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BTIG Initiates Coverage of NanoString with Buy Rating

NEW YORK (GenomeWeb) – Investment bank BTIG initiated coverage of NanoString Technologies on Monday with a Buy rating, saying new market opportunities could await the company's nCounter platform. 

BTIG analyst Dane Leone had a price target of $16 on NanoString's stock and estimated the company's full-year 2015 revenues at $61 million with a loss per share of $1.90. 

In a research note, he said that while the current installed base of NanoString's nCounter System is less than 300, the technology is flexible enough for researchers that the figure could eventually approach the 2,500 to 3,000 microarray systems that are globally installed. 

As NanoString eyes the launch of the third-generation of the nCounter in the first half of this year, the availability of the lower-cost, lower-throughput system "should significantly expand NanoString's market opportunity," Leone said, estimating the new system could expand the market opportunity for the technology by 3,000 to 6,000 units for an aggregate opportunity of 6,000 to 9,000 placements. By the end of 2017, Leone estimates the installed base of nCounter systems to exceed 800. 

He also took note of revised and more realistic expectations around NanoString's Prosigna breast cancer prognostic assay. Leone said that while the company once spotlighted the test as a key growth driver, one year after receiving US Food and Drug Administration approval in late 2013, Prosigna generated less than $1 million in sales. NanoString is guiding to about $2 million in Prosigna sales for 2015, which would be well under 1 percent of the total market share, Leone said. 

"[W]e do think that investor expectations have become appropriately low, and inclusion within the National Comprehensive Cancer Network treatment guidelines for breast cancer could produce upside to current estimates," Leone said. "Also, if revenue expectations fail to achieve management hurdle rates, further downsizing of the Prosigna program would likely be seen as a positive catalyst for investors." 

Lastly, Leone said that NanoString's new entry into the companion diagnostics space could drive growth going forward. Last year, the company forged its first CDx deal to develop an in vitro diagnostic assay for use on the nCounter platform to screen patients who may benefit from Celgene's diffuse large B-cell lymphoma (DLBCL) treatment Revlimid (lenalidomide). 

Since then, NanoString reached additional deals with two undisclosed biopharma companies in the fourth quarter of 2014. In an email today to GenomeWeb, NanoString CEO Brad Gray said the deals are focused on the use of the company's existing diagnostic assays to help select patients for drugs in development. One deal is for the use of Prosigna, and the other is for the use of the company's DLBCL subtyping assay. 

Gray said that the new deals are "fundamentally different from our companion Dx partnership with Celgene in that we have not committed to developing a CDx. Rather, these exploratory studies are designed to determine whether our assays could be potential CDx's, and we hope that exploratory collaborations such as these will lead to more CDx collaborations in the future." 

He declined to disclose the financial terms of the agreements but said that "exploratory collaborations such as these have much lower economics than our Celgene collaboration," which could provide NanoString up to $45 million.