Leerink Partners Starts Endologix (ELGX) at Market Perform
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Leerink Partners initiates coverage on Endologix (NASDAQ: ELGX) with a Market Perform rating and a price target of $13.00.
Analyst Ravi Misra commented, "ELGX is the largest abdominal aortic aneurysm (AAA) pure play and holds the #4 position in the $1.5B WW AAA market. We think stock price appreciation prospects are tied to the long-term potential of the pending Nellix US launch, where FDA approval remains a matter of when and not if, in our view. This novel aneurysm sealing device brings to the US market a potential game-changing technology for AAA repair that should drive sustained double-digit revenue growth through 2020E as well as a concurrent ramp in adj. EBITDA margin. New product launch stories are well received in the MedTech universe; for our part we think Nellix will obtain significant adoption, and we acknowledge the potential for accelerating double-digit revenue growth led by significant uptake of Nellix in the US through 2020. But we think upside potential above our current out-year revenue estimates is limited, and that valuation already gives credit for this new product launch. While we believe TRIV-related synergies are achievable and model similar GMs and opex dollar spend in line with mgmt's post-TRIV integration assumptions, our lower sales estimate leads to a lower adj. EBITDA margin (~12% in 2020E vs. the company's 20% est.). Thus, we remain on the sidelines as we are not yet convinced that there is enough Nellix revenue upside beyond our current thinking to support a higher multiple given that ELGX already trades at a ~1x premium on EV/'16E Sales (5.7x) vs. other small cap high growth peers."
Shares of Endologix closed at $12.22 yesterday.
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