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?