JNJ - Quanterix Corporation: Going For Three In A Row

2023-11-06 13:45:31 ET

Summary

• Today, we revisit Quanterix Corporation, a life sciences company that develops and markets digital immunoassay platforms.
• The company has posted much better than expected quarterly numbers over the past two quarters, and third quarter numbers will be out shortly.
• The company has a rock-solid balance sheet, has seen some recent insider buying and just made Goldman Sach's "Conviction List."
• Buy, Hold or Sell?  An updated analysis follows in the paragraphs below.

In three words I can sum up everything I've learned about life: it goes on ."? Robert Frost.

It has been just over a year since our initial article on Quanterix Corporation (QTRX). The stock was crushed in August of last year when it posted disappointing guidance and announced a strategic realignment plan involving layoffs. The shares have since fully recovered. Third quarter results should come out this week. The company named a new CFO in August and saw some insider buying in its shares in September. An updated analysis follows below.

Company Overview:

Quanterix Corporation is a life sciences company that is headquartered just outside of Boston, in Bilerica, MA. The company develops and markets digital immunoassay platforms that advance precision health for the life sciences research and diagnostics industry. The stock currently trades at just under $23.00 a share and sports an approximate market capitalization of $860 million.

The company provides numerous ultra-sensitive digital assay platforms that detect protein biomarkers to the Healthcare industry and utilizes its CLIA-certified Accelerator Laboratory to provide contract research services as well. This summer, Quanterix launched a biomarker blood test it calls LucentAD. This test can help to diagnose patients experiencing symptoms consistent with early Alzheimer's disease.

Late in October, the company entered into an arrangement with Johnson & Johnson ( JNJ ) to develop blood-based tests for the detection of Alzheimer's disease. Financial terms of the deal were not disclosed.

Second Quarter Results:

The company posted its second-quarter numbers on August 7th. Quanterix had a GAAP loss of 16 cents a share, far better than the loss in the high 30s analysts were expecting. Revenues rose 32% on a year-over-year basis to $31 million, some $5 million above the consensus estimate. Product revenue rose by a third from 2Q2022 to $19.7 million and that was with instrument revenue falling 38% to $3.5 million.

It was the second quarter in a row that Quanterix easily beat both top and bottom expectations. Revenue growth benefited from increased Accelerator Lab utilization and higher consumables revenue as well as a non-recurring $1.5 million bump to elated product and license agreements. Consumable revenue grew by $6 million or 65% from the second quarter of 2022.

It was a very solid quarter, as can be seen above. GAAP gross margin shot up to 61.7% from under 38% in the year prior. Management made particularly good progress in lowering operating expenses despite increased volume, which greatly improved these gross margins. Based on quarterly results and its progress on these fronts, leadership slightly bumped up its forward guidance around several metrics (below).

Analyst Commentary & Balance Sheet:

Since second quarter results were posted, Goldman Sachs ($34 price target), Leerink Partners have both reissued Buy ratings on the stock while Canaccord Genuity ($32 price target, up from $25 previously) upgraded the shares to a Buy from Neutral noting " that assay redevelopment program and increasing its operating margin assumptions bode well for the company" a nd sees the company returning to double-digit sales growth in 2024 . Goldman Sachs also just placed QTRX on its 25-stock " conviction list."

Just over three percent of the outstanding float in the shares are currently held short. A director bought just over 20,000 shares in the firm in the first half of September.

The company is making progress on lowering its cash burn. Its net loss of $6.2 million in the second quarter was a huge improvement from the $24.9 million net loss in 2Q2022. Management also lowered its full-year cash needs for FY2023 to $30 million to $35 million. According to the company's second-quarter 10-Q , Quanterix ended the first half of 2023 with just under $330 million worth of cash and marketable securities on its balance sheet . The company has no long-term debt. Quanterix did a high cash flow breakeven status in Q2 for the first time, it should be noted.

Verdict:

Quanterix Corporation lost $2.61 a share on just over $105 million worth of revenues in FY2022. The current analyst firm consensus has losses dropping to $1.04 in FY2023 on sales growth in the high single digits. They see $1.22 a share in the red for the company in FY2024 despite projected sales growth in the low teens.

The company has made progress this year in reducing costs and sales growth should accelerate in 2024 thanks to product launches. Analysts have optimism the company has a significant opportunity in testing for Alzheimer's. That said, Quanterix is unprofitable and is likely to remain so. Fortunately, Quanterix's balance sheet is rock solid, and it has no need to raise additional capital.

Quanterix Corporation stock should only be considered for purchase by aggressive growth investors. A fresh set of data points will be out shortly with Q3 results, as the company tries to make it three quarterly reports it has easily exceeded expectations.

To live is the rarest thing in the world. Most people exist, that is all ."? Oscar Wilde.

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