Rodman & Renshaw Prescribe A $6 Price Target For Cancer Genetics

Cancer Genetics Inc CGIX represents “a highly differentiated investment opportunity, given its broad pipeline of tests…and with its ability to generate high-margin revenue from partnerships with biopharmaceutical firms that are seeking to develop theranostic solutions for patients, Rodman & Renshaw’s Raghuram Selvaraju said in a report.

Analyst Selvaraju initiated coverage of Cancer Genetics with a Buy rating and a price target of $6. The company’s broad pipeline of tests includes both commercial-stage and under development precision diagnostics in the oncology sector.

Diversified Revenue Base

Cancer Genetics has a diversified revenue base, with direct billing contributing 20 percent, commercial payers accounting for 47 percent and Medicare contributing 33 percent of total revenues. Biopharma services accounted for ~65 percent of the company's 2015 revenues, with ~30 percent from clinical services and 5 percent from discovery.

Bright Prospects

“CGI also has a broad network of established collaboration agreements with both academic institutions and for-profit organizations, which should enable continuing development of highly innovative diagnostic solutions along with expansion of the revenue base,” Selvaraju wrote.

The analyst added Cancer Genetics could become cash flow positive in early-to-mid 2018 and may generate significant margin expansion as the company expands sales of proprietary tests.

Cancer Genetics could generate $44.3 million in sales in 2017, versus an estimated $27.6 million in 2016, representing 60 million y/y revenue growth. Given these prospects, current valuation “offers an attractive entry point,” Selvaraju commented.

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