Bionano’s (BNGO)

Investors appeared disappointed with Bionano’s (BNGO) latest financial update, sending shares lower in the subsequent session after a decline in gross margins led to wider losses than anticipated.

A chip supplier’s manufacturing issues were behind 1Q22’s gross margin hitting 15%, down from 30% in 1Q21. This led to a Q1 net loss of $29.52 million, which translated to EPS of -$0.11, vs. the Street’s -$0.07 estimate.

Maxim analyst Jason McCarthy is non-plussed, noting the effects are “expected to be transient and worked out over the next few quarters.”

The company fared better on the top-line, with revenues increasing by 80% year-over-year to reach $5.7 million, with two main factors driving the growth; an expanded installed base of 176 units leading to “increased consumables utilization” and the inclusion of revenues from NxClinical, the software solution for variant analysis which the company acquired last year when it brought BioDiscovery on board. That said, revenues were down quarter-over-quarter by 10%, although McCarthy says the sequential drop was expected, given Q1 is “traditionally a weak quarter due to seasonality.”

There were 12 new Saphyr OGM (optical genome mapping) systems installed in the quarter as the total reached 176. These only include the ones installed, not units shipped or sold, while there was also an omicron-related backlog at the quarter’s end. Additionally, consumables’ use rose by 24% from the same period last year to 3,200. More flow cell usage is an essential indicator since the more Saphyr is used for research, the more awareness grows, which should lead to increased “adoption” down the line.

Assessing Bionano’s prospects, McCarthy is pleased with the cytogenetics disruptor’s progress.

“Overall, Saphyr seems to be gaining traction,” the analyst said. “With management investing further into platform development (including software to integrate with next-gen sequencing), marketing, and the clinical program to establish Saphyr as SOC in clinical guidelines, we continue to see growth potential for the Saphyr platform.”

As such, McCarthy reiterated a Buy rating backed by a $6 price target. The implication for investors? Upside of a hefty 325%.

There are currently two other Bionano reviews on file and both are positive, with all coalescing to a Strong Buy consensus rating. The average target is even more optimistic than McCarthy’s; at $6.50, the figure leaves room for share gains of 361% in the year ahead.