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Stocks of Most Diagnostics Firms Dragged Down by Weak Broader Markets in October

NEW YORK (360Dx) – Softness in the broader markets dragged down the stocks of most diagnostic companies in October, as the 360Dx Index fell almost 9 percent month over month.

The share prices of just five of the 28 companies in the index improved in value last month, paced by Veracyte (+56 percent), followed by Guardant Health (+ 21 percent), which was added to the 360Dx Index this month, and NeoGenomics (+20 percent).

Accelerate Diagnostics (-35 percent) was the biggest decliner, while shares of GenMark Diagnostics (-27 percent) and Enzo Biochem (-19 percent) also dropped significantly.

The Dow Jones Industrial Average slid 5 percent month over month, while the Nasdaq Composite was down 9 percent. The Nasdaq Biotech shed nearly 15 percent of its value in October.

Accelerate Dx had no obvious drivers for its share price decline in October, and the only recent news it reported was in late September when it announced Joan Martin, its head of Europe, the Middle East, and Africa, would leave the company for personal reasons.

GenMark's share price drop last month, meanwhile, followed a 14 percent month-over-month decline in September. Late that month, Medicare administrative contractor Palmetto GBA finalized local coverage determinations for viral respiratory panels and determined that the use of small multiplex viral panels in susceptible populations may be reasonable and necessary, but the use of highly multiplexed nucleic acid amplification tests, such as those offered by GenMark, as front-line diagnostics cannot currently be justified.

Early in October, the company announced it had filed an application with the US Food and Drug Administration for clearance of its ePlex Blood Culture Identification Gram-Negative and ePlex Blood Culture Identification Fungal Pathogen panels. It ended the month by saying its Q3 revenues grew 36 percent year over year and beat the consensus Wall Street estimate on the top line.

Despite the recent softness in the firm's stock price, Wall Street remains relatively positive about the long-term outlook on GenMark's stock. In a research note following the release of the firm's Q3 financial results, Canaccord Genuity analyst Mark Massaro wrote that he continues to view the firm's shares as "oversold and undervalued. We continue to believe that a multi-billion-dollar market opportunity awaits" GenMark.

Enzo Biochem had a lumpy October, punctuated by its announcement mid-month that its Q3 revenues were down 13 percent year over year.

Among the gainers, Veracyte's shares were lifted by its third quarter financial results. The firm beat analysts' average estimates on the top and bottom lines, and it raised its full-year revenue guidance to a new range of between $90 million and $91 million from a previous range of between $87 million and $89 million. That news led to a gain of 22 percent the day after the earnings were released.

Guardant Health, meantime, went public on Oct. 4 and its shares were immediately lapped up by investors who pushed up its stock price 16 percent on its first day of trading. By the end of October, a slew of investment banks began covering the company's stock with bullish ratings and outlooks.

JP Morgan analyst Tycho Peterson called the company a market leader in the liquid biopsy space, which he estimated to be worth about $40 billion just in the US. In a note, he said that Guardant Health has "leveraged its differentiated proprietary digital sequencing workflow to successfully commercialize two tests for personalized therapy selection" and has developed two programs focused on recurrence monitoring and early cancer screening.

"Importantly, FDA approval for GH360 (73-gene panel) is expected in 2019, which should pave the way for pan-cancer Medicare coverage nationwide starting in 2020, followed by private payor traction and ramping OUS adoption thereafter," Peterson wrote.

NeoGenomics had a mixed start to October, but its share price began ticking up after the company announced it was buying clinical oncology laboratory Genoptix. Since the deal was announced, NeoGenomics' shares have risen more than 30 percent.

The firm ended the month by reporting its Q3 revenues grew 17 percent year over year.