Sometimes, things just fit like a key in a lock. This might be the case when it comes to one biotech’s recent acquisition, so says Maxim’s Jason McCarthy.
On August 24, Bionano Genomics (BNGO) revealed it is purchasing molecular diagnostic services company, Lineagen, in a deal worth $9.6 million. As per the terms of the deal, BNGO will also take on $2.9 million in debt and repay the $1.1 million in COVID PPP loans. “We view the acquisition as synergistic, or a 'Lock-and-Key' fit for Bionano as it continues to expand its footprint in the cytogenetics space,” McCarthy commented.
What exactly is Lineagen bringing to the table here? Extensive experience in commercializing cytogenetic tests, navigating third-party contracts and reimbursement, according to McCarthy. “Lineage has microarray testing which provides critical information for pediatric neurodevelopmental disorders, including autism and developmental delay... Lineagen has developed and compiled a database stemming from Toronto Sick Kids (The Hospital for Sick Children), with samples from kids with developmental delays. The company has also conducted over 60,000 tests from over 30,000 kids,” he explained.
This “substantial database” is so important as the specific roles of the genes involved with the disease often aren’t know. Offering further explanation, McCarthy said, “There may be some literature mining that can help find some information, but connecting the dots is usually difficult and sometimes impossible. The Lineagen approach is able to better connect those dots.”
Reflecting an added bonus, Lineagen also brings about $7 million in revenue, $10 million on an annualized basis, with it. However, McCarthy believes that even though “the revenue is a positive, it's the expertise that is most important in our view, as it should help Bionano accelerate its penetration in cytogenetics.” This could include Saphyr-based testing getting the green light from the FDA.
Through its optical SV mapping, Saphyr combines the power of karyotying, FISH and microarray and transforms it into one workflow with superior results. To this end, the microarrays from Lineagen can potentially be converted to use on Saphyr, and new tests for Saphyr can also be developed, in McCarthy’s opinion. He also mentioned, “The first Saphyr-based test stemming from all of this could come on-line in 2021 as per Bionano on the conference call... The CLIA license that comes with Lineagen will also be a significant factor as it can get Saphyr-based tests to FDA clearance and reimbursement.”
Everything BNGO has going for it prompted McCarthy to stay with the bulls. Along with a Buy rating, the 5-star analyst kept a $2 price target on the stock. This suggests shares could climb 232% higher in the next year. (To watch McCarthy’s track record, click here)
Turning now to the rest of the Street, other analysts are on the same page. With 100% Street support, or 3 Buy ratings to be exact, the consensus is unanimous: BNGO is a Strong Buy. The $1.55 average price target brings the upside potential to 131%. (See Bionano stock price forecast on TipRanks)
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