• MJ

Bionano: Big Upside Potential but Plagued by Slow Sales Growth

Background

Bionano Genomics is a biotech company founded in 2003 and based in San Diego, California that creates solutions for genome analysis. They specialize in optical genome mapping. Their primary product is the Saphyr system which is a research instrument that rapidly identifies genome variation. The assembly and discovery systems of the Saphyr system far outperform sequencing-based technologies in sensitivity, meaning that Saphyr detects far more cases of structural genome variants. Some of Bionano’s other products include Bionano chips, Bionano Prep Kits, and Bionano Data Solutions.

Fundamentals

· Beta of 0.9147

· Market cap of $480.76 million

· Revenue of $17.98 million


Recent Developments

· Bionano appointed Dr. Aleks Rajkovic to its board of directors. (07.03.2022)

· Q4 2021 revenue rose 58% to $6.3 million.

· Launch of its rare undiagnosed genetic disease (RUGD) strategic initiative aimed at the 350 million people globally living with a rare disease. (28.02.2022)

· Publication of prospective study demonstrating performance improvements from OGM in the analysis of AML and MDS compared to traditional methods. (22.02.2022)

· Bionano announced the adoption of its Saphyr system by two genetics lab hubs within the UK’s National Health Service (02.02.2022)


Analysis

The appeal of Bionano’s Saphyr system is its wide range of applications including undiagnosed genetic disorders, hematologic malignancies, solid tumor research, gene discovery, gene therapy, and evolutionary biology. Furthermore, the genetic testing market is very hot and is expected to grow 10.1% per year from 2020 to 2027. The market is expected to reach $21.1 billion in 2027. Bionano is also involved in the chip consumable and diagnostic testing services segment which expands its market potential.


While these markets have very large potential as they continue growing, competition in the genetic testing market is increasing. Cheaper genome analysis methods including QF-PCR and Karyotyping remain popular due to their relatively low price point. Additionally, larger companies such as Pacific Biosciences are developing complex tools like the Saphyr system that detect genomic variations. Currently, Bionano is not positioned to beat the competition and gain significant market share. Its Saphyr system is believed to be slightly dated and there are many discrepancies in the structural genomic variations it can detect compared with its competitors. These issues with Bionano’s main technology platform are very concerning for a company trying to compete in the rapidly progressing field of genomics.


Bionano’s slow sales are another point of concern. Bionano reported sales declines of -15.59% and -16.06% for 2019 and 2020 respectively. The slow sales growth may indicate a lack of demand for the Saphyr system within the medical community. In response to this, Bionano has attempted to expand its product offerings by acquiring Lineagen and BioDiscovery, however positive results have not yet been observed from these additions. Another factor limiting Bionano from greatly increasing its revenue base is the fact that it does not have its own manufacturing facility. Instead, Bionano relies on outsourcing its production to third parties which provides no control over the supply chain and limits opportunities for more revenue. On top of this, Bionano has a trend of increasing operating expenses that cut into their revenue.


Despite these concerns, Bionano does have some impressive statistics. They have a total debt of 1% which is fantastic, especially considering that they have over $337 million in assets. Additionally, Bionano had $17.98 million in revenue in 2021 and projects to generate $30 million in revenue for 2022. Revenue growth is expected to reach 87.21% per year by 2025. While the current stock is at 1.75, the latest analysts suggest that the target is 6 or even up to 9 which creates over 400% upside potential.


Conclusion

While analysts are positive about Bionano, I remain skeptical due to the slow sales growth and growing competition in the genetic testing field. Bionano currently has the smallest position in my portfolio at 0.23%. I bought at the low price of 0.9 so I will keep a small position in Bionano for the benefit of the doubt until I complete the analysis of my biotech portfolio.


Sources:

https://investorplace.com/2022/02/bngo-stock-is-not-the-genomics-stock-to-bet-on/


https://www.alliedmarketresearch.com/genetic-testing-market#:~:text=The%20genetic%20testing%20market%20accounted,10.1%25%20from%202020%20to%202027.


https://investorplace.com/2022/02/bionano-genomics-has-attractive-applications-but-an-unattractive-stock-price/


https://www.marketwatch.com/investing/stock/bngo/financials/income


https://www.reuters.com/companies/BNGO.A/key-developments




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