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William Blair, Cowen Initiate Coverage of Sera Prognostics With Outperform Rating

NEW YORK — Investment banks William Blair and Cowen on Monday initiated coverage of Sera Prognostics, a newly public developer of women's health diagnostics, with Outperform ratings.

Neither bank gave a price target for Sera's shares.

Sera, which floated its shares on the Nasdaq last month through a $75 million initial public offering, uses proteomics and bioinformatics platform to discover, develop, and commercialize biomarker tests. The Salt Lake City-based company is initially focusing on improving pregnancy outcomes and has launched a blood test called PreTRM for predicting the risk of preterm birth.

In a note to investors, William Blair analyst Brian Weinstein highlighted the large market potential for PreTRM, noting that the March of Dimes estimates $25 billion is spent each year in the US on treating medical conditions associated with preterm births. Additionally, a recent study by insurer Anthem found that the test led to $1,608 in gross savings per pregnant woman tested, Weinstein noted.

Anthem has agreed to cover PreTRM for its members and raise awareness of the test under a commercial partnership with Sera.

In his research note, Cowen's Doug Schenkel pointed to Sera's pipeline of biomarker tests for predicting a range of other pregnancy-related conditions including preeclampsia and gestational diabetes, which "have the potential to offer significant health benefits to women and their babies.

"It is estimated that of the 140 [million] births globally each year, 25 percent are affected in some form by complications such as preterm labor, high blood pressure, preeclampsia, gestational diabetes, and stillbirth," Schenkel wrote. As such, the total addressable market for Sera's products could exceed $1 billion annually.

Despite the deal with Anthem, which Weinstein and Schenkel view as a key validator for Sera, both analysts warned that the company remains very early stage.

"There is limited history of investor success with diagnostic companies at this early stage of development," Schenkel wrote. "Accordingly, while the promise is exciting, there is arguably higher risk associated with a company just beginning to generate commercial test revenue with its first product."

Further, Sera's payor-centric commercial model is unproven and the specific terms of its arrangement with Anthem have not been disclosed, Weinstein stated. The company's technology platform has not yet been established beyond PreTRM and data from additional prospective trials are not yet available, he added.

During morning trading on Monday, shares of Sera were down about 2 percent at $12.61.