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Piper Jaffray Initiates Coverage of OncoCyte With Overweight Rating

NEW YORK (GenomeWeb) – Investment bank Piper Jaffray today initiated coverage of cancer diagnostics firm OncoCyte with an Overweight rating and a $6 target on the company's stock.

In a research note, analyst William Quirk said that in his view OncoCyte's test, called DetermaVu, is potentially best in class for lung cancer diagnosis, and he believes the US Centers for Medicare & Medicaid Services could start reimbursing for the test as early as late 2020.

Data on DetermaVu suggests it can "rule out 75 percent of false positives with 90 percent sensitivity," Quirk said, adding that the initial market for the test is intermediate nodules, which represents a $1.8 billion market domestically. Over time, he added, the bank believes OncoCyte can expand into the low-risk lung cancer group — comprising about 5 million to 8 million patients — bringing the firm's longer-term domestic total addressable market to $4.9 billion.

Quirk estimated that commercial payors could start reimbursing for the test in 2023.

A few weeks ago, OncoCyte said that it may launch the test by the end of this year after receiving strong performance data from its latest internal validation using a population-reflective, blinded sample cohort. DetermaVu analyzes a panel of gene expression biomarkers linked to the body's immune response to assess whether a lung nodule in likely or unlikely to be cancer.

Earlier this week, the Alameda, California-based firm announced it raised $40.25 million in gross proceeds from a public offering of its common stock. It had targeted about $35 million in gross proceeds.

In morning trading on the Nasdaq, OncoCyte's shares were up 5 percent at $4.03.