Summary
- SomaLogic caught a strong bid in December and the rally has extended into the new year.
- The price change looks well supported by company-specific catalysts and market generated data.
- The company's niche differentiators are also attractive should they convert at the company's top and bottom lines.
- Net-net, rate buy, seeking $6.30 price objective.
Investment Summary
Shares of SomaLogic, Inc. ( SLGC ) have caught a strong bid in December and broken out against a long-term downtrend. After listing in FY21' investors sold shares en masse and SLGC still has 6.23% short interest of its outstanding float. With the sharp reversal off 52-week lows the question turns to what's in store for the stock into the new year. Here I'll run through the additional catalysts to move the needle for SLGC's and the market generated data that shows confluence for the rally to extend further. Net-net, rate buy, looking for price objectives to $6.30.
SLGC catalysts for further price change
SLGC's primary offering is its proprietary SomaScan Assay. It is designed for the detection and measurement of protein biomarkers in a single sample of blood or other bodily fluid. Per the company, it is said "to provide 7,000 highly reproducible measurements of circulating proteins from a single sample of plasma, serum, or urine" . Note, this is the largest purported protein number than any other proteomic assay. The SomaScan assay is based the company's SomaSignal technology, which uses aptamers – specifically, it uses slow off-rate modified aptamers ("SOMAmer") to complete tightly bind to its specific protein targets.
SOMAmers are a subtype of aptamers, single-stranded DNA or RNA molecules that are capable of binding to specific targets such as proteins, carbohydrates, with high specificity and affinity. In effect, SOMAmers are engineered aptamers designed to have a slow dissociation rate from their target, which allows for longer duration of binding and increased potency. This property also makes SOMAmers attractive as therapeutic agents for various diseases, including cancer, cardiovascular disease, and neurological disorders.
The engineering process outlined above is quite intriguing. To illustrate, SOMAmers are generated through the chemical modification of the aptamer's structure. The modifications introduce non-nucleotide components into the aptamer structure, which result in stronger and more stable aptamer-target interactions. The introduction of these components also increases the molecular weight of the aptamer, enhancing its pharmacokinetics and pharmacodynamics, ultimately making it a more viable therapeutic candidate.
The proteomics market is anticipated for a 13.5% CAGR into FY30', and was valued at $22Bn in FY22'. Additional research points to a 16.6% CAGR into FY26'. In any sense, SLGC's presence in this market means it has potential to re-rate to the upside, should its financials stack up at the same rate of change.
To that effect, the company announced its preliminary FY22' top-line results last month, where it now expects ~$98mm at the upper end of range. This is around 20% YoY growth in turnover and confirms a reasonable growth period for the company. Aside from the revenue announcement, the company also advised of several additional catalysts to add torque to its flywheel.
First, SLGC announced it has entered into a strategic collaboration with Group 42 Healthcare to fulfil its proteomics requirements. The deal forms part of a multiomic research and healthcare initiative between the pair. For reference, multiomics include genome, proteome, transcriptome, epigenome, and microbiome applications. The agreement encompasses several countries, ranging from the UAE and the wider Middle East/North Africa ("MENA") region. Group 42 apparently selected SLGC due to its broad proteome. Additionally, SLGC has recently extended its contract with Novartis (NVS), ensuring it remains their primary proteomics platform through 2033. To-date, SomaLogic has processed over 150,000 samples for Novartis, providing proteomics data for its translational research initiatives. Moreover, the company has recently undergone a strategic restructuring, aimed at prioritizing its long-term growth initiatives in its life sciences segment.
SLGC market generated data
SLGC broke out above its longer-term resistance level in December and has continued tracking higher for the last 4-weeks to date. Weekly volume trends have been equally supportive after it broke the 50DMA after the short-term rally.
Exhibit 1. SLGC breakout above long-term resistance level
As to where we are in the trend, the price line and lagging line crossed the cloud in January and both have held their positions. Support has lifted to $3.30, and the cloud cross means we can trade the upside targets listed later. Moreover, the cloud itself has crossed and it's widening with a bullish progression. We are bullish above the cloud here.
Exhibit 2. Bullish cloud cross with both price and lagging lines above the cloud
Moreover, weekly money flows have registered as inflows over the last 3-weeks, the first over the last 12-months to date. This adds further weight to an additional re-rating to the upside, with demand finally arriving into the new year.
Exhibit 3. Weekly money flows finally shifting to a demand bias in January
Data: Updata
Looking at the weekly market profile since December, the price structure has continued to shift higher with the point of control and value zones in tandem. Buyers have had multiple time-price opportunities beneath each point of control and this evidences that demand has been active with each weekly pullback in price. The depth of the value zone for buyers is also deep, meaning buyers have been entering longs at the low-points of downside volatility. This is supported by the volume patterns across each price range. Given this, the market continues to find fair value at a higher level as new demand enters the stock each week. Hence, there looks to be plenty of opportunities to buy SLGC on price weakness as it reprices higher. This tells us there's demand and generates a solid case for the rally to extend.
Exhibit 4. Weekly market profile illustrating buyers active at depth along the price ladder
As such, we have upside targets to $6.30, and this supports our bullish view on the stock. Given the strong market generated data, including the trend analysis above, we are looking to trade these upside targets.
Exhibit 5. Upside targets to $6.30
Data: Updata
In short
SLGC's re-rating looks to be well supported by market generated data and additional catalysts for price change looking ahead. We are looking to trade upside targets to $6.30, playing the company's recently announced FY22' revenue estimates and the corresponding price response. Net-net, rate buy.
For further details see:
SomaLogic: Rally Looks Well Supported To Extend