Biodesix, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Biodesix develops and commercializes diagnostic tests, primarily for lung disease, and provides testing and research services to biopharmaceutical companies. Q1 revenue growth was driven predominantly by COVID-19 testing.
Key financial results
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $28.9 million | $5.1 million |
| Direct costs and expenses | $18.2 million | $1.6 million |
| Gross profit / margin (calculated) | $10.6 million / 36.9% | $3.5 million / 69.0% |
| Operating loss | $5.6 million | $8.4 million |
| Net loss | $7.0 million | $9.7 million |
| Operating cash flow | $(11.3) million | $(4.5) million |
- Revenue increased 466%. Diagnostic-test revenue was $27.2 million, including $23.2 million from COVID-19 tests; services revenue was $1.7 million.
- Management reported lung diagnostic revenue growth of 10% and biopharmaceutical service revenue growth of 12% versus Q1 2020.
- Operating expenses rose 155% to $34.4 million, led by higher direct testing costs. R&D was $3.3 million, sales, marketing, general and administrative expense was $11.9 million, and the contingent-consideration remeasurement charge was $1.0 million.
- Interest expense was $0.7 million; the company also recorded a $0.7 million loss on extinguishment of debt.
Liquidity, debt and balance sheet
- At March 31, 2021, cash and cash equivalents were $55.3 million, down from $62.1 million at year-end 2020. Current assets were $81.2 million and current liabilities were $16.1 million.
- Cash, cash equivalents and restricted cash decreased $6.9 million during the quarter. Investing activities used $0.5 million; financing activities provided $5.0 million.
- Debt carrying value was $33.0 million: a new $30 million term loan and approximately $3.1 million under the Paycheck Protection Program (PPP) loan. The company repaid $25.9 million of 2018 Notes in connection with the refinancing.
- The new term loan bears interest at the greater of prime plus 2.00% or 5.25%, has interest-only payments through February 2023 (potentially February 2024 if a revenue milestone is met), and matures March 1, 2026. It includes liquidity and revenue covenants and is secured by substantially all company assets.
- Contingent consideration was $30.9 million. If specified performance targets are met, the seller may have rights that could require a $37 million share repurchase, payable over eight quarters, subject to the agreement’s terms.
Changes, outlook and risks
- The sharp year-over-year revenue increase reflects COVID-19 testing launched after Q1 2020; management cautions that this demand may not persist and may not indicate future revenue.
- Management said lung testing and biopharmaceutical activity had begun recovering, but COVID-19 restrictions continued to delay clinical trials. It expected further improvement in biopharmaceutical activity in the second half of 2021. No specific full-year revenue or earnings guidance was provided.
- Management expects continued significant expenses and near-term operating losses, but believes cash, cash equivalents and cash generated from sales will cover anticipated needs for at least 12 months from the report date. It also said additional capital may be needed.
- COVID-19 may continue to disrupt lung testing, clinical studies and customer trials; reduced demand or revocation of the tests’ FDA Emergency Use Authorizations could adversely affect results. The Big Ten Conference represented 58% of Q1 revenue and 66% of accounts receivable at quarter-end, creating notable customer concentration.
- Other disclosed risks include reimbursement uncertainty, reliance on single-source suppliers, competition, product performance, data security, regulatory compliance and the ability to sustain market adoption. The company reported no material legal proceedings and no default under the new term loan as of March 31, 2021.
- Disclosure controls and procedures were assessed as effective at the reasonable-assurance level; the filing reports no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- How much revenue and cash generation depend on COVID-19 testing, and whether demand and related margins continue.
- Whether lung-test adoption and biopharmaceutical services recover as management expected, including the effect of delayed clinical trials.
- Accounts-receivable collection from the Big Ten Conference and the company’s exposure to other concentrated customers.
- Compliance with the term loan’s liquidity and revenue covenants, future debt service, and the company’s stated liquidity runway.
- The probability, timing and potential cash impact of the Indi contingent-consideration arrangement and its possible $37 million repurchase obligation.