Many of the issues coming out of the healthcare reform discussion: rising medical costs, Medicare budget, need for better clinical outcomes, push for biogenerics have caused concern among investors and limited returns in the healthcare sector. Although M&A activity has picked up, funding for venture start-ups. equity for public companies and IPOs’ is down to a trickle. But biotechnology is evolving particularly in genomics, robotics and cell biology. Companies in the diagnostic sector that already have the cash flow or a strong balance sheet, product sales and platform technologies can take advantage of this environment because diagnostic tests have become faster, better and cheaper with the added blockbuster of molecular medicine that can ultimately deliver lower costs of treatment and better clinical outcomes.
Our 2009 Life Science Portfolio had several Diagnostic picks that had huge gains over a one year period: Abaxis (ABAX) up 56% , Inverness (IMA) up 71%, and Hologic (HOLX) up 36%. We still like these stocks on weakeness as they are leaders among the small caps in their markets. Other Dx companies in the 2009 Portfolio are still at good values: GenProbe (GPRO) $43.7 and tools Company Illumina (ILMN) $37.
With a view to the emerging long term technology trends in genomics and personalized medicine we see a greater need for diagnostics that can show clinical utility and cost effectiveness of treatment. This trend is already happening with Cancer (Her-2 test) and various infectious diseases such as HIV, HCV and HPV.
Some of the diagnostic stocks to watch with strong molecular capability are :
Genomic Health (GHDH) $17.30 Genomic based testing.
Genoptix (GXDX) $31.90 Personalized testing
Qiagen (QGEN) $21.40 Molecular tools and Diagnostics
Sequenom (SQNM) $5.20 Genetic Analysis and SNP analysis
More on these companies later.
Disclosures:Raygent owns SQNM,