BioNano (NASDAQ:BNGO) stock has soared more than 1,000% in recent weeks. Shares have clawed back from penny stock range to top the $10 mark now. Not too long ago, the Nasdaq was threatening to delist BNGO stock because its share price was so low. Now, that’s no longer a hazard.
BioNano has come roaring back due to excitement around its tumor testing platform. It has demonstrated positive clinical results, generating a bunch of trading activity. On top of that, BioNano has raised capital, ensuring that the company has money to keep operating for years to come.
Still, this is a highly speculative situation. At this point, BioNano’s successes have not translated to commercial momentum. In Q3 2020, the company generated just $2.2 million in revenue. That figure was actually a decline from the same period in 2019. Thus, investors should use caution when assessing the flurry of positive media attention about BioNano this year.
Why BioNano Has Surged
On paper, the company has a promising diagnostic testing platform. BioNano’s lead product, Saphyr, is used to detect structural variations in cells. These anomalies are linked to cancerous tumors, genetic diseases and more. BioNano claims Saphyr allows this sort of testing to happen at a far lower price per genome than its rivals such as PacBio. It also reports excellent results in terms of sensitivity and catching more problematic samples than the competing PacBio product.
In addition, in January, BioNano reported that scientists are using Saphyr to find structural variants that may cause patients to have a more severe reaction to the novel coronavirus. While Covid-19 stocks aren’t as hot as they were last year, this is still enough to generate additional excitement.
On top of that, as of recently reported data, bears have sold 17% of BNGO stock short. As we’ve seen in recent weeks, traders are looking at heavily shorted stocks as targets for short squeezes. BioNano appears to have benefited from this phenomenon.
Sizing Up BioNano’s Balance Sheet
Regardless of what you think of BioNano’s business strategy, BNGO stock is worth more now than it was in December. That’s because the company has shrewdly used the recent share price momentum to raise capital.
Our Mark Hake has a detailed look at the math. BioNano sold stock for $3/share, and then again for $6/share a few weeks later. On a combined basis, these deals brought in around $300 million. Add in other cash balances, and Hake estimates that BioNano has something like $400 million of cash on hand. The company’s market capitalization appears to be around $3 billion, depending on how many shares the firm issued in its last offering.
Thus, the company has at least $1 per share in net cash and potentially significantly more. This gives BioNano a solid footing going forward. BNGO stock was clearly trading with a potential wipeout risk prior to December, hence the 25 cent share price at one point last year. Now, the company is cashed up and carry on operations for several years. As such, the stock is at little risk of losing all its recent gains.
BNGO Stock Verdict
BioNano’s situation is much better than before. But it’s hardly great. You can’t really justify a fully diluted $3 billion market cap just off $400 million of cash. The business has to deliver as well to justify that much of a premium.
Long story short, traders should be extremely careful with BNGO stock. After all, shares were trading for 50 cents each in December, and now they’re at $11. As we’ve seen with GameStop (NYSE:GME), stocks that go up thousands of percent in a few weeks can quickly give back most of their gains.
BioNano’s platform could be the next best thing in cancer research. Or it very well might not be. These are complicated scientific matters, and it’s hard for outsiders to fully assess the situation. The best proof of success are commercial revenues. If BioNano’s platform beats out other rivals such as PacBio, it will see sales soar in coming quarters. Otherwise, BNGO stock will cool back off once the current wave of trading enthusiasm subsides.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.