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Mizuho Starts Coverage of Fluidigm, BG Medicine with Buy Rating

NEW YORK (GenomeWeb News) – Mizuho Securities has initiated coverage of Fluidigm and BG Medicine, placing a Buy rating on both firms.

For Fluidigm, Mizuho analyst Peter Lawson has placed a $17 price target on the firm's stock, a roughly 11 percent premium to Thursday's closing price of $15.28.

Lawson offered three key reasons for the Buy rating: Fluidigm is a pure-play genomics firm that is well-positioned in the research market; it offers a strong product cycle and "killer app" with single-cell analysis; and it has demonstrated strong execution, organic growth, and gross margins at the high end of the industry — 68 percent, placing it among Life Technologies, Qiagen, and Illumina.

"We favor strong product cycles as opposed to legacy technology given the backdrop of weakened government spending," Lawson wrote in a research note. "Fluidigm is uniquely focused on single-cell genomic analysis, a 'next frontier' in research, as well as high throughput genotyping, and diagnostics."

He also said that Fluidigm is likely to benefit from an increasing demand for sample preparation and single-cell analysis products as "sequencing costs, rate of analysis, and technical barriers continue to fall." And though the outlook for academic funding is uncertain and is presenting a headwind for the research industry as a whole, the genomics space has the best spending outlook, he noted.

In addition to the C1 Single-Cell AutoPrep System, which Fluidigm expects to place with early-access users before the end of this year, Lawson pointed to the firm's potential digital PCR play. There are already competitors in this segment of the market, however, and he said that Mizuho is monitoring RainDance's droplet technology in particular.

Fluidigm also sells the BioMark HD and Access Array systems. The BioMark HD is used to study gene expression profiles down to the single-cell level, as well as high-throughput SNP genotyping and digital PCR for copy number variation and rare mutation detection. The Access Array enables high-throughput target enrichment for all of the major next-generation sequencing instruments.

Earlier this month Fluidigm reported that its second-quarter revenues increased 22 percent year over year driven by 79 percent growth for its consumables.

Mizuho also initiated coverage of BG Medicine with a $6 price target, a 51 percent premium to its Thursday closing price of $3.90.

Lawson noted that as a pure-play cardiovascular diagnostics company, BG is well-positioned to benefit from better CV disease management. He also said that the firm offers a strong product cycle, with its Galectin-3 test being the first novel cardiovascular biomarker cleared by the US Food and Drug Administration in more than five years.

Lawson also said the firm has a series of upcoming catalysts including additional Galectin-3 approvals and the resubmission of its CardioScore test for identifying individuals at high risk for near-term cardiovascular events such as a heart attack or stroke. The firm said earlier this month that it had withdrawn its application with the FDA seeking clearance of the test after it had determined it would not be able to respond in full to a request from FDA to confirm certain data from its BioImage validation study for the test.

"We intend to submit a new 510(k) as soon as we are satisfied that the information requested by the FDA is addressed in the new submission," said BG President and CEO Eric Bouvier.

"We readily see BG Medicine as a potential M&A target for larger diagnostic and healthcare management companies, broader medical device and life science companies, and biopharma companies looking for companion diagnostic exposure," Lawson wrote in a research note.

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