Bionano Genomics, Inc.

Greetings, and welcome to BioNano Genomics Incorporated third quarter 2020 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ashley Robinson, with the best of relations. Thank you. You may proceed.

Thank you, LaTanya, and good afternoon, everyone. Welcome to the Bionano Genomics Third Quarter Financial Results Conference Call. Leading the call today is Dr. Eric Holman, CEO, and he's joined by Chris Stewart, CFO of Bionano. After market closed today, Bionano issued a press release announcing its financial results for the third quarter of 2020. A copy of the release can be found on the investor relations page of the company's website. Before we begin, I would like to remind everyone that certain statements made during this conference call may be forward-looking. including statements about the company's strategic and commercialization plans, adoption of the Sapphire system, the advantages of the Sapphire system over current technologies, and the company's expectations regarding timing and content of study results and anticipated benefits of these studies in driving adoption of Sapphire. Such forward-looking statements are based upon current expectations, and the results contemplated in these statements may not be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in the company's press release and its other 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 call will also be available online in the investor section of the company's website. And for the benefit of those who may be listening in to the replay or archived webcast, this call is held and recorded on November 12, 2020. With that, I'll turn the call over to Eric Holman. Eric?

Thank you, Ashley, and good afternoon, everybody. Let me begin by saying that we are really pleased with how the third quarter came together. Most of our commercial indicators grew over the prior quarter as we saw significant momentum Returning to the businesses, more and more geographies opened up with easing of COVID-based restrictions. We saw significant progress in key areas of market development, including presentation and publication of evidence in support of SAFIRE as a potential replacement for traditional cytogenetics methods. We transformed our leadership team with the addition of two key executives, Dr. Alka Chabi, who is our first chief medical officer, Alka joined us from Perkin Elmer, where she was the head of cytogenomics for Perkin Elmer Genomics and Vanadis. And Chris Stewart, our chief financial officer who previously worked at Tesla and has had a successful career in the tech and semiconductor industries. Finally, we acquired the CLIA diagnostic services business, Lineagen, in a stock-based transaction. The acquisition has the potential to expand our commercial services offering to customers who need CLIA-based data services. It has the potential to grow total revenues through sales of Lineagin's proprietary testing services for pediatric neurodevelopmental disorders, and it has the potential to provide critical strategic ingredients to outline the path for other CLIA labs to obtain payment for services on SAFIRE from third-party payers, including insurance companies and governments. Now, our focus since the very start of the year has been to pursue a go-to-market model that makes it easier than ever to get BioNano data through a combination of commercial services, reagent rentals, and a reduced price for acquiring a SAFIRE instrument. Our goal has been to increase significantly the amount of BioNano data and the number of SAFIRES in the field And based on the results from this third quarter, we can tell that this approach is working. Probably the biggest milestone that I want to share with you on this call is the publication this week, actually, of a landmark study in acute myeloid leukemia, or AML, by some of the most prestigious clinical and cancer institutes in the country, including Augusta University, Columbia University, Mayo Clinic, MD Anderson, and Penn State. who evaluated SAFIRE against the standard of care testing in 100 AML patients. Many of you will recall that we referred to this work as the Columbia study, and I'm happy to report that it's done and out, and it's really amazing. The significance of this paper is that the authors recommended that bio-nano-optical mapping replace karyotyping as first-line clinical test, in the evaluation of AML and other leukemia patients. And this is something that we really think is going to help us as we grow the installed base of SAFIRE for clinical testing around the world. I also want to highlight another high-profile paper that was published recently. This one is from the labs of Dr. Pui Kwok at UC San Francisco. He worked together with scientists at UC Berkeley and clinicians at the Oakland Children's Hospital. This was actually funded through a California Precision Medicine Initiative grant, and the results came out really nice for BioNano. It was the largest ever published using BioNano optical genome mapping to evaluate genetic disease patients who were previously undiagnosed with standard of care methods. Using the BioNano mapping, the authors were able to diagnose six patients out of 50 and flag another 10 patients with candidate pathogenic variants. Upon further analysis, three of those 10 in the flag group could also be diagnosed, making the total number of incremental diagnoses nine patients, or 18% of the undiagnosed population. That is a really significant number of patients to be diagnosed. And we believe that demonstrating this increase in diagnostic yield relative to the standard of care is going to be a key step in driving SAFIRE adoption in the future. Overall, the number of publications this year has grown significantly compared to last year. We estimate that there have been 98 papers published on the use of bio nanotechnology year to date. compared with just 80 for all of 2019. And something that's really significant about those publications is that the number of human structural variation-focused papers are up 70% year-to-date compared to 2019. And BioNano data have been presented at major national and international conferences across the globe this year, virtually, of course. And what we see in all that is that the awareness of BioNano and SAFIRE is increasing. We have always felt that it's really important for us to take steps to increase the amount of BioNano data in the field, and it really feels like our efforts are paying off. Now, let me turn to some of the other key metrics for the business, all of which we believe reflect significant momentum in research. the business that we're seeing in other areas. First of all, we shipped 11 Sapphires to customers this quarter, three of which were sold, and eight of those were under reagent rental contracts. That 11 systems is equal to the total number of systems shipped in the first two quarters of 2020 combined, reflecting, we believe, a nice recovery in the third quarter, and we expect that momentum to continue over the rest of the year. Now, these shipments combined with the installations completed in the quarter brings the total number of sapphires installed to date to 96 and the number of sapphires that are currently awaiting installation to 21. Next, we had a record quarter for the number of nano-channel array flow cells that were shipped with 1,785 flow cells sold. Now, recall that a flow cell is the unit of measure that represents the human sample equivalent of chip capacity. Some of our chips have two flow cells, and some of them have three. So, we measure the progress in consumable sales in units of these flow cells. The 1,785 flow cells sold represents 25 percent growth over the second quarter in 2020. and 34% growth over what we did in the third quarter of the prior year, 2019. More flow cells purchase corresponds with more samples being analyzed and more BioNano data that customers and potential customers will hear about. The progress here is really significant, and this third quarter has been another strong quarter for adoption of flow cells. Finally, our commercial BioNano data services has continued to perform well also. Keep in mind that we launched the commercial services as a solution for researchers who wanted to work with BioNano data, even if they couldn't purchase or rent a SAFIRE instrument. And we believe this strategy is essential for market development, and the number of projects and samples run by our services lab continues to perform well. So far in 2020, through the end of the third quarter, we had run 63 projects and a total of 577 samples. We compare that to the full year in 2019 when we ran just 38 projects and 212 samples. So we see substantial growth in the number of samples that were being processed in our lab, which again means more and more data available in the market to drive awareness of BioNano and its utility. And we believe this effort will result in more publications and more presentations and in turn contribute to more SAFIRE adoption. I also want to talk about what we see as the critical milestones to achieving widespread adoption by clinical labs that are seeking to develop laboratory-developed tests on SAFIRE and offer those tests for clinical use. To succeed along this path, we need to address three main prerequisites, the first of which is publishing multiple studies that show concordance with the existing standard of care as well as incremental improvement in diagnostic yield. The second is we need development and utilization of these laboratory-developed tests. And third, and this is especially important for labs in the United States, we need to have a clear path for clinics to build third-party payers for the SAFIRE-based tests and get reimbursed. Now, we've been making incredible progress in all of these areas, and I want to tell you about it. On the concordance data, we've been able to show 100% concordance with the existing standard of care in several publications now, including publications from MD Anderson, Radboud University in the Netherlands, this consortium of cytogeneticists led by Columbia University, including Mayo, University of Washington, Penn State, MD Anderson, Augusta University, and others. And as we've already discussed, we now see publications that are describing the improvements in diagnostic yield that come with adoption of SAFIRE. We expect these efforts to continue, but we also feel like we're beginning to build that critical mass. And we're so pleased that the Columbia paper has come out because it represents some of the best data that we have so far in the United States. Now, development of laboratory-developed tests, or LDTs, is another key prerequisite for clinical adoption. We announced this quarter the German accreditation of SAFIRE for detection of various types of structural variations that cause constitutional genetic disorder. Similarly, accreditation processes are underway for genetic diseases and leukemia in the United Kingdom as part of the national health system there. Similar work is underway in Belgium and the Netherlands. Augusta University in the U.S. is developing an LDT for cancer based on their results in heme malignancies and solid tumor. These have been presented for us at the Cancer Genomics Consortium meeting last August. We have other partners that are CLIA certified and CAP accredited labs that will develop LDTs. Praxis is a commercial service provider that we've talked about. And here at BioNano, we intend to develop laboratory develop tests as well. And so we're making good progress on obtaining a critical mass of clinical assays developed on SAFIRE that are commercially available in jurisdictions around the world. And lastly, regarding the third-party reimbursement, this challenge is most acute in the U.S. And we acquired Lineagen in an effort to overcome this barrier. With their CLIA license and vast clinical expertise, together with the leadership of our chief medical officer, Al Khachabi, We are now positioned to develop laboratory-developed tests in-house that can improve upon the standard of care. We love working with our partners, and they're very supportive. But when we have the opportunity to control the process, we can be a lot more certain about timelines. And so we intend to leverage Lineagenda's expertise and their existing portfolio to of third-party payer contracts and certified coders to work out this path for reimbursement of LDTs based on SAFIRE. We intend to use a combination of billing existing CPT codes where appropriate, obtaining PLA codes for the service, and obtaining coverage from ODX for Z codes. As these paths get established and reimbursement is obtained, We intend for Lineagen to share these strategies with other labs, which will enable them to follow this path. Our goal with Lineagen is to support the commercialization of SAFIRE by overcoming key barriers such as reimbursement and making those solutions available to the market. I want to be clear that our intent with Lineagen is not to compete with other service providers, but to make them successful in adopting SAFIRE. Finally, I want to say a few things about SAFIRE and the significant advancements in our technology. Among them include the biggest upgrade ever to our software capabilities, which is making SAFIRE more and more capable, and importantly, easier, faster, and cheaper to use. Our newest DNA isolation kit allows for faster and much simpler isolation of ultra-high molecular weight genomic DNA from remarkably small amounts of tumor samples, which removes one of the key hurdles in the study of solid tumors. And this new kit has been received enthusiastic and our sales to customers have really beat our expectations. Applications on SAFIRE run in the market are expanding. We now see our users conducting comprehensive structural variation analysis throughout oncology detecting rare variants that may be responsible for genetic and inherited diseases, or looking at off-target effects that may be occurring during CRISPR-based gene editing, all while telling us that our system is easier to use than other genome analysis systems in their labs. This is the kind of feedback that we've been working hard to achieve, and so when we get it, we're pleased to hear it, and we're so very pleased to tell you about it. In comparison to other systems for genome analysis, we believe that none is capable of the comprehensive structural variation detection that SAFIRE offers, not to mention at the throughputs and costs that are achievable with SAFIRE, especially against long-read sequencing platforms like PacBio and Oxford Nanopore, which don't have the performance speed, or cost metrics that are necessary to compete with Sapphire. And so I was very excited to give you this update on our business. And with that, I will now turn over the call to Chris Stewart, our new CFO, for an overview of the financials. Chris?

Thanks, Eric. First off, I want to say that I'm very excited to be here, and I really appreciate the warm welcome that I received from the Bionano team. I'm convinced that this is the perfect time to be joining Bionano. As you can see by the announcements from just this quarter, we've made substantial advances to make SAFIRE more usable, and we are building toward critical mass on the depth and breadth of published data on efficacy, including concordance with multiple existing cytogenetic standards of care, while we are also starting to see evidence being published that SAFIRE can increase diagnostic yields. I plan to leverage my experience in managing companies through periods of change to channel the momentum we are seeing into business success. We will continue to build out the infrastructure and business processes to support the profitable growth that we expect. The re-agent rental program and the services product have been very well received in the market and are having the intended effect as we are getting SAFIRE systems and data into the hands of influential people. We believe that this will translate into the growth of our consumables business which is expected to be the long-term profit driver for the company. Now let me turn to a breakdown of the commercial results for the quarter. Revenue in Q3 was $2.2 million, up 86% sequentially from $1.2 million in Q2. Revenue was comprised of about $725,000 or 33% in instrument sales, $855,000 or 39% in consumables, and including those related to our re-agent rental program. And $616,000, 28% in services and other revenue. Q3 services revenue includes approximately $445,000 of revenue from Lineagen for the period from August 21st through the end of the quarter. Going forward, we will include Lineagen with our services revenue. Organically, BioNano revenue was up 48% quarter on quarter. This increase was driven by the start of a recovery from the COVID shutdown that we experienced in Q2. Europe was particularly strong, returning to levels we were seeing at the end of 2019. While many customers are still not back in their labs, and there's certainly a risk of a COVID resurgence that could continue to impact our business, it was encouraging to see the enthusiasm with our customers as they started to get back to working with Sapphire Systems and Data. Cost of sales in Q3 were $1.5 million, resulting in a gross margin of 34%. Gross margin was down from 49% in Q2 due mainly to the higher mix of instrument sales versus consumables and services that we saw in Q2. Second quarter operating expense was $11 million, an increase of about $3 million over last quarter. The increase was primarily due to $1.5 million of transaction-related costs for the lineage and acquisition, as well as additional operating expenses related to the lineage and acquisition. We also returned salaries to their pre-COVID levels after the reduction in salaries that management took in Q2. Finally, as of September 30th, our cash balance was $18.9 million. This includes about 15 million received in the quarter pursuant to warrant exercises. Therefore, we believe we have adequate cash to carry us into the first quarter of next year. As we've talked about before, we have an S3 in place and believe we have sufficient options available to raise cash in the future. Looking forward into 2021, we are focused on growing revenue with the continued underlying goals of building on the published data and exposing more researchers and clinicians to the advantages of SAFIRE and creating a path to reimbursement for SAFIRE testing in the clinic. We will build on both our sales and marketing and R&D teams prudent late through the year. With that, I'll turn it back over to Eric.

Great. Thanks, Chris. And let me say welcome aboard and let me say the same to Alka. It's really great to have our team at Critical Mass. And with that, I will turn it back over to the operator to open up the call for Q&A. Operator?

Thank you. At this time, we will conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one at this time. One moment while we post our first question. Our first question comes from Kevin DeGieter with Oppenheimer. Please proceed.

Hey, good afternoon, guys. I want to add my congratulations to all the new members of the team, and what looks like a really solid quarter here. I guess a couple of questions, if I may. Starting off with the publication this week, your data was You know, very impressive, and I guess my question here is, you know, do you think you need, you know, large datasets in, you know, other hematologic subsets to really kind of change practice, you know, particularly here in the U.S.? Or, you know, do you think it's a sufficiently broad study to be, you know, practice changing sort of across, you know, cytogenics, you know, at least in terms of the hematologic community?

Look, more data are better, and nobody is ever satisfied with the amount of data that's available. You know that. But what I will say is that across the leukemias, this is a seminal data set. We expect it to be submitted for peer review and publication later on this year, and our studies will continue. I would say overall in hematologic malignancies is that we would like to expand our datasets in multiple myeloma specifically and lymphomas to really round out the heme malignancy space. We will continue to add more and more studies in leukemia, but this is really a seminal dataset for us that goes a long way.

Great. And then my next question, which may be somewhat related, you did touch on engagement with MoldDx as an important component of the payer and third party reimbursement discussion. Can you use comments of where that stands currently? Have you had any interaction with the folks there? And how should we think about potential timelines and critical milestones sort of along that process?

Sure. So the company has been engaged with folks at MoldyX and Palmetto, and those engagements and interactions that have influenced our thinking and helped us form different strategies. What we are now engaging in with them is a very specific conversation based on the data sets that we now have available in this paper from the Columbia Consortium. is something that really helps us have those conversations because in a very objective way, we can lay out how Sapphire transforms the current standard of care. And so it's really about taking those general conversations and making them more and more specific, and so we can get into what coverage would be like. And when it comes to a timeline, I think that we're pursuing three strategies in parallel, leveraging existing codes, and so we can do that essentially right away, engaging with MOL-DX, as you picked up on, as well as the PLA code process. And these will unfold certainly for the remainder of this year and into next year, and will be driven by the sort of standardized timelines that are out there for this process. I do think it's going to take you know, into next year before we see a lot of measurable outcomes from this work. But we're very much engaged and moving along at a rapid pace.

Okay. And then just maybe one more follow-up and a housekeeping, if I may. Can you remind us under the existing codes, you know, when a lab submits sort of what that reimbursement rate or range can be and In the housekeeping component here, if I think about the 1,785 flow cells in the quarter, should we think about those as principally all through the research market, or are there some early cytogenetic and clinical volumes that kind of feed into that number?

Yeah, I mean, with regard to the, you know, what is the average reimbursement around existing codes, you know, this is always, you know, dependent upon what, you know, a lab has in their contract with the payer. But, you know, these range in the $1,000 to $2,000 range, depending upon indication, and can even go higher. It just depends upon the specific application. But they are They're in that range solidly between $1,000 and $2,000. With regard to where these flow cells are going, of course, we have an installed base, which is primarily research, I would say 80%. But when we look at the adoption that we're seeing, that's actually the other way around. It's probably 80% clinical, and a lot of these flow cells are going there to support the reagent rental contracts that they entered into. So very crude back of the envelope math would probably put that at 50-50, which is incredible.

Yeah, no, that's great. Thanks so much, Eric. I appreciate taking the questions.

Our next question comes from Jeffy Cohen with Ladenburg-Dalman. Please proceed.

Oh, hi, Eric, Chris, and Oka. How are you?

Good, thanks. How are you?

Just fine. I wanted to start with some of the, so you placed 11 units, so there's 96 in the fleet. Could you talk about the backlog a little bit? You mentioned 21 units. Do you expect those to be in place and up and running by the end of the year, or is that a spillover into Q1 as well?

Yeah, if I had to make an estimate, over the course of the third quarter, we installed nine. So I think we went from 87 to 96. So we were able to install nine. So if our access to labs stays where it is, it probably improves a little bit. I think we can cover probably about half of these at least, and maybe a little bit more. But part of the problem is just getting access to labs. And as everybody should know, the situation is not stable in Europe, for example. So restrictions are being reintroduced. And our best guess is that those restrictions will not completely prohibit us from installation, but it could delay. So I'm going to say, you know, Let's say that in the fourth quarter we can do roughly half of those.

Okay, got it. Chris, could you speak to the SGN line? I know that there was 1.5 in transaction relation from Lineagen and 1.3 in bad debt in combination with the 33 added FTEs from Lineagen. For forecasting, what might that look like going forward? Kind of, you know, what's the baseline on the SG&A line going forward? Should that be – should that revert back to something on the order of Q2, or would you expect this to be the new baseline going forward?

No, certainly, you know, accounting for the one-time expenses, You know, we expect to be back in the range, you know, where we were towards the end of 2019 and early 2020 as far as organic bio-nano. And then the lineage in business adds another 15-ish percent of that. So that's probably the way to think about it.

Okay, got it. And then lastly, Eric, could you talk about, it looked like pretty nice utilization. Could you talk about the throughput and efficiencies as far as the time to process the tests? And, you know, could you see more efficiency or faster throughputs going forward with the current equipment or other developments going on?

Yes. You know, so... In constitutional genetic disorders and in cytogenetics overall, you know, 100 samples a week is like a sweet spot. And we've been driving towards that. And we are there in the constitutional genetic disorders now in some of the cancer applications because these specimens are highly heterogeneous and the pathogenic variants may be present at very low abundances. you got to collect a little bit more data on them. And so what we are doing is accelerating the methods through a variety of tweaks. These are just turning knobs here and there to speed that up and get that up to the 100 sample a week level. Of course, genetic diseases will speed up as well. But where we're at now is really a good place even for both indications. And so The improvements in speed that we get will be gravy. There are other areas of optimization that we are working on, and that will make it easier to process multiple samples, let's say, at one time. And so, ultimately, we're going to be able to bring cost per sample down through that process. That's some of the longer-term R&D initiatives that are underway. And then, you know, we want to simplify data analysis by adding features and capabilities to the software. And that has the effect that it speeds the process up because the people who are interpreting the data will have to do less work. And so those are really three programs that are ongoing and will continue to progress as we progress. get more and more adoption of SAFIRE, higher and higher volumes. Labs use it. They're going to want things to go faster and faster. And so, you know, we're constantly pressing in that direction.

Okay, so no current gating limitations, but possibly other areas that you're addressing on the commercial side going forward. Is that a good way to put it?

Yep, that's correct.

Perfect. Okay, that does for me. Thanks for taking the questions.

Thanks, Jeffrey. Thanks.

Our next question comes from Scott Henry with Roth Capital. Please proceed with your question.

Thank you and good afternoon. A couple questions. First, the leukemia market, how should we think about that in terms of the target market for placement in that category as well as procedures?

Yeah. I mean, there are about 200,000 people diagnosed with leukemia every year in the U.S. And those are just the patients that are diagnosed. So many, many more are tested and then you've got the lymphomas to go along with that. And so this is a substantial patient population overall. We would estimate it to be in the neighborhood of a million patients reliably. And that testing in the U.S. is spread out across So between 550 and 750 labs. And, you know, so that would be the placement opportunity and the volume opportunity. I do think that a lot of these labs are going to end up adopting multiple sapphires. So let's say that minimum is 550 to 750. And then the total number of sapphires is going to be driven by the testing volume itself.

Okay. Thank you.

Those are U.S. numbers. By the way, in Europe and in Canada, where they have a rational single-payer health system, they're ahead of us in adoption. The combination of Europe and Canada together probably represent the same kind of economic opportunity that we see here in the U.S.

Great. The flow cells Is that a figure you're going to give us going forward?

Yes, that's our intention, yes. I think we certainly reported it last quarter, and I think we did the quarter before that. But that's really the best way. If we talk about chips, some chips have two flow cells, some chips have three, so then you need to know which chip. But if we just tell you how many flow cells went out, then you have a sense of the amount of consumable flow capacity that's being purchased by the market, and as long as they keep purchasing it, it's because we're growing the install base and the existing install base is using what they purchased.

Okay. And I think I took down 34% year over year. What was the sequential change, or if you could just give me the 2Q flow cell number?

It was 22. 4%, I think, versus the second quarter. Is this a coincidental change?

Yeah, 25% over Q2 2020 and 34% over third quarter 2019. Okay, thank you. That was the highest number ever. That is the world record to date.

Okay, great. And then I didn't see the 10Q yet, but could you give me the shares outstanding? I didn't see that in the release.

Let me go get it for you, and then I'll come back to you on it.

Okay, fair enough. I think this was a partial Linogen revenue quarter. I mean, now that you've kind of owned that business for a little while – How do we think about the steady state revenue run rate of that business now? I think the number was solid in the third quarter, but I'm not sure how much of it it entailed.

I'm sorry. I was looking for the share count number.

So, you know, it was roughly $450,000 of revenue attributable to that services business in the third quarter. You know, and the time period was August 21st through the end of the quarter, so roughly half of the quarter. And I think that that's been their steady run rate this year, but their business is is muted as a result of COVID because doctor's offices are not operating at full capacity, which is needed to see patients and refer them for testing. So there's upside to that. But please keep in mind that those revenues help and that cash comes in the door and that's really important. We also value heavily the strategic capabilities like the clinical team that Alka inherited the day she joined. And so there's a tremendous strategic benefit. But there is upside. If you say that they're running at roughly $750 to $1 million per quarter, that's probably what they've been doing this year. And we would expect that to tick up next year.

Okay. And just to follow up on your response, how is the selling environment? When we think about Q4, it's typically seasonally the strongest quarter. Uh, but COVID, I mean, how is, you know, should we think about that as, you know, a 25% haircut to the market right now? Or how, how do you think about that environment out there for fourth quarter?

Yeah. I mean, what we have seen is, uh, I think, you know, nice return here in the third quarter versus our first and second quarter. Um, We do expect our fourth quarter to be better than our third quarter, reflecting this seasonality and so forth. However, without a doubt, there are limiters on the ability to get in and see customers. Customers are not operating their labs at the same levels of capacity. If you look at published information that's out there, you'll see that labs are running anywhere from You know, a research lab, let's say a cancer research lab, is going to be running anywhere from, you know, 25 to 75% capacity. You know, so what I would say, you know, I'm not really going to try to quantify it for you, but, you know, we are thinking that we'll do better in the fourth quarter than we did in the third quarter, reflecting an ongoing improvement in the momentum. And the other thing that I would say is that of all of our markets, the U S is toughest, not because the COVID situation is necessarily tougher here or, or not, but because of just where we're at in terms of customer readiness to adopt. So the researchers they're on board and they're using the system, but they're not working as much. The clinical folks are on board, but they need, they need, they need more as we've been talking about, whereas in Europe, the clinical folks are up and running more significantly. So I think Europe is going to contribute significantly to the business in fourth quarter. We do see recovery in the U.S. So I just want to say that we'll do better in the fourth quarter than we did in the third, reflecting continued improvement.

Okay, fair enough. And the final question is kind of a tough one, but I think it's a fair question. The scientific momentum, in my opinion, just seems like it's never been better. You're getting traction. You're making a lot of progress. But the burn rate kind of holds you back a little bit because it's still significant relative to the company size. Do you think from Q3, do you think this is going to be a high watermark for the burn, meaning it should start to decline? Obviously, you've got a little bit of a headwind in not having – that one and a half million transaction cost after Q3. But do you think we should start to see that decline now? Are we at that inflection point?

Yeah, I mean, I'd like to say definitively, yes, but it's tough, right? Because what we need to do is continue down the path of building on the data that's out there, right? So we need to continue to get Sapphire Systems into the hands of the people that can publish data We do, you know, with the way we're operating the re-agent rental program, we can do that and grow revenue at the same time, but we're still making investments. We still have to grow the sales and marketing team, you know, especially on the clinical side, and we have some investments to make to expand even further on the capabilities of Sapphire and make it easier to use and things like that. So, you know, I hope we're not increasing the burn over time, but I wouldn't I wouldn't call it, you know, an absolute high watermark, you know, for the near-term future.

Okay. Thank you for the feedback.

And the share count, the weighted average share count at the end of Q3 was about 133 million shares. And, you know, we've had a little bit of option exercise, excuse me, warrant exercise. So the share count's up a little bit from that as of today.

Thank you, ladies and gentlemen. We have reached the end of the Q&A session, so at this time I would like to turn the call back over to management for closing comments.

Thank you, operator, and thank you to everyone for joining, and we look forward to speaking with you after the fourth quarter, and I appreciate you joining. Thank you very much.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation. Have a great day.