Microcap genome analysis tools and services company Bionano Genomics (BNGO) announced Monday that it has acquired privately-held molecular diagnostics services company Lineagen in a mixed cash-and-stock deal valued at $9.6 million including assumed debt. Bionano paid 6.2 million shares of its own stock (worth $0.64 per share at the time of the announcement) and approximately $1.7 million in cash, assumed liabilities of approximately $2.9 million, and repaid $1.1 million in outstanding principal and accrued interest amounts due pursuant to a Paycheck Protection Program loan issued to Lineagen under the Coronavirus Aid, Relief, and Economic Security Act, in exchange for all outstanding shares of Lineagen.
Lineagen sells laboratory-developed tests used to diagnose pediatric neurology disorders including Fragile X and autism. Bionano has backed its decision to buy the company, saying the acquisition will support its “market leadership in digital cytogenetics and comprehensive genetic diagnostics for pediatric neurodevelopmental disorders,” and expand its offerings to include “CLIA-certified diagnostic testing services along with expertise in commercializing cytogenetic assays, genetic counseling, third party payor contracts and reimbursement.”
As it turns out, Oppenheimer analyst Kevin DeGeeter thinks it’s a great idea — and doubled down on his outperform rating and $1.50-a-share price target on Bionano. This figure implies a strong upside of 123% from current levels. (To watch DeGeeter’s track record, click here)
In a note that came out in the wake of Bionano’s announcement, the 5-star analyst hypothesized that Lineagen’s “proprietary database of 60,000 pediatric neurology samples from 30,000 patients based at SickKids,” could improve Bionano’s chances of finding a Big Pharma partner going forward. The analyst further argued that Bionano’s purchase was cheap at just 1.6 times trailing revenues, and will help the company build scale in clinical diagnostics work.
According to DeGeeter, Lineagen did $6 million in sales over the past 12 months, which is where the 1.6x sales valuation came from. The analyst did admit, however, that the acquisition will cost Bionano additionally in the form of cash burn. Bringing Lineagen in-house, says the analyst, will cause Bionano to burn through an additional $1 million per quarter, adding to a burn rate that is already approaching $32 million.
Also worth pointing out: Bionano is carrying $15.7 million in debt. Add $2.9 million in debt assumed for the acquisition, and its debt load should rise to $18.6 million. Subtract $1.7 million paid for the acquisition, and the company’s cash and equivalents will dwindle to $15.5 million — thus leaving Bionano with more debt than cash on its balance sheet. And at the rate Bionano will be burning cash post-acquisition (now presumed to be $36 million annually), the company could be out of cash in under six months.
Overall, Wall Street loves this stock, earning a stellar analyst consensus rating, as TipRanks analytics demonstrate BNGO as a Strong Buy. Out of 3 analysts polled in the last 3 months, all 3 are bullish on the stock. With a return potential of nearly 131%, the stock’s consensus target price stands at $1.55. (See BNGO stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
