Good day and welcome to the Bionano Genomics Conference Call announcing its acquisition of Biodiscovery. Today's conference is being recorded. At this time, I would like to turn the conference over to Amy Conrad from Investor Relations. Please go ahead.
Thank you, Armie, and good morning, everyone. Welcome to the Bionano Genomics conference call, where we will be discussing the acquisition of Biodiscovery. Leading the call today is Doctor. Eric Holmlin, CEO of Bionano. He is joined by Chris Stewart, CFO of Bionano Rich Shippey, CEO of Bionano and Doctor.
Suheel Shams, CEO of Biodiscovery, who are available for questions. This morning, Bionano issued a press release announcing the Biodiscovery transaction. A copy of the release can be found on the Investor Relations page of the company's website. I would like to remind everyone that certain statements made during this conference call may be forward looking, including statements about Bionano's strategic and commercialization plans, sales pipeline, anticipated benefits or improvements to the Saphyr system, anticipated milestones for 2021 and the advantages of the Saphyr system over current technologies, our expectations regarding timing and content of study results and anticipated benefits of these studies in driving adoption of the Saphyr system. Such forward looking statements are based upon current expectations and there can be no assurances that the results contemplated in these statements will be realized.
Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in Bionano's press release and Bionano's reports filed with the SEC. These forward looking statements are based on information available to Bionano today, and the company assumes no obligation to update statements as circumstances change. An audio recording and webcast replay for today's conference call will also be available online in the Investors section of the company's website. With that, I will turn the call over to Eric.
Thank you, Amy, and good morning, everyone. Thank you for coming together on such short notice. Today is really an incredible day for Bionano, and we believe for everyone in the genomics field, we have entered into a material definitive agreement with Biodiscovery, which is a best in class software company, to acquire them with the goal of creating what we believe can become the most comprehensive variant analysis platform in genomics. I'm incredibly excited to be here with members of my team to talk to you about the acquisition, but also to be joined this morning by Doctor. Sohail Shams, who's the Founder and CEO of Biodiscovery.
Sohail?
Thank you, Eric. Thank you, everyone. I'm very excited to be here.
Fantastic. So as you know, we believe the next wave of big biology and value creation in genomics will be driven by structural variation analysis. We also believe an essential component of that expansion is the integration of genome structure analysis with sequence variant analysis. The Biodiscovery acquisition moves us significantly closer to realizing this vision by creating what we believe will be the most comprehensive variant analysis platform in the field. Now we believe this transaction is key to accelerating our efforts to drive adoption of optical genome mapping, which, as you know, we refer to as OGM.
We believe it will simplify the data analysis process, reduce the overall interpretation time per sample and effectively increase our reach into the discovery and translational research markets where the combination of next generation sequencing and optical genome mapping can reveal more answers. In the future state, once optical genome mapping has been fully incorporated into Biodiscovery's Nx clinical platform, we will be able to offer a powerful solution for genome variant analysis in a single window. Biodiscovery enables us at Bionano to provide our customers with a powerful solution for data analysis that goes well beyond just accelerating adoption of optical genome mapping. This integration into software has the potential to transform Bionano Genomics from an OGM solutions provider into a broader genomics data solutions provider with the most comprehensive platform for genome analysis that can integrate most of the data types that are used in the field today. Now let me introduce you a little bit by Biodiscovery.
The company is based in California, just North of San Diego and El Segundo by LAX. The company was founded by Doctor. Silhil Shams, who, as you know, now is here on the call with us today. We are really excited that Doctor. Shams will join the Bionano management team as our Chief Informatics Officer going forward.
And he will continue to drive the Biodiscovery business with our support. And to complement the great people at Biodiscovery, they have also built a very powerful business with hundreds of software business software customers globally using their best in class software for DNB analysis, which we believe will expand our reach of OGM more broadly. 2020 revenues for Biodiscovery were $3,600,000 and the company was profitable. Now here, I'm summarizing for you a snapshot of Biodiscovery's products, the NX Clinical and NexSys Copy Number software solutions. NexSys Copy Number is a platform for CNV analysis and really the original for translating microarray data into a useful format that was a big part of driving the movement from microscopes to microarrays in cytogenetics, resulting eventually in changes to medical guidelines elevating microarrays to a first line analytical tool.
And something that you should know is that Doctor. Alka Chawbe, our Chief Medical Officer, and Rich Shippe, our Chief Business Officer, worked together with SoHeel at that time during that process. And so there is a long history between the people involved in this transaction. Now the Nx clinical product is Biodiscovery's current flagship. It builds on the CMB analysis of Nexus copy number by incorporating next generation sequencing data.
It's the only platform agnostic data interpretation and reporting software that fully and seamlessly integrates NGS and microarray data to provide visualization of single nucleotide variants, copy number variants in absence of heterozygosity across the genome for a fully integrated view, including database functionality for annotation and reporting. That's why users of Nx Clinical are so excited by it, and they recognize that SOHEAL is a visionary in connecting the questions that they're asking with the answers that come from the samples. We've been working with Sohil and his incredibly talented team for some time now to go through the process of adding optical genome mapping data to Nx Clinical. That's an ongoing process, and we believe this acquisition will accelerate it and allow us to do much, much more. So when we look at today's laboratory environment, we recognize that software is the critical interface.
Software is the window through which the results of all the incredible technology in genomics are viewed. Software really is the last mile. It touches every aspect of the value proposition. We know that powerful software can create a seamless workflow to make obtaining genomic data fast, easy, and affordable. In today's genomics workflow, one simple solution doesn't exist.
And we are really pleased to take on this challenge of helping researchers and clinicians integrate their data types across the full scope of genome analysis to get the answers they seek. We believe this transaction enables us to create a powerful new platform for genomics. Optical genome mapping is our proprietary data type, but the clinical research lab desires integration across platforms. And this Biodiscovery software capability is that vehicle for such integration. I want to talk a little bit here about the integration plan and the new operational structure.
As I mentioned, Sohil will become the Chief Informatics Officer of Bionano. The existing location for Biodiscovery will remain, become one of our key software development hubs. And so Hill will continue to play a major role in running biodiscovery but spread his wings across all of our software development and bioinformatics teams at Bionano. The goal of the integration plan is really twofold: to drive the structural variation analysis capabilities of optical genome mapping into the Nx clinical platform and then to continue to support Biodiscovery's current users and to support the company in continuing to grow their business. And these are big goals that we believe we can accomplish together with this world class team, combined with the group that has been developing our solutions at Bionano so incredibly powerfully for many years now.
So lastly, I want to kind of summarize how we are approaching the integration process over time. As you can see, we've been working with NX Clinical and Suheel and his team to feature optical genome mapping. And we expect to have OGM integrated into a commercially available version of Nx Clinical soon. This is going to be a stepwise process. Sometime in the 2022, we'll roll out a version of Nx Clinical that will feature some aspects of optical genome mapping.
And then we will continue working closely with that team to fully integrate the comprehensive structural variation detecting capabilities of OGM into Annex Clinical over time. And when we've completed that process, we know that we were going to have really a first in class genomic solution. The process of enhancing and developing NX Clinical won't stop there, though, because we'll be focused on adding some of the additional data types that were summarized on one of the previous slides. For example, we are going to be expanding NX Clinical beyond just the optical genome mapping, but to be adding methylation. We also have a vision for incorporating gene expression analysis with RNA Seq data.
And we even have our sights set on including proteomics data into this solution over time. And so you can see that our focus is not just on providing optical genome mapping solutions, but really transforming Bionano into a complete solutions provider around genomics data. And we know that that's the powerful solution that we can bring to users with a proprietary data type and a platform agnostic software solution. So at this point, I'll turn the call over to Chris to give him a chance to review some of the financial details of the transaction before we take your questions. Chris?
Thanks, Eric. I want to start by saying that I echo Eric's excitement for the acquisition, and I believe that the capabilities we are adding here can accelerate and broaden our market leadership in digital cytogenetics and comprehensive genome analysis. The transaction consideration will be up to $100,000,000 consisting of a combination of about 60% cash, 40% equity. A portion of the equity is subject to vesting based on continued service of key employees. And a portion of the cash is contingent on achieving full integration of OGM data into ByDiscovery's software platform.
You can find additional details in our eight ks filed this morning. The acquisition is expected to close before October 22. Biodiscovery's 2020 revenue was about $3,600,000 and they are on track to grow this year. The acquisition is modestly accretive for Bionano, which will result in a small but positive impact on EPS. We're very pleased with the terms of the transaction and look forward to integrating the Biodiscovery team into Bionano.
I'll now turn it back over to Eric for closing remarks. Eric?
Thanks, Chris. And I just want to close out by thanking Sohil for joining us on our journey to transform the way the world sees the genome. We strongly believe that our market, genomics, has the potential to do incredible good in the world. And through this process, we know we have found kindred spirits at Biodiscovery who will relentlessly drive to our end goal, which is to impact people's lives by elevating their health and wellness. And with that, operator, we are now ready to take your questions.
Operator?
Your first question comes from the line of Sung Ji Nam of BTIG. Your line is open.
Great. Thank you for taking the questions and congrats on the transaction. Just a couple of quick ones from me. Could you maybe break down what the split is between for Biodiscovery, what is the split between clinical versus discovery translational customers?
Well, the product is a research use only product and used throughout the clinical research community. Having said that, the vast majority, 90% or more are focused on clinical translation applications. Okay.
And then just to confirm what the differentiating factor is for biodiscovery, is that just is the key differentiating factor the platform agnostic approach the platform has?
Yes. So the NX clinical platform and its predecessor, Nexus copy number, provide a key function in the workflow, and that is to visualize the variants that are picked up by the instrument and its variant calling algorithms so that they can be visualized in the context of the whole genome. It provides a vehicle to interpretation through annotation in connection with the database and the clinical literature. And then condenses all of that into a consistent reporting format. So our current tools, through Access and Solve do the variant calling and provide visualization of the variants.
But there's a fair amount of manual curating of the variant calls. And so the NX clinical platform will automate that process and then, as you point out, integrate our variant calls, offering the opportunity to visualize them and interpret them alongside sequence variants in a completely platform agnostic way.
Great. Thank you so much.
Your next question comes from the line of Jeffrey Cohen of Ladenburg Thalmann. Your line is open.
Hi, Eric, Chris and Rick. How are you? Great. Hi, Jeff. Good.
So, congratulations on the transaction. I have two questions. I guess, firstly, so Hill, could you spend a minute or two and tell us a little bit about this Nexus copy number and what your plans are for it going forward?
Sure, copy number or NX clinical or both?
The copy number. NX clinical, was focused on NX clinical, that's really the flagship.
Right, because Nektostatin number is more of the legacy product, still used in the research application, for cohort analysis. And X Clinical is our flagship product, that's used across the globe in many clinical labs. And what was exactly the question?
I think that was it. So my second question is, could you discuss a little bit about the process of pulling in historic data from Bionano or the operations and the data and the analysis from the researchers that's been collected over the past number of quarters, will that be able to be integrated into the platform over time?
Yes. I mean, the fact that it is it is, you know, retrospective data, if we wanna call it that, it's the data type. And so we we need to build in that functionality to integrate the data type into the platform. And then any OGM data will be able to be, visualized, interpreted and reported through the NX clinical platform. Okay, got it.
And then lastly, for us, could you talk about the pricing model and the number of users out there for the platform currently, the Nx clinical platform? And how is that working as far as pricing? Is it subscription based? Or how might that work?
Yes. The predominant go to market approach for Nx Clinical is to sell end users a packet of analytic capabilities that is based on a per sample fee. So there would be, a user would purchase a certificate or token that allows them to run a certain number of samples and then, the cost for that token is based on a per sample fee and that can be in the tens of dollars per sample.
Your next question comes from the line of Kevin DeGeeter of Oppenheimer. Your line is open.
Eric, yes, congrats on the transactions. Actually a really nice deal. Maybe just three questions. Sorry. Can you talk a little bit more detail about the buy versus continue to collaborate decision here?
I mean, you are you basically do have the only optical genome mapping platform. So from a data type standpoint, you were in a unique position that it may not be obvious why the acquisition was necessarily, the only path forward for integrating, the capability onto NexSys. And then maybe secondarily, can you quantify the overlap between some of the Biodiscovery customers and kind of potential Tier A customers for SAPPHIRE? I'm just trying to understand how many or kind of how we should think about where there's where Biodiscovery is already in with a customer that the Sapphire may be an appropriate target for Sapphire in the coming years? And then just lastly, on a high level, it looks like the Nexus platform is primarily integrating machine learning kind of capability.
I'm just kind of wondering to what extent do you think this platform is suitable and has kind of a data standardization that would allow more kind of AI and deep learning capabilities within Bionano? And then maybe we have a follow-up.
Yes. So, I'll see if I can remember all those, and I'm going to start from the very top, which is to say, you're absolutely right. This is a build versus buy process. And we've been working with Soheel and his team for some time. And as I mentioned, the relationships go back many years.
And through that process of working closely with them, it became clear to us that to bring Sohil and his team in house was absolutely the right call because it's not just providing a visualization, interpretation and reporting solution for optical genome mapping, but it's really integrating optical genome mapping with the other data types. And while we recognize that Bionano can be incredibly successful and win by proliferating our system, you know, the best solution for customers is to simplify and their workflow and empower them to get the answers they seek. And that empowerment comes through the seamless integration of these data types. And so we we really felt that to achieve that level of integration, which is empowerment for customers, we would do that better if we brought that team in house. And so that was a big driver of the decision.
Other factors are that we're not the only group that's seeking SOHEAL's time and attention. And so in order to ensure that optical genome mapping gets integrated and onto the market, we felt it was better to have connection to that team. And then lastly, I don't know what it's like in the research analyst business or investment banking business, but talent in software development, bioinformatics is incredibly difficult to find. So Heal has, cultivated and curated a team of incredible software developers and computational biologists, bioinformatics scientists, customer support for software analytical tools that is really best in class in the industry. So putting all of those things together, we felt that just building this through an partnership would do justice to the value potential that was there.
So that's the answer to the first question. I think with regard to the capabilities
around
AI and machine learning and all of the powerful skills. I mean, there's a tremendous overlap here because our tools leverage those capabilities to search through the raw data and transformed and digitized data through our own process of variant calling. And those are our proprietary capabilities. And we believe that we can overlap that with the capabilities that exist within biodiscovery to really build powerful tools that are cross platform. And I'm pretty sure that this is something, this cross platform idea is something that if you go talk with users, they're going to say is critically important to them but is not being addressed for them.
And so this is really a very powerful opportunity for us to bring those capabilities together, and we're going to leverage that both from our existing capability side within Bionano, which is world class, together with what Soheel has brought together. Terms of the overlap of our end users, it's meaningful, right? Meaningful double digit percentage. But because Bionano has been evolving its installed base from that basic research through translational research more over to that clinical research side and the folks that are developing LDTs, the overlap is increasing, but is not in any way like the majority of Biodiscovery or Nx Clinical's installed base. And we're excited about that because we believe that the existing Nx Clinical users will pull us in as our integration, into that platform increases over time.
So that's one of the reasons that we believe these steps will accelerate adoption of optical genome mapping on the way to building this incredibly powerful analytical platform. I hope I've covered your questions.
That's great, Eric. And then maybe just a follow-up. You did highlight a first half, I believe, '22 for integrating some aspects, of the biodiscovery capability or some aspects of ODM into the biodiscovery capability. Can you just characterize what that first, component of integration might include? And then how we might think about, a timeline to potential full integration of, the ODM capability into NEXUS?
Yes. So it's really about, starting out with copy number variations, gains and losses and adding them, to the suite of tools and importantly enabling the visualization of those variant calls. So in a typical CMD analysis, the approach that the cytogenetics lab is taking is very, very visual. So it's important for them to analyze the variant calls on the scaffolding of the chromosomes. And so that's what Nx Clinical does so incredibly well.
So it's beginning to integrate our, copy number variant calls into that visualization platform as we then build and go beyond just gains and losses and start to look expand to really all of the structural variation calls that optical genome mapping takes. So that initial phase will be some visualization of the CMVs. Like we say, we're aiming to get that done in the first half first quarter twenty twenty two. The full integration, we believe, will take some time, and that will be a stepwise process, and there will introductions of new capabilities. And we really have to sit down and think about how quickly we can get that done.
But progress will certainly be made, throughout 2022 on that process.
Great. Thanks for taking my questions.
Your last question comes from the line of Michael Okonovich of Maxim Group. Your line is open.
Hey guys, thanks for taking the question. Congratulations on the acquisition.
like to start off, I guess, a little broad and just see how this fits into the idea that Saphyr is not a competitor, but a complement to sequencing. And is this acquisition more about expanding your internal capabilities or providing a robust tool to better enable that integration with other methods like NGS that provide different but also important data?
Yes and yes, Michael, it's all of the above. I mean, think that when we started out in this process, we, thought of ourselves as an optical genome mapping solutions provider, which as you point out is highly complementary to all sequencing. We don't compete with sequencing. We encourage as much sequencing as possible because it gives us a chance to resolve the genome structure in those cases. But as an OGM solutions provider, we also recognize the incredible power of integrating the data types.
And we also saw that customers were eagerly seeking that integration into a single window. And so the beginning was to really augment the capabilities of the Saphyr system. And I kind of realized in going through the slides and the commentary, I could have done a better job, and Sung Ji was very helpful in drawing out the kind of key differentiating factors. But it really is around this idea of interpretation reporting, visualization interpreting and reporting. We have great visualization capabilities.
Those are going to overlap with the NX clinical platform. But interpretation, by querying databases, annotation and providing a window into the significance of variant calls according to what's been reported in the literature, this is critical. And that's something that's done manually today. And the Nx clinical platform will shrink the time required to do that from in some cases, if you have a lot of variants you've got to go through, it takes hours, right, to less than twenty minutes. It's incredibly fast.
So adds this powerful interpretation and annotation capabilities, which we would have to build from the ground up. There are open source solutions out there, but they're not great. NxClinical is great. It's the market leader. And then powerful reporting capabilities.
So the interpretation of reporting is something that we don't have. We would have to leverage things that exist in the market. So building that out is key to being an OGM solutions provider. But then we recognize that this is the sort of second part of your question or comment is that the real value in this market is connecting all of those data types together to generate answers on the next level. And so that's what has really gotten us very excited about transforming the company into a broad genomics solutions provider with a proprietary data type.
And we've seen this in other industries. When we look across industries, we see this, and we think that Netflix is an example of this, right? It's possible to view a host of content generated from a variety of sources in Netflix, but Netflix is the only home for Netflix originals. And so that's an analogy that we apply to this way of thinking. And of course, you know, the original content that we're providing through OGM is incredibly powerful.
It's taking off. Everybody is super excited about it. But think about providing that through a platform that envelops all data types and makes all data types accessible in the context of OGM. We believe that that's just incredibly powerful and enabling for the market.
So I'd also like to touch on that just because when you say that you could sorry, lost my train of thought here. What I'm trying to ask is, does the added integration and the ease of integration offering essentially all these platforms on the same digital analysis tool further highlight the unique data that OGM offers?
Yes, without a doubt. Because the process of genome analysis often involves drilling down on a data set until you hit a brick wall, then transferring over to a different platform, drilling down until you hit a brick wall and so forth. And so by having all the data types consolidated, the process itself is streamlined. But now having the optical genome mapping data type right there next to sequencing variants really enhances the sort of interplay between the two data types. And as you can imagine, creates insights that really couldn't be obtained, would be less likely to be obtained if you had to look at the two data types separately.
Looking at them together, seeing a sequence variant inside a structural variant at the same time is an insight that you wouldn't be able to get as easily without the integration. So we really do believe that there's an enhancement in the value of optical genome mapping by having it integrated. And this is going to drive adoption throughout clinical translational research where the value proposition is to add an incremental data type to sequencing. And let's face it, that sort of sounds like more work to researchers. Well, we're simplifying the more work and creating the value by putting the two data types together.
Think that that probably wraps us up. I appreciate everybody's, time in joining the call. And with that, I'll turn it back over to the operator.
I'm showing no further questions at this time. I would now like to turn the conference back to Doctor. Please go ahead.
Great. Well, like I said, thank you, everybody, for joining. Please stay tuned. We'll have a chance to update you more when we give our next earnings call. And this is a very exciting day for us.
And we couldn't be happier to welcome Suheel and the Biodiscovery team to Bionano. Thank you very much.
This concludes today's conference call. Thank you for participating. You may now disconnect.