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Trump executive order on organ transplants will fuel a little-known biotech company, Raymond James says

Key Points
  • Raymond James has a Strong Buy rating on CareDx, a biotech company with a product that can be used to predict whether kidney transplants will be rejected.
  • President Donald Trump is poised to sign an executive order to increase kidney transplants.
  • "We still expect a multiyear tailwind for transplants, and as a result, we are raising our revenue estimates given an acceleration from the ~5% typical increase in annual kidney transplants," the analysts wrote.
President Donald Trump talks to reporters before boarding Air Force One to return to Washington from Morristown Municipal Airport in Morristown, New Jersey, July 7, 2019.
Jonathan Ernst | Reuters

President Donald Trump's executive order on kidney care will be a boon to a transplant diagnostics company, according to Raymond James.

The financial firm has a "Strong Buy" rating on CareDx, a biotech company with a product that can be used to predict whether kidney transplants will be rejected. Raymond James thinks the executive order from the Trump administration will fuel 12-15% annual growth in the number of completed organ transplants.

"We still expect a multiyear tailwind for transplants, and as a result, we are raising our revenue estimates [for CareDx] given an acceleration from the ~5% typical increase in annual kidney transplants," the analysts wrote, saying that the company is a "best in class growth story" in the transplant diagnostic space.

Raymond James also believes the executive order could lead to an increase in heart transplants. The total addressable market for kidney and heart transplant care is currently about $2.6 billion, the analysts wrote.

CareDx has 30% market penetration in heart transplants and 5% in kidney transplants, but its kidney technology is still fairly new, according to Raymond James.

The executive order is aimed at increasing the number of kidney transplants, while also lowering the total spending on kidney care by the federal government. Medicare spends more than $100 billion per year treating kidney disease.

CareDx, which has a market cap of $1.7 billion, was up as much as 2.5% in early trading. It has gained more than 50% so far this year. Raymond James has a price target of $46 per share for the company.

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