Bionano Genomics(BNGO) - 2020 Q4 - Annual Report

Part I Business Bionano Genomics specializes in optical genome mapping with its Saphyr system and provides diagnostic services for neurodevelopmental disorders Overview Bionano Genomics offers OGM solutions and diagnostic services, with Saphyr system installations growing to 97 in 2020, despite a $1.6 million revenue impact from COVID-19 - The company's core business revolves around the Saphyr® system for optical genome mapping (OGM) and diagnostic testing services for neurodevelopmental disabilities via its subsidiary, Lineagen[20] - The installed base of Saphyr systems increased by 24 units in 2020, reaching a total of 97 systems by year-end[25] - The COVID-19 pandemic caused a revenue decrease of approximately $1.6 million in 2020 compared to 2019, attributed to lab shutdowns and operational restrictions[24] - In January 2021, Bionano raised approximately $350 million in gross proceeds from two public offerings of its common stock[33] Market Opportunity The total addressable market for Bionano's Saphyr system and Lineagen's diagnostic services is estimated between $4.4 billion and $5.7 billion - The total addressable market for the Saphyr system and consumables is estimated to be between $2.7 billion and $3.5 billion[42] - The serviceable addressable market (SAM) for Lineagen's first-line genetic testing services for neurodevelopmental disorders is estimated to be between $1.7 billion and $2.2 billion in the United States[43] Commercial Offerings Bionano's offerings include the Saphyr OGM system with consumables and software, alongside Lineagen's LDTs for neurodevelopmental disorders - The Saphyr system is a complete sample-to-result solution for structural variation analysis, comprising the Saphyr instrument, Saphyr Chip consumables, Bionano Prep Kits, and data solutions including Bionano Access software[44][46][47][53] - The end-user cost per sample is expected to decline from under $500 in 2020 to approximately $100 in 2023, with throughput expected to increase from 12 to 192 human samples per day in the same period[44] - Lineagen offers a suite of LDTs for pediatric neurodevelopmental disorders, including Chromosomal Microarray (CMA), Fragile X, Whole Exome Sequencing (WES), and Pharmacogenetics (PGx) testing[71] Sales and Marketing Bionano employs a direct sales force and distributors for OGM, with a long sales cycle, while diagnostic services target pediatric specialists and secure insurance contracts covering 90 million lives - The OGM commercial team comprises 72 people, with a direct sales force in North America and Europe, and distributors in Asia-Pacific and other regions[82] - The sales cycle for the Saphyr system is lengthy, typically 9 to 12 months, due to the capital investment and customer evaluation process[82] - The diagnostic services commercial team has 4 people and targets pediatric specialists. As of year-end 2020, the company had insurance contracts covering approximately 90 million lives in the U.S[83] Manufacturing and Supply Bionano outsources Saphyr instrument and chip manufacturing, assembles reagents in-house, and utilizes third-party labs for diagnostic service wet lab work - The Saphyr instrument and chip consumables are manufactured by third-party contractors, while reagent kits are assembled internally[85][86][87] - Diagnostic services utilize outsourced components, including Illumina's CMA testing platforms, and contract with third-party labs for wet work, while Bionano handles data interpretation and reporting under its own CLIA license[88] Government Regulation Bionano's RUO products and LDT diagnostic services are subject to extensive regulation, including potential FDA oversight and complex reimbursement requirements - The company's OGM products are currently labeled "For Research Use Only" (RUO). If the FDA determines they are intended for clinical diagnostic use, they would require regulatory clearance (510(k)) or approval (PMA)[100][188] - The company's diagnostic services are provided as Laboratory Developed Tests (LDTs), which are regulated under CLIA. The FDA has authority over LDTs but has historically exercised enforcement discretion[107][190] - The company is subject to numerous healthcare regulations, including CLIA, HIPAA, state laboratory licensing laws, and federal/state anti-kickback and fraud and abuse laws[202][203] Risk Factors The company faces significant risks including recurring net losses, uncertain profitability, reliance on single-source manufacturers, intense competition, and complex regulatory and reimbursement landscapes Risks related to our financial condition and need for additional capital The company has a history of recurring net losses, reported a $41.1 million net loss in 2020, and faces uncertainty regarding future profitability and capital needs, alongside restrictive debt covenants - The company has a history of recurring net losses, reporting a net loss of $41.1 million for the year ended December 31, 2020, and an accumulated deficit of $143.7 million[144] - The business has been adversely affected by the COVID-19 pandemic, which has disrupted operations, impacted productivity, and may continue to negatively affect demand and financial results[148] - The company's debt facility with Innovatus contains restrictive covenants. The company was not in compliance with the revenue covenant for Q3 2020 and has previously breached covenants, requiring waivers and fees to avoid default[146][153] Risks related to our business operations Key business risks include achieving market acceptance, reliance on single-source manufacturers, long sales cycles, intense competition, and cybersecurity threats - Market acceptance of the Saphyr system is a key risk, as potential customers may be reluctant to replace their existing, long-used research systems[155] - The company relies on a single contract manufacturer for its Saphyr instruments and a single contract manufacturer for its chip consumables, posing a significant risk to supply continuity[170] - The life sciences research and diagnostic markets are highly competitive, with competitors including Pacific Biosciences, Oxford Nanopore, and 10x Genomics, many of whom have greater financial and human resources[183] Risks related to government regulation and diagnostic product reimbursement Significant regulatory risks include potential FDA oversight of RUO products and LDTs, and the uncertainty of obtaining favorable reimbursement for diagnostic tests - A primary risk is the potential for the FDA to regulate the company's RUO products as medical devices, which would require costly and lengthy clearance or approval processes and could halt sales[188] - A significant change in how the FDA regulates Laboratory Developed Tests (LDTs) could substantially increase the cost and time to commercialize the company's diagnostic services and reduce demand from customer labs[190] - The company's and its customers' ability to generate revenue from diagnostic tests depends on obtaining and maintaining favorable coverage and reimbursement from government and private payors, which is complex and uncertain[195][198] Risks Related to Intellectual Property The company's success depends on protecting its intellectual property, which faces risks from patent challenges, competitor circumvention, reliance on licensed technology, and potential infringement lawsuits - The company relies on patent protection, but cannot guarantee that pending applications will issue as patents or that existing patents will not be challenged, invalidated, or circumvented by competitors[208] - A core part of the company's technology is licensed exclusively from Princeton University. A breach of this license agreement could lead to its termination, preventing the company from selling its products[210] - The company could be sued for infringing third-party intellectual property rights, which could result in costly litigation, substantial damages, and potentially block the sale of its products[213] Unresolved Staff Comments The company reports that it has no unresolved staff comments - None[248] Properties The company leases its headquarters in San Diego and an office in Salt Lake City, anticipating future space needs for growth - The company leases its main facility of 35,823 sq. ft. in San Diego, CA (lease expires Dec 2025) and a 9,710 sq. ft. office in Salt Lake City, UT (lease expires Sep 2021)[249] Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[250] Mine Safety Disclosures Not applicable, as the company has no mine safety disclosures - None[251] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "BNGO", has approximately 90 record holders, and does not intend to pay cash dividends - Common stock trades on The Nasdaq Capital Market under the symbol "BNGO"[255] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[258] Selected Financial Data As a smaller reporting company, Bionano Genomics is not required to provide selected financial data - Not required as the company is a smaller reporting company[263] Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2020, total revenue decreased by 16% to $8.5 million, net loss widened to $41.1 million, but liquidity significantly improved through recent equity offerings Results of Operations In 2020, total revenue decreased 16% to $8.5 million due to lower instrument sales, while net loss widened to $41.1 million driven by increased operating expenses Results of Operations (2020 vs. 2019) | Metric | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $8,502,984 | $10,129,508 | ($1,626,524) | (16)% | | Instrument Revenue | $3,084,869 | $6,762,463 | ($3,677,594) | (54)% | | Consumable Revenue | $3,144,742 | $2,711,981 | $432,761 | 16% | | Service & Other Revenue | $2,273,373 | $655,064 | $1,618,309 | 247% | | Total Cost of Revenue | $5,730,137 | $6,768,147 | ($1,038,010) | (15)% | | Loss from Operations | ($38,551,322) | ($25,874,906) | ($12,676,416) | 49% | | Net Loss | ($41,106,351) | ($29,815,070) | ($11,291,281) | 38% | | Net Loss Per Share | ($0.39) | ($1.99) | | | - Selling, general and administrative (SG&A) expenses increased by $10.9 million (54%) in 2020, due to headcount additions, increased legal/accounting fees, $1.5 million in transaction costs for the Lineagen acquisition, and a $1.8 million bad debt expense[287] Liquidity and Capital Resources The company experienced negative cash flow from operations in 2020 but significantly improved its liquidity position through substantial equity offerings in late 2020 and early 2021 Cash Flow Summary (2020 vs. 2019) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($38,314,378) | ($29,529,720) | | Net cash used in investing activities | ($2,449,952) | ($61,056) | | Net cash provided by financing activities | $61,901,667 | $30,379,420 | - As of December 31, 2020, the company had $38.4 million in cash and cash equivalents and an accumulated deficit of $143.7 million[289] - Subsequent to year-end, in January 2021, the company raised gross proceeds of approximately $101.8 million and $230.0 million from two separate underwritten public offerings[298] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Bionano Genomics is not required to provide market risk disclosures - Not required as the company is a smaller reporting company[320] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2020 and 2019, including balance sheets, income statements, cash flows, and detailed notes Consolidated Balance Sheet Summary (as of Dec 31) | | 2020 | 2019 | | :--- | :--- | :--- | | Total Current Assets | $46,789,156 | $28,258,241 | | Cash and cash equivalents | $38,448,710 | $17,311,373 | | Total Assets | $60,449,526 | $30,207,866 | | Total Current Liabilities | $8,943,976 | $26,367,021 | | Total Liabilities | $25,367,352 | $26,594,148 | | Total Stockholders' Equity | $35,082,174 | $3,613,718 | Consolidated Statement of Operations Summary (Year Ended Dec 31) | | 2020 | 2019 | | :--- | :--- | :--- | | Total Revenue | $8,502,984 | $10,129,508 | | Total Cost of Revenue | $5,730,137 | $6,768,147 | | Total Operating Expenses | $41,324,169 | $29,236,267 | | Loss from Operations | ($38,551,322) | ($25,874,906) | | Net Loss | ($41,106,351) | ($29,815,070) | | Net Loss Per Share | ($0.39) | ($1.99) | - In August 2020, the company acquired Lineagen, Inc. for consideration including approximately $1.9 million in cash and 6.17 million shares of common stock, plus the assumption of $2.9 million in liabilities. The acquisition added $7.2 million in goodwill and $1.6 million in intangible assets[451][453] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports that there were no changes in or disagreements with accountants on accounting and financial disclosure - None[456] Controls and Procedures Management identified a material weakness in internal control over financial reporting as of December 31, 2020, due to insufficient resources and inadequate segregation of duties, with remediation efforts underway - Management identified a material weakness in internal control over financial reporting as of December 31, 2020[459] - The weakness was due to an insufficient number of resources, leading to inadequate segregation of duties. This did not result in any identified material misstatements[459] - Remediation efforts include engaging external consultants and hiring additional qualified financial personnel to enhance internal controls[460][462] Other Information The company reported that on March 15, 2021, its Paycheck Protection Program (PPP) loan of approximately $1.77 million, received in April 2020, was forgiven in full by the Small Business Administration (SBA), including all accrued interest - The company's Paycheck Protection Program (PPP) loan of approximately $1.77 million, plus accrued interest, was forgiven in full by the SBA, effective March 15, 2021[464] Part III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the 2021 Proxy Statement, and the company has adopted a code of business conduct and ethics - Information is incorporated by reference from the 2021 Proxy Statement[467] - The company has adopted a code of business conduct and ethics applicable to all employees, officers, and directors[468] Executive Compensation Information for this item is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[469] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[470] Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[471] Principal Accounting Fees and Services Information for this item is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[472] Part IV Exhibits, Financial Statement Schedules This section lists all documents filed as part of the Annual Report, including financial statements and an index of exhibits - This section provides an index of all exhibits filed with the Form 10-K, including material contracts and corporate governance documents[477][478] Form 10-K Summary The company reports that there is no Form 10-K summary - None[482]