Biodesix, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2020. Biodesix develops and commercializes diagnostic tests, primarily focused on lung disease, and provides testing and research services to biopharmaceutical companies. Financial statements are unaudited and do not reflect the October 2020 IPO or related conversions.
Financial performance and liquidity
Amounts below are in millions of dollars unless otherwise noted.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $9.193 | $3.942 | $18.528 | $16.281 |
| Direct costs and expenses | $3.891 | $1.503 | $7.346 | $4.244 |
| Loss from operations | $(6.240) | $(9.028) | $(20.281) | $(23.197) |
| Interest expense | $2.658 | $0.706 | $6.899 | $2.005 |
| Net loss | $(8.845) | $(9.601) | $(26.817) | $(24.201) |
| Operating cash flow | Not separately provided | Not separately provided | $(12.610) | $(15.997) |
- Q3 revenue grew 133%, driven largely by $5.5 million of COVID-19 testing revenue. Nine-month diagnostic revenue included $6.9 million from COVID-19 tests.
- Direct costs rose faster than revenue in both comparative periods. Gross margin, calculated as revenue less direct costs, was approximately 57.7% in Q3 2020 versus 61.9% in Q3 2019, and 60.4% for the first nine months of 2020 versus 73.9% in 2019.
- At September 30, cash and cash equivalents were $6.348 million; cash, cash equivalents and restricted cash totaled $6.530 million. Current assets were $18.149 million and current liabilities were $56.563 million.
- At September 30, the balance sheet included $26.6 million of current convertible notes, $24.438 million of term debt (including $7.202 million current), and a $3.099 million PPP loan. The company also reported $30.071 million of contingent consideration and a $6.650 million put-option liability.
- Total liabilities were $107.764 million. Convertible preferred stock had a $193.959 million carrying amount and $202.582 million liquidation preference; stockholders’ deficit was $255.176 million.
Material changes versus prior periods
- Nine-month revenue increased 14%, but non-COVID-19 diagnostic test revenue declined by $3.8 million; COVID-19 tests more than offset that decline. Services revenue fell 23% for the nine-month period, partly because a prior-year contract had been completed.
- Q3 diagnostic test revenue increased 127%; management attributed the increase to COVID-19 testing, while non-COVID-19 test revenue declined by $0.7 million.
- Nine-month net loss increased by $2.616 million despite a smaller operating loss, principally as interest expense rose by $4.894 million with additional convertible borrowing and term-loan interest.
- Cash used in operations decreased by $3.387 million year over year. Financing provided $16.055 million in the first nine months of 2020, principally from convertible notes and the PPP loan.
Outlook, commentary and risks
- In October 2020, the company completed its IPO, selling 4 million shares at $18 per share and receiving approximately $63.0 million in net proceeds. Convertible notes and preferred stock converted into common shares at the IPO closing. Management said cash, IPO proceeds and expected product sales should fund operations for at least 12 months from issuance of the financial statements; it nevertheless expected operating losses through at least December 2021.
- Management expected COVID-19 testing revenue to be a significant portion of revenue through the first quarter of 2021, alongside higher capacity-related costs. Demand may fall as the pandemic changes, and this revenue may not indicate future performance. No formal numerical revenue or earnings guidance is stated.
- COVID-19 also disrupted non-COVID testing, sales activity and clinical studies; management expected continuing effects, with the ultimate financial impact uncertain. The COVID-19 tests operate under FDA emergency use authorizations that may be revoked or expire.
- Key risks include reimbursement and payer concentration (Medicare represented 61% of non-COVID diagnostic revenue for the nine months), test adoption, competition, clinical-study delays, and dependence on suppliers—including Bio-Rad for GeneStrat and COVID-19 testing and Oncimmune for Nodify CDT.
- The term loan is secured by company assets and subject to minimum-liquidity and revenue covenants; the company reported no default at September 30. Indi-related contingent consideration could reach $37 million in undiscounted payments if its milestone is achieved.
- The company opted out of sharing future ficlatuzumab development and regulatory costs, effective December 2, 2020; it estimated $0.3 million of remaining obligations and will retain specified royalty and license-income rights. It also elected not to exercise Oncimmune’s $9 million option to expand the Nodify CDT field of use.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. The filing reported no legal proceedings expected to have a material adverse effect.
Important facts for investors to verify
- How much COVID-19 testing contributed to subsequent revenue, margins and cash generation, and how demand and capacity costs evolved after the first quarter of 2021.
- Whether non-COVID diagnostic volumes recovered and whether payer coverage, reimbursement rates and customer concentration changed.
- Post-IPO cash, operating cash burn and financing needs relative to management’s stated 12-month liquidity expectation.
- Debt repayment, covenant compliance and interest costs, as well as the potential timing and form of any Indi contingent-consideration payment.
- Clinical-study progress, test adoption and the continuing authorization and regulatory status of the COVID-19 testing program.