Bionano Genomics, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2020 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K, or our Annual Report, filed with the Securities and Exchange Commission, or the SEC, on March 23, 2021. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Bionano Genomics, Inc. and its subsidiaries or, as the context may require, Bionano Genomics, Inc. only. Forward-Looking Statements The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to any statements concerning the potential effects of the COVID-19 pandemic on our business, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking 16 Table of Contents statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. Overview We are a life sciences instrumentation company in the genome analysis space that provides tools and services based on our Saphyr system to scientists and clinicians conducting genetic research and patient testing, and provides diagnostic testing for those with autism spectrum disorder (“ASD”) and other neurodevelopmental disabilities through Lineagen, Inc., our wholly owned subsidiary (“Lineagen”). We develop and market the Saphyr system, a platform for ultra-sensitive and ultra-specific structural variation detection that enables researchers and clinicians to accelerate the search for new diagnostics and therapeutic targets and to streamline the study of changes in chromosomes, which is known as cytogenetics. Our Saphyr system comprises an instrument, chip consumables, reagents and a suite of data analysis tools, and genome analysis services to provide access to data generated by the Saphyr system for researchers who want to evaluate Saphyr data quickly and with a low up-front investment. Lineagen has been providing genetic testing services to families and their healthcare providers for over nine years and has performed over 65,000 tests for those with neurodevelopmental concerns. We have incurred losses in each year since our inception. Our net loss was $9.9 million for the three months ended March 31, 2021. As of March 31, 2021, we had an accumulated deficit of $153.6 million. We expect to continue to incur significant expenses and operating losses as we: • expand our sales and marketing efforts to further commercialize our products; • continue research and development efforts to improve our existing products; • hire additional personnel; • enter into collaboration arrangements, if any; • add operational, financial and management information systems; and • incur increased costs as a result of operating as a public company. Recent Highlights We shipped 11 Saphyr systems during the quarter ended March 31, 2021, compared to 5 systems shipped in the same quarter in 2020. The installed base of Saphyr systems was 107 at the end of the quarter. We sold 2,603 nanochannel array flow cells during the quarter ended March 31, 2021, which represents an increase of 275% over the same period in 2020. We analyzed 227 samples in our Saphyr service lab. COVID-19 Overview The COVID-19 pandemic, and the measures imposed to contain this pandemic in areas where we operate our business and elsewhere have disrupted and are expected to continue to impact our business. For example, to comply with applicable regulations and to safeguard the health and safety of our employees and customers, we temporarily reduced our on-site business operations, implemented work-from-home practices, and modified other business practices, including those related to employee travel and physical participation in meetings, events, and conferences. Limited access to our facilities or customer sites has adversely affected, and is expected to continue to adversely affect, our operations. Disruptions resulting from the COVID-19 pandemic may continue to impact our operations and overall business. The impact of COVID-19 is evolving rapidly and its future effects remain uncertain. As a result of such uncertainties, the duration of the disruption and the related impact on our business, operating results and financial condition cannot be reasonably estimated at this time. We are continuing to closely monitor the impact of the COVID-19 pandemic on our business and are taking proactive 17 Table of Contents efforts designed to protect the health and safety of our workforce, continue our business operations and advance our corporate objectives. Financial Overview Revenue We generate product revenue from sales of our instruments and consumables. We currently sell our products for research use only applications and our customers are primarily laboratories associated with academic and governmental research institutions, as well as pharmaceutical, biotechnology and contract research companies. Consumable revenue consists of sales of complete assays which are developed internally by us, plus sales of kits which contain all the elements necessary to run tests. We also generate service revenue from the sale of diagnostic testing services for those with autism spectrum disorder and other neurodevelopmental disabilities through our wholly owned subsidiary Lineagen. Other revenue consists of warranty and other service-based revenue. The following table presents our revenue for the periods indicated: Three Months Ended March 31, 2021 2020 Product revenue $ 2,049,000 $ 983,000 Service and other revenue 1 1,119,000 153,000 Total $ 3,168,000 $ 1,136,000 1 Includes $851,000 of revenue generated from Lineagen during the three months ended March 31, 2021. The following table reflects total revenue by geography and as a percentage of total revenue, based on the billing address of our customers. North America consists of the United States and Canada. EMEIA consists of Europe, Middle East, India and Africa. Asia Pacific includes China, Japan, South Korea, Singapore and Australia. Three Months Ended March 31, 2021 2020 $ % $ % North America 2 $ 1,498,000 47 % $ 726,000 64 % EMEIA 1,587,000 50 % 390,000 34 % Asia Pacific 83,000 3 % 20,000 2 % Total $ 3,168,000 100 % $ 1,136,000 100 % 2 Includes $851,000 of revenue generated from Lineagen during the three months ended March 31, 2021. Cost of Revenue Cost of product revenue for our instruments and consumables includes costs from the manufacturer, raw material parts costs and associated freight, shipping and handling costs, contract manufacturer costs, salaries and other personnel costs, overhead and other direct costs related to those sales recognized as product revenue in the period. Cost of service revenue consists of third-party laboratory costs to process the diagnostic samples, salaries of our clinical technicians who interpret and deliver the results to patients, warranty services, and other costs of servicing equipment at customer sites. 18 Table of Contents Research and Development Expenses Research and development expenses consist of salaries and other personnel costs, stock-based compensation, research supplies, third-party development costs for new products, materials for prototypes, and allocated overhead costs that include facility and other overhead costs. We have made substantial investments in research and development since our inception, and plan to continue to make investments in the future. Our research and development efforts have focused primarily on the tasks required to support development and commercialization of new and existing products. We believe that our continued investment in research and development is essential to our long-term competitive position. Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and other personnel costs, and stock-based compensation for our sales and marketing, finance, legal, human resources and general management, as well as professional services, such as legal and accounting services. Results of Operations Comparison of the Three Months Ended March 31, 2021 and 2020 The following table sets forth our results of operations for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, Period-to-Period Change 2021 2020 $ % Revenues: Product revenue $ 2,049,000 $ 983,000 $ 1,066,000 108.4 % Service and other revenue 1,119,000 153,000 966,000 631.4 % Total revenue 3,168,000 1,136,000 2,032,000 178.9 % Cost of revenue: Cost of product revenue 1,513,000 774,000 739,000 95.5 % Cost of other revenue 612,000 82,000 530,000 646.3 % Total cost of revenue 2,125,000 856,000 1,269,000 148.2 % Operating expenses: Research and development 2,678,000 2,674,000 4,000 0.1 % Selling, general and administrative 9,528,000 7,368,000 2,160,000 29.3 % Total operating expenses 12,206,000 10,042,000 2,164,000 21.5 % Loss from operations (11,163,000) (9,762,000) (1,401,000) 14.4 % Other income (expenses): Interest expense (538,000) (761,000) 223,000 (29.3) % Gain on forgiveness of Paycheck Protection Program loan 1,775,000 — 1,775,000 — % Other income (expenses) (15,000) 18,000 (33,000) (183.3) % Total other income (expenses) 1,222,000 (743,000) 1,965,000 (264.5) % Loss before income taxes (9,941,000) (10,505,000) 564,000 (5.4) % Provision for income taxes (6,000) (5,000) (1,000) 20.0 % Net loss $ (9,947,000) $ (10,510,000) $ 563,000 (5.4) % Revenue Total revenue increased by $2.0 million, or 178.9%, to $3.2 million for the three months ended March 31, 2021 compared to $1.1 million for the same period in 2020. The increase impacted all regions. The increase in product sales was driven by increased demand of our reagent rental program and consumables, while the increase in service and other revenue was mostly driven by sales generated by our Lineagen subsidiary. Furthermore, below is a summary of changes for the three months ended March 31, 2021 as compared to the same period in 2020: • North America revenue increased by $0.8 million, or 106%; • EMEIA revenue increased by $1.2 million, or 307%; and 19 Table of Contents • Asia Pacific revenue increased by $0.1 million, or 315%. Revenue for the three months ended March 31, 2021, includes service revenue of $0.9 million generated from our Lineagen subsidiary. Cost of Revenue Total cost of revenue increased by $1.3 million, or 148.2%, to $2.1 million for the three months ended March 31, 2021 compared to $0.9 million for the same period in 2020. The increase was primarily due to a shift in our product mix towards higher margin consumables and services. Selling, General and Administrative Expenses Selling, general and administrative expenses increased by $2.2 million, or 29.3%, to $9.5 million for the three months ended March 31, 2021 compared to $7.4 million for the same period in 2020. This is primarily due to additional headcount-related costs resulting from the acquisition of Lineagen, completed in August 2020. These were offset by a decrease in bad debt expense by $1.0M when compared to the same period last year. Interest Expense Interest expense decreased by $0.2 million, or 29.3%, to $0.5 million for the three months ended March 31, 2021 compared to $0.8 million for the same period in 2020, driven by changes in our term-loan debt. In April 2020, we paid down $5 million of the $20 million outstanding under the Innovatus LSA (as defined below), resulting in a decrease to our quarterly interest expense. Gain on forgiveness of Paycheck Protection Program loan A gain on forgiveness of Paycheck Protection Program loan of $1.8 million was recognized during the three months ended March 31, 2021 in connection with the forgiveness of our PPP Loan (as defined below), including all accrued interest in full. Liquidity and Capital Resources Sources of Liquidity Since our inception, we have incurred net losses and negative cash flows from operations. We have primarily generated cash flows from sales of equity securities and debt financing. We anticipate that future sources of liquidity will principally come from sales of common stock and other equity instruments, borrowings from credit facilities and revenue from our commercial operations. See Note 6 to our condensed consolidated financial statements for a discussion of our recent equity activity and Note 5 to our condensed consolidated financial statements for a discussion of terms and provisions of our debt included elsewhere in this Quarterly Report on Form 10-Q for more information. We incurred net losses of $9.9 million and $10.5 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $153.6 million and cash and cash equivalents of $362.1 million. Cash Flows The following table sets forth the cash flow from operating, investing and financing activities for the periods presented: Net cash provided by (used in): Three Months Ended March 31, 2021 2020 Operating activities $ (13,904,000) $ (8,032,000) Investing activities (24,000) — Financing activities 337,536,000 (1,135,000) Operating Activities We derive cash flows from operations primarily from the sale of our products and services. Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses to support the growth of our business. We have historically experienced negative cash flows from operating activities as we have developed our technology, expanded our business and built our infrastructure and this may continue in the future. 20 Table of Contents Net cash used in operating activities was $13.9 million during the three months ended March 31, 2021 as compared to $8.0 million during the same period in 2020. The increase in cash used in operating activities of $5.9 million is primarily attributed to increased headcount-related costs resulting from the acquisition of Lineagen. Investing Activities Historically, our primary investing activities have consisted of capital expenditures for the purchase of capital equipment to support our expanding infrastructure. We expect to continue to incur additional costs for capital expenditures related to these efforts in future periods. During the three months ended March 31, 2021, cash used in investing activities was negligible. Financing Activities Net cash provided by financing activities was $337.5 million during the three months ended March 31, 2021 as compared to the same period in 2020 where we had net cash used in financing activities of $1.1 million, an increase of $338.7 million. During the three months ended March 31, 2021, we raised approximately $328.6 million in net proceeds from executing two follow-on offerings and sales under our at-the-market facility with Ladenburg Thalmann. In addition, we raised approximately $9.7 million from warrant and option exercises. Paycheck Protection Program In April 2020, we received loan proceeds of approximately $1.8 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (“the PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). The PPP Loan accrued interest at a rate of 1.00% per annum, and is subject to the standard terms and conditions applicable to loans administered by the SBA under the CARES Act. In February 2021, we applied for forgiveness of the PPP Loan, and in March 2021, the PPP Loan, including all accrued interest, was forgiven in full. Under the terms of the CARES Act, recipients of loans under the PPP can apply for and be granted forgiveness for all or a portion of such loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and certain other eligible costs (the “Eligible Costs”). Pursuant to the Paycheck Protection Program Flexibility Act (the “PPPFA”), enacted on June 5, 2020, we were permitted to use loan proceeds on Eligible Costs through October 2, 2020, or the date that was 24 weeks from the PPP Loan origination date (the “Covered Period”). In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. This certification further required us to take into account the maintenance of our workforce, our need for additional funding to continue operations, and our ability to access alternative forms of capital in the current market environment to offset the effects of the COVID-19 pandemic. The PPP Loan is also described in Note 5 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Capital Resources As of March 31, 2021, we had approximately $362.1 million in cash and cash equivalents, and working capital of $363.1 million. We have a $5.0 million revolving line of credit with Innovatus Life Sciences Lending Fund I, LP (the “Innovatus LSA”), under which no borrowings were outstanding as of March 31, 2021. This facility is scheduled to expire in March 2024. In addition, the carrying value of our outstanding debt as of March 31, 2021 was $14.9 million. In August 2020, we filed a shelf registration statement on Form S-3 with the SEC covering the offering, issuance and sale of up to $125.0 million of our securities, including up to $40.0 million of common stock pursuant to an at-the-market facility (“ATM”) with Ladenburg Thalmann & Co. Inc. acting as sales agent. During October through December 2020, we sold 27,025,384 shares of common stock under the ATM at an average share price of $0.82, and received gross proceeds of approximately $22.1 million before deducting offering costs of $573,263. In January 2021, we sold an additional 6,298,152 shares of common stock under the ATM at an average share price of $2.68, and received gross proceeds of approximately $16.9 million before deducting offering costs of $422,034. The Ladenburg ATM was terminated effective March 22, 2021. On January 12, 2021, we completed an underwritten public offering of 33,368,851 shares of common stock, including 4,352,458 shares of common stock sold pursuant to the underwriters’ exercise in full of their option to purchase additional shares. The price to the public in the offering was $3.05 per share and the underwriters purchased the shares from us pursuant to 21 Table of Contents the underwriting agreement at a price of $2.867 per share. The gross proceeds were approximately $101.8 million before deducting underwriting discounts and commissions and other offering expenses. On January 19, 2021, we filed an automatically effective shelf registration statement on Form S-3 (File No. 333-252216) with the SEC as a “well-known seasoned issuer.” The registration statement allows us to issue an indeterminate number or amount of common stock, preferred stock, debt securities and warrants from time to time in one or more offerings. However, there can be no assurance that we will complete any such offerings of securities. Any future offerings under this registration statement will be dependent upon, among other factors, market conditions, available pricing, our financial condition, investor perception of our prospects, our capital needs and our ability to maintain status as a well-known seasoned issuer. On January 25, 2021, we completed an underwritten public offering of 38,333,352 shares of common stock, including 5,000,002 shares of common stock sold pursuant to the underwriters’ exercise in full of their option to purchase additional shares. The price to the public in the offering was $6.00 per share and the underwriters purchased the shares from us pursuant to the underwriting agreement at a price of $5.64 per share. The gross proceeds were approximately $230.0 million before deducting underwriting discounts and commissions and other offering expenses. On March 23, 2021, we entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”), pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $350.0 million, through or to Cowen, acting as sales agent or principal. As of the date of this filing, no shares have been issued pursuant to this Sales Agreement. Management believes the available cash balance will be sufficient to fund operations, obligations as they become due and capital investments for at least the next twelve months. See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, and similarly did not and do not have any holdings in variable interest entities. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that materially affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates under different assumptions or conditions. There were no material changes in our critical accounting policies and estimates during the three months ended March 31, 2021. See Note 2 to the condensed consolidated financial statements in our Annual Report. Recent Accounting Pronouncements See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information concerning recent accounting pronouncements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide information typically disclosed under this Item.