Ladenburg ups Vericel to buy; PT $13

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Ladenburg Thalmann upgraded Vericel (NASDAQ:VCEL) to “buy” from “neutral” and introduced a price target of $13. The stock closed at $9.10 on July 13.

“We believe Vericel shares are oversold and would be buyers of the stock prior to second quarter financial results expected during the second week of August and potential top-line data for cartilage defect repair competitor, NeoCart, from Histogenics expected in the coming weeks,” writes analyst Kevin DeGeeter. 

In March, Ladenburg downgraded the stock to “neutral,” saying the launch of MACI was proceeding “ahead of our expectation and Vericel was building a dominant position in the cartilage repair market that could serve as a formidable barrier to entry against future competitors, but valuation appeared to fully reflect these strong fundamentals,” he added. 

While the company subsequently further de-risked the launch and strengthened the fundamental business with a $75-milliom equity offering, Mr. DeGeeter said Vericel shares have underperformed the market. Since April 6, Vericel shares are down 23% while the Nasdaq Biotech Index is up 7%. 

In terms of the impact from the expected near-term Phase 3 readout from NeoCart, “we are neither positive nor negative on prospects for the study,” he said. 

“However, our base case assumes that in the absence of head-to-head data against MACI, many surgeons will be reticent to switch and that the nearly three- year commercial head start for MACI offers a significant barrier to NeoCart adoption,” Mr. DeGeeter added. 

Stephen Kilmer