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Could 10x Genomics Deliver a 10x Return?

By Keith Speights - Apr 5, 2021 at 6:04AM

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The company's CEO thinks it's capitalizing on the biggest value-creation opportunity of the next several decades.

10x Genomics (TXG 3.80%) has seen its market cap nearly quadruple since going public in 2019. But the company is still only in its early innings of growth. In this video recorded on March 11, 2021, Motley Fool CEO and co-founder Tom Gardner talks with 10x Genomics CEO and co-founder Serge Saxonov about the potential for his company to deliver a 10 times return over the next 10 to 15 years.

Tom Gardner: I run a new portfolio service called Discovery 10X where we look for companies that we think could deliver 10x returns over the next 10 to 15 years. 10x Genomics was right in this March Madness basketball-analogous world that we're in right now -- was right on the bubble for me given the market cap of the business at about $17 billion.

I was asking myself, "Could this be a $170 billion market cap 10 to 15 years from now?" At this point, 10x Genomics is not in that portfolio because of that size.

This hour conversation is making me think that I've misestimated or been a little too shortsighted and I don't want to put you on the spot as a public market CEO to say, to make any forward projection about that, but is that how you think about the business?

In other words, what we realize -- so the data for investing, like the data for mapping the genome down to the cellular level, spatial molecules getting all this information, there actually is a very interesting overlay to the public markets.

We have 5,000, let's say, public companies. They all have a number of data points inside of them. We can look for the patterns. We want to find Parkinson's earlier or cancer earlier so that we can get in and find what are the connections in those cells that caused these outcomes down the line? How can we, well, one if you are a consultant, how do we correct those organizations earlier, but as an investor, how do we find those good patterns earlier and earlier in the mix?

One of my concerns is maybe this is at a — 10x from here for 10x Genomics would make it really quite massive, but you're emphasizing that you feel you're early on, still early on, that 20- to 30-year transformative time horizon.

I guess I don't really know what my question is other than to say, how do you react to that or how do you think about that? Again, many CEOs if I ask them about that, they would say, I'm not thinking out that far. But in terms of that long-term perspective we bring as an investor, we're not evaluating you over the next three months which would be absurd or even over the next two years, which is largely absurd, but over the next 10 to 20 years, and maybe, how do you think about value creation for the stakeholder that is your shareholder?

Serge Saxonov: Like I said before, I do take the long-term view and I do think that the reason we talk about this being the century of biology is because I think this is the biggest value-creation opportunities that are going to be happening in the coming decades. It's here.

If you look back to the late '90s. I think a lot of people have roughly the right thesis. The internet is going to revolutionize things; it's going to be the story over the next couple of decades. If you placed your bets right, if you look at the amount of market cap that'll get created and roughly by all new companies from that point on, we'll be talking about count $10 or $20 trillion. Well beyond that.

As you look into what the potential is here within the life sciences, we're on that trajectory. I think the actual lifetime of a trajectory could be quite a bit longer. It's not just two decades. I think it goes beyond that.

The point of highest leverage, what actually is going to drive that revolution in the life sciences, fundamentally, it has been new technology, because that's the thing that drives new scientific knowledge which ultimately drives curious and ultimately transforms healthcare and I see us at that maximum leverage point on driving that revolution.

Then, of course, the question is making sure that we collect the right economics so that we can measure it with the change that we're driving. I feel reasonably confident that we'll do well there and if we're a success, we'll be absolutely one of the most important and largest companies in the world and that's where we're headed.

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