Time To Buy EndoChoice, William Blair Says

In a report published Tuesday, William Blair analyst Margaret Kaczor initiated coverage of

with an Outperform rating. According to the William Blair report, "EndoChoice is the only company to address the continuum of care in the $6 billion worldwide gastrointestinal (GI) market through its single-use products (SUPs), Fuse endoscopy system, and in-house pathology services." Fuse endoscopy provides as much as a 330 degree view of the colon, as compared to the up to 170 degree view offered by existing endoscopes in the market. Fuse endoscopy therefore makes precancerous polyps (adenomas) visible to gastrointestinal physicians. A large study demonstrated that Fuse allows doctors to detect 69 percent more adenomas, as compared to the existing technology. Also, while the standard endoscopy methods lead to an adenoma miss rate of 41 percent, Fuse only leads to a 7 percent miss rate. The analyst believes that Fuse could prove to be a growth driver for the company. "We estimate that Fuse will contribute nearly 80 percent of EndoChoice's revenue growth through 2018. Only recently launched, Fuse has an installed base of 100 systems worldwide in the 30,000-system market," Kaczor stated. The analyst believes that Fuse, along with EndoChoice's SUPs, would drive sustainable growth of 20-30 percent for the next few years. The company also has a large long-term opportunity in the form of its pathology services.