SVB Leerink starts Organogenesis at OP; PT $9

SVC Leerink initiated coverage of Organogenesis (NASDAQ:ORGO) with an “outperform” rating and $9 price target. The stock closed at $4.84 on Jan. 9.

Organogenesis is a regenerative medicine company with a portfolio of bioactive and acellular biomaterials products in advanced wound care and surgical biologics, including orthopedics and spine.

Analyst Richard Newitter writes that Organogenesis is positioned to increase market share within the advanced wound care segment and will benefit from an increasing trend towards advanced skin-substitutes, an area in which Organogenesis has several differentiated products.

“We believe Organogenesis has yet to be fully ‘discovered’ by investors with a below-peer valuation that, in our view, is highly dislocated from the company’s longer-term sales growth prospects, healthy end-markets and a scalable 70%+ gross margin business,” Mr. Newitter said. 

While the company will be challenged by the loss of pass-through reimbursement status for its PuraPly antimicrobial, “the company has numerous offsets and new product launches – not to mention one of the leading (and largest) dedicated wound care sales organizations in the industry – that should help mitigate the PuraPly impact in 2020-2021, and more importantly position the company for a steep growth re-acceleration once it anniversaries in 2022.”

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