BTIG starts Fulgent Genetics at buy

BTIG initiated coverage of Fulgent Genetics (NASDAQ:FLGT) with a ‘buy” rating and $15 price target. The stock closed at $8.86 on Friday.

“While the genetic testing market is not without challenges and competition is formidable, we believe Fulgent’s proprietary technology platform drives multiple sustainable competitive advantages, including a broad and flexible test menu and an attractive cost structure,” writes analyst Karen Koski.

“We expect the genetic testing market, and especially multi-gene panels to experience significant growth over the next decade, as next generation sequencing costs continue to decline, breadth of content expands, physician and patient awareness grows, data on additional clinically actionable mutations becomes available, and reimbursement coverage becomes more widespread,” she added.

Since launching its first commercial genetic tests focused on rare pediatric diseases in 2013, Ms. Koski said Fulgent has expanded its offering to include more than 18,000 single-gene tests and 200-plus multi-gene, disease-specific panels that collectively test for over 7,500 genetic conditions, including cancers, cardiovascular diseases, and neurological disorders.

She estimates test volume and revenue of about 13,000 and $18.8-million this year, respectively, which represents significant growth from about 7,000 tests and revenue of $9.6-million in 2015. “Fulgent’s ability to reach profitability at current revenue levels is also impressive and a rare feat in the diagnostics space,” she added.

Ms. Koski said Fulgent’s multi-faceted strategy for future growth includes vertical and lateral customer growth via sales and marketing expansion; broadening its product offering to address new markets; international expansion; developing payer relationships with a focus on already established markets; clinical lab partnerships; and eventually collaborating with pharmaceutical companies.