GeneDx Chief Executive Katherine Stueland says some parents go through an "odyssey" as they grapple with mystifying symptoms from their newborn children. That's where her company steps in by offering DNA sequencing tools to help them find answers.
GeneDx offers whole exome sequencing and whole genome sequencing to help diagnose genetic diseases. The exome includes all the protein-coding genes inside a person's body. The genome is every piece of DNA.
Stueland recalled a parent with a child enrolled in a GeneDX study that uses genome sequencing to screen 100,000 newborns for 250 genetic diseases not currently included in standard newborn screening.
"I think she, as a first-time mom, was like, 'I didn't know what was normal and what wasn't normal,'" Stueland told Investor's Business Daily. "And having that genetic diagnosis sooner fundamentally changed her course of action as a mom."
GeneDx Undergoes A Transformation
Founded as a genetic testing company in 2000 by two scientists from the National Institutes of Health, GeneDx itself has been on an odyssey.
The company's stock has had a roller-coaster ride this year. GeneDx shares started the year trading under 3 a share. Today, the stock is trading around 39. That's a quadruple-digit gain over the past nine months.
Stueland says investors are starting to appreciate the company's turnaround.
The GeneDx of today is the result of a merger between Sema4 Holdings and GeneDx. Sema4 was known for diagnostic tests for reproductive health, women's health and some cancers. The biotech stock went public in 2021 via a reverse merger with CM Life Sciences. GeneDx was a subsidiary of Opko Health.
After the merger, GeneDx wound down the cancer, reproductive and women's health businesses in 2022.
"We wanted to focus on where we have a distinct competitive advantage in exome and genome in the pediatric setting," Stueland said. "Now, we're growing and scaling that business."
Biotech Stock Takes Off In 2024
That pivot has paid off.
GeneDx reported $70.5 million in sales, beating expectations for $59.3 million, according to Craig-Hallum Capital Group analyst Bill Bonello. Revenue from continuing operations — which excludes the defunct cancer, reproductive and women's health businesses — surged 77% to $68.9 million.
The biotech stock popped because of the company's looming profitability. A key reason was that GeneDx's scrapped businesses were serious cash burn offenders.
"We've reduced cash burn for nine consecutive quarters from that all-time high of $90 million a quarter, and we delivered net losses last quarter of $2.7 million," Stueland said. "We are just hovering on profitability."
The Street doesn't expect GeneDx to become profitable until 2026, though the company expects to hit that mark in 2025. Analysts polled by FactSet expect GeneDx to report an adjusted loss of $1.22 per share this year and losses of 4 cents a share next year. In 2026, they call for a gain of 78 cents per share.
But that could be conservative, BTIG analyst Mark Massaro said in a recent report.
"GeneDx has walked a long road and the new management team took a company teetering in danger, to one that is knocking on the door of profitability," he said. "We think what this management team has done is one of the best turnarounds we have seen in the space in the last decade."
Massaro reiterated his buy rating on the biotech stock, and raised his price target to 45 from 35.
GeneDx's Opportunity In DNA Sequencing
Bonello, the Craig-Hallum analyst, says it's early days for whole genome and whole exome sequencing. He estimates that the market is worth about $3 billion annually with less than 10% penetration. GeneDx currently leads the exome testing space with a whopping 80% market share.
The health care space is likely to shift to exome and genome testing, which are more effective when it comes to diagnosing rare diseases, Bonello said. Insurance reimbursement for these screening tests is improving. The average sales price is also on the rise.
"As the unequivocal leader in a growing market, with prospects for 25% to 30% sustainable growth, improving margins, and a clear path to profitability, we see significant room for upside to the shares," he said.
Bonello rates the biotech stock a buy with a 46 price target.
Highly Rated Biotech Stock
GeneDx stock has a best-possible Relative Strength Rating of 99, according to IBD Digital. This puts shares in the leading 1% of all stocks when it comes to 12-month performance.
The biotech stock also has a Composite Rating of 90. This is a 1-99 measure of a stock's fundamental and technical measures.
But this isn't what drives Stueland.
GeneDx hopes to intervene at the scariest part of parenthood, she says. It provides diagnoses for numerous rare diseases where a diet change, treatment or clinical study can make a massive difference. And, when it comes to rare diseases, the sooner the intervention, the better.
"You've had a child who was born with hearing loss," she said. "GeneDx diagnosed that child. They have since been on an experimental gene therapy and can hear again. That is all the motivation we need to continue to be a thriving player and a really critically element in improving health care for the better."
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
