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CareDx, Invitae Lead Dx Stocks Higher in August

NEW YORK (360Dx) – Shares of diagnostic companies ended the last full month of summer on a high note as the 360Dx Index shot up more than 6 percent month over month in August with several firms seeing sizeable gains.

Overall, the index outpaced the broader markets. The Dow Jones Industrial Average was up 2 percent month over month, while the Nasdaq Composite grew almost 6 percent and the Nasdaq Biotech Index rose nearly 5 percent. Nineteen firms in the 360Dx Index saw their share prices move up in August, while 7 companies' stock prices retreated.

Five companies' share values grew more than 20 percent month over month in August paced by CareDx (+81 percent), followed by Invitae (+68 percent), Exact Sciences (+28 percent), GenMark Diagnostics (+28 percent), and Natera (+20 percent).

NantHealth (-31 percent) led the decliners, while Luminex (-17 percent) was the only other firm whose share priced contracted in the double-digits in August.

Foundation Medicine was dropped from the 360Dx Index following its acquisition by Roche.

CareDx's announcement early in the month that its Q2 revenues grew 48 percent year over year propelled its stock price up 13 percent and fueled its continued rise throughout August.

In a research note last month, Piper Jaffray analyst William Quirk said that CareDx's AlloSure test volume grew 119 percent compared to Q1 2018, while the number of new patients with standing AlloSure orders increased to 793 in Q2 from 568 in Q1. He further added that CareDx is now in 76 transplant centers, up from 52 in Q1, and estimated that the firm is in about 71 out of 76 high-volume kidney transplant centers in the US.

"Given the competitive dynamic, we believe it is increasingly important for the first mover to establish operations in as many high-volume centers as possible, and this handily exceeds our expectations," Quirk wrote.

Invitae's strong stock performance in August followed a positive July when its stock price moved up 20 percent month over month. It started last month by announcing its Q2 revenues more than doubled year over year, and the firm raised its full-year 2018 revenue guidance, resulting in a one-day share-price gain of 17 percent. A few days later, the company filed a shelf registration to potentially offer $250 million of its stock, debt, or warrants to purchase shares.

Exact Sciences, like CareDx and Invitae, said at the start of August that its Q2 revenues grew sharply year over year. The results, however, disappointed investors who reacted by selling off the company's shares. Later in the month, though, it announced a comarketing agreement with Pfizer for the Cologuard colorectal screening test, driving up its share value 31 percent in one day.

The deal is "clearly a major positive that will accelerate adoption and the timeline to Cologuard becoming the standard-of-care screening test in the $14 billion-plus market," Jefferies analyst Brandon Couillard said in a note. "We see the deal as a potential game-changer for Cologuard that adds conviction to [Exact Sciences'] ability to reach its $5 billion long-term venue goals."

Meantime, GenMark ended July by reporting a 20 percent increase in its Q2 revenues month over month. August was a quiet period for the firm news-wise and there were no obvious drivers to its stock price increase.

Natera started August by reporting a 21 percent increase in its Q2 revenues, and on a conference call to discuss the financial results CEO Mat Rabinowitz said the company anticipates commercializing its fetal fraction analysis capabilities and plans to develop new reproductive health products. Natera also said that it expects increased reimbursement for its noninvasive prenatal tests in the average-risk market, which makes up about 60 percent of its Panorama test sales.

Mid-month, it announced a partnership with Fox Chase Cancer Center to evaluate the company's Signatera circulating tumor DNA assay to monitor kidney cancer recurrence.

A 6 percent decline in its Q2 revenues year over year preceded a steady drop in NantHealth's stock throughout August. The firm also said that it had secured a $100 million line of credit with sister company NantCapital. On a conference call after the release of its financial results, NantHealth Chairman and CEO Patrick Soon-Shiong said the financing is to fund future operations while NantHealth works through convincing payors to cover for its molecular diagnostic tests.

Meanwhile, Luminex's month-over-month share-price retreat was fueled by the loss of its business with Laboratory Corporation of America. After reporting a 4 percent increase in its Q2 revenues year over year, Luminex President and CEO Homi Shamir said on a conference call that LabCorp had made its last order from Luminex for its NuSwab product in Q2, the foundation of LabCorp's women's health portfolio.

That led to a one-day 28 percent drop in Luminex's stock price.

Analysts noted that the loss of the LabCorp business will impact Luminex's profitability and were unsure about Luminex's ability to compete in the molecular diagnostics space with its anticipated Verigene II platform.

"[W]hile we remain cautious about the company’s ability to drive sustained revenue growth from a very crowded field of molecular diagnostic players, we believe the opportunity to convert its technology partners to a new instrument platform is intriguing and could yield an interesting, and underappreciated, revenue contribution," William Blair analyst Brian Epstein said in a research note.