Wells Fargo starts tools and diagnostics group with positive bias

Wells Fargo last night initiated coverage of the life science tools and diagnostics group. Amid stable to improving fundamentals, Wells is positive on tools and sees select opportunities to own “attractive durable growth names at reasonable valuations,” the analyst told investors in a research note. The firm says that after a two-year period of lackluster fundamentals plagued by a post-COVID reset and slowdown in China, it expects a return to more normalized mid-single-digit core revenue growth moving into the second half of 2024 and into 2025, supported by roll-off of de-stocking headwinds, improving biotech funding, instrument replacement cycle demand, emerging applied markets, rising new drug approvals, and likely contribution from China stimulus programs. Wells’ top picks in tools are Bruker (BRKR), Repligen (RGEN) and Waters (WAT). In diagnostics, the analyst prefers names with diversified revenue streams across multiple large end-markets, stable-to-improving reimbursement trends and attractive pipelines that can support sustainable revenue growth. The firm’s top picks in diagnostics are Exact Sciences (EXAS) and Myriad Genetics (MYGN). Wells’ Overweight rated stocks outside of its top picks are Avantor (AVTR), Maravai Lifesciences (MRVI), Agilent (A) and Thermo Fisher (TMO). The firm’s Underweight rated names are Mesa Labs (MLAB) and CareDx (CDNA).