Genetics Investing

Fulgent Genetics saw a 27 percent decrease year over year in its fourth quarter in 2017, and a 2.18 percent increase in total revenue for the year.

This is an exciting time of the year for investors as many companies release Q4 and full 2017 financial results as well as a 2018 outlook. But, for companies who didn’t perform as well as expected the previous year, releasing these statements requires a bigger explanation.

Fulgent Genetics (NASDAQ:FLGT) is one such company, who released on Wednesday (February 28) a less than satisfactory financial report for 2017.

According to the press release, the company saw a 27 percent revenue decrease in its fourth quarter in 2017 compared to the same quarter in 2016–dipping from $5.9 million in Q4 2016 to $4.3 million in 2017–and a 2.18 percent increase in total 2017 revenue. While Fulgent’s overall financial revenue for 2017 is a slight increase, its Q4 2017 earnings have impacted the company’s share price and sparked investor and analyst concern.

Ming Hsieh, chairman and CEO of Fulgent said the company experienced some challenges in 2017 that impacted its financial results, including sales reorganization and business initiation by its joint venture in China.

“We are working through these challenges and believe we are well positioned to capitalize on an opportunity to drive growth in 2018,” Hsieh said.

Hsieh continued, stating the company has to remain “focused” on expanding its test menu, and is looking forward to launching the company’s somatic-based cancer test later in 2018.

Fulgent Genetics develops a wide range of affordable genetic tests to provide physicians with clinically actionable diagnostic information. The information is expected to help the quality of patient care and build a genetic reference library while maintaining accuracy, accessible pricing and turnaround time. While building its gene library, the company is able to test more genes than any competitors.

Investor Takeaway

The financial results were released after market close on Wednesday, meaning its share price wasn’t impacted by the news until Thursday (March 1). In early trading on Thursday, Fulgent’s share price dropped as low as 13 percent to $4.28, but by market close, the price evened out at a 10.02 percent decrease to $4.31. Fulgent currently has an average hold rating from analysts, with just one buy rating and an average price target of $6.50.

Piper Jaffray analyst William Quirk downgraded his rating to a hold. He told Genome Web, “The company anticipates at least $20 million for full-year 2018 which appears relatively reasonable… but after a year of significant disappointment (on top of a limited track record as a public company) we have limited visibility into the turnaround and thus have diminished confidence in management.”

This quarterly release shouldn’t define Fulgent’s upcoming year. As mentioned by Hsieh, a new cancer somatic-based test will launch later this year, which should fuel investor interest.

Don’t forget to follow @INN_LifeScience for real-time updates!

Securities Disclosure: I, Gabrielle Lakusta, hold no direct investment interest in any company mentioned in this article.


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