908 Devices Stock: Pure Play in Mini Mass Spectrometers

Butterfly Community (BFLY) is an organization that we’ve favored ever since first writing about its handheld ultrasound gadget greater than six years in the past whereas reviewing a few of the high AI startups in healthcare. Whereas the expertise is difficult, the idea is fairly easy: Shrink the capabilities of an ultrasound machine all the way down to the dimensions of a typical scanner used on the grocery retailer and pair it with a smartphone and machine-learning algorithms. Let the disruption start. 

However although we favored the premise, the corporate’s choice to go public by merging with a special goal acquisition firm (SPAC) was one thing of a flip off. After the mud had settled, it was obvious that Butterfly Community overpromised on income, sending inventory shares on a steep decline. The thesis continues to be sound – disrupting the market with a less expensive, idiot-proof piece of {hardware} – however our general portfolio is already heavy on giant medical gadget firms. As well as, the total addressable market (TAM) appears small and the competitors fairly large. 

One one who continues to be bullish on Butterfly Community is Cathie Wooden, the Moses of Ark Make investments, an funding administration agency that focuses on disruptive tech shares. BFLY is at present the No. 18 largest holding within the ARK Genomic Revolution ETF (ARKG), with about $2.4 billion in belongings below administration.

At this time, Ark Make investments owns about 6% of Butterfly Community after persevering with so as to add to its place over the previous couple of months. At No. 17 within the ARKG portfolio is an organization known as 908 Gadgets (MASS) during which Ark Make investments has a ten% stake. Let’s half the Purple Sea of losses – Wooden’s present price foundation is twice what MASS shares are at present buying and selling – and see if there may be any long-term potential for retail traders.

About 908 Gadgets Inventory

The worth proposition behind 908 Gadgets is equivalent to Butterfly Community, however slightly than disrupting the marketplace for ultrasound machines, the Boston-based firm is shrinking the expertise that powers mass spectrometers by growing handheld and desktop devices. Based 10 years in the past, 908 Gadgets raised a modest $67 million in disclosed funding, however with a few significantly notable names. One is the enterprise arm of Saudi Aramco, which simply occurs to be the most important firm on this planet by market cap at almost $8 trillion. The truth is, the fuel and oil big participated in three completely different funding rounds. The opposite is In-Q-Tel, which is mainly the enterprise arm of the CIA. The CIA’s curiosity in 908 Gadgets will develop into clear shortly.

In contrast to Butterfly Community, 908 Gadgets had a conventional IPO in December 2020 – the final firm to go public that 12 months. On the time, the corporate raised greater than $136 million in an upsized providing and ended the day up greater than +127%. After all, these heady days are nicely behind us, with the inventory down about 75% because it premiered on the general public markets. Its market cap is simply north of $500 million. After all, we all know the market is especially punishing tech shares proper now, so let’s not get too caught up up to now and see the place 908 Gadgets goes.

What’s a Mini Mass Spectrometer?

Mass spectrometry – or mass spec, because the dorks cool children consult with it – is an analytical method used to characterize the whole lot from small molecules to complicated proteins. A mass spectrometer is form of like an excellent fancy scale that measures the mass (therefore, the identify) of those particles by way of some scientific hocus pocus utilizing ionization and electrical currents that we gained’t hassle to dive into too deeply right here. Principally, these extremely delicate machines can detect, establish, and quantify nearly any molecular pattern primarily based on its molecular weight. The important thing takeaway is that the majority mass spec machines immediately are very giant, costly, and extremely complicated. Assume mainframe laptop measurement. In distinction, 908 Gadgets has developed each handheld and desktop variations of those huge machines.

The corporate refers to its proprietary expertise, first developed at Oak Ridge Nationwide Laboratory, as high-pressure mass spec (HPMS), which allows it to miniaturize key parts utilizing semiconductor microfabrication strategies. For instance, one thing known as the ion entice, which is the place ionized particles are sorted and manipulated below vacuum, is one thousand occasions smaller than these in standard laboratory mass spec devices. A typical vacuum system alone weighs lots of of kilos and requires a number of hundred watts of energy 24 hours a day. 908 Machine’s mass spec devices use much less energy than a 20-watt LED mild bulb. By the way, the identify of the corporate is a reference to 0.908, which is the “level of stability and instability inside ion entice mass spectrometers – the purpose at which the magic occurs!” Um, OK. Shifting on …

Mass Spectrometers from 908 Gadgets

Awkward nerdy identify apart, 908 Gadgets has launched two flagship mass spec merchandise that mix its HPMS platform, a proprietary pattern preparation and separation expertise known as the ZipChip, and machine studying strategies to each management the {hardware} and interpret the info.

Launched in 2017, the MX908 is a handheld, battery-powered, mass spec gadget designed to quickly analyze fuel, liquid, and strong supplies within the subject. Sure, that is the tricorder that Star Trek promised us all these many years in the past when Capt. Kirk was galivanting across the galaxy banging blue chicks. It could actually detect hint portions of greater than 150 harmful supplies, together with medicine, explosives, and unsafe chemical substances with “sensitivity corresponding to current field-based applied sciences.” The corporate claims that “in comparison with a number one transportable mass spec product, the MX908 is as much as 15x sooner, as much as 10x smaller, and as much as 2x cheaper.” Its machine-learning software program might help interpret and extrapolate outcomes. For instance, the MX908 is pre-programmed to judge a dozen of the most typical fentanyl variants after which makes use of machine studying to search for patterns suggestive of the greater than 2,000 fentanyl analogs.

The Insurgent, a small desktop mass spec launched in 2019, can seemingly carry out on par with high-performance liquid chromatography (HPLC) devices in a laboratory, however at a value per pattern that’s as much as 10 occasions decrease, a 3rd of the capital price, and as much as 2,000 occasions sooner. The units have varied R&D functions associated to prescribed drugs and biotech, significantly round cell and gene therapies, artificial biology, and extra.

The Marketplace for Mini Mass Spec Devices

Certainly, 908 Gadgets believes that the cell and gene remedy trade, together with associated functions equivalent to the brand new era of nanotechnologies turning cells into micro-factories, would be the driving pressure behind increasing its TAM within the close to future from a fairly modest $5 billion immediately to $22 billion in only a handful of years. We encountered an identical projection from firms in one other pick-and-shovel play, chilly storage logistics, for cell and gene remedy.

For handhelds, the corporate believes the market will greater than double from $1.5 billion to $3.6 billion with software program utility extensions into high quality assurance and high quality management for issues like inspecting uncooked supplies and detecting adulterated supplies. The a lot greater leap of religion is within the desktop Insurgent for bioprocessing and analysis.

908 Gadgets isn’t the one agency growing desktop mass spectrometers. MOBILion Techniques has taken in $116 million in funding from names like Agilent (A) and IP Group (IPO.L). The agency makes a speciality of figuring out and analyzing difficult molecules that different devices up to now have did not detect. Fierce Biotech had the next to say about their product providing – Mobie – in an article which talked about their newest funding spherical, a $60 million Collection C raised final July.

Mobie combines MOBILion’s high-resolution ion mobility expertise with Agilent Applied sciences’ mass spectrometers and Protein Metrics’ evaluation software program, leading to a supercharged tackle the molecular evaluation workflow that’s meant to be sooner and extra correct than standalone mass spectrometers.

Credit score: Fierce Biotech

Ought to You Purchase 908 Gadgets Inventory?

We name it a leap of religion as a result of the corporate primarily depends on the MX908 for almost all of its income, in comparison with its desktop units, Insurgent and ZipChip. The latter two are additionally the place the corporate expects to develop recurring revenues by way of the proprietary consumables that the machines require to function. Consumables accounted for 19% of product income in 2021, up from 14% the 12 months earlier than. Total annual income development was up a formidable 64% year-over-year.

The combination is certainly altering as nicely. In H1-2022, income grew 40% however desktop income development hit 52%. One other encouraging quantity for a corporation closely reliant on {hardware} gross sales was a 60% gross margin as of Q2-2022. As well as, 908 Gadgets acquired a German firm known as TRACE Analytics for $15.3 million. TRACE Analytics gives on-line evaluation and sampling methods for biotech functions, a expertise to assist clients construct related bioprocessing and analytics methods. 

There are all nice metrics and strikes, however let’s put some further context round these numbers. 908 Gadgets has bought all of two,100 or so devices. And whereas it counts all 20 of the highest 20 pharmaceutical firms by income amongst its 450 clients, most of its gross sales depend on authorities companies. As well as, one buyer accounted for a whopping 43% of whole income final 12 months. That’s an enormous quantity of buyer focus danger.

Issue within the firm’s small market cap and at present modest whole addressable market, and also you give you a fairly low ceiling for future development except 908 Gadgets can actually ship its disruptive expertise at a world scale. At this stage of the sport, that potential stays debatable and with an excessive amount of danger for our style. 

For individuals who need to pull the set off on some shares, 908 Gadgets has a easy valuation ratio of round 11. Right here’s how that compares to different widespread life sciences shares in our disruptive tech inventory catalog.

Conclusion

Firms like 908 Gadgets and Butterfly Community have developed game-changing applied sciences that would doubtlessly reshape their respective industries. The problem is that these are comparatively small, area of interest markets. 908 Gadgets does make a extra compelling case, particularly if its mini mass spectrometers show to be the form of pick-and-shovel R&D play that it outlines for cell and gene therapies, precision fermentation, and different rising functions for analyzing and characterizing cells. Which may put it nearer to the likes of firms like Illumina (ILMN) with its ground-breaking gene-sequencing expertise and $37 billion market cap. 

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