Roth starts Apollo at buy

Roth Capital Partners initiated coverage of Apollo Endosurgery (NASDAQ:APEN) with a “buy” rating and target price of $10. The stock closed at $6.21 on August 2.

“We believe Apollo is an attractive ‘masked growth’ Med Tech company, with long-term growth potential driven by continued strong endo-bariatric segment growth, from both Orbera and OverStitch, paired with moderating declines in its lap-band surgical business,” writes analyst Chris Lewis.

Unlike other single product obesity companies, Mr. Lewis said Apollo has a broad portfolio of non-surgical and minimally invasive products to treat obesity across varying stages.

Apollo has an established revenue base of $65-million in 2016, and a leverageable commercial infrastructure, consisting of 80 direct reps, of which 40 are in the U.S. and 40 internationally.

Mr. Lewis expects flat reported revenue growth in 2017 on tough endo-bariatric comparatives, citing large Orbera starter kit sales in the first half of 2016, and continued surgical declines – albeit moderating – and acceleration to 9% top-line growth in 2018 driven by endo-bariatric revenue growth of 26%, partially offset by surgical revenue declines of 12%. 


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