Janney Montgomery Scott launched coverage of Interpace Biosciences (NASDAQ:IDXG) with a “buy” rating and fair value estimate of $12. The stock closed at $4.81 on April 14.
Analyst Paul Knight writes that Interpace has transformed in the past eight months. The changes include acquiring the contract research business of financially distressed Cancer Genetics for $27-million in July 2019; funding of the transaction and supplying growth capital with $47-million in convertible preferred equity from the venture capital firms of Ampersand Capital and 1315 Capital; and achieving significant price increase approvals for two of its three largest diagnostic tests in December and January.
Mr. Knight said the company is a market leader in diagnostic and high technology clinical trial support for rapidly growing markets like immunotherapy. “Serving nine of the 10 largest biopharma firms in 255 clinical trials, revenue growth is targeted to exceed 30% annually.”
Interpace also has potential significant price increases ahead, Mr. Knight said. The company has four proprietary tests in thyroid, pancreas and esophageal cancers that represent about 63% of estimated revenue in 2021. “Based on government recommendations, pricing looks positive,” he added.
Citing a multiple of three times estimated revenue in 2021 for his fair value estimate of $12, Mr. Knight said, “we would expect that multiple to increase as the company gains greater visibility of revenue potential after COVID disruptions, integration of the Cancer Genetics service group and realization of higher test pricing approved by the CMS.”
