NEW YORK (GenomeWeb News) – Australian investment firm Lodge Partners has initiated coverage of Genetic Technologies (GTG) with a Buy rating and 12-month price target of A$.57 ($.62), citing its BrevaGen breast cancer test and its IP portfolio as potential growth drivers.
The bank began its coverage nearly a month ago, and GTG made the report available on its website today.
Lodge also had a 2011 revenue estimate on GTG of A$21.5 million ($23.5 million) and EPS of A$.002.
In the report analyst Marc Sinatra wrote that GTG is two years into a five-year plan to become a "world class diagnostics and cancer management business," and added that the launch of the BrevaGen test in the US in June is expected to "add significantly to revenues from FY 13 and profit in FY 14."
GTG intends to charge $945 per test, but has an "effective price" of $426, Sinatra said, adding that he expects 6,000 BrevaGen tests to be conducted in 2012 and 27,600 in 2013.
Prior to GTG's purchase of the test in 2010 from Perlegen Sciences, the company had relied on licensing its IP and its Australia Pacific genetic testing operations for revenues. GTG, Sinatra said, has granted more than 50 licenses resulting in revenues of more than A$65 million to date.
GTG has also aggressively pursued legal action against companies that it feels has infringed its IP, and during the past year has sued a number of firms in the US courts and settled with some defendants. According to Sinatra, the company is in the planning stages of another US lawsuit, which would be its fourth, alleging patent infringement.
In his note, Sinatra said that based on remaining legal targets, "assertion of its IP rights over two of its key patents could yield more than A$100 million in revenues over the coming years, with revenues from other patents, as yet, untargeted."
He also anticipates GTG pursuing an M&A strategy to further build out its cancer diagnosis and management franchise, especially in breast cancer.
Last month, the company announced it had raised about $12.7 million in a private placement with proceeds directed at "acquisition growth" in the molecular diagnostics field and marketing of the BrevaGen test in the US.
"We expect IP generated to be used for acquisitions, further development, and roll-out of new molecular diagnostic products," Sinatra said. "This area provides an exciting opportunity with predecessor companies having done the hard yards in terms of market preparation."
As a point of comparison, he said that Myriad Genetics generated $320 million in revenues from its BRACA tests for breast cancer in its fiscal 2010, while Genomic Health generated $176 million from its Oncotype Dx breast cancer assay in 2010.