Transgenomic Inc. (TBIO.OB) Finds Positive Profit Position on Strong Consumable and Research Services Sales
In the world of “Big Pharma,” sometimes the small things go unnoticed. Investors are so interested in when and how the product pipeline will be filled, they miss the development process required to fill it. In a certain sense, they don’t see the trees through the forest. There is much work that needs to be done before a drug gets anywhere near the sales stage, and as the drug companies often say in support of higher drug prices, it costs to get to that point. Finding a company that is a part of that process is an opportunity, and one that can be very profitable.
Transgenomic Inc., a life science company, works to provide research services and products to the medical, education and pharmaceutical industries. The company’s primary focus is molecular genetics and diagnosis.
Although the general concept of the genome is known and somewhat understood by the general public, its overall practicality can be somewhat foggy for most. When looked at from an investment standpoint, however, the opportunity for profit crystallizes in that the general make-up of a genome is that of variation and the problems that variation brings. If a company can identify, and potentially modify, the variation, it can profit. In this sense, Transgenomic has identified the opportunity and is profiting by offering services and products that carry out the identification of the variation within a genome.
The company operates on two levels, instruments/consumables and laboratory services. On the instruments/consumables side of the business, the company has installed over 1,400 WAVE systems for genetic variation and detection capability world-wide – with each system requiring consumables to operate. The company’s laboratory operation, which generates a majority of sales, is located in Omaha Nebraska. At these facilities, the company works with pharmaceutical clinical trials, universities and others interested in biomarkers and associated genetic research.
Interestingly, one might think that sales of the company’s WAVE diagnostic product would drive revenue. This is apparently not the case. In the first nine months of 2008, WAVE sales actually decreased 7% but were supported by consumables to the 1,400+ systems already in place rising 4%. The company’s laboratory services also witnessed solid growth for the same period rising 66%. From this perspective, the company appears to have an in-place revenue stream that is self supporting regardless of WAVE sales.
Additionally, ongoing pharmaceutical research and genetic identification sales are far outpacing the pricing cycle required by medical institutions and research universities to purchase higher cost WAVE hard goods. Transgenomic Inc. has moved into a positive profit position on the strength of reoccurring sales and research services. As the genome is further understood, sales will ultimately begin to build in a geometric fashion and provide a solid and profitable future for the company.
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