Biodesix, Inc. — FY 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 16, 2021. This is an annual report, not a standalone fourth-quarter filing. The filing reports fourth-quarter revenue of $27.0 million and COVID-19 testing revenue of $21.4 million.
Business context
Biodesix is a data-driven diagnostics company focused primarily on lung disease. It earns revenue from clinical diagnostic testing and biopharmaceutical research and testing services. Its portfolio includes four blood-based lung tests and, through a Bio-Rad partnership, two COVID-19 tests offered under FDA Emergency Use Authorizations (EUAs). Diagnostic tests generated 90% of FY 2020 revenue, compared with 71% in 2019.
Financial performance and liquidity
| Metric | FY 2020 | FY 2019 | Change |
|---|---|---|---|
| Revenue | $45.6 million | $24.6 million | +86% |
| Gross profit | $23.6 million | $18.5 million | +27% |
| Gross margin | Approximately 51.7% | Approximately 75.3% | Lower |
| Operating expenses | $68.5 million | $51.3 million | +34% |
| Operating loss | $(22.9) million | $(26.7) million | Loss narrowed |
| Net loss | $(31.4) million | $(30.7) million | Loss increased 2% |
| Basic and diluted loss per share | $(6.48) | $(126.97) | Not directly comparable |
| Cash used in operating activities | $(21.4) million | $(21.7) million | Slightly lower use |
COVID-19 testing contributed $28.3 million of FY 2020 revenue; lung diagnostic revenue was $12.6 million, down from $17.3 million, and services revenue was $4.6 million, down from $7.2 million. Direct costs rose to $22.0 million from $6.1 million, largely reflecting COVID-19 testing and Nodify CDT costs. The gross-margin rate declined despite higher gross-profit dollars, alongside a major shift in revenue mix and higher direct costs.
At December 31, 2020, cash and cash equivalents were $62.1 million, versus $5.3 million a year earlier; current assets were $86.1 million and current liabilities $32.1 million. Management said cash, cash equivalents and expected operating receipts should fund anticipated needs for at least 12 months from the financial-statement date. The IPO generated approximately $63.8 million in net proceeds; cash also reflects a roughly $7 million prepayment for three years of directors’ and officers’ insurance.
Notes payable totaled $27.8 million, including $11.8 million classified as current and $15.9 million long-term. The secured 2018 term loan bears 10% annual interest, with principal repayments scheduled to begin in March 2021 and continue through its February 2023 maturity. A $3.1 million PPP loan is also outstanding; the Company stated it intended to repay it under its terms. The term loan is secured by substantially all Company assets and includes liquidity and revenue covenants; the Company reported compliance at year-end.
Material changes and unusual items
- The October 2020 IPO raised approximately $63.8 million net and converted outstanding preferred stock and convertible notes into common stock. The Company also completed a 0.1684664-for-1 reverse stock split; these capital-structure changes make per-share comparisons with 2019 difficult.
- COVID-19 demand drove the revenue increase, while lung diagnostic volumes declined 27% and biopharmaceutical services revenue fell 36%, with management attributing weakness to pandemic disruptions and restricted sales activity.
- Interest expense increased to $7.6 million from $3.0 million, including $4.4 million of non-cash amortization of convertible-note discounts. Convertible debt and related put-option liabilities converted or were reclassified to equity in connection with the IPO.
- Revenue was concentrated: the Big Ten Conference accounted for 30% and Centura Healthcare 17% of 2020 total revenue. Medicare represented 17% of total revenue in the financial-statement notes; elsewhere the filing states it reimbursed 18% of diagnostic-test revenue.
Outlook, risks and contingencies
- No quantified revenue, earnings or cash-flow guidance is provided. Management expected COVID-19 testing revenue to remain a significant portion of first-quarter 2021 revenue and anticipated increased capacity costs in that quarter. It cautioned that pandemic-driven testing demand may fall as conditions change, including with vaccine availability, and may not indicate future revenue.
- Management expects continued operating losses and investment in sales, marketing, research and development, regulatory activities and testing capacity. The Company has a history of losses and may need additional capital; profitability is not assured.
- COVID-19 disrupted non-COVID testing, customer activity and clinical studies, with fewer lung-test samples received from the latter half of March 2020 and studies expected to take longer. Clinical and commercial demand, reimbursement, and market acceptance remain uncertain.
- The COVID-19 tests operate under EUAs that may be revoked or cease to apply. Most lung tests are marketed as laboratory-developed tests; future FDA or legislative changes could require additional review, expense or delay.
- The Integrated Diagnostics acquisition includes contingent consideration tied to a gross-margin milestone. If achieved, the seller may require redemption for $37 million in cash, or the Company may otherwise have to repurchase shares for that amount under the agreement’s terms. The recorded contingent-consideration liability was $29.9 million at year-end.
- Other key risks include customer and payer concentration, reimbursement and collection uncertainty, single-source suppliers (including Bio-Rad for ddPCR supplies and Oncimmune for Nodify CDT materials), competition, data privacy and cybersecurity, and debt covenants. The Company reported no material pending legal proceedings at filing.
Important facts for investors to verify
- Whether COVID-19 testing demand and its contribution to revenue persisted after the unusually strong fourth quarter, and the resulting effect on gross margin and cash burn.
- Whether lung-test volumes, services revenue, reimbursement coverage and collections recovered; review receivables, deferred revenue and customer concentration.
- Progress on repayment of the term loan and PPP loan, covenant compliance, and the potential timing and cash impact of the $37 million contingent-consideration obligation.
- Enrollment, timelines and results for the ALTITUDE, INSIGHT and BEACON-Lung studies, and any resulting effect on clinical adoption or reimbursement.
- Whether cash generation and financing needs remain consistent with management’s stated 12-month liquidity expectation, and how much of the IPO proceeds remains available for operations.