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Broader Markets Drag Down Stocks of Diagnostics Firms

NEW YORK (360Dx) – The topsy-turvy broader markets dragged down the shares of most diagnostics company in February as the 360Dx Index slid 3 percent compared to January.

The index still outpaced the Dow Jones Industrial Average, which declined 4 percent month over month, and the Nasdaq Composite, which was down 5 percent, but lagged behind the Nasdaq Biotech, which fell 2 percent.

Of the 25 companies in the index, 21 saw their share values drop month over month. The biggest decliners were GenMark Diagnostics and Opko Health, each of whose shares were down 24 percent, while the shares of Enzo Biochem and Natera each were down 14 percent.

The only notable gainer in February was Foundation Medicine (+19 percent).

GenMark's stock decline last month wiped out the gains it made in January when its share price grew more than 30 percent month over month. Its stock value fell throughout February, punctuated by a 15 percent drop on the last day of the month after the company released its fourth quarter and full-year 2017 financial results. While its top line results for Q4 and 2017 beat the consensus Wall Street estimates, management also said that in 2018, it anticipates placing between 140 and 170 ePlex analyzers, falling short of Wall Street analyst expectations.

GenMark CEO Hany Massarany further noted that the company expects system placements in Europe to temporarily slow down, especially in the first half of the year.

In a research note issued on Tuesday, Cowen analyst Doug Schenkel voiced concerns about GenMark's guidance for 2018 that were shared by many investors. "Simply put, despite achieving a number of important business milestones in 2017, execution has been inconsistent," he wrote. "From a bottoms-up perspective, we believe this is the last time the bar will be lowered on ePlex placements — hopefully we are not again proven wrong."

Opko, meanwhile, had no obvious drivers behind its stock-price drop, although the decline began immediately after its former President Gregory Henderson abruptly resigned in late January as president of Opko's BioReference Laboratories business. Opko did not give a reason for his departure.

The company is scheduled to release its Q4 and full-year 2017 financial results after the close of the market today.

February's drop in Enzo's share price also had no obvious reasons but continued a months-long trend going back to late last summer.

Natera, similar to GenMark, returned the share-price gains it saw in January, even though it reported no news last month.

Foundation Medicine was the lone bright spot among the firms in the index last month, as no other company's stock price rose in the double digits. Since a parallel review of the company's FoundationOne CDx test by the US Food and Drug Administration and the Centers for Medicare & Medicaid Services resulted in the approval of the test by the FDA, and a preliminary national coverage determination by CMS in November, Foundation's stock has soared nearly 56 percent.

In the middle of February, Cowen initiated coverage of the firm with an Outperform rating.