Bionano Genomics, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Bionano develops and markets the Saphyr genome analysis system, including instruments, consumables, reagents, and data analysis tools.
Key financial metrics
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $2.17 million | $3.39 million | $4.03 million | $5.16 million |
| Gross profit (gross margin) | $0.62 million (28.5%) | $1.58 million (46.5%) | $1.33 million (32.9%) | $2.50 million (48.5%) |
| Operating loss | $6.84 million | $4.01 million | $13.03 million | $8.35 million |
| Net loss | $7.66 million | $3.31 million | $15.52 million | $7.16 million |
| Net loss per share | $0.71 | $0.98 | $1.47 | $1.37 |
| Cash used in operating activities | Not provided separately for Q2 | Not provided separately for Q2 | $12.87 million | $9.75 million |
At June 30, cash and cash equivalents were $15.29 million, current assets $23.93 million, current liabilities $7.54 million, and total liabilities $26.56 million. Long-term debt was $18.62 million, plus $0.80 million outstanding on the revolving credit line. Stockholders’ equity was negative $1.34 million; accumulated deficit was $88.28 million.
Material changes versus comparable periods
- Q2 revenue fell 35.9% year over year; product revenue declined 37.9%. Management attributed the decline mainly to lower international sales: EMEIA revenue fell 51% and Asia Pacific fell 66%; North America decreased 9%.
- For the first half, revenue declined 21.9%. North America fell 13% and Asia Pacific 74%, partly offset by a 26% increase in EMEIA.
- Q2 gross margin declined to 28.5% from 46.5%; first-half gross margin declined to 32.9% from 48.5%. Management cited fewer instruments shipped and lower consumables sales in Q2. For the first half, instrument shipments increased 17%, but total cost of revenue was approximately flat.
- Q2 operating expenses increased 33.5%, including a 44.9% increase in selling, general and administrative expense. The company cited added sales, marketing and support personnel, public-company costs, and higher marketing spending. First-half SG&A rose 54.2%.
- Net loss widened in both periods. The comparisons also reflect prior-year gains from changes in fair value and expirations of preferred-stock warrants; those warrants became equity-classified after the 2018 IPO and are no longer remeasured. First-half 2019 results included a $0.92 million loss on extinguishing MidCap debt and related prepayment costs.
Cash flow, financing, outlook, and risks
- First-half operating cash use increased to $12.87 million from $9.75 million. Investing cash use was $0.03 million; financing provided $11.67 million. Cash decreased by $1.23 million during the six months.
- In March 2019, Bionano replaced its MidCap facility with an Innovatus loan agreement: $20.0 million in term loans was drawn, with an additional $5.0 million term tranche subject to conditions and a $5.0 million revolving facility. At June 30, term-loan principal was $20.0 million and revolver borrowings were $0.8 million. The debt is secured by substantially all assets, including intellectual property. The stated effective interest rate was 13.4%; interest includes a payment-in-kind component, and scheduled principal payments begin after the interest-only period ending March 2022.
- The company also reported equity-sale arrangements with Aspire Capital and Innovatus-affiliated investors. These financings and the debt transactions supported liquidity, but did not eliminate the funding shortfall disclosed by management.
- Going concern: Management stated that existing cash and expected resources would not be sufficient for anticipated needs over at least the next 12 months, raising substantial doubt about the company’s ability to continue as a going concern. It expects ongoing losses and negative operating cash flows and plans to seek additional funding through equity or debt, collaborations, licensing, asset sales, or other arrangements. Availability and terms are uncertain; failure to obtain funding could require reduced or delayed operations and development.
- Management expects significant expenses and operating losses to continue as it expands commercialization, research and development, staffing, and public-company infrastructure. The filing provides no specific revenue or earnings guidance.
- Debt covenants restrict certain activities; a default could accelerate repayment and expose pledged assets to foreclosure. Bionano reported covenant compliance at June 30. The filing reported no accrued litigation losses and no pending claims or legal actions for which it was a defendant.
Investor verification points
- Whether Bionano can raise sufficient capital to fund operations for at least the next 12 months, and the terms and dilution associated with any financing.
- Revenue trends by product and region, instrument shipments, installed-base utilization, and recurring consumables sales, particularly given the sharp international revenue declines.
- Cash burn, available borrowing capacity and conditions on the remaining term-loan tranche, debt service requirements, and continued compliance with Innovatus covenants.
- The drivers and sustainability of lower gross margins and higher commercialization and support costs.
- Potential dilution from outstanding warrants, options, and equity-purchase arrangements; the filing reports 4.22 million common warrants outstanding and 1.72 million options.