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UBS Initiates Coverage of Bio-Rad Laboratories, Fulgent Genetics, Bio-Techne

NEW YORK – UBS announced on Thursday that it has initiated coverage of Bio-Rad Laboratories, Fulgent Genetics, and Bio-Techne, with Buy, Neutral, and Buy ratings, respectively.

For Bio-Rad, UBS analyst Dan Leonard and his colleagues wrote that the Buy rating reflects its view that Bio-Rad is positioned for outsized margin expansion over the next two years once volumes recover. Furthermore, UBS said that downturns and headwinds in process media and digital PCR are product cycles that will likely be overcome. 

UBS said risks to its $395 price target include "greater than expected pressures from macro and capital markets cycle sensitivity, competitive share loss or market maturation in dPCR, inability to increase penetration of pharma/biotech customers, and inability to execute on cost-saves."

Although Fulgent is a growing business, UBS rated it Neutral due to an anticipated deceleration ahead and assigned its stock a $35 price target.

"While we believe Fulgent can continue to grow its next-generation sequencing-based testing business … we expect growth will decelerate going forward," Leonard and his colleagues wrote.

Specifically, Fulgent's efforts to utilize payor contracts from its acquisitions for NGS billing have developed more slowly than expected, UBS said, and although its expanded carrier screening offering is prominent, reimbursement in that category is challenging, and Fulgent's NGS-based oncology and pharma offerings are in the beginning stages.

Lower growth trends and limited visibility in the oncology and pathology spaces could also dampen Fulgent's growth momentum, according to UBS. "Fulgent's therapeutic efforts might hold promise, but we believe investors are unlikely to attribute much value for at least the next two years while we await more clinical data," the analysts said.

Other downside risks to investment in Fulgent include a potential inability to gain market share, reimbursement pressures that could add pricing headwinds, inability to secure pharma partnership deals, and costs associated with the proposed US Food and Drug Administration laboratory-developed testing regulation change.

Bio-Techne, on the other hand, was rated Buy by UBS with an $80 price target because its analysts see a return to double-digit growth after depressed demand related to the COVID testing boom.

"Despite the hangover, we haven't lost faith that Bio-Techne's core protein reagents business has high-single-digit growth prospects," Leonard and his colleagues wrote, adding that growth drivers in instruments as well as potential upsides in cell therapy should restore Bio-Techne's sales trend.

The UBS analysts were also "heartened" that Bio-Techne's most recent long-range plan of greater than $2.0 billion in sales by FY28 seems reasonable. "We believe the stock price reflects skepticism that Bio-Techne can return to double-digit sales growth and see this disconnect as a buying opportunity," they wrote.

Risks to Bio-Techne investment include greater than expected deterioration in the macro and biotech funding environment, slower growth in pharma and biotech end markets, lower than expected FDA approvals of cell and gene therapies, and a related decrease in research and development demand, as well as rising competition.

In Thursday afternoon trading on the New York Stock exchange, Bio-Rad's shares were down a fraction of a percent to $309.86, while Fulgent shares on the Nasdaq were unchanged at $26.52, and Bio-Techne's shares were up approximately 3 percent to $67.71.