Is Genetic Technologies (GENE) The Next Billion Dollar Molecular Diagnostic Company?

August 29, 2012 12:09 PM EDT
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Price: $1.13 -2.59%

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    1 Buy, 0 Hold, 0 Sell

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    Up: 35 | Down: 31 | New: 10
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Shares of Australia-based Genetic Technologies Ltd. (Nasdaq: GENE) are ripping higher after Australian investment bank Lodge Partner issued an Buy rating on the stock with a 12 month price target of AUD0.57, or 489% above yesterday's close of AUD0.097.

The firm noted that FY12 results showed that the company is making good progress with its key diagnostic product, BREVAGen, and the Company expects to regain momentum in its US patent assertion program following a weak FY12 revenue contribution.

Commenting further on BREVAGen, the firm notes that GENE reported 125 tests sold in 1H12 and 416 for FY12, implying 291 tests were sold in the second half. "This equates to 230% growth on a HY basis, the firm highlights.

While the company released revenues from BREVAGen calculated on a cash basis, "we believe the company would have generated in excess of $210k in revenues on an accrual basis for the year (under the same assumptions, $35k would have been generated by the 71 kits sold in July 2012)," the firm notes and highlights.

While this may seem like small beans, Myriad Genetics (NASDAQ: MYGN) and Genomic Health (NASDAQ: GHDX) had revenues of $500k and $250k, respectively, in their first year of sales. These two companies have subsequently grown to be valued at over at over a billion dollars each, the analyst notes. Specifically, Myriad Genetics has a maket cap of $2 billion and Genomic Health is at $1 billion.

"We are forecasting unit sales of BREVAGen to be between 2500-3500 units in FY13, with corresponding revenues of AUD1.25m to AUD1.75m," the firm notes and highlights.

Shares of GENE are up 33 percent to $4.15 in mid-day trading.

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