Singular Genomics Systems(OMIC) - 2021 Q4 - Annual Report

Part I Business Singular Genomics develops NGS and multiomics technologies, launching G4 in 2021 and developing PX - The company's mission is to accelerate genomics for the advancement of science and medicine by developing powerful, fast, flexible, and accurate sequencing products[18] - The company's foundational technology is a proprietary Sequencing Engine, which forms the basis for its two main products: the G4 for the NGS market and the PX for the multiomics market[21][22] - The G4 sequencer was commercially launched in December 2021, with shipments expected to begin in the second quarter of 2022. The PX multiomics platform is anticipated to launch commercially in 2023[23][24] - As of December 31, 2021, the company had 221 full-time employees, with 134 in research and development[42][48] Our Products The company offers the G4 NGS sequencer and is developing the PX multiomics platform for high-throughput analysis - The G4 sequencer is designed with four flow cells, providing flexibility and high throughput. It achieves cycle times of 2.5 minutes and Q30 or higher accuracy on 75%-90% of base calls[29] - Specialized kits for the G4 are planned for Q4 2022, including HD-Seq for high-accuracy rare variant detection (Q50) and XR-Seq for long reads up to 3,000 base pairs, targeting applications in oncology and immunology[31][33] - The PX platform is designed for high-throughput multiomics, processing 1 million to 10 million cells per run and up to 96 tissue samples, a significant increase over current technologies[37] Commercialization and Market Strategy The strategy focuses on G4 and PX instrument adoption for recurring consumable revenue, initially in North America - The business model is centered on placing instruments (G4 and PX) to drive a recurring revenue stream from the sale of consumables[43] - The commercial strategy for the G4 involved a three-step process: beta pilot tests (completed 2021), an early access program (substantially complete), and a broad market launch (December 2021)[44][45] - Initial commercial efforts are focused on North America via a direct sales organization, with future expansion planned for Europe and Asia Pacific through direct sales and distributors[47] Intellectual Property The company protects its technology with 9 issued US patents and licenses from Columbia University - As of February 1, 2022, the company owns or exclusively licenses 9 issued U.S. patents, with many more applications pending globally. Owned patents are expected to expire between 2038 and 2042[52] - The company has an exclusive license agreement with Columbia University for patents related to sequencing compositions and methods. This agreement includes annual fees, potential royalties, and up to $3.9 million in milestone payments[55][58] Risk Factors Significant risks include limited operating history, net losses, competition, and product commercialization challenges - The company is a pre-revenue entity with a history of significant losses ($98.8 million in 2021) and expects to incur future losses, making it difficult to evaluate its prospects[84][85] - The life sciences market is highly competitive, with rivals like Illumina, 10x Genomics, and Thermo Fisher having greater resources, brand recognition, and established customer relationships[88][89] - The business is highly dependent on the successful commercialization of the G4 and development of the PX. Failure to achieve market acceptance or meet performance metrics would substantially harm the business[91][92] - The company faces significant intellectual property risks, including potential infringement lawsuits from competitors and the challenge of protecting its own patents and trade secrets[160][161] - Regulatory risks include potential changes to the FDA's oversight of Research Use Only (RUO) products and Laboratory Developed Tests (LDTs), which could subject the company's products to more stringent and costly regulations[198][199][200] Properties The company leases 83,515 sq ft in California and secured new leases for over 205,000 sq ft for HQ - As of year-end 2021, the company leased 83,515 sq. ft. in La Jolla and San Diego[242] - In January 2022, the company leased two new buildings to be constructed in La Jolla, comprising 113,094 sq. ft. and 92,572 sq. ft., to serve as its future headquarters[243] Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[245] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common stock trades on Nasdaq (OMIC); no dividends paid; May 2021 IPO raised $237.2 million - The company's common stock trades on the Nasdaq Global Select Market under the symbol "OMIC"[249] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[250] - The IPO in May 2021 generated net proceeds of approximately $237.2 million, and the planned use of these proceeds has not materially changed[254] Management's Discussion and Analysis of Financial Condition and Results of Operations Pre-revenue company with $98.8 million net loss in 2021 due to increased R&D and SG&A expenses Results of Operations Net loss increased to $98.8 million in 2021, driven by higher R&D, SG&A, and non-cash charges Results of Operations (2021 vs. 2020) | | Twelve Months Ended December 31, | | Change | | :--- | :--- | :--- | :--- | | (in thousands) | 2021 | 2020 | $ | | Research and development | $32,655 | $21,247 | $11,408 | | Selling, general and administrative | $28,624 | $6,287 | $22,337 | | Loss from operations | ($61,279) | ($27,534) | ($33,745) | | Change in fair value of convertible promissory notes | ($35,199) | - | ($35,199) | | Net loss | ($98,771) | ($27,945) | ($70,826) | - R&D expenses increased by $11.4 million (54%) in 2021, primarily due to a $7.6 million increase in employee compensation costs to support the G4 and PX development efforts[285] - SG&A expenses increased by $22.3 million (355%) in 2021, mainly from a $13.9 million rise in employee compensation and a $6.0 million increase in professional fees related to becoming a public company[286] Liquidity and Capital Resources Financed by IPO, the company holds $339.2 million in cash, sufficient for 12 months of operations - As of December 31, 2021, the company had cash, cash equivalents, and short-term investments of $339.2 million and an accumulated deficit of $151.9 million[290] Cash Flow Summary (2021 vs. 2020) | | Year Ended December 31, | | | :--- | :--- | :--- | | (in thousands) | 2021 | 2020 | | Net cash used in Operating activities | $(51,701) | $(24,873) | | Net cash (used in) provided by Investing activities | $(130,861) | $24,005 | | Net cash provided by Financing activities | $372,128 | $7,515 | - In September 2021, the company refinanced its debt with Silicon Valley Bank, securing a new loan agreement for up to $35.5 million. The proceeds of the first tranche ($10.5 million) were used to repay the prior loan[302] Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate sensitivity on investments; inflation has no material effect - The company's market risk is primarily limited to interest rate sensitivity on its cash and investment portfolio[324] - The company does not believe that inflation has had a material effect on its business or financial condition[325] Financial Statements and Supplementary Data Includes audited financial statements for 2021 and 2020, reflecting pre-revenue status and liquidity Balance Sheets Balance sheet shows increased assets and equity to $355.6 million due to IPO proceeds Balance Sheet Highlights (As of Dec 31) | | 2021 | 2020 | | :--- | :--- | :--- | | (in thousands) | | | | Cash, cash equivalents & short-term investments | $339,223 | $26,919 | | Total Assets | $355,648 | $30,502 | | Total Liabilities | $19,475 | $12,873 | | Total Stockholders' Equity (Deficit) | $336,173 | $(51,555) | Statements of Operations Net loss reached $98.8 million in 2021, driven by higher operating expenses and non-cash charges Statement of Operations Highlights (Year Ended Dec 31) | | 2021 | 2020 | | :--- | :--- | :--- | | (in thousands, except per share data) | | | | Loss from operations | $(61,279) | $(27,534) | | Net loss | $(98,771) | $(27,945) | | Net loss per share, basic and diluted | $(2.10) | $(2.64) | Statements of Cash Flows Cash flows show $51.7 million used in operations, offset by $372.1 million from financing activities Statement of Cash Flows Highlights (Year Ended Dec 31) | | 2021 | 2020 | | :--- | :--- | :--- | | (in thousands) | | | | Net cash used in operating activities | $(51,701) | $(24,873) | | Net cash (used in) provided by investing activities | $(130,861) | $24,005 | | Net cash provided by financing activities | $372,128 | $7,515 | Controls and Procedures Disclosure controls were effective; new ERP system implemented in Q4 2021, modifying internal controls - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[448] - The company is exempt from providing a management assessment on internal control over financial reporting due to its status as a newly public company[450] - A new enterprise resource planning (ERP) system was implemented in Q4 2021, resulting in changes to internal controls[451] Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters Information for Items 10-14 is incorporated by reference from the 2022 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[456][458][459] Part IV Exhibits, Financial Statement Schedules Lists financial statements and all exhibits filed or incorporated by reference into the annual report - This section lists all exhibits filed with the Form 10-K, including the Certificate of Incorporation, Bylaws, material contracts such as lease agreements and the license agreement with Columbia University, and executive compensation plans[466]