For the last year the world has been mostly focused on the Covid-19 pandemic and the related importance of testing, treatments and vaccine development and distribution, recalls Tyler Laundon, small cap expert and editor of Cabot Early Opportunities.
While the pandemic has taken center stage there remains a huge need for advance testing, treatment options and cures for other diseases. That points toward personalized medicine and next-generation genomic sequencing (NGS) solutions.
There are many players in the sequencing market, each of which offers a different twist and exposure for investors. Below, I look at three of the most intriguing sequencing stocks.
10x Genomics (TXG) is an early stage genomics tools company developing solutions to analyze biological systems at incredibly high resolution and massive scale. It has a market cap just under $20 billion.
The company’s products are used by nearly all of the top 100 global research institutions and top 20 global pharma companies, which rely on 10x’s solutions to make major discoveries in oncology, immunology and neuroscience.
The company’s product portfolio is built around Chromium and Visium instruments, consumables, and software. These genetic testing solutions give researchers the power to measure biology at the highest level of resolution, such as at the single cell level, or at high spatial resolution of tissues and organs.
The bulk of revenue comes from academic markets, but the company also has exposure to government, biopharma and biotech customers. As with many companies in the sequencing market, consumables play a huge role (over 80% of revenue) and help smooth out fluctuations in instrument sales.
Analysts are generally positive on 10x Genomics’ stock and refer to the long runway of growth afforded by the company’s dual focus on affordable single cell (Chromium) and spacial (Visium) biology platforms. Visium is a newer platform that’s enjoyed a strong launch.
Personalis (PSNL) is a cancer genomics company offering next-generation sequencing (NGS) solutions and data analysis services to support personalized cancer vaccine and cancer immunotherapy development. It also provides sequencing and data analysis for population sequencing projects. It has a market cap of $1.5 billion.
Customers of cancer genomic services are primarily pharma and biotech companies, universities and non-profits. Customers of population sequencing initiatives are led by the U.S. Department of Veterans Affairs (VA).
The value of this company derives from its proprietary ImmunoID NeXT Platform, which provides customers with complex genomic info from both tissue and liquid biopsy samples. Altogether, Personalis is going after a roughly $40 billion market, based on test prices that range from $2,840 to $4,000 a pop. Its main markets are in the U.S. and Europe.
Big picture, Personalis should do well because there is a growing need for genomic data in immune-oncology and cancer drug development. The opportunity in liquid biopsy is especially exciting.
While the company is early stage and has faced challenges due to the COVID-19 pandemic, the pipeline of new products and a likely boost to volumes post-COVID portend good things in the second half of 2021 and beyond.
Adaptive Biotechnologies (ADPT) has become a leader the immune-driven medicines market, which is approaching $50 billion across research ($1 billion), diagnostics ($16 billion) and drug discovery ($31 billion). The company has a market cap of $8.1 billion.
Adaptive has developed a platform that characterizes genetic code of the body’s adaptive immune system. The platform sequences T-cell receptors (TCR) and B-cell receptors (BCR), maps receptors to antigens, pairs receptor chains, and identifies drug candidates that could be potential therapies.
The current focus is development of products to diagnose, treat and monitor diseases, including certain cancers, Lyme disease and COVID-19.
One of Adaptive’s many areas of growth is ClonoSEQ, which is used to detect and monitor minimal residual disease (MRD) in bone marrow from patients with multiple myeloma, B cell acute lymphoblastic leukemia (ALL) and lymphoblastic leukemia (CLL). The number of treatable patients is expected to double in 2021.
Additionally, Adaptive has recently launched its T-Detect COVID-19 test, which can confirm past COVID infections by looking at T-cells. Next up is T-Detect Lyme, and tests for Crohn’s and Celiac are in the pipeline for 2021.
Finally, in drug development the company is working with partner Genentech for a TCR candidate that could work in multiple solid tumors. It is also working with Amgen to develop therapeutic antibodies to treat or prevent against various strains of COVID-19. Adaptive is a high-growth company, though the pandemic has taken a toll.
