Products for RUO for the time being but aiming for clinical use as medical device
Saphyr simplifies cytogenetics, is more efficient and cost effective, detecting 100s bp (base pairs) to Millions bp Structural Variations (SVs) on Chromosomes.
- Illumina: 1 to 100s bp
- PACBIO: 1 to 10000 bp
More detection of SVs means earlier detection of genetic diseases
○ 50 - 70% of patients tested for Constitutional Genetic Diseases have their results negative
○ 50 - 70% of patients tested for Blood Cancers have their results negative
○ FY19: 66% instrument + 27% other products (94% products) + 6% services
product gross margins: 31%, services gross margins: 58%
○ 3Q20: 72% products (-50% YoY) + 28% services (+307% YoY), Total Revenues down 33% YoY
product gross margins: 28%, services gross margins: 52%. Gross Profits down 21.5% YoY
Stock given 180 more days to maintain share price of $1.00 to remain on the NASDAQ
Rumors of possible investment from Ark
Change in business model allowing customers to rent instruments instead of buying them. Explains shift from product revenues to services in recent quarter. Less revenues but more gross profits
9500 potential customers with recurring revenues on chips, kits, services and now rents.
Company estimates a potential market of $2.6 - $3.8 billion with current TTM revenues about $7 million.
Only one product subject to FDA approval to maximize market
Limited customer base of less than 9500.
High stock dilution of X15 since IPO in September 2018
High salary and compensation to insiders with very little ownership of shares
Only a few hundreds of products sold in 17 years for less than $10 million in revenues in the TTM
Revenues of $7.30 million in the TTM, down from $10.1 million in 2019. CAGR of 2% since 2016.
Spending about $9 million a year on R&D. More than TTM Revenues
SG&A costs $27.5 million in TTM, growing by 9% annually since 2016.
Net loss of $37.2 million in TTM vs $29.8 million for FY19. $35 million loss as FCF.
Good Balance Sheet - Can raise more capital through stocks, raised $19 million in IPO and $36 million post-IPO
○ Total assets: $41.4 million including $8.5 million in intangibles; total liabilities: $26.7 million, book value of $14.6 million.
○ Cash: $18.8 million, debts: $1.7 million, current assets: $29.2 million, current liabilities: $24.7 million.
New business model can improve on margins but useless if revenues don’t grow.
My personal Biases:
○ Not really a fan of pharmaceutical stocks, whereby future depends on approval of only one product
○ Probably a pump and dump stock with 1000% in a few days
○ DCF model won’t work because future FCF in the coming years will be negative
○ Despite big recent gains, it has underperformed the S&P 500, sector and industry since IPO.
○ Looking at scenarios where they achieve profitability by 2026. Very unlikely to happen.
○ profit margin of Illumina about 25%. There’s a good correlation between EPS and price (PE of 85, range of 30-200 in last 10 years). Bionano can achieve profit margins of 10% in 2026. PE ratio as Exit Multiple.
○ Their estimates of $2.6 - $3.8 billion is too optimistic
○ Bull case: $3.5 billion; Base case: 2.5 billion; Bear case: $1.5 billion in revenues in 2026
○ Further share dilutions by 300%
○ PE Ratios: X20, X40, X60, X80, X100 each with equal probabilities of 20%.
Looks as good investment if they achieve profitability, which is unlikely
Need big margin of safety to account for big risks
25% expected annual returns not worth the risk
Most probably a pump and dump, wait for a better opportunity to enter if presents itself, SELL rating for now.
Not worth $1 billion for now.