Analysts See Plenty of Potential for 10x Genomics

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Barry Cohen

The biotech’s stock has tripled since going public, but it faces some stiff challenges

Eighteen months after going public, 10x Genomics Inc.’s (TGX) shares have tripled to more than $166, yet analysts think that’s still well below its twelve-month median price target. Some on Wall Street feel the shares could go as high as $240.

The Pleasant, California-based biotechnology company designs and manufactures gene sequencing technology used in scientific research. It was founded in 2012. The company’s sales in 2020 were nearly $300 million, a 22% jump from the previous year.

10x’s products are used by researchers to perform single-cell and whole-genome sequencing. “Using our tools they (researchers) can decipher very clearly what is going on and what kind of treatment would’ve worked to save someone,” co-founder and CEO Serge Saxonov told Forbes. “It’s something that was just not possible even a couple of years ago.”

To illustrate his point, Saxonov pointed to the Fred Hutchinson Cancer Research Center, where 10x’s products have been used to better understand patients’ cancers in immunotherapy and cell therapy programs.

The bad news is the firm suffered a net loss of nearly $543 million as compared to a net loss of just over $31 million for 2019. In-process research and development accounted for only $447 million of the deficit.

William Blair, an asset management company, recently started covering 10x, although it did not offer a price target. Blair served as co-manager in 10x’s September 2020 $440 million public offering of common stock. Genome Web reported that in a statement, Blair analyst Matt Larew wrote:

“The company’s Chromium platform has established itself as the clear leader in the single-cell market and 10x has used this as a jumping-off point to develop solutions to help researchers understand biology at a resolution and scale not available with legacy technologies.”

Over time, Blair’s Brian Weinstein thinks the market for 10x’s solutions will expand substantially. Weinstein seems to be on target in my opinion, given that 10x’s solutions compete in 25% of the worldwide life sciences market of $60 billion. At the same time, with sales of $300 million, 10x currently has only a tiny share of the business.

Yet the company owns a lofty market cap of $18 billion, suggesting investors may be getting ahead of themselves.

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Other causes for investor concern are 10x’s increasing expenses, negative cash flow and the number of insiders selling the stock. Then there are the numerous lawsuits. Since 2015, 10x has been hit with six separate patent infringement actions by Bio-Rad Laboratories Inc. (BIO).

Other public companies vying for a piece of the same market as 10x include Pacific Biosciences (PACB), Fluidigm Corp. (FLDM) and Illumina, Inc. (ILMN).

Disclosure: The author has no position in any of the stocks mentioned in this article.

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About the author:

Barry Cohen

Barry Cohen has nearly 40 years experience in communications and marketing, the majority in senior positions at large international health care companies, including Abbott Laboratories and Bayer Inc.

He has contributed to a number of financial websites, writing primarily about the stocks of health care companies.

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