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Castle Bio, NantHealth Pace Gainers as 360Dx Index Climbs 4 Percent in December

NEW YORK – To round out the year, diagnostic firms, overall, saw higher gains in share prices during December as the 360Dx Index jumped 4 percent month over month, continuing November's upward trend. 

Of the 32 companies in the Index, 21 firms saw their share prices increase last month led by Castle Biosciences (+41 percent), NantHealth (+40 percent), and CareDx (+27 percent). Meanwhile, 11 companies' stock prices fell, paced by Quotient Limited (-25 percent), Burning Rock Biotech (-19 percent), and Invitae (-16 percent).

The Index was on pace with the broader markets as the Dow Jones Industrial Average was up 3 percent and the Nasdaq was up nearly 6 percent month over month, and the Nasdaq Biotechnology improved 4 percent.

In December, Castle Biosciences received coverage from Medicare Administrative Contractor Wisconsin Physicians Service Insurance Corporation for its DecisionDx-Melanoma test. The decision followed Palmetto GBA's expanded LCD for molecular diagnostic tests used to help in risk stratification for melanoma tests, and MACs Noridian and CGS Administrators aligned their coverage with Palmetto's earlier this year.

The Texas-based company also priced an underwritten public offering of 4 million shares of its common stock at $58 per share, expecting $232 million in proceeds. Castle Biosciences said it has no specific plan for the proceeds but could use the funds to advance its product pipeline, support its currently marketed products, or pay amounts owed under its loan agreement.

After the offering closed, Castle Bio prepaid in full an outstanding term loan facility to improve its balance sheet, paying approximately $21.6 million.

The only news from NantHealth last month was data presented at the San Antonio Breast Cancer Symposium showing the adoption of trastuzumab (Genentech's Herceptin) in patients with HER2-positive breast cancer likely isn't affected by patient selection, stage of disease, or goals of care. NantHealth's share-price spike in December is based on a modest stock price of $2.30 at the end of November.

CareDx also had a relatively quiet month, with the only news coming from a judge's denial of Natera's motion to invalidate three patents held by Stanford University and licensed to CareDx. The original patent infringement suit was filed by CareDx against Natera in 2019 for methods of cell-free DNA analysis for noninvasive monitoring of organ transplant rejection. In June of this year, Natera filed a motion for summary judgment on invalidity of the three patents because they claim unpatentable subject matter, but the motion was denied.

Among the decliners, in early December, Quotient Limited said it received a request from the US Food and Drug Administration for additional testing data for its 510(k) submission for the firm's Initial Serological Disease Screening Microarray (SDS) and MosaiQ instrument. The data request is related to specific individual performance characteristics of the assays on the microarray, the company said, and Quotient plans to resubmit its application early this year.

The firm's COO Ed Farrell also announced his departure from the company last month due to personal reasons, which will take effect a year from his notice.

Last month, Burning Rock Biotech announced it is exclusively licensing Oncocyte's DetermaRx lung cancer test in China. Under the agreement, Oncocyte will receive cash payments after transferring and installing its DetermaRx technology and will receive ongoing royalties per patient tested with DetermaRx. The technology transfer is expected in Q1 of this year, with complete installation by the third quarter of 2021. Burning Rock CEO Yusheng Han said DetermaRx will be combined with the firm's products for genetic testing and minimal residual disease detection, which are currently under development.

The agreement was a boon for Oncocyte, leading Piper Sandler to raise its rating on the company from Neutral to Overweight. According to Cowen analyst Doug Schenkel, Burning Rock estimates China's stage I-IIA non-squamous non-small cell lung cancer incidence rate is above 100,000 per year, which could bring a sizable market opportunity. Schenkel called the agreement "an important step in the expansion of BNR's growing test menu."

The only significant news for Invitae last month was UnitedHealthcare's decision to cover noninvasive prenatal testing for average risk pregnant women, which could have a positive impact on the company. Invitae brought its NIPT product in house earlier this summer and expects to transition all testing in house in 2021, Schenkel said in another analyst note. Bringing testing in house allows the firm to be paid for more tests, he added.

He added that Invitae's momentum in Q4 was continuing, although there was higher uncertainty about that continued momentum related to potential COVID-19-related slowdowns.