Life Science Sector Review: Diagnostics and Tools Update

Life Science Sector: What’s Going On With Dx and Tools Stocks?

We dropped coverage of Life Science diagnostics and tools stocks in January 2016 just after the severe market correction began. Of course the downdraft opened up great values in several stocks.We have reviewed selected stocks in the sector with the idea that more opportunities lie ahead in 2017. Some dominant trends in precision medicine remain intact: companion diagnostics and pharmacogenomics that are required to optimize targeted oncology therapies, breakthroughs in genomics and molecular analysis platforms and of course  consolidation with M&A. Here is our review of the sector from December 2015.

Here are financial metrics for 2016 YTD. In the table below the names in bold were on our 2015 focus list.

Top Winners YTD

Genmark Diagnostics (GNMK) up 54.51%. New products for multiplexing molecular diagnostic tests.38% sales growth forecasted for 2107 with Revenues of $68M.

Nanostring (NSTG) up 48.81%. Innovative platform for molecular analysis , translational research and gene expression. A 30% sales growth is  forecasted for 2017.

Cepheid  (CPHD) up 44.95% on its acquisition by Danaher (DHR).

Neogen (NEOG) up 12.3%. Steady revenue grower but lackluster earnings.

Accelerate Diagnostics (AXDX) up 6.1%. Early stage Company with a rapid clinical diagnostic platform for identification and antibiotic susceptibility of infectious pathogens.

Top Losers YTD

Pacific Biosciences (PACB) down 69.1%. Lost deal with Roche.

Illumina (ILMN) down 32.45%. Missed Q3 forecast.

Meridian Bioscience (VIVO) down 14.72%.Slowing top line growth.

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We added Foundation Medicine (FMI) to our focus listen early July at a price of $20.40. The stock has been volatile with many upside trading opportunities.

Today we will add Hologic (HOLX) to our focus list at a price of $40. The stock has been recovering from July lows and is well-positioned for EPS growth in 2017. The blood screening business will be sold to Grifols for 1.85B in cash which should boost its balance sheet and top and bottom line growth. A new view of the Company will be presented at the JPMorgan Conference in January and should bring in investors.The Company is focused on diagnostic solutions, imaging and surgical interventions.

Disclosure : long FMI, PACB

2016 Selected Life Science Diagnostics Stocks

12/20/16 Current $Price 5 Yr %Perf Yr End MarkCap $Rev B P/S PEG Sales
Dx and Tools Symbol Trend 12/19 High YTD P $ $B 2016Est Q/Q%
Abaxis ABAX Up 51.86 65.61 -6.86 1.19 0.226 5.25 2.28 4.6
Accelerate Dx AXDX Up 22.8 30 6.1 1.18 n/a n/a n/a n/a
Alere ALR ?ABT 39.43 53.84 0.87 3.42 2.4 1.43 n/a -3.5
Cepheid CPHD Acquired 52.95 63 44.95 3.87 4.91 9.8 -33.7
Foundation Med FMI Down 20.35 49.57 -3.37 0.696 0.114 6.1 n/a 15.7
Genmark Dx GNMK Up 11.99 15.2 54.51 0.546 0.476 11.47 n/a 27.1
Genomic Health GHDX Up 30.55 37 -13.21 1.03 0.323 3.21 11.8
Hologic HOLX Up 40.88 42.45 3.59 11.32 2.83 4 3.52 3.4
Illumina ILMN Down 129.65 239.8 -32.45 19.19 2.37 8.09 2.99 10.3
Luminex LMNX Flat 20.51 24.9 -4.11 0.896 0.258 3.46 0.52 17.5
Meridian VIVO Down 17.5 27.24 -14.72 0.748 0.196 3.82 1.44 -0.2
Neogen NEOG Up 63.49 67.88 12.3 2.44 0.33 7.39 3.9 11.6
Nanostring NSTG Up 21.89 23.27 48.81 0.463 0.0836 5.55 n/a 52.2
Qiagen QGEN Up 27.62 28.42 6.63 1.32 5.02 4.83 7.7
Quidel QDEL Flat 20.65 31.44 -2.59 0.712 0.191 3.72 n/a 5.3
PacBio PACB Down 4.05 13.13 -69.1 0.369 0.101 3.65 n/a 80.6
ThermoFisher TMO Flat 141.25 159 0.42 56.17 17.97 3.13 2.53 8.9
iShares Russell IWM Up 136.8 138.31 21.47 37.89
(benchmark)

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