Cantor picks RCEL as best 2024 medtech idea; bullish on PACB, AXGN, CERS

Cantor Fitzgerald has chosen AVITA Medical (NASDAQ:RCEL) as its “best idea” for medtech for 2024 while remaining bullish on Axogen (NASDAQ:AXGN), Cerus (NASDAQ:CERS), Elutia (ELUT), Exagen (XGN), NANO-X (NNOX), NeuroPace (NPCE), Nyxoah (NYXH), SI-BONE (SIBN) and Pacific Biosciences (NASDAQ:PACB).

The investment bank said it chose skin restoration products provider AVITA based on its “top-tier” growth rate of around 64% year-over-year and gross margins of approximately 85%.

“We believe RECL should trade at a premium to peers given the company’s superior growth profile and best-in-class gross margins,” Cantor analysts wrote in a recent note.

Cantor pointed out that AVITA’s recent guidance excluded revenue for the expected launch of PermeaDerm under the company’s distribution agreement with Stedical Scientific. It added that it was increasing its 2024 commercial revenue estimates for the company to $82.9M, which it believes is still “conservative” as it doesn’t include revenue from the launch.

Cantor is also bullish on Pacific Biosciences, commenting that a recent selloff in the shares has created a “sound entry point in the name for investors that can look past Q1.”

The investment firm noted that PacBio ended 2023 with backlogs for both Revio and consumables, “which is not normal for the company.” While Cantor expects continued pressure on PacBio through Q1, it sees the stock as attractive for longer-term investors “given the company’s best-in-class long-read offering and recent expansion into the short-read sequencing market with Onso.”

Cantor continues to view AxoGen as a “viable takeout candidate,” with shares “still trading below peers despite a strong run-up” at the beginning of the year. It also sees the company’s revenue momentum continuing based on “strong clinical data that should help attract middle adopters,” products launches and an “enhanced focus” that includes breast neurotization and oral/maxofacial procedures.

The bank also believes it’s a “good time to revisit the Cerus story,” citing “an improved operating environment, return to revenue growth and path to sustained profitability.” For Elutia, Cantor said that it was still all about whether the company gets FDA approval for CanGarooRM, which it believes could become an “obvious choice” for Medtronic rivals, “implying $360M in low-hanging annual revenue.”

Cantor sees “positive share price appreciation” for Exagen this year, with volumes and ASPs picking up speed. It also raised its price target to $16 for NeuroPace, which it believes will continue to beat revenue expectations.

As for Nyxoah, Cantor believes upcoming data from its DREAM study, expected in early April, will likely be the biggest catalyst for the stock this year as the company prepares for an anticipated launch of its obstructive sleep apnea device Genio in the US in late 2024.

Cantor also sees 2024 being another year of strong revenue growth for SI-BONE as the company hires additional territory managers and expands into adjacent markets. The investment bank raised its 2024 revenue estimate for SI-BONE to $163.5M from $160.9M.