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Cowen Initiates Coverage of 23andMe With Outperform Rating

NEW YORK — Cowen on Thursday initiated coverage on personal genomics firm 23andMe with an Outperform rating and a $6 per share price target.

In a note to investors, Cowen analyst Steven Mah highlighted 23andMe's strong and loyal customer base, which has helped the company build a population-scale genetic database of over 13.1 million genotypes and 4 billion phenotypic data points. This resource, he wrote, gives 23andMe an edge in its growing therapeutics business.

"The inefficiencies of traditional drug-discovery methods have long plagued the industry, and we see 23andMe as a leader in data-driven drug discovery," Mah wrote. "With the largest database of its kind by a significant margin … we see immense potential [for the firm] to disrupt how future therapeutics are developed," particularly in the field of personalized medicine.

In the near term, 23andMe's therapeutics business is expected to benefit from the multiple drug candidates it has discovered and which have advanced into clinical testing, as well as by the extension of its target-discovery collaboration with GlaxoSmithKline into 2023. Longer term, 23andMe will have the opportunity to collaborate with other biopharma partners using its "unique and hard-to-replicate database."

Meanwhile, 23andMe's direct-to-consumer testing business is likely to remain durable amid new product innovations and international markets, Mah noted. In addition, the Sunnyvale, California-based company is launching a genetics-based primary care service that Cowen expects will be supported from a regulatory and commercial perspective despite its nascence.

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