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BTIG, Canaccord Genuity Initiate Coverage of Genetron with Buy Ratings

NEW YORK — Investment banks BTIG and Canaccord Genuity on Tuesday initiated coverage of newly public genomic products and services provider Genetron Holdings.

Beijing-based Genetron floated 16,000,000 of its American Depositary Shares on the Nasdaq earlier this month to raise $256 million. The company specializes in cancer molecular profiling and its offerings include a range of lab-developed tests and in vitro diagnostics for cancer, as well as drug development services for biopharmaceutical partners.

In a note to investors, BTIG's Sung Ji Nam rated Genetron a Buy with a $20 target price based on expected 40 percent to 50 percent revenue growth annually through 2022 and adoption of the company's offerings by the majority of top 200 Class 3 Grade A hospitals for cancer treatment in China in the next few years.

Nam cited significant market growth potential in China for genomic diagnostics, as well as Genetron's early-mover advantage and differentiated product portfolio. Genetron is the number three player in the lab-developed test segment of the next-generation sequencing-based cancer molecular profiling market in its home country, "but is the top provider of NGS-based molecular profiling for brain and digestive cancers," she wrote. "Genetron continues to strengthen both its LDT and IVD capabilities to meet evolving end-market needs, is developing early cancer screening tests … and has a robust portfolio and pipeline of biopharma collaborations."

Nam also cited Genetron's management team, which has experience in the cancer product development space in both the US and China.

Cannacord's Max Masucci initiated coverage of Genetron with a Buy rating and a $19 per share target price.

In his report, he called Genetron's estimate of a $20 billion total addressable market for its existing and upcoming tests as conservative, and sees future products — namely the company's recently approved 8-gene lung cancer monitoring assay and its HCCScreen liver cancer screening test — as driving "geometric increases" in its opportunity in China.

Masucci also sees Genetron's One-Step Seq library construction method, which is designed for small- and medium-sized panels and involves a single mixture of DNA sample to reagent and one PCR reaction, as disrupting traditional DNA sequencing processes based on its time and cost savings, as well as its lower sample requirements and lower risk of cross contamination.

"One-Step Seq is likely to provide Genetron with [cost of goods] advantages and pricing flexibility within its evolving portfolio of IVD assays, which we view as a key differentiator vs. local competitors," he wrote.

Mascussi also noted that Genetron has generated more than $2 million from sales of its PCR-based SARS-CoV-2 test, which has received Emergency Use Authorization from the US Food and Drug Administration, CE marking, and approval for export from Chinese regulators.

"Our thesis is underpinned by the company's multi-year runway for growth in precision oncology, but we expect [Genetron] to execute nimbly on its near-term opportunity in COVID-19 PCR testing," he wrote.