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Credit Suisse Initiates Coverage of Illumina, Life Tech, Thermo Fisher, Cepheid, Qiagen, and Waters

NEW YORK (GenomeWeb News) – Investment firm Credit Suisse has initiated coverage of six companies operating in the life science tools and molecular diagnostics space.

On Wednesday analyst Vamil Divan initiated coverage on Illumina, Life Technologies, Thermo Fisher Scientific, Cepheid, Qiagen, and Waters.

Illumina was given a Neutral rating and a $30 target price on its stock. Divan estimated 2011 revenues at $1.05 billion, and 2012 revenues at $1.07 billion. He provided an EPS estimate for 2011 at $1.20 and for 2012 at $1.29.

"While we appreciate the potential of Illumina's technology and trust the management team to lead Illumina through its current challenges," Divan said in a research note, "we remain on the sidelines on the stock given the significant near-term headwinds that the company is facing related to government funding and, perhaps more importantly, the current overcapacity of Illumina consumables in the sequencing market."

He initiated coverage of Life Technologies with an Outperform rating and a $47 target price, and estimated revenues in 2011 at $3.73 billion and in 2012 at $3.88 billion. His EPS estimate is $3.70 for 2011 and $4.19 for 2012.

"We value the diversity that Life offers as well as its recurrent revenue stream and expansion into applied and emerging markets," Divan said. "Life is not all about defense, however, as our due diligence and insights from a proprietary research survey highlight the long-term potential for [Ion Torrent's] Personal Genome Machine in the benchtop DNA sequencing market."

Coverage of Thermo Fisher was initiated with an Outperform rating and a $57 target price.

"While its organic growth is naturally less than some [of] its peers given its revenue base, organic growth in the low-mid-single-digit range combined with deal synergies, margin expansion and share repurchases should still drive double-digit earnings growth at a relatively cheap price," Divan said.

He provided revenue estimates of $11.63 billion for 2011 and $12.52 billion for 2012. Divan estimated EPS at $4.14 for 2011 and $4.76 for 2012.

He started coverage of Cepheid with an Outperform rating and a $40 price target. He provided revenue estimates of $271.7 million for 2011 and $351.3 million for 2012, while Divan estimated EPS at break-even for 2011 and at $.43 for 2012.

In a research note Divan wrote, "We believe Cepheid's best-in-class GeneXpert platform is poised for increased adoption in the US and internationally as the company maintains leadership in molecular testing for healthcare-associated infections and expands into numerous other testing markets."

Coverage of Qiagen was initiated with a Neutral rating and a target price of $15.

"We see Qiagen as a company at a crossroads, as near-term concerns over its human papillomavirus test overshadow the longer-term potential of the company's efforts in companion diagnostics and personalized medicine," Divan said. "We are optimistic on Qiagen's longer-term potential but remain on the sidelines until the near-term headwinds are either elucidated or eradicated."

Divan estimated revenues for 2011 at $1.16 billion. For 2012 he projected revenues at $1.25 billion. EPS was estimated at $.97 for 2011 and $1.08 for 2012.

Lastly, he began coverage of Waters with a Neutral rating and an $80 price target.

He projected 2011 revenues at $1.85 billion and for 2012 at $2.02 billion. EPS is estimated at $4.77 for 2011 and $5.36 for 2012.

"As a leading player in the areas of liquid chromatography, mass spectrometry, and thermal analysis, Waters should continue to benefit from its positive product stories, especially in the conversion to ultra performance LC," Divan said. "However, the stock trades at 13.7x our 2012 EPS estimates … and faces difficult comparisons in the coming quarters, which we believe could limit near-term upside and leads to our Neutral rating."

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