Pretty good. Busy? Yes, it's been busy. Hi, welcome to the Canaccord Genuity Global Growth Conference. I'm Kyle Mikson, I cover lifestyle and tools and diagnostics for Canaccord. Pleased to welcome you to this fireside chat with Bionano Genomics. The company offers a really kind of a novel approach to optical genome mapping with an instrument and consumables platform. With the company, we have Erik Holmlin, the CEO. Thanks, Erik, for joining us today. Appreciate it.
You bet.
So, I guess, you know, Bionano, we don't cover it here. Maybe you could just provide a little overview for the audience, like, you know, what the company does, the history a little bit, and what, what kind of what you recently, you know, presented, I guess, at your earnings.
Yeah, sure. Well, thank you very much for the opportunity to participate, and, you know, we follow your research and work with great interest and think you have a good handle on a lot of the exciting innovation out there. So it's a pleasure to participate and talk about Bionano, which is an innovative healthcare company that I think most would describe as a life sciences instrumentation company, and so we sell a platform called the Stratys System, and that's our second system that we've been selling for optical genome mapping. Its predecessor, the Saphyr System, is also in the market, so we have two very powerful platforms for this methodology or technique called optical genome mapping, which is a form of genome analysis that looks at single DNA molecules, and unique from sequencing, optical genome mapping is designed to look at large rearrangements in the genome.
So you might think of hundreds or thousands or even hundreds of thousands or millions of base pairs being rearranged in the genome, and optical genome mapping can pick those up. Extremely high resolution compared to the standard of care, which is karyotyping, and high throughput and low cost, and what's very powerful about the methodology overall is that it combines the information that you would be getting from three traditional methods that are in use routinely today. So karyotyping, which is the global standard for large rearrangement analysis clinically, fluorescence in situ hybridization, or FISH, which is used routinely in hematological malignancies and other cancers to identify clinically actionable markers, as well as microarrays. And so optical genome mapping is a replacement or alternative to those three methods that's substantially faster. It saves weeks compared to the traditional approach, about half the cost overall.
Now what we're finding after several publications that have started to come out, including publications related to our own clinical trials, is that it's substantially better. The success rate in cytogenetic labs that are using optical genome mapping is much higher than it is with traditional methods. What that means is that half of the time, a leukemia sample will go to a cytogenetics lab, and it'll be returned with an answer that says normal karyotype, 50% of the time. Optical genome mapping is providing the same 50% of results, but of the 50% that are normal, we're starting to pick up pathogenic variants within that population, so it's a significant improvement, meaning more patients get treatment as a result.
Okay. I think that was helpful to understand, like, you know, where you kind of fit in the context of like, you know, karyotyping, microarray, and like a sequencing as well. But how do you think about the TAM for optical genome mapping? And just maybe there's some overlap with like long read, for example, or something outside of it, and there's also a clinical aspect that's kind of interesting, if you could talk about that.
Yeah, I think that, you know, optical genome mapping has been on its own sort of trajectory and evolution as a, as a technique and a technology, but where it has found its real home, the killer application, is in this area of replacing these traditional methods. And what's really interesting is that when you look at these cytogenetics labs, sequencing is not a technique which is used routinely there. The cytogenetic lab exists as part of anatomic pathology, which is separate, in most cases, from molecular pathology. Molecular pathology is where you're going to see sequencing used, right? And so cytogenetics, as an opportunity, includes thousands of labs on a global basis, you know, about 1,200 labs in the United States, another 1,200 labs in Western Europe, and we estimate the rest of the world is equal to those two combined.
So there's about 10,000 labs worldwide doing cytogenetic analysis, and we've done work to understand the number of patient samples that go through those labs, and we estimate that on a global basis, it's 10 million patient samples. And so, you know, on average, our price is about $500 per sample. So you can imagine it's a pretty substantial multibillion-dollar market in the recurring revenue stream just coming from samples, and then 10,000 labs can adopt the equipment. In addition to this cytogenetic analysis, there is a use in drug development for karyotyping, microarrays, and FISH, and that's in cell and gene therapy, bioprocessing in general.
So the process of modifying or editing cells, genetic, gene editing for therapeutic applications, it's critical to understand if you've achieve the desired on-target effect, but even more important to know whether there have been potentially deleterious off-target effects created by the technology. And so optical genome mapping is being adopted throughout pharma now for an application in genome integrity assessment and cell and gene therapy development. And so that's in addition to the substantial opportunity in cytogenetics.
Okay. So I think, so Stratys is like, it was launched roughly a year ago. It, I think it offers like, you know, 4, 4 times, fourfold data increase, basically, or it's definitely higher throughput than the Saphyr. How has the rollout been for that? I mean, I know we're in, like, a capital, capital purchasing is, like, you know, dilemma right now. So what, you know, how has that rollout been? What's the install base looking like today?
Yeah, so, you know, the first, you know, we rolled out Stratys, which, as you said, is the next generation of optical genome mapper. In a side-by-side comparison of throughput, Stratys has four times the throughput of its predecessor, the Saphyr system. And the reason that we focused on developing a system with higher throughput was simply that high-volume labs have an interest in adopting optical genome mapping and using it on a routine basis. The bottleneck for them is simply that the Saphyr system couldn't accommodate their volumes. Now, we were happy to sell them as many Saphyr systems as they needed to accommodate that volume, but it starts to get impractical to have 10 or 20 systems in a single lab. And so the Stratys system solves that issue by bringing this increase in throughput.
There's a lot of flexibility in the workflow that Stratys introduces as a new system. For example, there's random access, so you can jump the queue. A lot of great features of Stratys. We put that out in early access at the end of 2023, so we made 10 systems available, and that was an oversubscribed program. Those systems were installed in the, you know, at the end of 2023, but primarily in the first part of 2024, and so labs are up and running. They're making comparisons to Saphyr, and they're excited about the new workflow and certainly seeing the improvements in throughput. Since then, we have gone into what we'd call the full commercial production release, and so our contract manufacturer is now building the Stratys system.
It's available commercially, and we see the uptake and the demand for it as being strong. Something that's really important to note about new Stratys sites is that about 70% of Stratys adoption is by new customers. So somewhat unique compared to most new instruments that cycle through a genomics business, we're not relying on a big upgrade of the existing installed base, and this makes sense to us. So, you know, we really developed Stratys to accommodate those labs that were on the sidelines regarding optical genome mapping, 'cause our current product at the time didn't satisfy their throughput needs. Once we've satisfied those throughput needs, you're seeing new customers coming in. So it's bringing new customers in from the sidelines, and those customers tend to have higher volume needs and higher throughput overall, and so we're excited about the uptake there.
So new customers, y ou're attracting new customers, people that wouldn't have bought, like, a Saphyr before?
Yeah
With Stratys?
Yeah.
Interesting.
That's 70% of the Stratys adoption.
Like, new to OGM?
They're new to OGM.
Cool.
Yeah.
Okay.
Yeah.
That's interesting. It's interesting because, like, it's like not, we hear that with other sequencing companies sometimes, but I don't know. Like, everything's kind of new to OGM, but so it's interesting that it's not recurring, like, you know, same store customer, same store sales, more or less, like these.
Well, we certainly have, I mean, you know, 30% of Saphyr sites have adopted Stratys, but if you're gonna be a Saphyr user, even before you bring it on board, you're going to assess its ability to serve your needs. And so sites that have brought it on board, you know, it accommodates their volume needs, and these would be in, you know, low to medium throughput, academic medical centers or regional reference lab. But now with Stratys, we're able to address major medical centers across the United States, across Western Europe, as well as large commercial reference laboratories, which, you know, really had not been able to come on board.
I think, I think also all of this is happening real time, so as you see Saphyr getting adopted, those users are publishing papers, presenting at conferences, and so that just accelerates awareness. And so new adoption is coming in at much higher volumes than the earlier adoption.
Okay. With Stratys, are you most excited for the, like, market opportunity that's unlocked within the, like, kind of clinical world or the, like, life sciences, biopharma, like, you know, cell and gene-type world?
Yeah, I mean, I think that when we look at the adoption that we've seen really over the last, you know, 6 quarters, you know, what we see is that it's all in academic medical centers or regional reference labs, with the exception of the biopharma. So I'd say it's 80%, what we call AMCs and reference labs, and 20% in pharma. If we look back to, 2022, for example. A very small fraction of it was in pharma. And so you see a lot of accelerating growth and adoption on the pharma side for cell and gene therapy applications. And then it wasn't, you know, 80% in AMCs and reference labs, it was probably 50%. So those two application areas have really, become our focus commercially and the focus of the inbound demand.
You know, we're obviously excited about both. And, you know, the unmet need is so significant across cytogenomics, cytogenetics, that, you know, we see just entire systems converting over to optical genome mapping as their frontline, first line, you know, alternative. And, you know, June of this year, we had an incredibly significant milestone for this sort of clinical path, which is that the AMA established a CPT code, a Category I CPT code, which can be used by any laboratory in the United States practicing optical genome mapping. And so now reimbursement is in the process of getting completed for OGM, and so, you know, that's something that we really see as being a key driver going forward, of not only adoption and more labs, but of consumables pull-through.
Yeah. Do you think that the CPT code was not, like, as appreciated as it should have been, like, in the world, in the community?
Well, you know, I would say yes. I mean, I think that, and by community, if we mean this community, Wall Street, I would say yes.
Yeah.
Certainly, you know, if you were to ask me, which investors do on a regular basis, "What's the number one question that your salespeople are asked?" In the United States, it's, "Is there a CPT code for this?" And so for three years, right, that was the third application for a Category I CPT code for OGM. So third time was the charm, and so for a long time they would have to answer, "No, it's coming." Right? But now we're past that. That's not the end of the reimbursement story. In many respects, we still have more work to do. So, coverage determinations by Medicare administrative contractors, those programs are underway.
But I think most labs recognize that after there's a Category I CPT code, I mean, the standards are so incredibly high to get that code established. I mean, you need scientific rigor. There needs to be utility and real value in the methodology. A variety of external stakeholders comment during the process, including committees that convene, and then there's an expectation that there is already an established level of routine use in place, and that's sort of the catch 22 that everybody has to go through. How can there be an established level of routine use without the CPT code? But nevertheless, we were able to or optical genome mapping was able to pass all of those thresholds. And so, you know, this is really significant, and you know, the end user population certainly recognizes the importance of it.
What's the next steps with kind of the reimbursement and the coverage and the payment for that?
Right. So, in the fourth quarter of last year, we submitted an application. So, you know, Bionano runs a CLIA lab, it's in San Diego, called Bionano Laboratories, and we offer commercially a menu of clinical tests. We've been in the process of really streamlining that menu, so we've discontinued some services. Those services were based on sequencing or microarrays, and that's some legacy products that we have. And we focused that menu just on OGM-based laboratory developed tests, and we have one in hematological malignancies called OGM-Dx Heme One . And so, on the basis of that test and on behalf of that laboratory, we applied for a local coverage determination from MolDX, and it's working its way through the system.
So every time we see Gabe from MolDX, we chase after him and ask for an update, and he says it's in the queue. It's going to be a new coverage determination, so it'll be a new policy. It's not possible for us to really piggyback on an existing policy, and so that will take some time. We expect to see a draft LCD, hopefully early in 2025.
The CPT code, is that—like, what's the procedure that's got like, like, like applied to?
Yeah. So that's for the application of optical genome mapping to hematological malignancies.
It's like it's that broad, it's that, like, high level?
Yes.
Okay.
Yes. You know, it does not currently apply to applications in genetic diseases, and so that's another big opportunity. So a lot of blood cancers are analyzed by optical genome mapping, but a lot of genetic diseases are as well, whole genome analysis and then targeted analysis. For some of the targeted analysis, there already exist gene-specific CPT codes, and so labs that are running that can use those CPT codes and get paid. You know, next year we would expect to apply for a Category I CPT code, or we would expect our customers to apply for a Category I CPT code for the whole genome constitutional genetic disease analysis.
In what, like, diagnostic use case is this really doing for the blood cancer? So this is like monitoring, is it like s creening? It's not screening?
Yes and yes. I mean, it's primarily enabling the, you know, definitive diagnosis of the specific type of leukemia, lymphoma, or myeloma. And there are guidelines, WHO, NCCN, and so forth, which really describe the process that an oncologist would follow based on a, you know, set of objective data coming from a clinical analysis to manage the patient. And optical genome mapping, you know, historically, it's been karyotyping that would be used, some FISH staining for specific markers, but now optical genome mapping takes the place of both of those. And so the guidelines are very specific to look for this sort of a rearrangement impacting that gene or a duplication or a copy number variation, and if those types of events are found, the therapeutic course is very clear.
That information is also used to calculate something called a prognostic score, which will determine the severity of disease and drive critical clinical decision-making, including whether somebody should go on to therapy or not, or whether they would be a candidate for a bone marrow transfusion. And what we've seen, like at MD Anderson, which is, you know, gone routine with optical genome mapping as of last November, every new leukemia case at MD Anderson is mapped because they see the value above and beyond the traditional methods. They find so many more actionable variants in samples compared to karyotyping and FISH alone. And so this allows them to get patients on therapy, including clinical trials, and so it's got a significant impact on the therapeutic management of leukemia patients.
Okay. If I could just take, you know, going back to, like, maybe your earnings that were recent, you know, like, your guidance was lowered by not much. It was, like, $1 million, $1 million or $2 million, basically up to midpoint. Why was that, given there's, like, this demand and use cases and the CPT? Like, it seems like there's, like, momentum. I mean, obviously, the macro is tough, but yeah, what happened?
Yeah, I think that, I mean, the business is global, and so we are progressing in Western Europe, progressing in, you know, North America. You know, in Canada, optical genome mapping is in guidelines. It's, you know, a first-line alternative to karyotyping. And we've also been progressing well in China. And so in China, our strategy has been to bring on board OEM partners who will bring a disassembled Saphyr system into China, reassemble it. It's made in China, and they'll sell it to hospitals there. Other genome analysis equipment firms have done similar models, like in non-invasive prenatal testing, for example, sequencing is there.
and we have about three or four partners that have been going down this path, and in a couple of cases, they're at the stage where they've gotten clearance for the kits, and they've submitted their package to the National Medical Products Administration, NMPA, which is the Chinese FDA. They've submitted the instrument, and they're waiting for clearance, and so we would have expected them to purchase a certain amount of consumables this year, and t hey're behind.
So, you know, we said it would be best to sort of back the guidance down and kind of assume that that doesn't catch up in 2024. That's the primary driver. We've also seen a little bit of a lag, so when, you know, about 30% of customers are converting from Saphyr over to Stratys, we've seen that they pause. And there's a validation step that happens, and so that's taken some time, and so out of prudence, we've also factored that into the lowering of the guidance.
Yeah, that's why the whole, like, new to OGM and, like, you know, the switching as well, these are sort of... They're nice metrics to, like, for, like, leading indicators of, like, like, long-term sort of, like, adoption and, and healthy growth and stuff, but it's, like, near term, it probably affects utilization negatively.
Near term, it's a little bit bumpy. But I think, you know, what we see is that all of these labs, when they come on board, and this is why we're so excited about this adoption for hematological malignancies and constitutional genetic disorders, is that once it becomes a routine, it stays, right? Karyotyping has been the global standard for 50 years, right? And so, you know, once you become that standard, you're gonna be that standard for a long time.
I think you had some, like, head count reductions in this year, so.
Yeah, we certainly have been, you know, faced with the need to extend our cash runway by reducing expenses, and, and, you know, we have had three sort of, you know, reductions in force, and the latest one that we did, we did heavily reorganize the commercial team, and I suspect that that has been a factor in some of the, you know, challenges that we've seen. So again, we factor that into the guidance adjustments.
Okay. I guess looking forward, you know, a year, a year from now in 2025, hopefully, this CapEx constraints, all, all that stuff, the pressure there is, is gone, hopefully, or at least the comparison year view is easier. It's another year of Stratys being out there. It's another, y ou know, these, these newer users and everything are gonna be more mature. What are some, like, reasons for optimism and hope and kind of like, you know, tailwinds for you last year?
Yeah, I mean, I think that, you know, if we look in the rearview mirror just briefly and we see everything that's been accomplished, you know, a brand-new system, four times the throughput is in the market. Not just that, but an incredibly new, powerful software platform for visualization, interpretation, and reporting of the data. This streamlines the workflow so incredibly. It allows the laboratory to put a report in the hands of whoever is gonna consume that information, which is just a one-pager, super intuitive, everything that they would expect to see out of the guidelines, so major product advancements that, that streamline the overall workflow. And, you know, those things are just behind us, so we're just beginning to see the fruits of those.
You know, with the CPT code out and established and these coverage decisions in process, I think if you start to look forward a year from now, of course, you know, here's where we make forward-looking statements, and so we don't actually know what's going to happen, but there, it's reasonable to expect that this momentum will continue to build. And you know, we do have to, you know, tough it out and weather the current storm, along with, you know, our peers in the market.