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Piper Sandler Raises Rating on Oncocyte to Overweight

NEW YORK — Piper Sandler on Tuesday upgraded its rating on Oncocyte to Overweight with a new price target of $4 following a licensing deal for the diagnostics firm's DetermaRx lung cancer assay.

Oncocyte exclusively licensed the Chinese rights to the treatment stratification test to Burning Rock Biotech in exchange for upfront payments and royalties. The test is designed to differentiate stage I-IIA non-small cell lung cancer patients at high risk of recurrence who may benefit from adjuvant chemotherapy post-surgery from those who might avoid it.

In a note to investors, Piper Sandler analyst Steven Mah wrote that Oncocyte will receive $4 million upon the transfer and installation of DetermaRx technology to Burning Rock under the deal, plus an additional $2 million once the test is included in in the US Comprehensive Cancer Network.

The Chinese lung cancer market is approximately five times larger than in the US and Guangzhou, China-based Burning Rock is a leader in the cancer therapy selection market, Mah wrote. "We believe that [Burning Rock is] an ideal partner for DetermaRx given their scale … and existing relationships with both smaller hospitals and also top-tier cancer hospitals throughout China."

Mah added that the added exposure from the Burning Rock deal will help "drive oncologist mindshare and utilization of DetermaRx." As such, he upgraded his rating on Oncocyte to Overweight from Neutral and increased his price target to $4 from $2.

Earlier this year, Irvine, California-based Oncocyte signed a distribution agreement for DetermaRx, which launched in the US in January, covering India, the Middle East, and Africa with CORE Diagnostics.