Good day, and welcome to the Bionano Genomics Fourth Quarter and Year-End 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Amy Conrad, Investor Relations for Bionano. Amy, please proceed.

Thank you, Hillary, and good afternoon, everyone. Welcome to the Bionano Genomics fourth quarter and year-end 2020 financial results conference call. With me today are Dr. Erik Holmlin, CEO of Bionano; and Chris Stewart, CFO of Bionano. After market close today, Bionano issued a press release announcing its financial results for the fourth quarter and year ended December 31, 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 Bionano’s business strategy and commercialization plans, sales pipeline, anticipated benefits or improvements to the Saphyr system, and the advantages of the Saphyr system over current technologies, or expectations regarding timing and content of study results and anticipated benefits of these studies in driving adoption of the Saphyr system. Such forward-looking statements are based upon current expectations and there can be no assurances that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in our press release and 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 conference call will also be available online in the Investors section of the Company website. With that, I’ll turn the call over to Erik. Erik?

Thank you, Amy, and good afternoon, everyone. I want to thank you all for joining us on our year-end 2020 call. And to open up today, I'd like to review our progress and updates and then Chris will review the financials. I'll close it out and then we'll open up the call for Q&A. But let me begin by saying that 2020 was really a tremendous year for Bionano. And going into the year, our focus was on making it easier than ever for our customers to get access to Saphyr data. The objective was to really raise awareness about the unique and extensive insight that Saphyr and optical genome mapping provide into structural variations in the genome. And despite the start that 2020 brought us and the challenges that came along with it, we were able to successfully increase the installed base of Saphyr systems to 97, which was an increase of 24 systems from the prior year. We shipped a record number of flow cells and removed a major roadblock for customers by expanding our services lab, which made Saphyr data available to customers for as little as a few hundred dollars. This concerted effort to see the market resulted in a number of high-profile customer engagements, numerous studies published in 2020 and fueled the presentations that our next-generation cytogenomics symposium in January. Globally, we saw a substantial increase in the interest in optical genome mapping for the power of genome analysis that it provides. We announced reagent rental agreements focused on cytogenomic validation studies with three of the largest children's hospitals in Europe, in Spain, Italy and France. We had agreements with cytogenetics Labs and hospitals in Germany, Switzerland, Slovenia, Australia and Canada. We also saw traction throughout Europe, and in Australia and Canada. In part, we…

Thanks, Erik. Let me start with a review of our financial results for the fourth quarter and year ended December 31, 2020. Revenue in Q4 was approximately $4 million consistent with the preliminary results that we issued back on January 7. This represents an increase of 43% compared to $2.8 million in the same period of 2019. The increase was primarily driven by a $1.1 million increase in service revenue, largely from our Lineagen subsidy subsidiary acquired in August of 2020. Revenue for the year came in at $8.5 million, down $1.6 million or 16% from 2019, largely due to restrictions on our customers' lab operations related to COVID-19. While activity is picking up, we do believe that COVID-19 restrictions will continue to affect revenue across our business. Our gross margin came in at 30% down 9% from the same period last year, due mainly to lower instrument selling prices, and some year end accounting entries related to inventory value cleanup. As Erik mentioned at the beginning of the call, we ended the year with an installed base of 97 Saphyr systems, an increase of 24 from the year and 2019. Our reagent rental and our services programs are doing well, reflecting an increasing interest in Saphyr and the incredibly novel and meaningful data that the system can produce. We are actively trying to make it easier for potential customers to obtain a new Saphyr data, which we believe will lead to instrument and consumables revenue down the road. Operating expense for the fourth quarter of 2020 was $12.3 million, an increase of approximately $3.4 million compared to $8.9 million in the same period of 2019. The increase is primarily due to an increase in salary expense. During 2020, headcount increased by 49, including 33 that joined us as a…

Yes, thanks, Chris, for that summary. And what I think is clear here is that 2020 has really set an incredible foundation for us. And our fundraising here in 2021 has cleared the path for us to really focus on execution going forward. What we've put together here is a summary of important milestones, and what we see as the timing for each of them. And the key takeaway from these milestones is that while we are focused on the commercialization and commercial adoption, and utilization of Saphyr, and optical genome mapping very broadly, we want to make sure that we really emphasize the importance of clearing the path to truly significant adoption overall. And so a lot of these milestones are based on that aspect. And so beginning with the second quarter, we expect to see important accreditations for the capabilities of Saphyr in certain European markets, these accreditations lower barriers for other labs in other markets to adopt more broadly, we'll be expanding the commercial release of assays and capabilities on Saphyr, including pre natal assays, for the first time in the third quarter, as well as expanding additional pediatric assays around different sample types that can be adequately handled for optical genome mapping. And then what we'll begin to see in the fourth quarter is a number of the key programs that are underway in clinical studies starting to show results. So we are expecting to see the interim publication results from our pediatric clinical studies, we expect to see validation of additional laboratory developed tests and other reimbursement codes emerging from these clinical study sites; we're going to have a prototype of a next generation high throughput Saphyr, which will expand capabilities of optical genome mapping, even broader than what they are today. And importantly, we…

[Operator Instructions] Our first question comes from Kevin DeGeeter of Oppenheimer. Please state your question.

Hey, guys, thanks for taking my questions. Just a couple from me today. First, with regard to the next-gen optical imaging platform and the target to have a prototype by 4Q. Can you just walk us through a little bit in terms of the target product profile there? And incrementally, what are the primary operational challenges to meet that 4Q timeline?

Sure. So what we're focused on is building a platform that can serve the substantially higher throughput operating labs, compared to your traditional community cytogenetics lab. The community cytogenetics labs represent the vast majority, but these higher volume labs take a significant amount of the volume. And so we are anticipating by the time the system is launched and up to full speed that it will represent an increase of approximately 14-fold over the current throughput of the Saphyr system, which is roughly 5,000 human genomes per year. And so that's a pretty substantial overall increase in throughput. When you talk about the milestones and work that needs to be done, it's relatively straightforward in that we've built these instruments before and the principles of operation are not changing. But we're adapting a completely novel optical imaging platform, which is, of course, off-the-shelf available today. And we need to implement it in the configuration that's useful for optical genome mapping. But there's really no substantial invention involved. And so we believe that the program overall is relatively low risk.

And I get a fair number of questions from investors with regard to the addressable market for Saphyr in the pediatric and prenatal markets. Can you just comment on how you see the addressable opportunity in those two segments?

Sure. I mean, we typically look at it from the perspective of the number of labs that are out there. And if those labs were to adopt Saphyr and convert their menus over what would that look like? So, in cytogenetics, broadly speaking, there’s roughly 2,500 labs worldwide probably somewhere between 2 million samples per year being processed for this type of molecular pathology. And, overall, that represents somewhere in the neighborhood of a $3 billion to $3.5 billion market for us. That includes some of the research market as well. But something that I would really emphasize for these investors who are asking questions is that that's the market that is right in front of us today. And with the technology accelerating capabilities as quickly as it is being used in research to discover new applications, the total market opportunity for optical genome mapping goes well beyond that low single-digit billion number and is substantially larger. It's harder for us to quantify it specifically, because some of the applications haven't even been developed. Others are still on the come. So think about when optical genome mapping is used more broadly in prenatal testing and throughout pediatric testing. Think about more broadly, the situation where genome analysis is conducted on every newborn, so not just the idea of doing sequencing and looking at SNPs, but starting to look at genome mapping and structural variation as well. So the potential we believe is really very significant. But some of these proximal markets add up to being in that range.

Really helpful. And then lastly for me, with regard to the fourth quarter, what was the consumable revenue? And can you just comment on the relative split between cytogenetics and other applications?

Yes. So consumable revenue was, let's see, got it right in front of me here about $4 million. No, excuse me. Sorry. Give me one second here. I had multiple things going on. Consumable revenue was about $1.3 million in Q4.

And qualitatively, how do we think about the split between cytogenetics and other end markets?

Yes. Outside the United States - yes, I'd just say, outside the United States, it's 75:25, 80:20. And I would say, it's not quite 100% human, but it's almost entirely human. And then within that, it's 75:25, a lot of the non-human is still focused on drug development. So we really shifted from a basic research tool that's used throughout genome analysis to one that's primarily used in human applications. And outside the U.S., 75:25 cyto versus research. In the U.S., it's more balanced. We see increasing cyto types of applications, but it's closer to maybe 60% research, 40% cyto.

Super helpful. I’ll get back in the queue. Congratulations on all the progress.

Thank you, Kevin.

The next question comes from Jason McCarthy of Maxim Group. Please state your question.

Hey, guys, thanks for taking the questions. As opposed to kind of thinking about the revenue last year or even this year, can you talk a little bit more broadly about the -- not the shortcomings, but I'll just call the shortcomings of NGS, whether it's long reads or short reads. And where that missing components in genomic interrogations, really matters? And maybe in the context of 50% of cancers don't get the proper diagnosis and genomic diseases are even worse. And how Saphyr completes that puzzle, if you would? And that's the story I think investors need to hear over this year.

Yes, no, I mean, I appreciate that sort of opportunity, Jason, because I think that's really where the focus should be. We have labored hard to develop the product and make it relevant in some really, really important end markets. And what we're seeing now is that those markets are adopting and so sure, it's important that we're selling the product and that people are paying for it that sort of validates that it's a viable commercial product, but our focus is on really clearing the path to being this much, much wider adoption to fill these critical gaps and on a regular basis publications are appearing, showing that sequencing as powerful as it is for detecting short, small variants really underperforms when it comes to detection of large structural variations. And if you just read through and I know you're a kind of guy who would read through the medical guidelines, not everybody would. But if you look at the medical guidelines for testing in genomic diseases, hematologic malignancies, solid tumors, they all recommend as the first line of analysis, some form of structural variation detection, whether that's karyotyping, microarrays, fluorescence in situ hybridization. And as much as there is an interest in having sequencing addressed those markers, the publications show that that sequencing cannot. And furthermore, to really get next generation sequencing in particular to work well in the clinic, it's still requires extraordinary depth of coverage, which means that to make it work reliably, consistently, at high throughput, and at low cost, it's not possible to do a whole genome analysis, that's with next generation sequencing. I'm not even talking about long read sequencing. And so it really leaves an opportunity for optical genome mapping to come in and be the go to solution to look at…

Right. And then also, just one more broad thought that maybe you can help out with is microarrays is kind of got rolled up with next-gen sequencing, right, next-gen took them out western blots, got rolled up in digitized proteomics. And then the natural progression for cytogenetics is not if it's when it's going to move on to something else. And it should be something like structural variation. Can you kind of give your view of that view, if you would?

Yes, I mean, so thank you for pointing out two examples in history where a technology has consolidated other platforms into a single, streamlined workflow. So NGS did it not only to microarrays but completely revolutionized Sanger sequencing. And so, next generation sequencing is an amazing example of that. Western blot is another amazing example of that. And that was done by companies and industry. So Illumina we know and others around next generation sequencing, Ventana, around the cell surface marker analysis, and so it's really, I think, a very clear and obvious path for optical genome mapping to streamline and industrialize the cytogenetics workflow and something that's very interesting about this cytogenetics space is that laboratory directors there and people who work in cytogenetics see the technology revolution that optical genome mapping provides something that they've been waiting for, in many cases, their whole career. So, as you know, Dr. Alka Chaubey joined us as our first Chief Medical Officer last August, and she sees the Saphyr system as that thing. She's been looking for her entire career as a Cytogeneticist and cytogenomics professional. And she's not alone in that view. And so we really see Saphyr industrializing this workflow and becoming something that's used incredibly broadly. And for that reason we actually call the sort of euphoria, that Saphyr brings cytopia, because it's like utopia for Cytogeneticists, and it not only improves patient outcomes, but it positions cytogenetics at the center of drug development and other areas of important discovery research where it just isn't used today, because it's so laborious and time consuming. So it's -- we're about to see truly a revolution in genome analysis around structural variation detection that Saphyr brings.

Our next question comes from Jeffrey Cohen of Ladenburg Thalmann.

Hi, Erik, Chris and Alka. How are you? So just a few questions. One follow up to Kevin's questions earlier, it's sounding like you're going to have two SKUs as far as a platform one more for high throughput facilities. And one, the current one to continue with kind of the R&D side of things. Is that a safe assumption?

Yes. And which is to say that we'll offer both platforms, and that will enable us to serve the market as broadly as possible, but we don't see the current platform going away.

Okay, and then, secondly, could you talk about revenues and placements by geography, at least kind of in the macro standpoint for 2020? And maybe give us some sense of how that may look for 2021?

Yes, so we're seeing strength in Europe. They're moving forward faster with getting systems validated into their workflow. US is lagging a little bit behind, though we've been stronger in the research market in the US than we have been traditionally, but we're starting to see an uptake in clinical revenue. And then China has been pretty quiet, obviously, I think last year, for a lot of reasons, it was a quiet year. But we see that picking up but lagging still behind Europe and North America. So we expect to see the most growth in Europe next year, followed by North America and then the Far East.

Got it, Okay And then lastly, for me, Erik, if you could talk a little more about some of the developments that are going on or expect to be going on and as far as psychiatric disorders and other neurological conditions, that would be super helpful.

Sure, so through our Lineagen business, we are providing services to physicians who are managing patients with a variety of neuro developmental disorders, including autism spectrum disorder and other disorders that span that space. And our focus is to continue to serve them with the existing standard of care tools. But over the course of this year, we'll begin developing those applications on the Saphyr system and making them available through our own CLIA lab, working with payers to cover those assays. And so that's one area where we'll be focused on neuro developmental disorders. Our customers in the research side of the market have been applying optical genome mapping to other neurodegenerative diseases, such as Alzheimer's and ALS. And their results are simply spectacular. And we expect that those programs to continue and it's expanded beyond the diseases that I mentioned, like ALS and Alzheimer's, which affects primarily older adults to include now applications and discovery research in pediatric populations. And so what we expect to see as a result of this research is that there can be novel content discovered that could be the basis of future laboratory developed tests. And so we'll just have to see how that research plays out. But it's an incredibly interesting area. And it's an area that that where structural variation is already known to play a significant role. And so the Saphyr system, almost certainly is going to amplify that.

Got it. And then lastly, for me, it feels like are you broke through kind of a 1% TAM area on the research side of things. It's just feels like perhaps 2021 may be the year that you break through to that 1% tam, on the commercial side? Is that a good way of picking the size of the platform out there and the capabilities and the growth anticipated for the coming year?

Yes, I mean, the numbers that you're citing, I would need to get out my slide rule and verify those calculations. But breaking through barriers is clearly what has been happening for us, and it's really been around awareness, and understanding and appreciation. And what anybody, I think in the company would relate to you is that the amount of inbound interest in our target end markets is higher than it's ever been, and it'll be higher tomorrow than it was today. But we have certain structural barriers that you have to call them barriers, you have to call it what it is, we have certain structural barriers that we need to address and the reimbursement one of the big one here in the US, and we have great programs that are designed to address that. And the most fundamental and foundational aspect of addressing that is building an incredible ware chest of data that supports the utility of optical genome mapping in these settings, and really validates it. And that's the basis of these clinical trials, which our CMO has designed. And we're in the process of getting underway. And you'll see them progress significantly over the course of 2021 and 2022. And it's that foundation of data, like when we start climbing on top of that, that's where we're going to keep bursting through the next thresholds, if you will. And so, yes, we've broken through in many respects. And that's given us the opportunity to do more work. And those commercial breakthroughs will be -- we will see them over the course of this year. But it's really after we get some key work done this year that those commercial breakthroughs will really start to take off.

Our next question is from Scott Henry of ROTH Capital.

Thank you. Good afternoon and congratulations on quite a year so far. Just a couple questions. And first, I don't know if you gave this but did you mention how many Saphyr placements whether it be lease, the sale were made during the quarter?

Yes, it was approximately 12. Yes.

Okay. All right, and just checking my numbers. So there were 96 installed I had at the end of Q3. So a lot of those, I would assume they're out there ready to install in Q1. Is that the correct way to think about it? Or whenever it may be in the future?

Yes, that's right. Yes.

Okay. Great. Thank you. And then when we look out to 2021, how should we think about the quarters? I don't know how much COVID is going to impact the first half of the year. Just trying to get a sense on Q1. Obviously, there's only eight days left in the quarter. But just trying to get a sense of how that trajectory may look throughout the year.

Yes, so typically Q1is a little, typically Q1 is a little seasonally soft for us, as the labs spend their budgets in Q4 and then are working on saving money in Q1. But it won't be dramatic. And then we expect to see modest growth through the year quarter-on-quarter. For the full year, we expect to see like substantial, double digit growth. But it's -- we don't think it's going to be triple digit growth. But we'll see year-on-year growth by the end of the year in the substantial double digits.

Okay, great. And I haven't seen the 10-K yet. Could you give me a sense of where the real time shares outstanding are given a lot of levers in there?

Yes, exactly. So we ended the year with 189 million shares outstanding. And right now we've got about 280 million shares outstanding. With all the work we have done this year.

Okay. That's helpful. And then I guess, just kind of a big picture question for Erik. Obviously, it's a different company today than it was even four months ago, both in terms of market cap in terms of cash balance. So given that change in those dynamics, how do you think about managing the company today versus then? I mean, will there be any changes to the business model, perhaps either growing fast, or being able to invest more in SG&A and R&D? Just try to try to think of how you view it today versus four months? Maybe you don't view it differently at all. But my guess is you probably do.

Yes, no, it's a great question. And I think that's, I think, if you're asking, it's probably a question on a lot of people's minds. And we have -- we sort of allow that question to hang around for a while and haven't gone for an immediate answer. But we're very definitive; the company is positioned in an absolutely exciting, substantial market genomics, with a very differentiated technology that serves an unmet need, which, by the measurements that we can make on that unmet need, is really substantial, like the end user markets are in the billions. But we're pretty sure that the total opportunity is bigger than anybody expects today, and that only time and more discoveries are going to open that up. And so we don't think that it makes sense to change the business model at all. What makes the most sense is to take advantage of the resources that investors have made available to us and put that money to work behind the incredible story of optical genome mapping and Saphyr system in helping patients in making new discoveries that are going to transform different diseases. And really advancing the overall healthcare objectives of genomics broadly defined in this new era of big biology driven by structural variation analysis. And so the capital is there to help us really double down on this plan. It's not there to help us change the plan. It doesn't mean that we don't see the need for tuck-ins and different technologies that are out there in the space that would accelerate our plan. But the capital is there for us to double down on the original vision and make that happen sooner than we might have been able to make it happen without the capital.

Our next question is from Kevin DeGeeter of Oppenheimer.

Hey, just to follow up on Scott's point, just to clarify for financial modeling. How are you thinking about the split between reagent rental and capital purchase on that kind of call it 53 or more units, you have to place this year.

So right now we see it as roughly 50:50. And then it gets a little bit interesting, because we are starting to see some early reagent rentals that are now converting to sales. So what I think we're going to end up seeing going forward is a little bit 50% plus reagent rentals. And then some of those, a lot of those will transition to sales over the course of six months to a year.

Got it and recognizing you don't provide guidance as such on operating expenses. I think we all expect OpEx expenses to accelerate pretty meaningfully this year; any parameters you would provide as to how to think about either over the course of the next 12 months or longer term the trajectory of spend? Thanks.

Yes, so the biggest things we're investing in this year are first headcount, we're adding headcount across the sales marketing organization and in R&D, and we're also spending on these clinical trials. That's where, as you heard from Erik where our focus is on getting those clinical trials going as fast as we can get them going. So yes, so OpEx is going to be this year I don't think it's going to be staggering, I'd say somewhere in the 20% to 40% range this year. And then I would probably keep it in that range for the next couple of years' growth that range.

We have reached the end of the question-and-answer session. And I will now turn the call over to Erik for closing remarks.

Yes, great. Thank you, operator and thank you to everybody who attended the call today. And we look forward to seeing you soon for our first quarter 2021 call. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.