Biotech Tools Boosts 10X Genetics

09/23/2020 5:00 am EST

Focus: HEALTHCARE

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Even after mapping the human genome, scientists still don’t know why some people with a particular variation in their DNA develop cancer, while others with the same variation don’t, observes Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

This is mainly due to the limitation of biotech research tools. 10X Genomics (TXG), which designs and manufactures gene sequencing tools and software, is addressing this problem. Its technology suite enables the study of cells and systems at an unprecedented level of resolution.

This allows for the capture of DNA, RNA, protein and immunological info from individual cells (it has helped researchers discover previously unrecognized cell types, including those linked to cystic fibrosis, melanoma, breast cancer and kidney disease).

Despite widespread lab closures in Q2, the firm reported strong instrument demand particularly driven by COVID-related research; 10X reported significant tailwinds from its Immune Profiling products, as researchers use them to increase their understanding of SARS-CoV-2. It also recently launched an integrated software product which adds support for targeted gene analysis.

The top line was 23% lower because just one-fourth of customer labs were open early in the quarter (though 60% were open by the end of Q2). There should be improvement from here, with revenues flat-ish this quarter and resuming growth in Q4.

New product development is a top priority for 10X, which has an IP portfolio of over 500 patents pending. And with the single-cell genome sequencing market worth an estimated $25 billion by 2025, 10X has an exciting runway for future growth as the virus-induced hiccups in demand fade.

Technically, TXG was on a roller-coaster ride after its IPO last September, rising from $54 to peak at $108 in January before plummeting back to $50 in March.

Since then, however, TXG has enjoyed a smoother path, with a quick rebound above $80 after the low, a steady advance along its 10-week line for a few months and a recent big-volume rip to new highs (coming after a share offering, which is unusual). If you want in, aim for dips of a few points.

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