Biotech companies spend a lot of money. They spend it on research and development, clinical trials, and (if they are lucky) marketing and a salesforce. Bringing a new pharmaceutical or medical device to market is an expensive proposition. In fact, it's fair to say that a lot of biotech companies bleed cash.
So it's highly unusual to find biotech companies with a cash position that's higher than the company's valuation. Nonetheless, our contributors found three fascinating biotechs that meet that standard. Here's what they think about Invitae (NVTA +0.00%), Singular Genomics (OMIC +0.00%), and Agenus (AGEN +0.87%).
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Right now, Invitae's cash is higher than its market cap
Taylor Carmichael (Invitae): The biotech market has been creamed in 2022, and Invitae stock is no exception. This genomic biotech came public in February 2015. The market got super excited about Invitae in 2020, and the stock reached an all-time high of $61 in December of that year. Now the stock is at an all-time low of $3.52. So we've gone from maximum optimism to maximum pessimism in a really short time.
Invitae does genetic screening to see what a person's DNA says about their risk profile for hereditary cancer, rare genetic diseases, and other diseases. Oncology is Invitae's biggest driver, representing almost two-thirds of its revenue in the first quarter.
One nice thing about Invitae's crashing stock price is that the company's market cap ($800 million) is now smaller than its cash on hand ($885 million in cash and marketable securities). What about its burn rate?
Invitae is not profitable yet, so the company burned $169 million in Q1. The company estimates it will burn through at least $600 million in cash this year, and possibly as much as $650 million.
That's a scary amount of disappearing cash. And it's even scarier when you reflect that Invitae says it will not be cash flow positive until 2025. So even though the company now has a cash cushion higher than its market cap, that burn rate still makes this a dangerous stock, in my opinion.
The device maker in a multi-billion-dollar market
Patrick Bafuma (Singular Genomics): Life science technology company Singular Genomics not only fits the bill of having a market cap below its current assets ($216.7 million versus $325.8 million), but it has massive growth potential too. Since it's targeting multi-billion-dollar markets, it won't take much for investors to reap serious rewards with this up-and-coming biotech.
Its first product, the G4, which will ship in second-quarter 2022, targets the next-generation sequencing (NGS) market. NGS provides the potential for comprehensive mutation detection over multiple genomic targets at a time. That means many different samples can be tested in the same test tube while analyzing multiple different portions of DNA on said samples, all at the same time.
The NGS market was worth $7 billion in 2020, according to the company, and it estimates it will be worth $37 billion by 2030. Singular Genomics claims the G4 is two to three times faster than currently available options, while up to 100 times more accurate. If this proves true in the hands of the end-user, this biotech could carve out an impressive piece of the NGS market. Not to mention that it sets up nicely for the 2023 launch of its PX system, which aims to overtake 10x Genomics in the $10 billion single cell and spatial biology market.
While I would usually brush aside unproven biotechs, this life science company has an impressive management team. To start, it is founder-led. Its president and senior vice presidents are from a company that knows a thing or two about next-generation sequencing, Illumina. A savvy C-suite is a must in this environment, and this management team has also had stints at Exact Sciences' Thrive, Roche's Foundation Medicine, and Thermo Fisher's Life Technologies. Singular has a solid list of executives, but it also seems to offer a better technology in a growing field -- and is trading for incredibly cheap.
A deeply undervalued cancer company
George Budwell (Agenus): Agenus is a small-cap cancer specialist that has been hit particularly hard by the broad downturn across the biotechnology space this year. Speaking to this point, the company's shares are presently down by a staggering 51.8% year-to-date at the time of this writing. As a result, Agenus' last stated cash position of $263 million is currently greater than its enterprise value of $248 million. That's not an uncommon occurrence in the volatile biotech space these days. But Agenus arguably deserves special attention from bargain hunters for a few solid reasons.
First and foremost, Agenus' flagship product candidate AGEN1181 (aka botensilimab) is making steady progress in the clinic. During the company's last quarterly conference call, for instance, management noted that botensilimab is slated to begin mid-stage testing for colorectal, melanoma, and pancreatic cancers sometime later this year.
What's more, these forthcoming studies are designed to demonstrate the drug's superiority to other immunotherapies and/or other standards of care. In other words, Agenus is intent on showing regulators and prescribers alike that botensilimab is indeed a major step forward for these various indications, and not a so-called "me-too" drug (drugs that are basically copycats of pre-existing medications).
Second, Agenus sports multiple collaborations with pharma heavyweights such as Bristol Myers Squibb and Gilead Sciences, among several others. The company thus has a shot at hauling in close to $3 billion in milestone and royalty payments from its impressive array of collaborations over the next few years.
What's the downside? Although Agenus is arguably woefully undervalued right now, its stock is unlikely to take flight anytime soon. The bottom line is that botensilimab's clinical program will likely take a few years to produce the data necessary to support a regulatory filing. Moreover, Agenus' ongoing collaborations probably won't bear fruit in the near term (less than six months), either. This beaten-down biotech stock will therefore require a hefty dose of patience from prospective shareholders.
