For some reason, IPOs are coming out of the woodwork these days. Seems strange when you consider that just three months ago, all hell was breaking loose, and everyone seems to have forgotten about that. In fact, since the first-ever mention of the Woohoo Flu, the Nasdaq has gone up by +13%. Maybe everyones rushing to IPO before the door slams shut again?

It was only several months ago that we wrote about How Berkeley Lights Enables Synthetic Biology, and now theyve filed for an IPO, which means we get to take a look under the hood. Well assume youre already familiar with the company from our previous piece and jump right into their S-1 filing to look for juicy insights.

The value proposition on offer from Berkeley Lights is that researchers can do a lot more, with a lot less, and do it much quicker. An entire roomful of equipment can be replaced with a single platform called The Beacon Optofluidic System where wells are replaced with chips. (Remember organs-on-a-chip? Well this is lab-on-a-chip.) The core technology behind the Beacon platform are OptoSelectchipsthat contain thousands of NanoPen chambers which are like wells on a microplate.

The chips you see above are capable of not only sorting cells, but measuring their characteristics. All of this takes place rapidly, at scale. The platform is operated through an easy-to-use software interface which guides the entire laboratory workflow which thanks to automation can operate at lightening speeds. For example, discovering an antibody is a process that would typically take about three months. Using the Beacon platform, that same process takes just a single day.

Cells are microscopic factories that make minute amounts of a variety of valuable proteins, such as antibodies, and therefore require a high degree of precision when analyzed individually, Berkeley Lights correctly points out. Now, just imagine taking thousands of cells and measuring the individual characteristics of each cell to only select a chosen few. These capabilities can be configured as customized workflows which are unique to a customers particular requirements, something that translates into a total addressable market of approximately $23billion:

It all works out to about 1,600companies, academic institutions, and governmental and other organizations which Berkeley can sell their Beacon platform to using three different revenue models:

The company also talks about the Berkeley Lights BioFoundry which may develop proprietary valuable biological assets they could sell or license to customers, such as functionally validated antibodies or new organisms applicable to synthetic biology.

Since the first commercial sale of Beacon in the United States in December 2016, Berkeley Lights has just dipped their toes in the water with 45 customers and an install base of 54 Beacon machines. The customer list includes eight of the ten largest biopharmaceutical companies in the world who comprised 18% of their total revenues in 2019 which came in at $56.7 million, a growth of +81% over 2018 revenues of $31.3 million.

About 70% of their 2019 revenues came from direct sales while the other 30% came from strategic partnerships like the one with Ginkgo Bioworks we discussed in our previous article. A breakdown of revenues by addressable markets shows that most the money in 2019 came from the antibody therapeutics segment:

We also see heavy spending on R&D at around $38 million in 2019, a number thats equivalent to 67% of revenues at the moment (nearly 42% of all 210 employees work in R&D). That spending is to ensure their intellectual property moat is strong and to stay well ahead of any competitors, or in the case of Berkeley Lights, potential competitors.

One valuable piece of information presented in the S-1 filing is a list of names that Berkeley Lights describes as potential competitors. The use of the word potential implies that the Beacon platform is so advanced that their nearest competitors can only accomplish parts of what they do. Being able to discover an antibody in a single day vs. three months is an exponential leap forward, and represents an entirely new way of doing things, as opposed to incremental improvements over existing methods. Lets quickly look at the names Berkeley Lights listed as potential competitors.

Maybe were overthinking Berkeley Lights use of the term potential competitors, but were inclined to think that at least some of that lab equipment being replaced by a single Beacon platform comes from the first three companies listed above that all seem to be more mature, with each claiming high levels of industry adoption. The fourth company is a relatively new startup that seems to be making similar claims as Berkeley Lights regarding their ability to sort cells at scale:

Investors must love how the core technology developed by Berkeley Lights, the OptoSelect chips, also happen to be consumables. In some business models, companies will simply give away a platform because high-margin consumables will more than pay for it over a short period of time. Investors will want to watch how the new subscription service evolves, and use number of customers and machines deployed as key metrics.

In the companys words, a key factor to our future success will be, our ability to increase the adoption of our platform. They have eight of the largest biopharma companies as reference clients. Now, their 37 salespeople need to go out and get these machines in the hands of the remaining 1,555 possible customers theyve identified.

If the IPO proceeds as planned, shares of Berkeley Lights will trade under the ticker BLI.

Here at Nanalyze, we hold the lion's share of our investing dollars in a portfolio of 30 dividend growth stocks. Find out which ones in the Quantigence Dividend Growth Investing report freely available to Nanalyze Premium subscribers.

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All About the Berkeley Lights Stock IPO - Nanalyze