bngo-20201231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM

Commission File Number 001-38613

Bionano Genomics, Inc.

(Exact name of Registrant as specified in its Charter)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (858) 888-7600

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Trading Symbol(s) Name of Each Exchange on which Registered

Common Stock, $0.0001 par value BNGO The Nasdaq Stock Market, LLC

Warrants to purchase Common Stock BNGOW The Nasdaq Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YesxNo ̈

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ̈Nox

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNo ̈

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YesxNo ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ̈ Accelerated filer ̈

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2020 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $26.7 million based on the closing price of the registrant’s common stock on June 30, 2020 of $0.51 per share, as reported by the Nasdaq Capital Market.

As of March 12, 2021, the Registrant had 278,661,545 shares of common stock, $0.0001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement, or the Proxy Statement, for the Registrant’s 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the Registrant’s fiscal year ended December 31, 2020.

Table of Contents

Page

PART I

Item 1. Business 4

Item 1A. Risk Factors 26

Item 1B. Unresolved Staff Comments 61

Item 2. Properties 61

Item 3. Legal Proceedings 61

Item 4. Mine Safety Disclosures 61

PART II

Item 6. Selected Financial Data 62

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 71

Item 8. Financial Statements and Supplementary Data 2

Item 9A. Controls and Procedures 2

Item 9B. Other Information 3

PART III

Item 10. Directors, Executive Officers and Corporate Governance 4

Item 11. Executive Compensation 4

Item 14. Principal Accounting Fees and Services 4

PART IV

Item 15. Exhibits, Financial Statement Schedules 5

Item 16. Form 10-K Summary 7

Signatures 8

As used in this Form 10-K, “Bionano,” the “Company,” “we,” “our,” and “us” refer to Bionano Genomics, Inc. and its subsidiaries or, as the context may require, Bionano Genomics, Inc. only. "Lineagen" refers to our wholly owned subsidiary, Lineagen, Inc.

Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K, or this Annual Report, contains forward-looking statements and information within the meaning of the safe harbor provisions for the U.S. Private Securities Litigation Reform Act of 1955. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions, including risks described in “Risk Factors” and elsewhere in this Annual Report, regarding, among other things:

•the size and growth potential of the markets for our products, and our ability to serve those markets;

•the rate and degree of market acceptance of our products;

•ability to expand our sales organization to address effectively existing and new markets that we intend to target;

•impact from future regulatory, judicial, and legislative changes or developments in the U.S. and foreign countries;

•ability to compete effectively in a competitive industry;

•the success of competing technologies that are or may become available;

•the performance of our third-party contract sales organizations, suppliers and manufacturers;

•our ability to attract and retain key scientific or management personnel;

•the accuracy of our estimates regarding expenses, future revenues, reimbursement rates, capital requirements and needs for additional financing;

•the impact of the COVID-19 pandemic on our business and operations;

•our ability to comply with the covenants and satisfy certain conditions of our debt facility;

•our ability to obtain funding for our operations; and

•our ability to attract collaborators and strategic partnerships;

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in Part I, Item 1A Risk Factors and elsewhere in this Annual Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report.

The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Annual Report. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Annual Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report to reflect events or circumstances after the date of this Annual Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and

you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

RISK FACTOR SUMMARY

Below is a summary of the principal factors that make an investment in our securities speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, and other risks and uncertainties that we face, are set forth below under the heading “Risk Factors” below and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC before making investment decisions regarding our securities.

•We have incurred losses since we were formed and expect to incur losses in the future. We cannot be certain that we will achieve or sustain profitability;

•Our quarterly and annual operating results and cash flows have fluctuated in the past and might continue to fluctuate, which could cause the market price of our securities to decline substantially;

•We are an early commercial-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance;

•Our business, and that of our customers, has been adversely affected by the effects of public health crises, including the COVID-19 pandemic; in particular, the COVID-19 pandemic has materially affected our operations globally, including at our headquarters in San Diego, California, as well as the business or operations of our research partners, customers and other third parties with whom we conduct business;

•Our future capital needs are uncertain and we will require additional funding in the future to advance the commercialization of Saphyr and our other products and services, as well as continue our research and development efforts; if we fail to obtain additional funding, we will be forced to delay, reduce or eliminate our commercialization and development efforts;

•If our products fail to achieve and sustain sufficient market acceptance, our revenue will be adversely affected;

•Our future success is dependent upon our ability to further penetrate our existing customer base and attract new customers;

•We are currently limited to “research use only” with respect to many of the materials and components used in our consumable products including our assays;

•In the near term, sales of our Saphyr system, consumables and genome analysis services will depend on levels of research and development spending by academic and governmental research institutions and biopharmaceutical companies, a reduction in which could limit demand for our products and adversely affect our business and operating results;

•If we do not successfully manage the development and launch of new products, our financial results could be adversely affected;

•If the FDA determines that our RUO products are medical devices or if we seek to market our RUO products for clinical diagnostic or health screening use, we will be required to obtain regulatory clearance(s) or approval(s), and may be required to cease or limit sales of our then marketed products, which could materially and adversely affect our business, financial condition and results of operations. Any such regulatory process would be expensive, time-consuming and uncertain both in timing and in outcome;

•If we are unable to protect our intellectual property, it may reduce our ability to maintain any technological or competitive advantage over our competitors and potential competitors, and our business may be harmed;

•The terms of our debt facility place restrictions on our operating and financial flexibility, and failure to comply with covenants or to satisfy certain conditions of the agreement governing the debt facility may result in acceleration of our repayment obligations and foreclosure on our pledged assets, which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our securities to decline; and

•The price of our securities may be volatile, and you could lose all or part of your investment.

PART I

Item 1. Business.

Overview

We are a global leader in optical genome mapping, or OGM, solutions for genome analysis. We provide tools and services based primarily on our Saphyr® system to scientists and clinicians conducting genetic research and patient testing. We also provide diagnostic testing services for pediatric patients suspected of neurodevelopmental disabilities through our wholly owned subsidiary, Lineagen, Inc. Our Saphyr system is a platform for ultra-sensitive and ultra-specific structural variation detection that enables researchers and clinicians to accelerate the search for new diagnostics and therapeutic targets and to streamline the identification of structural changes in chromosomes, known as cytogenetics. Our Saphyr system is comprised of an instrument, chip consumables, reagents and a suite of data analysis tools. We also offer genome analysis services with the Saphyr system for researchers who want to evaluate OGM data quickly and with a low up-front investment. Lineagen has been providing genetic testing services to families and their healthcare providers for over nine years and has performed over 65,000 tests for those with neurodevelopmental concerns.

Optical Genome Mapping

Optical genome mapping is a method of genome analysis that reveals structural variations, or SVs.Structural variation refers to large-scale structural differences in the genomic DNA of one individual compared to another. Each structural variation involves the rearrangement or repetition of as few as several hundred base pairs to as many as tens of millions of base pairs. Structural variations may be inherited or arise spontaneously. Structural variations are well known to cause diseases such as genetic disorders, cancer and others. We believe no other products exists that can detect structural variations more comprehensively or cost and time-efficiently than our Saphyr system does.

Our customers include researchers and clinicians who seek to identify and understand the biological or clinical implications of genome variation. OGM with the Saphyr system can be used to facilitate new research and to improve the treatment of patients through better testing and development of new medicines or treatment protocols. It can also be used as a single alternative to multiple traditional cytogenetic tests like karyotyping, microarrays and fluorescent in-situ hybridization (FISH), which are expensive, slow and labor-intense. OGM with the Saphyr system provides an advanced solution designed to simplify workflow, reduce cost, and increase diagnostic yield. Our customers also include researchers in non-human segments, such as agricultural genomics, seeking to advance their understanding of how structural variation impacts industrial applications of plants and animals.

We have established relationships with key opinion leaders in genomics research and clinical applications, including rare diseases and oncology, including some of the world’s most prominent clinical, translational research, basic research, academic and government institutions as well as leading pharmaceutical and diagnostic companies. Examples include Augusta University, Children’s Hospital of Philadelphia, Children’s National Health System, Boston Children’s Hospital, PerkinElmer, GeneDx, Mayo Clinic, Columbia University, DuPont Pioneer, Garvan Institute of Medical Research, Genentech, McDonnell Genome Institute at Washington University, National Institutes of Health, Pennsylvania State University, Radboud University Medical Center and Salk Institute for Biological Studies.

We believe that Saphyr is the only genome analysis platform capable of comprehensive, cost effective & efficient detection of large structural variations, typically involving 500 base pairs and larger. Today, these structural variations cannot be reliably detected by gene sequencing. Research Use Only (RUO) high throughput sequencers, of which there are approximately 6,000 - 7,000 currently installed worldwide, cannot reliably detect the larger structural variations that our Saphyr is designed to detect. Therefore, Saphyr may be adopted alongside this installed base of sequencers as a complement that is designed to give users the ability to see a much wider scope of genome variation than ever before.

The Saphyr system, which is for RUO, is starting to be adopted by cytogenetics labs that seek to use it in commercial clinical tests of its patients as a laboratory-developed test, or LDT. We estimate that approximately 2,500 cytogenetics labs exist worldwide. These labs currently rely on legacy methods for clinical tests and research that look at chromosomal structure, location, and function in cells. Prominent guidelines for oncology and genetic disease clinical diagnostics recommend use of these existing methods for first-line structural variation testing. The organizations issuing these guidelines include, among many others, World Health Organization (WHO), National Comprehensive Cancer Network (NCCN), American College of Medical Genetics (ACMG) and American College of Obstetricians & Gynecologists (ACOG).

Over the past few years, several major medical institutions have conducted more than 20 human translational research and human clinical studies to assess Saphyr’s ability to detect structural variations and diagnose patients and, in certain studies, to compare those results to those produced via existing cytogenetic methods. In 2020, the results of several of these studies were published by the institutions. We believe that these publications, as well as additional forthcoming publications and the results of large-scale clinical studies that are being conducted in 2021 will lead to further adoption of the Saphyr system.

Diagnostic Services

Through our wholly owned subsidiary, Lineagen, acquired in August 2020, we provide proprietary molecular genetic diagnostic services for individuals demonstrating clinical presentations consistent with neurodevelopmental disorders (NDDs), including Autism Spectrum Disorders (ASD) and other disorders of childhood development. Lineagen's comprehensive genetic testing services can detect a majority of known NDD-causing genome variations, including testing for proprietary variations, and combines testing with Lineagen’s Proprietary Variant Index (PRISM) that uses a proprietary database of over 35,000 individuals with NDDs tested with over 60,000 tests that provides additional evidence for candidate genes associated with NDDs.

COVID-19 Overview

The COVID-19 pandemic, and the measures imposed to contain this pandemic in areas where we operate our business and elsewhere have disrupted and are expected to continue to impact our business. For example, to comply with applicable regulations and to safeguard the health and safety of our employees and customers, we temporarily reduced our on-site business operations, implemented work-from-home practices, and modified other business practices, including those related to employee travel and physical participation in meetings, events, and conferences. In addition, the quarantine of our personnel and the inability to access our facilities or customer sites adversely affected, and is expected to continue to adversely affect, our operations.

During the twelve months ended December 31, 2020, we experienced a $1.6 million decrease in revenue, as compared to the same period of the prior year, which we largely attribute to the COVID-19 pandemic due to labs shutting down and other measures restricting operation of facilities where our instruments are installed. While the COVID-19 pandemic did not prevent us from operating our business during the twelve months ended December 31, 2020, we took steps to reduce our cash used in operations in order to offset the decrease in cash generated from sales. For example, we implemented salary reductions for most of our salaried employees and reduced the number of working hours of most of our hourly employees by 25% from April through June of 2020.

Disruptions resulting from the COVID-19 pandemic may continue to impact our operations and overall business. The impact of COVID-19 is evolving rapidly and its future effects remain uncertain. As a result of such uncertainties, the duration of the disruption and the related impact on our business, operating results and financial condition cannot be reasonably estimated at this time. We are continuing to closely monitor the impact of the COVID-19 pandemic on our business and are taking proactive efforts designed to protect the health and safety of our workforce, continue our business operations and advance our corporate objectives.

Recent Saphyr System Highlights

Executed on Commercialization Offerings for Saphyr

The Company executed on its commercialization strategy, expanded the utilization of its Saphyr system and increased the amount of Bionano data generated across the globe, driving scientific momentum. The installed base of Saphyr systems was 97 at the end of the year, an increase of 24 from year-end 2019.

Validated System Utility with Benchmarking, Scientific Publication and Clinical Adoption

Rigorous and extensive benchmarking of Saphyr was conducted against traditional cytogenetic methods and long read sequencing and these results were published and validated in several key publications, presentations and announcements including:

•OGM concordant with traditional cytogenetics in landmark leukemia study;

•International consortium demonstrates that Bionano's Saphyr detects all 100 chromosomal aberrations in 85 Genetic Disease Patients;

•Large multi-center study on 100 AML samples shows that Saphyr outperforms standard-of-care and leads to the recommendation of Saphyr being a first line test.

•Publication reveals in side-by-side comparison that method using PacBio sequencing detects only 72% of the large structural variants detected by optical genome mapping with Saphyr; and

•University of Iowa Hospitals and Clinics (UIHC) switched their method of clinical molecular testing for patients with presumed Facioscapulohumeral Muscular Dystrophy (FSHD) to an assay based on OGM that they developed using Bionano’s Saphyr and validated as a Laboratory Developed Test (LDT).

Expanded System Beyond Cytogenetics and Improved Diagnostics

Researchers and clinicians demonstrated the ability of OGM with Saphyr to go beyond the scope of detection of standard cytogenetics and traditional diagnostics as evidenced in several key publications including :

•UCSF & Children’s Hospital Oakland study finds that Saphyr can diagnose an additional 18% of children with genetic disease who were undiagnosed after standard of care testing.

Revealed Genetic Drivers of Severe Covid-19 Susceptibility

OGM with Saphyr identified SVs that affect genes in pathways that control immune and inflammatory response, viral reproduction and mucosal function. These results became the foundation of multiple research efforts, including one international consortium and publication:

•COVID-19 Host Genome SV Consortium identifies structural variants with possible roles in pathogenesis and outcomes in severely ill COVID-19 patients using Bionano's Saphyr® system.

Expanded Applications of OGM in Human and Non-Human Research

Several other published studies illustrated key applications of OGM to areas of human and non-human research, including:

•Bionano Genomics data is essential part of the first ever complete assembly of a human X-Chromosome;

•Vertebrate Genome Project rules Bionano optical genome mapping technology as essential part of assembling reference quality genomes;

•Bionano's Saphyr plays essential role in identifying three previously unknown genetic mutation types in cancer in study from Weill Cornell.

Advanced and Optimized the Performance of the Saphyr System for Adoption in Labs that will Develop Clinical Assays and LDTs

The Company affected several enhancements to the system and made significant advancements in the system’s capabilities including utility in identifying SVs in solid tumor oncology indications and DNA isolation:

•Bionano Genomics Releases Saphyr Updates for Industry-Leading Data Yields that Enable Analysis of Complex Cancer Samples at Unprecedented Depths;

•Bionano Genomics Solidifies its Entry into Solid Tumor Analysis with Launch of New Kit and Protocol that Significantly Simplify Tissue and Solid Tumor Analysis; and

•Bionano Genomics Achieves Key Milestone with Software Update for its Saphyr System that Increases Throughput to 96 Human Genomes Per Week and Adds Saphyr Assure for Monitoring System Health.

Recent Corporate Highlights

•In January 2021, Bionano raised approximately $350 million in gross proceeds from two underwritten public offerings of shares of its common stock.The underwriters exercised in full their options to purchase additional shares, which were priced at $3.05 per share and $6.00 per share, respectively;

•The Company successfully closed the acquisition ofdiagnostics services provider, Lineagen, to accelerate the clinical adoption of Saphyr for digital cytogenetics, expanded diagnostic testing menu with the launch of Lineagen’s EpiPanelDx PLUS Gene Panel Test that identifies genetic conditions related to epilepsy; and

•The Company enhanced the senior management team with the appointments of Christopher Stewart as Chief Financial Officer and Dr. Alka Chaubey as Chief Medical Officer.

Industry Background

Optical Genome Mapping

Genome analysis is the process of extracting and interpreting biological information from DNA. DNA is the code that is found in all living cells and determines the characteristics and health of all living organisms. Although each organism’s DNA order is unique, all DNA is composed of the same four nucleotides that come in pairs, which are referred to as base pairs. The human genome is composed of six billion of these base pairs (three billion of which are the maternal copy and three billion of which are the paternal copy of the genome), distributed across 23 pairs of chromosomes ranging in size from approximately 50 million to approximately 250 million base pairs. Genome variation is defined as at least one base pair differing in a comparison of sequence against a reference standard and can be as large as tens of millions of base pairs.

Genome structure refers to the way in which the various functional elements of the genome such as genes, reading frames, promoters and others are ordered, oriented and organized across the 23 pairs of chromosomes. Variation in genome structure, or structural variation, is one of the most biologically important aspects of the human genome. It is the underlying driver of many known human diseases, including numerous genetic disorders, cancer, metabolic disorders and other. Structural variations occur when large

groups of base pairs are deleted or change their position in the genome relative to a normal standard. Structural variations can be as small as a few hundred base pairs or as large as tens of millions of base pairs. Many researchers and clinicians now agree that despite major advances in the speed and cost-effectiveness of DNA sequencing, it fails to reliably detect structural variations.

We believe the currently available methods to detect structural variations for research and clinical applications, other than Saphyr, are antiquated and cumbersome and can only detect a small proportion of the structural variations across an entire genome. For example, chromosomal microarray analysis (CMA) is a widely accepted, front-line test used in the diagnostic evaluation of children with developmental disabilities. CMA can detect most unbalanced structural variations, but cannot detect balanced structural variations which are identifiable by the Saphyr system. Balanced structural variations are known causes of cancer (ex: BRC-ABL and other fusion genes). CMA and similar methods therefore have very limited utility in population research studies that seek to discover new structural variations to explain a wide array of disease pathology. Without additional tools, researchers and clinicians cannot comprehensively study the genome, which we believe will ultimately result in the failure of genomics to deliver on its full promise of new therapies and diagnostics.

The Saphyr system is a proprietary, sample-to-result platform based on optical mapping of the genome, which is the process of assigning the chromosomal location, order and orientation of all elements of the genome. We believe that Saphyr is the only product capable of detecting structural variations at high sensitivity and specificity with a workflow that is cost-effective and time-efficient. A complete and accurate physical map of the genome enables the user to much more readily and systematically detect the structural variations that sequencing and cytogenetics technologies miss.

Diagnostic Services

Through our Lineagen subsidiary, we offer tests that use chromosomal microarray analysis (CMA), which is recommended by the American College of Medical Genetics and Genomics (ACMGG), the American Academy of Pediatrics (AAP), and the American Academy of Neurology (AAN), among other renowned societies for evaluation of patients suspected of genetic disease. We are actively performing research to determine whether OGM with the Saphyr system can replace CMA as the front-line test for children with developmental disorders. As the scientific, peer-reviewed literature supports this claim, the coding entities such as CMS and the AMA would need to adopt the proper procedural codes to allow for insurance reimbursement of new testing methodologies before they become mainstream clinical diagnostic instruments. Importantly, OGM is expected to be able to detect full mutations consistent with fragile X syndrome, which is another front-line test for children, especially males, with autism spectrum disorder and intellectual disability. Studies are ongoing to determine the sensitivity and specificity for OGM as it relates to fragile X syndrome. We also employ Whole Exome Sequencing (WES), which aims to detect genome single nucleotide variations that are different from genome structural variations and are not detectable by OGM.

Market Opportunity

Optical Genome Mapping

According to Research and Markets, the worldwide market for genomics products and services is expected to reach approximately $54.4 billion by 2025, up from approximately $22.7 billion in 2020, representing a compound annual growth rate of 19%.

The two areas of the genomics market that are driving the uptake of our product are:

•Sequencing for Discovery Research. In discovery research across patient cohorts, sequencing is primarily used to find single nucleotide variations responsible for disease or therapeutic response. Sequencing alone, however, is significantly limited due to its inability to reveal structural variations. Our Saphyr system has been expanding this market segment by complementing sequencing to expand the scope of genome variation that can be analyzed in a study and achieve a more comprehensive view of the genome.

•Cytogenetics. To provide a clinical diagnosis, cytogenetic tests detect known variations that are linked to specific diseases or therapeutic responses. The technologies used for detecting structural variations are expensive and involve cumbersome workflows with relatively limited ability to scale to higher volumes or more complex testing panels. Sequencers tend not to be used for cytogenetics due to their inability to reliably detect structural variations. Cytogenetics laboratories are beginning to adopt Saphyr as a more effective and efficient approach to finding the structural variations relevant to cytogenetics. For this segment, Saphyr is used alone to provide comprehensive detection of structural variations and enable diagnostic calls without the need for any sequencing or cytogenetic technology.

We believe that the discovery research and cytogenetics segments together comprise an addressable opportunity for us to sell up to approximately 9,500 Saphyr systems, representing a current total instrument market opportunity of approximately $2.1 billion. Importantly, we expect this market opportunity to expand at the rate of adoption of new RUO high throughput sequencers which we estimate is over 15% per year. While we do not expect the number of cytogenetics labs to increase significantly, we expect our growth in this market to be driven by conversion of traditional cytogenetics methodologies to our Saphyr system.

In addition to the instrument sales opportunity, Saphyr instruments generate recurring revenue from chip consumables that are used on a per-sample basis. We believe each Saphyr instrument has the potential to create recurring revenue in a range of approximately $60,000 to approximately $150,000 per year, suggesting a potential annual recurring revenue opportunity of approximately $0.6 billion to approximately $1.4 billion.

Therefore, we believe that our currently addressable portion of the genome analysis market is estimated to be between $2.7 billion and $3.5 billion. Further, we believe that if Saphyr is able to successfully penetrate the currently addressable market, this will spur additional basic and translational research creating new areas where Saphyr and OGM data can be used to improve medical care. These may include pre-conception and pre-natal genetic screening, uses to advance gene editing techniques and precision medicine.

Diagnostic Services

According to estimates from the Centers for Disease Control and Prevention (CDC), approximately one in six, or about 17%, of children have one or more developmental disabilities, including ADHD, ASD, and other NDDs. Excluding the approximate 5% to 6% subset of developmental disabilities that Lineagen does not provide genetic diagnostic genetic testing for, the total addressable market (TAM) for Lineagen’s genetic diagnostic testing is estimated to be approximately 11% of children between the ages of 0 and 18 years old, or approximately 8,140,000 children.

We believe a portion of the TAM is not serviceable due to a number of factors, including suboptimal and/or inaccessible payors that include certain U.S. Medicaid plans, patients tested by in-house laboratories (i.e., at medical institutions) unavailable for testing by Lineagen, and patients previously tested/diagnosed. Given that CMA testing is recommended as first-line genetic diagnostic testing for all individuals with ASD and other forms of NDDs, we believe the serviceable addressable market (SAM) in the United States for Lineagen’s first-line FirstStepDx PLUS testing is approximately is 1,971,069 children.

Therefore, based on reimbursement rates for CMA testing established by the Centers for Medicaid & Medicare Services (CMS) of between $900 - $1,160, we believe that our SAM of the first-line genetic testing market for ASD and other NDDs is estimated to be between $1.7 billion and $2.2 billion.

Our Commercial Offerings

Optical Genome Mapping

We develop and market the Saphyr system, a complete sample-to-result solution for structural variation analysis by OGM that empowers comprehensive genome analysis and facilitates a deeper understanding of genetic variation and function. We believe it is the only solution capable of addressing the needs for structural variation analysis because it is:

•Highly sensitive. We believe Saphyr is the most sensitive detector of structural variations larger than 500 base pairs currently on the market.

•Highly specific. Saphyr has a very low false positive rate, typically less than 2%.

•Cost effective. We expect the end user cost of reagents and chip consumables per sample to continue to decline from less than $500 in 2020 to approximately $100 per sample in 2023.

•Fast. Saphyr generates over 4,400 giga base pairs of information per day, outpacing the fastest sequencers in the market. For highly sensitive structural variation detection, this performance allows Saphyr to process twelve human samples per day. We expect future generations of Saphyr to exhibit throughputs as high as 192 human samples per day by the end of 2023. Over this same period, we expect to continuously improve the automation of sample prep and bioinformatics to help drive efficiencies of workflow.

The Saphyr Instrument

The Saphyr instrument is a single-molecule imager that includes high performance optics, automated sample loading based on machine learning algorithms and computational hardware and control software. The instrument’s high-performance optics simultaneously image DNA linearized in hundreds of thousands of nanochannels. The instrument’s control interface is the user’s primary control center to design and monitor experiments as they occur in real time. The computational hardware is responsible for the secondary processing of the image data being produced on the Saphyr. The Saphyr instrument is currently capable of analyzing up to 5,000 human samples per year. A higher throughput version is currently in development that is expected to dramatically increase the throughput.

The Saphyr Chip

The Saphyr Chip® is the consumable that packages the nanochannel arrays for DNA linearization. In its current form, each Saphyr chip has three flow cells containing approximately 120,000 nanochannels that are roughly 30 nanometers wide and can hold a unique sample. To manufacture the arrays, we use photolithography in a semiconductor fabrication facility to print hundreds of thousands of tiny grooves on silicon wafers and then dice the wafers into individual chips. Our chips are inexpensive to manufacture and highly scalable. The fluidic environment in each channel allows individual molecules to move swiftly utilizing only the charge of DNA. Hundreds of thousands of molecules can move through hundreds of thousands of parallel nanochannels simultaneously, enabling extremely high-throughput processing on a single-molecule basis.

Saphyr Sample Prep and Labeling Kits

Our Bionano Prep KitsTM and DNA labeling kits provide the reagents and protocols needed to extract and label ultra-high molecular weight, or UHMW, DNA for use with the Saphyr system. These kits are optimized for performing our genome mapping applications on a variety of sample types.

Our workflow begins with the isolation of ultra-high molecular weight DNA. Our sample prep kits are optimized for isolating and purifying ultra-high molecular weight DNA in a process that is gentler than existing DNA extraction methods. The resulting purified DNA is millions of base pairs long and optimal for use with our systems. Each Bionano Prep Kit allows customers to perform five to 10 HMW DNA preps. Our kits and protocols enable the extraction of HMW DNA from a variety of sample types including human or animal tissue and tumors, plant tissue, cell lines, bone marrow aspirates and human blood.

Our labeling reagents are optimized for applications on our genome mapping systems. Starting with HMW DNA purified using the appropriate Bionano Prep Kit, fluorescent labels are attached to specific sequence motifs. The result is uniquely identifiable genome-specific label patterns that enable de novo map assembly, anchoring sequencing contigs and discovery of structural variations as small as 500 base pairs to up to chromosome arm lengths.

Our kit for DNA labeling, the Direct Label and Stain (DLS) kit, is a proprietary, nondestructive chemistry for sequence motif labeling of genomic DNA that improves every aspect of our genome mapping. DLS uses a single direct-labeling enzymatic reaction to attach a fluorophore to the DNA at a specific 6-base pair sequence motif, yielding approximately 16 labels per 100,000 base pairs in the human genome. After labeling, the molecules are linearized in the Saphyr chip on the Saphyr instrument and imaged. Through the isolation, labeling and linearization steps, the molecules maintain an average length of around 250,000 base pairs. The label patterns on each molecule allow them to be uniquely identified and aligned in a pair-wise comparison against all other molecules imaged from the same sample.

Data Solutions

Our data solutions offering includes a complete suite of hardware and software for end-to-end experiment management, algorithms for assembling genome maps and algorithms and databases for bioinformatics processing, all of which is driven through convenient web-based management and monitoring tools.

Bionano Access is our web-based hub for Saphyr operations. It provides all the software that our customers need for experiment management and our structural variation analysis in one place. With Bionano Access our customers can:

•set up runs and monitor real-time data quality metrics remotely to flag potential sample quality issues early;

•automatically start de novo assemblies and structural variation analysis when the desired amount of data has been collected;

•detect variants with an allele fraction of 1%

•visualize and manipulate maps and structural variants; and

•analyze trios and clinical samples by filtering through uncommon variants to identify inherited and de novo variants, and export in a file format that is used consistently throughout the industry.

We have a suite of proprietary algorithms and databases that fully enable our proprietary bioinformatic and structural variation analysis pipelines. Using pairwise alignment of the single molecule images, consensus genome maps are constructed, refined, extended and merged. Molecules are then clustered into two alleles, and a diploid assembly is created to allow for heterozygous structural variation detection. Genome maps typically span entire chromosome arms in single, contiguous maps. Comparative analysis of maps reveals structural variation. Our customers use our variant annotation workflow to specifically uncover rare and sample-specific mutations. For example, to help a customer determine genomic variant frequency in a tumor, Saphyr compares the cancer sample structural calls against over 600,000 structural variations from over 250 humans with no evidence of diseases. To identify somatic mutations, the workflow can run comparisons of the tumor specimen against a control sample to determine whether the cancer mutations are present in low abundance among the control’s genome. Using this high through-put pipeline approach, we can efficiently focus on dozens of clinically significant structural candidates for further analysis.

Our hardware solution includes the Saphyr Compute Server, which provides cluster-like performance in an affordable, compact solution and the Bionano Compute Server, which expands the analytical capacity of the suite of tools. With these solutions, our customers are capable of performing multiple simultaneous analyses and sustaining continuous throughput, which allows them to spend less time waiting for data, so they can focus on investigating results. We also offer a cloud-based solution for data analysis.

Our approach to measuring genome structure and structural variation is novel and highly differentiated. Most efforts in the genomic industry to address structural variation have been based on taking sequencing by synthesis as the starting point and attempting to overcome its deficiencies to make it applicable to structural variation analysis. In contrast, the Saphyr system directly observes extremely long genomic DNA without any amplification to construct a physical map that accurately assigns the chromosomal location, order, orientation and quantity of all the genome’s functional elements. Our solution is built upon four key elements:

•Extremely long molecules for analysis. Structural accuracy can only come from analysis of extremely long chromosomal fragments. The Saphyr system is capable of analyzing single molecules that are on average approximately 250,000 base pairs long. Such fragments will contain enough unique sequence information that they are distinguishable from other fragments. These lengths are over 1,000 times longer than the average read length with Illumina systems and approximately 10 times longer than the average read lengths with Pacific Biosciences and Oxford Nanopore systems. Building a picture of the genome with massive building blocks overcomes the inherent challenge of genome complexity and is the key to Saphyr’s unprecedented sensitivity and specificity.

•Proprietary nanotechnology for massively parallel linearization and analysis of long molecules with single molecule imaging. Analyzing these extremely long chromosomal fragments required invention. Molecules of this size are more like balls of yarn in a test tube and must be unraveled for meaningful analysis. We invented, patented, developed and commercialized nanochannel arrays to capture them from solution and unwind and linearize them for structural variation analysis. Each molecule is imaged separately, making it possible to deconvolute complex mixtures including haplotypes and heterogeneous tumors, as shown in the graphic below.

•DNA labeling chemistry specifically for physical mapping. The detailed analysis of sequence we use is also highly unique and novel. Instead of identifying the sequence of every base pair in these long fragments, we label and detect specific sequence patterns or motifs that occur universally across every genome with an average frequency of approximately one site for every few thousand base pairs. The key to our method entails introducing fluorescent tags at the sequence-specific site using highly specific and robust enzymatic chemistry along the extremely long fragments. These fragments, stretched out in nanochannels, are then directly imaged allowing us to measure the distance between labels with high accuracy. The pattern of labels detected on all these fragments can then be related to the pattern of sequence motif sites in a reference genome for comparison. Changes in the pattern indicate structural variation.

•Bioinformatic tools for structural variation analysis. Finally, our approach includes a novel bioinformatics platform that we developed from the ground-up to take advantage of the unique benefits of our solution. It comprises proprietary algorithms for the construction of a structurally accurate physical map of the genome without using a reference genome in assignment of structure. Physical maps of a test subject are then compared in cross-mapping analysis that allows our system to detect genome wide structural variation, including the most complex balanced events. Our system can do so by comparing one physical map against a common reference, or against the maps of a mother and father in the case of an afflicted child with an undiagnosed disease for example, or against maps of normal blood when studying solid tumor cancers. This comparative approach uses our proprietary database of healthy individuals to filter out the non-disease causing structural variants found in the general healthy population.

Diagnostic Services

•Multiple LDTs focused on pediatric patients with ASD and other forms of NDDs. All aspects of the testing services we offer were designed with a specific patient cohort in mind; namely, children with neurodevelopmental disabilities (NDDs). Based on the extreme hypersensitivities of children with NDDs, in many cases coupled with intellectual disability (ID), blood draws are incredibly challenging. We have developed and optimized all genetic testing solutions around DNA collected from a cheek swab, which also allows for operational simplicity and efficiency. In addition to the sample collection, we have sought technical and interpretive expertise specific to this disease group with customized genetic testing technology platforms and in-licensing of proprietary gene databases focused on NDDs.

•Personalized, easy-to-understand results. Because the number of children who qualify for clinical diagnostic testing for NDDs far exceed the number of genetic specialists, medical societies such as the American Academy of Pediatrics and the American Academy of Neurology recommend CMA testing be performed by other pediatric specialists. Without specific training in genetics, most test results are too complex to be meaningfully translated into actions that improve patient care. Our multi-disciplinary team of genetic counselors, laboratory directors, and variant analysts take care to write reports according to industry standard while also bringing the reading level down for non-genetic specialists and parents alike.

•Genetic counseling and clinical education. While medical societies support the use of diagnostic genetic testing, they also recommend (and some payors even require) genetic counseling prior to testing. Genetic counseling is a communication process for families provided by a licensed, nationally certified genetic counselor with a 2-year master's degree. The purpose is to ensure families understand the benefits and limitations of testing, as well as provide informed consent, to undergo testing that may reveal medical diagnoses or other challenging situations for the patient and possibly his/her relatives.

•End-to-end customer support with reimbursement. Although diagnostic genetic testing is a recommendation by several medical societies, it is not universally or equitably processed and reimbursed by insurance organizations. This has become a barrier that prevents physicians and medical clinics from employing standard of care genetic testing for children. Accordingly, we were the first in our class to develop an integrated process to streamline insurance submissions for diagnostic testing for NDDs.

Our Focus Areas

Optical Genome Mapping

Our Saphyr system serves many segments of the genomics market seeking to find and understand structural variation. We have identified focus areas where we concentrate our resources to ensure robust adoption of our system and frequent utilization of consumables. We have selected these segments because of their urgent need to detect structural variations and the significant economic opportunity they represent. Our current focus areas are human genetic diseases, including rare diseases and oncology. Our Saphyr system, which is for RUO, is being used for basic and translational research and also beginning to be adopted by cytogenetics labs that seek to use it in commercial clinical tests of its patients as an LDT.

Genetic Diseases

In genetic disease, existing tools have reached a plateau where almost half of patients with genetic disease who are tested in clinical laboratories fail to receive a definitive molecular diagnosis. In order to increase diagnostic yield, an increase in the understanding of the structure and structural variation of the genome is essential. The standard of care consists usually of a combination of both phenotype-dependent targeted tests, and whole-genome analysis approaches. Targeted tests can consist of Multiple Ligation Probe Amplification, or MLPA, to test for the presence or absence of specific exons, PCR amplification and Sanger sequencing of candidate genes and multiple FISH probes to pick up specific structural variants common to the expected disease. For whole genome approaches, first tier diagnostic tools include CMA and karyotyping techniques like metaphase chromosome spreads. More recently, whole exome sequencing or whole genome sequencing are increasingly being introduced.

A future workflow in which Saphyr is used as an alternative to karyotyping, the large majority of FISH, microarrays and MLPA tests would allow genetics clinics to rely on Saphyr to detect all structural variants larger than 500 base pairs and on next-generation sequencing to detect all single nucleotide variants and other variants smaller than 500 base pairs. Since up to numerous FISH and MLPA tests are often performed, Saphyr’s single whole genome analysis provides a cost-effective solution that saves significant amounts of time, labor and analysis in lieu of such tests.

Oncology

In cancer, each patient has a unique disease with a complex pattern of genome changes. Traditional and recently-developed treatments do not attack the individual changes in each patient’s tumor. Recent personalized medicine programs aim to provide clinicians with individual treatments specifically targeting the mutations found in each patient’s cancer. For personalized cancer medicine to be successful, all variants in the cancer genome need to be detected, which is not feasible with cytogenetic or whole genome sequencing approaches. The studies presented below demonstrate that Saphyr is critical for a complete understanding of a cancer genome, which is essential to enable truly targeted treatments.

The Saphyr System’s Industry-Leading Sensitivity and Specificity

Saphyr offers unmatched sensitivity for the detection of large structural variations greater than 500 base pairs. Saphyr’s specific sensitivity percentages from recent studies are shown below

•99% sensitivity for homozygous insertions/deletions larger than 500 base pairs;

•95% sensitivity for heterozygous insertions/deletions larger than 500 base pairs;

•95% sensitivity for balanced and unbalanced translocations larger than 50,000 base pairs;

•99% sensitivity for inversions larger than 30,000 base pairs;

•97% sensitivity for duplications larger than 30,000 base pairs; and

•97% sensitivity for copy number variants larger than 500,000 base pairs.

A study by the Human Genome Structural Variation Consortium published in the journal Science allowed for a comparison between OGM with Saphyr and Pacific Biosciences’ (PacBio) long-read sequencing technology’s ability to detect structural variation. The consortium used a custom sequencing method based on high-coverage HiFi reads generated with PacBio’s Sequel II system and the single-strand preparation and sequencing method StrandSeq to establish a comprehensive catalog of human SVs with base-pair and haplotype resolution. The PacBio-based method detected only 72% of the large SVs that OGM detected across 32 different human genomes. OGM uniquely made 5,590 large SV calls missed by PacBio, corresponding to 1,175 unique SV loci. Many of these large SVs consisted of more complex rearrangements or overlap with large repetitive areas called segmental duplications which are associated with developmental delay and adult neuropsychiatric disease, highlighting the importance of OGM in genome structure analysis. The publication did classify some large SVs as being uniquely detected by the sequencing-based method based on PacBio HiFi. Upon further analysis, however, most of these SVs were in fact identified by OGM but classified differently. Overall, less than 2% of the large SVs detected by PacBio were missed by OGM

In another study, our system detected seven times more structural variations larger than 5,000 base pairs compared to next-generation sequencing. Dr. Pui-Yan Kwok at the University of California, San Francisco, demonstrated the robustness of our system for genome-wide discovery of structural variations in a trio from the 1000 Genomes Project. Using our system, hundreds of insertions, deletions, and inversions greater than 5,000 base pairs were uncovered amounting to 7.3 times more than the large structural variation events detected by next-generation sequencing. Importantly, many of the structural variations that were found were in regions believed to contain functional elements leading to disruption of gene function or regulation.

Diagnostic Services

We offer a suite of multiple Laboratory Developed Tests (LDTs) specialized for providers focused on caring for pediatric patients with NDDs. Our LDT suite includes the following tests, several which are supported by multiple reimbursement codes, and all provide personalized, easy-to-understand result reports supported by a robust team of clinical genetic specialists, including genetic counselors, and cytogeneticists:

•FirstStepDx (FSDx) PLUS. Our FSDx PLUS is a Chromosomal Microarray (CMA) test designed to identify unbalanced structural variations in the genome (deletion and duplications) that are known to be underlying genetic causes of ASD, developmental delay, and intellectual disability. CMA is recommended as a first-tier genetic test for individuals with ASD and other forms of NDDs by a number of US-based medical organizations, including the American College of Medical Genetics and Genomics (ACMGG), American Academy of Neurology (AAN), and the American Academy of Pediatrics (AAP).

•Fragile X Syndrome Testing. Fragile X syndrome is a genetic condition caused by mutations in the FMR1 (fragile X mental retardation 1) gene. Fragile X is the most common heritable single gene cause of ASD. Fragile X also causes a range of developmental problems including other developmental disabilities and cognitive impairment as such, Fragile is also recommended as a first-tier genetic test for individuals with ASD and other forms of NDDs.Additionally, Fragile X can be inherited; a woman with Fragile X syndrome has a 50% chance of passing on the mutation to her children.Our Fragile X testing provides screening and diagnosis of triplet repeat expansions that cause this and related (FXTAS and FXPOI) conditions.

•Pharmacogenetics (PGx) Testing. Our PGx test analyzes genetic variations within genes known to play a role in the metabolism of medications that are commonly prescribed to individuals with ASD and other NDDs, including anti-epilepsy,anti-depression and anti-anxiety, and attention-deficit/hyperactivity disorder (ADHD) drugs. Our PGx test helps identify the risk of side effects from certain medications and provides healthcare professionals additional information on choice and dosage of most efficacious medications.

•NextStepDx (NSDx) PLUS. Our NSDx PLUS is a Whole Exome Sequencing (WES) test which aims to detect single nucleotide genome changes that are not detectable by the FSDx CMA test. The method of testing relies on technologies that allow rapid sequencing of large amounts of DNA in parallel, which are known as next-generation sequencing. As many known mutations that cause ASD and other forms of NDDs occur in gene-coding regions called exons (all exons in a genome make up a the “exome”), WES is an efficient method to identify additional disease-causing mutations.

•EpiPanelDx PLUS. EpiPanelDx PLUS is a genetic testing panel designed for patients who have experienced seizures, infantile spasms, encephalopathy, or febrile seizures. Much like CMA, WES, and Fragile X Syndrome testing, identification of the specific genetic etiology through panel testing can help confirm a clinical diagnosis or genetic syndrome, help

determine medical management, provide information about clinical course of disease, and assist family testing for at-risk relatives

•Mitochondrial DNA Testing. Mitochondrial DNA testing can help identify genetic variants associated with mitochondrial disorders, which comprise a large group of complex conditions with wide clinical variability. Mitochondrial disorders are caused by dysfunction of the mitochondrial respiratory chain, which is the process by which energy is made for the cell. Mitochondrial DNA, while largely controlled by genes in the nuclear DNA housed across the 23 chromosomes, is a distinct form of DNA that one inherits only from the mother. Because it is distinct, it is not included in most genetic testing assays unless specifically ordered.

•Whole Genome Sequence (WGS) Testing. Our WGS diagnostic test (WGDx) can detect the majority of genome mutations such as deletions, duplications, and single base changes, both within and outside of gene coding regions.In addition to diagnostic information for ASD and NDDs, understanding one’s genome can give insights that lead to better physician or individual lifestyle, dietary, and disease prevention decisions.

Our Strategy

Optical Genome Mapping

Our goal is to enable new research in genomics to allow greater insight into their role in human health in ways that have not been possible with any other current research and diagnostic technologies.

Our strategy to achieve this includes:

•Drive adoption of Saphyr in discovery research and cytogenetics markets. Saphyr has the potential to significantly expand the life science research market and genomics-based diagnostics market because of its unrivaled sensitivity, by enabling researchers to perform studies on structural variations that they were previously unable to perform. We believe Saphyr has the capability to enable the development of a new category of diagnostic tests and tools.

•Through our Lineagen subsidiary, develop novel LDT’s and create reimbursement paths on the Saphyr System. With our recent acquisition of Lineagen, we are uniquely positioned to develop LDT’s based on OGM with Saphyr that can improve upon the existing standards of care for diagnostic testing for neurodevelopmental disorders. We plan to work with payers to secure reimbursement alternatives for Saphyr based testing, which we would share with our customers to drive demand for the Saphyr system.

•Support the publication of findings with Saphyr by our customers beyond the more than 280 papers published to date. The annual number of publications featuring data generated by Saphyr and its predecessor system has steadily increased since 2010 when the first publication appeared. Recently, the overall number of these publications has grown significantly. For example, of the more than 280 papers published to date, approximately 80 were published in 2019 alone and 213 since 2017, the year Saphyr was launched. We will continue to support and foster our customer base to help grow the number of publications featuring our systems’ data. We believe that these publications are impactful as our customers’ studies cover structural variations in areas of high unmet medical need, such as rare and undiagnosed pediatric diseases, muscular diseases, developmental delays and disorders, prostate cancer and leukemia.

•Expand gross margins through economies of scale and growing sales of consumables. Our overall gross margin has historically been driven by our instrument gross margin as the sales of our instruments have constituted the significant majority of our total revenues to date. However, our instrument gross margin is significantly lower than our consumables gross margin. We expect our overall gross margin to expand in 2020 and beyond as:

◦We further negotiate with silicon fabrication manufacturers for better contract pricing of our consumables. As our manufacturing lot volumes increase, we expect to have lower costs of goods sold. This is driven by the pass along of some of the economies of scale of contract manufacturers that mainly operate in the ultra-high-volume silicon computer chip industry.

◦Consumables sales continue to represent the fastest growing component of overall revenues. As consumables growth continues to outpace instrument growth, we expect the proportion of our product mix which is higher gross margin to increase, thereby expanding our overall gross margin.

•Continue to innovate our products and technologies. We designed Saphyr to accommodate performance enhancements without the need for replacement of the entire instrument. For example, hardware upgrades and new consumables are made available to purchase by customers. We intend for these performance enhancements to be delivered on a regular

basis. In addition, we periodically make available software upgrades to customers through download at no charge. We expect to continue developing and refining our technologies to improve the ease of use of our Saphyr system and enable our existing installed systems to meaningfully increase sample throughput and sensitivity and specificity of structural variation detection.

•Partner with industry-leading companies and laboratories to accelerate adoption of OGM in clinical markets. Establish additional collaborations with customers to help drive validating studies. Expand partnership efforts with clinical diagnostic companies to commercialize LDTs in the U.S. as well as LDTs and approved tests outside the U.S.

Sales and Marketing

Optical Genome Mapping

As of December 31, 2020, our commercial team consisted of 72 individuals, including 29 salespeople, three marketing personnel, and 40 sales support personnel, including customer solutions personnel, field service engineers and field application specialists. This commercial staff is primarily located in North America, Europe, and China. Most of our sales support team is located at our headquarters in San Diego and some work remotely throughout the U.S., Europe, and China.

We sell our products through a direct sales force in based in North America, Europe. Our sales strategy involves the use of a combination of sales managers and sales representatives. Our direct sales force includes 18 salespeople located in the U.S. and 7 located in Europe, and 4 in China. We expect to increase our sales force as we expand our business.

We sell our products through a network of distributors in the Asia-Pacific region and select other markets outside of North America and Europe. Specifically, we distribute our instruments and reagents via third-party distributors in markets such as China, Japan, South Korea, Singapore, Australia, India and South Africa. Three of our distributors are in China, one in Australia, one in Italy, one in Sweden, one in Japan and one in South Korea.

The role of our sales managers and sales representatives is to educate customers on the advantages of Saphyr and the applications that our system makes possible. The role of our field application specialists is to provide on-site training and scientific technical support to prospective and existing customers. Our field application specialists are technical experts with advanced degrees, including seven with Ph.Ds., and generally have extensive experience in academic research and core sequencing lab experience.

In addition, we maintain an applications lab team in San Diego, California composed of scientific experts who can transfer knowledge from the research and development team to the field application specialists. The applications lab team also runs foundational scientific collaborations and proof of principle studies, which help demonstrate the value of our product offering to prospective customers. This team also provides commercial services by running samples on Saphyr for researchers who do not have a Saphyr system of their own.

We intend to significantly expand our sales, support, and marketing efforts in the future by expanding our direct footprint in North America and Europe as well as developing a more comprehensive support network in China where significant market opportunities exist. Additionally, we believe that there is significant opportunity in other European, South American, Asia-Pacific and Middle Eastern regions. We plan to expand into these regions via initial penetration with distributors.

Our systems are relatively new to the life science marketplace and require a capital investment by our customers. The sales process typically involves numerous interactions and demonstrations with multiple people within an organization. Some potential customers conduct in-depth evaluations of the system including having us run experiments on in-house Saphyr systems. In addition, in most countries, sales to academic or governmental institutions require participation in a tender process involving preparation of extensive documentation and a lengthy review process. Because of these factors and the budget cycles of our customers, our sales cycle, the time from initial contact with a customer to our receipt of a purchase order, can often be nine to 12 months.

Diagnostic Services

We primarily sell our suite of LDTs to pediatric physicians through a physician-directed “in-person” sales model. As of December 31, 2020, our commercial team consisted of three salespeople, and one sales support personnel. This commercial staff is located in North America, and the sales personnel primarily work remotely in U.S. states where we have obtained insurance reimbursement.

Our sales and marketing efforts are targeted primarily on specialty pediatricians, including pediatric neurologists, medical geneticists, and developmental and behavioral pediatricians. We also target general pediatricians with large numbers of patients.

Our managed care efforts are directed to establishing contracts and/or credentialing with private and governmental insurance carriers that provide coverage for patients with ASD and other forms of NDDs. As of December 31, 2020, we had contracts or credentials with providers of insurance that cover approximately 90 million lives within the U.S.

Manufacturing and Supply

Optical Genome Mapping

Our manufacturing strategy is to outsource instrument and chip manufacturing and internally develop and assemble reagent kits in our own facility.

Instruments

Our Saphyr instrument is manufactured by a third-party medical device manufacturer. Nearly complete Saphyr instruments are shipped by the manufacturer to us for final assembly and quality control testing. Upon completion, we ship directly to our customers’ locations globally, or distributors’ locations in the case of certain systems sold in the Asia-Pacific region. Installation of, and training on, our products is provided by our employees in the markets where we conduct direct sales, and by distributors in those markets where we operate with distributors.

We believe this manufacturing strategy is efficient and conserves capital. However, in the event it becomes necessary to utilize a different contract manufacturer for Saphyr, we would experience additional costs, delays and difficulties in doing so, and our business could be harmed. This manufacturer actively manages obsolescence of all components in our system. This is done through their supply management process where we get notified of any parts that will become obsolete with enough lead time to identify alternatives.

Consumables

All our chip consumables are produced by a third-party manufacturer at its facility; however, we have established procedures for a replacement manufacturer if required. We complete final assembly and quality control assessments of our chips at our headquarters in San Diego.

Our reagents are sourced from a limited number of suppliers, including certain single source suppliers. Reagents include all components required to run a sample on Saphyr, such as capture and detector reagents, enzyme reagents and enzyme substrate. Although we believe that alternatives would be available, it would take time to identify and validate replacement reagents for our assay kits, which could negatively affect our ability to supply assay kits on a timely basis. Reagents are supplied through a single source supplier. This supplier requires a sufficient notification period to allow for supply continuity and the identification and technology transfer to a new supplier in the event either party wishes to terminate the relationship.

We actively manage component obsolescence by subscribing to our vendors’ end-of-life notifications. If a vendor is unable to provide sufficient notification, we keep safety stock of the component to minimize disruption to operations.

Diagnostic Services

We take advantage of outsourcing certain components of the genetic testing process. Instrumentation, chips, and reagents are developed by Illumina, a widely accepted manufacturer of CMA testing platforms. In fact, across all academic and commercial laboratories performing CMA, Illumina is one of the top three CMA manufacturers (in addition to Affymetrix/Thermo Fisher and Agilent). We have also historically contracted with third parties for kits, collection devices, and fulfillment. Finally, we maintain contracts with a network of laboratories to perform the wet work on our various LDT tests in order to conserve capital and maintain flexibility of adjusting contract lab based on the best-in-class/most updated technology and customer service. As of December 31, 2020, we have established contracts with two primary laboratories to perform wet lab services. All third-party laboratories have met stringent criteria, including passing a site visit from our management, and being CAP and CLIA-certified. We obtain raw data from laboratories for expert, optimized, and proprietary interpretation and reporting as previously described. In fact, we have our own CLIA license, for which regular site visits are held to ensure maintenance of compliance, under which this expert interpretation and reporting is carried out by the multidisciplinary team focused on clinical diagnostics for individuals with NDDs. Furthermore, we maintain all patient and provider touchpoints in all cases.

Key Agreements

Optical Genome Mapping

License Agreement with Princeton University

In January 2004, we entered into a license agreement, or the License Agreement, with Princeton University, or Princeton. Pursuant to the License Agreement, we received a worldwide, exclusive right and license to, among other things, manufacture and market products or services utilizing patents and inventions related to our sample preparation, DNA imaging and genomic data analysis platform and other key technology.

We are obligated to pay Princeton an annual license maintenance fee in the mid-four digits, which can be reduced by royalties paid to Princeton during the preceding 12 month period. We are also obligated to make royalty payments to Princeton equal to (i) a percentage in the mid-single digits of our and any of our sub-licensees’ net sales of products covered by the License Agreement and

(ii) a percentage in the low-single digits of our and any of our sub-licensees’ revenue from services covered by the License Agreement. Our royalty obligations continue on a licensed product-by-licensed product and licensed service-by-licensed service basis, in every country of the world, until the later of the last sale of a licensed product or service or the expiration of all Princeton patent rights.

The term of the License Agreement will continue until all of our royalty payment obligations have expired, unless terminated earlier. Princeton may terminate the License Agreement upon written notice in the event of our material breach of the License Agreement if such breach remains uncured for 60 days. We may terminate the License Agreement without cause upon 60 days’ advance written notice to Princeton.

Agreement for the Manufacture of Our Instruments

We have engaged a single third-party manufacturer to produce and test our instruments on an as-ordered basis. The manufacturer of our instruments has no obligation to manufacture our instruments without a purchase order. In addition, this manufacturer has no obligation to maintain inventory in excess of any open purchase orders or materials in excess of the amount it reasonably determines will be consumed within 90 days. We are obligated to purchase any material deemed in excess pursuant to the agreement. The price we pay is determined according to a mutually agreed-upon pricing formula. We may terminate a purchase order by giving the manufacturer at least 30 days’ written notice.

Agreement for the Manufacture of Our Chip Consumables

We have engaged a single third-party manufacturer to manufacture our chip consumables used in our Saphyr system and provide engineering services to us. This third-party has no obligation to manufacture our chip consumables without a purchase order. The prices and fees we pay are established in our agreement with this manufacturer or determined by the manufacturer pursuant if supported by appropriate information. Our agreement with this manufacturer automatically renews for successive one year terms unless a party notifies the other party in writing at least 30 days prior to the expiration of the then-current term. We may terminate an order of the agreement at any time upon 30 days’ written notice.

Intellectual Property

Genome Analysis

Our core technology for nucleic acid research is related to methods and devices for non-sequencing based analysis of macromolecules such as nucleic acids. Using this technology, long (high-molecular weight) nucleic acids can be suitably labeled and elongated in order to ascertain structural information such as scaffold organization, copy number, and genomic repeats that is not readily obtained with current sequencing-based approaches. We have secured and continue to pursue intellectual property rights globally, including rights related to analysis of nucleic acid molecules, as well as innovations in the molecular biology and bioinformatics spaces.

We have developed a global patent portfolio that includes 67 issued patents across 14 patent families and an exclusively licensed portfolio of patents and applications from Princeton University, which includes 29 patents across two families. The global patent portfolio owned and licensed by us has effective filing dates ranging from 2001 to 2018. The owned and licensed patent families contain issued patents and pending applications that relate to devices, systems, and methods for macromolecular analysis, and reflect our active and ongoing research programs. The commercial focuses of these patent families are discussed below.

Commercial Focus Number of Issued Patents and Pending Patent Applications

Nanochannel devices and systems 79

Methods of macromolecule analysis using nanochannel arrays 71

Methods of genetic detection and copy number analysis 31

Method of genomic sequence and epigenomic analysis. 53

Method of optimizing nanochannel analysis 6

Next-generation products 12

In addition to pursuing patents, we have taken steps to protect our intellectual property and proprietary technology by entering into confidentiality agreements and intellectual property assignment agreements with our employees, consultants, corporate partners and, as applicable, advisors.

Diagnostic Services

Lineagen, Inc. has registered trademarks to certain of its genetic testing services and a patent portfolio of patent applications that relate to diagnostic tests and methods to diagnose or predict disease by detecting one or more of ASD-associated CNVs, methods for assessing the presence or absence of a chromosomal deletion or duplication syndrome and methods of selecting patients for treatment

based on such assessments, probe compositions, and related PCR-based methods of diagnosis by detecting ASD-associated SNPs and / or CNVs, methods for treating Wolf-Hirschhorn syndrome (4P- syndrome) seizures with cannabidiol or with vitamin B6 combination in patients with deletion of particular seizure susceptibility region, and has exclusively licensed a method of identifying a genome sequence mutation that is linked to causality of a disease using computer program product from The Hospital for Sick Children (SickKids) in in Toronto, Canada.

Government Regulation

Our business is subject to and impacted by extensive and frequently changing laws and regulations in the United States (at both the federal and state levels) and internationally. These include laws and regulations particular to our business and laws and regulations relating to conducting business generally (e.g., export controls laws, U.S. Foreign Corrupt Practices Act and similar laws of other jurisdictions). We also are subject to inspections and audits by governmental agencies. Set forth below are highlights of certain key regulatory schemes applicable to our business. Below are discussions concerning government regulation of our OGM products and services and, separately, our Diagnostic Services.

Optical Genome Mapping

Our products are currently intended for research use only, or RUO, applications, although our customers may use our products to develop their own products that are subject to regulation by the FDA. Although most products intended for RUO are not currently subject to clearance or approval by the FDA, RUO products fall under the FDA’s jurisdiction if they are used for clinical rather than research purposes. Consequently, our products are labeled “For Research Use Only.”

The FDA’s 2013 Guidance for Industry and Food and Drug Administration Staff on “Distribution of In Vitro Diagnostic Products Labeled for Research Use Only or Investigational Use Only,” or, the RUO/IUO Guidance, provides the FDA’s thinking on when IVD products are properly labeled for RUO or for IUO. The RUO/IUO Guidance explains that the FDA will review the totality of the circumstances when evaluating whether equipment and testing components are properly labeled as RUO. Merely including a labeling statement that a product is intended for research use only will not necessarily exempt the device from the FDA’s 510(k) clearance, premarket approval, or other requirements, if the circumstances surrounding the distribution of the product indicate that the manufacturer intends its product to be used for clinical diagnostic use. These circumstances may include written or verbal marketing claims or links to articles regarding a product’s performance in clinical applications, a manufacturer’s provision of technical support for clinical validation or clinical applications, or solicitation of business from clinical laboratories, all of which could be considered evidence of intended uses that conflict with RUO labeling.

When marketed for clinical diagnostic use, our products will be regulated by the FDA as medical devices. The FDA defines a medical device in part as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article which is intended for the diagnosis of disease or other conditions or in the cure, mitigation, treatment, or prevention of disease in man. FDA regulates the development, testing, manufacturing, marketing, post-market surveillance, distribution, advertising and labeling of medical devices. The FDA also requires the device to be registered by the medical device manufacturer and listed as a marketed product.

The FDA classifies medical devices into one of three classes on the basis of the intended use of the device, the risk associated with the use of the device for that indication, as determined by the FDA, and on the controls deemed by the FDA to be necessary to reasonably ensure their safety and effectiveness. Class I devices, which have the lowest level of risk associated with them, are subject to general controls. Class II devices are subject to general controls and special controls, including performance standards. Class III devices, which have the highest level of risk associated with them, are subject to general controls and premarket approval. Most Class I devices and some Class II devices are exempt from a requirement that the manufacturer submit a premarket notification, or 510(k), and receive clearance from the FDA which is otherwise a premarketing requirement for a Class II device. Class III devices may not be commercialized until a premarket approval application, or PMA, is submitted to and approved by the FDA.

510(k) Clearance Pathway

To obtain 510(k) clearance, a sponsor must submit to the FDA a premarket notification demonstrating that the device is substantially equivalent, or SE, to a device legally marketed in the U.S. for which a PMA was not required. The FDA is supposed to make a SE determination within 90 days of FDA’s receipt of the 510(k), but it often takes longer if the FDA requests additional information. Most 510(k)s do not require supporting data from clinical trials, but the FDA may request such data.

Premarket Approval Pathway

A PMA must be submitted if a new device cannot be cleared through the 510(k) process. The PMA process is generally more complex, costly and time consuming than the 510(k) process. A PMA must be supported by extensive data including, but not limited to, technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. After a PMA is sufficiently complete, the FDA will accept the application for filing and begin an in-depth review of the submitted information. By statute, the FDA has 180 days to review the accepted application,

although, review of the application generally can take between one and three years. During this review period, the FDA may request additional information or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. In addition, the FDA will conduct a preapproval inspection of the manufacturing facility to ensure compliance with its quality system regulations, or QSRs. New premarket approval applications or premarket approval application supplements are also required for product modifications that affect the safety and efficacy of the device.

Clinical Trials

Clinical trials are usually required to support a PMA and are sometimes required for a 510(k). In the U.S., if the device is determined to present a “significant risk,” the manufacturer may not begin a clinical trial until it submits an investigational device exemption application, or IDE, and obtains approval of the IDE from the FDA. These clinical trials are also subject to the review, approval and oversight of an institutional review board, or IRB, at each clinical trial site. The clinical trials must be conducted in accordance with the FDA’s IDE regulations and good clinical practices. A clinical trial may be suspended by the FDA, the sponsor or an IRB at its institution at any time for various reasons, including a belief that the risks to the study participants outweigh the benefits of participation in the trial. Even if a clinical trial is completed, the results may not demonstrate the safety and efficacy of a device to the satisfaction of the FDA, or may be equivocal or otherwise not be sufficient to obtain approval of a device.

After a medical device is placed on the market, numerous regulatory requirements apply. These include among other things:

•compliance with QSRs, which require manufacturers to follow stringent design, testing, control, documentation, record maintenance, including maintenance of complaint and related investigation files, and other quality assurance controls during the manufacturing process;

•reporting of device malfunctions, serious injuries or deaths;

•registration of the establishments where the devices are produced;

•labeling regulations, which prohibit the promotion of products for uncleared or unapproved uses; and

•medical device reporting obligations, which require that manufacturers investigate and report to the FDA adverse events, including deaths, or serious injuries that may have been or were caused by a medical device and malfunctions in the device that would likely cause or contribute to a death or serious injury if it were to recur.

Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include sanctions, including but not limited to, warning letters; fines, injunctions, and civil penalties; recall or seizure of the device; operating restrictions, partial suspension or total shutdown of production; refusal to grant 510(k) clearance or PMA approvals of new devices; withdrawal of 510(k) clearance or PMA approvals; and civil or criminal prosecution. To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and periodic, pre-scheduled and unannounced inspections by the FDA.

Laboratories that purchase certain of our products and perform clinical diagnostic testing are also subject to extensive regulation under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, requiring clinical laboratories to meet specified standards in areas such as personnel qualifications, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections. Adverse interpretations of current CLIA regulations or future changes in CLIA regulations could have an adverse effect on sales of any affected products. Moreover, if we decide to operate our own clinical testing laboratory, we will be required to comply with CLIA. If, in the future, we operate our own clinical laboratory to perform clinical diagnostic testing, we would become subject to the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its corresponding regulations, as well as additional federal and state laws that impose a variety of fraud and abuse prohibitions on healthcare providers, including clinical laboratories.

Laboratory Developed Tests (LDTs)

Federal agencies involved in the regulation of LDTs include CMS and the Food and Drug Administration (FDA). CMS regulates the quality of clinical laboratories and the clinical testing process pursuant to the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and the FDA regulates the safety and effectiveness of the diagnostic test pursuant to authorities in the Federal, Food, Drug, and Cosmetic Act. Although the FDA has statutory authority to regulate medical devices, the FDA has historically exercised its enforcement discretion and not enforced applicable provisions of the

Federal Food, Drug, and Cosmetic Act and FDA regulations with respect to LDTs, which are a subset of in vitro diagnostic tests that are intended for clinical use and designed, manufactured and used entirely within a single laboratory. The FDA does not consider devices to be LDTs if they are designed or manufactured completely, or partly, outside of the laboratory that offers and uses them. We sell our Saphyr system on an RUO basis to CLIA certified cytogenetic laboratories, which may use the system to develop LDTs.

At various times since 2006, the FDA has issued documents outlining its intent to require varying levels of FDA oversight of many types of LDTs. In October 2014, the FDA issued draft guidance that sets forth a proposed risk-based regulatory framework that

would apply such oversight to LDTs. The FDA has indicated that it does not intend to implement its proposed framework until the draft guidance documents are finalized. It is unclear at this time if or when the FDA will finalize its plans to end enforcement discretion for LDTs, and even then, whether the new regulatory requirements are expected to be phased-in over time. However, the FDA may decide to regulate certain LDTs on a case-by-case basis at any time. A significant change in the way that the FDA regulates any LDTs that we, our collaborators, or our customers develop using our technology could affect our business. If the FDA requires laboratories to undergo premarket review and comply with other applicable FDA requirements in the future, the cost and time required to commercialize an LDT will increase substantially and may reduce the financial incentive for laboratories to develop LDTs, which could reduce demand for our instruments and our other products. In addition, if the FDA were to change the way that it regulates LDTs to require that we undergo pre-market review or comply with other applicable FDA requirements before we can sell our instruments or our other products to clinical cytogenetics laboratories, our ability to sell our instruments and other products to this addressable market would be delayed, thereby impeding our ability to penetrate this market and generate revenue from sales of our instruments and our other products.

Europe/Rest of World Government Regulation

Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in non-U.S. countries prior to the commencement of clinical trials or marketing of our product for clinical diagnostic use in those countries. The regulations in other jurisdictions vary from those in the U.S. and may be easier or more difficult to satisfy and are subject to change. For example, the European Union recently published new regulations that will result in greater regulation of medical devices and IVDs. The IVD Regulation is significantly different from the IVD Directive that it replaces in that it will ensure that the new requirements apply uniformly and on the same schedule across the member states, including a risk-based classification system and increasing the requirements for conformity assessment. The conformity assessment process results in the receipt of a CE designation which has been sufficient to begin marketing many types of IVDs. That process will become more difficult and costly to complete.

Other Governmental Regulation

We are subject to laws and regulations related to the protection of the environment, the health and safety of employees and the handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials. For example, the U.S. Occupational Safety and Health Administration has established extensive requirements relating specifically to workplace safety for healthcare employers in the U.S. This includes requirements to develop and implement multi-faceted programs to protect workers from exposure to blood-borne pathogens, including preventing or minimizing any exposure through needle stick injuries. For purposes of transportation, some biological materials and laboratory supplies are classified as hazardous materials and are subject to regulation by one or more of the following agencies: the U.S. Department of Transportation, the U.S. Public Health Service, the U.S. Postal Service and the International Air Transport Association. We generally use third-party vendors to dispose of regulated medical waste, hazardous waste and radioactive materials that we may use during our research.

Coverage and Reimbursement

Currently, our product is for research use only, but clinical laboratories may acquire our instrumentation through a capital purchase or capital lease and use the Saphyr and direct label stain chemistry to create their own potentially reimbursable products, such as laboratory developed tests for in vitro diagnostics. Our customers may generate revenue for these testing services by seeking the necessary approval of their product from the FDA or CMS, along with coverage and reimbursement from third-party payors, including government health programs and private health plans. The ability of our customers to commercialize diagnostic tests based on our technology will depend in part on the extent to which coverage and reimbursement for these tests will be available from such third-party payors.

In the U.S., molecular testing laboratories have multiple options for reimbursement coding, but we expect that the primary codes used will be the genomic sequencing procedure codes, or GSPs. The American Medical Association, or AMA, added GSPs to its clinical laboratory fee schedule in 2015. In addition, CMS recently issued a coverage determination providing for the reimbursement of next-generation sequencing for certain cancer diagnostics using an FDA-approved in vitro diagnostic test. Private health plans often follow CMS coverage and reimbursement guidelines to a substantial degree, and it is difficult to predict what CMS will decide with respect to the coverage and reimbursement of any products or services our customers try to commercialize.

In Europe, coverage for molecular diagnostic testing is varied. Countries with statutory health insurance (e.g., Germany, France, The Netherlands) tend to be more progressive in technology adoption with favorable reimbursement for molecular diagnostic testing. In countries such as the United Kingdom with tax-based insurance, adoption and reimbursement for molecular diagnostic testing is not uniform and is influenced by local budgets.

Ultimately, coverage and reimbursement of new products and services is uncertain, and whether laboratories that use our instruments to develop their own products or services will attain coverage and adequate reimbursement is unknown. In the U.S., there is no uniform policy for determining coverage and reimbursement. Coverage can differ from payor to payor, and the process for determining whether a payor will provide coverage may be separate from the process for setting the reimbursement rate. In addition,

the U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price controls and restrictions on reimbursement.

Healthcare Reform

In the U.S. and abroad, there have been and continue to be a number of legislative initiatives to contain healthcare costs and change the way healthcare is financed. By way of example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the ACA, became law. The ACA is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. For example, the ACA contained a 2.3% excise tax on certain entities that manufacture or import medical devices offered for sale in the U.S., which has been permanently eliminated as part of the 2020 spending package.

There have been executive, judicial and Congressional challenges to certain aspects of the ACA. For example, President Trump signed several Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress considered legislation to repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA, such as removing penalties, effective January 1, 2019, for not complying with the ACA's individual mandate to carry health insurance. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the "individual mandate" was repealed by Congress as part of Legislation enacted in 2017 (H.R. 1, "An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018"), informally titled the Tax Cuts and Jobs Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The United States Supreme Court is currently reviewing this case, but it is unknown when a decision will be reached. Although the Supreme Court has not yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the Supreme Court ruling, other such litigation, and the healthcare reform measures of the Biden administration will impact the ACA and our business.

Further, other legislative changes have been proposed and adopted since the ACA was enacted. For example, on April 1, 2014, the Protecting Access to Medicare Act of 2014, or PAMA, was signed into law, which, among other things, significantly altered the payment methodology under the Medicare Clinical Laboratory Fee Schedule, or CLFS. PAMA requires certain laboratories performing clinical diagnostic laboratory tests to report to CMS the amounts paid by private payors for laboratory tests. Beginning on January 1, 2018, CMS has begun using reported private payor pricing to periodically revise payment rates under the CLFS.

We expect that additional state and federal healthcare reform measures will be adopted in the future, particularly in light of the new presidential administration, any of which could limit the amounts that federal and state governments will pay for healthcare products and services. In addition, sales of our tests outside of the U.S. will subject us to foreign regulatory requirements, which may also change over time. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.

Other Healthcare Laws

Our operations are directly or indirectly, through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal and state anti-kickback statutes and false claims laws. These laws may impact, among other things, our sales and marketing and education programs, and our financial and business relationships with researchers who use our instruments to develop marketed products or services. By way of example: the federal Anti-Kickback Statute prohibits, among other things, any person or entity from, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, to induce, or in return for, purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, item, or service reimbursable, in whole or in part, under a federal healthcare program; and the federal false claims laws, including, without limitation the federal civil False Claims Act, prohibit, among other things, anyone from knowingly and willingly presenting, or causing to be presented for payment, to the federal government (including Medicare and Medicaid) claims for reimbursement for, among other things, drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. The ACA, among other things, amended the intent requirement of the federal Anti-Kickback Statute to clarify that a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a crime. In addition, the ACA clarifies that the government may assert that a claim that includes items or service resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Further, the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories. EKRA’s reach extends beyond federal health care programs to include private insurance (i.e., it is an “all payor” statute). For purposes of EKRA, the term “laboratory” is defined broadly and without reference to any connection to substance use disorder treatment. The law includes a limited number of exceptions, some of which closely align with corresponding federal Anti-Kickback Statute exceptions and safe harbors, and others that materially differ. Additionally, the Stark Law, which prohibits a physician from making a referral for certain designated health services covered by the Medicare or Medicaid program, including laboratory and pathology services, if the physician or an immediate family member of the physician has a financial relationship with the entity providing the designated health services and prohibits that entity from billing, presenting or causing to be presented a claim for the designated health services furnished pursuant to the prohibited referral, unless an exception applies.

There are also state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers. In addition, we may be subject to HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and their implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization by entities subject to the rule, such as health plans, healthcare clearinghouses and certain healthcare providers and their business associates who create, use or disclose individually identifiable health information on their behalf. We may also be subject to state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

If our operations are found to be in violation of any of these laws, we may be subject to significant penalties, including, without limitation, civil, criminal, and administrative penalties, damages, fines, disgorgement, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs, additional integrity oversight and reporting obligations, imprisonment, contractual damages, and reputational harm.

Diagnostic Services

Clinical Laboratory Improvement Amendments of 1988 and State Regulation

As a clinical laboratory, we are required to hold certain federal and state licenses, certifications and permits to conduct our business. As to federal certifications, in 1988, Congress passed the CLIA, establishing more rigorous quality standards for all commercial laboratories that perform testing on human specimens for the purpose of providing information for the diagnosis, prevention, or treatment of disease or the assessment of the health or impairment of human beings. CLIA requires such laboratories to be certified by the federal government and mandates compliance with various operational, personnel, facilities administration, quality and proficiency testing requirements intended to ensure the accuracy, reliability and timeliness of patient test results. CLIA certification is also a prerequisite to be eligible to bill state and federal healthcare programs, as well as many commercial third-party payers, for laboratory testing services. Our laboratory located in Salt Lake City, Utah is CLIA certified. This laboratory must comply with all applicable CLIA requirements. If a clinical laboratory is found to be out of compliance with CLIA standards, CMS may impose sanctions, limit or revoke the laboratory’s CLIA certificate (and prohibit the owner, operator or laboratory director from owning, operating, or directing a laboratory for two years following license revocation), a directed plan of correction, on-site monitoring, civil monetary penalties, civil actions for injunctive relief, criminal penalties, or suspension or exclusion from the Medicare and Medicaid programs.

CLIA provides that a state may adopt laboratory licensure requirements and regulations that are more stringent than those under federal law and requires compliance with such laws and regulations. The State of Utah follows all Clinical Laboratory Improvement Amendments (CLIA) regulations for laboratory facility and personnel requirements. Utah does not have any additional licensure and regulations.

Our laboratory in Salt Lake City, Utah has also been accredited by the College of American Pathologists, or CAP, which means that our laboratory has been certified as following CAP standards and guidelines in operating the laboratory facility and in performing tests that ensure the quality of our test results.

HIPAA and other Privacy Laws

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), established comprehensive federal standards for the privacy and security of health information. The HIPAA standards apply to three types of organizations: health plans, healthcare clearing houses, and healthcare providers that conduct certain healthcare transactions electronically (“Covered Entities”). Title II of HIPAA, the Administrative Simplification Act, contains provisions that address the privacy of health data, the security of health data, the standardization of identifying numbers used in the healthcare system and the standardization of certain healthcare transactions. The privacy regulations protect medical records and other protected health information by, among other things, limiting their use and release, giving patients the right to access their medical records and limiting most disclosures of health information to the minimum amount necessary to accomplish an intended purpose. The HIPAA security standards require the adoption of administrative, physical, and technical safeguards and the adoption of written security policies and procedures.

On February 17, 2009, Congress enacted Subtitle D of the Health Information Technology for Economic and Clinical Health Act, or HITECH, provisions of the American Recovery and Reinvestment Act of 2009. HITECH expanded and strengthened HIPAA, created new targets for enforcement, imposed new penalties for noncompliance and established new breach notification requirements for Covered Entities. Regulations implementing major provisions of HITECH were finalized on January 25, 2013 through publication of the HIPAA Omnibus Rule (the “Omnibus Rule”).

Under HITECH's breach notification requirements, Covered Entities must report breaches of protected health information that has not been encrypted or otherwise secured in accordance with guidance from the Secretary of the U.S. Department of Health and Human Services (the “Secretary”). Required breach notices must be made as soon as is reasonably practicable, but no later than 60 days following discovery of the breach. Reports must be made to affected individuals and to the Secretary and, in some cases depending on the size of the breach, they must be reported through local and national media. Breach reports can lead to investigation, enforcement and civil litigation, including class action lawsuits.

We are currently subject to HIPAA and maintain an active compliance program that is designed to identify security incidents and other issues in a timely fashion and enable us to remediate, mitigate harm or report if required by law. We are subject to prosecution and/or administrative enforcement and increased civil and criminal penalties for non-compliance, including a new, four-tiered system of monetary penalties adopted under HITECH. We are also subject to enforcement by state attorneys general who were given authority to enforce HIPAA under HITECH. To mitigate penalties under the HITECH breach notification provisions, we must ensure that breaches of protected health information are promptly detected and reported within the company, so that we can make all required notifications on a timely basis. However, even if we make required reports on a timely basis, we may still be subject to penalties for the underlying breach.

In addition to the federal privacy and security regulations, there are a number of state laws regarding the privacy and security of health information and personal data that are applicable to our clinical laboratories. Many states have also implemented genetic testing and privacy laws imposing specific patient consent requirements and protecting test results by strictly limiting the disclosure of those results. State requirements are particularly stringent regarding predictive genetic tests, due to the risk of genetic discrimination against healthy patients identified through testing as being at a high risk for disease. We believe that we have taken the steps required of us to comply with health information privacy and security statutes and regulations, including genetic testing and genetic information privacy laws in all jurisdictions, both state and federal. However, these laws constantly change, and we may not be able to maintain compliance in all jurisdictions where we do business. Failure to maintain compliance, or changes in state or federal laws regarding privacy or security could result in civil and/or criminal penalties, significant reputational damage and could have a material adverse effect on our business.

The General Data Protection Regulation (“GDPR”), which applies to all EU member states from May 25, 2018, also applies to some of our operations. The GDPR is discussed in more detail elsewhere in this report. The GDPR applies not only to organizations within the EU, but also applies to organizations outside of the EU that offer goods or services to EU data subjects or that process or hold personal data of EU data subjects. The regulation specifies higher potential liabilities for certain data protection violations, and we anticipate that it will result in a greater compliance burden for us as we conduct our business in the European Union. Fines for non-compliance can range from the greater of 2% of annual global revenues or €10 million, up to the greater of 4% of annual global revenues or €20 million. The GDPR is discussed in more detail under the heading “International Regulations” below.

Transparency Laws and Regulations

A federal law known as the Physician Payments Sunshine Act (the “Sunshine Act”) requires certain medical device manufacturers to track and report to the federal government certain payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals and ownership or investment interests held by physicians and their immediate family members. Manufacturers must report data for the previous calendar year by the 90th day of the then-current calendar year. CMS then publishes the data on a publicly available website no later than June 30th. Beginning in 2022, applicable manufacturers also will be required to report such information regarding its payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives during the previous year. There are also state “sunshine” laws that require manufacturers to provide reports to state governments on pricing and marketing information. Several states have enacted legislation requiring medical device manufacturers to, among other things, establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales and marketing activities, and such laws may also prohibit or limit certain other sales and marketing practices. These laws may adversely affect our sales, marketing, and other activities by imposing administrative and compliance burdens on us. If we fail to track and report as required by these laws or to otherwise comply with these laws, we could be subject to the penalty provisions of the pertinent state and federal authorities.

Reimbursement and Billing

Reimbursement and billing for diagnostic services is highly complex. Laboratories must bill various payors, such as private third-party payors, including managed care organizations (“MCO”), and state and federal health care programs, such as Medicare and Medicaid, and each may have different billing requirements. Additionally, the audit requirements we must meet to ensure compliance

with applicable laws and regulations, as well as our internal compliance policies and procedures, add further complexity to the billing process. Other factors that complicate billing include:

•variability in coverage and information requirements among various payors;

•patient financial assistance programs;

•missing, incomplete or inaccurate billing information provided by ordering physicians;

•billings to payors with whom we do not have contracts;

•disputes with payors as to which party is responsible for payment; and

•disputes with payors as to the appropriate level of reimbursement.

Depending on the reimbursement arrangement and applicable law, the party that reimburses us for our services may be:

•a third-party who provides coverage to the patient, such as an insurance company or MCO;

•a state or federal healthcare program; or

•the patient.

Presently, approximately 90% of our diagnostic service revenue is paid by private third-party payors.

Federal and State Fraud and Abuse Laws

A variety of state and federal laws prohibit fraud and abuse involving state and federal health care programs, such as Medicare and Medicaid. These laws are interpreted broadly and enforced aggressively by various state and federal agencies, including CMS, the Department of Justice, the Office of Inspector General for the Department of Health and Human Services (“OIG”), and various state agencies. In addition, the Medicare and Medicaid programs increasingly use a variety of contractors to review claims data and to identify improper payments as well as fraud and abuse. Any overpayments must be repaid within 60 days of identification unless a favorable decision is obtained on appeal. In some cases, these overpayments can be used as the basis for an extrapolation, by which the error rate is applied to a larger set of claims, and which can result in even higher repayments.

Anti-Kickback Laws

The Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending of an item or service that is reimbursable, in whole or in part, by a federal health care program. “Remuneration” is broadly defined to include anything of monetary value, such as, for example, cash payments, gifts or gift certificates, discounts, or the furnishing of services, supplies or equipment. The Anti-Kickback Statute can be interpreted broadly to prohibit many arrangements and practices that are lawful in businesses outside of the health care industry.

Recognizing the potential breadth of interpretation of the Anti-Kickback Statute and the fact that it may technically prohibit many otherwise innocuous or beneficial arrangements within the health care industry, the OIG has issued a series of regulations, or safe harbors intended to protect such arrangements. Compliance with all requirements of a safe harbor immunizes the parties to the business arrangement from prosecution under the Anti-Kickback Statute. The failure of a business arrangement to fit within a safe harbor does not necessarily mean that the arrangement is illegal or that the OIG will pursue prosecution but would be evaluated on a case-by-case basis. Still, in the absence of an applicable safe harbor, a violation of the Anti-Kickback Statute may occur even if only one purpose of an arrangement is to induce referrals. The penalties for violating the Anti-Kickback Statute can be severe. These sanctions include criminal, civil and administrative penalties, imprisonment and possible exclusion from the federal health care programs. Many states have adopted laws similar to the Anti-Kickback Statute, and some apply to items and services reimbursable by any payor, including private third-party payors.

Physician Self-Referral Bans

The federal ban on physician self-referrals, commonly known as the Stark Law, prohibits, subject to certain exceptions, physician referrals of Medicare patients to an entity providing certain designated health services, which include laboratory services, if the physician or an immediate family member of the physician has any financial relationship with the entity. Several Stark Law exceptions are relevant to arrangements involving clinical laboratories, including but not limited to: (1) fair market value

compensation for the provision of items or services; (2) payments by physicians to a laboratory for clinical laboratory services; (3) certain space and equipment rental arrangements that satisfy certain requirements; and (4) personal services arrangements. Penalties for violating the Stark Law include the return of funds received for all prohibited referrals, fines, civil monetary penalties and possible exclusion from federal health care programs. In addition to the Stark Law, many states have their own self-referral bans, which may extend to all self-referrals, regardless of the payor.

State and Federal Prohibitions on False Claims

The federal False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government. Under the False Claims Act, a person acts knowingly if he or she has actual knowledge of the information or acts in deliberate ignorance or in reckless disregard of the truth or falsity of the information. Specific intent to defraud is not required. The qui tam provisions of the False Claims Act allow a private individual to bring an action on behalf of the federal government and to share in any amounts paid by the defendant to the government in connection with the action. Penalties include payment of up to three times the actual damages sustained by the government, plus significant civil penalties, as well as possible exclusion from federal health care programs. In addition, various states have enacted similar laws modeled after the False Claims Act that apply to items and services reimbursed under Medicaid and other state health care programs, and, in several states, such laws apply to claims submitted to any payor.

Civil Monetary Penalties Law

The federal Civil Monetary Penalties Law, or the CMP Law, prohibits, among other things, (1) the offering or transfer of remuneration to a Medicare or state health care program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies; (2) employing or contracting with an individual or entity that the provider knows or should know is excluded from participation in a federal health care program; (3) billing for services requested by an unlicensed physician or an excluded provider; and (4) billing for medically unnecessary services. The penalties for violating the CMP Law include exclusion, substantial fines, and payment of up to three times the amount billed, depending on the nature of the offense.

International Regulations

We market some of our tests outside of the United States and are subject to foreign regulatory requirements governing laboratory licensure, human clinical testing, use of tissue, privacy and data security, and marketing approval for our tests. These requirements vary by jurisdiction, differ from those in the United States and may require us to implement additional compliance measures or perform additional pre-clinical or clinical testing. For example, the In Vitro Diagnostic Medical Devices (2017/746/EU) (“IVDR”) will replace the existing In Vitro Diagnostic Medical Devices Directive (98/79/EC) (“IVDD”) in the European Union (“EU”). The IVDR was published in May 2017, marking the start of a five-year period of transition from the IVDD. During the transitional period the IVDR will come into force gradually, starting with the provisions related to the designation of Notified Bodies and the ability of manufacturers to apply for new certificates under the IVDR. The transitional period will end on 26 May 2022, the “Date of Application” (“DoA”) of the Regulation. From that point the IVDR will apply fully. The EU has also implemented the General Data Protection Regulation, or GDPR, which requires us to meet new and more stringent requirements regarding the handling of personal data about European Union residents. In many countries outside of the United States, coverage, pricing and reimbursement approvals are also required. We are also required to maintain accurate information on and control over sales and distributors’ activities that may fall within the purview of the Foreign Corrupt Practices Act, its books and records provisions and its anti-bribery provisions.

Other Regulatory Requirements

Our laboratory is subject to federal, state and local regulations relating to the handling and disposal of regulated medical waste, hazardous waste and biohazardous waste, including chemical, biological agents and compounds, blood and bone marrow samples and other human tissue. Typically, we use outside vendors who are contractually obligated to comply with applicable laws and regulations to dispose of such waste. These vendors are licensed or otherwise qualified to handle and dispose of such waste.

We are subject to laws and regulations related to the protection of the environment, the health and safety of employees and the handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials. For example, the U.S. Occupational Safety and Health Administration (“OSHA”) has established extensive requirements relating specifically to workplace safety for healthcare employers in the U.S. This includes requirements to develop and implement multi-faceted programs to protect workers from exposure to blood-borne pathogens, including preventing or minimizing any exposure through needle stick injuries. For purposes of transportation, some biological materials and laboratory supplies are classified as hazardous materials and are subject to regulation by one or more of the following agencies: the U.S. Department of Transportation, the U.S. Public Health Service, the United States Postal Service, the Office of Foreign Assets Control, and the International Air Transport Association. We generally use third-party vendors to dispose of regulated medical waste, hazardous waste and radioactive materials and contractually require them to comply with applicable laws and regulations.

Human Capital Management

As of December 31, 2020, we had 147 employees, of which 72 work in sales, sales support and marketing, 38 work in research and development, 24 work in operations and 13 work in general and administrative. As of December 31, 2020, of our 147 employees, 126 were located in the U.S. and 21 were employed outside the U.S. None of our employees are represented by a labor union or are subject to a collective bargaining agreement.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity incentive plans are to attract, retain and reward personnel through the granting of stock-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Corporate Information

We were formed in January 2003 as BioNanomatrix LLC, a Delaware limited liability company. In August 2007, we became BioNanomatrix Inc., a Delaware corporation. In October 2011, we changed our name to BioNano Genomics, Inc., and in July 2018, we changed our name to Bionano Genomics, Inc.

Our principal executive offices are located at 9540 Towne Centre Drive, Suite 100, San Diego, California 92121, and our telephone number is (858) 888-7600. Our website address is www.bionanogenomics.com. Information contained in, or that can be accessed through, our website is not incorporated by reference into this Annual Report, and you should not consider information on our website to be part of this Annual Report. Our design logo, “Bionano,” and our other registered and common law trade names, trademarks and service marks are the property of Bionano Genomics, Inc.

Item 1A. Risk Factors.

You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this Annual Report, including our financial statements and related notes appearing below. The risks described below are not the only ones facing us. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition or results of operations. In such case, the trading price of our securities could decline. This Annual Report also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

Risks related to our financial condition and need for additional capital

We have incurred recurring net losses since we were formed and expect to incur losses in the future. We cannot be certain that we will achieve or sustain profitability.

We incurred net losses of $41.1 million and $29.8 million and used cash in operations of $38.3 million and $29.5 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $143.7 million. We cannot predict if we will achieve sustained profitability in the near future or at all. We expect that our losses will continue for the foreseeable future as we plan to invest significant additional funds toward expansion of our commercial organization and the development of our technology. In addition, as a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company. These increased expenses will make it harder for us to achieve and sustain future profitability. We may incur significant losses in the future for a number of reasons, many of which are beyond our control, including the other risks described in this Annual Report, the market acceptance of our products, future product development and our market penetration and margins.

Our quarterly and annual operating results and cash flows have fluctuated in the past and might continue to fluctuate, which could cause the market price of our securities to decline substantially.

Numerous factors, many of which are outside our control, may cause or contribute to significant fluctuations in our quarterly and annual operating results. These fluctuations may make financial planning and forecasting uncertain. In addition, these fluctuations may result in unanticipated decreases in our available cash, which could negatively affect our business and prospects. In addition, one or more of such factors may cause our revenue or operating expenses in one period to be disproportionately higher or lower relative to the others. As a result, comparing our operating results on a period-to-period basis might not be meaningful. You should not rely on our past results as indicative of our future performance. Moreover, our stock price might be based on expectations of future performance that are unrealistic or that we might not meet and, if our revenue or operating results fall below the expectations of investors or securities analysts, the price of our securities could decline substantially.

Our operating results have varied in the past. In addition to other risk factors listed in this section, some of the important factors that may cause fluctuations in our quarterly and annual operating results include:

•adoption of our systems and related products;

•the timing of customer orders to purchase our systems;

•the rate of utilization of consumables by our customers;

•receipt and timing of revenue for services provided by out data solutions service;

•the timing of the introduction of new systems, products, system and product enhancements and services;

•our ability to successfully execute our sales and marketing strategy for our Lineagen products and diagnostic assays; and

•the receipt and timing of revenue from our distribution and marketing arrangements.

In addition, a significant portion of our operating expense is relatively fixed in nature, and planned expenditures are based in part on expectations regarding future revenue. Accordingly, unexpected revenue shortfalls could decrease our gross margins and cause significant changes in our operating results from quarter to quarter. If this occurs, the trading price of our securities could fall substantially.

We are an early commercial-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.

We are an early commercial-stage company and have a limited commercial history. Our limited commercial history may make it difficult to evaluate our current business and makes predictions about our future success or viability subject to significant uncertainty. We will continue to encounter risks and difficulties frequently experienced by early, commercial-stage companies, including scaling up our infrastructure and headcount. If we do not address these risks successfully, our business will suffer.

If we are unable to maintain adequate revenue growth or do not successfully manage such growth, our business and growth prospects will be harmed.

We may not achieve substantial growth rates in future periods. Investors should not rely on our operating results for any prior periods as an indication of our future operating performance. To effectively manage our anticipated future growth, we must continue to maintain and enhance our financial, accounting, manufacturing, customer support and sales administration systems, processes and controls. Failure to effectively manage our anticipated growth could lead us to over-invest or under-invest in development, operational and administrative infrastructure; result in weaknesses in our infrastructure, systems, or controls; give rise to operational mistakes, losses, loss of customers, productivity or business opportunities; and result in loss of employees and reduced productivity of remaining employees.

Our continued growth could require significant capital expenditures and might divert financial resources from other projects such as the development of new products and services. As additional products are commercialized, we may need to incorporate new equipment, implement new technology systems, or hire new personnel with different qualifications. Failure to manage this growth or transition could result in turnaround time delays, higher product costs, declining product quality, deteriorating customer service, and slower responses to competitive challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our products, and could damage our reputation and the prospects for our business.

If our management is unable to effectively manage our anticipated growth, our expenses may increase more than expected, our revenue could decline or grow more slowly than expected and we may be unable to implement our business strategy. The quality of our products and services may suffer, which could negatively affect our reputation and harm our ability to retain and attract customers.

Our future capital needs are uncertain and we will require additional funding in the future to advance the commercialization of Saphyr and our other products and services, as well as continue our research and development efforts. If we fail to obtain additional funding, we will be forced to delay, reduce or eliminate our commercialization and development efforts.

Our operations have consumed substantial amounts of cash since our inception. We expect to continue to spend substantial amounts in order to continue the commercialization of our products as well as our research and development programs. During October 2020 through January 2021, as described further under the heading Capital Resources included in Item 7 of this Annual Report, we raised an aggregate of $370.8 million in gross proceeds from an at-the-market facility and other public offerings, before deducting underwriting discounts and commissions and other offering costs and expenses. However, in the future, we may need to raise additional funding. For example, we may need to raise additional capital to:

•expand our sales and marketing efforts to further commercialize our products and services;

•expand our research and development efforts to improve our existing products and services and develop and launch new products and services, particularly if any of our products and services are deemed by the U.S. Food and Drug Administration, or FDA, to be medical devices or otherwise subject to additional regulation by the FDA;

•seek FDA approval to market our existing RUO products or new products utilized for diagnostic purposes;

•lease a larger facility or build out our existing facility as we continue to grow our employee headcount;

•hire additional personnel;

•enter into collaboration arrangements, if any, or in-license other products and technologies;

•add operational, financial and management information systems; and

•cover increased costs incurred as a result of continued operation as a public company.

Our future funding requirements will be influenced by many factors, including:

•market acceptance of our products and services;

•the cost and timing of establishing additional sales, marketing and distribution capabilities;

•the cost of our research and development activities;

•the success of our existing distribution and marketing arrangements and our ability to enter into additional arrangements in the future; and

•the effect of competing technological and market developments.

We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us.

In addition, the COVID-19 pandemic may compromise our ability to comply with the terms of our loan agreement and could result in an event of default. If an event of default were to occur, our lender could accelerate our repayment obligations or enforce other rights under our loan agreements. Any such default may also require us to seek additional or alternative financing, which may not be available on commercially reasonable terms or at all. For example, for the three months ended September 30, 2020, we were not in compliance with the revenue covenant under the Innovatus LSA. Although we secured a waiver for such noncompliance in December 2020, there can be no assurance that we will be able to maintain compliance with our covenants in the Innovatus LSA in the future and securing such waivers in the future may require us to divert further cash towards the repayment of debt and subject us to fees incurred in connection with the negotiation of such waivers.

If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our products. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations. Any of these factors could have a material adverse effect on our financial condition, operating results and business. Any of the foregoing could significantly harm our business, prospects, financial condition and results of operation and could cause the price of our common stock to decline.

Our business, and that of our customers, has been adversely affected by the effects of public health crises, including the COVID-19 pandemic. In particular, the COVID-19 pandemic has materially affected our operations globally, including at our headquarters in San Diego, California, as well as the business or operations of our research partners, customers and other third parties with whom we conduct business.

Our business could be adversely affected by health crises in regions where we have operations, concentrations of sales and marketing teams, distributors or other business operations. Such health crises could also affect the business or operations of our research partners, customers and other third parties with whom we conduct business. In particular, the COVID-19 pandemic and the measures imposed to contain this pandemic have disrupted and are expected to continue to impact our business.

In response to public health directives and orders implemented in response to the COVID-19 pandemic, we have implemented work-from-home policies for certain employees and temporarily scaled back our operations. We have also modified certain business practices, including those related to employee travel and cancellation of physical participation in meetings, events and conferences, and implemented new protocols to promote social distancing and enhance sanitary measures in our offices and facilities. The quarantine of our personnel and the inability to access our facilities or customer sites has adversely affected, and is expected to continue adversely affecting, our operations. For example, certain members of our workforce are now performing their duties remotely and these employees have not been able to maintain the same level of productivity and efficiency due a lack of resources that would otherwise be available to them in our offices and additional demands on their time, such as increased responsibilities resulting from school closures or the illness of family members.

The effects of these public health directives and orders and our related adjustments in our business have negatively impacted productivity, disrupted our business and delayed our timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. The spread of COVID-19 has resulted in a widespread health crisis that is also adversely affecting the economies and financial markets of many countries, including in the United States, Europe and Asia, which has resulted in an economic downturn that may negatively affect demand for our products and services and materially affect us financially. For example, customers who have committed to order minimum quantities of consumables or to purchase our Saphyr instrument could delay or default on these commitments. Further, restrictions on our ability to travel, stay-at-home orders and other similar restrictions on our business have limited our ability to support our global and domestic operations, including providing installation and training and customer service, resulting in disruptions in our sales and marketing efforts and negative impacts on our commercial strategy. In addition, disruption of global financial markets as a result of COVID-19 may limit our ability to access capital, which could negatively affect our liquidity. A recession or market correction resulting from the spread of COVID-19 could also materially affect our business and the value of our common stock even after the outbreak of COVID-19 has subsided, due to unforeseen adverse impacts on us or our third-party manufacturers, vendors and customers.

Also, in connection with our Diagnostic Services, COVID-19 poses the risk that we or our employees, contractors, suppliers, courier delivery services and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. The continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt the supply chain of materials needed for our diagnostic tests, interrupt our ability to receive specimens, impair our ability to perform or deliver the results from our tests, impede patient movement or interrupt healthcare services causing a decrease in test volumes, delay coverage decisions from Medicare and third-party payors, delay ongoing and planned clinical trials involving our tests and have a material adverse effect on our business, financial condition and results of operations.

These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition. In addition, quarantines, stay-at-home, executive and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, could disrupt our supply chain and affect customer decision-making. For example, any actual or perceived disruption in our product distribution channel could alter customer buying decisions, prompting customers to delay or cancel their orders, which would negatively impact our sales revenue and could harm our reputation. In addition, we anticipate that ongoing disruptions in our supply chain will cause shortages in the materials required to operate our instruments, therefore limiting our ability to process customer samples and the ability of users of our system to operate our system.

In addition, we are subject to various affirmative and negative covenants in our loan agreement with our lender. If the effects of COVID-19 cause us to fall out of compliance with one or more of such covenants and we are unable to secure a waiver or negotiate an amendment to our loan agreement on reasonable terms, or at all, an event of default could occur, which would allow our lender to accelerate our repayment obligations or enforce its other rights under our loan agreement. Any such default may also

require us to seek additional or alternative financing, which may not be available on commercially reasonable terms or at all. If we are unable to access funds to repay our lender, our lender could take control of our pledged assets. Any of the foregoing events would negatively impact our financial condition and liquidity.

The ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business or the global economy as a whole, and such impacts may not be fully recoverable. In addition, the current and potential adverse impacts of the COVID-19 pandemic on our business, financial condition, results of operations and growth prospects, may also have the effect of heightening many of the other risks and uncertainties described in this Annual Report.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.

BNGO US Equity

BNGO · 10-K · period ended 2020-12-31

Item 1. Business.

Item 1A. Risk Factors.

BNGO US Equity☆

BNGO · 10-K · period ended 2020-12-31

Item 1. Business.

Item 1A. Risk Factors.

BNGO US Equity