Bionano Genomics, Inc. (BNGO) is a provider of genome analysis solutions that enable researchers and clinicians to reveal answers to challenging questions in biology and medicine. The company has undergone a significant transformation over the past year, as it has implemented a series of strategic initiatives aimed at streamlined its operations and positioning the business for long-term success.
Business Overview and History Bionano Genomics was founded in 2003 and is headquartered in San Diego, California. The company's core technology, optical genome mapping (OGM), allows for the analysis of large, complex genomic structural variations that are difficult to detect using traditional sequencing methods. Bionano has developed a global patent portfolio that includes more than 150 issued patents across approximately 39 patent families that are either owned or exclusively licensed. In addition to its OGM solutions, the company offers a platform-agnostic software solution that integrates next-generation sequencing, microarray, and OGM data to provide analysis, visualization, interpretation, and reporting of copy number variants, single-nucleotide variants, and absence of heterozygosity across the genome in one consolidated view.
Bionano has expanded its offerings through strategic acquisitions. In 2021, the company acquired Lineagen, a U.S.-based provider of proprietary molecular diagnostics services; BioDiscovery, a U.S.-based software company; and Purigen, a U.S-based DNA and RNA extraction company. These acquisitions increased Bionano's headcount by more than 75 employees and added new leases, which contributed to increased operating expenses and net losses.
The company has faced challenges since its inception, including recurring net losses and negative cash flows from operating activities. Despite these obstacles, Bionano has continued to advance its OGM technology and expand its product portfolio. Through its Bionano Laboratories business, the company also provides OGM-based diagnostic testing services.
Financial Performance and Liquidity As of September 30, 2024, Bionano reported $23.4 million in cash, cash equivalents, and available-for-sale securities, of which $11.4 million was subject to certain restrictions. The company's cash and cash equivalents position has been a key focus, as it works to manage its liquidity and preserve its runway.
For the nine months ended September 30, 2024, Bionano reported total revenue of $22.61 million, a decrease of 11% compared to the same period in 2023. This decline was primarily driven by a 53% decrease in service and other revenue, which was partially offset by a 5% increase in product revenue. The company's gross margin for the third quarter of 2024 was negative 139% on a GAAP basis and 26% on a non-GAAP basis, reflecting the impact of one-time charges related to the company's strategic shift.
Bionano's operating expenses have decreased significantly as a result of its cost-saving initiatives. For the third quarter of 2024, the company reported GAAP operating expenses of $35.5 million, a 69% decrease from the same period in 2023. On a non-GAAP basis, operating expenses were $16.1 million, a 49% decrease year-over-year. These reductions have helped to mitigate the impact of the revenue decline and improve the company's cash flow profile.
In the most recent fiscal year (2023), Bionano reported annual revenue of $36.12 million, with a net loss of $232.49 million. The company's annual operating cash flow for 2023 was negative $125.18 million, and its annual free cash flow was negative $126.87 million. For the third quarter of 2024, Bionano reported revenue of $6.07 million, a 35% decrease year-over-year, primarily due to a $0.5 million write-down of aged receivables tied to discontinued clinical service products. The net loss for Q3 2024 was $44.25 million.
Bionano's liquidity position as of September 30, 2024, included $8.79 million in cash and cash equivalents, with an additional $11.40 million in restricted cash and investments. The company's debt-to-equity ratio stood at 0.46, while its current ratio was 1.43 and its quick ratio was 0.99.
Product Segments and Revenue Breakdown Bionano operates in two primary product segments: Instruments and Consumables. The Instruments segment includes OGM systems and Ionic Purification systems, while the Consumables segment comprises reagents, chips, and other consumables used with these systems.
For the nine months ended September 30, 2024, the Instruments segment generated $5.29 million in revenue, a 21% decrease compared to the same period in 2023. This decline was attributed to the company's strategic shift towards focusing on its existing installed base rather than new system placements.
The Consumables segment showed strong growth, with revenue increasing 22% to $9.37 million during the first nine months of 2024. This growth was driven by higher utilization of consumables as the installed base of OGM systems expanded.
Bionano's software segment, which includes its VIA software for data analysis and interpretation, saw a 13% increase in revenue to $4.70 million for the first nine months of 2024.
Service and other revenue, primarily from Bionano Laboratories' diagnostic testing services, decreased 53% to $3.25 million in the first nine months of 2024, largely due to the discontinuation of certain clinical service offerings related to neurodevelopmental disorders.
Geographic Performance and Market Presence During the nine months ended September 30, 2024, approximately 62% of Bionano's revenue was generated from customers located outside the United States, primarily in Europe and Asia Pacific regions. The company anticipates that a substantial percentage of future revenue will continue to come from international sources.
Operational Highlights and Strategic Initiatives One of the key highlights for Bionano in the third quarter of 2024 was the continued growth in its installed base of OGM systems, which reached 368 as of September 30, 2024, a 22% increase from the same period in 2023. Additionally, the company reported a 27% year-over-year increase in the number of nanochannel array flowcells sold, reaching 7,835 in Q3 2024, indicating growing utilization among its existing customer base.
Bionano's strategic shift has centered around a focus on driving utilization and adoption of OGM from its existing installed base, with less emphasis on new placements of its OGM systems. This approach is intended to preserve cash and position the company for long-term sustainability, even if it results in slower growth in the near term.
The company has also made progress on its reimbursement initiatives, with the establishment of a new CPT code for optical genome mapping by the American Medical Association. This is a significant milestone that could enable wider adoption of the technology, as clinicians and laboratories seek to utilize OGM for hematological malignancies and other applications.
Risks and Challenges Bionano's transition to a more streamlined operating model has not been without its challenges. The company has faced headwinds related to the discontinuation of certain clinical service offerings, which resulted in a write-down of aged receivables and a negative impact on its top line. Additionally, the company has experienced delays in system placements, as some customers have taken longer than expected to secure the necessary approvals for capital equipment purchases.
The competitive landscape in the life sciences research and diagnostic markets remains intense, with Bionano facing competition from both established and emerging players. The market is characterized by rapid technological changes, frequent new product introductions, and changing industry standards. The company's ability to maintain its technological edge and continue to drive the adoption of its OGM solutions will be crucial to its long-term success.
Furthermore, Bionano's financial position and ability to execute on its strategic initiatives are subject to various risks, including the need for additional capital, potential regulatory changes, and the overall macroeconomic environment. The company's success will depend on its ability to navigate these challenges and effectively allocate its resources to the most promising growth opportunities.
Forward-Looking Guidance For the fourth quarter of 2024, Bionano expects revenue to be in the range of $6 million to $7 million. The company anticipates its OGM installed base to reach between 370 and 380 systems by the end of Q4 2024. For the full year 2024, Bionano projects total revenue to be in the range of $28 million to $30 million based on the Q4 guidance.
Management has acknowledged that the company may experience slower growth in the adoption and expansion of OGM as a result of its expense reduction efforts. However, they emphasize that cash preservation and reaching profitability are more important targets than growth at any cost in the current business environment.
Conclusion Bionano Genomics has embarked on a transformative journey, marked by a strategic shift aimed at streamlining its operations and positioning the company for long-term sustainability. While the near-term financial performance has been impacted by this transition, the company's focus on driving utilization of its OGM technology among its existing customer base, coupled with its progress on reimbursement initiatives, suggests that Bionano may be well-positioned to weather the current challenges and emerge as a stronger, more resilient player in the genome analysis market.
As Bionano continues to navigate this period of change, investors will be closely watching the company's ability to execute on its strategic plan, manage its liquidity, and capitalize on the potential of its innovative OGM solutions. The road ahead may not be without its obstacles, but Bionano's determination to adapt and reinvent itself could ultimately prove to be a key differentiator in the dynamic life sciences industry.