Greetings. And welcome to Bionano Genomics Inc. Second Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ashley Robinson of LifeSci Advisors. Thank you. Please go ahead.

Thank you, Donna, and good afternoon, everyone. Welcome to the Bionano Genomics second quarter financial results conference call. Leading the call today will be Dr. Erik Holmlin, CEO of Bionano. After the market closed today, Bionano issued a press release announcing its financial results for the second quarter 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 our strategic and commercialization plans, 2020 sales pipeline, anticipated benefits or improvements to the Saphyr system, and the advantages of the Saphyr system over current technologies, our expectations regarding timing and content of study results and anticipated benefits of these studies in driving adoption of the software system. Such forward-looking statements are based upon current expectations and there can be no assurances that these 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 our 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’s website. For the benefit of those who may be listening to the replay or archived webcast, this call is held and recorded on August 13, 2020. With that, I will turn the call over to Erik Holmlin. Erik?

Thank you, Ashley, and good afternoon, everyone. I want to thank you for joining us today for this review of our second quarter results. And after my prepared remarks we'll open the call for a Q&A session. And I just want to say at the outset that we are really amazed and thrilled at the progress we see around the globe in connection with the adoption of Saphyr and its use for really groundbreaking work across genomics. What we're seeing are papers published recently that are showing how Bionano can be a part of creating solutions such as potential treatments and vaccines for COVID-19, possibly even test used to manage the disease of patients with COVID-19. And all of this progress is happening amongst incredible advances that we're making in driving Saphyr to become the potential new standard in cytogenetic analysis for oncology and genetic diseases. In the business, we are seeing an enthusiastic response to the new go-to-market strategy that we implemented earlier this year. Our goal has been to make it easier than ever for clinicians and researchers to access Bionano data in a way that's going to enhance their understanding and utility of our Saphyr technology. We see that we are gaining traction with significant increases in services projects, consumable sales, and rental programs and system sales that taken together really grow the installed base of Saphyr systems around the world. We are seeing increasing interest in the academic community amongst researchers who are continuing to publish really groundbreaking research and findings that show using our system will advance their understanding of genomics. And we are also seeing publications now that illustrate the acceptance of Saphyr by clinical researchers who are developing assays for cytogenetics, including in areas such as genetic diseases and hematology-oncology. In fact two…

Thank you. [Operator Instructions] Our first question is coming from Kevin DeGeeter of Oppenheimer. Please go ahead.

Hey, guys. Thanks for taking question. Erik, appreciate the really thorough update. A few things. Appreciate the disclosure with regard to flow chips. I think you said about 1200 in the quarter. Is that still overwhelmingly research? Or are you beginning to see some pull-through from cytogenetics customers? And I suppose the related question is do you always have kind of visibility as to whether or not a customer is using this for sort of a research project versus cytogenetics at this point?

Yeah. Yeah, we have pretty good visibility, because we're engaged in the selling process. And so, there's a pretty deep discussion as to the applications. I would underscore for everybody following along and for you that the Saphyr is for research use only and not for diagnostic purposes. And so, labs will develop it and develop clinical diagnostic assays on it which they offer as laboratory developed tests or in accordance with whatever their regional regulatory requirements are such as throughout Europe. But, when a customer intends to develop clinical assays on the system, we're generally aware of that. What I will tell you is that, at least half of the flow cells, and I think it was about 1,400 or so flow cells that were sold in the quarter. At least half of those are going to sites that are developing assays that they intend to apply in a clinical setting. Many of those assay development projects and adoptions are through the reagent rental program, which is sort of predicated on a volume of chips upfront. But these caps are going towards these assay development projects.

No, that's very positive. It's good to hear. And if you were to you kind of characterize uptake for some of this -- use potentially in a clinical setting. In Europe versus U.S., are you seeing any geographic variation in terms of uptake for applications outside of the research -- traditional research market?

Well, we do and it would be difficult to disentangle the remarkably complex sort of macro environment that we're in right now. But the facts are that Europe is really accelerated in its adoption of Saphyr for these types of cytogenetic-oriented applications. And one would need to disentangle whether that's a reflection only of Europe's relatively progressive state regarding an exit from pandemic shutdown versus that here in the United States? Or is it something structural about the European economic -- health economic system. I think both of those things are playing a role here and it will take some time for it to play out. But the facts are that Europe is really doing incredibly well and showing really leadership at least in our company around adopting this cutting-edge technology.

Great. And maybe one last one for me then I'll get back in the queue. And that is the service revenue, you did see what looks like a nice sequential uptick, which I think is consistent with what some of us hoped we would see with the new commercial model. But if we think about that $240,000 give or take revenue. Is that a base that we should think about as continuing to grow through the balance of the year? Or were there specific service contracts perhaps large more one-off contracts in 2Q that may not make that representative of a trend in service revenue?

No. I believe that this is a reflection of what to expect overall. And within that services and other revenue, yes, I would note that there are some other things, such as revenues tied to warranty and service warranty service contract. And so -- but -- so I do believe that that's not dominated by any single event.

Great. Understand. Thanks for taking my questions. It’s actually a pretty nice quarter. Thank you.

Thank you.

[Operator Instructions] Kevin, we are coming back to you for any additional questions that you have.

Okay. I actually just had maybe one more and it's sort of largely a housekeeping item. And that's as you think about -- you've really kind of cleaned up the capital structure here. It looks like in fact converted kind of over half of the warrants that were outstanding. With kind of a little bit more balance sheet flexibility, are there certain COVID-related spending cuts that you mentioned kind of salary reductions other items that may look to reverse here in the near term? Or should we think about the operating expense structure as reported in 2Q as being the baseline for the balance of the year.

Well, we have parsed out the salary reductions. And so that's certainly a portion of the relative benefit. Even though we were up on a year-over-year basis we might have been up more if the salary reductions were in place. So we have reversed those out. But fairly limited travel and expense costs overall and laboratory work in headquarters is focused primarily on those services projects. We're never reducing product development, but it's not as much as we would have been doing a year ago. So some discretionary spending remains relatively down on a year-over-year basis. So it's probably somewhere in between.

And then just lastly for me. You did mention upcoming publication from a very visible consortium that I think many folks particularly in the U.S. view -- you view as kind of thought leaders in the cytogenetic space. And then my question is sort of for the U.S. potential U.S. cytogenetics-related business. Do you think that publication is important to drive potential customer engagement? Or is there a sense from the data that's been presented at a number of meetings actually over the last six months to 12 months that Saphyr works and that -- for cytogenetics and publication sort of validating that it works may not be as important in driving uptake or use decisions.

Well, I would say that, we are certainly buoyed, by the results that are coming from these studies and publications, in Europe. We have had for example the Columbia-led study has been presented. And we've been able to share those results. They are phenomenal results 100%, concordance in that study. And the publication is proximal. And as you know, with publications there, they get on time lines that are fairly unpredictable. But there's no, reason for the delay other than publications are on an unpredictable time line. But the results are very positive. So we're buoyed by, the study that are in Europe. But I will say that, because of overall differences in just the structure of approaching clinical testing workflows, studies conducted in and published out of United States-based laboratories are also going to be needed. And very important and play a significant role. And it won't be just one. There are several that are ongoing. And one is great, but there needs to be a critical mass and so that's really something that, we're deeply focused on.

Very well, thanks for taking all my questions.

You're welcome.

Thank you. Our next question is coming from Jason McCarthy of Maxim Group. Please go ahead.

Hi, everyone. Thanks for taking my questions. It's Adheip on the line for Jason. Just looking beyond, COVID-19. Given the fact that, tumour heterogeneity plays a substantial impediment to therapy, in many cancer indications, do you see the Saphyr platform playing more of an increasingly central role in drug research? And do you see this becoming an increasingly larger revenue stream?

Yeah. So I believe that, our ability to see adoption by drug developing firms, such as pharmaceutical companies, biotech companies, and the partners that serve them, CROs for example, we expect that to improve. And there have been improvements and enhancements in our product portfolio, that will help drive that including the release of solid tissue DNA isolation kit, because that can be directed to solid tumour research. So our product portfolio is rounding out there. And when you couple that with Saphyr's remarkable ability to see the pathogenic events, even if they're present in an extremely low abundance, it means you have a very powerful system and data type to uncover novel events that may be druggable targets. And so it is our expectation that, pharma research, initially in a basic research setting, but eventually as part of clinical trial enrolment. And other forms of patient testing will continue to be something that is a significant opportunity for us.

Great. Thanks for the additional clarity.

Thank you. This brings us to the end of our question-and-answer session. I would like to turn the floor back over to Mr. Holmlin, for closing comments.

Thank you very much, operator. I want to thank everybody, who has joined the call. And I wish you all the very best. And we're excited about, the future of Saphyr and our progress within Bionano. So thank you very much.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines or log off the webcast, at this time. And have a wonderful day.