Those who held BioNano Genomics (NASDAQ:BNGO) stock from late December until mid-February had a very happy start to 2021.
BNGO stock rocketed from 51 cents on Dec. 16, 2020 to $15.57 at the close of trading on Feb. 16, 2021. The stock has given up more than a third of that gain, but it’s attracted the attention of retail investors.
BioNano has a compelling story that has the potential to cause great disruption in the field of genetics and in the treatment of genetic diseases and perhaps even some cancers. However, those who invest in BioNano Genomics probably won’t meaningfully benefit for years.
The Next Frontier of Genomics
BioNano Genomics is an innovator in the analysis of genomic structures. Such analysis is taking the field of genomics beyond what is possible through genomic sequencing. Structural variation (SV), BioNano’s area of specialization, is more than a next generation of gene sequencing; it’s taking the field in a different direction altogether.
The objective of structural analysis is to go beyond where gene sequencing leaves off. By introducing information that sequencing cannot detect, SV raises the likelihood of correctly diagnosing patients and may lead to a different approach to developing therapeutic treatments. And eventually the results of this structural analysis could become the precursor to gene editing procedures.
Lower Cost, Higher Throughput
However, structural analysis is not a new field. And that’s part of the opportunity of BNGO stock. Prior to BioNano arriving on the scene, genomic structural analysis was bifurcated into distinct processes, each requiring much time and a great deal of expertise to execute.
BioNano’s product that enables analysis of SVs, its Saphyr system, combines multiple processes in a single system. Its objective is to deliver results in significantly less time than competing products.
The company has driven down the cost of performing SV analysis to around $450 per gene.
At the same time, it’s increased the speed at which the analysis can be performed. Ultimately, the combination of lower cost and higher throughput will be a key catalyst to driving widespread adoption of the Saphyr system.
And BioNano is also taking steps to ensure that its customers — cytogenetics labs and research labs — get reimbursed for performing these tests. One of these steps was the acquisition of Lineage, a diagnostic service provider that offers services which BioNano’s customer base finds attractive.
If It Was Easy, It Would Have Been Done Already
In the broad field of genomics, the scientific community has moved the ball a long way in the last 20 years. However, while progress in the field is accelerating, it still takes time. And that’s why investors have to be realistic about what to expect from BNGO stock.
Currently four analysts have issued ratings and price targets on BioNano. Since the beginning of the year, two of these analysts have raised their price targets on BNGO stock significantly. Maxim Group raised its target from $2 to $14 in January. Then in February, Oppenheimer increased its target from $1.50 to $15.
BioNano has an addressable market of around $3.5 to $4 billion dollars. However achieving those lofty price targets will require aggressive sales growth that will be difficult to generate in the next 12 months.
Investors Have to Be Patient With BNGO Stock
BioNano is not profitable yet, but the company does have revenue coming in. That being said, its revenue is not enough at this time to support the most optimistic forecasts of analysts.
I think there is a long-term case for owning BNGO stock. But I would caution investors that its story will be told in years, not months. For that reason, I advise investors to keep their positions small and to look for better entry points.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.