Olink Stock (OLK) – A Lesser Known Play on Proteomics

Figuring out how much to tax the commoners is a tricky problem to solve. Tax people too much and they won’t have much of an incentive to work. Tax them too little and you won’t generate much revenue. In Sweden, taxes are the highest of any country in the world at over 57%, yet plenty of people still seem willing to work. Spotify, IKEA, and Volvo are all Swedish companies that have achieved global brand recognition through hard work. Today, we’re going to talk about a Swedish life sciences company that hopes to dominate the proteomics space.

About Olink Stock

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Founded in 2016, Swedish company Olink (OLK) was acquired by Summa Equity AB, a Nordic private equity firm, in 2019. Shares of the company now trade on a number of European stock exchanges, and also trade on the Nasdaq Global Select market under the ticker OLK. This means U.S. investors can now buy shares using any brokerage account without having to access foreign exchanges. With a $4.45 billion market cap and Q1-2021 revenues of just $13.63 million, the company is extremely overvalued according to our simple valuation ratio.

  • 4.45 billion market cap /0.054 billion in annualized revenues = 82

We don’t even consider buying any stock with a valuation ratio over 40, no matter how exciting their story sounds. That being said, we’re still keen to learn more about what the company does given they made our list of 7 Proteomics Stocks For Investing in Proteins.

What Olink Does

Up until now, many proteins have not been detectable in blood samples because ELISA technology, the industry standard for protein detection for over 40 years, isn’t capable of doing so. Enter Olink and their Proximity Extension Assay (PEA) technology which allows scientists to detect and quantify circulating proteins (proteins found in blood) using a library of protein biomarker targets which they believe “is among the world’s largest extensively validated protein libraries.” Their products require only 1 microliter (0.000202884 of a teaspoon) or less of sample volume, which is approximately 20 to 1,000 times less than the sample volume required by certain other proteomics technologies.

At the end of 2020, Olink had a library of approximately 1,500 biomarker targets with another 1,500 to be added this year.

Credit: Olink

To put that number in perspective, around 10,500 proteins can be found in blood. The Human Proteome Project, with a catalog of approximately 5,000 circulating proteins, provides one of the most comprehensive analyses of proteins detectable in blood. Roughly speaking, that means Olink will cover about half of all meaningful proteins found in blood by the end of this year.

Today, Olink’s protein biomarkers can be utilized in three different manners.

  • Olink’s own instrument – the Olink Signature 100 – a benchtop system for biomarker analysis available in Q4-2021
Credit: Olink
  • A biomarker platform – Olink Explore – that uses three of Illumina’s next-generation sequencing (NGS) machines of which there is an install base of about 5,000 machines.
  • Olink Target where reactions are quantified by real-time PCR using the Fluidigm BioMark™ HD real-time PCR platform

Olink has a customer base of almost 700 customer accounts in over 40 countries worldwide with their products having been used in approximately 560 peer-reviewed publications. Up until now, the majority of their revenues have come from services.

Customers and Revenues

Olink’s revenues are principally generated from two segments, Kit and Service. Kit revenues refer to the sale of their panels directly to customers that run the kit and analysis in their own labs. Service revenues involve Olink running the analysis on their products on behalf of their customers. Last quarter, 70% of their revenues came from services.

Investors would clearly prefer a razor and blade model where high-margin consumables make up a large percentage of revenues down the road. That’s much more scalable than a services business model which only grows linearly based on how many bodies you throw at it. One reason Olink may be so highly valued is that there’s an expectation that product revenues will quickly surpass services revenues. That may be the case, but we’ll wait until product revenues become a majority before we take another look at the stock. It’s important that they first demonstrate product-market fit.

Olink lists their principal competitors as Quanterix, Meso Scale Diagnostics, Luminex, and SomaLogic – all names we’ve talked about before – as well as “more established technologies such as ELISA or mass spectrometry provided by a number of established vendors.” This is a good segue into the critical decision that needs to be made.

To Buy or Not to Buy

In our recent piece on Quanterix Stock: A Way to Play the Proteomics Boom, we looked at how our list of known proteomics pure-play stocks compare when it comes to revenues.

Company NameTickerAnnualized Revenues
(USD millions)
SeerSEERNada
QuanterixQTRX109
CodexisCDXS72
OlinkOLK54
SomaLogicTBD55 (2021 full year)
Nautilus BiotechnologyTBDNada
Quantum-SiQSINada

Were we to consider buying any proteomics stock right now it would be Quanterix, a company that’s much more reasonably valued with a simple valuation ratio of 18. Would we buy Olink at that same valuation? Not until products surpass services as a majority of total revenues would we consider answering that question.

Our methodology for investing in any given tech theme involves waiting for a leader to emerge and then placing our bets accordingly. Olink has aspirations to become a leader, but those aspirations and $5 won’t get you a plate of meatballs at IKEA.

Conclusion

It’s still early days for proteomics as the world’s most notable researchers, across academia and commercial, kick the tires on the pick-and-shovel offerings from various proteomics platform providers. There’s space for multiple winners here, but a leader will likely emerge as one with consistent revenue growth based on a razor and blade model with a growing install base.

We’re skeptical of companies that aren’t generating revenues yet, and we’re also interested in taking a closer look at SomaLogic once they’ve made some proper regulatory filings. For now, we’re avoiding Olink stock going forward given their rich valuation and heavy reliance on services.

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2 thoughts on “Olink Stock (OLK) – A Lesser Known Play on Proteomics
  1. In April 2021 (around 4 months ago) I created a watchlist to track proteomics stocks.
    All 7 stocks are in red and Olink (OLK) is actually the best performing – only -1%.
    The 2 worst performing stocks are SEER and NAUT – both -40%.
    QSI (the one ARK keeps in its portfolio) is -20%.

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