SOPHiA GENETICS SA — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. Although the request metadata refers to 2021 Q4, this filing is an annual report and does not provide standalone fourth-quarter results. Financial statements are prepared under IFRS and presented in U.S. dollars.
Business context
SOPHiA GENETICS operates a cloud-based healthcare analytics platform for genomics and other multimodal health data, serving hospitals, laboratories and biopharmaceutical companies. It reported more than 790 customers, 382 recurring platform customers, and over 910,000 genomic profiles analyzed at year-end. The company completed its Nasdaq IPO in July 2021.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $40.5 million | $28.4 million | +42% |
| Gross profit | $25.2 million | $17.7 million | +43% |
| Gross margin | 62% | 62% | Unchanged |
| Operating loss | $71.5 million | $37.4 million | Loss widened |
| Net loss | $73.7 million | $39.3 million | Loss widened |
| Net cash used in operating activities | $57.9 million | $31.7 million | Cash use increased |
- SOPHiA platform revenue was $39.5 million, up 45%; workflow equipment and services revenue was $1.0 million, down 16%. COVID-19-related revenue was $2.6 million.
- Operating expenses rose 76% to $96.7 million, led by increases in general and administrative costs (+119%), selling and marketing (+65%), and research and development (+43%). Management attributed the increases to growth and hiring, product and quality initiatives, and IPO/public-company costs.
- Year-end cash and cash equivalents were $193.0 million, with an additional $72.4 million in term deposits. Management said available cash was expected to fund working capital and capital expenditure needs for at least 12 months.
- The company reported no outstanding borrowings at year-end; lease liabilities were $13.1 million. It reported total liabilities of $44.8 million and an accumulated deficit of $211.4 million.
- Financing cash flow was $237.8 million, principally reflecting net IPO, greenshoe and GE Healthcare private-placement proceeds. Investing cash outflow was $56.9 million.
Material changes versus FY2020
- Revenue growth reflected a 51% increase in platform analysis volume, higher customer usage and new customer additions, as customers resumed non-COVID operations and pandemic restrictions eased. Analysis volume increased to 243,394 from 161,049.
- Recurring platform customers rose to 382 from 314; average revenue per platform customer increased to $92,028 from $70,004. Net dollar retention was 142%, compared with 110%.
- Net loss widened as operating expenses grew substantially faster than revenue. Gross margin remained at 62% despite higher cost of revenue.
- Cash and term deposits increased substantially following the IPO and related share issuance. The company repaid its COVID-related loans and the TriplePoint success fee was settled in 2021.
Outlook, risks and unusual items
- Outlook: The filing provides no numerical revenue, earnings or cash-flow guidance. Management expects continued net losses and increased investment in research and development, sales and marketing, customer relationships and regulatory clearances. It expects gross margin to improve over time, but cautions that cloud-computing costs may pressure margins in the near term.
- Key business risks: The company depends on continued customer adoption, successful platform expansion, reimbursement and regulatory pathways, third-party cloud and manufacturing providers, and distributors. Distributors represented 34% of revenue in 2021, versus 23% in 2020. Cybersecurity, privacy, competition, foreign-exchange exposure and pandemic-related disruption are also identified risks.
- Regulatory position: U.S. products are sold as research-use-only, not for diagnostic use; the company intends to pursue IVD clearances or approvals. Regulatory changes affecting laboratory-developed tests or AI/ML medical software could affect demand, costs and timing.
- Controls and accounting: Management concluded disclosure controls were not effective at year-end because of material weaknesses involving finance staffing and expertise, formal accounting controls, and IT general controls. Remediation was underway; effectiveness had not yet been demonstrated over enough reporting periods. The filing also describes an earlier whistleblower complaint concerning $2.0 million of uncollected minimum-volume commitments recorded as revenue in 2019 and 2020; the company reversed those amounts before issuing the relevant financial statements.
- Unusual operating item: In June 2021, the company identified cross-contamination in index plates in some third-party-manufactured DNA enrichment kits and notified certain customers. It reported no detection-rate impact inconsistent with claimed limits and no pending or threatened claims to date.
- Other: The company has never paid dividends and does not anticipate doing so in the foreseeable future. It reported no material subsequent events and no contingent assets or liabilities at year-end. The independent auditor issued an unqualified opinion on the IFRS financial statements.
Important facts for investors to verify
- Reconcile reported revenue growth with analysis volume, customer additions, product mix and the $2.6 million of COVID-19-related revenue.
- Track operating expense growth and cash burn against management’s stated minimum 12-month liquidity outlook, including the availability and maturity of term deposits.
- Monitor remediation of the material weaknesses and the reliability of revenue recognition, distributor reporting and financial IT controls.
- Assess distributor concentration, cloud-hosting costs and third-party manufacturing and quality risks, including any further consequences of the 2021 kit contamination.
- Verify progress and costs for U.S. IVD regulatory plans, reimbursement, and the company’s ability to improve margins while continuing to invest and incur losses.