NEW YORK – Investment bank Cowen on Thursday initiated coverage of NeoGenomics with an Outperform rating and a price target of $42 per share.
Analyst Dan Brennan said in a research note that Cowen sees NeoGenomics' organic growth accelerating as new tests, namely the RaDaR minimal residual disease assay, launch. The company's stock is down approximately 40 percent year to date, which "creat[es] an attractive entry point ahead of improving growth," Brennan wrote.
He added that Cowen believes NeoGenomics' "growth profile is about to inflect upwards" as a result of the increasing revenue mix from pharma services, informatics, and next-generation sequencing. That mix will be enhanced by the launch of RaDaR, he added. The MRD test will supplement the company's core clinical business outside of NGS to accelerate top-line growth from the low double digits to mid-teens over the next four years, Brennan said.
RaDaR "has strong performance … which can translate into a solid commercial ramp," Brennan said. He noted that he expects NeoGenomics to file for Medicare coverage for the test in early 2022, starting with the lung cancer indication, with approval targeted by 2023.
Beyond RaDaR, Brennan said the company's "very large US lab network" and the resulting patient data "positions the company to be a valuable partner to pharma companies for drug discovery and development." He forecast growth in the pharma services segment to reach about 20 percent with NGS growth above 20 percent.
In morning trading Thursday on the Nasdaq, NeoGenomics' shares were up about 1 percent to $32.33.