Bionano Genomics, Inc. quarterly report, Q1 FY2023

Bionano Genomics, Inc. — Q1 2023 Form 10-Q

Reporting period: Three months ended March 31, 2023. The company provides optical genome mapping (OGM) systems and consumables, genomic software, diagnostic services, and nucleic-acid purification products.

Financial performance

Revenue rose 30%, with product revenue up 30% and service and other revenue up 32%. Product gross margin increased to 29% from 15%, which management attributed partly to higher sales, improved chip yields, and lower scrap and quality-control costs. Total operating expenses grew 30%, primarily from higher research and development spending, headcount, professional services, marketing, acquired-intangible amortization, and acquisition-related contingent consideration expense. Higher interest income contributed to the year-over-year change in other income.

Liquidity, capital and balance sheet

• At March 31, cash and cash equivalents were $4.1 million, short-term investments were $91.7 million, and working capital was $104.4 million. Cash, cash equivalents, and restricted cash totaled $4.5 million.
• Management reported recurring losses and operating cash outflows and concluded there is substantial doubt about the company’s ability to continue as a going concern within 12 months after the filing’s issuance. Management says existing cash and investments are insufficient for that period and additional financing is needed; financing may not be available on acceptable terms or at all.
• The company raised approximately $15.2 million gross through its Cowen at-the-market facility in Q1 by selling approximately 9.5 million shares at an average $1.60 per share. The facility was amended to provide for up to $200 million of sales from the amendment date. Shares outstanding increased from 297.2 million at year-end to 306.8 million at March 31.
• No conventional borrowing balance is reported. Lease liabilities totaled approximately $11.2 million, and acquisition-related contingent consideration was $23.1 million, including $9.5 million current. Potential milestone payments include up to $32 million related to Purigen, in addition to BioDiscovery consideration.
• Total assets were $292.2 million and stockholders’ equity was $231.5 million. Accumulated deficit was $385.8 million.

Business developments, outlook and risks

• The Saphyr installed base reached 259, up approximately 47% year over year; flowcells sold rose approximately 62% to 5,226. Management linked product growth to demand for OGM systems and reagent-rental placements, and service growth mainly to Bionano Laboratories sample-analysis volume.
• Management expects revenue to increase as OGM awareness, published evidence, workflow efficiencies, and acquired businesses contribute. It anticipates cash used in operations may decrease over the next 12–24 months, but expects continued operating losses and cash outflows.
• On May 9, 2023, the company announced a cash-savings initiative that included workforce reductions. Management expected previously planned R&D and SG&A spending to decrease in the remainder of 2023; savings and execution are uncertain. The filing provides no specific revenue or earnings guidance.
• Risks include the need for additional capital and potential dilution, uncertain market adoption and customer research budgets, supply-chain and manufacturing dependence, regulatory limits on research-use-only products and diagnostic reimbursement, acquisition integration and milestone costs, and volatile share price. Management said a post-quarter share-price decline could lead to a material goodwill impairment in a future period.
• Subsequent event: on April 13, the company issued one Series A Preferred share to the board chair. It carries 3 billion votes only on the specified reverse-stock-split proposal, subject to stated voting conditions, and is redeemable following approval or at the board’s direction. The filing also describes a proposed 1-for-5 to 1-for-10 reverse split for stockholder consideration.
• The company reported no material litigation and said disclosure controls and procedures were effective at quarter-end. It was integrating Purigen’s internal controls.

Key facts investors should verify

• How much additional capital is needed, when it must be raised, and the likely cost and dilution; monitor liquidity against the going-concern warning.
• Whether the May 2023 cost-savings initiative delivers the expected reductions without impairing sales, research, or operations.
• Whether installed-base growth translates into sustained consumables use, revenue growth, and improved gross margins.
• The timing and probability of BioDiscovery and Purigen milestone payments, and their cash-flow impact.
• Whether the reverse-split proposal proceeds and how the special preferred-share voting arrangement affects the vote.
• Whether the subsequent share-price decline or other developments trigger a goodwill impairment.