Adaptive Biotechnologies(ADPT)

Adaptive Biotechnologies Corporation

Stock: ADPT

Rating: Good

Author: Waleed M. Tariq

Summary

  • Adaptive Biotechnologies’ patented technology gives it a market-leading advantage.
  • The company’s stock price has dropped by over two-thirds in the last year.
  • Low pricing, robust balance sheet, and expected growth make the stock a buy.

Bullish

  • Adaptive biotech’s technology could offer it an edge in diagnostics. Products target $54 billion industry.
  • ADPT stock is positive due to the company’s tech edge and in-place agreements.
  • ADPT’s 471 filed patents, most of which are in effect, provide it a competitive edge, according to SEC filings.

Bearish

  • Investing in SG&A and R&D for future sales reduces net income.
  • Universities, government agencies, and private and public research institutions compete with Adaptive.

Competitive Advantage

  • Adaptive’s local competitor, Juno Therapeutics, has openly recognized that its technology is a crucial window into understanding reactions and non-reactions to medications (to drugs).
  • A competitive advantage cited in an ADPT SEC filing is the company’s 471 pending patents, the majority of which are already in use.

Financial Performance

  • Adaptive’s 2021 revenue increased 57% YoY. Sequencing sales climbed 90% and Development revenues grew 32%. Despite strong revenue growth, SG&A and R&D costs have reduced its bottom line.
  • CapEx to sales ratio of above 40% shows where the company is directing its resources.

Chart

  • ADPT expects to invest heavily on sales support in 2022.The company’s income statement is indeed expected to improve in the upcoming quarters, but it will not turn profit.

Genentech Agreement

  • ADPT and Genentech struck an agreement to develop, produce, and market neoantigen-directed T-cell treatments in December 2018.
  • The firm screens and identifies T-Cell Receptors (TCR) that target certain neoantigens. Genentech handles clinical, regulatory, and marketing.

Risks & Challenges

  • Investors expect biotech profits. Regulated. Selling a manufacturer’s product quickly After being designed and approved, biotechnology products may take longer to market. Poor products ruin inventory.
  • Investors should support product development. Stocks in the small-cap biotech sector are famously volatile due to lack of liquidity and reliance on positive news and sentiment.

Conclusion

  • Even if the stock’s consensus analyst target price is $32 (an upside of 166%), short- and medium-term investors may meet tremendous volatility.