Monday, March 11, 2024

BioNano In Peril Again

While I still have a pair of pre-AGBT and AGBT interviews to write up - plus a long list of post ideas inspired by AGBT - breaking news about BioNano Genomics takes precedence.  The company has announced a major restructuring, with about 30% of its employees being laid off.  I've been laid off twice and it's never enjoyable, so I hope what I write here is appropriately sensitive - but won't be surprised if I still commit a faux pas.  Even with the restructuring, one analyst who likes BioNano estimated they will have about three quarters of cash - this is indeed a perilous time.

Right before the pandemic I wrote a piece about BioNano that was a elegiac in nature - though I had missed a key bit of additional financing - an error that will grate on me forever.  As I wrote back in 2020, BioNano management was very gracious about it and actually invited me to come to their suite and chat.  Their new focus on marching into the cytogenetics market made good sense to me, particularly with Alexander Hoischen giving his enthusiastic endorsement of the value of optical genome mapping for rare genetic disease diagnosis.  

BioNano investors in those days were extremely passionate, with some brooking no possible dissent from their bull thesis on the company.  Just to be clear to any remaining BioNano bulls or bears: I have no investment position in any company in the genomics tools space.  The only individual stocks I hold are in current or prior employers (or companies which have absorbed prior employers) and I never short stocks or play any sort of options, futures or other derivatives.  

Optical genomic mapping (OGM) as refined by BioNano is a wonder of technology - individual DNA strands imaged for specific sites while sitting in precise nanochannels.   The only other company in optical genome mapping, Opgen, abandoned their efforts in 2016 (you can get an Argus instrument for $1.2K on eBay!).  BioNano has been at this for years; I remember seeing an early instrument at AGBT in 2014 (or was it 2013?).  Their most recent instrument, Stratys, can be loaded with up to 12 samples and then new samples added as prior ones complete - and there's a way to have newer samples pass older samples in the queue.  The amount of data generated per sample has improved, and BioNano keeps pushing the technology of extracting High Molecular Weight (HMW) DNA forward -- they have a device in beta that uses a funky electrophoretic technique called "isotachyphoresis".  

BioNano has also gained a key toehold in a number of cytogenetics markets - rare diseases and liquid tumors appear to be the most advanced with efforts to push into solid tumors.  Conventional cytogenetics is a very skilled profession, and even then vagaries of sample preparation can interfere with appropriate identification.  Back at Infinity our one program was directed at EML4-ALK fusions in lung cancers and this is a 12 megabase inversion.  The standard assay then was a "breakapart" Fluorescent In Situ Hybridization (FISH) assay where a red probe and green probe target EML4 but one in the region that will fuse and the other in the region that doesn't.  In the ideal world, these signals will normally be atop one another but if the inversion occurs they will "break apart" - now there will be clear separation between them.  But in the real world, the twisting of the chromosome and angle relative to the plane of the tissue section make scoring these very challenging.

Microarrays marched in and became a key tool for cytogenetics - but microarrays can't detect balanced events such as the EML4-ALK fusion inversion or balanced translocations.  

BioNano OGM can map structural variations as small as 500 basepairs and can detect the gamut of cytogenetic rearrangements -- and that's not just theory but backed up by many publications. So the potential value is high.

Who might be nipping at BioNano's heels?  The most similar company is Nabsys , which I also once wrote an obituary when it actually shut down in 2015 but then later rebooted. Note to longs in any company: my writing obituaries for companies doesn't seem to hurt them!  Nabsys had a suite at AGBT and is moving towards launching their device, which uses nanochannels and electrical detection to perform genome mapping.  So nOGM (non-Optical Genome Mapping?).  

Back when I wrote the last piece, I tended to think Oxford Nanopore would be the one breathing down BioNano's neck.  Nanopore sequencing can deliver so much more information than OGM - at least in theory - and a nanopore instrument would be a lower capital cost instrument available for more uses.  But ONT hasn't pushed in this direction, so there isn't really appropriate software support for cytogenetics, ONT can't routinely deliver as high a coverage of really long fragments for best sensitivity at detecting chromosome rearrangments and certainly ONT hasn't pushed for the studies and regulatory approvals that would be required for this to be adopted nor the automation to make this simple -- though perhaps the TurBOT system if it works could go in that direction..  Oh, and it would be more expensive per sample - ignoring equipment amortization which gets complicated

In a future piece, I'll argue (based again on Alex Hoischen presenting at AGBT) that PacBio sequencing should be considered the standard for whole genome analysis in rare disease diagnosis.  But, PacBio can't quite do it all -- there are balanced chromosomal anomalies that ~20Kb HiFi reads aren't long enough to resolve.

Illumina Complete Long Reads (ICLR) - yeah, right.  Maybe in theory they could contend, but the expense is high due to required oversampling and Illumina seems to be supporting these only for SNP detection in a bit more regions of the genome than standard Illumina whole genome sequencing.  

The interesting short read candidate would be Phase Genomics' CytoTerra product, which uses proximity ligation (aka HiC) to extract correlational information about which DNA is closer to which other DNA.  The beauty of CytoTerra is no HMW extraction required - and it even works on Formalin Fixed Paraffin Embedded (FFPE) samples that are the darling of the pathology world and bane of the genomics community. No long read or synthetic long read approach can ever be expected to work with FFPE, as the process of creating it and the process of extracting DNA from it are both very hard on DNA - typical fragment sizes are a few hundred bases.  But the first step of proximity ligation is formalin fixation, so deparaffinized FFPE samples are easy game for proximity ligation.

What happens now to BioNano?  The cuts are across the board.  Some laboratory services and their staff are being cut entirely - BioNano used these (in some cases, microarrays!) to get a toehold in the cytogenetic market but apparently they aren't internally profitable and now the focus is entirely on OGM.  BioNano is also abandoning their own efforts to directly commercialize their products outside of the US and European markets - they'll rely on distributors.  If distributors are energetic and competent, that just means splitting the pie more ways; if they aren't very good at selling BioNano then there could simply be lost sales.  That's the problem with layoffs especially at this scale - future plans and growth are being sacrificed.

But as noted at the beginning, BioNano is in survival mode.   They already had a reverse split last summer to stay in NASDAQ's good graces, and are again hovering just above the $1 share price that NASDAQ considers a minimum.  They entered a convertible debt agreement last fall that they just renegotiated in terms I would need infinitely more finance courses to understand (perhaps that's just one more!).  As noted in the intro, even a very favorable observer thinks they have a very short leash -- perhaps just three quarters.

So what next?  Acquisition is a likely outcome.  I would group possible acquirers into three buckets - but I'll also confess two of these are areas where describing me as a dilettante might be generous.

The one I know about is the genomics space.  As noted above, BioNano might be a fit for PacBio if PacBio wanted to offer a one-stop-shop for rare disease genomics.  It could be a fit for Illumina to try to be more serious about rare disease genomics, but there'd still be a need for many other assays (subject of the one planned piece I mentioned).  Illumina might be shy about acquiring in the genomics space, but it's hard to see a strong antitrust case - BioNano isn't a competitor or successor to Illumina technology.  Perhaps Element could pursue on similar grounds. 

Going private via an investment firm is an interesting new possibility -- that's what's happening to Nanostring after their bankruptcy.  But what would attract a financier to Nanostring pre-bankruptcy?  Or would they wait?  Anyone buying BioNano must convince themselves they can drive it to profitability.

Perhaps the most likely outcome is a large conglomerate with diagnostic assets - like Danaher, Roche, ThermoFisher or BD.  I don't have a grasp - and don't feel like investing in developing one - of such companies tastes in acquisitions.  For example, over on Discord it has been suggested that ThermoFisher prefers acquiring already profitable companies, which BioNano isn't.  In any case, the big advantage for the underlying OGM technology is that such companies have the marketing forces to drive BioNano technology into the market.  They may also have cheaper access to the capital that will be required to drive the business to profitabilty

BioNano disappearing as an independent entity in 2024 is a real possibility - but I'd love to see them proving me wrong again in 2025.  Doesn't everyone like to see the underdog succeed?

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