Sarepta Therapeutics Inc

Sarepta Therapeutics Inc (NASDAQ: SRPT) is a biotechnology entity involved in developing precision genetic medicine for rare diseases.  

Investment Rationale – WATCH at USD 79.35

• The cost of sales increased by US$9.7 million in Q1 FY21 due to quality issues which led to write-offs of certain batches of EXONDYS 51.
• SRPT’s liquidity (Cash, Cash Equivalents, Investments and Restricted Cash and Investments) position also declined slightly to US$1.7 billion from the end of FY20, which can impact its potential to manage its ongoing operations.
• On a GAAP basis, basic and diluted loss per share aggravated to US$2.10 in Q1 FY21 from the loss of US$0.23 per share in Q1 FY20.
• From a technical standpoint, 100-day EMA (USD 86.38) is sustaining above the current market price, reflecting a bearish momentum in the stock.

Risk Assessments

• The Group has a history of operating losses and exposed to liquidity risk amid uncertain outlook scenarios.
• The stock price has fallen around 52% in the past year, and it is prone to high volatility amid macroeconomic instabilities.

Recent News

Clinical Update: On 3 May 2021, Sarepta unveiled positive results from Phase 2 MOMENTUM Study of SRP-5051, and the Company is putting endeavouring for its approval in the United States.

Financial Highlights for the quarter ended 31 March 2021 (as on 5 May 2021)

 (Source: Company Website)

• During Q1 FY21, Sarepta Therapeutics reported a 24% increase in net product sales to US$124.9 million.
• The Company also launched its third RNA therapy for Duchenne, AMONDYS 45™ and got FDA (Food and Drug Administration) approval for it.
• It also strengthened its pipeline during the first quarter and reported a positive date for its investigational gene therapy, SRP-9003 for limb-girdle muscular dystrophy Type 2E.

Share Price Chart

 (Analysis done by Kalkine Group)

Conclusion

Sarepta Therapeutics has been progressing well for the development of RNA-targeted therapeutics and gene therapy for rare diseases. However, the worsened losses and significant underperformance of stock price in the past year makes the stock a risky bet amid the challenging current environment. Moreover, the Company does not have a clear outlook for its profit-generating capacity. In such a scenario, any negative clinical result can adversely affect the shareholder’s value. The stock made a 52 week High and Low of USD 181.83 and USD 67.68, respectively.

Based on the recent corporate developments, aggravated losses, quality issues, uncertain outlook, we have given a “WATCH” stance on Sarepta Therapeutics Inc at the closing price of USD 79.35 (as on 18 June 2021), while we look forward to reviewing upcoming market catalysts and progress of SRP-5051.

Bionano Genomics Inc

Bionano Genomics Inc (NASDAQ: BNGO) is engaged in optical genome mapping for genome analysis. It also provides diagnostic testing services and provides tools & services through its Saphyr® system.

Investment Highlights – WATCH at USD 7.62

• As of now, the Company only generated revenue from the sale of instruments and consumables for research use only. The Company has never paid dividend and even expects to retain future earnings for business development and expansion. The net losses aggravated from US$29.8 million in FY19 to US$41.1 million in FY20.
• From a technical standpoint, 20-day EMA (USD 7.13) sustaining above the current market price, indicating bearish momentum.
• In terms of valuation metrics, EV/Sales multiple is quite overvalued against the Technology industry’s median.
• BNGO is an early commercial-stage entity and has been incurring losses since it is formed, while there is no certainty regarding its ability to achieve profitability.
• The financial results can be adversely impacted further if new product development and launch are not successfully managed.

Key Risks

• The Company requires additional funding to support its growth objectives and other commercialisation efforts as clinical trials are quite expensive, and BNGO does not generate any profit.
• The Covid-19 pandemic can delay clinical trials and regulatory approvals.

Recent News

Management Change: On 14 June 2021, Bionano Genomics appointed Richard Shippy as its Chief Business Officer.

Financial Highlights for the year ended 31 March 2021 (as on 13 May 2021)

 (Source: Company Website)

• During Q1 FY21, net loss was US$9.9 million, reduced slightly year-on-year.
• There was 179% increase in revenue, driven by the record sales of consumables and Saphyr installed base.
• As of 31 March 2021, a strong balance sheet was maintained with US$362 million in cash, solidified by two successful financing.

Share Price Chart

 (Analysis done by Kalkine Group)

Conclusion

Bionano has certainly given a solid start to FY21 with a sharp increase in sales and geographic expansion. However, headcount, material and supply expenses increased the operating expenses in Q1 FY21 as the Covid-19 pandemic continued to disrupt the business. Moreover, the Company has been dependent upon the sales of common stock and equity instruments since the IPO for its liquidity. Therefore, its ability to attain liquidity from external sources would decide its growth prospects. Hence, it is prudent not to punt on this risky stock. Stock 52 week High and Low were USD 15.69 and USD 0.43, respectively.

Based on the weak fundamentals, heightened operational risk, uncertain market conditions, we have given a "WATCH" stance on Bionano Genomics Inc at the closing market price of USD 7.62 (as of 18 June 2021), while we look forward to reviewing how Company responds post lifting lockdown restrictions.

*The reference data in this report has been partly sourced from REFINITIV.