Forget Quantum-Si stock, Thermo Fisher with Olink acquisition is a better long-term investment

Proteomics Innovator Stock quantum silicon (QSI -11.45%) The startup will enable cutting-edge research into the world of proteins, which could be key to developing advanced medical treatments and expanding our understanding of biology in general.

The stock price skyrocketed in July when prominent tech investor Cathie Wood started buying shares again.Woods’ Ark Genome Revolution ETF As of this writing, it owns almost 12% of Quantum-Si.

Proteomics is still in the early stages of commercial development.But it’s promising enough that the medical device and services giant can make it happen. thermo fisher scientific (TMO -0.40%) We are acquiring another proteomics equipment startup. Olink (OK -0.16%), $3.1 billion. The offer was announced in October, several months after Wood’s latest quantum silicon stock purchase, and represents a 74% premium to Olink’s trading price before the deal was announced.

Quantum silicon stocks have seen a resurgence in recent months, following a sharp decline after the Cathie Wood hype died down. Quantum-Si’s affordable semiconductor-based proteomics system appears to hold significant technical advantages over other systems currently on the market. It is also expected that the company’s benchtop protein sequencing device “Platinum” will become more popular.

But for now, and for most individual investors, Thermo Fisher, which acquired Olink, is a better long-term investment than Quantum-Si.

Current drawbacks of quantum silicon

To explain the long and uphill battle that lies ahead for Quantum-Si, you need to look at its top-line financials. In the third quarter of 2023, the company’s revenue was just $223,000. Given that the company’s benchtop proteomics systems cost about $70,000 each, only a few of them were sold last quarter.

As I wrote in the summer, the backlog of orders seems to be low at the moment. As of the end of September, the outstanding amount was only about $100,000. The situation is not that different from the end of the previous quarter. Perhaps Quantum-Si’s new distribution agreement will help increase interest from potential customers, with a “full commercial launch” scheduled for late 2024.

Meanwhile, Quantum-Si continues to burn through cash. Net losses for the first nine months of 2023 totaled $74 million, or -$69 million on an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) basis. Management says approximately $275 million in cash and short-term investments will keep Quantum-Si development moving forward “through 2026.”

O-Link also has limited sales and is in the red on both a GAAP and free cash flow basis.

Data by YCharts.

But parent company Thermo Fisher is a highly profitable giant with deep pockets. Olink needs cash to advance its future potential in proteomics, and Thermo Fisher can deliver. Unless sales prospects change dramatically, Quantum-Si will likely need an infusion of outside capital at some point.

What should investors do?

For some investors seeking more speculative investments, potentially Quantum-Si is a promising high dividend stock. However, to ultimately realize greater benefits, the research-based ecosystem surrounding proteomics will need to expand, which may take time. Given the current difficult financial situation, Quantum-Si may or may not take some time.

For investors looking for more reliable long-term returns, Thermo Fisher-plus-Olink ticks several important boxes. The combined business is profitable, with Thermo Fisher paying dividends and generating modest but steady returns to shareholders (as measured by total return, which combines stock price appreciation and reinvested dividends). We have a long track record.

Data by YCharts.

For most retail investors, Quantum-Si should be considered nothing more than a speculative bet. If you have an investment in stocks, that should be reflected. His Thermo Fisher, the acquirer of Olink, now excels in equity investments in healthcare, life sciences, and proteomics.