NEW YORK – The 360Dx Top 30 declined slightly month over month in March after remaining essentially flat in February.
The Top 30 conflicted with the trends of the broader market, however, as the Dow Jones Industrial Average rose 2 percent month over month from February, while the Nasdaq grew 3 percent. The Nasdaq Biotech Index increased 4 percent.
The Top 30's largest gainers for March were Dermtech (+15 percent), Burning Rock Biotech (+10 percent), and Opko Health (+10 percent). The decliners were led by Accelerate Diagnostics (-49 percent), NeoGenomics Laboratories (-43 percent), and Natera (-38 percent).
Dermtech, like another gainer in March, was boosted by mostly positive financial results. At the beginning of last month, the firm posted a 52 percent year-over-year increase in Q4 revenues, due to sales growth for its noninvasive skin cancer tests. While the La Jolla, California-based company fell short of consensus Wall Street estimates, test revenues grew 87 percent to $3.0 million and billable sample volume climbed 42 percent.
For full year 2021, its revenues doubled to $11.8 million, slightly missing Wall Street's average estimate. Assay revenues were up 162 percent, and billable sample volume increased by 86 percent.
Burning Rock also reported in late March that its fourth quarter revenues were up 12 percent while its full year 2021 revenues grew 18 percent. Burning Rock also projected revenues of approximately RMB 620 million ($97.4 million), which would indicate 22 percent revenue growth for full year 2022.
The Shanghai-based company also announced last month that the National Medical Products Administration of China approved its nine-gene sequencing test, LungCure CDx, as a Class III medical device.
Opko Health's only significant news last month was the announcement that diabetes management services company 9am.health will offer at-home laboratory testing services in partnership with Opko subsidiary BioReference Laboratories. As part of the deal, 9am.health customers will be able to access BioReference's blood-drawing service Scarlet Health for $15 per month.
The month's decliners were also likely impacted by their quarterly financial results, although Accelerate Diagnostics saw growth in its Q4 revenues. At the beginning of March, the firm announced its fourth quarter revenues rose 6 percent year over year to $3.3 million, although they missed the Wall Street estimate of $3.7 million. For the full year, Accelerate's revenues grew 5 percent to $11.8 million, slightly missing the Wall Street consensus estimate of $12.0 million.
NeoGenomics' monthly decline was not led by financial results, but rather by late-breaking news that its CEO was departing and it was lowering Q1 2022 financial estimates. On Tuesday, the company announced that CEO and board member Mark Mallon would leave the company, effective immediately. Although it did not specify the reason for his departure in its statement, management shared during a call with investors that Mallon's lack of clinical lab experience and the disappointing performance of NeoGenomics' lab led to the decision, according to Cowen analyst Dan Brennan.
William Blair's Brian Weinstein wrote in a note to investors that NeoGenomics' "situation is fixable over time with the right leadership, as this is not a product, reimbursement, regulatory, or new competitive dynamic that alters the company’s prospects in a permanent way."
The firm also withdrew its estimates for Q1 and full-year 2022 revenues on Tuesday. It had previously announced expected revenues of $118 million to $120 million but said that its revenues "may be below the low end of that guidance." The firm also expects earnings before interest, taxes, depreciation, and amortization to come in below its previous guidance of a loss of $12 million to $15 million.
Natera, meantime, received a spate of bad news throughout the month that likely affected its share price drop. Early in the month, researchers at City of Hope published a study in JAMA Network Open calling the reliability and utility of Natera's Signatera assays into question, specifically for recurrence monitoring in colorectal cancer patients. The study's authors highlighted the results as evidence that genomic minimal residual disease testing may be unhelpful and unreliable in detecting recurrences earlier than standard-of-care imaging and blood protein tests.
The firm was also hit with a negative report from short seller Hindenburg Research that claimed Natera drove its growth through deceptive sales and billing practices. The report said that payors had imposed prior authorization requirements for Natera's tests in an attempt to decrease excessive billing. Natera refuted the claims, accusing Hindenburg of attempting to turn a quick profit and adding that Hindenburg is under criminal investigation for illegal trading tactics. After the report, Natera's stock fell nearly 33 percent, although it rebounded by 19 percent the day after.
Adding to the list, in mid-March a Delaware District Court jury awarded CareDx $44.9 million in damages in its false advertising suit against Natera, finding Natera liable for false advertising and unfair competition. The jury also found CareDx liable for two instances of false advertising but did not summarily find that CareDx intentionally and willfully engaged in false advertising. Natera, meantime, was found liable for nine instances of false advertising.
However, many Wall Street analysts did not see the suit having a material impact on Natera. BTIG's Mark Massaro wrote in a note to investors that while its "difficult to know now what financial impact [Natera] may face," he thinks it "ranges from zero impact to what right now appears to be a very minimal impact." Investment bank Canaccord Genuity analyst Kyle Mikson noted that "although the timing may be unfavorable given the Hindenburg short report," he thinks "the stock reaction is overdone." He added that "we do not view this as a crushing blow to Natera's reputation and marketing ability of its organ health business."
The firm's rough patch, though, was accompanied by Natera's lead independent director of its board, Roelof Botha, making a $5 million share purchase in the company. Natera's executives and directors also agreed to take company stock instead of salaries and retainers for the rest of 2022, showing a vote of confidence in the firm's long-term outlook, according to Mikson.
|360Dx Top 30|
|Burning Rock Biotech||BNR||9.29||8.43||10.20|
|Thermo Fisher Scientific***||TMO||590.65||544.00||8.58|
|360Dx Top 30 Average||118.10||119.41||-1.10|
*Becton Dickinson paid a dividend of $.87 per share on March 9.
**Danaher paid a dividend of $.25 per share on March 24.
***Thermo Fisher Scientific paid a dividend of $.30 per share on March 15.