Quanterix Stock: A Way to Play the Proteomics Boom
Yesterday’s news cycle was dominated by a headline that makes you almost shed a tear. No, we’re not talking about how Kelly Osbourne doesn’t know how to go on after the death of her dog. We’re talking about the sheer beauty of DeepMind’s latest accomplishment – the ability to predict a protein’s 3D structure from its amino acid sequence.
Yesterday, DeepMind launched the AlphaFold Protein Structure Database, which offers “the most complete and accurate picture of the human proteome to date, more than doubling humanity’s accumulated knowledge of high-accuracy human protein structures.” It’s being heralded as one of the most important datasets since the mapping of the Human Genome, because prior to this, only a fraction of proteins made by the human genome had confirmed structures. Now, nearly all of them do.
If this new information stands to transform biology, it only makes sense that we should place some bets on the companies that stand to benefit from it, one of those being Quanterix (QTRX).
About Quanterix Stock
Our recent piece on A List of 7 Proteomics Stocks For Investing in Proteins was lauded by the critics as precisely what proteomics investors were looking for. We don’t disagree, but the article lacked depth. While we marveled at Quanterix’s revenue growth, here’s where we left things:
Their verbose 53-page Q4 and Fiscal Year 2020 Earnings deck is so daunting that we’re inclined to pass on the stock simply because we don’t have enough time and resources to understand the value proposition.Credit: Nanalyze
As one of our premium subscribers once said, “don’t tell me you don’t understand something and leave it. That’s what I’m paying you for.” Fair enough, so we took a pass on the convoluted Quanterix investor deck and jumped into their latest 10-K filing.
“Simoa” Detection Technology
Of the 100,000 proteins in the human body that AI has now fully understood, 10,500 can be found in blood. However, many proteins are not detectable in easily accessible blood samples because ELISA technology, the industry standard for protein detection for over 40 years, isn’t capable of doing so. Enter Quanterix with their technology, Simoa, described as “the most sensitive commercially available multiplex protein detection platform” available. Researchers often look for the presence of protein biomarkers in samples of blood or other fluids, and Simoa can do that exceptionally well with its ability to trap single molecules in tiny microwells, 40 trillionths of a milliliter, that are 2.5 billion times smaller than traditional ELISA wells. This provides researchers with a digital readout of single molecules, all through a fully automated desktop machine.
One example of a practical application of Simoa would be the “neurofilament light (NfL) biomarker” which is being used by researchers to possibly detect dementia 20 years before onset. It’s research like this that points to Quanterix becoming a testing and diagnostics company in the future.
Now that we understand what Quanterix does, we can then begin to identify key metrics for investors to watch. It’s early days for the platform, so we’re primarily interested in adoption and market share being captured, which is best represented by the number of installed machines and the number of biomarkers supported. These metrics are presented in the following informative slide found in their investor deck.
Another metric to watch is the revenue breakdown chart provided in their annual investor deck.
We’d like to see consumables growing steadily over time while “Lab & Services” and “Others” become less important as time goes on.
Interestingly enough, Quanterix doesn’t even list any of the other six proteomics stocks we looked at as their competitors. Instead, they list six names which “have products for protein detection that compete in certain segments of the market in which we sell our products.” One of them, Singulex, appears to have gone under. Another, Gyros Corporation, is one of those Japanese firms that you need a secret decoder wheel to figure out what they do. The remaining four names are as follows.
Bio-Techne (TECH) is an $18 billion company that derives over 75% of their revenues from “Protein Sciences,” worth about half a billion dollars for the first nine months of this year. With over 80% of revenues coming from consumables, we can imply a certain level of maturity for the company’s platform.
Nonetheless, continuing growth doesn’t seem to be a problem for the company based on their annual and quarterly revenue growth trends.
Luminex, a provider of molecular, proteomic, and cellular analysis tools, was publicly traded until they were acquired by the Italians. Last week, DiaSorin, a global leader in the In Vitro Diagnostic (IVD) field, acquired Luminex for $1.8 billion. Looking at Luminex’s old investor deck, we see a company with nearly half a billion dollars in 2021 revenues with 75% coming from consumables, assays, and royalties.
With more than 25,000 instruments installed worldwide, it seems that Luminex is also a rather mature technology platform.
Meso Scale Diagnostics
Not a lot of information to be found for this private company that describes themselves as “the world’s leading provider of highly sensitive multiplex immunoassays.” The company was founded in 1995, the same year in which their website appears to have been designed. A handful of press releases talk about the usual COVID stuff, but little can be found as to how formidable a competitor Meso Scale Diagnostic might be.
NanoString Technologies, Inc.
NanoString (NSTG) launched their first commercial product 13 years ago, nCounter, which is used to conduct what is known as bulk gene activity, or gene expression analysis. Around 950 systems have been installed since then, and their next platform, GeoMx DSP, was launched in 2019 and is designed to enable the field of spatial biology which has a protein component to it.
Here’s how NanoString defines spatial biology.
Spatial Biology is defined as the study of tissues within their own 2D or 3D context and is the new frontier of molecular biology. In the same way that GPS captures location coordinates within an area to create a map and track you within it, the same principle can be translated to a cellular and molecular level.Credit: NanoString
Before we go any further, we’d like to point out something concerning. Where’s the revenue growth?
For a company that’s been selling a platform for over a decade, we’d expect them to be showing some consistent revenue growth.
To Buy or Not to Buy
What we might conclude is that there are old school proteomics companies like Bio-Techne and Luminex, and then the new guard, companies like Quanterix, and perhaps some of the other promising platforms that have yet to show revenues. Since Quanterix has the most sensitive platform on the market, it all comes down to how important sensitivity is to researchers. Apparently, it’s important enough to merit a study last year that compared the leading platforms on the market and found that indeed Quanterix’s Simoa technology is the most sensitive.
Whenever there’s an incredibly complicated investment theme that we want exposure to, we’re always a bit frazzled leading up to when we actually place our bets. The single-cell revolution is a good example. We finally pulled the trigger on a company that we believe will come out ahead as a leader – 10X Genomics – alongside a side bet on Berkeley Lights. In the case of proteomics, we need to wait for a leader to emerge and then pounce. Leaders capture market share, and market share is a proxy for revenues. So, here’s how everyone is stacking up so far.
|Company Name||Ticker||Annualized Revenues|
|SomaLogic||TBD||55 (2021 full year)|
Two of these companies – SomaLogic and Nautilus Biotechnology – haven’t even completed their SPAC mergers yet, so they’re not even worth considering until that happens. SomaLogic is on our radar with their claim of having “a significant first mover advantage,” so we’ll be taking another look if that SPAC deal gets sealed.
Any company without revenues is not on our radar, so that means Quanterix seems to be in the lead, at least based on annualized revenues (last quarter revenues * 4 except for SomaLogic which only provided 2020 revenues). Let’s also keep in mind that there are private companies out there that could be emerging as leaders too, we just can’t see them yet.
Given our risk-averse approach to today’s overheated market, we’re going to keep Quanterix stock as a “like” and watch how this space evolves. Should we decide to open a position, Nanalyze Premium annual subscribers will be the first to know via our new email trade alerts.
DeepMind co-founder, Demis Hassabis, believes that yesterday’s announcement represents “the most significant contribution AI has made to advancing the state of scientific knowledge to date.” We’ve talked before about how proteins are the most amazing machines in the world, and now we’re a whole lot closer to understanding all of the known proteins, and perhaps most exciting, the vast world of unknown proteins.
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Quanterix looks like a good long term stock, the only question is the timing on opening position. Share price was falling since February when it reached $86, now is $53. Ideally you would like to buy it near the bottom. Next earning date is early August, so quite soon. In Q1 they beat on revenue. It seems to me their revenue growth is accelerating, so Q2 results may be good as well. They are expected to be profitable in 2023.
On another note: I just checked if ARK has a position for Quanterix: they don’t have it. On the other hand they keep buying Quantum-Si.
Good luck trying to time the market. Nobody can successfully do that, which is why we use dollar-cost-averaging. Earnings days can go either way of course.
“Interestingly enough, Quanterix doesn’t even list any of the other six proteomics stocks we looked at as their competitors. Instead, they list six names which “have products for protein detection that compete in certain segments of the market in which we sell our products.”
Would it be a fair interpretation that Quanterix is a biomarker company and not a proteomics company, and that not all biomarkers are proteins. Thus, are proteomics companies only partially competitors?
That’s a fair interpretation, absolutely. Makes a lot of sense. Thank you for the comment.
Shares of Quanterix Corporation (QTRX) soared in extended trade on Monday and on Tuesday after the life sciences company announced that it was granted Breakthrough Device designation by the U.S. Food and Drug Administration (FDA) for its blood test, Simoa® phospho-Tau 181 (pTau-181), which helps in diagnostic evaluation of Alzheimer’s Disease.
Quanterix’s blood test helps measure pTau-181 concentration in human serum and plasma using the Quanterix HD-X immunoassay system.
Thank you for the update. In the world of volatile tech stocks, anything moving 13% shouldn’t be considered as having “soared.” These short-term price movements are largely just background noise.