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Oppenheimer, BTIG Initiate Coverage of MDxHealth at Outperform, Buy

NEW YORK – Investment banks Oppenheimer and BTIG initiated coverage of MDxHealth's shares on Monday, with ratings of Outperform and Buy and price targets of $18 and $15, respectively.

The company priced an initial public offering of American Depositary Shares in the US earlier this month, offering 3,750,000 ADSs — each representing 10 ordinary shares of the company's stock with no nominal value per share — at $12 per ADS. The shares, which started trading on Nov. 4, closed at $12 on their first day on the Nasdaq, but traded as high as $13.17.

In a note to investors, Oppenheimer analyst Kevin DeGeeter said his rating was based on the company's recent listing on the Nasdaq, expanding access for US-based specialist healthcare investors; and net proceeds of $41.9 million from the IPO, extending the firm's cash runway into at least 2024.

He also pointed to expectations for a positive coverage update of MDxHealth's SelectMDx prostate cancer test from the US Centers for Medicare and Medicaid Services in the first half of 2022 and said that update could define a path toward Medicare reimbursement for the firm's tests in the second half of next year. Finally, DeGeeter noted, MDxHealth is expanding its menu to include a new panel for urinary tract infections, while leveraging existing sales channels.

"Over [the] past two years, MDxHealth has reported negative revenue growth as new leadership tightened financial controls and focused on driving test volume from more profitable repeat customers engaged with use of both SelectMDx and ConfirmMDx products," he wrote. "View transition as painful but necessary to prepare for better operating leverage following expanded reimbursement coverage for SelectMDx."

In his own note to investors, BTIG analyst Mark Massaro said MDxHealth's genomic tests for prostate cancer are more accurate and objective, less invasive, and provide more personalized information to inform urologists how men should be treated compared to more traditional tools like PSA testing.

"MDxHealth's flagship tests are included in [National Comprehensive Care Network] guidelines and have demonstrated strong clinical utility," he wrote. "We model double-digit revenue growth for the next several years."

He added that the company's shares are trading at about 3.3X BTIG's 2022 revenue estimate of approximately $25 million, which is a significant discount to its peers, which trade at about 7.9X. A successful finalization of the firm's Medicare local coverage determination, which is expected by around mid-2022, will be a major catalyst for the stock, Massaro added.

MDxHealth's shares rose more than 9 percent to $9.43 in morning trading.

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