NEW YORK – Investment bank Oppenheimer on Wednesday initiated coverage on diagnostics company Bionano Genomics with a rating of Outperform and a price target of $1.50.
In a note to investors, analyst Kevin DeGeeter said the company is transitioning from selling optical mapping equipment to research labs to selling clinical diagnostics that have the potential to replace microarrays for cytogenetics analysis.
"If a series of clinical validation studies scheduled for presentation in 2020 confirm Saphyr performs as well as microarrays with faster turnaround time, we believe [Bionano] will be positioned for acceleration in revenue growth in 2021 and peak cytogenetics revenue of $75 million to $100 million," he wrote. "While improved detection, particularly in larger variants, may be possible with Saphyr compared to microarrays, we do not view better analytical performance as necessary for commercial success in US."
DeGeeter noted several points that went into his Outperform rating, including Bionano's move to take Saphyr from a research-use instrument into clinical testing. The company was formed to commercialize optical mapping technology as an alternative to long-read sequencing for the detection of large genomic structural alterations, he said. While early adoption was focused on academic researchers, the launch of the second-generation Saphyr platform in 2017 offering a cost-per-run below $500 means Bionano now has a product profile suitable for high-volume clinical diagnostic applications.
Further, DeGeeter said, the value proposition of cytogenetics with Saphyr lies in the faster turnaround time of five days compared to 14 to 21 days with microarrays. He compared it to the value of liquid biopsies versus tissue-based testing for solid tumors.
"In both examples, primary benefit is the potential to capture genetic information more quickly to begin patients on the best therapy sooner," DeGeeter added.
The only 2020 headwind that he noted for the company is the impact of the COVID-19 pandemic on reported revenues. Oppenheimer expects Bionano's revenues to decrease from $10.1 million in 2019 to $7.7 million in 2020 as a strategic shift to a reagent rental placement model combined with COVID-19 related restrictions on wet lab work at research centers affect reported revenues. However, the impact from both of these trends is expected to recede beginning in the fourth quarter of 2020.
Bionano's shares rose more than 12 percent to $.31 in Wednesday morning trading on the Nasdaq.