CLSA analyst Paul Knight and his team were the only analysts attending the recent American Association for Cancer ResearchÂs annual meeting, and he has since updated his outlook for the life science companies in his coverage universe.
Knight writes in a note that Âour experience left us with the confidence that the commercial opportunities for diagnostic and clinical applications have never offered more promise. ”
He has Buy ratings on Agilent (A), Danaher (DHR), Sigma Aldrich (SIAL) and Thermo Fisher (TMO), while he also rates Life Technologies (LIFE), Mettler-Toledo (MTD), Neogen (NEGO), PerkinElmer (PKI), Safeguard (SFE), Waters (WAT) and WuXi (WX) as Outperform. (CLSA rates stocks it expects to beat the market by as much as 10% as Outperform, while those rated Buy are expected to beat the market by more than 10%.) Knight rates Bio-Rad Lab (BIO) at Underperform and Illumina (ILMN) at Sell.
Below are his insights into demand, potential new products and other catalysts he sees in the sector:
 Concept to clinic
Niche conferences like the annual AACR are gaining in importance over industry staples like PittCon.
Customers are focused on buying tools for research that are most likely to help find utility in genetic discoveries, a target most likely to obtain grant funding.
The ability to monetize research places a greater emphasis on fields like oncology, which represents approximately 18% of the US$5.9bn molecular diagnostics market.
Diagnostic and clinical applications prime for commercial success
The development of diagnostic tests is becoming a more costs-effective process due to increases in equipment technology.
Regulation has the potential for fields to create new standards in diagnosis and ultimately clinical usage.
Next-generation sequencing methods are in their infancy, while Qpcr and fluorescence and capillary electrophoresis were the most prevalent technologies for test commercialization.
A look into research end-market demand
Attendees were largely academic and government researchers who, upon our conversations with sales and company representatives, were remaining cautious with capital equipment.
Epigenetic research dominated the booth representation, similar to the hype surrounding stem cells 5 years earlier, according to a sales representative from a leading chemical company.
Color into pharma end markets was similarly cautious with a number of peptide and antibody companies anticipating the rise in demand from CRO companies.
PerkinElmer and Techne stand out
The PerkinElmer booth was consistently jam packed and our tour with Caliper reps clearly demonstrated the synergies among product lines that will amount to an impressive discovery workflow.
TechneÂs R&D systems and their recently acquired sister company, Tocris, provided insight into the sales force, which is just now integrating and allowing cross-selling each others and recently acquired Boston Bio chems products.
A few private companies of note were Rain Dance technologies, who unveiled their digital PCR machine, and PrimeraDx, who produces a next-gen PCR machine that ombines PCR and capillary electrophoresis for clinical and research applications.
