Biodesix, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited results. Biodesix develops and commercializes diagnostic tests, primarily for lung disease, and provides testing and development services to biopharmaceutical companies.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $6.5 million | $28.9 million |
| Gross profit / gross margin | $3.3 million / 51% | $10.6 million / 37% |
| Operating expenses | $21.0 million | $34.4 million |
| Operating loss | $14.5 million | $5.6 million |
| Net loss | $15.6 million | $7.0 million |
| Basic and diluted loss per share | $0.50 | $0.26 |
| Cash used in operating activities | $13.1 million | $11.3 million |
- Revenue fell 77% year over year. Diagnostic-test revenue was $5.6 million, down 79%; services revenue was $0.9 million, down 45%.
- Management attributed the diagnostic decline chiefly to COVID-19 testing revenue falling $22.3 million; core lung diagnostic revenue increased $0.7 million, or 17%, to $4.6 million. COVID-19 testing revenue was approximately $1.0 million, down 96%.
- Gross margin improved as sales shifted toward higher-margin lung diagnostics and away from COVID-19 testing, partly offset by costs of launching GeneStrat NGS.
- Sales, marketing, general and administrative expense rose 21% to $14.5 million, primarily due to workforce expansion and sales and marketing activity. Research and development expense was $3.2 million, down 3%.
- Cash and cash equivalents were $16.4 million at March 31, 2022, versus $32.7 million at December 31, 2021. Current assets were $27.2 million and current liabilities $29.8 million. Total liabilities were $53.9 million; stockholders’ equity was $7.8 million.
- Term-loan principal outstanding was $10.0 million at quarter-end. Contingent consideration related to the Indi acquisition was $30.0 million. Operating lease liabilities were $2.3 million.
Material changes and subsequent events
- Cash declined $16.3 million during the quarter. Financing cash use included a $4.6 million Indi milestone payment, partly offset by approximately $1.7 million of net common-stock proceeds.
- After quarter-end, Biodesix raised approximately $11.7 million through a private placement and approximately $2.7 million net through its at-the-market offering. It repaid $3.0 million of term-loan principal in April; a further $2.0 million repayment was extended to September 30, 2022, subject to the stated funding conditions.
- On May 9, 2022, the company issued a secured convertible note with $16.025 million principal in exchange for $15.0 million gross proceeds (approximately $13.0 million net). A further $10.25 million-principal note for $10.0 million proceeds is available only if specified conditions are met. The notes carry 6% interest; redemption may be made in cash or, subject to limits, shares priced at 85% of the lowest daily VWAP during the preceding ten trading days.
- The Indi payment schedule was amended after quarter-end, spreading payments into 2024 and adding a $6.075 million exit fee in October 2024; interest at 10% applies to specified deferred amounts. Payments remain subject to lender consent.
- The company signed a 12-year lease for a planned Louisville, Colorado headquarters and laboratory. The lease provides for landlord construction contributions and a required $5.0 million cash-collateralized letter of credit upon commencement. The filing expected accounting commencement in Q2 2022.
Outlook, risks and unusual items
- Going concern: Management states that substantial doubt exists about the company’s ability to continue as a going concern. It expects, under its operating plan, that it may not maintain term-loan financial covenants over the next 12 months without additional capital or covenant relief; default could accelerate repayment. Subsequent financings and amendments address liquidity needs, but do not eliminate the stated risks or guarantee adequate future funding.
- Management reported all borrowing covenants were met at March 31, 2022, while also noting that future covenant compliance is at risk. Additional financing may dilute shareholders, impose restrictive terms, or be unavailable; absent adequate capital, the company may substantially reduce operations.
- Management reported lung-test deliveries reached an all-time high in March as care providers returned toward pre-pandemic practices. It expects COVID-19 testing demand to remain below its Q1 2021 peak; no quantified revenue or earnings guidance is provided.
- Key operating risks include COVID-19 disruption to lung testing and clinical studies, reimbursement and payer coverage, adoption of tests, competition, dependence on suppliers, and volatility in biopharmaceutical service revenue. COVID-19 tests rely on emergency-use authorizations that may be revoked.
- Unusual items include $81,000 of intangible-asset impairment and $379,000 of inventory excess and obsolescence charges. The 2021 comparison included a $728,000 debt-extinguishment loss and $983,000 contingent-consideration fair-value expense.
Important facts for investors to verify
- Cash runway and covenant compliance after the private placement, ATM proceeds, term-loan repayment, and May convertible-note financing.
- Whether the conditional second Streeterville note becomes available and the resulting dilution, redemption costs, and repayment obligations.
- Actual payment dates, lender consents, accrued interest, and total cash burden under the revised Indi schedule and exit fee.
- Whether core lung diagnostic growth persists and offsets lower COVID-19 testing and uneven biopharmaceutical services revenue.
- Commencement and full financial impact of the new headquarters lease, including the cash-collateralized letter of credit.