Pharmaceutical/bio
The author is an analyst for Shinhan Securities. He can be reached at jaewonjeong@shinhan.com -- Ed.
1Q23 operating loss decreases on cost control despite sales drop
Psomagen continued in the red in 1Q23 with sales of USD6.52mn (-11.2% YoY) on standalone basis. Sales fell as orders were slashed by a major client’s decision to perform genome sequencing in-house. However, the company was able to reduce operating loss by almost 86% YoY on efficient cost management. SG&A expense decreased by 46% YoY, despite one-off costs from the relocation of the headquarters building earlier this year.
Strong growth to be led by new DNA sequencing services
Full-year earnings are expected to turn positive in 2023. Demand for Psomagen’s Next Generation Sequencing (NGS) and Sanger Sequencing (CES) services, the main source of sales, should increase with the addition of new clients. Global pharmaceuticals like Sanofi and GSK have been added to the client list that includes Variantyx, Admera Health, Moderna TX, and the National Institutes of Health (NIH). Moreover, the B2C business has generated sales from its own brand launched last year, which offers services at a lower price and greater convenience vs. competitors. The business is on a steep growth track with 1Q23 sales already exceeding last year’s total.
Psomagen’s long-term growth is likely to be driven by new genome analysis services. The company developed single-cell sequencing technology in 2021 and proteomics solution in 2022. Since then it has partnered with Olink Proteomics, a global leader in the protein analysis market, and has become a certified service provider for 10x Genomics, a major single-cell RNA sequencing platform. We see further upside in sales through partnership with leading firms in view of the growth potential and size of the US genome sequencing market.
Transformation into a provider of multi-omics solutions
Psomagen is transforming into a provider of multi-omics solutions (NGS, CES, proteomics, single cell, microbiome sequencing) in the US. Going forward, market focus will likely shift away from single-cell-based sequencing toward multi-omics technology, which enables diagnosis based on analysis of multi- level omic data. Partnership with major firms in the North American market looks promising.
Backed by steady sales growth, the company saw a decline in operating loss each year since it was listed on the KOSDAQ in 2020 through the technology- based special listing track. We may well expect a profit this year on steady improvement of the mainstay business.