NEW YORK – Solid earnings reports amid the increasing demand for COVID-19 testing led to a hearty uptick in the share prices of many diagnostics companies in July as the 360 Index grew 13 percent month over month.
The uptick followed a modest 2 percent rise in the index in June.
The broader market continued its climb as well, as the Dow Jones Industrial Average rose 2 percent compared to June and the Nasdaq increased 7 percent in July. The Nasdaq Biotech Index, however, declined 2 percent month over month.
The 360Dx Index's largest gainers in July were Opko Health (+51 percent), Veracyte (+38 percent), Quidel (+26 percent), and NeoGenomics (+23 percent). The decliners were led by Adaptive Biotechnologies (-23 percent), with CareDx the next highest drop (-6 percent).
Opko's jump comes after a positive earnings report at the end of the month with Q2 revenues up 33 percent, largely due to increases in SARS-CoV-2 testing volumes. Although clinical and genomic testing volumes have fallen, the firm's subsidiary BioReference Laboratories processed 2.2 million COVID-19 molecular tests during the quarter. BioReference has also provided 400,000 serology tests measuring SARS-CoV-2 antibodies. BioReference has formed testing partnerships with states, cities, professional sports associations, and healthcare organizations during the pandemic and has contracted with colleges and universities to provide testing for the fall semester, the firm said on its earnings call.
In addition, Opko announced Medicare granted its appeal for reimbursement of 14,000 4Kscore prostate cancer tests performed in 2019 before it received a local coverage determination, leading to $10.9 million in additional revenue.
Despite a decline in revenues year over year, Veracyte still topped the consensus Wall Street estimate on the top line with its Q2 financial results announced at the end of the month. Revenues fell 31 percent due to a decline in testing, but as hospitals began to perform more non-emergency procedures towards the end of the quarter, volumes increased.
Veracyte also announced last month it has partnered with MaviDx to develop ultra-high-throughput genomic testing for SARS-CoV-2 on the firm's nCounter diagnostic platform. MaviDx's assay will detect SARS-CoV-2 copy numbers from nasal or throat swabs and could lead to 40,000 samples being processed per day on the nCounter system, both firms said. In an analyst note, Puneet Souda from SVB Leerink said the move into COVID-19 testing was a "high-risk, high-reward play that is already becoming a driver of the stock in the near term."
Quidel's gain comes on the back of an 86 percent revenue increase year-over-year in the second quarter, thanks largely to its COVID-19 testing products. Sales of its rapid immunoassay products, led by the Sofia SARS Antigen test, almost tripled and molecular diagnostic product sales skyrocketed due to revenues from the Lyra SARS-CoV-2 molecular diagnostic assay. The company is massively ramping up production of its three SARS-CoV-2 tests and preparing for significant revenues in the third quarter as well. At the end of the month, Quidel also received a $71 million contract from the National Institutes of Health to increase manufacturing and delivery of its point-of-care Sofia SARS Antigen FIA test kit.
Brian Weinstein, an analyst at William Blair, said in a note after the results were announced that "commentary on demand the company is seeing (labeled by management as 'unfathomable'), expanding supply capabilities, share gains in point-of-care testing, and a pipeline of assets that should begin to contribute in the coming months all contributed to what we believe should be seen as a very strong outlook for the company."
Earlier in July, Quidel announced that the US Department of Health and Human Services intended to purchase 2,000 Sofia and Sofia 2 instruments, along with 750,000 Sofia SARS Antigen FIA tests for detection of COVID-19 in nursing homes.
NeoGenomics, like Veracyte, announced revenue declines during its second quarter earnings report, but it beat analysts' average estimates and is preparing for Q3 revenue growth. As oncology testing volumes continue to recover and as NeoGenomics ramps up its COVID-19 testing capacity, the firm expects organic revenue growth of about 20 percent in the third quarter. NeoGenomics also touted its expanded liquid biopsy offerings during the earnings call, which have strengthened its next-generation sequencing product portfolio.
There's no clear reason for Adaptive Biotechnologies' decline, as the company hasn't reported earnings results yet and had a quiet month in July, mainly announcing that it has priced a public offering of common stock that is expected to bring in $240 million for the firm. Adaptive also said at the end of the month it has launched its ImmuneSense Lyme research study to help develop a Lyme disease diagnostic.
There's also no clear reason for CareDx's decline, as the firm had no news during July. It is scheduled to report its second quarter financial results this week.
