Biodesix, Inc. — Q2 2023 Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2023. Financial statements are unaudited. Biodesix develops and provides diagnostic tests and related services, with a primary focus on lung disease.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $11.9 million | $11.0 million | $20.9 million | $17.5 million |
| Gross profit / margin | $8.6 million / 73% | 64% margin | Not clearly stated for the six-month period | Not clearly stated for the six-month period |
| Operating loss | $10.9 million | $11.6 million | $27.3 million | $26.1 million |
| Net loss | $13.4 million | $15.8 million | $32.1 million | $31.4 million |
| Net loss per share | $0.17 | $0.40 | $0.41 | $0.89 |
| Cash used in operating activities | Six-month period: $6.7 million | Prior-year six-month period: $22.7 million |
- Q2 revenue rose 8% year over year; six-month revenue rose 20%. Core lung diagnostic revenue grew 58% in Q2 and 69% for the six months. Q2 revenue growth was 48% excluding prior-year COVID-19 revenue.
- Q2 gross margin increased to 73% from 64%, attributed to higher lung-test volume, testing workflow efficiencies, and discontinuation of lower-margin COVID-19 testing.
- Q2 net loss narrowed by $2.5 million, but the six-month net loss widened by $0.6 million. Higher sales, marketing, general and administrative expense and interest expense weighed on results.
- At June 30, cash and cash equivalents were $17.4 million, versus $43.1 million at December 31, 2022. Cash, cash equivalents and restricted cash declined $25.7 million during the first half. Investing cash outflow was $14.2 million, primarily property and equipment purchases.
- Current assets were $25.2 million versus current liabilities of $28.0 million. Total liabilities were $84.6 million and stockholders’ equity was negative $7.0 million.
- Perceptive term-loan principal outstanding was $30.0 million; its balance-sheet carrying amount was $24.7 million after discounts and issuance costs. The stated interest rate was approximately 14.1%, floating, with principal due at maturity in November 2027. The debt is secured by substantially all company assets.
Material changes and business developments
- COVID-19 testing revenue fell to zero in Q2 from $3.0 million a year earlier; the company ceased commercial COVID-19 diagnostic testing after the public health emergency expired on May 11, 2023.
- Services revenue declined 43% in Q2 and 50% for the six months, reflecting delayed clinical-trial enrollment and the completion of a material contract in 2022.
- Sales, marketing, general and administrative expense increased 9% in Q2 and 20% in the first half, largely from sales-team compensation and increased sales, training and marketing activity. Research and development expense declined 13% in Q2 and 6% for the first half.
- Interest expense increased 81% in Q2 and 94% in the first half, mainly from the Perceptive loan and interest accretion on Indi contingent consideration. Prior-year comparisons included a $3.0 million loss on extinguishment of liabilities, which did not recur in 2023.
- Capital spending included substantial construction and laboratory improvements for a new Louisville, Colorado facility. The company reported $14.1 million of property and equipment purchases in the first half, partly offset in operating cash flow by $13.0 million of tenant-improvement reimbursements.
Outlook, risks and contingencies
- The filing provides no specific revenue or earnings guidance. Management expects continued near-term operating losses while investing in growth, and expects research and development and sales and marketing spending to increase.
- Management stated that the current operating plan raises substantial doubt about the company’s ability to continue as a going concern for more than one year after issuance of the financial statements. Without additional capital or covenant relief, management expects the company may be unable to maintain loan covenants during the next twelve months, potentially triggering default and accelerated repayment. The company was compliant with covenants at June 30, 2023.
- After quarter-end, the company entered into agreements for a private placement of 16,975,298 shares at $1.62 per share, for approximately $27.5 million, with funding scheduled in two tranches on August 31 and September 29, 2023. This was not cash on hand at June 30. The company also amended the Perceptive facility in August to lower future revenue-covenant thresholds and revise conditions for access to the $10 million Tranche B loan.
- Additional funding may be needed; financing may be unavailable or dilutive and debt financing may impose further restrictions. If adequate capital is unavailable, management may substantially limit operations, including workforce, compensation, capital spending and other costs.
- Other material exposures include scheduled Indi contingent-consideration payments, including installments and an exit fee; long-term lease commitments; variable-rate debt; reliance on Medicare and other payers; delayed clinical-trial activity; and single-source suppliers. Medicare represented 47% of first-half revenue. Management reported no legal proceedings expected to have a material adverse effect.
Important facts for investors to verify
- Whether the post-quarter private placement funded on schedule, and the resulting cash runway and dilution.
- Whether Biodesix can meet Perceptive revenue covenants, maintain compliance, and access additional loan tranches.
- Whether core lung-test growth and reimbursement support can offset the loss of COVID-19 revenue and weaker services revenue.
- Cash consumption after tenant-improvement reimbursements end, and the timing and amount of facility and capital expenditures.
- The timing and funding of Indi contingent-consideration payments, and the company’s ability to meet lease and debt obligations.