Bionano Genomics, Inc. (NASDAQ:BNGO) 2nd Annual Maxim Group Virtual Growth Conference March 30, 2022 3:30 PM ET
Company Participants
Erik Holmlin – Chief Executive Officer
Michael Paul – Chief Strategy Officer
Conference Call Participants
Jason McCarthy – Biotechnology Analyst at Maxim Group
Jason McCarthy
Welcome back everyone. Today we are bringing you Erik Holmlin, the CEO of Bionano Genomics. Bionano’s developing Optical Genome Mapping or OGM which is a genomic interrogation technique that provides long range structural information you can access with other techniques.
The last few years have been focussed on generating the publications, build the awareness and demonstrating the clinical utility with their Saphyr system to be able to replace laborious manual cytogenetic techniques and to complement sequencing for a more complete interrogation of the Genome. Now the Bionano story is evolving with a greater focus on refining the platform, software and strategy to drive its growing commercial adoption.
Erik, would you like to start this off and give a quick overview of what’s going on at Bionano.
Michael Paul
Let me just correct that beginning part, that developing, they developed it, its’ commercialized. They are selling it, they might be refining it. There’s a lot going on over there on the commercial side.
Erik Holmlin
That was really well done summary, Michael. And we are so grateful to you guys. We loved the interactions that we have and we think you guys really get it and your summary was like it proves that. And to Jason’s point, we have really made a ton of progress in I would say clearing the path for broader and broader adoption in commercialization of Optical Genomaping and to first the numbers too what we finished the year last year $80 million in revenues and 164 Saphyr systems installed as of December 31, 2021 and that exceeded our goal of 150 for the year and represents about 65% year-over-year growth in the installed base. We doubled the number of consumable flow cells that were sold into the market and so what it means is that people are adopting the methodology and the system to perform it in-house at a pretty good rate and an growing rate. And then they are using it, right. So those two things in combination form the basis of what we believe will be a big business in genome analysis. And a big revenue driver, but because of the consumables pull through, there will be, it’s going to be a profitable business for us down the road.
And you mentioned some of the things that we’ve done to really accelerate commercial adoption and make that smoother. And one of them has really been about this acquisition that we made of BioDiscovery, which is a software company based in the LA area. Brilliant [ph] founder, Soheil Shams who became our Chief Informatics Officer, and they developed an incredible product called NxClinical, and the idea is that NxClinical will be a software platform that allows for the analysis of optical genome mapping data, but it already is widely used for next generation sequencing and microarray. So it gives us this platform to integrate all of these data types. And as you said, we’re not we’re not competitive with next generation sequencing, we complement it. And so doing that inside a single software, makes it easy for customers to realize that complementary, complementarity and making things easy for customers in this space is kind of the name of the game.
So we’re really excited about how we’ve come into 2022. We see this as another important year for us in terms of a stepping stone and developing, and the growth in publications, adoption utilization is, is just fantastic.
Jason McCarthy
I still think that there is, I always like to go all the way back to the beginning and whatever. I don’t think there’s a healthcare investor on the planet who doesn’t know who Illumina is, right? Otherwise, you should probably be investing in something else. But understand, you mentioned, you’re not competing against next-gen. But helping people, again, understand what optical mapping and structural variation is, and where it fits in to short and long read sequencing and understanding that it’s not sequencing is not sequencing. And it’s nice; you can just walk through it.
Erik Holmlin
Yes, a lot of those investors you talk about, and we love them, and they have supported our company. So we’re grateful to them. But that that’s sometimes like, when you can tell they’re kind of getting the story, they’ll speak up unless it well, that’s not sequencing, Mike, you’ve got it, man, because sequencing is great. This is a very, very powerful tool, which is being used all over the place in amazing ways. And what sequencing does today, the modern version of it is it builds a copy of DNA, one base pair at a time.
And so when it builds that copy, and then and then you can read, it’s just like writing a word, like you spell the word one letter at a time. And when it’s done, you can read it. And if the letter is misspelled, if the word is misspelled, because the letter is wrong, you can detect that. But what begins to happen is that, those, that copying process can only go so far. So you don’t get like a full sentence when you’re sequencing DNA. And so that collection of words that that could fit anywhere in the book, it’s hard to determine it just based on that small copy that you make short reads sequencing, and then long reads sequencing can do a little bit better. But with optical genome mapping, it’s really like having a whole page in the book. So sequencing, next generation sequencing that Illumina sells might be like spelling out a couple of words, long read sequencing might be getting a whole sentence, we have the whole page. And the idea is that the story in the book really does require that you have the words in the right paragraph in the right page in the right chapter of the book.
And so when you have a whole page, it helps you determine if things have been rearranged. And that’s what structural variation is, if a page has been torn out of the book and is missing, that’s going to be pretty obvious. Turns out sequences can pick that up. If it’s been rearranged to a new chapter, we can pick that up with mapping but you can’t pick it up with sequencing because of this sort of short read.
Now in biology, it can be very, very, very significant. If you have these large rearrangements, and that’s what cancer testing is all about today. People use karyotyping to get a very gross macro look at whether the genome at the chromosomal level has been rearranged. And the resolution of karyotyping is about 5 million base pairs. We increase that resolution down to 500 base pairs, so much, much higher resolution to pick up these large structural rearrangements, which are critical in cancer, and play a big role in genetic diseases as well.
And so optical genome mapping provides you with the structural organization of information in the genome. And sequencing is your spell checker, sometimes you only need a spell checker, that’s fine. Sometimes you only need a structural map, that’s fine. But when you think about it, as we get into this more refined, higher resolution medicine, you’re going to need both.
Jason McCarthy
I think something that’s something that was important to on the sequencing side is our genome, makeup repeats. And they can’t see right, like Illumina take all those little pieces of data and try to write the chapter or the page, but I can’t see if you have repeats everywhere, it just doesn’t know where to put them. When it tries to do it sequence alignment, right. That’s part of the problem, too. It’s just not.
Erik Holmlin
That’s right.
Jason McCarthy
At practice, not impossible. They can’t do it.
Erik Holmlin
Yes, I mean, if I could continue the sort of book analogy. I mean, if you took the book and you tore it up, and you just cut the pages up into every individual word, like think about it, you’d have these tall stacks of words that are repeated throughout the book. And then if you ask yourself, what chapter did that word come from? There’s no way of knowing simply no way of knowing. Let’s just be clear about that. I mean, people talk about Google variants and different analytical techniques. When it’s all cut up that way, there’s no way there’s too many possible solutions. And so our approach is to not look at each individual word, but to look at them string strung together in long paragraphs or chapters. And then it becomes obvious where it fits.
And by the way, if you have a few misspellings in your email, or your text message, not the end of the world, you know what the biology is. But sometimes a misspelling really matters. So yes, the two of them fit together. And the biology of the genome itself creates the technical problem which we solve the repetitiveness.
Jason McCarthy
So you were talking before about a lot of the work that you’ve been doing and on the software side and like to see if you you’re a bit deeper on what NxClinical does for you, what stage that program is, and really what allowing simultaneous analysis of multiple information types in a single workflow can do to help drive the adoption of Saphyr, other works on the book analogy too.
Erik Holmlin
Yes, I mean, listen. I mean, let’s just have Jason give the talk. And because he really gets it.
Jason McCarthy
I love this story. I thought I listen, I sat in a lab and dropped slides and — it was torture.
Erik Holmlin
Yes, I mean, it’s so it’s painful. It’s painful to do these process. So we simplify that overall. And then we make it better providing a lot more information. Now, now, it’s like, okay, well we have, we have all the words, and we know where they fit in the book. And so without the software that we have, somebody would have to integrate them manually. And that’s doable. And our users do that day in and day out. And they’ve been publishing these amazing papers, but it’s laborious, it takes a long time. And, and so what NxClinical does, is that it will automate that process. What it does today is that it provides a very powerful approach to detecting copy number variation, which is a form of structural variation. It’s not, its gains and losses. The data sources are NGS, next generation sequencing or chromosomal microarray. You still won’t be able to determine what chapter of the book the gains or losses are coming from, but it still is useful information and so, NxClinical is a gold standard for revealing copper number variation from NGS and chromosomal microarrays best sensitivity in the market.
And then once it’s detected them, it allows you to visualize and interpret them with a workflow that is incredibly fast and automated. And this idea of interpretation involves relating the variant that’s detected to all of the known clinical literature that exists and so we have to maintain databases that allow for that. And we make that query in an automated fashion. And then that translates into a report.
And so it’s a very seamless process that’s easy to work. And here’s the thing, it goes fast. And so when you’re a laboratory scientists, and if you’re happening to do this, if you develop the laboratory developed tests, and you’re using the software in conjunction with, the right kind of credential people who are looking at the data. I’m saying this for people who, this is Research Use Only software, right. But your time to a reportable result is incredibly fast. So this is a process that will automate the integration of optical genome mapping with sequencing. Everybody wants that, it’ll go, it’ll go, it’ll be easier to get that integrated view. And then it’s going to go incredibly fast. And that is really the name of the game in the lab space today.
Jason McCarthy
Can you talk about the inability, or lack of diagnosis for genetic diseases, and also cancer and maybe cancer, through the lens of tailoring treatment for patients? And where Saphyr could be very, very useful in though in those settings?
Erik Holmlin
Yes. So people will say, do you really need to do optical genome mapping? Should you be looking at, at at the structure of the genome if you have sequencing? And to me, the answer is very clear. Yes. But of course, I’m going to say that because I run a structural variation detection company. But when you think about the success rates of clinical testing for genetic diseases, and cancer, 50% to 70% of tests come back with no pathogenic variant finding. And that’s because you’re using a lot of these traditional methods that have low resolution, or you’re using sequencing. And so you’re not finding the variance. So obviously, there’s more there to be found. And optical genome mapping is now proven to find incrementally more, there’s been some papers that have been published where that rate is significant double digit, percentage, incremental, pathogenic variant finding, so it’s going to solve more cases. But a lot of times labs will say, I don’t need to see more variants. But the variants that we’re finding, or being found by our end users are incredibly impactful.
And one really good example was Children’s Hospital of LA, Dr. Gordon Urraca,[ph] who runs a lab that is doing testing in pediatric leukemias and lymphomas. And the way that they run their testing for these kids, they use sequencing and sequencing will pick certain variants that are highly relevant for therapy selection. And they have for cost reasons, developed a panel of commonly detected sequence variants in kids. Right, but kids don’t have you — it can happen that kids will have variants that are not just pediatric variants, but more common in adults. They’re not able to look at those for cost and time reasons. And so what they’re able to do with optical genome mapping is layer that on top of their sequence variant panel on a whole genome basis. And so they’re picking up structural variants that are more common in adult patients. And this is research, of course, but the variants that they’re finding are totally druggable targets.
And so the idea again of complimenting sequencing is very powerful. And it’s incredibly meaningful in the clinic, because people will get treatments that they otherwise wouldn’t get. And that’s, that’s saving lives.
Jason McCarthy
What about the idea of changing or automating workflows on the cytogenetic side. We saw with western blotting and microarray is ultimately a waveline, high throughput automated, but when you’re doing karyotyping and FISH and southerns, and what have you, it’s laborious, right? It’s costly, and it’s still low resolution, relatively low resolution.
Erik Holmlin
Yes, I mean, look. So our we were just at American College of Medical Genetics and Genomics meeting in Nashville, everybody was together for the first time for two years. We, we exhibited all three of our business, our testing laboratory services, which is our legacy lineagen business, which connects us to patients; we were exhibiting the software solutions from BioDiscovery. And then, of course, optical genome mapping as being that, that hub that these different spokes revolve around. And it’s clear that the market views optical genome mapping as the future of cytogenetics, right. For the reasons that you’re saying. This is something that can be positioned as a primary alternative to karyotyping FISH, microarrays southern blot and a lot of these other techniques.
Now, sometimes, a [indiscernible] will say, well, you’re not going to make those go away completely. I guess that’s fair, right? I mean, sequencing didn’t make them go away at all. So I’m not trying to say that those techniques will be completely eliminated. Like, for example, there’s a FISH stain for BCR-ABL, right? The fusion gene and protein that drives Chronic Myelogenous Leukemia, you can get results with that FISH in two hours. Do it, if I’m not patient do it because optical genome mapping takes a few days, right? So do that.
But we have a customer in Belgium that developed a laboratory developed test for pediatric leukaemia, and they put karyotyping used to be the first thing that they do, they still run it for confirmatory reasons, but they put it at the end. They used to do 10 FISH assays. Now they only do one, the BCR ABL assay. So they eliminated nine FISH assays. They used to do multiplex ligation probe assay MLPA, they don’t do it anymore. They used to do a handful of PCR assays, they don’t do them anymore. So optical genome mapping completely reorganize that workflow. And so we say it’s the future of cytogenetics. It’s going to be that primary workhorse. And we have, it’s not going to happen overnight. Investors, I want to manage expectations. As Michael said in the introduction, we’re building towards that. But how do you get there?
Well, customers adopt, they buy the system, they use their research grants, their endowments, to look at these patients who are negative by traditional standard-of-care. They analyze them in a research setting with optical genome mapping, which ends up explaining many of those patients, which is very valuable. And it also illustrates to the world how optical genome mapping fits in. So this is really the future of cytogenetics through a process of consolidating these workflows and automating and industrializing some of the traditional methods.
Jason McCarthy
I spent time in a cytogenetics lab. And it was at a hospital, and then we get requests all day for cytogenetic workups, and the workload just from volume is, is overwhelming, I’d say. There are more bigger hospital systems that have cytogenetics labs that you really would look towards first that would look to they got a thing — their workflow somehow.
Erik Holmlin
Yes. So I mean, I think cytogenetics is practiced at most academic medical centers and large hospitals. It’s a revenue driver for these institutions, and can be something that can drive procedures and a lot of. So it’s economically beneficial for them to have those centers, then LabCorp, and quest also process thousands, and thousands, and thousands of carrier types and FISH assays for all sorts of cancers and genetic diseases every year. So there are many, many patients. And our approach today is to focus on academic medical centers across the United States that will adopt the system and begin the process of integrating it into their production workflow. But there are a few things that need to fall into place for that to happen, right? We need to address the reimbursement question, right. So they’re not going to just stop doing FISH for which they get reimbursed right now, because that would kind of antagonize this revenue equation that they need to work on. But they want to build the assay. They build it up as a reflex, right that they use in research to study these samples that are negative by the standard-of-care. And they begin to build the case in their institution for broader adoption, those data are published. And the AMA that approves CPT codes, which will be looking at our application for a CPT code in the future. And that looks at PLA codes that are being submitted by different labs that have developed LDTs, laboratory developed tests based on optical genome mapping, it creates this sort of, critical mass of voice in the market that this is valuable technology, it starts getting reimbursed, and then there can be a process of converting traditional methods over to optical genome mapping. They have to follow a rigorous path of assay development and validation under laboratory developed tests and we don’t mark it Saphyr for clinical use that way, but this is the path that that people will work on. And so we focus on academic medical centers to get them to adopt for research use today and evolve down this path.
Jason McCarthy
So I’d like to tell you to touch on your four part clinical program and does that represent a pathway to gain reimbursement more broadly?
Erik Holmlin
Yes, you’ve got to go at this you know our board has – [Technical Difficulty]
Jason McCarthy
Okay, sorry, guys, just a technical difficulties. That happens with Zoom sometimes. But Erik, if you could kind of close with us, walk us through what’s coming up for Bionano in 2022. And what we have to look forward to?
Erik Holmlin
Yes, so 2022 is to be a year of continuing to expand the install base. And so we’re seeking to get from 164 at the end of 2021 to 240 by the end of this year. And we’re going to be focusing on reimbursement by applying for Category One CPT code. We’ll continue to advance our next generation optical genome mapping instrument. And so we’ll have a system in the field by the end of the year like a pre commercial system, beta system, think of it as that and our clinical trials, which that’s where I got cut off but important clinical trials to serve the medical guide medical societies that set guidelines as well as the third party payers that that determine coverage for reimbursement. We’re going to progress those and we’re going to launch a version of NxClinical in the second half of the year that allows that incorporates optical genome mapping. And we’ve already given a little bit of a taste of this out there. So some folks have been talking about, OGM in NxClinical, but that’s going to be a full-fledged commercial version in the second half of this year. So a lot of great progress in commercial and product development and then market development.
Jason McCarthy
And we actually have sequel and — waiting in the queue, we’re going to talk to them at four, but a lot of activity give you an interesting panel coming out of this Bionano single molecule stuff at Sequel, we should talk about something like that. Oh, it’s interesting. It’s cool.
Erik Holmlin
Yes, we would be all over it. And the appetite for this stuff in the research market is high and people just want robust solutions. And so that’s what we’ve been focused on providing and the guys at Sequel super cool. So appreciate it, guys. I was going to take the opportunity to connect and hang out.
Jason McCarthy
Have a good afternoon and we’ll catch up with you soon Erik.
Erik Holmlin
All right.
Jason McCarthy
Bye
Question-and-Answer Session
End of Q&A
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