownership, impacting its ability to continue as a going concern Risks related to our financial condition and need for additional capital Bionano faces substantial doubt about its going concern ability due to recurring losses, negative cash flows, and unpredictable operating results, compounded by macroeconomic factors and uncertain capital needs - Bionano is an early commercial-stage company with a limited commercial history, making it difficult to evaluate its current business and predict future performance, especially with increased operating costs from recent acquisitions and headcount expansion[187] Financial Performance and Liquidity Risks (in millions) | Metric | 2022 | 2021 | | :-------------------------------- | :----------- | :----------- | | Net Losses | $132.6 | $72.4 | | Cash Used in Operations | $124.8 | $71.9 | | Accumulated Deficit (as of Dec 31, 2022) | $348.7 | N/A | | Going Concern | Substantial doubt within 12 months | N/A | - Unfavorable geopolitical and macroeconomic developments, including inflation, rising interest rates, and the Ukraine-Russia conflict, could adversely affect business, financial condition, and results of operations by decreasing demand, increasing costs, and disrupting supply chains[192][220] - The COVID-19 pandemic has materially affected global operations, supply chains, and clinical studies, leading to increased costs and potential delays, with long-term impacts remaining uncertain[221] - The company's ability to use net operating losses (NOLs) and research and development (R&D) credit carryforwards may be limited by ownership changes, potentially increasing future tax obligations[222] Risks related to our business operations Bionano's operations face risks from acquisition integration, market acceptance, lengthy sales cycles, reliance on single-source suppliers, international expansion, cybersecurity threats, and intense competition - Acquisitions, joint ventures, and other strategic transactions could disrupt business, cause dilution, and may not yield anticipated benefits or synergies, leading to increased expenses and potential impairment charges[195][252] - Market acceptance of Bionano's products and technologies is uncertain, as potential customers may be reluctant to replace existing systems, and failure to demonstrate superiority or gain scientific community endorsement could slow adoption[223][321] - The company relies on single contract manufacturers for its OGM systems and chip consumables, and limited or sole suppliers for certain reagents, posing risks of supply disruptions, increased costs, and delays if replacements are needed[260][261][323] - International operations expose Bionano to various risks, including compliance with foreign regulatory requirements, difficulties in staffing and managing foreign operations, intellectual property protection challenges, currency fluctuations, and anti-bribery laws[234] - Bionano is highly dependent on information technology systems and data, making it vulnerable to cyberattacks, security incidents, and non-compliance with stringent and evolving data privacy laws (e.g., CCPA, CPRA, GDPR, UK GDPR), which could lead to regulatory actions, litigation, and reputational harm[238][324] Risks related to government regulation and diagnostic product reimbursement Bionano faces significant regulatory risks, particularly if its Research Use Only (RUO) products are deemed medical devices or marketed for clinical use, requiring costly and time-consuming FDA clearance or approval. The company's Bionano Laboratories diagnostic services are subject to complex billing procedures and uncertain third-party payor coverage and reimbursement policies, which can impact revenue. Non-compliance with federal and state healthcare fraud and abuse laws, including Anti-Kickback and False Claims statutes, could result in substantial penalties and harm business operations - If the FDA determines Bionano's RUO products are intended for clinical use, or if the company markets them for such use, it would be required to obtain FDA 510(k) clearance or premarket approval, a process that is expensive, time-consuming, and uncertain[241] - Billing for Bionano Laboratories' diagnostic testing procedures is complex, involving various payors with differing requirements, and the company faces risks of claim denials, audits, and changes in reimbursement policies, which could adversely affect revenue and cash flow[306][307] - The company is subject to federal and state healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, Stark Law), and non-compliance could result in significant penalties, including civil, criminal, and administrative sanctions, and exclusion from healthcare programs[247][280] - Healthcare legislative or regulatory reform measures, such as the ACA and PAMA, could lead to more rigorous coverage criteria and downward pressure on pricing for products and services[245][309] Risks related to intellectual property Bionano's ability to maintain its competitive advantage is heavily reliant on protecting its intellectual property (IP), including patents, trademarks, copyrights, and trade secrets. Risks include the failure of patent applications to issue, challenges to existing patents, inability to protect IP globally, and the impact of changes in patent laws. The company also faces claims of inventorship or ownership disputes, potential infringement lawsuits from third parties, and the risk that its employees or consultants may wrongfully use or disclose trade secrets - Bionano relies heavily on patent protection, trademarks, copyrights, trade secrets, and contractual restrictions to protect its proprietary technologies, but these provide limited protection and may not adequately secure a competitive advantage[23] - Risks include the failure of pending patent applications to result in granted patents, challenges to the validity or enforceability of existing patents, and the possibility that competitors may design around patented technologies[23] - Protecting intellectual property rights globally is expensive and challenging, as foreign laws may offer less protection, and enforcement proceedings can be costly and divert management attention[7] - Changes in patent laws, such as the America Invents Act (AIA) and U.S. Supreme Court rulings, could diminish the value of patents and impair the company's ability to protect its products or technologies[9] - The company faces risks of third-party infringement claims, which could lead to costly litigation, substantial damages, injunctions, or the need to obtain licenses on unfavorable terms[30] Risks related to ownership of our securities Bionano's securities face high volatility, dilution risks from future stock sales, and potential litigation, while recurring losses raise going concern doubts and anti-takeover provisions limit stockholder influence - The trading price of Bionano's securities has been and may continue to be highly volatile, influenced by factors such as commercial progress, competition, operating results, and broad market conditions[16] Common Stock Price Volatility (Last 12 Months) | Metric | Value | | :---------------- | :------ | | High Price | $3.60 | | Low Price | $1.23 | | Intra-day Low | $1.16 | | Intra-day High | $4.35 | - Future sales of substantial amounts of common stock, including shares from equity incentive plans, or the perception of such sales, could adversely affect the market price and cause dilution to existing stockholders[5][36][293] - The company's recurring losses, negative cash flows, and significant accumulated deficit raise substantial doubt about its ability to continue as a going concern, which could lead to liquidation and loss of investment for stockholders[19] - Anti-takeover provisions in charter documents and Delaware law could delay or prevent a change of control, limiting the market price of securities and frustrating attempts to replace management[5] ITEM 1B. UNRESOLVED STAFF COMMENTS The company has no unresolved staff comments - The company has no unresolved staff comments[326] ITEM 2. PROPERTIES Bionano leases various office, laboratory, and manufacturing spaces in San Diego, Salt Lake City, and Pleasanton, believing its current properties are sufficient for its needs - Bionano leases approximately 35,823 square feet of office, laboratory, and manufacturing space at its San Diego headquarters, with leases expiring December 31, 2025[294] - Additional leased spaces include 11,978 sq ft and 5,278 sq ft in San Diego (expiring Jan 2026), 9,710 sq ft in Salt Lake City, Utah (expiring Dec 2026, from Lineagen acquisition), and 16,165 sq ft in Pleasanton, California (expiring July 2027, from Purigen acquisition)[294][329] - The company believes its current properties are sufficient to satisfy its needs[329] ITEM 3. LEGAL PROCEEDINGS The company is not currently involved in any material legal proceedings and is unaware of any pending or threatened actions that could significantly impact its business - The company is not currently a party to any material legal proceedings and is unaware of any pending or threatened legal proceedings that could have a material adverse effect on its business, financial condition, or results of operations[343] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - This item is not applicable to the company[343] ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The company's common stock and warrants are traded on Nasdaq, with information provided on holders, dividend policy, and equity security purchases Market Information Bionano Genomics' common stock (BNGO) and warrants (BNGOW) are traded on The Nasdaq Capital Market - The company's common stock trades on The Nasdaq Capital Market under the symbol 'BNGO'[343] - Warrants to purchase common stock are listed on the Nasdaq Stock Market LLC under the symbol 'BNGOW'[343] Common Stock Holders As of March 6, 2023, there were approximately 95 holders of record for Bionano's common stock, with the actual number of beneficial owners being higher due to shares held in 'street' name - As of March 6, 2023, there were approximately 95 holders of record of the company's common stock[343] Warrant Holders As of March 6, 2023, there was one holder of record for Bionano's warrants, with the actual number of beneficial owners being higher due to warrants held in 'street' name - As of March 6, 2023, there was one holder of record of the company's warrants[343] Dividend Policy Bionano Genomics has never declared or paid cash dividends on its capital stock and intends to retain any future earnings for business operations, not for dividend payments in the foreseeable future - The company has never declared or paid cash dividends on its capital stock[297] - Bionano intends to retain any future earnings for use in business operations and does not plan to declare or pay cash dividends in the foreseeable future[297] Purchases of Equity Securities by the Issuer and Affiliated Purchasers Bionano Genomics did not make any purchases of its equity securities during the reported period - There were no purchases of equity securities by the issuer or affiliated purchasers[297] Recent Sales of Unregistered Securities This section is not applicable to the company for the reported period - This item is not applicable[297] ITEM 6. [RESERVED] This item is reserved - This item is reserved[297] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's discussion and analysis of Bionano's financial condition, liquidity, capital resources, and results of operations, including critical accounting policies and estimates Overview Bionano Genomics, a genome analysis solutions provider, faces substantial doubt about its going concern ability due to recurring net losses and negative cash flows despite a $10.0 billion OGM market potential - Bionano Genomics is a provider of genome analysis solutions, including OGM, diagnostic services, and software, with a mission to transform genome understanding[331] - The estimated economic potential for OGM in cytogenomics, discovery research, and cell bioprocessing QC markets is approximately $10.0 billion annually[331] Key Financial Overview (2022) (in millions) | Metric | Amount | | :-------------------- | :------------- | | Net Losses (2022) | $132.6 | | Net Losses (2021) | $72.4 | | Accumulated Deficit (as of Dec 31, 2022) | $348.7 | - The company expects to continue incurring significant expenses and operating losses, leading to substantial doubt about its ability to continue as a going concern within 12 months without additional capital[331] Macroeconomic and Geopolitical Developments Bionano's business and financial results are materially impacted by adverse macroeconomic and geopolitical developments, including the Ukraine-Russia conflict, related sanctions, lingering COVID-19 effects, inflation, and supply chain disruptions - Adverse geopolitical and macroeconomic developments, such as the Ukraine-Russia conflict, related sanctions, lingering COVID-19 effects, inflation, and supply chain disruptions, continue to materially impact Bionano's business and financial results[346] - These factors have led to increased costs for component parts and production, disruptions to trade, commerce, and liquidity, and a decrease in sales in fiscal years 2021 and 2022[346][347] - The long-term impact of these events is uncertain, with potential for reduced product demand, decreased corporate capital expenditures, and ongoing operational challenges[347] Financial Overview Bionano generates revenue from product sales (systems, consumables, software) and service revenue (diagnostic testing, sample evaluations, warranties). Cost of revenue includes raw materials, manufacturing, and personnel. Operating expenses are driven by significant investments in research and development (R&D) and selling, general, and administrative (SG&A) activities, which are expected to increase with business growth and acquisitions - Revenue is generated from product sales (systems, consumables, NxClinical™ software) and service revenue (diagnostic testing, customer sample evaluations, warranty, support, repair, and maintenance services)[348] - Cost of product revenue includes raw materials, freight, contract manufacturing, personnel, and depreciation, while cost of service revenue covers third-party lab costs, clinical technicians, and equipment servicing[350] - Research and development (R&D) expenses consist of personnel, stock-based compensation, research supplies, and third-party development costs, with substantial and continued investments planned[351] - Selling, general and administrative (SG&A) expenses primarily include personnel, amortization of intangibles, marketing, and professional services, and are expected to increase with customer base growth[352][342] Results of Operations In 2022, Bionano experienced a 55% increase in total revenue to $27.8 million, driven by strong growth in instrument, consumables, and software sales. Despite this, net loss widened to $132.6 million, an 83% increase from 2021, primarily due to significant increases in R&D (118%) and SG&A (51%) expenses, reflecting investments in growth and acquisitions. Gross profit increased, but gross margin slightly decreased, while interest income rose and interest expense fell Consolidated Results of Operations (Years Ended Dec 31, in thousands) | Metric | 2022 | 2021 | Period-to-Period Change (2022 to 2021) | Percentage Change | | :------------------------------------ | :------------------ | :------------------ | :------------------------------------- | :------------------ | | Product revenue | $20,425 | $12,686 | $7,739 | 61% | | Service and other revenue | $7,377 | $5,295 | $2,082 | 39% | | Total revenue | $27,802 | $17,981 | $9,821 | 55% | | Cost of product revenue | $15,966 | $10,524 | $5,442 | 52% | | Cost of service and other revenue | $5,891 | $3,583 | $2,308 | 64% | | Total cost of revenue | $21,857 | $14,107 | $7,750 | 55% | | Research and development | $49,047 | $22,485 | $26,562 | 118% | | Selling, general and administrative | $88,596 | $58,490 | $30,106 | 51% | | Total operating expenses | $137,643 | $80,975 | $56,668 | 70% | | Loss from operations | $(131,698) | $(77,101) | $(54,597) | 71% | | Interest income | $1,507 | $236 | $1,271 | 539% | | Interest expense | $(298) | $(927) | $629 | (68)% | | Gain on forgiveness of PPP loan | — | $1,775 | $(1,775) | 100% | | Loss on debt extinguishment | — | $(2,076) | $2,076 | (100)% | | Other expense | $(223) | $(59) | $(164) | 278% | | Loss before income taxes | $(130,712) | $(78,152) | $(52,560) | 67% | | Benefit (provision) for income taxes | $(1,884) | $5,717 | $(7,601) | (133)% | | Net loss | $(132,596) | $(72,435) | $(60,161) | 83% | | Net loss per share, basic and diluted | $(0.46) | $(0.26) | N/A | N/A | | Weighted-average common shares outstanding | 289,210 | 276,782 | N/A | N/A | Revenue Breakdown (Years Ended Dec 31, in thousands) | Revenue Source | 2022 | 2021 | Period-to-Period Change (2022 to 2021) | Percentage Change | | :-------------------- | :------------------ | :------------------ | :------------------------------------- | :------------------ | | Instruments | $8,567 | $5,887 | $2,680 | 46% | | Consumables | $6,731 | $5,808 | $923 | 16% | | Software | $5,127 | $991 | $4,136 | 417% | | Total product revenue | $20,425 | $12,686 | $7,739 | 61% | | Services and other | $7,377 | $5,295 | $2,082 | 39% | | Total revenue | $27,802 | $17,981 | $9,821 | 55% | Gross Profit and Margin (Years Ended Dec 31, in thousands) | Metric | 2022 | 2021 | Period-to-Period Change (2022 to 2021) | Percentage Change | | :-------------------- | :------------------ | :------------------ | :------------------------------------- | :------------------ | | Product gross profit | $4,459 | $2,162 | $2,297 | 106% | | Service and other gross profit | $1,486 | $1,712 | $(226) | (13)% | | Total gross profit | $5,945 | $3,874 | $2,071 | 53% | | Product gross margin | 22% | 17% | N/A | N/A | | Service and other gross margin | 20% | 32% | N/A | N/A | | Total gross margin | 21% | 22% | N/A | N/A | Liquidity and Capital Resources Bionano faces substantial doubt about its going concern ability due to recurring losses and insufficient liquidity, relying on equity and debt financings to meet significant future capital requirements for growth and R&D - Bionano has incurred net losses and negative cash flows from operations since inception, with a $348.7 million accumulated deficit as of December 31, 2022[462] - The company's existing cash and cash equivalents ($5.1 million) and available-for-sale securities ($108.1 million) as of December 31, 2022, are not anticipated to be sufficient for the next twelve months, raising substantial doubt about its ability to continue as a going concern[467][494] Cash Flow Summary (Years Ended Dec 31, in thousands) | Activity | 2022 | 2021 | | :-------------------- | :----------- | :----------- | | Operating activities | $(124,816) | $(71,927) | | Investing activities | $82,767 | $(278,062) | | Financing activities | $23,007 | $336,111 | - Net cash used in operating activities increased by $52.9 million in 2022 due to increased headcount, professional fees, and spending on materials and supplies[469] - The company's future capital requirements are substantial, including working capital, general corporate expenses, scaling operations, R&D, and corporate infrastructure, necessitating additional funding through equity or debt financings[486][288] Critical Accounting Policies and Estimates Bionano's financial statements rely on significant management estimates and assumptions, particularly for revenue recognition, stock-based compensation, and business combinations. These estimates, including fair value measurements for acquired assets and contingent consideration, are inherently uncertain and can materially impact reported financial results if actual outcomes differ from assumptions. Goodwill impairment testing and lease accounting also involve complex judgments - The preparation of financial statements requires significant management estimates and assumptions, including selling prices for multiple performance obligations, future cash flows, discount rates, and valuations in business combinations[476][523] - Stock-based compensation expense is recognized based on estimated grant date fair value using the Black-Scholes option-pricing model, which requires significant assumptions for risk-free rate, volatility, expected term, and dividend yield[498][477] - Business combinations are accounted for using the acquisition method, requiring fair value estimates for identifiable assets, liabilities, and contingent consideration, which are inherently uncertain and subject to refinement during the measurement period[478][526] - Contingent consideration liabilities, related to acquisitions like BioDiscovery and Purigen, are revalued quarterly based on probability-weighted models and Monte Carlo simulations, with changes impacting the consolidated statement of operations[474][608][609] Recent Accounting Pronouncements Bionano recently adopted ASC 842 (Leases), ASU 2021-08 (Business Combinations - Contract Assets and Liabilities), and ASU 2021-04 (Equity-Classified Written Call Options), with no material impact on consolidated results. The company is currently evaluating the expected impact of ASU 2016-13 (Credit Losses) on its financial statements - Bionano adopted ASC 842 (Leases) on January 1, 2021, recognizing ROU assets and lease liabilities on the balance sheet for leases longer than 12 months, with no material impact on consolidated results of operations[622] - The company early adopted ASU 2021-08 (Business Combinations - Contract Assets and Liabilities) on October 1, 2021, applying it prospectively to acquisitions[623] - ASU 2021-04 (Issuer's Accounting for Certain Modifications or Exchanges for Freestanding Equity-Classified Written Call Options) was adopted on January 1, 2022, without a material impact[623] - Bionano is currently evaluating the expected impact of ASU 2016-13 (Credit Losses) on its financial statements, which becomes effective in the first quarter of 2023[365] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details Bionano's exposure to market risks, including interest rate fluctuations, foreign currency exchange rates, and inflation, and their potential impact on financial condition Interest Rate Risk Bionano is exposed to interest rate risk primarily from its cash, cash equivalents, and available-for-sale securities. The company invests in highly liquid, short-term, investment-grade debt securities to preserve principal. While increased interest rates are observed, a hypothetical 100 basis point change is estimated to have a minimal impact ($0.4 million) on investments. Changes in interest rates also affect the fair value of acquisition-related contingent consideration liabilities - Bionano is exposed to interest rate risk from its cash, cash equivalents ($5.1 million), and available-for-sale securities ($108.1 million) as of December 31, 2022[528] - The company invests primarily in highly liquid, high-quality government and other short-term debt securities to minimize exposure to adverse shifts in interest rates[528] - A hypothetical 100 basis point change in interest rates is estimated to have approximately a $0.4 million impact on the company's investments[528] - Changes in interest rates also impact the fair value of acquisition-related contingent consideration liabilities, as the risk-free interest rate is a component of the discount rate used in their valuation[528] Foreign Currency Exchange Rate Risk Bionano conducts a portion of its business in foreign currencies, primarily the British Pound, Chinese Renminbi, Euro, and Canadian dollar, exposing it to transactional and translation foreign currency exchange risk. Despite this, the company believes a hypothetical 10% change in foreign exchange rates would not materially impact its business, financial condition, or results of operations due to minimal foreign currency denominated assets and liabilities - Bionano conducts a portion of its business in currencies other than the U.S. dollar, primarily the British Pound, Chinese Renminbi, Euro, and Canadian dollar, leading to transactional and translation foreign currency exchange risk[481] - The company does not currently participate in material foreign exchange hedging activities[481] - As of December 31, 2022, Bionano had minimal assets and liabilities denominated in foreign currencies, and a hypothetical 10% change in foreign exchange rates is not expected to have a material impact[481] Inflation Bionano has experienced inflationary pressures, particularly increased logistical costs and raw material prices, attributed to geopolitical and macroeconomic developments. However, the company does not believe inflation had a material effect on its business, financial condition, or results of operations in 2022, nor does it anticipate a material effect in future reporting periods, beyond general economic impacts - Bionano experienced inflationary pressures, including increased logistical costs and raw material prices, largely attributed to geopolitical and macroeconomic developments[504] - Despite these pressures, inflation did not have a material effect on the company's business, financial condition, or results of operations in 2022, as cost of revenue was not significantly impacted[504] - The company does not expect anticipated changes in inflation to have a material effect on its business, financial condition, or results of operations for future reporting periods, beyond general economic impacts[505] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents Bionano's audited consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, cash flows, and accompanying notes, along with the independent auditor's report Report of Independent Registered Public Accounting Firm BDO USA, LLP issued an unqualified opinion on Bionano Genomics' consolidated financial statements for 2022 and 2021, but included an explanatory paragraph expressing substantial doubt about the company's going concern ability due to recurring losses. The critical audit matter identified was the determination of fair values for developed technology and contingent consideration in the Purigen acquisition - BDO USA, LLP issued an opinion that Bionano Genomics' consolidated financial statements for December 31, 2022 and 2021, present fairly, in all material respects, the financial position and results of operations[532] - The report includes an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern due to recurring losses from operations[533] - The critical audit matter identified was the determination of fair values for developed technology and contingent consideration in the acquisition of Purigen Biosystems, Inc., due to subjective assumptions and sensitivity to changes in those assumptions[508][510][536] Consolidated Balance Sheets Bionano Genomics' consolidated balance sheet shows a decrease in total assets from $377.1 million in 2021 to $307.5 million in 2022, primarily driven by a reduction in cash, cash equivalents, and investments. Total liabilities increased from $39.9 million to $58.1 million, while total stockholders' equity decreased from $337.1 million to $249.4 million, reflecting the accumulated deficit and other comprehensive loss Consolidated Balance Sheet Summary (in thousands) | Asset/Liability/Equity | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------------ | :----------- | :----------- | | Cash and cash equivalents | $5,091 | $24,571 | | Investments | $108,095 | $226,041 | | Accounts receivable, net | $7,022 | $4,934 | | Inventory | $29,761 | $12,387 | | Total current assets | $157,298 | $272,414 | | Property and equipment, net | $18,029 | $10,318 | | Intangible assets, net | $41,143 | $26,842 | | Goodwill | $77,289 | $56,160 | | Total assets | $307,502 | $377,100 | | Accounts payable | $12,534 | $10,769 | | Accrued expenses | $10,552 | $8,621 | | Contract liabilities (current) | $871 | $684 | | Contingent consideration (current) | $9,382 | — | | Total current liabilities | $35,884 | $21,840 | | Contingent consideration (non-current) | $12,970 | $9,066 | | Total liabilities | $58,104 | $39,982 | | Common stock | $30 | $29 | | Additional paid-in capital | $599,207 | $553,747 | | Accumulated deficit | $(348,715) | $(216,119) | | Accumulated other comprehensive loss | $(1,124) | $(539) | | Total stockholders' equity | $249,398 | $337,118 | Consolidated Statements of Operations Bionano Genomics reported a net loss of $132.6 million in 2022, an 83% increase from $72.4 million in 2021. Total revenue grew 55% to $27.8 million, driven by product and service revenue increases. However, operating expenses significantly increased by 70% to $137.6 million, primarily due to higher research and development and selling, general and administrative costs, leading to a larger loss from operations Consolidated Statements of Operations Summary (in thousands) | Metric | 2022 | 2021 | | :------------------------------------ | :----------- | :----------- | | Product revenue | $20,425 | $12,686 | | Service and other revenue | $7,377 | $5,295 | | Total revenue | $27,802 | $17,981 | | Cost of product revenue | $15,966 | $10,524 | | Cost of service and other revenue | $5,891 | $3,583 | | Total cost of revenue | $21,857 | $14,107 | | Research and development | $49,047 | $22,485 | | Selling, general and administrative | $88,596 | $58,490 | | Total operating expenses | $137,643 | $80,975 | | Loss from operations | $(131,698) | $(77,101) | | Interest income | $1,507 | $236 | | Interest expense | $(298) | $(927) | | Gain on forgiveness of PPP Loan | — | $1,775 | | Loss on debt extinguishment | — | $(2,076) | | Other income (expenses) | $(223) | $(59) | | Net loss | $(132,596) | $(72,435) | | Net loss per share, basic and diluted | $(0.46) | $(0.26) | Consolidated Statements of Comprehensive Loss Bionano Genomics reported a total comprehensive loss of $133.2 million in 2022, an increase from $73.0 million in 2021. This includes the net loss for the period, along with other comprehensive loss components such as unrealized losses on investment securities and foreign currency translation adjustments Consolidated Statements of Comprehensive Loss Summary (in thousands) | Metric