Companies in the diagnostics space, in general, and those names in the life sciences tools space that are moving to the diagnostic side should have more pricing power and long-term growth potential with less exposure to some of the volatility currently in the market, says Vamil Divan, M.D., a Vice President and Senior Analyst at Credit Suisse Group.
“I think I definitely have a little bit more positive sentiment on the diagnostic companies, because I see what they’re offering. Even the tools companies, as I mentioned, some of them are trying to get their stuff to be a little bit more clinically relevant,” he said. “I think there, if you are providing innovation and providing real value, you can move yourself away from some of these headwinds on the macroeconomy and government funding of research, by providing tools that might help diagnosis or better treat people with diseases.”
Divan highlights Cepheid (CPHD), which he says is more of a pure diagnostics play. He says Cepheid is not specifically a tools provider, however the company offers the best-in-class platform to do molecular diagnostic testing. CPHD is predominantly focused right now on testing for infectious diseases, specifically those that are acquired in the hospital setting, but it is expanding to additional tests in virology, oncology and women’s health.
“We still see a lot of room for this technology to gain traction, not just in the larger hospitals in the U.S., where they’ve been focused, but also in small and medium hospitals in the U.S. and internationally. Only about 30% of their revenues are international, and I think there is lot of room for them to grow there,” he said.
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