Bionano Genomics, Inc. Q4 FY2020 Earnings Call

Good day, and welcome to the Bionano Genomics Fourth Quarter and Year-End 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Amy Conrad, Investor Relations for Bionano. Amy, please proceed.

Thank you, Hillary, and good afternoon, everyone. Welcome to the Bionano Genomics fourth quarter and year-end 2020 financial results conference call. With me today are Dr. Erik Holmlin, CEO of Bionano; and Chris Stewart, CFO of Bionano. After market close today, Bionano issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2020. A copy of the release can be found on the Investor Relations page of the Company’s website. Before we begin, I would like to remind everyone that certain statements made during this conference call may be forward-looking, including statements about Bionano’s business strategy and commercialization plans, sales pipeline, anticipated benefits or improvements to the Saphyr system, and the advantages of the Saphyr system over current technologies, or expectations regarding timing and content of study results and anticipated benefits of these studies in driving adoption of the Saphyr system. Such forward-looking statements are based upon current expectations and there can be no assurances that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in our press release and other reports filed with the SEC. These forward-looking statements are based on information available to Bionano today, and the Company assumes no obligation to update statements as circumstances change. An audio recording and webcast replay for today’s conference call will also be available online in the Investors section of the Company website. With that, I’ll turn the call over to Erik. Erik?

Thank you, Amy, and good afternoon, everyone. I want to thank you all for joining us on our year-end 2020 call. And to open up today, I'd like to review our progress and updates and then Chris will review the financials. I'll close it out and then we'll open up the call for Q&A. But let me begin by saying that 2020 was really a tremendous year for Bionano. And going into the year, our focus was on making it easier than ever for our customers to get access to Saphyr data. The objective was to really raise awareness about the unique and extensive insight that Saphyr and optical genome mapping provide into structural variations in the genome. And despite the start that 2020 brought us and the challenges that came along with it, we were able to successfully increase the installed base of Saphyr systems to 97, which was an increase of 24 systems from the prior year. We shipped a record number of flow cells and removed a major roadblock for customers by expanding our services lab, which made Saphyr data available to customers for as little as a few hundred dollars. This concerted effort to see the market resulted in a number of high-profile customer engagements, numerous studies published in 2020 and fueled the presentations at our next-generation cytogenomics symposium in January. Globally, we saw a substantial increase in the interest in optical genome mapping for the power of genome analysis that it provides. We announced reagent rental agreements focused on cytogenomic validation studies with three of the largest children's hospitals in Europe, in Spain, Italy and France. We had agreements with cytogenetics labs and hospitals in Germany, Switzerland, Slovenia, Australia and Canada. We also saw traction throughout Europe, and in Australia and Canada. In part, we believe due to the fact that their healthcare systems are single payer systems and the path to reimbursement for novel technologies and healthcare is typically faster than in other geographies. In the U.S., we've noted that a path to reimbursement from third-party payers is going to be a necessary step to gaining widespread adoption of optical genome mapping with the Saphyr system, and that's something that we recognize can be a long and challenging process, but we are very focused on addressing it. Now to complement the expansion of our commercial efforts, the utility of optical genome mapping with Saphyr was validated through benchmarking, scientific publication of data and, of course, clinical adoption. Throughout the year, numerous rigorous and extensive comparisons of Saphyr were conducted against traditional cytogenetic methods, long-read sequencing. And the results of these comparisons were published in several key publications and presented in different presentations at industry meetings taking place through a variety of announcements. All of these studies showed that Saphyr is a superior alternative to traditional cytogenetic methods. Specifically, as you can see on this slide, we had growing excitement. As more and more researchers got access to the breadth of data on structural variation in genome structural analysis in general that Saphyr can provide. And through these studies, they demonstrated Saphyr's ability to go beyond the standard understanding of genome structure in a variety of clinically relevant areas. On the clinical side, specifically, we are seeing Saphyr bring value to cytogenomic analysis by reducing the total reagent cost, turnaround time, labor cost, and by simplifying the analysis of genomes in cancer patients, and patients suspected of having a genetic disease, all compared to today's workflows in cytogenetics. And we believe that Saphyr offers a truly better, faster and more cost-effective tool that overall will accelerate actionable results and improve patient outcomes. We believe that this path to widespread adoption of optical genome mapping with Saphyr in the U.S. requires three main prerequisites. First, publishing multiple large studies that show concordance with the existing standard of care. There is a requirement for labs that adopt the Saphyr system across the U.S. to develop assays for clinical applications, and validate those assays as laboratory-developed tests. And lastly, a clear path for clinics and labs that are operating optical genome mapping assays. They need to be able to bill insurance providers and be reimbursed for their tests before they'll comfortably convert over from the standard of care. Now one of the most important areas of validation in 2020 was with the University of Iowa Hospitals & Clinics, who switched their methods of molecular testing for patients presumed to have FSHD, which is a rare muscular disease with no approved therapy, to optical genome mapping with the Saphyr system. In addition, we had a very meaningful publication come out using Saphyr data from UC San Francisco, in collaboration with Oakland Children's Hospital. Here, researchers and clinicians were able to diagnose an additional 18% of children who were otherwise undiagnosed standard of care testing using the Saphyr system. Now this kind of work and all of the studies that have gone on over the course of 2020 are truly groundbreaking in the scientific advances they bring and showing how diseases can be diagnosed with new tools. But they really enforce why everybody at Bionano Genomics shows up for work every day. We are truly determined to revolutionize the way diseases are diagnosed, and in particular, for children, where a diagnosis of a disease can have a profound effect on their lives, on their family's lives and on the lives of the caregivers and the healthcare system overall. Our goal is to shorten the diagnostic journey and accelerate the path that these patients are on to managing their disease and in many cases, the most effective treatment. Now in 2020, we've also made significant advances in our technology, and released the biggest upgrade to our software capabilities, which together have continued to improve the capability of Saphyr. We introduced our newest DNA isolation kits, which allow for faster and much simpler isolation of ultra-long genomic DNA from smaller and smaller amounts of samples, including solid tumors, which has removed one of the most significant hurdles in the study of structural variation in solid tumors. We also saw our users conduct comprehensive structural variation analysis throughout oncology, where they are now able to detect rare variants that may be the drivers of different diseases, including in genetic and inherited diseases, as well as being able to detect off-target effects that may be occurring during CRISPR-based gene editing. All the while using the Saphyr system and telling us that it's easier to use than other genome analysis systems in their labs. And so this feedback and the progress that we're making makes us believe that our system is ready to serve the needs of what is an increasingly large market for structural variation analysis both on the clinical side and on the research side. Expansion in the number of Laboratory Developed Tests (LDTs) in the market is another driver of wider adoption. We announced last quarter, the German accreditation of Saphyr for the detection of various types of structural variations that cause constitutional genetic disorders. This is a prime example of how Saphyr can be an alternative to existing tools, getting to faster diagnoses while also reducing costs. Similar accreditation processes are underway for genetic diseases and leukemias in other parts of Europe, as well as here in the United States. Labs, such as Praxis, have launched a menu of laboratory developed tests and obtained reimbursement codes for them. Augusta University is also developing novel laboratory developed tests for cancer based on their results in hematologic malignancies and solid tumors, which had been presented at the Cancer Genomics Consortium meeting. And so for us, 2020 was really a spectacular year. And now that we've had a chance to cover many of the advancements, I want to turn the focus to 2021 and talk a little bit about what we see ahead. 2021 is truly shaping up to be another transformational year for the company. Thanks to your support our shareholders, we've taken major steps to secure the financial future of the company by raising a substantial amount of capital, which sets the stage for execution of our plan without the overhang of capital limitations. 2021 is going to be critical to the long-term growth. We are squarely focused on driving the global development of Saphyr based assays for use in clinical testing of patients with genetic diseases and hematologic malignancies, and on the adoption of Saphyr for using larger clinical studies that will allow us to obtain a critical mass of data on Saphyr application across a number of key areas, including prenatal and postnatal genetics, hematologic malignancies including leukemias and lymphomas, and then solid tumors. These data are expected to expand the number of publications, including peer-reviewed ones, and support an increase in the number of laboratory developed tests on the market with the goal of reimbursement of Saphyr based laboratory developed tests by third party payers in the U.S. and around the world. Now a big part of our ability to drive adoption of Saphyr stems from the successful acquisition we made of Lineagen in 2020, which added important products and skills, including the content and domain expertise required to build a reimbursed diagnostic menu on Saphyr. Combining these products with the services business, we believe that we can accelerate the broader adoption of Saphyr as a technology for clinical assay development throughout cytogenetics. Overall, 2020 was a great year, and challenging against a challenging backdrop. And we are continuing to gain traction in many important ways. And we are seeing evidence that this strategy is working. With 2020 showing us that Saphyr is ready to serve a significant need in a substantially large and growing market. We see that our customers are ready to adopt the new technology. And I believe our goal of establishing Bionano as the next great genomics company is greater than ever. And with that, I would like to turn the call over to Chris for an overview of financials. Chris?

Thanks, Erik. Let me start with a review of our financial results for the fourth quarter and year ended December 31, 2020. Revenue in Q4 was approximately $4 million consistent with the preliminary results that we issued back on January 7. This represents an increase of 43% compared to $2.8 million in the same period of 2019. The increase was primarily driven by a $1.1 million increase in service revenue, largely from our Lineagen subsidiary acquired in August of 2020. Revenue for the year came in at $8.5 million, down $1.6 million or 16% from 2019, largely due to restrictions on our customers' lab operations related to COVID-19. While activity is picking up, we do believe that COVID-19 restrictions will continue to affect revenue across our business. Our gross margin came in at 30%, down 9% from the same period last year, due mainly to lower instrument selling prices and some year-end accounting entries related to inventory value cleanup. As Erik mentioned at the beginning of the call, we ended the year with an installed base of 97 Saphyr systems, an increase of 24 from the year in 2019. Our reagent rental and our services programs are doing well, reflecting an increasing interest in Saphyr and the incredibly novel and meaningful data that the system can produce. We are actively trying to make it easier for potential customers to obtain new Saphyr data, which we believe will lead to instrument and consumables revenue down the road. Operating expense for the fourth quarter of 2020 was $12.3 million, an increase of approximately $3.4 million compared to $8.9 million in the same period of 2019. The increase is primarily due to an increase in salary expense. During 2020, headcount increased by 49, including 33 that joined us as a result of the Lineagen acquisition. Operating expenses for the year ended December 31 was $41.3 million, an increase of approximately $11.4 million from the $29.9 million in the same period of 2019. The increase was comprised of about $4.5 million of salary expenses, $3.4 million of legal and other outside services related to the Lineagen acquisition and other corporate activities, $2.6 million of Lineagen expenses and just under a $1 million of various other net changes. Finally, our cash balance as of December 31 was $38.4 million. So clearly 2020 was off to a great start. Since the beginning of the year, we've raised about $335 million through two underwritten public offerings, sales on our ATM facility, and the exercise of outstanding warrants for our common stock driven by the increase in our share price. Our strong balance sheet allows us to shift our focus to achieving our long-term vision of disrupting genomics, thereby contributing to advances in healthcare through the global adoption of Saphyr. Our main objectives for 2021 revolve around clearing additional barriers to widespread adoption through the execution of our clinical studies, continuing to build on the number of published studies showcasing the power of Saphyr, and Saphyr data, supporting the development of LDTs, and building on the market momentum that we started to see through the course of 2020. And with that, I'll turn the call back over to Erik to discuss some of our upcoming milestones, and then we'll open the call up for Q&A. Erik?

Yes, thanks, Chris, for that summary. And what I think is clear here is that 2020 has really set an incredible foundation for us. Our fundraising here in 2021 has cleared the path for us to really focus on execution going forward. What we've put together here is a summary of important milestones, and what we see as the timing for each of them. The key takeaway from these milestones is that while we are focused on the commercialization and commercial adoption and utilization of Saphyr and optical genome mapping very broadly, we want to make sure that we really emphasize the importance of clearing the path to truly significant adoption overall. And so a lot of these milestones are based on that aspect. And so beginning with the second quarter, we expect to see important accreditations for the capabilities of Saphyr in certain European markets. These accreditations lower barriers for other labs in other markets to adopt more broadly. We'll be expanding the commercial release of assays and capabilities on Saphyr, including prenatal assays, for the first time in the third quarter, as well as expanding additional pediatric assays around different sample types that can be adequately handled for optical genome mapping. What we'll begin to see in the fourth quarter is a number of the key programs that are underway in clinical studies starting to show results. So we are expecting to see the interim publication results from our pediatric clinical studies, we expect to see validation of additional laboratory developed tests and other reimbursement codes emerging from these clinical study sites; we're going to have a prototype of a next generation high throughput Saphyr, which will expand capabilities of optical genome mapping, even broader than what they are today. And importantly, we expect the installed base of Saphyr systems to grow by as much as 50% on a year-over-year basis to 150 systems as a key step in just increasing the amount of utilization of Saphyr that's taking place in the market. And so when we look at this progress, we see it as being very important. We see it also in the context of a much larger vision. And that vision is really about what is the future of genome analysis. To understand that vision, we look to the past and what we see is that the first 20 years in this century have focused on genome analysis based first on microarrays and then on next generation sequencing. The impact that these technologies have had on healthcare broadly defined has been simply incredible. For investors, the value creation has been remarkable as well. But it's clear that innovation with these technologies is leveling off. And so when we look to the future, what we see is that the era of big biology in genomics is going to be driven by new technology. Certainly, we see optical genome mapping and the Saphyr system at the center of the next big wave, which is going to be focused on genome structure analysis. We think that we are really at the beginning of this incredible journey. We're pleased with the progress that we have, but we're very focused on what the future brings. We couldn't be more excited about where we're positioned. And so with that, operator, I'd like to turn it over to you for Q&A.

Our first question comes from Kevin DeGeeter of Oppenheimer. Please state your question.

Hey, guys, thanks for taking my questions. Just a couple from me today. First, with regard to the next-gen optical imaging platform and the target to have a prototype by Q4. Can you just walk us through a little bit in terms of the target product profile there? And incrementally, what are the primary operational challenges to meet that Q4 timeline?

Sure. What we're focused on is building a platform that can serve the substantially higher throughput operating labs, compared to your traditional community cytogenetics lab. The community cytogenetics labs represent the vast majority, but these higher volume labs take significant amounts of the volume. We are anticipating by the time the system is launched and up to full speed, it will represent an increase of approximately 14-fold over the current throughput of the Saphyr system, which is roughly 5,000 human genomes per year. That's a substantial overall increase in throughput. When you talk about the milestones and work that needs to be done, it's relatively straightforward in that we've built these instruments before and the principles of operation are not changing.

And I get a fair number of questions from investors regarding the addressable market for Saphyr in the pediatric and prenatal markets. Can you just comment on how you see the addressable opportunity in those two segments?

Sure. We typically look at it from the perspective of the number of labs that are out there. If those labs were to adopt Saphyr and convert their menus over, what would that look like? In cytogenetics, broadly speaking, there’s roughly 2,500 labs worldwide and probably somewhere between 2 million samples per year being processed for this type of molecular pathology. Overall, that represents a market for us in the neighborhood of $3 billion to $3.5 billion. That includes some of the research market as well. But something that I would really emphasize for these investors who are asking questions is that that's the market that is right in front of us today. With technology accelerating capabilities as quickly as it is being used in research to discover new applications, the total market opportunity for optical genome mapping goes well beyond that low single-digit billion number and is substantially larger. It's harder for us to quantify it specifically, because some of the applications haven't even been developed. Others are still on the come.

Really helpful. And then lastly for me, with regard to the fourth quarter, what was the consumable revenue? And can you just comment on the relative split between cytogenetics and other applications?

Yes. Consumable revenue was about $1.3 million in Q4.

And qualitatively, how do we think about the split between cytogenetics and other end markets?

Yes, outside the United States, it's about 75:25 or 80:20. It's not quite 100% human, but it's almost entirely human. And then within that, it's 75:25, a lot of the non-human is still focused on drug development. We've really shifted from a basic research tool used throughout genome analysis to one that's primarily used in human applications. Outside the U.S., it's about 75:25 cytogenetics versus research. In the U.S., it's more balanced. We see increasingly cytogenetics applications, but it's closer to maybe 60% research, 40% cytogenetics.

Super helpful. I’ll get back in the queue. Congratulations on all the progress.

Thank you, Kevin.

The next question comes from Jason McCarthy of Maxim Group. Please state your question.

Hey, guys, thanks for taking the questions. As opposed to kind of thinking about the revenue last year or even this year, can you talk a little bit more broadly about the shortcomings of NGS, whether it's long reads or short reads? And where that missing components in genomic interrogations really matters? Maybe in the context of 50% of cancers don't get the proper diagnosis and genomic diseases are even worse. And how Saphyr completes that puzzle, if you would? That's the story I think investors need to hear over this year.

Yes, I appreciate that opportunity, Jason, because I think that's really where the focus should be. We have labored hard to develop the product and make it relevant in some really important end markets. What we're seeing now is that those markets are adopting. Sure, it's important that we're selling the product and that people are paying for it; that sort of validates that it's a viable commercial product. But our focus is on really clearing the path to much wider adoption to fill these critical gaps. On a regular basis, publications are appearing showing that sequencing, as powerful as it is for detecting small variants, really underperforms when it comes to detecting large structural variations. If you read through the medical guidelines for testing in genomic diseases, hematologic malignancies, solid tumors, they all recommend as the first line of analysis, some form of structural variation detection, whether that's karyotyping, microarrays, fluorescence in situ hybridization. As much as there is an interest in having sequencing address those markers, the publications show that sequencing cannot. Furthermore, to get next generation sequencing to work well in the clinic, it still requires extraordinary depth of coverage, meaning to make it work reliably, consistently, and at high throughput and low cost, it's not possible to do a whole genome analysis with next generation sequencing, not even talking about long-read sequencing. This really leaves an opportunity for optical genome mapping to come in and be the go-to solution to look at structural variation, particularly those over 500 base pairs. Where would that matter? That's what all the medical guidelines are calling for. We clearly matter there. Let's talk about drug development in cancer, where fusion genes, for example, are incredibly important. There are many known ones out there that are the target of different therapeutic development programs. For every fusion protein that's known, we believe there are many that have yet to be discovered because a tool like the Saphyr system is not being used broadly yet. Think about an environment where every genome analyzed runs through sequencing, fine to look for small variants, but also through optical genome mapping to look for large genomic variation, because it's definitely complementary to single nucleotide variants. The more impactful story is that optical genome mapping and the Saphyr system are the only ones capable of doing that at a throughput that matters, at a cost that matters, and at a turnaround time that matters. That's where this technology is positioned. The opportunity is really significant. I said this in my prepared remarks, but I think it's really important; we are at the very beginning of the story, we're just writing the introduction right now.

Right. And then also, just one more broad thought that maybe you can help out with is microarrays kind of rolled up with next-gen sequencing, right? Next-gen took them out, western blots got rolled up in digitized proteomics. The natural progression for cytogenetics is not if it's when it's going to move on to something else. It should be something like structural variation. Can you kind of give your view of that view, if you would?

Yes, thank you for pointing out two examples in history where a technology has consolidated other platforms into a single, streamlined workflow. NGS did it not only to microarrays but completely revolutionized Sanger sequencing. Next generation sequencing is an amazing example of that. Western blots are another amazing example of that. And that was done by companies and industry. So Illumina and others around next generation sequencing, Ventana around cell surface marker analysis; it's clear and obvious that optical genome mapping will streamline and industrialize the cytogenetics workflow. Something that's very interesting about this cytogenetics space is that laboratory directors and people working in cytogenetics see the technology revolution that optical genome mapping provides. It's something they’ve been waiting for their whole careers. Dr. Alka Chaubey joined us as our first Chief Medical Officer last August, and she sees the Saphyr system as that thing she's been looking for her entire career as a Cytogeneticist and cytogenomics professional. She's not alone in that view. We see Saphyr industrializing this workflow and becoming something that's used broadly, which is why we refer to the euphoria Saphyr brings as 'cytopia,' because it's like utopia for Cytogeneticists. It not only improves patient outcomes, but positions cytogenetics at the center of drug development and other areas of important discovery research where it isn't used today because it's so laborious and time-consuming. We're about to see a truly revolutionized approach to genome analysis around structural variation detection brought by Saphyr.

Our next question comes from Jeffrey Cohen of Ladenburg Thalmann. Please state your question.

Hi, Erik, Chris, and Alka. How are you? Just a few questions. One follow-up to Kevin's questions earlier. It sounds like you're going to have two SKUs as far as a platform; one more for high throughput facilities and one, the current one to continue with kind of the R&D side of things. Is that a safe assumption?

Yes, that's correct. We will offer both platforms, allowing us to serve the market as broadly as possible, but we don't see the current platform going away.

Okay, and then secondly, could you talk about revenues and placements by geography, at least kind of in the macro standpoint for 2020? Maybe give us some sense of how that may look for 2021?

Yes, we're seeing strength in Europe, moving forward faster with getting systems validated into their workflow. The U.S. is lagging a little bit behind, though we've been stronger in the research market in the U.S. than we have been traditionally. We're starting to see an uptake in clinical revenue. China has been pretty quiet last year for a lot of reasons; it was a quiet year. We see that picking up, but lagging still behind Europe and North America. So we expect to see the most growth in Europe next year, followed by North America and then the Far East.

Got it. Okay, and then lastly for me, Erik, if you could talk a little more about some of the developments that are going on or expect to be going on as far as psychiatric disorders and other neurological conditions, that would be super helpful.

Sure. Through our Lineagen business, we provide services to physicians managing patients with a variety of neurodevelopmental disorders, including autism spectrum disorder and other related disorders. Our focus is to continue serving them with the existing standard of care tools. Over the course of this year, we'll begin developing those applications on the Saphyr system and making them available through our own CLIA lab while working with payers to cover those assays. That's one area where we'll be focused on neurodevelopmental disorders. Our customers in the research side of the market have been applying optical genome mapping to other neurodegenerative diseases, such as Alzheimer's and ALS, and the results are simply spectacular. We expect that those programs will continue and expand beyond the diseases mentioned to include applications and discovery research in pediatric populations. This research may yield novel content that could serve as the basis for future laboratory developed tests. We'll have to see how that research plays out, but it's an incredibly interesting area where structural variation is already known to play a significant role, and so the Saphyr system is almost certainly going to amplify that.

Got it. And then lastly for me, it feels like you broke through kind of a 1% TAM area on the research side of things. It just feels like perhaps 2021 may be the year that you break through to that 1% TAM on the commercial side. Is that a good way of pointing to the size of the platform out there and the capabilities and the growth anticipated for the coming year?

Yes, the numbers you're citing would need to be verified, but breaking through barriers is clearly what has been happening for us, and it's been around awareness and understanding. The amount of inbound interest in our target end markets is higher than it's ever been, and will be higher tomorrow than it was today. We have certain structural barriers; reimbursement is a big one here in the U.S. We have great programs designed to address that. The most fundamental aspect of addressing it is building a robust data set supporting the utility of optical genome mapping in these settings and validating it. That's the basis of these clinical trials. As we progress significantly over the course of 2021 and 2022, that foundation of data will serve to overcome the barriers to adoption. Yes, we've broken through in many respects, and that offers us the opportunity to do more work. We will see commercial breakthroughs over the course of this year, but it's really after completing key work this year that those breakthroughs will start taking off.

Our next question is from Scott Henry of ROTH Capital.

Thank you. Good afternoon, and congratulations on quite a year so far. Just a couple of questions. First, did you mention how many Saphyr placements, whether it be lease or sale were made during the quarter?

Yes, it was approximately 12.

Okay, great. I had 96 installed at the end of Q3, so a lot of those I would assume are out there ready to install in Q1. Is that the correct way to think about it, or whenever it may be in the future?

Yes, that's right.

Okay, great. And then when we look out to 2021, how should we think about the quarters? I don't know how much COVID is going to impact the first half of the year. Just trying to get a sense on Q1. Obviously, there are only eight days left in the quarter. But just trying to get a sense of how that trajectory may look throughout the year.

Typically, Q1 is a little seasonally soft for us, as the labs spend their budgets in Q4 and then save money in Q1. But it won't be dramatic. We expect to see modest growth through the year quarter-on-quarter. For the full year, we expect substantial double-digit growth, but it won't be triple-digit growth. We'll see year-on-year growth by the end of the year in the substantial double digits.

Okay, great. I haven't seen the 10-K yet. Could you give me a sense of where the real-time shares outstanding are, given a lot of levers in there?

We ended the year with 189 million shares outstanding, and right now we've got about 280 million shares outstanding with all the work we have done this year.

Okay, that's helpful. And then I guess just kind of a big picture question for Erik. Obviously, it's a different company today than it was four months ago, both in terms of market cap in terms of cash balance. Given that change in dynamics, how do you think about managing the company today versus then? Will there be any changes to the business model, perhaps either growing faster or being able to invest more in SG&A and R&D? Just trying to think about how you view it now versus four months. Maybe you don't view it differently at all. My guess is you probably do.

Yes, it's a great question. We have allowed that question to linger for a while without an immediate answer. We're very definitive; the company is positioned in an absolutely exciting, substantial genomics market with a differentiated technology serving an unmet need. The end-user markets are in the billions, and we're pretty sure that the total opportunity is bigger than anyone expects today. We don't think it makes sense to change the business model. What's makes the most sense is taking advantage of the resources investors made available to us and deploy that money behind the incredible story of optical genome mapping and the Saphyr system to help patients make new discoveries, which will transform different diseases and advance overall healthcare objectives of genomics in this new era of big biology driven by structural variation analysis. The capital is there to help us really double down on this plan; it's not for changing the plan. It doesn't mean we won't seek tuck-ins and technologies that could accelerate our plan, but the capital is there for us to double down on the original vision and make that happen sooner than we might have without that capital.

Our next question is from Kevin DeGeeter of Oppenheimer.

Hey, just to follow up on Scott's point, just to clarify for financial modeling. How are you thinking about the split between reagent rental and capital purchase on that 50 to 53 units you have to place this year?

Right now, we see it as roughly 50:50. It gets a little interesting; we are starting to see early reagent rentals that are now converting to sales. So what I think we'll see going forward is a little over 50% reagent rentals. A lot of those will transition to sales over the course of six months to a year.

Got it. Recognizing you don't provide guidance as such on operating expenses, I think we all expect OpEx expenses to accelerate pretty meaningfully this year; any parameters you would provide as to how to think about either over the course of the next 12 months or longer term the trajectory of spend? Thanks.

Yes, the biggest things we're investing in this year are first headcount; we're adding across sales, marketing and R&D. We're also spending on clinical trials. As you heard from Erik, our focus is on getting those clinical trials going as fast as we can. OpEx will see growth, not staggering. I'd say somewhere in the 20% to 40% range this year, and I would probably keep it in that range for the next couple of years.

We have reached the end of the question-and-answer session. I will now turn the call over to Erik for closing remarks.

Yes, great. Thank you, operator, and thank you to everybody who attended the call today. We look forward to seeing you soon for our first quarter 2021 call. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.