Shares of life sciences company Bionano Genomics (NASDAQ:BNGO) have dropped more than 20% in the past month. The development is puzzling, considering how it upturned four consecutive quarters of revenue slump with its latest earnings results. Regardless, the pullback presents an excellent opportunity to buy BNGO stock at a discount.
As a refresher, Bionano is a life sciences company that provides instrumentation for genome analysis. Its flagship product is called Saphyr, a platform that accelerates the discovery of new diagnostics and therapeutic targets. Therefore, it streamlines the discovery pathways for chromosomal changes. The company offers four main products: data solutions, prep kits, Saphyr and Irys.
Earlier this year, the company’s investor presentation stated that its market opportunity stands at over $3.25 billion. It plans to reach yearly distribution of roughly 10,000 Saphyr Systems.
Moreover, BNGO stock is trading at a steep discount to its average analyst price estimates. Therefore, the opportunity is ripe to scoop up the stock for future gains.
Stellar Fourth-Quarter Results
Bionano recently reported its fourth-quarter results, in which it posted a massive 43% increase year-over-year in revenues to $4 million. Additionally, it also beat consensus revenue estimates of $3.5 million. Product revenue was up 4% to $2.7 million, and service revenues grew handsomely to $1.1 million. However, the growth in revenues wasn’t enough to turn a profit, as it posted a hefty $11.7 million loss. Net loss exceeded analyst estimates of $7.9 million. Quarterly expenses rose 38.2% on a year-over-year basis to $12.3 million, mainly due to salary expenses.
Most of the company’s revenue growth was attributable to the addition of diagnostic services provider Lineagen. The deal closed in August last year and contributed substantially to its financial performance in the fourth quarter. However, it also added to the company’s salary expense in a big way. A total of 49 new staff members were added in the last year, the bulk of which came from Lineagen. Additionally, Bionano increased the use of its Saphyr diagnostics system in the quarter. Its installed base rose to 97, up 24 from 2019.
Perhaps the most encouraging element of its financials is its strong balance sheet position. It ended 2020 with $38.4 million in cash and equivalents, compared to $17.3 million in 2019. Moreover, it raised another $335 million through a couple of underwritten public offerings and the utilization of its $40 million ATM facility and warrants. Therefore, in CFO Chris Stewart’s words, “As we begin 2021, Bionano’s balance sheet is in its strongest position ever.”
So far, Saphyr has shown a lot of promise in increasing throughputs, providing ease of use and dropping the price per sample. Several studies were released in the third quarter last year, comparing the system with different cytogenetic methods. The results have shown that Saphyr has similar efficacy in less time and at lower costs. Additionally, recent studies allude to the effectiveness of the platform in areas such as the coronavirus and oncology.
There’s a lot on Bionano’s plate this year, which will solidify its bull case. It expects to obtain accreditation for its Saphyr-based laboratory tests for acute lymphocytic leukemia and facioscapulohumeral muscular dystrophy for some European markets. Additionally, it plans to expand its pediatric assays in the third quarter this year.
Moreover, it also expects to validate three new laboratory-developed tests with billing codes in the fourth quarter. Hence, if everything is in line, it should have a much larger installed base by this year’s conclusion.
Bottom Line on BNGO Stock
BNGO stock has been on a negative streak of late for no particular reason. Its progressing well in the commercialization and expansion of its Saphyr system, which is looking increasingly promising. And is balance sheet is the strongest it has ever been.
If anything, I feel that the pullback is an excellent opportunity to invest in the stock, which could prove to be a disruptor in the life sciences sector.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.