Time To Buy Natera's Call Option On 'Liquid Biopsy,' Morgan Stanley Says

In a report published Friday, Morgan Stanley analyst Steve Beuchaw upgraded the rating on Natera Inc NTRA to Overweight, while maintaining the price target at $20, following the recent decline in the company's share price. Natera's shares have declined 20 percent since July 27. The company's decision to expedite its move into network/contracts with payors had resulted in increased pricing uncertainty in the near term, "but has not altered the outlook for pricing in '16-'17 as this transition was anticipated for this time period," analyst Steve Beuchaw said. Natera recently reported its 2Q results ahead of the consensus. "We have become more comfortable with our forecasts and PT over the last 2 weeks given our survey , the results in the quarter, rapid progress on expanded coverage, and our view post discussions with the company that there is a healthy level of conservatism in the guidance and our thesis is intact," Beuchaw added. In the report Morgan Stanley noted, "At current levels, NTRA shares clearly embed no value for the company's call option on liquid biopsy, a market we size in the $8-10bn range for lab test players." Beuchaw stated that the publication of data from the clinical trials for liquid biopsy tests demonstrating clinical utility could be a catalyst for Natera's shares. "Over the next 2-3 years, look for visibility on the company's liquid biopsy (genetic cancer test) platform, a play on a ~$10bn market opportunity that should reduce invasive tumor biopsies, drive early cancer detection, and support precise drug administration," the report added.