NEW YORK – Investment bank UBS on Tuesday initiated coverage of molecular diagnostics firm Veracyte with a Buy rating and a 12-month price target of $43 on the company's stock.
In a note to investors, UBS analysts led by Lu Li noted that the bank envisions "durable growth" in Veracyte's core products, chiefly its Afirma thyroid nodule and Decipher Prostate risk stratification tests, even though the markets for those tests have matured and Veracyte is already the market leader. Although sales growth will be moderated, they expect Afirma to grow about 7.5 percent in 2025 and Decipher Prostate to grow at around 17 percent in 2025.
In addition, Li noted that UBS sees "long-term growth potential" from Veracyte's minimal residual disease testing business, which the company acquired in January along with liquid biopsy startup C2i Genomics.
"We think Veracyte's whole-genome sequencing-based MRD platform is differentiated and could drive potential upside despite increasing market competition," Li wrote. Although the market is currently dominated by Natera's Signatera test, "we think the market is big enough for multiple players," she said, noting that the total addressable market (TAM) in the US is about 12 million annual tests and is currently less than 5 percent penetrated.
"Veracyte's WGS-based approach could be differential with potential higher sensitivity, genome-wide signatures, and operational advantages (e.g., faster turnaround time)," Li wrote. "While its first indication of muscle invasive bladder cancer has [a] small TAM of 95K tests, the platform can be expanded to other indications if the launch is successful."
In May, Veracyte CEO Marc Stapley said that Veracyte had moved development of the C2i technology for MRD detection in muscle invasive bladder cancer into its CLIA lab, with an anticipated clinical launch in the first half of 2026.
In August, the company raised its full-year financial guidance after reporting that its second quarter revenues grew 27 percent year over year.
In mid-afternoon Wednesday trading on the Nasdaq, shares of Veracyte were up a fraction of a percent at $34.37.