Addressable Market Aside, Bionano Stock Is a Buy on Innovation Alone

In a recent presentation, Bionano’s (NASDAQ:BNGO) CEO, Erik Holmlin, explained in detail the reasons why the company’s Saphyr system is so valuable making me rethink my position on BNGO stock.

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Holmlin outlined the company’s revenue opportunities and its go-to-market strategy, as well as steps it’s taking to ensure that researchers and doctors can be reimbursed for using its system by payers.

Between that and viewing the presentation and slides I’m increasingly persuaded by the bull case.

I’m convinced that the company’s technology will be revolutionary and that Bionano will become tremendously profitable. Consequently, I recommend that all long-term investors buy BNGO stock.

A Closer Look at BNGO Stock

Bionano’s analytical platform, Saphyr, has an unparalleled ability to detect structural variations of the molecules of DNA, Holmlin explained. Small structural variations (SVs) can be the force driving diseases, including cancer.

According to this slide presentation, accepted medical guidelines already recommend detecting SVs in order to diagnose many diseases, including blood cancers. The current standard-of-care techniques for analyzing DNA, however, cannot detect many SVs because of the highly repetitive nature of DNA.

Homlin explained that Saphyr can reveal DNA variations other diagnostic apparatus can’t detect, meaning it can detect diseases those apparatuses would miss.

By successfully diagnosing patients who could not previously be diagnosed, Saphyr could save millions of lives.

Among the diseases for which Saphyr has produced new information are ALS, Alzheimer’s, liver cancer, leukemia, and epilepsy.

I believe that, by revealing new information about diseases, the company’s tool greatly increases the chances of finding cures for them or making discoveries that will greatly mitigate their impact.

Importantly, multiple U.S. medical thought leaders have endorsed Saphyr, and tests have shown that its diagnoses concur 100% with those of standard-of-care products.

A Large TAM and a Viable Go-to-Market Strategies

Bionano has a sizeable total addressable market (TAM), $2.6 billion to $3.8 billion according to company estimates.

It believes that it can obtain $500 million to $600 million from selling Saphyr to cytogenetics labs for diagnostic purposes, along with annual recurring revenues of $200 million to $400 million. There are over 2,500  such labs around the world, the company estimated.

A much bigger opportunity is research labs, of which there are over 7,000 in the world. Holmlin claimed that Bionano could generate $1.4 billion to $1.8 billion by selling Saphyr to those labs and another $500 million to $1.1 billion in annual recurring revenues.

The company is conducting 22 clinical tests of the platform in four main areas, pre-natal, post-natal, blood cancers, and solid tumors. Based on this data, payors can decide to reimburse the company’s customers for their use of Saphyr.

Bionano is working hard to enable its customers to be reimbursed for the tests.

In August 2020, Bionano acquired diagnostic service provider Lineage. Lineage provides services that cytogenetics labs find attractive, including genetic counseling, certified tests, certified coders, and a large patient database.

Packaging those features with Saphyr makes the system much more attractive and provides an opportunity for Bionano to market even more directly to potential customers.

The Bottom Line on BNGO Stock

Saphyr looks poised to enable health care professionals to correctly diagnose many more patients while allowing researchers to make diseases much less deadly.

Meanwhile, Bionano is taking multiple steps to make Saphyr more attractive to labs. Given all of these points, I believe that the company will ultimately become very successful.

After its recent pullback, BNGO stock has a market capitalization of about $2 billion. In light of the company’s large opportunity, I think that long-term investors who buy its shares at their current levels will realize a very large profit.

On the date of publication, Larry Ramer held a long position in BNGO. 

Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.


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