Bionano Genomics, Inc.

Good day, and welcome to the BioNano Genomics Second Quarter 2021 Earnings Conference Call. 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, Laura, and good afternoon, everyone. Welcome to the BioNano Genomics Second Quarter 2021 Financial Results Conference Call. Leading the call today is Dr. Eric Holman, CEO of BioNano. He is joined by Chris Stewart, CFO of Bionano, and Dr. Alka Chavez, CMO of Bionano. After market closed today, Bionano issued a press release announcing its financial results for the second quarter of 2021. 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 plan, sales pipeline, anticipated benefits or improvements to the SAFIRE system, anticipated milestones for 2021, and the advantages of the SAFIRE system over current technologies, our expectations regarding timing and content of study results, and anticipated benefits of these studies in driving adoption of the SAFIRE 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 afternoon, everyone. We had a really great quarter to cap off this first half of 2021, which we believe has been one of the most transformational periods in our history. Total revenue for Q2 2021 was $3.9 million, which is up 226% versus Q2 of 2020. And that's a record for any Q2 in the history of the company. We also had great performance in many areas of execution, including seeing customers develop laboratory-developed tests, or LDTs, based on optical genome mapping, or OGM, with SAFIRE, and obtaining accreditation for SAFIRE-based LDTs in certain European markets, which was an important milestone for Q2. I also want to welcome to the team two outstanding executives who joined us this quarter, Jason Pryor, who became our Chief Commercial Officer, and Rich Schippe, who became our Chief Business Officer. Jason and Rich are experienced leaders, with Jason having held previous leadership positions at PerkinElmer and GeneDx, among other companies, and Rich having held previous leadership positions at Affymetrix and Illumina. So welcome to Jason and Rich. I want to start out our update today by outlining our strategy which is focused on execution in three key areas. First is growing the installed base of the SAFIRE systems and their consumables use in two markets. The clinical research market, where OGM provides an alternative to traditional methods that are outdated, slow, and have low success rates for finding the variants that drive biology and pathology. The other market is the discovery research market, where OGM empowers researchers looking for novel therapeutic targets and biomarker signatures. The second area of execution focus for us is continuously innovating, so we can bring new capabilities that accelerate the throughput of OGM, accommodate more sample types, and simplify data analysis and interpretation. Third is supporting the development of validation data through pivotal clinical research studies to show the efficacy of OGM, while following key opinion leaders as they showcase the prowess of our SAFIRE system in their presentations and publications, and also while they aim to gain third-party payer support through development and validation of their own LDTs to be applied in cytogenetics and cytogenomics. Here's how we're tracking against these objectives. Regarding the SAFIRE install base and utilization, SAFIRE systems installations completed in the quarter brought the total number of installed SAFIRES to 121 as of June 30th, 2021, versus 107 as of March 30th, the end of the first quarter. We shipped 13 SAFIRE systems this past quarter compared to six systems shipped in the same quarter in 2020. Our goal for 2021 is to reach 150 SAFIRE systems installed worldwide, and we believe we're on track to meet that goal. During the quarter, we sold 2,742 nano-channel array flow cells. Let me remind you that the flow cell is the unit consumable for analysis of one human genome. More flow cells sold leads to more utilization of optical genome mapping in the field and more data to support it. The increase represents 93% growth over the second quarter of 2020 and also represents the most flow sills sold ever in a single quarter. And so we're really proud of our progress in growing the installed base and seeing the utilization, which is measured by the number of flow cells that are going out into the field. Now, several notable cytogenetics laboratories in the U.S., including Children's Hospital of Cincinnati, which is using optical genome mapping to identify structural variations in pediatric leukemias, have adopted the SAFIRE system. Outside the U.S., SAFIRE was adopted enthusiastically in places like Korea, Europe, Africa, and China. including at Medicover in Germany, which is one of the largest commercial diagnostic companies in Europe, and NuProbe in China, which is a leading-edge company developing cancer diagnostic assays. In the United Kingdom, SAFIRE was adopted by two large laboratories that belong to the National Health System of the UK. Those are King's College Hospital in London and and the NHS Regional Genetics Laboratory in Belfast City Hospital. And so that actually gives us SAFIRE systems at all of the most significant sites in the United Kingdom doing cytogenetic and molecular pathology analysis. Regarding our progress and innovation, we continue to improve optical genome mapping with SAFIRE by making it easier, faster, and more cost-effective to operate. So this quarter, we released new protocols for isolating ultra-high molecular weight DNA, and that allows us to commercially support lower sample inputs, meaning smaller quantities of cells coming from a particular sample. It allows us to get down to as few as 500,000 cells from a single sample, which is really impressive. Our instrument control software has been updated to include the newest version of what we call SAFIRE Assure. And this is designed to enable system monitoring for predictive failure analysis and prevention to maximize SAFIRE uptime. And this is critical as the install base grows so we can monitor it and make sure that customer's product is performing as it's intended to. We are on track now to release in Q3 novel assays that will expand into different sample types for genetic disease and cancer analysis. And we are on track to release a significant update to our analysis software, which will streamline cytogenetic data analysis for clinical research and assay development. And so we'll look forward to updating you on that progress in our next call. Our project to build the next generation SAFIRE system, which we expect to have the ability to run up to 70,000 samples per year by the end of 2023, is on track. And we anticipate completing the first prototype system by the end of 2021. And lastly, in innovation, on May 4th, we were issued a patent entitled Methods and Devices for Single Molecule Whole Genome Analysis, which covers novel labeling methods that complement our whole genome approach. They allow us to target certain areas of the genome and provide a higher level of resolution below the typical 500 base per cutoff of OGM with SAFIRE. And so this was an important IP for us to get. Lastly, I want to talk about the progress we've made in proliferating data that validates optical genome mapping and demonstrate its incredible scope of utility. And this is not only our own work, but it's work by customers who are using the SAFIRE system. And they, in turn, influence prospective customers who are seeking to adopt the technology. And so it's really important to see this progress at conferences and in the literature because that's a precursor to adoption and sales. We had the largest presence to date at the 2021 Annual Clinical Genetics Meeting of the American College of Medical Genetics and Genomics, which is known as ACMG. That was held in April. It featured 16 presentations by SAFIRE customers and bio-nano scientists, which is nearly triple the number presented last year and based primarily on work done in the United States. And so that's really exciting progress for us. Our users delivered Overall, a record number of presentations featuring optical genome mapping at the 2021 European Cytogenomics Conference. And the data presented there by leading key clinicians and in their posters showcase optical genome mapping as a superior solution for genomic analysis in leukemia and genetic disease. One presentation in particular from Dr. Barbara de Wally at Leuven in Belgium, outlined their implementation of optical genome mapping in a new workflow focused on pediatric ALL patients that was 21 days faster with OGM compared to the traditional method. So imagine a patient who is being evaluated for blood cancer and then being able to get their results three weeks faster than they can with the traditional methods. and how that can impact and change management of these patients. It's really incredible. And then just this week, at the 2021 Annual Cancer Genomics Consortium meeting, which is one of the most important cancer genetics meetings in the world, our customers delivered 10 presentations that highlight the benefits of optical genome mapping for clinical research applications ranging from solid tumor analysis to hematologic malignancies, products of conception, pre- and postnatal genetic analysis. So you can see that the scope of optical genome mapping is being defined, and it's very broad. And these customers have spoken about the incredible enthusiasm they have for bringing in this technology over the traditional methods. They've also emphasized that they've been waiting for this kind of solution for a long time, and so we're really excited about the progress there. Now, overall, with regard to publications, which is an incredible leading indicator of interest and utilization of the technology, year-to-date there have been 111, and that includes 49 new publications in the second quarter. And I would note that that's the most publications on OGM ever in a single quarter. And so those are the kinds of metrics that we want to see. And we're very proud of the progress there. Now the lineage in business also had a good quarter with samples received for analysis across their suite of assays for pediatric neurodevelopmental disorders. Revenues for these diagnostic services are included with all service and other revenue on our financial statements. Lineagen is also a key element in our strategy to develop our own menu of laboratory-developed tests based on SAFIRE and leverage Lineagen's network of ordering physicians and contracts with third-party payers. They provide us with a clinical team of cytogenetics and genetic counselors, along with a direct channel to physicians and patients, and we see that as a key element of accelerating adoption of the SAFIRE system. Finally, we've seen significant progress in the field for the development of laboratory-developed tests and accreditation in Europe, including in Belgium, Germany, and Spain. In the U.S., two sites, Augusta University and Praxis Genomics, received proprietary analysis or PLA codes, which are anticipated to be used by these institutions to bill third-party payers for reimbursement of OGM tests, and we expect pricing for those codes to be determined and released by the end of this year. This is, again, incredible progress to support the adoption and utilization of optical genome mapping in our target markets. I would like to now turn the call over to our CMO, Dr. Alka Chabe. So you can get an update from her on the pivotal studies we are conducting to demonstrate utility of OGM as an alternative to cytogenetic methods. with a higher overall success rate.

Thank you, Eric. So our studies will span our four major growth markets of pre- and post-natal genetic analysis, hematological malignancies including leukemias and lymphomas, and solid tumor analysis. The endpoints of each study are the same, namely demonstrating utility of optical genome mapping by showing Number one, concordance against the standard of care methods, such as karyotyping, FISH, and microarray. Number two, a higher success rate of optical genome mapping in finding pathogenic variants compared to the standard of care methods. Number three, significant workflow improvement compared to standard of care methods, including shorter time to actionable results. and consolidation of multiple assays into a single assay based on optical genome mapping. And number four, showing an overall health economic benefit of optical genome mapping versus the standard of care methods. To date, we have recruited important key opinion leaders to be principal investigators of these study sites across each endpoint. Among the 16 sites who have agreed to participate in all of these studies, We have signed contracts with 11, and we ultimately expect a total of 19 sites. Three of the four studies, prenatal, postnatal, and heme malignancies, are being conducted independently, but the solid tumor studies will begin in parallel next year. For the postnatal study, which was the first to receive IRB approval, a total of 300 out of the total 1,000 subjects have been enrolled. and sample analysis has been ongoing throughout the second quarter. For the prenatal studies, the IRB approval has been obtained, and site recruitment and training are in progress. The data generation is expected for the prenatal studies to begin by the end of the third quarter. For the hematological malignancies program, which will cover both leukemias and lymphomas, We are finalizing the contracts with the sites and we expect the IRB approval process to begin by the end of the fourth quarter. We believe in the relatively near term that these data will play an important role in driving adoption of optical genome mapping across the spectrum of applications and ultimately supporting potential reimbursement by third party payers. Also, over a three to five year period, We believe this data can serve as a basis to support changes in the guidelines of medical societies that recommend the uses of technologies for analysis in these clinical indications. Overall, we are very happy with the progress so far, and our key opinion leaders are very excited about taking part in this effort. Back to Eric.

Thank you, Alkia, and congratulations on your progress in these important programs. I will now turn the call over to Chris Stewart for an overview of our financials. Chris?

Thanks, Eric. As Eric mentioned, total revenue in Q2 was approximately $3.9 million, up 226% from the $1.2 million we reported in the same period of 2020. Year over year, revenue was up in all geographies and across both product and service revenues, for the three and six month periods ending June 30th, 2021, as compared to those same periods in 2020. The increase in global product sales was driven by increased demand for our Sapphire instrument and consumables, while the increase in service revenue was primarily driven by our Lineagen subsidiary. Our gross margins for the second quarter came in at 37%, up from 33% in Q1 of 2021, primarily due to improved margins on our instruments and service revenue. Q2 gross margin was down 12% from the same period last year, mainly due to a substantial increase in the revenue contribution from instrument sales off of the Q2 2020 COVID-driven low of instrument sales. Second quarter operating expense was $17.9 million. compared to $12.2 million in the first quarter of 2021 and $8 million in the second quarter of 2020. The year-over-year increase was primarily due to expenses from the lineage and acquisition and increased headcount and headcount-related spending as we build out all facets of the organization to support expected commercial progress. In addition, in the second quarter of 2020, The second quarter of 2020 was affected by COVID-driven cost-saving measures, including an across-the-board salary reduction. So Q2 was a very low baseline. Q2 of 2020 was a low baseline to compare against. The sequential increase in OPEX from Q1 was mainly due to $3.8 million in increased headcount and related expenses, including a $1.4 million increase in non-cash stock-based compensation expense, mainly driven by our Q2 employee equity grants which were amplified by the impact of our higher stock price. In other income and expenses, we recorded a net expense of $2.3 million, which was largely associated with the end-of-term fees and accrued interest as we paid off the $16 million outstanding balance on our term loan. $1.2 million of those expenses were non-cash accelerated amortization of accrued interest. Finally, as of June 30th, 2021, Our cash and cash equivalence balance was $333 million. On June 28th, we were added as a member of the U.S. small cap Russell 2000 index, which means BioNano's share performance is now included in a leading benchmark for institutional investors. Inclusion in the Russell index enhances the visibility of our company as we continue to grow the installed basis Sapphire systems and strive to build the next great genomics company. I'm really excited about our achievements this quarter. and look forward to carrying this momentum through the second half of the year. Going forward, we will, of course, remain focused on clearing the barriers to widespread adoption of optical genome mapping. With that, I will turn the call back to Eric to discuss upcoming milestones for the year, and then we'll open up the call for Q&A. Eric?

Thanks, Chris. We are progressing nicely against our objectives. On this last slide, you can see our anticipated milestones for 2021. which include the milestone that was achieved in the second quarter and the first quarter, and we believe we're making great progress against our goals in Q3 and Q4. I look forward to updating you on that progress in our next call. With that, operator, we're ready to take questions.

Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. One moment while we poll for questions. Our first question comes from the line of Sunjing Nam with BTIG. You may proceed with your question.

Hi, thanks for taking the questions. Congratulations on the quarter. Maybe starting out with, we'd love to hear your kind of what are the next steps in terms of gaining reimbursement in the U.S. for the cytogenetic methodology. Obviously, you guys are approaching it from many different angles, so we'd love to kind of hear, you know, to the extent that you can share kind of what could we anticipate over the next 12 months, for example.

Yeah, I mean, the pathway to seeing third-party reimbursement goes along a few different lines, as you mentioned. The first line is to ensure that there's widespread adoption and utilization. Third-party payers are willing to support shifts in technology like the one that we're driving, but they only want to do it if that's got significant commercial demand and need, and so widespread adoption is number one key. Beyond the widespread adoption, sites need to develop LDTs and begin the process of obtaining codes like PLA codes or interacting through their channels of reimbursement to put optical genome mapping on the radar screens of their network of payers. So it's really creating this critical mass of voice of support for optical genome mapping and need. And our role in that process is to, in parallel and completely independently, we don't support sites in the development of their LDTs or their validation, but we make sure that optical genome mapping performs according to their need. What we can do is develop laboratory-developed tests on our own. So we have a program here in San Diego to establish our own CLIA lab. And that's underway. And so we will establish that CLIA lab within it. And with Lineagen's help, we will develop laboratory-developed tests based on optical genome mapping ourselves. And we will put those out into the field and begin negotiating with payers ourselves around coverage and coding associating with those assays. And we can make that information available publicly. And so as the field progresses down its own path of getting reimbursement, we will progress down our path and we can share that information along the way. And then lastly, the most important aspect of not so much coding but coverage and pricing at a good level is for there to be a critical mass of data in support of the true value of optical genome mapping as an alternative workflow. And so that's where ALCA's clinical studies program comes in. And what I think you should think about in the context of this type of program is something like the Genomic Health TALER-RX trials, which We're obviously ongoing for a long time, and we have a long-term view here, but TaylorRx produced a number of important inflection points over its course, and that's what we intend for this program, is for it to generate data in support of converting workflows over by demonstrating, first, concordance with the standard of care, second, an increased success rate. So we know that the standard of care is able to detect a certain fraction of pathogenic variants in subjects that are analyzed. And we have an expectation that optical genome mapping should be able to do better. And so we'll establish that as part of our clinical trial programs. And then in addition to concordance and higher success rate, we want to demonstrate a faster time to result And as a result, a better health economic outcome for the labs and physicians that are utilizing the technology and the information. And so it's really a three-pronged strategy of making sure the market has a critical mass of adoption and pursues reimbursement on its own. We'll do the same in our own CLIA lab. And then we'll provide the data that support the claims around the value and utility of the technology. And those programs are all ongoing and parallel. And we expect to see results, you know, clearly over the next 12 months. Just this period, we saw two sites, Augusta University and Praxis Genomics, getting PLA codes for optical genome mapping assays. Praxis Genomics also has Z codes, which they obtained through Palmetto and the moldy X program that they can apply for reimbursement. And so this is a process is ongoing and we expect to see a lot of progress in the next 12 months.

Great. That's super helpful. Um, and then just along the same lines, I guess, um, on the accreditation in Europe of the Sapphire based LDTs, congratulations on that. Um, is this something where we can anticipate, uh, you know, routine usage of, um, optical genome mapping workflow and also replacement of conventional technology platforms? Or how should we think about how these laboratories, you know, their rate of utilization?

Yes. So, the sites that have been accredited have moved optical genome mapping into their routine use, into their production workflows, and completely transformed those workflows. As we mentioned in our remarks, but there's also a very nice press release about the European conference, the ECA conference. If you go through it, we detail the progress that the site in Europe, in Belgium, was able to make by implementing optical genome mapping. And among the progress, there's a significant... savings in turnaround time. So it goes from a four-week assay for pediatric ALL patients to a one-week assay, so 21 days shorter. But they also dramatically transformed the technologies they used. They went from using 10 fish probes to just one. That's BCR-able. You get the results in two hours. Makes sense. And they eliminated one assay, the multiplex ligation polymorphism or MLP assay. They don't use that anymore. They're still using karyotyping, but they don't use karyotyping up front. They receive the assays from this new – the results from this new workflow in one week, and they allow karyotyping to progress, and they use it for a confirmatory analysis when that result is ready. And we're seeing similar type of progress at sites in Spain and in Germany and many other sites along this same path in Europe. Yeah, the progress there is very significant, and these sites that have received accreditation have put the technology into their traditional workflows. And so we expect similar things to happen here in the U.S. There are some sites running genetic diseases. University of Iowa, Perkin Elmer are examples that look at FSHD, and so they have them in routine use here as well.

Great. Thank you. And then just if I could squeeze in one more question, maybe one for Chris. As we look at your gross margins in the quarter, I recognize that it's down year over year, but it's up significantly sequentially. And so I just was wondering if this level of gross margins is sustainable for the remainder of the year and beyond.

Yeah, we certainly expect gross margins to stay at this level, if not improve a little bit going forward as we improve utilization and we see continuing growth in consumables which, as you know, has a higher gross margin than instrument sales. So, yeah, we're comfortable with where we're at and expect some modest growth going forward over the next four quarters or so.

Great. Thank you so much for taking the questions.

You're welcome, Svenji. Thank you.

Our next question comes from the line of Jeffrey Cohen with Ladenburg-Solomon. You may proceed with your questions.

Hi, Eric, Chris, and Alka. How are you?

Great. Great, Jeff. How are you doing?

Doing fine. So a few questions. So firstly, on the commercial front, and congrats on Jason and Rich joining, could you give us a little flavor as far as what kind of growth and organization you're anticipating over the coming quarters, both domestically as well as internationally? Sure.

Got it. So, yeah, so we, as you know, we added about 37 heads in the quarter. That was a pretty substantial uptick where, you know, we're making a ton of progress. We're going to continue to grow headcount over the next, you know, foreseeable future. Not quite at that pace, but now that we have Rich and Jason on board, they've kind of got their heads around the existing organizations that they have. They've plugged some keyholes already, and now we'll continue to build out the commercial organization in support of the expected growth, and that's both in commission salespeople, but also customer support. The types of customers that we're working with now require more support, and we're putting that organization in place now. So continued growth, not quite at the same pace as Q2, a little bit more measured than that going forward, but we will continue to build out that organization.

Okay, got it. And can you give us a sense, I guess maybe a question for Eric or Alka, on the commercial channels out there being clinical research and discovery research. Can you talk a little bit about the TAMs and talk a little bit about the focus from a commercial standpoint? It looks like you're making strong progress on virtually all fronts commercially.

Yes. So what we see is that We are pursuing two markets which are addressable by optical genome mapping today. The first is that clinical research market where optical genome mapping is an alternative to traditional cytogenetic methods. I think the best way to think about the market potential there is to think about, on the one hand, the number of labs there are on a worldwide basis about 2,500 is our estimate. But maybe more importantly is just the total number of samples that go through those labs on an annual basis. And we've done some work to measure that. And our estimate, based on quite a bit of effort, is that it ranges somewhere between 4 to 5 million samples being analyzed in these labs on an annual basis. And so that's kind of the available market for us in those areas. And I would want to emphasize that that's hematologic malignancies and genetic diseases, primarily blood samples. We're not including solid tumor analysis in there. We were not precluded from addressing that, but clearly the low-hanging fruit for us is for analysis of blood samples in areas of genetic diseases and leukemias and lymphomas. Solid tumors is an expansion opportunity for us. So that's that sort of cytogenetics side. And, you know, when we estimate the size of that opportunity, it's, you know, it's in the, you know, two to three billion dollar range. When we look at The discovery research segment, we think about optical genome mapping as being a complement to cutting-edge research in genetics. So, mostly the applications of sequencers, but it could be other techniques, single-cell analysis, RNA-seq gene expression. but basically areas in research where optical genome mapping complements existing tools. So we're not trying to convert anything. We're coming in and adding new capabilities. And the way that we've kind of estimated that opportunity is to look at the total number of sequencers out there and then segment that a little bit by saying, well, such as sequencers, it's kind of like It's kind of like whole genome sequencers or higher throughput sequencers. So anything that like Illumina has out there that's a next seek or higher throughput, we feel we would complement. So there's about 6,000 of those sequencers out there. And so, you know, 6,000 sapphires, you know, $75,000 to $150,000 of annual consumables pull through. That's another That's another, you know, couple billion dollars. So we estimate that market opportunity to be, you know, and, you know, broadly speaking in that two to four billion dollar range. And that does not include things like solid tumor analysis, you know, any forms of screening, population genetics. These are all market expansion opportunities for us.

Got it. That's super helpful. And then last, briefly, any commentary on As far as any flavor on the sales of the actual Sapphires themselves, as far as you're going, you know, direct all in sales or earnouts or leases, and then any commentary on throughput developments as far as you had spoken previously about some increases as far as microchannel throughputs on a daily or weekly basis.

Yeah. Yeah. I got to correct you on this. Nano channel, you know, microchannel is too easy. Nano channel is harder, and we only take the difficult challenges. But, you know, with regard to the types of deals that we're doing, I think it's pretty evenly split between purchase and rental. And, you know, there's some difference in the markets, I would say, that On that clinical research side, in the cytogenetic transformation, they would be majority rentals. And on the discovery research, it's majority purchase. But all together, it's probably pretty evenly split. We don't break that out. One of the reasons we don't break it out is that rentals convert to purchases. So we don't want to confuse anybody right now. We just talk about the install base. It's pretty evenly split.

Super. I got it. Nano channels. Thanks, Eric. Thank you. Thank you, Jeff.

Our next question comes from the line of Jason McCarthy with Maxim Group. You may proceed with your question.

Hey there. Thanks for taking the question. Congrats on the quarter.

Yep. Thank you, Jason. Hey, Jason.

So I wanted to see if you could give us an idea of how many customers have started using Sapphire in a routine diagnostic setting and what the typical process is for someone to move Sapphire into routine use.

We don't count it, so I don't have a number. What I would say is that a substantial portion of the sites that are adopting optical genome mapping are bringing it in-house for clinical research right on the edge of an implementation for what they would do would be to create a laboratory-developed test and to put it into production. So the majority are headed in that type of a direction. I want to make sure that people know we market the SAFIRE system and optical genome mapping for research use, and we support people doing that research application. They certainly go down this path of implementing it for routine use. But the majority are using it in that direction. We have seen several. Several have reported to us and presented at conferences that they have put it in routine use. It's more common in Europe because the reimbursement landscape is a little bit more favorable there. And so we've seen, you know, we're probably into the double-digit ranges. That's an estimate right now, but I would estimate more than 10 have reached that level or are very close. And there are a handful fewer than 10 here in the U.S. And, you know, single-digit numbers and any other geography that we're in. But the progress is certainly there, and everybody is using SAFIRE almost exclusively for clinical research and as an alternative to cytogenetic methods, for sure. With regard to the process, it again varies because that process is regulated, and the customers have to comply with the regulations that are relevant in their jurisdiction and their geography. Here in the U.S., which is the, you know, geography that I'm most familiar with, it's a process of starting first with assay development. So we sell a platform for research use, and, you know, that's how we market it and support it. And so we have a set of qualification criteria that we make sure the system adheres to. And it's really up to the labs to have their plan to develop an assay, which involves picking an indication. Some labs have gone after indications that are in genetic diseases like FSHD. Others have been pursuing hematologic malignancies. We talked about ALL, CLLC. and other areas of significant need. We know that MD Anderson is working in MDS. So these are areas of great interest. And they develop an assay, which means they detect the structural variants that are of interest to them and their clinical population. They develop that panel. It's completely up to them. They set the cutoffs for what determines a positive or negative result in the assay, and they determine how they're going to report that to their ordering physicians. And then they validate that assay by running known samples against a gold standard, which is typically the traditional methods, karyotyping, FISH, and microarrays. And once they determine that they've met the validation criteria, then they can make that assay available on their test menu. The validation criteria typically include some type of reproducibility analysis, multi-operator analysis, and so forth. And so once they've met those validation criteria, they can make the assay available on their test menu, and ordering begins at that point.

All right. Thank you. And then I'd also like to ask, this is probably, you know, bit early to really be thinking about, but, you know, with your clinical program getting up and running across those four key markets, Dr. Shelby mentioned that down the line, one of the goals would be to eventually get on, get included in the diagnostic guidelines. So I'd like to see if you can give me an idea of what the process for getting into the guidelines would be and what you would really have to show in order for them to consider integrating optical genome mapping in the standard guidelines?

You know, that process involves, you know, it's multifaceted. And I would say at the end of the day, the society guidelines and the folks that write and modify those are seeking better solutions for the communities that follow those guidelines. And so by better, they're looking for better outcomes, so we need to measure these outcomes. And they're looking for an increase in success rate. So they would like to see technologies that result in actionable results for more people who are getting tested. And they would like to see those actionable results turn into better patient outcomes, whether that's treatment selection, management of genetic diseases by a variety of methods that are available. But I think that the primary endpoint that would influence them to consider revising their guidelines is a higher success rate for the patient population that's being tested. And the reason that we can say that is that we followed the changes in society guidelines for other technologies, and that's the primary metric. Now, they want to see that on a large scale. So that's why we have set our studies up to be 1,000 patients. 30 patients is interesting. 100 patients is nice. 1,000 patients is compelling. And they want to see that key opinion leaders who have been involved in influencing those guidelines time and time again are embracing this new approach. And so that's why Alka and her team have worked incredibly hard to recruit the thought leaders across the industry to be involved in these trials. And I don't want to yet say in support of optical genome mapping, the success of the trials will gain their support, but their involvement shows you that they have a strong belief that This is a technology that can transform the workflow and they want to be involved. And once they're involved and the trials prove to be successful, we'll have the things that the society guidelines need. And we set for ourselves a three to five year timeline, let's say from the beginning of this year, for those transformations to happen.

All right, thank you. And then just one more. As we're looking forward towards the rest of 2021, Obviously, right now, the story is largely data-driven. As the big data readouts come out, you get more awareness. More awareness leads to adoption. So I'd like to see if you could point to any particular data readouts that we should be looking for in the second half of 2021.

Yes, we expect in our clinical program for the postnatal studies, so pediatrics, genetic disorders to have a preliminary readout and certainly presentations of those data and very likely a preprint publication submitted by the end of this year. And we're on track. As you see, we already have hundreds of subjects enrolled in those studies, and so we'll have a solid preliminary readout. by the end of this year for the postnatal study. And prenatal will follow that probably early next year. Hematologic malignancies after that later in 2022 and so forth.

All right. Thank you very much, and congratulations on the quarter. Thank you, guys. Thank you.

Our next question comes from the line of Kevin DeGeter with Oppenheimer. You may proceed with this question.

Hi, this is Susan calling in for Kevin DeGieter. Great quarter, guys. I just have a few questions. Can you comment on why demand for instrument was so high this quarter? And if you think that this run rate is sustainable for the second half of the year?

So, I mean, I think that it's a great question because the demand is a function of you know, an incredible amount of work, and I'm sure that folks recognize that sales are a lagging indicator. They tell you, you know, high good demand like you've referenced tells you about things that you've done well sometime in the past. So if we look to the past, what have we seen? You know, examples of record publications in a quarter, but this has been consistent for quarter after quarter after quarter. We had this year in January one of the most epic displays of optical genome mapping utilization that's been given in our Next Generation Cytogenomics Symposium. And that just caused awareness to explode. As awareness has increased, we've been able to back that up with success at customer sites. So word of mouth of the utility and robustness of optical genome mapping has gotten around. That in turn leads people to seek to adopt the system. One other function here has been our own go-to-market model. So we've worked to reduce the barriers to adoption, you know, across the board. to make sure that people have the data they need to get funding. That's the role of our services lab. And sites have applied for funding within their institutions, so they're increasingly funded. But we've also created this reagent rental opportunity so that for as little as $66,000, a lab can rent a SAFIRE system through a consumables commitment, and we'll put it on site. So it's a combination of data supporting the utility and robustness of the system, word of mouth and publications, and then our own, you could call it promiscuous, commercial go-to-market model that encourages people to adopt quickly. And to the second part of your question, we believe that this momentum is going to continue to build and that we would see continued progress in future quarters. We have not given revenue guidance and we're not doing that here, but we see what your guys' model and others who have been on the call today kind of forecast for the second half and we We're very proud of the inline quarters that we've had so far, and we're expecting inline quarters through the remainder of the year.

Great. Thank you for all of that detail. And just to follow up on understanding metrics, are you guys able to predict if consumables are sustainable, or is it still too early?

Well, I would say that the safe answer is that it's still too early because the installed base has just grown massively in the past few quarters, and we expect it to continue to grow that way. And there's always a lag between somebody getting their system, getting up to speed, and then really determining their steady-state utilization. It is early to tell, but what we know is that sites that are adopting, certainly under a re-agent rental contract, are making commitments to $132,000 of annualized consumables purchases to retain the system on site. So as long as they maintain that commitment, we'll see... we'll see this consumables revenue as being stable. And so give us a few quarters to determine what that steady state is, and we'll be able to say better. But the signs point to robustness going forward.

That's really helpful. And just one last question. Do you expect the commercial release of prenatal assays or expansion of pediatric assays to contribute meaningfully to revenue? And this will be next quarter, so it's coming up really soon.

What I would say is that it's not a direct driver of revenues per se. It's a driver of adoption, which, you know, adoption is revenue related. But, you know, what it does is really expand expand the applicability of the technique to drive future adoption. So we don't see it as something that's going to be a significant driver of uptake in the third quarter. But in subsequent quarters, it opens a completely new market for us. And so it will be, over time, a revenue driver.

Those are all the questions from us. Thank you.

Thank you.

Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Dr. Eric Holmland for closing remarks.

Thank you, Laura. I just want to say here at the end that we are really pleased at our progress. I want to thank everybody who's joined the call today, especially those who asked these incredibly important and insightful questions. We look forward to speaking to you again on our Q3 call. Thank you very much.

Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time.