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Nanosphere Shares Spike 27 Percent on Jefferies Upgrade

NEW YORK (GenomeWeb News) – Investment firm Jefferies today upgraded Nanosphere's stock to Buy, driving the firm's shares up 27 percent to $3.20 in Tuesday morning trading.

In a research report, Jon Wood upgraded the Northbrook, Ill.-based molecular diagnostics company from a Hold rating and increased the price target to $5 from $2 following the approval last week from the US Food and Drug Administration of its Gram-Positive Blood Culture Nucleic Acid Test (BC-GP) on its Verigene System.

Wood said the regulatory thumbs-up should "drive a significant acceleration in new Verigene system placements" over the coming period, and added that with more than 200 customers actively evaluating the Verigene system for its bloodstream infection test alone, "we expect the test to be the cornerstone of an expanding test menu serving the microbiology lab with the anticipated commercialization of three additional tests," by the end of 2013: C. difficile, gram-negative blood culture, and enteric panels.

He further said that the test should enjoy first-mover advantage for at least one year, resulting in a "significant ramp in new instrument placements," and he foresees little in the way of competition in the near-term "to disrupt its ability to convert a meaningful portion of the market to its molecular offering."

Since gaining FDA approval for the gram-negative blood culture panel, Nanosphere's stock has risen 32 percent, closing at $2.52 on Monday on the Nasdaq. Despite that, Wood said that there is "plenty of room for additional upside on evidence of accelerating new system placements and incremental new product pipeline development milestones."

He raised his revenue forecast for 2012 to $9.5 million from $9 million and for 2013 to $28 million from $20.3 million. For 2013, Wood is forecasting $11.5 million of revenue generated from the gram-positive blood culture panel, implying an 8 percent market penetration rate. At a 20 percent penetration rate, the test would generate $25 million in revenues.

Wood also forecast 210 new Verigene system placements over the next four quarters and an annualized reagent annuity of about $74,000 by the end of the first quarter of 2013.

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