Complete Genomics: A Leader In DNA Sequencing

| About: Complete Genomics, (GNOM)
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Company Background
Complete Genomics (NASDAQ:GNOM) was founded in 2005 and is headquartered in Mountain View, CA. It is an up and coming life sciences company that develops and commercializes an innovative DNA sequencing platform for complete human genome sequencing and analysis. The company provides a Complete Genomics Analysis Platform, which combines its proprietary human genome sequencing technology with the company's advanced informatics and data management software. Complete Genomics offers an innovative, end-to-end, outsourced service model to the customers with data that is immediately ready to be used for genome-based research. Its technology allows academic and biopharmaceutical researchers to conduct large-scale complete human genome studies that will help in identifying the genetic underpinnings of complex diseases and drug responses.

This is a very optimistic story for those of you new to Complete Genomics.

Real Facts
The company's latest Q2 earnings report for the quarter ending June 30, 2012 was released on August 8, 2012 in after hours trading. It reported its highest revenue generating quarter to date, with $8.7M in revenues compared to $5.9M in Q2 of 2011. According to the Q2 2012 results:

  • Complete Genomics delivered data for approximately 2,200 genomes, including approximately 100 non-revenue generating genomes, for its clinical validation study with the Mayo Clinic and its cancer grant programs.
  • The company recognized revenue for more than 2,100 genomes, including approximately 200 genomes that had shipped but were awaiting recognition at the end of the first quarter.
  • Expenses increased and were due to the ramp up of operating expenses: $26.8M vs. $20.8M.
  • The company's backlog as of June 30 was approximately 4,600 revenue generating genomes, including approximately 1,000 genomes booked in the second quarter, representing an aggregate revenue potential of approximately $22M. In the third quarter, it expects to deliver over 2,200 genomes to revenue and non-revenue generating customers.
  • Earlier in February 2012, the shares soared on positive news that Complete Genomics signed a deal with the Mayo Clinic's Center for Individualized Medicine to provide large-scale genomic sequencing services.

Financial Strength
Cash on hand was reported to be $43M, and current debt to be $21M from Q2. Accounting for the restructuring and layoffs of approximately 55 personnel, the current burn rate should drop from approximately $20M per quarter to about $18M, or even less. Complete Genomics has also hired Jefferies to further assist on other strategic initiatives to help the company with its business plan and strategic initiatives.

Pending Catalysts for September
In September of 2012, the company is anticipating Clinical Laboratory Improvement Amendments (CLIA) certification, financial details to the Mayo contract, and possibly some LFR related articles. It is very possible to expect CLIA certification very soon, as CEO Cliff Reid said in previous communications to investors that he wanted to be CLIA certified by the end of Q3. In short, the certification is a measure of quality assurance for clinical laboratories.

As for Mayo, we did not receive the financial details because the contract was dependent upon providing clinical level vs. research level WGS to Mayo. With the Mayo "Individualizing Medicine Conference" scheduled for the first week in October, and with Complete Genomics sponsoring the event, I expect that we could see either a news release prior to, or possibly during, this conference.

As for LFR, in a recent phone discussion with investor relations -- per my colleague, Dan Low, who also follows this company very closely -- stated that the company has discussed the possibility that there might be some LFR related articles coming soon, but obviously, can't give us any specific details beyond that until Complete Genomics issues a formal press release.

Recent Conference Call Info.
I highly recommend that interested investors listen to the interview with Complete Genomics CEO Cliff Ried, hosted by Singularity Hub in July 2012. Please click this interview link for more.

Complete Genomics has benefited from next generation sequencing technologies that has reduced its cost per genome by half each year for three straight years. Its current capacity is 10,000 genomes per year, and the devices read with stunning accuracy. The execution of its business plan seems to be improving, and the stock has made a very good run in the past few months. The company's financials are improving, and should do better with cost cutting measures. Complete Genomics' business model has gained some attention, too. I like this company on any recent drops to either add to or initiate a new stock position, however please consult with your financial advisor before taking any financial advice to make sure that this is a suitable investment for your portfolio.

Disclosure: I am long GNOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.