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This Biotech Breakthrough Could Deliver a Triple Digit Gain

This Biotech Breakthrough Could Deliver a Triple Digit Gain

10x Genomics (Nasdaq: TXG) recently announced it has begun shipping its Visium Spatial Gene Expression Solution. The Visium Spatial Gene Expression Solution is the first new product to result from 10x Genomics’ acquisition of Sweden’s Spatial Transcriptomics, a pioneer in the emerging field of spatial genomics.

This solution builds on the foundation of Spatial Transcriptomics’ earlier product offering, providing researchers with a comprehensive map of where gene activity is occurring in a tissue specimen.

The Visium Spatial Gene Expression Solution is the first of multiple assays planned for the company’s new Visium platform.

It has already seen strong demand from customers, including a significant number of pre-orders from first-time 10x Genomics customers, as well as from pharmaceutical and biotechnology companies.

Institutions like the New York Genome Center, Stanford University Genomics Facility and the University of Southern California (USC) Keck School of Medicine are among the first customers to receive the product.

While single cell analysis, which is enabled by 10x Genomics’ Next GEM technology, gives researchers the ability to see what is inside a cell, the Visium platform for spatial molecular profiling lets researchers see how cells are organized in relation to one another, allowing for a deeper understanding of biological systems in both normal and disease states.

“When we acquired Spatial Transcriptomics last year, it was with the belief our two teams could improve the resolution, scale and workflow in spatial genomics to rapidly accelerate our understanding of biology,” said Michael Schnall-Levin, senior vice president of research and development and founding scientist at 10x Genomics.

“Today’s announcement furthers our commitment to enable existing and new researchers in their work and opens new areas in molecular pathology that were not possible before.”

10x Genomics’ Visium Spatial Gene Expression Solution represents a significant improvement in resolution over the prior offering from Spatial Transcriptomics for spatial molecular profiling. The solution equips scientists in many areas of biology, including oncology and neuroscience, with the following:

  • Ability to survey hundreds of thousands of cells in a tissue section simultaneously using total mRNA spatial gene expression analysis
  • Five times more spots within a capture area (5000) than the prior offering from Spatial Transcriptomics allowing researchers to map gene expression to tissue architecture with high spatial resolution
  • Reduction in the time involved to perform an assay from three days to one day over the previous offering
  • Extremely high sensitivity capable of yielding at least 100,000+ UMI’s and thousands of genes per spot
  • Intuitive software for automated processing of Visium data as well as providing streamlined data analysis tools for both bioinformatics novices and experts
  • The only comprehensive kitted solution available on the market allowing researchers to perform gene discovery from total mRNA analysis

“Spatial genomics opens up new possibilities for bringing microscopic anatomy into the realm of RNA sequencing. Visium makes it possible to spatially resolve gene expression in a complex cytoarchitecture through an end-to-end fully kitted solution with turn-key software, and no need for capital equipment investment.

Scientists at the Lieber Institute for Brain Development (LIBD) running samples through the Visium solution have produced incredibly detailed results on the human brain that we did not think were possible,” said Daniel Weinberger, CEO of the Lieber Institute for Brain Development (LIBD), a leading neurosciences research institution.

Dr. Andrew Jaffe, Lead Investigator at LIBD continued to say, “These rich spatial transcriptome maps produced by Visium will add another dimension to the growing single nuclei and single cell RNA-seq datasets to spatially refine the cell types in the human brain and their subsequent dysregulation in debilitating brain disorders.”

Weinberger added, “We believe this technology answers important questions in neurology and neuroscience, and could also reveal novel molecular insights into other common human diseases with abnormal pathology.”

The stock has been in a persistent up trend since shortly after its IPO.

TXG daily chart

A Trade for Short Term Bulls

As with the ownership of any stock, buying TXG could require a significant amount of capital and exposes the investor to standard risks of owning a stock.

To reduce the risks of a trade, an investor could purchase a call option. This allows them to benefit from upside moves in the stock while limiting risk to the amount paid for the options. However, buying a call option can also require a significant amount of capital and includes the risk of a 100% loss.

Whenever an option is bought, the maximum risk is always equal to 100% of the amount of spent to purchase the option. Since options cost significantly less than a stock, the risk in dollar terms will usually be relatively small to own an option.

To further limit the risks of the trade, an investor could use a bull call spread. This strategy consists of buying one call option and selling another at a higher strike price to help pay for the cost of buying the first call. The spread strategy always reduces the risk of an options trade.

This strategy is designed to profit from a gain in the underlying stock’s price but has the benefit of avoiding the large up-front capital outlay and downside risk of outright stock ownership. The potential risks and rewards of this strategy are summarized in the chart below.

bull call spread

Source: The Options Industry Council

Both the potential profit and loss for the bull call spread are limited. The maximum loss is equal to the net premium paid when the trade is opened. The maximum profit is limited to the difference between the strike prices, less the debit paid to put on the position.

This strategy could be especially appealing with high priced stocks where the share price and options premiums are often a significant commitment of capital for smaller investors.

A Specific Trade for TXG

Every day, we scan the markets looking for trades with low risk and high potential rewards. These trades are available almost every day and we share them with you as we find them. Now, it’s important to remember these are trading opportunities in volatile stocks.

When we find a potential opportunity, we evaluate it with real market data. But because the trades are volatile, the opportunities may differ by the time you read this. To help you evaluate the current opportunity, we show our math and explain the strategy.

For TXG, the May 15 options allow a trader to gain exposure to the stock.

A May 15 $65 call option can be bought for about $11.10 and the May 15 $75 call could be sold for about $8.70. This trade would cost $2.40 to open, or $240 since each contract covers 100 shares of stock.

The amount paid to enter the trade is the largest possible loss on the trade. This is generally true whenever a trader is creating a debit to enter an options trade. “Creating a debit” means there is a cost to enter the trade. You could create a debit by simply buying puts or calls to open a directional trade.

In this trade, the maximum loss would be equal to the amount spent to open the trade, or $240.

The maximum gain on the trade is equal to the difference in exercise prices less the amount of the premium paid to open the trade.

For this trade in TXG the maximum gain is $7.60 ($75 – $65= $10; $10 – $2.40 = $7.60). This represents $760 per contract since each contract covers 100 shares.

Most brokers will require minimum trading capital equal to the risk on the trade, or $240 to open this trade.

That is a potential gain of about 216% based on the amount risked in the trade. The trade could be closed early if the maximum gain is realized before the options expire.