Is Bionano Genomics a Purchase?

Excessive-flying progress shares like Bionano Genomics ( BNGO 9.35% ) are usually controversial amongst completely different crowds of buyers. The place some may see a inventory’s potential to multiply in worth over time by pioneering new applied sciences or new enterprise fashions, others may see the unbounded threat that is related to making an attempt one thing new. 

However which crowd is true about Bionano? In reality, each side have some extent relating to this inventory. Let’s discover why.

Picture supply: Getty Pictures.

The argument for getting Bionano

For my part, the largest level in favor of investing in Bionano Genomics is that its enterprise mannequin will result in an enormous quantity of recurring earnings over time, thereby resulting in a virtuous cycle through which it might probably afford to funnel increasingly cash into creating new merchandise. 

Bionano makes a genome-mapping instrument referred to as the Saphyr, which is specialised in detecting main structural variations in chromosomes, comparable to giant insertions or deletions and translocations. 

Which means it is a great tool for a wide range of medical and analysis niches, starting from enabling genetic engineering of crops to detecting genetic issues. And, most significantly, Bionano claims that competing units cannot do the identical issues — nor can laboratory staff simply replicate its information output utilizing guide strategies. Due to this fact, not less than for now, the Saphyr’s capabilities are a aggressive benefit. 

Intriguingly, Bionano is constructing an ecosystem of consumable merchandise for the Saphyr. Its pattern preparation kits and microfluidic pattern chips are essential purchases for anybody to make use of the system. The concept is that you simply use the prep equipment to isolate and purify DNA from a pattern, then load the purified DNA into the chip, which you then insert into the Saphyr for evaluation. So any laboratory or clinic with a Saphyr might want to buy these consumables frequently, and utilizing the system extra ceaselessly entails buying much more. 

In different phrases, the Saphyr is Bionano’s ticket to constructing a considerable base of recurring income over time, which is tremendously interesting to buyers. Proper now, there are solely 164 Saphyrs put in globally, however in 2021, 69% extra methods had been put in than within the prior 12 months, which suggests the corporate’s march towards riches is simply getting began.

Talking of income, this firm is scorching, although it is not worthwhile but. Its annual income has grown by 77.5% within the final three years, and gross sales in 2021 clocked in at practically $18 million, an increase of 111% 12 months over 12 months. It additionally offered 96% extra chips in 2021 than it did in 2020, which implies that (not less than someplace) there’s an ever-growing variety of clients who’re really utilizing their units as supposed.

Count on this enterprise to maintain including to the Saphyr ecosystem and creating different analyzer units. Presently, administration expects one other system to launch within the first half of 2023. For subsequent 12 months, the corporate is predicting one other 33% to 50% soar in income.

To facilitate that outcome, it plans to maintain rolling out extra Saphyrs whereas launching new testing capabilities for the system in order that it might probably analyze sure genetic illnesses and blood issues. It’s going to even be releasing new protocols for its pattern preparation kits, which may spur some new gross sales.

Why it could be higher to carry off on shopping for Bionano

As compelling as Bionano’s enterprise mannequin and early indicators of market traction are, it is not a inventory for the faint of coronary heart. Within the final three years, its shares have fallen by a brutal 57%, and within the final 12 months the injury clocks in at a drop of over 75%. Although setbacks have been few and much between, the reality of the matter is that it is a speculative firm, making it not proper for risk-averse buyers. 

In spite of everything, Bionano is pioneering a chunk of {hardware} that is not essentially one thing that there’s a widespread, acknowledged want for inside the biopharma world. Even when the corporate’s claims concerning the Saphyr’s capabilities being nonreplicable utilizing different particular person units are solely true, many laboratories are apt to proceed utilizing their current hodgepodge of strategies and various methods to get the identical information. 

Likewise, even when it is true that the Saphyr is extra time-efficient than guide strategies or different approaches, it could be a tough promote to potential clients who do not assume that the system’s time-saving capabilities matter that a lot within the scheme of their enterprise. 

For my part, Bionano in all probability will succeed with getting the Saphyr extra broadly distributed in the long term, and it will probably make a ton of cash whereas doing so. Although the comfort issue is not going to be sufficient to drive wildfire-like gross sales progress endlessly, constant investing in creating new exams and capabilities will probably result in sources of recent income from previous clients. However its success may take fairly just a few years at its present price of putting in new methods, and it would underperform throughout a lot of that point. 

Due to this fact, except you are keen to take a position with a five- or six-year time horizon, it is best to in all probability move on this inventory. It is not that the corporate’s progress will stall; it is simply that the preliminary traction the corporate has gained will take fairly a while to snowball to the purpose the place the market will acknowledge its potential as a progress inventory — and it may even go down extra within the meantime.