Biodesix, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited financial amounts below are in millions unless stated otherwise. Biodesix develops and commercializes diagnostic tests, primarily for lung disease, and provides research, testing, and related services to biopharmaceutical companies. The company discontinued commercial COVID-19 diagnostic testing after the public health emergency expired in May 2023.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $13.5 | $11.1 | $34.4 | $28.6 |
| Gross profit / margin | $10.3 / 76% | $7.5 / 67% | $24.8 / 72% | $17.8 / 62% |
| Operating loss | $(7.2) | $(10.6) | $(34.5) | $(36.7) |
| Net loss | $(10.9) | $(13.7) | $(43.0) | $(45.1) |
| Net loss per share, basic and diluted | $(0.14) | $(0.34) | $(0.55) | $(1.22) |
- Q3 revenue grew 21%; lung diagnostic revenue rose 34% to $12.3 million. Services and other revenue increased 79% to $1.2 million. COVID-19 testing revenue was zero, versus $1.3 million a year earlier.
- For the first nine months, lung diagnostic revenue increased 54% to $32.4 million, while COVID-19 revenue fell to $0.01 million from $5.2 million. Services and other revenue declined 13% to $2.0 million, reflecting delayed clinical-trial enrollment and completion of a material contract.
- Q3 gross margin improved primarily with lung-test growth, workflow efficiencies, recovery in services, and the exit from lower-margin COVID testing. Q3 operating expenses were $20.7 million, down 5%; nine-month expenses were $68.9 million, up 5%, including a 14% increase in sales, marketing, general and administrative costs.
Cash, debt, and liquidity
- Cash and cash equivalents were $19.8 million at September 30, 2023, down from $43.1 million at December 31, 2022. Current assets were $28.9 million versus current liabilities of $32.6 million. Total liabilities of $88.2 million exceeded total assets of $86.8 million; stockholders’ equity was a deficit of $1.4 million.
- Nine-month cash flows: $10.6 million used in operating activities, $20.1 million used in investing, and $7.4 million provided by financing. Operating cash use included $18.3 million of landlord tenant-improvement reimbursements; investing outflows included $19.9 million of property and equipment purchases.
- Perceptive Term Loan principal outstanding was $30.0 million, with a stated interest rate of approximately 14.3% at quarter-end and maturity in November 2027. The loan is interest-only, secured by substantially all company assets, and subject to financial covenants. The company reported covenant compliance at September 30.
- Contingent consideration was $24.5 million at quarter-end; $19.3 million was classified as current. Contractual obligations include substantial debt, lease, and contingent-consideration payments.
Changes, outlook, and risks
- The company raised $15.3 million in Q3 from a private placement of common stock to directors, officers, and other leadership members. The remaining $12.2 million of the approximately $27.5 million offering was expected in Q4 2023, alongside issuance of the remaining shares. The filing also said Biodesix planned to draw an additional $10 million from Perceptive’s second tranche in Q4, subject to facility conditions.
- Management stated that continued external capital and compliance with revenue covenants, or covenant relief, would be needed to execute its operating plan. Despite financing and cost-control measures, management concluded that substantial doubt exists about the company’s ability to continue as a going concern for a period beyond one year after issuance of the financial statements. Without sufficient capital, the company may substantially limit operations. No assurance of further financing is provided.
- No formal numeric revenue or earnings guidance is provided. Management expects near-term operating losses and anticipates investment in growth, sales and marketing, and product development. It cited continued adoption of lung diagnostics and ongoing clinical and commercial development as business priorities.
- Risks include reimbursement uncertainty, customer and test-volume variability, reliance on single-source suppliers, high cash needs and covenant-default risk, and potential dilution from future equity financing. The filing highlights the FDA’s September 2023 proposed rule to regulate laboratory-developed tests as medical devices; if finalized, it could impose additional requirements on Biodesix’s tests. The company reported no legal proceedings expected to have a material adverse effect.
- Other notable items: the company recorded a $1.4 million Q3 loss from the fair-value change in warrant liabilities. It invested heavily in its new Louisville, Colorado laboratory and office facility; the lease has a 12-year initial term. Disclosure controls were assessed as effective, and no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether the remaining $12.2 million private-placement proceeds were received and the related shares issued after quarter-end.
- Whether Biodesix drew the planned $10 million Perceptive tranche and whether it continues to meet the loan’s revenue and other covenants.
- Cash runway and financing needs, given the going-concern substantial-doubt disclosure and continuing operating losses.
- Progress in lung-test volumes, payer reimbursement and collections, and clinical-trial services revenue.
- Potential final FDA requirements for laboratory-developed tests and the cost, timing, and operational impact on the company.