WB starts Lucira Health at OP


William Blair initiated coverage of Lucira Health (NASDAQ:LHDX) with an “outperform” rating, based on “our outlook for a series of positive catalysts on commercialization and manufacturing as well as what we believe is an expanding use-case for [COVID-19] testing as a way to confirm negative status.” The stock closed at $19.31 on March 1.

Analyst Brian Weinstein writes that Lucira’s investment thesis now is largely tied to the success of the company’s first product, a test solution for COVID-19 approved in the point of care and for prescription at-home markets. “Lucira’s first test addresses a large, underserved, and important market for which the durability is underestimated,” he added.

Lucira has developed a handheld, simple, single-use, molecular diagnostic test powered by 2 AA batteries. “Because of its form factor and high accuracy, we believe the use-cases for the product are large and still evolving,” he said. In addition, “we are excited about the opportunity in over-the-counter markets, where the company is likely to be one of the first to receive Emergency Use Authorization.

While there will be continuing debate on the durability of testing and the evolving use-cases for decentralized molecular testing in general, Mr. Weinstein said Lucira should have a “series of important positive catalysts in the near term that could keep positive news flow in the investor psyche over the coming year.”

On valuation, he said Lucira shares trade at 2.4 times estimated 2022 revenue, a discount to other small-cap diagnostic companies, which trade at a mean of 3.7 times and median of 3.1 times.

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