Bionano $BNGO. Why this company could be a potential 10 bagger
Bionano is on a mission to disrupt the 60 yr old process of genome analysis for large structural changes/variations in the genome. The detection of large scale genomic variation in chromosomes utilizes many decade-old techniques of karyotyping, fluorescence in situ hybridization (FISH), or microarray for clinical tests.
Karyotyping is a process by which photographs of chromosomes are taken and a cytogeneticist looks under the microscope to look for structural abnormalities in the chromosomes. Obviously, it can be very subjective and unless there are large structural abnormalities, smaller abnormalities could easily be missed.
The picture above shows Karyotyping.
Bionano digitizes this process and with high accuracy provides information regarding large structural abnormalities in the chromosome. We can say in simple terms that Bionano is a digital genome analysis company for large structural variation in the genome.
The company’s annual report asserts that high throughput sequencers (HTS) that Illumina sells are good at detecting the genome variations involving just a few base pairs or a single nucleotide. The equipment sold by Illumina is not able to detect large structural variations in the genome which Bionano company’s equipment Saphyr can. On the other hand, Saphyr cannot detect genome variations that illumina’s equipment can. So, they complement each other.
Saphyr system: Instrument, chips, and software
The present techniques of detecting large structural variations in the genome are tedious, labor-intensive, time-consuming, expensive, and not scalable and only detects a small proportion of genome variations.
Bionano’s Saphyr system is the only product capable of detecting large structural variations with high accuracy in a time-efficient and cost-effective manner. It provides a complete and accurate physical map of the genome that enables users to easily and systematically detect structural variations that sequencing and cytogenetics technologies can easily miss.
This system is only available in a research use only (RUO) manner. But this shouldn’t deter investors from looking into the company. The company claims that the research/discovery segment as well as cytogenetics segments could demand up to 9500 Saphyr systems. Furthermore, the company generates recurring revenue-based consumables, reagents, and software systems.
The company estimates a total TAM of about 2.7 to 3.5 billion.
Existing technologies and where does Bionano stands:
Sequencing:
This technique is dominated by Illumina. It can read up to a few base pair variations or a single nucleotide.
Pacific Biosciences of California and Oxford Nanopore technologies developed systems that can read up to tens of thousands of base pairs. However ever, these read lengths are not enough to detect large structural variation in the genome and also not cost-effective.
Cytogenetics:
It is time-consuming, labor-intensive old fashioned technology with poor reliability and accuracy. It is more expensive than the Saphyr system.
Current situation of Bionano in the capital market:
2020 has been a turbulent year for Bionano. It got a delisting notice from NASDAQ because it was not able to maintain its stock price above 1 dollar for 10 consecutive days. On December 30th, 2020 it got a 180 days extension. But more than that few notable things occurred in the last two weeks which caused the stock price to rise meteorically.
On December 23rd, 2020, a publication revealed side by side comparison of the Pacific Biosciences sequencing method only detected 72% of large structural variants detected by the Saphyr system. Furthermore when the Pacific Biosciences method was used it cost between 10,000 to 20,00 dollars per genome while the Bionano system cost 500 dollars per genome.
On December 28th, 2020, Praxis genomics LLC, a customer of Bionano received accreditation from The College of American Pathologists (CAP) making it the first CAP certified lab for whole-genome analysis with Saphyr.
While this upstart company but the technology is very compelling and checks all the boxes to be a game-changer in the field of genome analysis.
Practically this company has no competition in its niche area of detecting large structural variation in the genome. It is highly accurate, time-efficient, and cheap.
At its scale, this company should be worth a multi-billion dollar valuation. Although the stock has risen more than 400% in the last 5 days. Its valuation is less than 500 million. I believe it has at least the potential to 10x from here.