On January 26, 2023, I shared an article titled – Akoya Biosciences: Something Special for Investing in a Spatial Bioscience Company. Looking back now, I admit my timing for this article was not ideal timing on my part. Overall, small biotechs with little or no revenue have, in many cases, seen significant declines in their stock prices YTD. Akoya Biosciences (NASDAQ:AKYA) was undoubtedly in this declining group. Based on my article’s publishing date, the stock was trading for $10.88 and subsequently traded down to $3.04 a share. Since this yearly low, the stock has traded back to $4.72 for a nice 55% bounce off the recent low, but it is still about a 50% decline from my initial article. However, I recently began to add to my holdings in the stock at the price of $4.44. The reason for this new article is simply that my initial opinion about the shares has only changed for the betterment of my view, as the interim results have given me more confidence in the future of Akoya.

One constant mantra that I have about investing in small biotechs or medical equipment companies has been that Investors should not invest in a stock solely based on it being a buyout candidate in the near term. Without the company having an underlying sound business model, operations funding, and stellar management that can execute its long-term objectives, many companies seeking to invest their money would avoid such a company lacking these attributes. However, considering a company’s likely potential for being taken over should be a part of your due diligence during your evaluation of a stock.

As I shared in my January 26, 2023, article, the following is the original foundational creation for investing in Akoya:

Historians credit Zacharias Janssen, a Dutch eyeglass maker, for discovering the microscope. The year was 1590 when the discoverer was a mere teenager, so some historians think it was his father, Hans Janssen, a spectacle maker, who probably contributed to young Jannsen’s discovery. This discovery opened the first use of such an instrument, and it has been a significant contributor to medical science. The ability to look and see what is happening inside a human body, where there have been enhancements of Janssen’s discovery of Jannsen’s discovery, has seen many instruments and systems being developed by scientists.”

Today, when a group is looking for ways to resolve issues, they often say – “Let’s put it under the microsphere.” By virtue of this adage, with this new article, I would like to update my earlier article related to Akoya. In the interim months of 2023, much has happened with Akoya. The significant additives are moving them forward to having a stream of revenues approaching $100,000,000.00 and eventually becoming a profitable company.

Spatial: Relating to or occupying space. In other words, spatial describes how objects fit together in space. And the word space is not limited to outer space. In the case of Akoya, it allows scientists to see how human cells function inside the space of the human body. For those wanting to understand better what this means to the bioscience work that is being done, I would recommend that you obtain a copy of Akoya’s white paper – How Spatial Phenotyping Can Uncover Novel Insights in Tissue Biology. This paper is designed for interested bioscience companies wanting to know more about what they might bring to their laboratories and scientists.

On a personal note, my wife is currently being treated for breast cancer. The good news is that my wife has a yearly mammogram done, so her cancer was found early, and it hasn’t migrated to her lymph nodes. The other good situation is that she is being treated by doctors associated with MD Anderson Hospital, which is rated the #1 treatment center for cancer patients. The citation of her case here relates to the need for a system or systems that offer a seamless workflow with the diagnostic testing applied to each patient. The following is a list of diagnostic tests done on my wife. Just for the record, Akoya has a working partnership with MD Anderson and the diagnostic tools they use for their patients:

• Echocardiogram
• EKG
• Sonogram
• Mammogram
• PT-Scan
• Biopsy (3)
• MRI
• Full Panel Blood Analysis
• Geriatric Testing

Modern-Day Background History of Akoya

Akoya can be traced back to 2015 when it came from a strong pedigree lineage. The company was founded to commercialize the CODEX System to enable ultra-high multiplexing for biomarker discovery.

The Phenoptics™ technology was initially conceived and developed by Cambridge Research & Instrumentation, acquired by Caliper in 2010, and subsequently acquired by PerkinElmer in 2011. The Phenoptics™ technology quickly became the industry standard for multiplexed tissue analysis for translational and clinical research.

The partnership between PerkinElmer and Telegraph Hill Partners, announced in November 2018, created the current Akoya Biosciences through the sale of Phenoptics™ by PerkinElmer and its incorporation into Akoya. This combination of complementary CODEX and Phenoptics™ technologies is fueling groundbreaking advancement in cancer immunology, immunotherapy, and a wide range of pathology research.

Revenue Growth Trends for Akoya

The following data reflects the YOY growth in Akoya’s revenue stream. As they develop and add new capabilities to their product offerings, bioscience labs can enhance their method of designing and creating new therapies, mainly for cancers. However, one can see that incremental growth has been achieved over the last four years.

• 2019 – $42,236.000 -Total Revenue
• 2020 – $42,443.000 – Total Revenue (Impacted by Covid)
• 2021 – $54,917,000 – Total Revenue with 29% YoY growth
• 2022 – $74,859,000 – Total Revenue with 36% YOY growth

Quarterly Revenue Growth 2023

1stQ – $21.4M Revenue

• $60.2M Cash
• 57.4% Gross Margin

2ndQ – $23.521M Revenue

• $93.3M Cash
• 51.5% Gross Margin

3rdQ – $25.215M Revenue

• $78.6M Cash
• 60.6% Gross Margin

2023 Revenue Projection Up to $98 Million, a YOY Growth of 30%.

Interim Events Since My Initial SA Article

• As of the 3rd Q, 2023, Akoya has an installed base of 1,132 instruments. This is the largest placement of those competing in the spatial biology market.
• Since their initial IPO in 2021, they have shown consistent growth in placement and related revenue growth. But keep in mind that since the IPO, the share prices have declined precipitously.
• Having their products evaluated and shared in peer-reviewed publications is now more than 1,070 such reviews. These reviews originate from scientific researchers from around the world.
• Gross profits from their product revenue have grown dramatically to 60.6%. This growth is providing them with a runaway to become cash flow positive soon.
• As the instrument placements grow, this will enhance the reagent and service revenue stream.
• The cash position as of the 3rd Quarter of 2023 stands at $78.60 million in cash and cash equivalents. Plus, they have an $11.3 million drawdown balance from an existing debt facility, giving them available capital of $89.8 million.
• Akoya has reiterated their revenue range, being up to $98 million, which is still expected for 2023. This would reflect a 31% growth in YoY revenue.
• Total assets currently stand at $177.2 million, and total liabilities are only $115.3 million, giving stockholder’s equity of $61.9 million.
• October Peer-Reviewed Publication Using Akoya’s clinical devices for Head and Neck Cancer done by researchers at the University of Queensland Frazer Institute

Akoya Could Be a Buyout Candidate

I think many investors in the stock market can agree that Akoya is operating in a dynamic market area where there should be growth in streamlining the workload for research and actual immediate needs in healthcare facilities where patients are being treated and where definitive answers are needed for treatment options.

Historically, small drug developers and medical device companies have been the target for being bought out and often at premium prices from where they were currently trading. Such activity has become more pronounced due to the significant drug companies seeing their blockbuster drugs and revenue generation facing patent expirations. The quickest and easiest method for replenishing their pipeline or actual drugs already in the marketplace is through buying smaller companies with a high potential to be a revenue source.

As I began writing this SA article, AbbVie (ABBV) agreed to buy ImmunoGen (IMGN) for $10.1 billion, which is where they would get their promising oncology drugs. This buyout offer gave the current shareholders an immediate 82% premium for their shares. As I finished this current article today (12/4/2023), Roche (OTCQX:RHHBY) announced they were paying Carmot $2.7 billion dollars for the rights to their obesity drug candidates that are in clinical trials. Two previous medical companies for which I’ve written SA articles about their potential have been bought out this year: Abcam (ABCM) and IVERIC bio, Inc. (ISEE). On December 3rd, 2023, an SA article showed a significant upward movement for biotech stocks and the reasons these positive results might continue to happen to medical-related stocks.

As stated in Akoya’s 2022 Annual Report, they are competing in a $14 billion market where they have taken a leadership position. The following is taken directly from their SEC filed latest annual report:

Large, addressable, and rapidly evolving market. The spatial biology market sits within a larger life sciences technology market. Within this market, spatial biology is currently estimated to be approximately $14 billion. The market for spatial biology encompasses the full research and drug development continuum, ranging from discovery through translational and clinical research and, eventually, the clinical markets. Each of these specific market segments have unique application and workflow needs and require fit for purpose product offerings. Today, our products and solutions are primarily sold into the cancer discovery and translational markets, representing a $7 billion addressable market. We believe that our offerings can be readily extended to serve adjacent application areas, including immunology and neurobiology, and in the near future applications in clinical markets, which may include obtaining FDA approval for our products. We currently estimate that within the spatial biology market, half of the opportunity is in the discovery and translational research markets and the other half is in the clinical market. With the growing adoption and innovation of spatial biology solutions and as spatial phenotyping is further validated through rapid acceleration of peer-reviewed publications, we believe the global TAM will continue to grow over the near and long-term horizon. Given the critical need for spatial biology, we believe our products are uniquely suited to address the specific needs of researchers across this continuum from discovery through translational and clinical markets.

The Akoya and Agilent Partnership Might Be the Start of a Marriage

At the beginning of 2023, on January 6, 2023, in a joint press announcement, Akoya and Agilent (A) revealed they had formed a partnership where Agilent would provide one of their products that would be combined and marketed with Akoya’s system. The product from Agilent is their Dako Omnis instrument and Akoya’s Phenolmager®HT. This combined product would provide a product creating singular assays in an end-to-end workflow, including reagents, staining, imaging, and analysis.

Under a separate Value-Added Reseller agreement, Akoya would distribute and resell the Dako Omnis product as a part of their end-to-end multiplex solution. The Agilent worldwide customer base would be made available to support their efforts.

Agilent is the perfect partner for Akoya as they already have a host of products used in bioscience laboratories where medical research is being done worldwide.

• Agilent Market Cap: $37.623B (As of 12/1/2023.) This reflects a YTD decline from about $55B
• Agilent 52-Week Price Range-$160.00-$97.00
• Price Earnings Ratio-30.74

There is no doubt that Agilent has been a successful player in the medical instrument markets, as shown by its share price and market capitalization. But to return to the previous lofty market capitalization, they must grow revenues and profits. The quickest way to do this is through new products that will immediately be revenue and profit/accretive. In the case of Akoya, their products will be synergistic, where blending into Agilent’s operations could be accretive due to cost savings for Akoya’s revenue stream. But investors should keep in mind even with the stellar quarterly expansion of their revenue stream, it should be a minimum of two calendar years before the scale of revenue to expenses will tip to there being a profit.

Caveats

• Akoya has a market cap of only $231.64 million, placing them in the Micro-Cap classification, thus being in the category many institutional investors will avoid.
• The 52-week low has been $3.04, and the close on 12/1/2023, the price was $4.72. This closing price reflects an excellent rebound of 55%. However, it should be noted that intraday, the share price has wide swings, with selling coming in near the daily close.
• Current daily volume does not provide a safe entry or exit opportunity with their stock shares. Buyers of their stock should have a firm bid price for their buy orders.
• Recently, the market for medical products (drugs and devices) has been buoyant in the upward movement of their share pricing. After such runs, the ordinary course is for profit-taking to be done. This is often more pronounced for end-of-year trading for rebalancing one’s portfolio.

Conclusion

• Akoya is a company participating in what is projected to be a $14 billion dollar market.
• Over the last two full calendar years, including what is being projected for 2023, Akoya has grown annual revenues at a 30% rate.
• Akoya has recently formed a partnership with a multi-billion-dollar company, Agilent, a significant player in the medical device market. Such a partnership could be the prelude to a merger.
• Gross profits on Akoya’s revenue stream have reached the 60% level.
• Akoya is approaching the $5.00 per share price, whereby reaching this price level could bring those buyers who avoid sub-five-dollar stocks into the market for Akoya shares.
• Upon exceeding the $5.00 price level, we could see the next cap on buyers at the $8.00 level.

Good luck with your future investments!

Editor’s Note: This article was submitted as part of Seeking Alpha’s Top 2024 Long/Short Pick investment competition, which runs through December 31. With cash prizes, this competition – open to all contributors – is one you don’t want to miss. If you are interested in becoming a contributor and taking part in the competition, click here to find out more and submit your article today!