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Summer Doldrums Persist: 360Dx Index Flat in August

NEW YORK (360Dx) – The summer doldrums persisted in August as the 360Dx Index was flat month-over-month for the second consecutive month.

That followed a sluggish July when the index also barely moved.

The index reflected similar stagnation in the Down Jones Industrial Average, which also moved up less than 1 percent month over month, and the Nasdaq Composite, which inched up 1 percent. It lagged the Nasdaq Biotech, however, which improved almost 5 percent in August compared to July.

The number of gainers and decliners in the index was evenly split between the 26 firms. Natera (+53 percent) led the gainers, while NantHealth (-35 percent) led the decliners.

Natera's share price rebounded from a soft July when its stock was down 26 percent month over month. It started August by reporting second quarter financial results that surpassed analyst estimates on both the top and bottom lines. On a call to discuss the results, the firm also announced the launch of its Signatera circulating tumor DNA assay for research use only and reported promising results for other recently launched products.

Other big gainers in the index were Myriad Genetics (+26 percent), and Foundation Medicine (+14 percent). Myriad reported an 8 percent revenue increase year over year for its fiscal fourth quarter at the beginning of August, and while the company said that it expects softness in its hereditary cancer testing business during fiscal 2018, it hopes that new products and cost-reduction efforts would make up the difference.

Mid-month, Myriad also received positive coverage decisions for its breast cancer recurrence test EndoPredict from Medicare administrator Palmetto GBA and private insurer Anthem.

Meanwhile, investor enthusiasm for Foundation Medicine's stock appeared minimally affected by legal actions taken against the company, both real and threatened. In late July, a class action lawsuit was filed, alleging Foundation Medicine made false and misleading statements about the reimbursement process for its cancer genomic tests, and throughout August additional lawsuits loomed. Investors barely blinked an eye.

On a positive note, Foundation said at the start of the month that its second quarter revenues grew 24 percent year over year.

August turned sour for NantHealth as its shares took a hit following an announcement that the company would restructure its business and lay off 300 employees. It also said that its Q2 revenues declined 17 percent year over year. The day after the announcement, NantHealth's stock dipped 14 percent. The company ended the month by saying it reached a distribution deal with Asia Genomics for NantHealth's molecular profiling service GPS Cancer.

Meantime, GenMark Diagnostics' stock price decline began after the firm reported a 1 percent year over year contraction in its second quarter revenues. While the results matched the consensus Wall Street revenue estimate, it missed the consensus earnings estimate. Immediately after the company reported its Q2 results, its shares had a one-day drop of as much as 18 percent.

At the time, Cowen analyst Doug Schenkel attributed the decline to "details on revenue mix, orders, and margins" that heightened uncertainty among investors. Canaccord Genuity's Mark Massaro called the immediate stock sell-off "moderately irrational" and said that investors might have been spooked by concerns that GenMark would have difficulty hitting the mid or high end of its 2017 revenue guide; lower than expected gross margins in Q2; and "likely" higher than expected increases in operational expenses for the second half of the year.

Those worries persisted throughout August as the firm's share price continued to fall throughout the month.

Hologic's soft August was similarly driven by worries stemming from its earnings results. While the company reported a 12 percent year over year increase in revenues for its fiscal third quarter, it lowered its full-year fiscal 2017 revenue guidance to a new range of between $3.04 billion and $3.06 billion from a previous range of between $3.05 billion and $3.08 billion.

Piper Jaffray analyst William Quirk said in a research note at the time that the lowered guidance resulted from weakness in the US in Hologic's Cynosure business, which it acquired earlier this year. He added that given the Cynosure sales team transition in the US, "we are not overly surprised they will not likely make FY17 expectations."