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New long-term position added to the portfolio - Cellink Life Sciences $CLNK-B $CLLKF
Stock price: 227 SEK
Mcap: 11.249 BSEK
Exchange: http://STO.ST
Ownership:
Erik Gatenholm (CEO): 23,7%
Hector Martinez (CTO): 15,4%
Handelsbanken Asset management: 8,04%
Thesis:
Stock price: 227 SEK
Mcap: 11.249 BSEK
Exchange: http://STO.ST
Ownership:
Erik Gatenholm (CEO): 23,7%
Hector Martinez (CTO): 15,4%
Handelsbanken Asset management: 8,04%
Thesis:
Overview:Cellink Life Sciences designs and develops bioprinting technologies that enable researchers to 3D print organs and tissue for applications primarily in pharmaceutical to cosmetic industries worldwide.
Opportunity: When you want to develop a drug you have to go through pre-clinical trials where there are several phases. This is very costly and chances of success are slim. Testing on 3D printed life tissue lowers these cost significantly and raises the chance of success.
Their printers also give researchers the possibility to print diseased tissue. For example cancer cells that can be experimented with.
In the future there is also the possibility to being able to print functioning human organs.
In the future there is also the possibility to being able to print functioning human organs.
According to Verified Market Research 3D Bioprinting Market the TAM is:
A very conservative estimate imo.
A very conservative estimate imo.
I think Gatenholm does a much better job than me in explaining the massive opportunity there is in bioprinting. So here is a link to his TedTalk from Gothenburg in 2019:
Business model:The 3D bioprinters used to cost several hundred thousand dollars. Cellink developed the most cost effective bioprinter in the world and by doing so bringing the technology to the masses and democratizing it.
But selling a printer to another firm is only a one time transaction, what happens when there are no more buyers?
The answer is the consumables. Recurring revenue! The firms have to keep buying the bioink, just as you have to keep buying more toner on traditional printers.
The answer is the consumables. Recurring revenue! The firms have to keep buying the bioink, just as you have to keep buying more toner on traditional printers.
They are now in more than 60 countries and over 1800 labs. Their customers count many of the top universities and also some of the worlds biggest pharmaceutical enterprises as seen below:
Acquisitions:Cellink has made 3 acquisitions in Germany. They have acquired Scienion, Dispendix and Cytena. This has moved them into the space of liquid handling and precision dispensing.
The process of 3D bioprinting is fairly complex. You have to get the human cells, you have to create an environment where the cells can reproduce, and then dispense those into the printer. These acquisitions have given Cellink a presence in the entire workflow!
Furthermore when asked about future M&A the CTO Gusten Danielsson wrote the following:
Cellink are looking to add business and products in the areas mentioned below:
Capital Structure & ownership:Insiders own around 42% of shares in the company with CTO Hector Martinez and Cellink CEO Erik Gatenholm owning 23,7% and 15,4 respectively. So much skin in the game is a very good sign and gives me comfort as a shareholder.
ManagementI think they got a very competent team that is more than capable of scaling the business to it's huge potential:
Financial checklist
Earnings and Sales Growth: 25 Percent or Greater - As seen on the picture below they have astonishing growth!
Insider Holdings: 10 Percent or more - Insiders own more than 42% of shares in the company
Relative Strength: Strong Price Appreciation - The stock is very new but during it’s lifetime it has outperformed the S&P 500
Make sure R&D expenditures aren’t getting shortchanged - These guys spend a large amount on (R&D) and it definitely ain’t getting shortchanged.
Rising margins at best, or holding steady at worst- Margins aren’t great, but at least they are somewhat steady.
Keep an eye on growth in the number of shares - Over the last year shares outstanding grew by 21%. They raised capital twice this year. The capital has been deployed to finance the acquisition of Scienon so i am not too worried about it. But important to track.
Positive cash flow from operations: The company does not have positive cash flow from operations. Again, not a huge concern as the primary focus shouldn’t be to become cash flow profitable. Instead they should be expanding their growth and sales and R&D, which they are.
Net Profit Margin: At least 7 Percent - Same as before.
Risks: 1. Changes in the business cycle
Recessions can affect the demand for the company products through reduced funding for universities or shrinking budgets at pharmaceutical companies.”
2. Fast paced technological areas
CELLINK operates in competitive areas. “New products and improved research methods are continuously developed and can affect the company’s competitiveness.“ Their technology is smart indeed, but who knows what tomorrow brings.
CELLINK operates in competitive areas. “New products and improved research methods are continuously developed and can affect the company’s competitiveness.“ Their technology is smart indeed, but who knows what tomorrow brings.
Final statement:Super exciting company within a super exciting technological field. Financials may scare many conservative investors away, but the huge growth rate makes up for it imo. If the management can execute, I think this company could see HUGE upside potential.
Sources: 
https://www.cellink.com/global/ https://www.verifiedmarketresearch.com/product/3d-bioprinting-market/ @trevmuchedzi on ChitChatMoneys 22nd day of Christmas episodeWould love to learn more!
