Celera Group, formerly Celera Genomics Group (CRA), is one of the two business segments of Applera Corporation. It has significant capabilities and expertise in proteomics, bioinformatics and genomics.
Celera divested its small molecule drug programs in the fourth quarter of fiscal 2006 and filed a registration statement with the SEC on the planned separation of Celera from Applera in February 2008. The recent acquisitions of Berkeley HeartLab and Atria will enable the company to achieve profitability in 2009. Following its decision to focus on the molecular diagnostics market, Celera acquired full ownership of Celera Diagnostics.
The companyâs decision to divest off its small molecule drug development programs will result in significant cost savings in the near future. Additionally, the company used its cash reserve to acquire Berkeley HeartLab and Atria Genetics in the first half of 2008 for a combined price of $215 million. The acquisitions are expected to be accretive in fiscal 2008 and we expect Celera to break-even on a non-GAAP basis in 2008. The acquisitions provide the company with a rich and diversified revenue base.
At the end of March 2008, the company had almost $340 million in cash and equivalents. The company expects to end fiscal 2008 with $330 million - $340 million in cash and cash equivalents. Our financial model shows the company will break-even on a non-GAAP basis in 2008 and achieve profitability on a GAAP basis in fiscal 2009.
We expect the company to actively hunt for new opportunities to utilize its tremendous cash position. Our price target of $15 corresponds to a P/S multiple of 8.5x our 2010 sales figure of $210 million, discounted at 20 percent for two years. Our model assumes shares outstanding of 83.2 million in 2010. The P/S multiple represents a significant discount to the industry P/S multiple.
We would like to see evidence of the company's ability to successfully integrate and leverage the commercial operations of Berkeley and Atria before we recommend the shares. As such, we maintain our Hold rating on the stock with a price target of $15.
Varun Parwal contributed to this report.
Read the full analyst report on CRA.
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