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Fulgent Genetics: Surviving The Covid Cliff

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Courage is nan value that life exacts for granting peace.”― Amelia Earhart

We past looked astatine Fulgent Genetics (NASDAQ:FLGT) early past summer. We noted astatine nan clip nan institution was navigating done a crisp driblet disconnected from Covid testing revenues but had immoderate cardinal things going for it complete nan longer term. We concluded that article pinch this proposal connected nan stock.

I expect Fulgent to proceed to usage its rate hoard to make further strategical 'bolt-on' acquisitions successful nan quarters/years up arsenic it builds retired a broad diagnostics platform. It is intolerable to foretell really accelerated Covid testing revenues will diminution going forward. However, halfway revenues are increasing smartly, and nan institution has a wall equilibrium sheet. With nan banal looking for illustration it is building a guidelines here, I took a mini 'watch item' holding successful Fulgent this week utilizing covered call orders arsenic options successful nan sanction are some liquid and lucrative."

Since it's been much than a half twelvemonth since we're visiting Fulgent, it is clip to 'circle back' connected nan finance thesis astir this diagnostic firm. An study follows below.

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Company Overview

Fulgent Genetics, Inc. is based successful Los Angeles. This diagnostic patient offers various Covid-19, molecular diagnostic, and familial tests. The banal presently trades conscionable supra 30 3 bucks a stock and sports an approximate marketplace capitalization of $1 billion.

What Sets Fulgent Apart?

November Company Presentation

Third Quarter Results

On November 7th, nan institution posted its 3rd 4th numbers. Fulgent Genetics had a GAAP profit of six cents a stock moreover arsenic revenues slid conscionable complete 53% connected a year-over-year ground to conscionable northbound of $105 million. It is important to statement that nan gross autumn was wholly owed to Covid testing income falling disconnected a cliff. This is hardly unsocial to Fulgent. This inclination is being seen crossed nan manufacture arsenic nan pandemic has ebbed on pinch testing for it. Labcorp (LH) conscionable noted a 90% driblet disconnected successful Covid testing revenues wrong its 4th fourth results.

Summary Financial Performance

November Company Presentation

'Core' aliases non Covid testing revenues much than doubled during nan 4th from nan aforesaid play a twelvemonth agone to $56 million. The institution had a affirmative adjusted EBITDA during nan 4th of $19.7 cardinal and rate from operations of $20.8 million.

Fulgent is Positioned to Execute connected Our Growth Strategy

November Company Presentation

Management guided 4th fourth income to $60 cardinal which was acold nether nan consensus. Core gross was guided to $52 million, which would beryllium up 86% from 4Q2021. Management noted that nan sequentially driblet successful halfway gross successful Q4 is owed to 'The sequential diminution is owed successful portion to important seasonality successful their Inform Diagnostics business related to a driblet successful elective surgeries and procedures astir nan vacation season, arsenic good arsenic nan hold successful managed attraction statement rotation up and nan delayed take and reimbursement of HelioLiver'. For each of FY2022, guidance expects full gross to beryllium conscionable complete $610 cardinal of which halfway income will travel successful conscionable complete $175 million.

Analyst Commentary & Balance Sheet

Since 3rd 4th results posted, some Credit Suisse ($50 value target) and Raymond James ($45 value target) person reissued Buy ratings connected nan stock. Piper Sandler downgraded nan shares to a Neutral pinch a $40 value target.

Less than 5 percent of nan outstanding float successful nan shares is presently held short. There has been nary insider activity successful banal truthful acold successful 2023. There were respective mini income from galore income totaling conscionable little than $200,000 successful aggregate successful nan 4th fourth of past year.

Balance Sheet

November Company Presentation

The institution ended nan 3rd 4th pinch conscionable complete $900 cardinal successful rate and marketable securities connected its equilibrium expanse against nary agelong word debt. It should beryllium noted that successful early November, Fulgent Genetics reacquired Fulgent Pharma, an independent clinical-stage pharmaceutical firm, for ~$100 cardinal successful rate and stock.

History of Fulgent Genetics

November Company Presentation

Fulgent Pharma's main plus is called FID-007. This is simply a proprietary Nano encapsulated formulation of paclitaxel developed to amended wide solubility floor plan of paclitaxel. It is targeting caput & cervix cancer, which could imaginable conscionable complete a $2 cardinal target marketplace opportunity. FID-007 is presently successful early shape development. Fulgent Genetics plans to proceed to create FID-007 nether nan 505(b)(2) pathway. They besides expect to statesman Phase 2 and 3 tests successful 2 to 3 further target indications successful nan adjacent 1 to 2 years, pinch information readouts complete nan adjacent 3 to 4 years.

Fulgent Pharma and Fulgent Genetics were a portion of Fulgent Therapeutics up until 2016 it should beryllium noted. This was nan latest successful a bid of small, strategical 'bolt on' acquisitions Fulgent Genetics has made successful caller years arsenic it builds retired its footprint successful familial and specialized oncology testing.

Fulgent’s Broad Capabilities

November Company Presentation

Verdict

The existent expert patient consensus has Fulgent losing immoderate $5.60 a stock successful FY2022 arsenic revenues autumn astir 40% to astir $610 million. A further income diminution of conscionable complete 55% to $260 cardinal is projected for FY2023, but losses per stock are pegged to diminution to conscionable complete 2 bucks a share.

Investors who look only astatine nan topline numbers, mightiness extremity up missing nan vessel connected Fulgent Genetics. Yes, wide income plunged successful FY2022 and will do truthful again successful FY2023. But this wholly owed to Covid testing being drastically curtailed crossed nan industry.

Sales from Fulgent's halfway testing divisions are increasing impressively and nan institution should spot wide income maturation return successful FY2024. Equating for Fulgent's monolithic magnitude of cash, nan institution is trading astatine little than 1 times halfway revenues. More than inexpensive capable to proceed to merit a mini 'watch item' holding arsenic Fulgent continues to negociate done nan Covid testing cliff. A caller group of information points will beryllium retired soon arsenic Fulgent reports 4th fourth results successful nan coming week.

People who insist connected dividing nan world into 'Us' and 'Them' ne'er contemplate that they whitethorn beryllium personification else's 'Them'.”― Ray A. Davis

Live Chat connected The Biotech Forum has been dominated by chat of lucrative buy-write aliases covered telephone opportunities connected selected biotech stocks complete nan past respective months. To spot what I and nan different play biotech investors are targeting arsenic trading ideas real-time, conscionable subordinate our organization at The Biotech Forum by clicking HERE.

Editor: Naga



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