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JP Morgan Assigns Overweight Ratings to Thermo Fisher, Qiagen

NEW YORK – Investment bank JP Morgan has assigned an Overweight rating to the stocks of both Thermo Fisher Scientific and Qiagen a week after Thermo Fisher's planned acquisition of Qiagen fell through due to resistance from a substantial portion of Qiagen shareholders.

JP Morgan moved to an Overweight rating on both companies from a Not Rated designation assigned during a restriction period as the potential acquisition played out.

In a note to investors, JPM analyst Tycho Peterson raised the price target on Thermo Fisher's stock to $460 by December 2021 from $350 prior to the restriction period, noting that the company delivered "exceedingly strong performance" the second quarter of 2020 including 11 percent year-over-year organic growth "that again demonstrated the resiliency of its portfolio and ability to scale up quickly to address COVID-19 opportunities."

Peterson noted that the investment bank sees COVID-19 tailwinds having durability for Thermo given its leading position in PCR and increasing testing demand outside the US, and upside as vaccines and therapeutics ramp up in the next two years.

And, while the Qiagen acquisition fell through, Thermo Fisher remains a "key consolidator in the tools space" with available cash of about $5.8 billion for additional M&A.

Downside risks to Thermo's growth include deterioration in global industrial demand, slowing pharma demand, softer academic demand than expected despite an increased National Institutes of Health budget, and technology shortfalls "including the inability to introduce competitive instruments and consumables in a timely and effective manner," Peterson said.

Meanwhile, in a separate note to investors Peterson raised Qiagen's December 2021 price target to $60 from a target of $40 prior to the restriction period, noting that the company has benefited from "robust COVID-19 tailwinds" year to date thanks to "a comprehensive portfolio supporting diagnostics, research, and therapeutic/vaccine development," tailwinds that the investment bank expects to persist well into 2021.

Beyond COVID-19, Peterson sees multiple other growth drivers "on the back of existing crown jewels" such as the QuantiFeron-TB latent tuberculosis testing portfolio, Qiagen's sample technologies, and new products including the QiaStat-Dx syndromic testing system, NeuMoDx high-throughput laboratory testing system (once Qiagen's full acquisition of NeuMoDx is completed, which is expected in the coming weeks), and forthcoming digital PCR platform.

Peterson also highlighted Qiagen's OEM PCR reagents for third-party diagnostic companies developing COVID-19 tests, its next-generation sequencing products for research including newly released gene panels and analysis pipelines for SARS-CoV-2 research, and a serology and rapid antigen test currently under development with an expected launch in the second half of the year.

Qiagen, he noted, "has one of the higher NIH exposures within our coverage (about 7 percent of revenues) and is well positioned to benefit from significant potential increases in the NIH budget next year … which will be especially helpful for the [digital] PCR new product cycle."

Downside risks to Qiagen's stock include slower-than-expected traction from new products, the "inability to attract a capable CEO and/or execute on a turnaround plan," and "value-destructive M&A," Peterson wrote.

Qiagen is currently helmed by CEO Thierry Bernard who was promoted from an interim role after guiding the company through a tumultuous period last year.

In morning trading on the New York Stock Exchange, shares of Thermo Fisher were flat at $420.64 while shares of Qiagen were down around 1 percent at $51.95.