NEW YORK (360Dx) – The share prices of diagnostic firms continued an upward trajectory in May as the 360Dx Index climbed 7 percent in May compared to April.
After a sluggish start to 2018, May was the second month in a row with healthy growth for the index, following a 3 percent month-over-month improvement in April.
In total, 20 companies' share prices rose last month, paced by Invitae (+34 percent), Luminex (+33 percent), and Foundation Medicine (+30 percent). Five companies' stocks slipped in value, with Accelerate Diagnostics (-8 percent) the biggest decliner.
The index beat the broader markets, as the Dow Jones Industrial Average rose 1 percent month over month, and the Nasdaq Composite and the Nasdaq Biotech each grew 5 percent.
Invitae's May bump was spurred on in part by its announcement at the start of the month of a 169 percent year-over-year jump in Q1 revenues. The firm also increased its revenue and test guidance for full-year 2018.
Some analysts, however, still believed the increased guidance was conservative, and Leerink analyst Puneet Souda said in a research note following the release of the Q1 results and Invitae's conference call, "[W]e believe there are multiple catalysts that can drive upside to those estimates. The majority of the raise in 2018 guide appears to be associated with volumes, and we believe improving reimbursement is likely to drive further upside over time."
Similarly, Luminex's share-price uptick followed its Q1 earnings results, which beat the consensus Wall Street estimates on the top and bottom lines. On a conference call, company officials also reported progress on the continued development of its Verigene II system, leading William Blair analyst Brian Weinstein to remark in a research note that if the company meets its targets for the platform, "we see significant value from these levels (2.6 times 2018 revenues and 11.4 times 2018 EBITDA). In addition, interesting M&A seems to be on the horizon and could also cause us to change our thinking."
Foundation Medicine, meanwhile, began May by announcing a year-over-year doubling of its Q1 revenues. Later in the month, it announced its FoundationOne CDx test had been approved by the US Centers for Medicare & Medicaid Services as a new advanced diagnostic laboratory test, and it ended May by announcing a collaboration with Merck to develop companion diagnostic tests for the drug firm's immunotherapy drug Keytruda (pembrolizumab).
Several other companies also saw their stock values climb more than 20 percent in May compared to April. Myriad Genetics (+29 percent) started the month by saying its Q3 revenues were down 2 percent year over year, but it still beat the consensus Wall Street estimate.
The company also presented data on its GeneSight pharmacogenomic test for patients with moderate to severe depression, and this week announced its plan to buy genetic screening firm Counsyl for $375 million.
Opko Health (+28 percent) also saw a boost from its Q1 results. While revenues dropped 4 percent year over year, the company beat analysts' average estimates on the top and bottom lines, leading to a one-day 29 percent increase in its share price the day after the results were released. Its shares continued to pick up steam until mid-month, when the company said that Medicare contractor Novitas had issued a draft local coverage determination of non-coverage for Opko's 4Kscore test for prostate cancer. That resulted in a one-day 18 percent drop in the company's share price.
Genomic Health's (+26 percent) shares rose sharply in May despite some potentially troubling news mid-month, when the company disclosed in a regulatory filing that the US Department of Justice was investigating the firm's compliance with a Medicare Date of Service billing regulation. Investors brushed aside any concerns, however, and Genomic Health's share price barely moved on the disclosure.
The company started May by announcing a 13 percent year-over-year jump in its Q1 revenues.
NeoGenomics (+21 percent) said that its Q1 revenues were up 10 percent year over year, driven by growth in its clinical genetic testing volume. Following the release of the results, First Call lowered its rating on the company's shares to Equal Weight from Overweight. In a research note, though, analysts Joseph Munda and Tracy Marshbanks said that "we continue to view the company positively due to its increased scale, geographic reach, and comprehensive test menu."
They added that they "believe this one-stop cancer testing shop is well positioned to grow its customer base of pharmaceutical customers, community-based pathologists, and clinicians, as well as enhance its reputation with existing clients as a leader in the field of molecular oncology."
Accelerate Diagnostics paced the decliners, and its month-over-month drop resulted from its Q1 earnings results. Despite recording a 51 percent increase in revenues year over year, the firm still fell short of analysts' average estimates on the top and bottom lines.