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Evaluating Veracyte's Medium And Long-Term Prospects

Dec. 06, 2018 8:31 AM ETVeracyte, Inc. (VCYT)1 Comment
BioTrench profile picture
BioTrench
573 Followers

Summary

  • Afirma has been making large gains in the thyroid space over the past year with additional runway for growth over the next few quarters.
  • VCYT has added Percepta and Envisia to their line-up and looks to ramp up sales as they continue acquiring coverage and hiring sales reps.
  • Given current growth trends, VCYT should be able to break-even in under 5 years.
  • We evaluate VCYT's long-term potential but note a number of variables that could significantly alter VCYT's valuation.

Veracyte (NASDAQ:VCYT) is a diagnostics company that combines machine learning with gene sequencing to facilitate the diagnostic process. VCYT currently offers three products: Afirma, Percepta and Envisia. Afirma has been on the market since 2011; in contrast, Percepta and Envisia are both (relatively) new products. Percepta has been commercially available for a year while Envisia is going commercial in 2019. VCYT has had a good run in recent quarters, going from $6.60 at the beginning of the year to $12.50 at the time of writing.

ChartVCYT data by YCharts

This is largely due to the high level of growth that they have been delivering over the past year.

Delivering Consistent Revenue Growth

Source: November 2018 Canaccord Presentation

With a market cap around $500M, VCYT may still have room to grow as it tries to break-even within the next few years.

Afirma - A raising standard in thyroid nodule diagnostics:

Afirma is being readily adopted in the thyroid nodule market with additional room for growth. Nodules are simply lumps of cells. They can be harmless or harmful, depending on a number of factors. Thyroid nodules have an estimated incidence of ~0.1%, which suggests that over 320,000 people require assessment and follow-up each year. As nodules can develop due to a variety of reasons, there is a need to identify which ones are actually malignant and require treatment.

Diagnosis of thyroid nodules, along with follow-up surveillance, is achieved through use of fine needle aspiration (FNA). As such, one estimate puts the number of FNA performed per year in the US at 600,000. Results from FNA can be broadly classified as benign, indeterminate, malignant or non-diagnostic. A number of studies found indeterminate rates to be in the 10-15% range1,2,3,4,5. This suggests that 60,000 to 90,000 tests come out as indeterminate each year.

The Afirma system is used

This article was written by

BioTrench profile picture
573 Followers
Background in biomedical looking for interesting opportunities.Focus on biotech, with the occasional foray into crypto, tech, and other areas.All written works are an expression of opinion and should not be interpreted as investment advice.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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