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Investment Banks Initiate Coverage of Centogene With Bullish Outlooks

NEW YORK – Three investment banks on Monday initiated coverage of rare disease genetic testing and services company Centogene with bullish outlooks.

BTIG initiated coverage of Rostock, Germany-based Centogene with a Buy rating on its stock and an $18 price target, while SVB Leerink rated the firm's shares Outperform and put a price target of $21. Evercore ISI began coverage of Centogene with an Outperform rating on its stock and a $17 price target.

All three banks were underwriters of Centogene's initial public offering in November.

All three investment banks noted the growth potential of the rare disease diagnostics and drug space and Centogene's capabilities in the market. In a research note SVB Leerink analyst Puneet Souda called Centogene a "leader in rare disease diagnostics" and pointed to its CentoMD database of clinically annotated genetic variants of rare diseases, which allows the company to drive "significant reduction in clinical trial enrollment and overall costs for its pharma partners, leading to milestone-based agreements and payments."

He added that the rare disease market is currently underpenetrated, resulting in patients often having to spend five to seven years getting their disease diagnosed. Centogene, Souda said, "helps reduce these diagnostic odysseys and trial enrollment time and cost significantly."

BTIG analyst Sung Ji Nam said in a research note that the company is at an inflection point "where it could more meaningfully monetize its value proposition" by targeting its biopharma customers and leveraging "one of the 'richest' global rare disease databases," and its large physician network. There is also "significant upside" to Centogene's valuation longer term as biopharma customers "realize [its] value proposition through more efficient discovery, development, and commercialization of orphan drugs," she added.

Also important is that Centogene's data repository is ethnically and globally diversified, providing important information to the European, Middle East, Northern Africa, and Latin America geographies, she said.

Evercore ISI analyst Luke Sergott wrote in a research note that currently there are more than 350 million rare-disease patients and more than 7,000 rare diseases. While rare disease drugs have a better chance of getting regulatory approval and higher average sales price than traditional drugs, pharma's challenge has been finding samples and data. Centogene's databases should provide pharma with access to both, he said.

"Centogene's diagnostic engine builds the data lake, which pharma partners pay to access. These pharma partnerships are expected to account for the lion's share of revenues, thus derisking the story from a diagnostics perspective (reimbursement) and making Centogene a first derivative play on rare disease biopharma without the binary risk," Sergott wrote.

In afternoon trading on the Nasdaq, its shares were down about 4 percent at $12.40.