Are you ready for another bubble? Not a real estate bubble, how about a “genomics bubble?”
Yes, thanks in part to the much lower cost of genome sequencing, a crowded field of health care companies is vying to take advantage of the recent significant advances in molecular analysis. The cost of genome sequencing, a hefty $300 million only 10 years ago, is now on its way down. Way, way down. A recent Motley Fool article suggested it will be less than $1,000 by the end of 2012 and it’s now “time to start buying into the next bubble” (http://www.fool.com/investing/high-growth/2012/04/13/its-time-to-start-buying-into-the-next-bubble.aspx).
The article suggests that “automating medical processes with computing power is within reach of many presently mature software companies.” An industry group called The Personalized Medicine Coalition, which is dedicated to promoting molecular analysis, indicates that prominent treatments and diagnostics in its field have grown from 13 to 72 products in six years, according to the Motley Fool article.
Of course, for bubble building, it’s always good to see a big acquisition to get the buzz flowing. In April, Bedford, MA-based Hologic (Nasdaq: HOLX) purchased San Diego-based Gen-Probe (Nasdaq: GPRO), a diagnostic test maker, for $3.72 billion. And FiveStarEquities also primed the pump with an announcement May 9 that the biotech industry has become a “hotbed” of merger and acquistion activity due in part to the fact that many large pharmaceuticals are facing major patent expirations in 2012 (http://finance.yahoo.com/news/biotech-industry-hotbed-merger-acquisition-122000039.html).
But these are relatively large companies (market caps $4.51 billion and $3.66 billion, respectively), compared to our small cap focus.
Genomics is an industry with a wide variety of notable companies. Here are a few, selected at random.
Carlsbad, CA-based GenMark (Nasdaq: GNMK, http://www.genmarkdx.com) is a molecular diagnostics company that develops the testing equipment used by labs for the detection and measurement of DNA and RNA targets in patient treatments. Its eSensor detection technology enables the detection of up to 72 distinct biomarkers in a single patient sample, Its XT8 System has been cleared by the FDA and is designed to support a range of molecular diagnostic tests with a workstation and disposable test cartridges. GNMK has a 52-week trading range of $3.63-$6.95 and a market cap of $106 million. It closed May 11 at $4.95, down 4 cents for the day.
Menlo Park-based Pacific Biosciences of California (Nasdaq: PACB, http://www.pacificbiosciences.com) has developed an integrated platform for genetic analysis. The company is focusing on the DNA sequencing market and has created what it calls its single molecule, real-time (SMRT) technology to record individual biochemical events as they occur. PACB is still in the development stage (it reported revenue of $10 million for the first quarter of 2012 and a net loss of $27.4 million) and its market cap is $146.3 million. It’s 52-week range is $2.25-$12.38. The stock closed May 11 at $2.52, down 13 cents for the day.
San Diego-based Sequenom (Nasdaq: SQNM, http://www.sequenom.com) made headlines in recent months with the announcement of its fetal Down Syndrome test. SQNM operates in two segments: molecular diagnostics and genetic analysis. The company is focused on translating the results of genomic science into solutions for biochemical research and other areas. SQNM trades actively (a daily average of 3,641,360) and a year ago the stock was trading for more than $8.70 (its 52-week range is $3.52-$8.71) but has been declining since. The market cap as of May 11 was $593 million. SQNM closed May 11 at $5.18, down 7 cents on the day.
Mountain View, CA-based Complete Genomics (Nasdaq: GNOM, http://www.completegenomics.com) is a life sciences company that has developed a DNA sequencing platform for human genome sequencing and analysis. Its genomic analysis platform provides its customers (academic and government research centers, biopharmaceutical companies, healthcare providers) with data to be used for genome-based research. The 52-week range for trading of GNOM stock is $2-$18.55 (the high was about a year ago) and its market cap is about $70 million. It closed May 11 at $1.98, down 7 cents for the day.
Irvine, CA-based CombiMatrix Corp. * (Nasdaq: CBMX, http://www.combimatrix.com/ operates mainly in molecular diagnostics and genetic analysis with a specialty in pre-natal chromosomal microarray testing. Combimatrix focuses its efforts on the developmental (pediatric) and pre-natal markets and is the only independent public company specializing in genomic arrays. CombiMatrix has posted annual growth rates in excess of 35% for the past three quarters. Its 52-week range is $0.76-$4. It closed May 11 at $1.01, up 1 cent on the day.
Los Angeles-based Response Genetics (Nasdaq: RGDX, http://www.responsegenetics.com) develops and sells clinical diagnostic tests and pharmacogenomic tests used in the treatment of cancer. It offers tests for non-small cell lung cancer, colorectal cancer and gastric and gastroesophageal cancer. The company also develops tests for other types of cancer that identify genetic profiles of tumors that recur after surgery. RGDX has a 52-week trading range of $0.81-$3.05 and market cap is about $40 million. The stock closed May 11 at $1.50, down 11 cents on the day.
* Denotes a client of Allen & Caron Inc., publisher of this blog