Can BioNano Genomics Map A Way Past Twin Perils?

When playing with the structure of this piece in my mind, it occurred to me that Norman Maclean's thoughts about fly fishing apply just as well to biotechnology companies

It is also interesting that thoughts about fishing are often carried on in dialogue form where Hope and Fear -- or, many times, two Fears -- try to outweigh each other

The executive team at BioNano Genomics may well be gripped by this situation, as they are faced with two great perils: their finances and their markets.

BioNano has commercialized some technically impressive equipment. Their Saphyr optical mapping platform takes very large DNA molecules and entices them to thread themselves into nanochannels which hold them as elongated straight molecules.  It's like taking a bowl of rotini and tricking it into being dried spaghetti.  Then they perform nicking and nick translation to label tiny spots on these individual molecules and image that.  Computation then takes many such images and constructs maps from them.  It's hard not to find this all pretty amazing.  They've successfully taken that technology and shown it useful for assembling genomes as well as structural variant characterization in cancer and rare genetic disorders. On the business front, BioNano successfully executed an IPO in August of 2018, raising over $20 million - less than the original goal of $30 million but still not chump change.

Alas, that's where the good news pretty much ends.

The business front is the most immediately troubling.  Since the IPO in the $6 range the stock never passed $8 and has mostly followed a course that looks like the mountains around Mann Gulch, a steep slope downwards/  Currently hovering around $1.20, last fall it even broke below $1 for a number of days.

BioNano is listed on the NASDAQ, which has certain standards for membership -- one of which is to keep the share price above a dollar.  Another is to have a certain level of stockholder equity, and last summer the NASDAQ warned BioNano that they were in arrears of that standard and had six months to fix it.  Delisting would mean exile to the Pink Sheets, the dreaded neighborhood of thinly traded (and therefore easily manipulated) penny stocks and companies with dubious business plans and even more dubious management teams.  Not a place any respectable technology company ever wants to find themselves.
[2020-01-24 -- it's been pointed out that BioNano raised $18M in October, which I miserably failed to find in preparing this, and is now back in compliance with the capital requirements at NASDAQ as well as having that much more in their bank account]

The same third quarter SEC filing that mentions the delisting threat also shows a relatively grim balance sheet.  The end of September 2019 showed $8.2 million in the bank -- not much more than the $6.4 million loss recorded for that quarter.  There's $6.0 million owed them by customers (accounts receivable), which is greater than the $3.4 million owed their own creditors (accounts payable).  That roughly mirrors the quarterly revenue of $3.3 million being somewhat larger than the cost of revenue of $2.4 million.  But there's another $6.6 million in expenses -- R&D plus general overhead.  Which leads to a grim conclusion: if BioNano could eliminate overhead they'd be near breakeven, but with it they're nowhere close.

The science side is more of a medium term issue, not like the very immediate threats of delisting or running dry on cash, but certainly troublesome.  BioNano just got some good exposure at the Plant and Animal Genomes (PAG) conference and I see a couple of AGBT titles mentioning optical mapping.  That almost guarantees BioNano, as their competitor OpGen pivoted to an entirely different business.  Their only direct competitor would seem to be Nabsys 2.0, with their electronic mapping scheme.

But ultimately the BioNano Saphyr instrument is a very expensive benchtop unitasker.  If you have plenty of optical mapping needs, then you might be happy with it -- but in many labs it will see at best intermittent use.  So a niche instrument requiring unique training and maintenance.

Any mapping instrument faces threats from sequencing: sequencers are the ultimate multitaskers capable of a wide and growing array of tasks.  A unitasker that delivers data the generalists can't -- or maximizes some other value parameter such as cost, ease-of-workflow or wallclock time -- is kept, but little-by-little their position will erode.  At Warp we tried both OpGen and BioNano on our seemingly impossible bacterial assembly problems; OpGen bellyflopped and BioNano gave limited insight.  Then along came sufficiently long PacBio reads and our genomes snapped together.  Optical mapping just isn't something worth considering in the bacterial world -- though I'll note one of the AGBT talks is on optical mapping of virus genomes, which I'm curious to find out why that was seen as a good strategy.

Structural variants are a subject of intense interest in the sequencing world, so the experimentalists develop new protocols for DNA isolation to drive read lengths higher and the computationalists generate new algorithms to use that data to more precisely and sensitively detect SVs.  Several years ago some of the Nabsys folks showed me data suggesting that their platform was best for certain scales of SVs; in a world of 20kb HiFi reads and Oxford Nanopore libraries with read N50s in the 100 kilobase range I wonder at what scales that is still true.  10X Genomics just dropped out of the linked reads for genomes arena, but now there's Universal Sequencing Technology with their TELL-Seq kits.  So BioNano lost one competitor but has gained another.  Even if the clinical assays that BioNano and their collaborators have genotyped are small numbers of patients, the existence of those assays gives a map for competitors -- metrics to match or beat and data to compare against.

Another use of BioNano has been to help scaffold difficult large genomes.  In addition to the bottom-up threat of longer read lengths and better assemblies from long read and linked read systems, there's more of a top down problem of better-and-better HiC kits.  In their recent newsletter, Arima Genomics showed how the use of affinity capture can give resolution of 500 basepairs for HiC.  Since standard HiC kits don't even require initial DNA purification -- and hence can preserve very large structural features -- they have a chance to cover all the size ranges for structural variants not available to straight-up sequencing.  Oxford Nanopore has put forth their Pore-C scheme, which packs many proximity tags into a single read, enabling more pairwise interactions to be captured and opening up detecting N-way interactions.  A kit requiring no special equipment and no capital spent on unitasking equipment to clutter the bench would be a tough opponent for the mapping instrument companies; multiple such kits with open benchmarks is far worse.

Maclean had another thought that certainly covers BioNano

That's how you know when you have thought too much -- when you become a dialogue between You'll probably lose and You're sure to lose

BioNano is in desperate need of a major strategic alliance, even if they can't command great terms given their weakness (the probably lose arm).  They might stay independent, but their partner would need to inject a heap of capital in order to meet the NASDAQ capital minimum with lots of room for later share price fluctuation.  Far more likely is an outright acquisition by the likes of Thermo Fisher.  In the near term that would mean the sad but necessary laying off of much of BioNano's staff, with perhaps some limited R&D folks kept around to try to build kits for additional tissue types.  But the only way the financials would work in anyone's hands is to substantially trim that $6 million quarterly overhead cost so that the small gross profit on sales can actually turn into something of a net profit.  Any acquirer will also throw their marketing muscle at Saphyr to push more sales, though in a large conglomerate there is the risk that Saphyr would be just one more beast in a very chaotic product zoo.

There is one other curious asset that BioNano has -- a cross-license agreement with Pacific Biosciences for certain patents to use royalty-free in their own areas of expertise (mapping for BioNano, sequencing for PacBio) -- but also an option for a royalty-bearing license in the other company's field.  These agreements can be transferred as part of a change-in-control or merger.  So acquiring BioNano is a backdoor route to access certain PacBio patents, though getting patent rights is far different than getting all of PacBio's technology and skilled personnel.

The alternative to a strategic partnership is "sure to lose" -- bankruptcy and extinction as a corporate entity.  Well, that's perhaps a bit extreme -- with the right bits of luck and skill BioNano might be able to pull out of this dive.  As someone who's been part of biotechs whose coffers ran dry, I wish them well.  But they're going to need a lot more than well wishes to survive long term.