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Piper Jaffray Initiates Coverage of PerkinElmer with Overweight Rating

NEW YORK (GenomeWeb News) – Investment bank Piper Jaffray has initiated coverage of PerkinElmer with an Overweight rating and a $46 price target.

Analyst William Quirk cited PerkinElmer's newborn screening business and expansion into high-growth markets as primary factors for its rating of the stock. He noted that PerkinElmer holds an approximately 65 percent share of the $200 million worldwide market for newborn screening. Further, that market is expected to grow to $1 billion as the rest of the world catches up to US newborn screening levels.

"We anticipate domestic and European birth rates to continue improving as both economies recover from recent recessions, with the US already showing signs of stabilization following several years of declines," said Quirk.

In addition to newborn screening, PerkinElmer has been building its prenatal screening business over the past several years. It acquired NTD Laboratories, which runs a CLIA lab performing prenatal testing, in 2006. And earlier this year, it inked an agreement to offer Verinata Health's Verifi test, which uses next-generation sequencing to assess fetal DNA in maternal plasma for aneuploidies.

During the firm's second quarter conference call early last month, PerkinElmer Chairman and CEO Robert Friel said the firm's efforts in marketing the Verifi test are not expected to have a material impact in 2013. However, "we feel very good about the rapid and successful contracting with the managed care providers for the Verifi test," he said, noting that it had more than 130 million contracted lives covered through agreements with insurance providers.

In addition, Quirk said that PerkinElmer "continues to increase its presence in higher growth markets, with recent acquisitions and product development focusing on laboratory informatics, next-generation sequencing sample prep and bioinformatics, Chinese [nucleic acid testing] blood screening, and immunoassay and microfluidics."

He said that expected growth in these markets is anticipated to be "partially offset by challenging European and pharmaceutical research markets."

The $46 price target for PerkinElmer's stock is based on 19x Piper Jaffray's 2014 earnings-per-share estimate and is line with PerkinElmer's peer group.

In Wednesday afternoon trade on the New York Stock Exchange, shares of PerkinElmer were up a fraction of 1 percent at $38.55.

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