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Will Fulgent Genetics have a Hot IPO Worth Betting on?

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Fulgent Genetics (FLGT) has revised its IPO price to a range of $9-$11 per share, down from its previously filed range between $12 and $14.  The number of shares the company is seeking to offer has been revised lower as well, down to 4.2 million shares from a previous 4.6 million.  This severely lowers the amount of money which Fulgent expects to raise (from $59.8 million to $42 million, excluding share purchase options for underwriters).

Fulgent is a company that seeks to provide physicians with diagnostic information, and its technology provides genetic testing for over 7,500 conditions.  The firm is growing fast, and its proprietary technology platform has led the company to believe that it has the most effective and wide ranging tests in the market.  It also strives towards bringing affordable diagnostics to patients that rely on its disease panels.

FLGT is heavily invested in NGS (next generation sequencing), a method for sequencing genomes quickly but at a low cost.  The DNA testing market is forecasted to see significant growth over the next 6 years or so, and NGS falls within this industry. 

Grand View Research says that NGS-based diagnostics stands to see considerable growth because of innovative and breakthrough developments.  The research firm also thinks that the variety of platforms for sequencing results in “efficient, highly accurate and rapid diagnosis (which) is attributive towards anticipated progress in this segment”.

Sales are growing fast, and Fulgent posted about $13 million in revenue for the 12 months ended June 30, 2016.  Right off the bat, it looks like this is an expensive IPO.  It is, and with the current midpoint share price target of $10, FGLT is valuing itself at a market cap of about $180 million (17.44 million shares outstanding).  Fortunately, the firm is in a rapidly growing industry, and it has displayed competitive advantages that make it worth taking a bet on over the long run.  FLGT is a high-risk, high-reward investment, so it would be wiser to place a small bet rather than going all in on the stock.  Of course, you should only buy shares if you are convinced by the growth potential of Fulgent Genetics and its industry.

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