Welcome to RBC Capital Markets 2024 Global Healthcare Conference. I'm Conor McNamara, the life science tools and diagnostics analyst. It's my pleasure to introduce our next company, Bionano Genomics. On the stage with me is Dr. Erik Holmlin, CEO. Welcome to the conference. Welcome to the stage. Thank you for being with us.
Yeah. Thank you, Conor.
Now, Erik, could you just give us a quick background on yourself and the company, on Bionano, and kind of what it is that you guys do that's differentiated?
Yeah, sure. Bionano is really, I think in many respects, a traditional life sciences instrumentation company, so we have commercialized proprietary technology, which is a basis of a consumable revenue stream that rides on the surface of an installed base of instruments that we've developed, and we've focused that system on applications in human genome analysis, and very specifically within an area called cytogenetics. It's where there's a lot of research, clinical research and clinical testing that happens in cancer, genetic diseases, and more and more frequently now, cell and gene therapy. Bioprocessing applications are leveraging cytogenetics for QC applications. And the focus of our platform is on identifying large rearrangements in the genome. They're called structural variations, and that's in contrast to what a sequencer looks for.
A sequencer will typically find small rearrangements of the size of 1 or maybe a few, 10 or a 100 base pairs. We look for them 500 base pairs and up, could be 500, 5,000, 5 million, or even whole chromosome. Our platform finds those, and when you compare what the approach that we take, which is called Optical Genome Mapping, does to the traditional cytogenetic workflow, it tends to find many more pathogenic variations, so it's very useful for researchers and clinicians. And then it takes the place of three different platforms that are in routine use today: Karyotyping, something which is called Fluorescence in situ hybridization, FISH, and microarrays.
Great. Thank you for that. And how long have you been with the company, and where and, where were you before Bionano?
So, I've been with the company since 2011, and we've been focused on commercializing this nanotechnology platform, you know, for quite some time now, obviously. And, you know, what's exciting is that we're now—we just launched at the end of last year, and we're in full commercialization now of our fourth instrument system. And so, you know, the third generation and now this fourth generation are really robust, proven platforms that are capable of taking on the rigors of a clinically used platform. And my background has been in commercializing technologies that ultimately get applied in the clinic, and my very first company actually led one of the most important revolutions in the 2000s in transforming laboratory workflows, and that was the introduction of rapid PCR testing in microbiology. So you may remember some of the companies.
Ours was called GenOhm Sciences. It was acquired by Becton Dickinson, but Cepheid and many others since have developed PCR-based rapid tests to transform the traditional culture-based methods in microbiology into something which is much more modern. So I really see what we're doing at Bionano as being a parallel path, so going into the cytogenetic labs, where they've been using karyotyping for 50 years, five decades. Karyotyping is the global standard, and we're transforming karyotyping, very manual, subjective workflow, into an industrialized, modern, instrument-based, digital molecular workflow. So it's really converting over a traditional clinical testing workflow into something which is modern. Given that there's way more karyotyping that happens around the world than sequencing, we see it as a huge opportunity.
Maybe let's start there. What, what do you see as the TAM? What's the market size that you're going after?
Yeah, when we look at the labs that are currently adopting optical genome mapping, they tend to be labs that are performing some form of pathology, anatomic pathology, and then cytogenetics. And you know, I find when I talk with the investment community about cytogenetics, it's always something that's brand new to them. But if you talk to them about their own experience, either themselves or with their families, they'll find that they've undergone cytogenetic testing, right? And they've experienced the frustrations with cytogenetic testing. About half of karyotypes with cancer, with patients who have cancer, come back as normal karyotypes, and why that's so frustrating is that it really makes it difficult to sort of manage the patient workflow.
And so when we look at this landscape of cytogenetic labs around the world, we estimate that there are actually 10,000 of them.
Mm-hmm.
and that they currently today process about 10 million samples globally. And so that's kind of what we see as the TAM-
Okay
... for Optical Genome Mapping, which is pretty big.
Okay. So of these 10,000 labs, what's the pushback that you're getting? 'Cause the first time we met, it's like sometimes you have this product that just makes so much sense. You're consolidating three very hands-on methods, and you're doing it in a cost-effective manner, and you're making their jobs easier. So what is the pushback? Why would you not adopt this?
Yeah, I think that it's somewhat systematic, and it varies by region. And so when you look across Europe, we now see European countries switching over to mapping from traditional cytogenetics, you know, like, across their major hospital systems now. This is very, you know, well-established now in Spain. France has a large program, and other European countries are moving very quickly. And when we look at why is that happening as quickly as it is in Israel, Israel is another good example. It's because these tend to be single-payer systems, and so the laboratory staff is trained and hired and asked to evaluate technologies. And when they select one, the third-party payment system for that technology is a budget that they control.
So not only when they make a technology selection can they choose what they want, but then they have the budget to fund it. In the United States, for example, it's different. We have to rely on third-party payers. The third-party payers tend to work on systems like, coding-
Mm-hmm
... coverage. And so, while we have been working on developing and hardening the technology, really applying it to the specific applications where we see the uptake, there are other things that need to be worked out alongside, and getting the money allocated to the technology is a big one. So in the United States, there's, you know, an effort underway right now to obtain a Category I CPT code that would cover Optical Genome Mapping. That's an application that started in February... very late stages. Actually, Optical Genome Mapping was on the agenda of the CPT editorial board, which met last week, and so we're eager to find out-
Right
... you know, how they voted on that. And, you know, in the event that there was a CPT code dedicated to optical genome mapping, that would lower a lot of financial barriers to adoption. The other element is that we think it's great, and I'm thrilled that you have-
Mm-hmm
... you know, recognized the value here. Customers have also come on board, really prominent sites. MD Anderson Cancer Center, after conducting a really thorough and rigorous study of the methodology compared to traditional techniques, ended up implementing it in their labs, and now every new leukemia patient at MD Anderson Cancer Center is offered the opportunity, through their physician, to have their genome mapped.
Uh-huh.
Right? So, when key opinion leader sites like that adopt the technology, that really starts to make a difference. But it's also about getting publications.
Mm-hmm.
In the last 12 months, we've seen an incredible array of landmark publications, both from European sites, European authors, American-
Mm-hmm
... authors, and then international consortia that have come together. And it's really an upswing in this critical mass of publications, critical mass of just numbers of genomes that have been published, that create a level of comfort in the install base as they reach for a new technology that's going to be used in clinical research applications that could have downstream implications on patients. So there's a, there's a reasonable carefulness that these scientists take when adopting the new technology, but addressing the third-party-
Mm-hmm
... payer, stuff is really important.
So we could see a tipping point, that as you get these publications out, and you get the payment in place, that this could be the standard of care within these labs?
We believe that, you know, kind of back to you know, the origin of your question, it is pretty logical, you know, converting three methods into one in an environment where there's tremendous pressure on laboratory staff, budgets, laboratory staff availability, and then, importantly, training. So the folks who have been doing karyotyping for 50 years, they're ready to, you know, hang up their cleats, right?
Yeah.
People are not being trained in that methodology-
Yeah
... so there isn't a workforce to come in and follow behind them. Those people are being trained to do data analysis on computers. So our workflow aligns nicely with the training. And so, yeah, we believe that it's really the future of cytogenetic testing. And what's something that's really important is that, it's not about mapping versus sequencing at all. These labs, somewhere in the institution, not typically in cytogenetics, but in a molecular pathology lab, for example, which is down the hall from cytogenetics, they do a ton of sequencing. And we're, you know, we're highly complementary to sequencing.
And so if you look at the study that MD Anderson did, they showed that the combination of sequencing, whole exome sequencing panels at really high depth, together with optical genome mapping, allowed them to find pathogenic and potentially pathogenic results in something like 97% of the samples that they analyzed.
Wow!
So incredibly powerful when you combine mapping and sequencing together. So we always say it's about mapping and sequencing, it's not about mapping versus sequencing.
Walk me through the economics. If you're a lab and you're considering adopting, you know, one of your boxes in the consumable stream, what are the economics for the lab?
... Yeah. So, you know, we, we offer a couple of different ways in which the laboratories can, you know, acquire the technology, bring it in-house, and operate it. And, you know, one is that they can buy the instrument from us. We now have two versions of the instrument, a lower throughput and a higher throughput. The higher throughput we just launched. And we did that because another sort of barrier to adoption we saw was that these labs that are running routine workflows have volumes that were kind of exceeding or could potentially exceed the capacity of our first system. And so, we now have those two systems on the market.
It's, you know, about $175,000 to buy the lower throughput model and about $290,000 to buy the higher throughput. That includes all of the computer hardware needed for data processing and so forth. And so, you can acquire that capital, and then if you acquire it, your per genome price for consumables or per sample price for consumables is, rough numbers, about $500.
Okay.
You can compare that to sequencing, which has still been trying to get down below $1,000 for a lot of whole genome-
Mm-hmm.
- sequencing applications, and so we're already well below that. So, you know, $500 is a little bit more expensive than microarrays, but when you think about all three of those techniques being combined into one, it's really compelling from a cost perspective. But labs also have the chance to basically lease the instrument from us so they can pay a higher price. We add a fee into the consumables charge, and that covers the rent of the instrument. So a traditional reagent rental model-
Ah.
- based on a commitment to a certain consumables flow, or they can purchase it outright, and we see a mixture of those.
Okay. And then, what's the breakdown between the research side versus clinical?
Yeah, so it's a research-use only product, so, we say it's 100% research use, and that's what the adoption is. But, the way we look at it is, you know, kind of like, who's adopting? What are the sites?
Yeah.
In 2023 overall, 57% of new adoption was in academic medical centers-
Okay.
MD Anderson, Memorial Sloan Kettering, and those types of sites. What we see when they're adopting is that their intention is to use on a routine basis, so they have a sample flow which they can process through mapping. Often in those sites, they also develop a laboratory-developed test.
Mm-hmm.
- which they market in their system. So that was 57%. Another 15% was to biopharma. And by the way, that 15%, 2023 versus 2022, is a doubling, so it was-
Okay
... about 7% in 2022. And, the reason that we see biopharma adopting is that, in cell and gene therapy applications, stem cell therapy applications, it's really critical to be looking at the genome throughout the process of modification of the cell. If you're doing CRISPR-Cas9 editing, for example, you're going to want to know if the desired target or targets... Now, these payloads, therapeutic payloads, are really complex. They can be 6, 9, 12 events that they're introducing into the genome. You want to be able to confirm that those are in place, and so optical genome mapping has the resolution that-
Mm-hmm
... can do that. It also has the sensitivity at low fractions to detect where there may be, off-target effects. So it's possible that your CRISPR-Cas9 system goes in and drops in, you know, a new functioning gene or, knocks out a gene-
Mm-hmm
... and while it's doing it, it wrecks something else. And so I think you can imagine that it would be critical to know if that's happening. And so you can use mapping to search for on-target as well as off-target effects. And what's really exciting is that the way that these users came to us was actually through dialogue with the FDA. So, when they started submitting pre-INDs, and the FDA was asking: "Well, how will you analyze for off-target effects that involve these structural variants? Because we know sequencing doesn't detect them. How we do it?" They said, "Well, we'll use karyotyping." And the FDA said, "No way. That's not going to cut it.
There's this company in San Diego, Bionano, give them a call." And so we were getting these calls, and the customers are saying, "Well, the FDA said we should call you." And, you know, sometimes you say-
Mm-hmm
... "The FDA said we should call you?
Not much.
No, no, but it was a good thing. Yeah, it was a good thing. And so, we, we've seen a lot of uptake, and now those customers have gone back, and now they're submitting INDs, and they're showing levels of what they believe to be safety in their programs, based on, optical genome mapping as a primary detection method. So you know, that right there is, you know, 72% adoption in 2023 was in academic medical centers and biopharma. Then we've seen adoption now in commercial reference laboratories.
Mm-hmm.
But those are really waiting for this higher throughput system-
Ah
... to fully come online.
Okay. We'll get to that in a second. Just on the cell and gene therapy, just a couple questions. One, within the, you know, within the sector, we've had a tough, call it, 18 months as far as just the budgets and headwinds. Have you guys felt that pressure, and where do we stand on investment from customers on this desire to be in cell and gene therapy?
So we certainly are aware of a lot of pullback, and we have seen some programs get put on hold. Now, that's been a little bit more based on actually the performance of the program.
Mm-hmm.
But I do think that we can sense that you know, prioritization of programs is a little bit more rigorous than it had been in prior years. But cell and gene therapy is such an important area of great importance to companies, and there are, you know, entire companies that are dedicated to it. And so, you know,
A couple of them-
... if they're doing anything, they're gonna be doing this kind of work, and so we expect that to continue to expand. And then, you know, I would recognize that, you know, we did $36.1 million of revenues-
Mm
... in 2023, and so, you know, 15% of it, you know, maybe it's not as big as Thermo's exposure.
Mm.
I acknowledge that.
Mm-hmm.
But, you know, we see it to a certain degree, but it's such a cutting-edge area with such important potential that we think it'll continue.
On the cell therapy, I mean, it sounds like could you be in a situation where as these programs come on market, you would need it, you know, for each patient, you would need to do the mapping OGM, or is it more on the early stage? 'Cause I could see a situation where you do the QA/QC on the back end for every single patient. Is that a possibility?
Yes. I mean, I say without question, and, you know, it's used mostly preclinical 'cause that's where all the programs are right now. But as it's being used to demonstrate safety-
Mm-hmm
... and these programs are so bespoke, that it's likely to follow it all the way through.
Okay.
Something else that's critical about that is that the cell and gene therapy programs are highly distributed, right?
Mm-hmm.
So it's not a centralized program.
Mm-hmm.
MD Anderson has theirs, Memorial Sloan Kettering has theirs, so they need to have the equipment on site-
Uh-huh
... which is, you know, nontrivial if you're gonna bring up, you know, a karyotyping workflow within a team that's never done it, so very amenable-
And-
to that application.
And then, can we talk about the—I don't know if it's just—if it's a complete machine upgrade, but from Saphyr to Stratys. And so does that—is Stratys going after a different customer base, or then are you also upgrading some Saphyrs to the Stratys?
Yeah, I think that there's, you know, kind of a whole spectrum there. Stratys is designed to satisfy users who intend to run, you know, in the thousands of samples-
Mm
... per year on a routine basis, and Saphyr does, you know, hundreds. And, so we see them coexisting in the market. There is overlap, so we do have groups that have said, "Hey, we are gonna bump up against the ceiling of our Saphyr or even Saphyrs-
Mm-hmm
... and so we wanna convert to Stratys. We also see labs say, "No, we're gonna keep the Saphyr, and we're gonna run it maybe as a backup system, or we're gonna run it as a development system." They have to, you know, do all sorts of things to upgrade and evolve their own internal assays, and so maybe they'll use that as, you know, something that they would use for ongoing R&D, and then Stratys would be their kind of industrial-strength workhorse.
Got it. Okay. And if you just look at the next 12 months, what are some of the big, you know, key, or I'll call it, key milestones for you? You mentioned, I mean, not just internally, but you mentioned the CPT code. You also, you know, you have a cost restructuring. What are some of the things that investors should be focused on over the next 12 months and what you're executing again?
Yeah, I think 2024 is a critical year for us. We are really eager to see, you know, positive inflection across the board in terms of all the programs that we're working on that relate to third-party reimbursement. The CPT code application was actually developed and submitted by one of our customers, and so, you know, that's a really exciting sign when the field takes on some of these challenges.
Mm
... and helps you. But there are many other things. So coding is one, but coverage is another, so working with MolDX and Palmetto through our own CLIA lab-
Mm
... to get local coverage determinations and working with other MACs. So those programs will unfold over the course of 2024 and, you know, into 2025, certainly. So with that 12-month horizon, you know, we've got to navigate the equity capital markets-
Mm
... effectively for the company and continue to address needs for our cash-
Mm-hmm
... runway. And so one of the ways we're doing that is, as you mentioned, taking steps to reduce the cash burn, so the cash needs are not as great, and we have a solid shot at getting to cash flow breakeven in 2026. And so we've been working on that, actually.
Okay. Great.
It began with some initiatives in May of last year, picked up in October, and then in March, another significant wave. We've been able to introduce these cost reduction initiatives after we got major product development initiatives completed, and so we've still been able to get big products out. That's the last thing I would say, is that we still have significant programs that we intend to release into the market that make running the mapping workflow, end-to-end workflow faster and easier from a DNA isolation through data collection on Stratys, and then analysis, and reporting through our proprietary software. In the middle there, we've been working with NVIDIA on a computer workstation that accelerates that-
Great
-process.
Well, Dr. Holmlin, thank you for that. Very exciting. Great to have you here, and thank you for attending the conference.
Thank you, Conor.
All right. Thanks, everyone for being here, RBC's 2024 Global Healthcare Conference. My name's Sean Dodge. I'm the healthcare IT analyst here at RBC, and I'm pleased to be joined by our next presenting company, which is OptimizeRx. And here on behalf of the company is their Chief Executive Officer, Will Febbo. Will, special thanks for, for you, for joining us this morning.