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CareDx, Burning Rock Biotech Pace Gainers as 360Dx Index Rises 6 Percent in October

NEW YORK – The 360Dx Index continued its upward climb in October, led partly by the announcements of solid financial results from many diagnostic firms. 

For the month, the index rose 6 percent, following a 5 percent increase in September

In contrast, the broader market decreased, as the Dow Jones Industrial Average fell nearly 5 percent compared to September, and the Nasdaq dipped 2 percent last month. The Nasdaq Biotechnology Index fell nearly 4 percent month over month.

The 360Dx Index's leader in October was CareDx (+29 percent), followed by Burning Rock Biotech (+23 percent), Quidel (+22 percent), and Exact Sciences (+21 percent). The decliners were led by Fulgent Genetics (-19 percent) and Luminex (-16 percent).  

CareDx's share price rise was driven largely by solid earnings results in the third quarter, with revenues up 58 percent year over year and beating Wall Street estimates. The jump was the result of a 61 percent increase in testing services revenues from its AlloSure Kidney blood-based, donor-derived, cell-free DNA test for organ transplant rejection, as well as its AlloMap Heart transplant test. The AlloSure Heart test received final coverage from Medicare Administrative Contractor Palmetto last month when used alongside the AlloMap test. The donor-derived, cell-free DNA diagnostic can identify underlying cell injury leading to organ rejection. In addition, Noridian aligned its coverage with Palmetto's decision to cover AlloSure Heart and followed in Palmetto's footsteps to combine coverage indications for both AlloSure Heart and Kidney tests in one document.  

Alex Nowak, an analyst with Craig Hallum, said in a research note that each $100 in incremental payment for the AlloSure Heart test and AlloMap could add approximately $1 million to the firm's top and bottom line. Jefferies' Brandon Couillard, meanwhile, said the surge in test volume was "attributable to more centers adopting AlloSure protocols rather than just pent-up demand" and raised 2021 revenue estimates. 

Burning Rock Biotech, a recent addition to the index, announced preliminary Q3 revenues last month and said it expects to bring in between RMB 118 million ($17.4 million) and RMB 123 million for the quarter, which would be a 16 percent increase from the previous year. The firm will release final results Nov. 20. 

Quidel started last month strong, receiving Emergency Use Authorization from the US Food and Drug Administration for its rapid antigen point-of-care test for SARS-CoV-2 and influenza A/B, detecting the three viruses from one swab in 15 minutes. Quidel was the first diagnostic firm to receive EUA for a rapid antigen test for SARS-CoV-2 in May. It finished the month by announcing a 276 percent increase in revenues for the third quarter, beating analyst estimates and coming in line with its preliminary revenue announcement. Quidel's skyrocketing revenues for the third quarter were driven by growth in its rapid immunoassay and molecular diagnostic solutions product categories due to strong demand for Sofia SARS Antigen and Lyra SARS-CoV-2 tests.   

Quidel CEO Doug Bryant said on a conference call to discuss the firm's financial results that he expects high demand for SARS-CoV-2 tests and instruments to continue through 2022 and noted the firm will continue increasing manufacturing capacities. He added that Quidel expects to launch four new products in the next year, including a combination influenza and SARS-CoV-2 RT-qPCR test kit and a rapid isothermal molecular SARS-CoV-2 test on the firm's Solana instrument.

In an analyst note, William Blair's Brian Weinstein wrote that Quidel's revenue growth was "simply unprecedented in this industry" and added that the firm should still "see expansion of revenue and earnings even from these levels." He suggested the potential of a billion-dollar quarter for the company next year.

However, JP Morgan's Tycho Petersen emphasized caution due to "continued questions around the perceived accuracy of antigen vs. PCR, an increasingly competitive market with the addition of large scale/low-cost competitive tests … as well as what will inevitably be headwinds once a vaccine emerges and is scaled."

Exact Sciences had a busy October, beginning the month with the extension and amendment of its agreement with Pfizer to promote its colorectal cancer screening test Cologuard. Pfizer will now provide sales and marketing support through the end of 2022 and health system support through the end of 2021.

But the big news from Exact Sciences came towards the end of the month when the firm announced it would acquire liquid biopsy company Thrive Earlier Detection for up to $2.15 billion. In the announcement, it added that it had acquired DNA methylation analysis firm Base Genomics for $410 million. Exact Sciences has participated in both of Thrive's funding rounds as an investor and said it would help continue the development and commercialization of Thrive's CancerSeek test, a blood-based, multi-omic, early-stage, pan-cancer screening test. The deal is expected to close in the first quarter of 2021 and has been approved by both companies' boards. 

Exact Sciences also announced an 87 percent increase in third quarter revenues, beating analyst estimates by $71 million. The jump was driven by a huge rise in COVID-19 testing revenue, which reached $102.2 million in the quarter compared to the second quarter's $34.6 million. In addition, the US Preventive Services Task Force shared draft guidelines for colorectal cancer screening, including ages 45 to 49 in the guidelines, which could make the path to reimbursement for Cologuard easier in that age group, SVB Leerink analyst Puneet Souda said in a research note.  

Fulgent Genetics at the beginning of October said it had inked partnerships with the Ohio Department of Rehabilitation and Correction and the Pac-12 Athletic Conference, which Oppenheimer's Kevin DeGeeter said were "important steps in building momentum" for the firm. Fulgent also said it will release its third quarter earnings next week.

Luminex's only announcement in October was its preliminary third quarter revenue increase of 35 percent year-over-year, reaching approximately $106 million. The firm expects its molecular diagnostics revenues to nearly double, due to its COVID-19 tests on its Aries platform. Luminex also said planned expansions of the Aries manufacturing line will likely be finished in the fourth quarter of 2020. William Blair's Weinstein called the preliminary results "underwhelming when compared to other operators in the space who are blowing away estimates as they sell all the COVID-19 products they can manufacture." Luminex will announce final financial results on Thursday.