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Cowen Downgrades GenMark's Stock as Banks Lower Price Targets

NEW YORK (GenomeWeb) – Investment Bank Cowen and Co. today downgraded shares of GenMark Diagnostics to Market Perform and reduced the price target to $7.25 over concerns with the firm's ability to bring its newest platform to market on time.

Several analysts from other investment banks also lowered price targets on GenMark's stock, though they maintained their ratings. Canaccord Genuity lowered its price target to $8 from $14 while maintaining a Buy rating, and Raymond James lowered its target to $9  from a previous $13.50 while sticking with an Outperform rating. William Blair reaffirmed a rating of Outperform.

Yesterday, on a conference call following the release of its third quarter financial results, GenMark officials said they had pushed back the expected European launch of the new ePlex system to the first quarter of 2016 from the fourth quarter of 2015. This also pushed back the expected US ePlex launch as well into the second quarter of 2016. GenMark officials attributed the delay to problems with injection molding of microfluidics components, which affected assay reliability.

In a research note, Cowen analyst Doug Schenkel said he remains "enthused about the potential long-term competitive positioning and market opportunity for ePlex," adding that "[o]ur valuation analysis still suggests the bias is likely to the upside." However, the timeline revision reduced his conviction in the firm's ability to meet its timeline and revenue expectations "for 2016 and beyond."

"Critically, in no way do we believe that management is being deceitful or obfuscating facts as it looks to scale its cartridge," William Blair analyst Brian Weinstein said, "but it is certainly fair to question if the last of the delays have now been communicated or if other small changes could occur down the road."

He added, "[T]he issues discussed on the call are not life threatening to the product or the company and, if timing holds, do not really change our view on the stock given where valuation stands," he added. "In addition, while the markets the company is targeting continue to develop, we have yet to see another company with the potential offering that GenMark should bring to the table."

Several analysts noted that aside from the delayed product launch, the company posted solid quarterly results, with 34 percent growth in revenues year over year and better than expected XT-8 Analyzer instrument placement.

In Wednesday afternoon trade on the Nasdaq, shares of GenMark were up nearly 2 percent at $6.90.