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360Dx Index Declines 2 Percent in March, Continuing Downward Slope

NEW YORK – Many diagnostics companies' stocks fell in March, continuing the slight decrease from February as the 360Dx Index was down almost 2 percent month over month.

Of the 31 companies in the Index, 11 firms saw their share prices increase last month led by Meridian Bioscience (+25 percent) and GenMark Diagnostics (+22 percent). Meanwhile, 20 companies' stock prices fell, led by Adaptive Biotechnologies (-29 percent), Burning Rock Biotech (-25 percent), Quidel (-22 percent), and Accelerate Diagnostics (-17 percent).

Oxford Immunotec has been removed from the Index following its successful acquisition by PerkinElmer.

The Index's decrease contrasted the broader markets as the Dow Jones Industrial Average was up nearly 7 percent month over month. The Nasdaq ticked up a fraction of 1 percent, while the Nasdaq Biotechnology Index fell 4 percent.

The reason for Meridian Bioscience's stock jump was unclear as it announced no significant news in March. Its share price began a steady climb in the middle of March after the company launched its Air-Dryable Direct DNA qPCR Blood Mix for manufacturing room temperature-stable molecular diagnostic tests direct from whole blood, plasma, or serum. In the past year, Meridian has seen significant revenue increases in its life sciences segment due to demand for reagents and mixes for molecular SARS-CoV-2 tests.

GenMark Diagnostics' increase came after Roche announced it would be acquiring the company for $1.8 billion. The deal is expected to close in the second quarter. When announcing the acquisition, Roche said GenMark's syndromic testing panel portfolio would complement its molecular diagnostics portfolio and that Roche's global network will allow GenMark's products, including its ePlex platform, to have an expanded reach. Roche also noted in an interview that it can support GenMark with its automation expertise and necessary raw materials.

After the acquisition announcement, investment bank Cowen downgraded GenMark to Market Perform. Analyst Doug Schenkel said in a note that GenMark has been "an attractive takeover target for larger diagnostic companies" and that the syndromic testing market "remains underpenetrated and should continue to be one of the fastest growing sub-segments within infectious disease molecular diagnostics for the foreseeable future."

The reason for Adaptive Biotechnologies' decline in March is unclear, as the company's only news was the receipt of Emergency Use Authorization from the US Food and Drug Administration for its COVID-19 T-cell response test. The blood-based test uses immune repertoire sequencing technology to identify people with an adaptive T-cell response to SARS-CoV-2, which can indicate recent or prior infection. The clinical validation study submitted for EUA found the test had a sensitivity of 97 percent and a specificity of 100 percent. 

BTIG analyst Mark Massaro wrote in a note that he believes the primary reason for the decrease is "investors taking profits in higher multiple growth-oriented names in favor of lower-multiple, value-oriented names," although he acknowledged that "we have seen our entire sector sell off in recent weeks." Massaro added that the firm's EUA for the COVID-19 test is "an FDA validation of their proprietary T-cell platform intended to detect a variety of diseases in the blood, and we expect a significant amount of FDA approvals to come in the future."

Last month, Burning Rock Biotech reported that its fourth quarter revenues rose nearly 50 percent year over year due to an increase in the average sales price per patient, along with test volume growth in the firm's central laboratory channel. Although the Chinese firm reported a negative impact from the COVID-19 pandemic, its in-hospital test revenue nearly tripled compared to 2019. However, its pharma research and development services revenues declined 7 percent. The company said it has completed development of its methylation-based six-cancer screening test and is ramping capacity for volume production.

Quidel had two key pieces of news in March, starting with an FDA EUA for its at-home rapid antigen COVID-19 test. The QuickVue At-Home COVID-19 test can be used by people to rapidly collect samples at home and is authorized for prescription home use with self-collected nasal swabs for people 14 years or older. The lateral flow test is authorized for children as young as eight when the swab is collected by an adult. Relatedly, the US National Institutes of Health said that it launched a study to evaluate the performance and utility of a smartphone application called MyDataHelps for use with Quidel's at-home test. The app would help users interpret their test results and provide independent confirmation of the result by taking a photo of the test strip. On Thursday, the FDA authorized the test for over-the-counter use in serial testing of asymptomatic individuals.  

However, later in the month Quidel issued first quarter and full year 2021 guidance that was well below average analysts' estimates. The firm guided for Q1 revenues of $450 million and full-year revenues of approximately $2.5 billion. Wall Street had estimated average Q1 revenues of $755 million and full year revenues of $2.9 billion. CEO Doug Bryant said that demand for testing in February and March had "softened significantly," down as much as 40 percent compared to Q4 2020. After the announcement of the new guidance, the firm's share price closed the day down nearly 17 percent. 

JP Morgan's Tycho Peterson said that he was cautious about Quidel's stock due to "tempered near-term expectations, a shift in focus to esoteric and OTC markets, the risk of inventory over-build, and lingering questions around the long-term viability of COVID-19 antigen testing as vaccine distribution is scaled."

Accelerate Diagnostics had no significant announcements in March, and the reason for its decline is unclear.