Sales Force Expansion And CLARIFY Study Will Boost Test Adoption

Key Takeaways

• Expansion of sales force and test adoption, along with CLARIFY study results, are expected to drive revenue growth and improve margins.
  
• Diagnostic services growth and potential profitability could enhance investor confidence and diversify revenues through new partnerships and innovative test developments.
  
• Challenges in achieving profitability and expanding operational costs without immediate revenue gains could impact net margins and financial performance.

Catalysts

Operates as a diagnostic solutions company.

• Biodesix plans to expand its sales force significantly in 2025, targeting primary care referral networks in addition to pulmonologists. This expansion is expected to increase test adoption, driving revenue growth from increased test volumes.
  
• The company launched the CLARIFY study in 2024, aiming to confirm the performance of its diagnostic tests and provide competitive data against PET scans. Results from this study, expected to begin releasing in 2025, are anticipated to bolster test adoption and reimbursement, positively impacting revenue and margins.
  
• Biodesix's diagnostic development services saw significant growth in 2024, with new contracts suggesting continued demand. The growth and possible new partnerships in 2025 could contribute to revenue diversification and margin improvement.
  
• The company is on track to achieve adjusted EBITDA profitability in the second half of 2025 by growing revenues while maintaining strict cost controls. This achievement is likely to enhance investor confidence and improve earnings.
  
• Biodesix's product pipeline, supported by research collaborations, is focused on innovative diagnostic tests, including potential multiomic MRD solutions. Successful new test development and commercialization could drive long-term revenue growth and improve profit margins.

Biodesix Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Biodesix's revenue will grow by 24.5% annually over the next 3 years.
• Analysts are not forecasting that Biodesix will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Biodesix's profit margin will increase from -60.2% to the average US Healthcare industry of 4.9% in 3 years.
• If Biodesix's profit margin were to converge on the industry average, you could expect earnings to reach $6.7 million (and earnings per share of $0.04) by about May 2028, up from $-42.9 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 93.3x on those 2028 earnings, up from -1.8x today. This future PE is greater than the current PE for the US Healthcare industry at 23.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.8%, as per the Simply Wall St company report.

Biodesix Future Earnings Per Share Growth

Risks

• The financial guidance for 2025 anticipates revenue growth driven largely by increased test volumes rather than significant changes in average selling prices (ASP), highlighting potential limits in pricing power which could impact revenue growth potential.
  
• The company experienced a net loss of $42.9 million for 2024, and while there was improvement, continued losses indicate potential challenges in achieving profitability, which could impact net margins.
  
• There is a substantial focus on expanding the sales force into primary care channels, which could increase operational expenses significantly without immediate proportional revenue increases, potentially affecting earnings.
  
• The company's dependence on securing more coverage policies for reimbursement improvements poses a risk if not achieved, as this could limit expected revenue growth and affect financial performance.
  
• Although opportunities in AI and machine learning are mentioned, the company has not disclosed specific developments, relying instead on existing technologies; this could result in competitive challenges and affect future revenue if competitors advance more quickly.

Valuation

• The analysts have a consensus price target of $2.9 for Biodesix based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $3.0, and the most bearish reporting a price target of just $2.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $137.6 million, earnings will come to $6.7 million, and it would be trading on a PE ratio of 93.3x, assuming you use a discount rate of 6.8%.
• Given the current share price of $0.54, the analyst price target of $2.9 is 81.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.