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Barclays Initiates Coverage on Genomic Health, Quidel, Cepheid; Upgrades Hologic

NEW YORK (GenomeWeb) – Barclays has initiated coverage of Genomic Health, Quidel, and Cepheid while it upgraded Hologic's stock to Equal Weight.

In a research note, analyst Jack Meehan rated Genomic Health Underweight with a price target of $25 per share. "[O]pportunities for profitability are further out," he said, noting that he prefers other companies offering "more robust and better validated tests" for prostate cancer prognosis.

Though Meehan noted that prostate prognostic testing represents a "significant volume, revenue, and earnings leverage opportunity for Genomic Health," he isn't sure that the firm's Oncotype DX "is the best prognostic test entering the market for prostate cancer."

He further noted that much of Genomic Health's revenues come from its testing for invasive breast cancer prognosis, a market in which he said the firm has 60 percent penetration in the US and holds a 90 percent market share. "Despite having a mature product on the market, Genomic Health continues to generate negative margins ahead of new product launches," he wrote. "We do not see near-term opportunities to remedy the situation, with the potential for further salesforce expansion needed, and new projects planned in liquid biopsy to replace current R&D initiatives."

Last week, Raymond James upgrades shares of Genomic Health to Market Perform. Shares of Genomic Health were trading down around 1 percent at 26.07 this afternoon on the Nasdaq.

Meehan rated Cepheid Equal Weight with a price target of $55. "[B]etter visibility in the next year will help frame growth opportunities from GeneXpert menu expansion" and entry into the point-of-care diagnostics market.

"Cepheid has an opportunity to significantly increase consumable pull-through as it expands its menu into virology and oncology," Meehan noted, also citing the firm's recent sales force expansion as a positive.

Shares of Cepheid were up nearly 2 percent at $47.78 in afternoon trading on the Nasdaq.

He rated Quidel Overweight with a $28 price target. Meehan said, "Quidel has an opportunity to grow the US influenza testing market and gain market share from competitors with Sofia," its next-generation immunoassay platform. He also noted that the firm is "in the early stages of a number of product launches that solidify its position in rapid point-of-care testing, and offer opportunities to enter adjacent markets."

In June, the US Food and Drug Administration cleared the firm's Solana molecular diagnostics platform and its Group A Streptococcus assay. Shares of Quidel were up more than 3 percent in afternoon trading on the Nasdaq at $20.99.

Barclays also upgraded Hologic to Equal Weight from Underweight based on improvement in 3D mammography instrument placements, and it reiterated a $40 price target for the firm's shares.

Shares of Hologic were up around 1 percent at $37.50 in afternoon trading on the Nasdaq.


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