Biodesix, Inc. — Form 10-K Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2021, with fourth-quarter highlights. Biodesix is a diagnostic testing and services company focused primarily on lung disease. It sells blood-based lung tests, COVID-19 tests and diagnostic research, clinical-trial and companion-diagnostic services to biopharmaceutical companies.
COVID-19 testing remained the largest single revenue source, while the company’s strategy is to grow its core lung diagnostics. The company reported operating as one segment.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 / comparison |
|---|---|---|
| Revenue | $54.5 million | $45.6 million; up 20% |
| Lung diagnostic revenue | $18.7 million | $12.6 million; up 49% |
| COVID-19 testing revenue | $30.2 million | $28.3 million; up 7% |
| Biopharmaceutical services revenue | $5.6 million | $4.6 million; up 20% |
| Gross profit and margin | $24.0 million; approximately 44% | $23.6 million; approximately 52% |
| Operating loss | $40.9 million | $22.9 million |
| Net loss | $43.2 million, or $1.58 per share | $31.4 million, or $6.48 per share |
| Cash used in operating activities | $28.2 million | $21.4 million |
| Cash and cash equivalents at year-end | $32.7 million | $62.1 million |
Gross profit and margin are calculated from reported revenue less direct costs and expenses; margin declined as direct costs grew faster than revenue. Fourth-quarter revenue was $7.2 million, including $5.4 million from lung diagnostics, $1.4 million from services and $0.4 million from COVID-19 testing. Q4 gross profit was $4.7 million, or 65% of revenue, and net loss was $13.3 million.
At year-end, total assets were $76.1 million, total liabilities $56.4 million and stockholders’ equity $19.7 million. Current assets were $43.6 million and current liabilities $29.0 million. The company had $10.0 million principal outstanding under its secured 2021 term loan, following a $20 million repayment in December. The loan carries a floating rate with a 5.25% floor and has an interest-only period through February 2024; final maturity is March 2026.
Material changes versus the prior year
- Total revenue increased 20%, led by 49% growth in lung diagnostics, principally Nodify XL2 and Nodify CDT. COVID-19 testing revenue increased for the full year, but fell sharply during the year as demand shifted toward point-of-care and at-home tests and the Big Ten contract ended.
- Direct costs rose 39%, while reported operating expenses rose 39%. Sales, marketing, general and administrative expense increased 45%, reflecting workforce and sales-force expansion, stock compensation and public-company costs. Net loss widened 38%.
- Operating cash outflow increased by $6.9 million. The year-end cash balance fell by $29.4 million; financing cash flow was only $1.3 million after loan repayments, despite $15.7 million net proceeds from a December at-the-market share offering.
- The company received forgiveness of its $3.1 million Paycheck Protection Program loan and recorded a gain on debt extinguishment. It also repaid $20 million of its new term loan in December and amended loan covenants.
Outlook, risks, contingencies and unusual items
- Going concern: The auditor’s report and management state that substantial doubt exists about the company’s ability to continue as a going concern for the following twelve months. Management said its operating plan could result in failure to meet term-loan covenants absent additional capital or covenant relief. Further financing was not secured at filing; if funding is unavailable, management may substantially limit operations.
- Management outlook: The company expected further improvement in biopharmaceutical services activity in 2022 and viewed declining COVID-19 testing demand as potentially supportive of recovery in lung diagnostics and services. It did not provide a numerical revenue or earnings forecast. Management cautioned that COVID-19 testing demand may moderate and is not a reliable indicator of future revenue.
- Indi acquisition payment: A milestone triggered a $37.0 million obligation, amended to six quarterly payments of approximately $4.6 million beginning January 2022 and a final payment of approximately $9.3 million in July 2023. The first $4.6 million payment was made in January 2022; future payments require lender consent.
- Customer concentration: The Big Ten Conference represented 40% of 2021 revenue; Medicare reimbursement represented 18%. The filing also says two customers accounted for 45% of total revenue. The Big Ten contract expired June 30, 2021.
- Other risks: COVID-19 and variant-related disruption, reimbursement and payer coverage, acceptance of lung tests, competition, regulatory changes affecting laboratory-developed tests, FDA emergency authorizations, single-source suppliers, and dependence on additional capital are significant uncertainties. Bio-Rad is a sole-source supplier for GeneStrat and COVID-19 testing components.
- Post-year-end financing and facilities: In March 2022, Biodesix entered into a committed, discretionary equity purchase agreement with Lincoln Park for up to $50 million over 36 months, subject to terms and share limits. It also signed a lease for approximately 80,000 square feet in Louisville, Colorado, with a 12-year initial term and substantial future rent and letter-of-credit obligations.
- Legal matter: A Telephone Consumer Protection Act dispute was settled; a payment of approximately $210,000 was approved in January 2022 and had been accrued in 2021. The company reported no other legal proceedings expected to have a material adverse effect.
Most important facts for investors to verify
- Whether the company raises sufficient capital and maintains or obtains waivers for its loan covenants, and how the auditor’s going-concern warning affects liquidity.
- Whether lung diagnostic revenue growth and biopharmaceutical services recovery can offset the decline in COVID-19 testing.
- The timing, lender consent and cash impact of the remaining $37 million Indi milestone payments.
- Revenue concentration, especially the loss of the Big Ten contract and the continued importance of Medicare and other major customers.
- The economics and funding requirements of the new Louisville lease, and the amount of equity ultimately issued under the Lincoln Park facility.