NEW YORK – While the COVID-19 pandemic upended and disrupted life throughout the globe, the crisis had an overwhelmingly bullish effect on the stocks of many diagnostics companies in 2020.
For 2020, the 360Dx Index grew by nearly 31 percent year over year, outpacing the Dow Jones Industrial Average, which grew by 7 percent in 2020, and the Nasdaq Biotech Index, which increased by 26 percent. The Nasdaq Composite was up nearly 44 percent in 2020.
The gain came on top of 2019's 33 percent growth over 2018.
Of the 28 companies in the index, 24 saw their stock prices improve year over year, while four saw their share values retreat. Four firms were added to the index this year: Burning Rock Biotech and Genetron Health, who went public this year, and Fulgent Genetics and Quotient Limited, who saw significant share price increases from COVID-19 testing.
Major gainers included CareDx (+236 percent), NantHealth (+214 percent), and GenMark Diagnostics (+204 percent), accompanied by a few decliners – specifically Accelerate Diagnostics (-55 percent) and Myriad Genetics (-27 percent).
CareDx and NantHealth operated mostly outside the COVID-19 space, and while they may have benefitted from the increased attention on the diagnostics industry due to the pandemic, their gains appear not to be directly related to the coronavirus.
Highlights for CareDx included receiving final coverage from Medicare Administrative Contractor Palmetto GBA for its AlloSure Heart transplant test when used along with the company's AlloMap test to determine the risk of organ rejection in heart transplant patients, as well as its AlloSure Kidney test for kidney transplant patients. Other MACs, such as CGS Administrators and Noridian, aligned their coverage with Palmetto's decision.
The coverage decision caused CareDx's share price to spike once it was announced, and Craig Hallum analyst Alexander Nowak estimated reimbursement from Medicare for the company's HeartCare product, which combines the AlloSure Heart and AlloMap Heart tests, could add up to $23 million to the firm's revenues. Nowak also said each $100 in incremental payment for the AlloSure Heart and AlloMap tests could add $1 million to the firm's top and bottom line.
CareDx also had positive earnings results, with third quarter revenues rising 58 percent due largely to a 61 percent increase in testing services revenues. However, the firm noted that although product revenues rose, the firm was still negatively impacted by the COVID-19 pandemic because hospitals and laboratories restricted access for non-essential personnel.
NantHealth's share price fluctuated throughout the year, boosted early on by its late December 2019 announcement that it had developed artificial intelligence software to improve lung cancer diagnoses. After two quarters of declining revenues, impacted by the pandemic's depression of the larger market, NantHealth saw a slight uptick in revenues in the third quarter, trending up. The likely reason for NantHealth's surge this year is its low share price may make any fluctuations in the price to result in a large percentage change.
Unlike CareDx and NantHealth, GenMark Diagnostics saw significant growth in its stock directly due to gains from SARS-CoV-2 testing this year. Through the first three quarters of 2020, GenMark saw at least 80 percent increases in revenue, with Q2 and Q3 revenues doubling year over year due to the demand for COVID-19 testing. GenMark was one of the earlier companies to receive Emergency Use Authorization from the US Food and Drug Administration for a SARS-CoV-2 test in March. The firm is transitioning from its single target SARS-CoV-2 test to a respiratory panel that detects 21 respiratory pathogens, including SARS-CoV-2, influenza, and other respiratory infections.
Among the decliners, Accelerate Diagnostics pivoted to SARS-CoV-2 testing, but focused on serology antibody testing, which hasn't seen the same uptake as PCR-based or antigen-based testing for the coronavirus. It signed an agreement with BioCheck and its Chinese affiliate Sophonix to distribute IgG and IgM antibody tests and BioCheck's immunoassay analyzer early in the year, and Accelerate received EUA from FDA for the system in August and for the antibody tests in September. In spite of the positive developments and revenue increases in the first three quarters of the year, however, investors remained chilly to the company's stock.
While COVID-19 provided a boost to some firms' top lines, that wasn't the case for Myriad Genetics. Pressures from the pandemic caused its fiscal Q3 earnings to decrease 24 percent, while fiscal Q4 earnings plummeted 57 percent, and earnings for the quarter ending Sept. 30 were down 22 percent. The decrease in genetic testing and other molecular tests significantly impacted Myriad's testing volumes throughout 2020.
Unrelated to the COVID-19 pandemic, Myriad's request for expanded coverage of its EndoPredict breast cancer gene expression test was denied by two MACs, CGS Administrators and Wisconsin Physicians Service Insurance Corporation. The company was also denied its attempt to dismiss a whistleblower lawsuit against it, which claims the company engaged in misconduct and fraud related to its Vectra test for rheumatoid arthritis
This week, Myriad announced it is selling its autoimmune business, which includes the Vectra DA test, and will reorganize its international operations.
