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SVB Leerink Initiates Coverage of Natera With Outperform Rating

NEW YORK – Investment bank SVB Leerink said on Thursday that it is initiating coverage of Natera with an "Outperform" rating and a price target of $75 per share.

"[Natera] to us is a leading reproductive testing company with a rapidly growing position in oncology that is addressing a $21 [billion total addressable market] in three core diagnostics end markets," Leerink analyst Puneet Souda wrote in a note to investors.

Natera holds a leading position in the $4 billion reproductive health market with its noninvasive prenatal Panorama and Horizon carrier screening tests, he wrote, and will benefit from a recent expansion of NIPT guidelines by the American College of Obstetricians and Gynecologists to include average-risk pregnancies. In the US, the market for NIPT, with a size of about 4.2 million pregnancies per year, is only about 30 percent penetrated, he estimated, and Natera "is best positioned as a market leader to benefit from increased adoption and a higher percentage of tests paid, more than offsetting any competitive pressures the market faces."

In addition, the company's Signatera cancer liquid biopsy assay promises to become a leader in the $15 billion minimal residual disease and cancer recurrence monitoring market over the next few years, he wrote. Natera has already secured Medicare coverage for MRD testing in stage II and III colorectal cancer, an estimated 250,000 patients, and is expecting a pricing decision next month. It is poised to expand into the Stage IV CRC and immunotherapy response monitoring markets, he added, as well as into other cancer types, such as lung, breast, and bladder cancer.

Finally, Natera's Prospera transplant rejection test offers the firm a long-term recurrent revenue stream, though the market opportunity is smaller, an estimated $2 billion, with 20,000 new kidney transplants per year and more than 200,000 patients living with a transplant. 

The company's strong and growing position across these three markets supports an estimated compound annual growth rate of 18 percent that could increase further with the growth of Signatera and Prospera sales, Souda wrote.

Natera's shares were up a fraction of a percent, to $61.60, in morning trading on the Nasdaq.