NEW YORK (GenomeWeb) – Investment bank Raymond James today upgraded its rating for shares of Quidel to Strong Buy and raised the target price from $55 to $60 following meetings with company management.
The bank previously rated Quidel at Outperform. It based the new rating on a number of factors, including a strong first quarter and increased confidence in the firm's ability to integrate the Triage assets, which it acquired from Alere, particularly in terms of R&D and manufacturing synergies.
The upgrade also considered an "underappreciated" growth in the installed base of Quidel's Sofia immunoassay and Solana molecular testing products and potential for additional value with future menu expansions, Raymond James analyst Nicholas Jansen wrote in a research note.
Specifically, "The long-term benefit of an expanding razor-razor blade model is what gets us excited ahead of planned menu expansion," Jansen wrote, particularly given an estimated installed base of Sofia immunoassay analyzers of 31,000 by the end of Q1.
In addition, Raymond James sees "long-term opportunity to cross-sell Quidel's product suite into new global commercial infrastructure and the potential for additional tuck-in M&A."
At the Raymond James Institutional Investors Conference, the investment bank learned that Quidel now estimates better flu performance in the first quarter than the firm described in its Q4 earnings. Quidel had expected 10 to 15 percent growth in the quarter but now anticipates about 25 percent growth, from $41 million in the first quarter of 2017 to above $50 million in Q1, 2018.
The Triage business Quidel acquired from Alere by way of Abbott is also yielding new possibilities for global distribution, which "opens new doors for new regional products as well as existing products to be sold in these new regions," Jansen wrote, adding that the bank also sees some Triage technology opportunities creating "upside revenue surprises."
The bank further noted that Quidel's business in China is "back on track" and should generate about $12 million in revenues quarterly, and that Sofia 2, the next-generation immunoassay analyzer, remains backordered even given Quidel's increasing of weekly manufacturing capacity from 350 instruments to 500 instruments.
Additionally, Quidel's first quarter molecular revenues have been over $600,000 per week, likely aided by flu and adding to the confidence for the $20M annual target, and the firm's CLIA-waived Lyme assay, which runs using a finger-stick blood sample, is still expected in time for the summer Lyme season, "with the hope that the product could eventually go from testing only those suspected of Lyme, to testing more patients to confirm the lack of Lyme."
Finally, Quidel plans improvements to the sensitivity of some of its Sofia immunoassay tests, "With the team sounding confident that Strep, for example, can pass the 98 percent level needed to remove the confirmatory requirement and truly alter the testing paradigm."
Separately, following the Investor Day presentation Canaccord Genuity reiterated its Buy rating and $55 price point for Quidel, citing the "extraordinary" first quarter outlined by the firm's CEO, Doug Bryant, as well as the "unbelievably successful" Sofia systems, with 8,226 Sofia placements and CLIA-waived test rollouts also aided by withdrawal of Abbott Binax products in the market. Quidel is currently "shipping every Sofia 2 they can make," Canaccord noted.
The company's stock was up approximately 4 percent at $48.92 in morning trading on the Nasdaq.