The Critics Are Wrong About Bionano Stock

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The critics of Bionano (NASDAQ:BNGO) stock are ignoring and/or severely underestimating developments involving its DNA mapping tool, Saphyr.

Source: Natali_ Mis/ShutterStock.com

Specifically, there is overwhelming evidence that – driven by positive clinical data, improvements in Saphyr, and continued progress towards reimbursements – the demand for the product should soar over the long-term.

Although the large declines of BNGO stock this year have been frustrating, patient, long-term investors who hold onto their shares are positioned to be handsomely rewarded for doing so.

Two Critiques of Bionano

In a Nov. 14 column, Seeking Alpha contributor Bashar Issa makes several highly bearish points about BNGO stock. He suggests that Bionano is unlikely to be acquired because “more conservative biotech companies focus on genomic companies with clearer strategy and more defined markets.” The author also implies that Bionano’s technology, first developed in the 1990s, is outdated and is no longer appealing to healthcare professionals and scientists.

And, of course, Issa highlights the company’s financial data and the number of Saphyr systems that it has sold or leased, calling that information “disappointing.”

Another critic is InvestorPlace contributor Dana Blankenhorn. His primary points are the poor performance of BNGO stock, the failure of the ARK Invest exchange-traded funds run by Cathie Woods, to buy the shares, and what he sees as the expensiveness of Saphyr and its tests.

The Tremendous Utility of Bionano’s Saphyr

Issa’s first two points – regarding the chances of the company being acquired and the current relevance of its technology – are refuted by the great life-saving potential that Saphyr has shown in studies.

For example, Dr. Rashmi Kanagal-Shamanna of the University of Texas, commenting in a statement on the study of Saphyr’s utility in a bone marrow disorder, on Dec. 8 said, ”  Importantly, {Saphyr… enabled us to see more variants in subjects at higher resolution compared to traditional workflows, which has the potential to help drive better outcomes as a result of better patient management.”

She explained that not only were Saphyr’s results 100% in line with those of  standard methods of genetic analysis, but Bionano’s product “enabled us to see more variants in subjects at higher resolution compared to traditional workflows, which has the potential to help drive better outcomes as a result of better patient management.”  Specifically, Saphyr identified “23 clinically significant SVs in 18% of the patients” that the standard methods did not detect. 

In summary, Kanagal-Shamanna was saying that Saphyr identified more variations than standard tools in 18% of the patients and that the identification of these variations could enable these patients to receive more effective treatments.  

In other studies, Saphyr has shown great potential to enhance the treatment of patients with several other diseases, including cancer  and genetic diseases.

The diagnostic advantages that Saphyr has shown over the standard techniques is a key reason why Brynn Levy, the medical director of the Clinical Cytogenetics Laboratory of the New York Presbyterian Hospital, is so upbeat on its technology.

He believes that the technology, known as optical genome mapping (OGM), could be more disruptive than the standard DNA tests for “prenatal and pediatric disorders, hematological malignancies and solid tumor cancers.” What’s more, the doctor believes that OGM could even eventually replace the standard tools used to evaluate DNA.

Bionano’s Financials Will Likely Surge Eventually

In the U.S. and most other advanced nations, the amount of money paid for the treatments of diseases is ultimately determined primarily by three factors. Those factors are the extent to which the treatments help patients, the number of patients that they can treat and the number of competing treatments that can accomplish or come close to accomplishing the same goals.

OGM, as Levy indicated and various studies have shown, has tremendous potential to greatly help many patients. Meanwhile, Bionano has exclusive rights to many technologies that Saphyr utilizes.

But another characteristic of treatments for diseases is they usually must be tested for years before regulators will allow them to actually be used. As a result, it takes many months for biotech companies like Bionano to generate large amounts of revenue from their products.

And sometimes, for a variety of reasons, the Street does not give nearly adequate value to the stocks of  companies that, in all probability, have products that will become blockbusters in the future.

I believe that BNGO stock is in the latter category. That’s because, as I indicated previously, I think there’s tremendous evidence that, as Dr. Levy said, Sapyr will prove to be very “disruptive.”

But before the product can generate huge revenue, it will have to be approved by the government and private insurers as a valid diagnostic tool for multiple diseases. When that happens, many hospitals and labs will be able to be reimbursed for the cost of using the product.

Likewise, after Saphyr’s ability to correctly and more effectively analyze DNA is proven, researchers will be much more likely to purchase and use the product.

Of course, after demand for Saphyr surges, Bionano’s financial results will jump as well, causing BNGO stock to rally. Additionally, as evidence of Saphyr’s efficacy mount, companies will likely become interested in acquiring it.

The Bottom Line on BNGO Stock

There’s actually very strong evidence that Saphyr can greatly enhance the treatment of many patients. And, as for Blankenhorn’s argument about Wood not buying Bionano’s shares, after she bought a number of  stocks that were clearly unattractive  this year, including Palantir (NYSE:PLTR), Teladoc (NYSE:TDOC) and Workhorse (NASDAQ:WKHS), I’m not too swayed by her judgment.

But it could easily take 18 to 36 months before the market gives BNGO stock the credit that it’s due. Given the product’s tremendous potential, I believe that the profits generated by the shares will be worth the wait. Consequently, I continue to recommend buying the name.

On the date of publication, Larry Ramer held a long position in BNGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.