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Leerink Initiates Coverage of HTG Molecular at Outperform

NEW YORK (GenomeWeb) – Leerink today initiated coverage of HTG Molecular with an Outperform rating for its stock and a target price of $6 per share.

In a note to investors, analyst Puneet Souda said that HTG has a growing funnel of biopharma partnerships and projects that have the potential to convert to US Food and Drug Administration-approved companion diagnostics and drive "significant revenue upside."

He noted that the firm has about "40 early-stage projects in the mix from biopharma with hopes of increasing that number to 60 as the project funnel continues to grow." Though timing remains unclear, he said, 10 percent of those should become "full-blown CDx projects" in the long term.

"We believe [HTG] will continue to differentiate itself from rest of the tumor-tissue diagnostics offerings on the market, given its unique chemistry and workflow that delivers higher sensitivity at low sample requirements," Souda added. He further noted that despite the recent failure of a biopharma partner project trial in May, HTG's upcoming project pipeline looks solid, given a backdrop of more than 3,000 oncology trials in the market.

Souda specifically pointed to a partnership agreement HTG inked with Qiagen in November 2016, noting that support from the partnership means HTG can deliver on the need of biopharma companies conducting oncology trials who are seeking partners that can deliver on companion diagnostics from assay development to regulatory approval. As part of the exclusive agreement, the companies are combining their technological and commercial strengths to offer pharma companies a next-generation sequencing solution for the development and commercialization of companion diagnostic tests with a focus on oncology.

HTG's full-year revenue is likely to wind up at the lower end of its guidance of $21 million to $25 million for 2018, Souda said. However, he added, the firm's research-use-only business — about 46 percent of its total sales — "should continue to deliver" with a long-term compound annual growth rate of 28 percent.