NEW YORK (GenomeWeb) – Investment bank Cowen today initiated coverage of NanoString Technologies.
In a research note, analyst Doug Schenkel gave shares of NanoString an Outperform rating with a price target of $20 per share.
"We view the risk/reward as compelling given the track record, predictable growth model, and upside sources," he said. Over the next two to five years, NanoString can generate sales growth "exceeding most other companies in the group, and the growth outlook is relatively predictable given the company's razor/blade model," Schenkel said.
The rating is based on the assumption of increased install base of nCounter systems, increased Prosigna breast cancer classifier revenues due to Medicare coverage, and consistent consumables revenue.
Schenkel added that NanoString also offers upside through its partnerships with pharmaceutical companies, application growth outside of oncology, quicker than expected uptake of its new multi-omics 3D Biology chemistry, rapid expansion of the installed base following the launch of the nCounter Sprint instrument, and quicker than expected uptake of the Prosigna breast cancer classifier.
Seattle-based NanoString's new 3D Biology chemistry is a "truly differentiated approach in molecular analysis," Schenkel said, and the success of Prosigna "demonstrates the clinical potential of nCounter technology." But he warned that the firm's reliance on an external product pipeline, along with the ever present uncertainties around regulatory approval and reimbursement, could pose investment risks.
Cowen's analysis also suggested that NanoString will "likely need to raise cash in the next few years." In May, NanoString signed a deal with Cowen to sell up to $40 million of its common stock.
In afternoon trading on the Nasdaq, shares of NanoString rose over 2 percent to $15.45.