HCW starts Avid Bioservices at buy; PT $5

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H.C. Wainwright launched coverage of Avid Bioservices (NASDAQ:CDMO) with a “buy” rating and $5 price target. The stock closed at $3.56 on May 23.

Avid has accumulated 25 years of biologics cGMP experience, including commercial production since 2005, and is now the company's sole focus following a recent divesting of all research and development efforts.

“We believe Avid provides investors an opportunity to benefit in the company’s revenue upside, as most contract manufacturing organizations are privately held,” writes analyst Joseph Pantginis.

In addition, he said investing in a drug manufacturing company is de-risked relative to investment into typical biotechnology drug development companies with greater clinical risk.

Mr. Pantginis said demand for commercial biologics is expected to grow at a compounded annual growth rate of 13% to 15% between 2016 and 2020. In addition, the biologic drug business is expected to expand by 2022 to $360-billion annually, comprising more than 50% of top 100 drug sales worldwide.

Contract development manufacturing organizations (CDMOs) with commercial capacity are limited and there are significant barriers to entry, which places existing CDMOs, such as Avid, “in an advantageous position to expand and meet this demand in an agile fashion,” he added.

Stephen Kilmer