VIA Software And Optical Genome Mapping Will Improve Laboratory Efficiency

Key Takeaways

• Enhancements in customer utilization and lab efficiency are projected to boost consumable sales and revenue growth.
  
• Cost reduction strategies and market focus have improved gross margins, easing financial pressures and enhancing profitability.
  
• Bionano's declining revenue, volatile margins, constrained cash, and strategic focus shift could limit growth and impact future earnings and investor confidence.
  

Catalysts

Provides genome analysis software that enables genomics labs to analyze and interpret data across a range of platforms to generate informative data visualizations for streamlined and simple reporting of causal variants.

• The focus on sustaining and driving utilization within the existing customer base is expected to increase consumable sales significantly, thereby boosting revenue growth.
  
• Adoption of VIA software aims to streamline lab workflows, thus enhancing sample processing efficiency and increasing capacity, which could lead to an uptick in consumable sales and higher revenue per customer.
  
• The recent establishment of a Category 1 CPT code by the American Medical Association for optical genome mapping in hematologic malignancies may drive increased adoption and reimbursement, positively impacting revenue.
  
• Strategic cost reduction initiatives and focus on profitable markets have already led to significant improvements in gross margins, which can relieve financial pressures and potentially improve net margins.
  
• The ongoing growth in publications regarding optical genome mapping and its adoption in the clinical research sphere suggests increased market acceptance and could influence reimbursement, further aiding revenue and margins.

Bionano Genomics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bionano Genomics's revenue will grow by 4.2% annually over the next 3 years.
• Analysts are not forecasting that Bionano Genomics will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Bionano Genomics's profit margin will increase from -364.0% to the average US Life Sciences industry of 12.9% in 3 years.
• If Bionano Genomics's profit margin were to converge on the industry average, you could expect earnings to reach $4.5 million (and earnings per share of $1.5) by about April 2028, up from $-112.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.5x on those 2028 earnings, up from -0.1x today. This future PE is lower than the current PE for the US Life Sciences industry at 36.5x.
• 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 11.35%, as per the Simply Wall St company report.

Bionano Genomics Future Earnings Per Share Growth

Risks

• Bionano reported a 24% decrease in total revenue for the fourth quarter of 2024 compared to the same period in 2023, which could pose a risk to future revenue growth if not addressed.
  
• The company is facing ongoing volatility in its gross margins, and management did not provide guidance on future margins, which may affect earnings predictability and investor confidence.
  
• Bionano has significantly reduced its operating expenses through cost-cutting and headcount reduction measures, but this may impact future growth initiatives if not managed carefully, potentially affecting net margins.
  
• The company's cash position appears constrained, with only $20.9 million in cash and cash equivalents subject to certain restrictions, which may limit its ability to finance operations or invest in growth initiatives, impacting future earnings.
  
• Shifts in go-to-market strategy, focusing on existing routine users rather than aggressively acquiring new customers, may limit top-line growth opportunities if routine user expansion does not materialize as expected, impacting future revenue.

Valuation

• The analysts have a consensus price target of $7.0 for Bionano Genomics 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 $10.0, and the most bearish reporting a price target of just $4.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $34.8 million, earnings will come to $4.5 million, and it would be trading on a PE ratio of 6.5x, assuming you use a discount rate of 11.4%.
• Given the current share price of $4.0, the analyst price target of $7.0 is 42.9% 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.