HTG Molecular Diagnostics, Inc, (NASDAQ: HTGM) is a commercial-stage company that develops and markets a technology platform to facilitate the routine use of complex molecular profiling. The Company’s HTG Edge and HTG EdgeSeq platforms, consisting of instrumentation, consumables, and software analytics, are used in sample profiling applications, including tumor profiling, molecular diagnostic testing, and biomarker development.
HTG is focused towards commercializing a revolutionary diagnostics test process. Specifically, the test is called EdgeSeq, and it’s designed to improve the utility of certain types of samples of particular cancers.
Effective June 14, 2017, HTG Molecular Diagnostics, Inc. entered into a statement of work (the “SOW”) with QIAGEN Manchester Limited (“QIAGEN”), a U.K. corporation and wholly owned subsidiary of QIAGEN N.V. The SOW was entered into pursuant to the Company’s Master Assay Development, Commercialization, and Manufacturing Agreement with QIAGEN, and addresses development activities expected to be conducted by the Company and QIAGEN in connection with the initial phase of a sponsor project agreement entered between QIAGEN and a pharmaceutical company.
The company also announced that it has amended and restated its IVD Test Development and Component Supply Agreement with Illumina (ILMN) to, among other things, extend the agreement term and increase the number of in-vitro diagnostic (IVD) test kits that may be developed for use with Illumina sequencing technology.
As per management, its HTG EdgeSeq research uses only products that utilize the Illumina sequencer technology that has been very well received by customers, which leads them to believe customers can easily adapt to its IVD kit portfolio planned for development under this agreement. With EdgeSeq, HTGM has taken the multiple testing machines and bundled them into one. It can use a single sample to conduct multiple types of tests. It’s basically brought the hardware side of the space up to speed with the sample side and thus is a potential game changer.
The Company announced its first quarter earnings data on Monday, May 15th. The company reported ($0.73) EPS for the quarter, missing consensus estimate of ($0.58) by $0.15. The company had revenue of $1.37 million for the quarter, compared to analyst estimates of $2.44 million. On average, equities analysts expect that HTG Molecular Diagnostics will post ($2.25) EPS for the current fiscal year.
Notwithstanding the muted results, core fundamentals (over the longer term) of the company continue to remain promising & the management is pleased with the Company’s momentum as it makes progress towards launching its innovative technology. Going forward the company would continue to focus on growing partnerships with pharma sector and developing high-value diagnostic tests.
HTGM already has connections with some of the major names in the healthcare sector – Merck & Co., Inc. (NYSE: MRK), Bristol-Myers Squibb Co (NYSE: BMY) and Qiagen NV (NASDAQ: QGEN) – and the company is hopeful its new technology will be launched to maximum effect in Europe. On the US side, the company is in the process of regulatory submission with the FDA and expects to submit the third and fourth (final) parts of the submission during the third and fourth quarters respectively this year.
As per the management, HTGM is well positioned for solid revenue visibility as it brings Proprietary technology, which allows it to do more with less and having matched its no extraction chemistry with NGS-based detection. The company claims to have a disruptive molecular NGS-based technology, to replace & consolidate existing tests in $4.2B markets (anatomical pathology – FISH, flow cytometry, IHC)
With the recent developments, analyst have revised their outlook on the stocks:
Firm: Rating: Price: Date:
Rodman & Renshaw BUY $6.00 May 16, 2017
Zacks BUY $4.50 May 11, 2017
Canaccord Genuity HOLD $6.50 April 19, 2017
The stock currently has an average rating of “BUY” and a consensus price target of $4.50. Considering present valuation, HTGM is at a favorable risk reward position. Moreover, modest expectations coupled with reduced valuations, has further de-risked the risk reward situation for the company.
About the Company: Headquartered in Tucson, Arizona, the mission of HTG Molecular Diagnostics (HTGM) is to empower precision medicine at the local level. In 2013 the company commercialized its first instrument platform and a portfolio of RNA assays that leveraged HTGM’s original proprietary nuclease protection chemistry. Continuous improvement led to the 2014 launch of the company’s HTGM EdgeSeq product line, which automates sample and targeted library preparation for next-generation sequencing.
Other accomplishments and highlights
- In the recent past. The Company entered into several key agreements including:
– A research agreement with Centre Léon Bérard, which provides the framework for molecular profiling studies aimed to advance precision medicine
– A Master Services Agreement with Daiichi Sankyo Company, Limited, for work to be performed in HTGM’s VERI/O laboratory
– A research collaboration agreement with Instituto Valenciano de Oncología (IVO), with the initial project utilizing the HTGM EdgeSeq Oncology Biomarker Panel to develop and validate a breast cancer recurrence risk score
- Launched direct-target sequencing technology and initial DNA mutation panel in VERI/O laboratory
- Announced HTGM EdgeSeq PATH Assay to launch in the second quarter of 2017
First Quarter 2017 Financial Results:
Earnings: Revenue for the first quarter of 2017 was $1.4 million, an increase of 58% over the same period in the prior year. In Q1 2017, product revenue included $23,000 instrument rental and extended warranty services and $0.5 million of consumable sales, with service revenue totaling $0.8 million comprised primarily of sample processing services.
Profitability: Net loss from operations for the first quarter of 2017 was $5.4 million, compared to $6.7 million for the first quarter of 2016. Net loss per share was $(0.73) for the first quarter of 2017 compared to $(1.02) for the first quarter of 2016. Going forward, strong product gross margins are likely to fuel improved operating margins as revenue growth leverages fixed cost base.
Liquidity: HTGM ended the first quarter with $5.4 million in total cash and investments, including $2.8 million in cash and equivalents and $2.6 million in short term, available-for-sale investments.
Since inception, HTGM’s operations have primarily been financed through the issuance of common stock, redeemable convertible preferred stock, the incurrence of debt and cash received from product sales, services revenue, and other income. As of March 31, 2017, it had $19.0 million of debt outstanding in its Growth Term Loan, NuvoGen obligation and capital lease obligations.
Following the end of the first quarter and through May 12, 2017, HTGM sold 1.78 million shares of common stock under a sales agreement with Cantor Fitzgerald & Co. at a weighted average share price of $5.66, for gross proceeds of approximately $10.0 million.
Key risk factors and potential stock drivers:
The company is exposed to risk of the potential for dilution. The company is going to need incremental capital.
Timely approval of the HTGM EdgeSeq ALKPlus Assay expected to be the first NGSbased oncology test approved by FDA as a CDx
The company’s ability to ramp-up profitability while sustaining its revenue growth would be one of the key stock driver over the near to medium term.
Stock Performance:
On Wednesday, June 21, 2017, HTGM shares opened at $2.69. The stock has an average daily volume of 3.1M shares exchanging hands. Market capitalization is $28.54 million. The current RSI is 27.55
In the past 52 weeks, shares of HTGM have traded as low as $1.20 and as high as $13.25.
At $2.69, shares of HTGM are trading below its 50-day moving average (MA) at $4.17 and below its 200-day MA at $2.99.
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