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Cowen Upgrades PerkinElmer Stock to Outperform

NEW YORK – Investment bank Cowen on Tuesday upgraded PerkinElmer's shares to Outperform from a previous Market Perform rating, citing the firm's effective generation and use of "COVID cash" and its planned divestiture of lower-margin businesses.

In a note to investors, analyst Max Masucci said the Waltham, Massachusetts-based firm is expected to generate at least $3.21 billion in revenues from COVID-19 diagnostics through 2022 and has used some of that cash for at least seven key acquisitions. He also noted PerkinElmer's announced $2.45 billion sale of its lower-margin applied, food, and enterprise businesses to New Mountain Capital.

Those planned divestitures "appear to have carried an outsized portion of global supply chain burdens faced by the company in recent quarters, and its life science's customer base is heavily weighted towards large, well-funded biopharma companies and researchers despite its concentration in pre-clinical applications," Masucci wrote.

He set a price target of $164 per share, or 20 percent higher than the closing price of $136.94 on Monday but lower than Cowen's previous price target of $192 per share. The firm was up about 1 percent in early morning trading on the Nasdaq to $138.20.

Masucci said he sees potential for revenue growth in PerkinElmer's BioLegend subsidiary, which is a life science antibodies and reagents provider that PerkinElmer acquired in 2021 for $5.25 billion. He also said that the highly profitable BioLegend will become a larger part of PerkinElmer's business and noted that PerkinElmer has predicted the subsidiary will generate more than $100 million per year in revenue synergies within five years of closing on the purchase.

Recent management meetings also raised the analysts' confidence in PerkinElmer's newborn screening business, which has potential for growth as US states and countries expand screening panels, and they see opportunities for PerkinElmer's latent tuberculosis testing to gain market share against market leader Qiagen.

PerkinElmer expanded into TB testing in 2021 with its $591 million acquisition of Oxford Immunotec, which PerkinElmer said at the time would combine its channel expertise and workflow and testing capabilities with Oxford Immunotec's T-cell immunology capabilities and proprietary interferon gamma release assay test kits for latent tuberculosis.

Last month, PerkinElmer announced it had secured US Food and Drug Administration authorization for an assay to detect both spinal muscular atrophy (SMA) and severe combined immunodeficiency (SCID) in newborns.