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Guardant Health Receives Positive Coverage From Investment Banks

NEW YORK (GenomeWeb) – Several equity research today initiated coverage of Guardant Health with favorable ratings, citing the firm's strong liquid biopsy testing portfolio — and especially its Guardant360 assay — as reasons for their optimism.

In a note to investors, William Blair's Brian Weinstein gave the firm's stock a rating of Outperform. He noted that Guardant's liquid biopsy portfolio "is gaining significant traction and has substantial growth opportunity," adding that Guardant360 is the most widely adopted among the handful of assays that have been developed to identify tumor mutations in the blood of advanced cancer patients in order to direct therapy.

"Ongoing clinical validation, pursuit of [US Food and Drug Administration] approval with pan-cancer designation, and improving reimbursement coverage set the stage for significant future growth," Weinstein wrote, adding that based Guardant's position as the "only public company of this kind with scale in the space," the company's shares deserves a premium valuation.

He predicted that Guardant's efforts to develop tests for recurrence detection in cancer survivors and early detection in high-risk but asymptomatic people could unlock more than $30 billion of market opportunity if the company overcomes risks, including competition, and regulatory and reimbursement uncertainty.

Near term catalysts include the company's planned submission of its Guardant360 assay to the FDA in 2019. According to Weinstein, FDA approval is expected to allow Guardant to qualify for a pan-cancer Medicare national coverage determination which could raise its test revenues, and possibly spur volume growth.

Although the stock may be volatile around news flow and market conditions, he added, upside potential in Guardant's pipeline and current business merited the Outperform rating.

JP Morgan also initiated coverage of Guardant Health today with an Overweight rating and a December 2019 price target of $42, with analyst Tycho Peterson writing in a note to investors that he continues "to see a favorable setup for the stock given the early stage of liquid biopsy adoption, robust clinical validation, encouraging recent payor traction, and [long term] upside optionality" via the company's early detection efforts.

Based on his analysis, Peterson views Guardant as having a "material head-start" relative to other firms in the liquid biopsy space like Foundation Medicine and Grail.

Leerink's Puneet Souda echoed many of the same points, initiating coverage of Guardant with an Outperform rating and a $55 12-month price target.

Souda wrote that Guardant360 is poised to become the standard of care in the longer term, and that the company is also well positioned to tap increasing portions of a more than $30 billion market as it moves from advanced cancer testing to building out its tests for early detection and recurrence monitoring.

Leerink estimated that Guardant currently holds about 75 percent of the market share in advanced cancer liquid biopsy, with Roche/Foundation Medicine in second place at about 21 percent.

Guardant360 is currently covered under a Medicare local coverage determination at $3,500 per test — only in non-small cell lung cancer. But Souda wrote that the anticipated FDA approval of the assay next year should allow for a full national coverage determination enabling pan-cancer coverage for the test.

"Select private payers" are already contracted at $4,000 per test, he added.

Cowen also rated Guardant at Outperform today, saying it is initiating coverage with a price target of $40. Analyst Doug Schenkel echoed the other firms, naming Guardant as the current market leader in advanced cancer liquid biopsy with an "attractive product pipeline" targeting the larger markets of recurrence monitoring and asymptomatic testing.

According to Schenkel's note, the company's 80 peer reviewed publications and 29 clinical outcomes studies have driven adoption of the test by an estimated 50 percent of US oncologists, and all 29 NCCN cancer centers.

Guardant's shares were down nearly 1 percent to $34.70 in early afternoon trading on the Nasdaq.