J.P.Morgan Conference #2: Red Screen Distracts Biotech Investors…Update

Green Screen Alert

Market UpdateIBB up 4% today erasing most of Wednesday’s Losses but we are still down 13.86% for the five day period. Nasdaq rallied 1.97%.

Rayno Biopharma top winners: ABBV up 6.56%, ALXN up 5.93%, AMGN up 5.29%,BIIB up 4.98%, REGN up 4.25%,RXDX up 8.96%, SGEN up 2.26% and VRTX up 5.75%.

Most of our small caps had big moves as well.

Rayno Dx and Tools Movers: FMI up 7.3%,ILMN up 6.46%, NSTG up 6.46%.

(uh oh they are pumping biotech bottom to buy on CNBC)

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Biotech Shares Crushed Again With NASDAQ-Flight to Cash

IBB Down 5.42% at 52 Week Low-Red Screen in All Sectors

Another nasty day in the market brought biotech shares to 52 week lows with the IBB at 280 level. The brief rally from yesterday tried to follow-through at the opening but it took less than 30 minutes before healthcare stocks joined the FANG (Facebook,Amazon,Netflix and Google) sell-off along with energy and consumer stocks. Amazon (AMZN) was up over 100% in 2015 but down 8% over past five days. Crude is currently at 12 year lows and the energy sector was down another 2.4% .The energy sector SPDR ETF (XLE) at $53 is now down 27% 12 month to date. It is pointless to review news and trends in the healthcare sector with the general rout in the market. Investors are raising cash to play another day because global concerns are mounting.

Nonetheless we will continue coverage of selected life science companies that presented over the past three days hopefully taking a step back next week to look for bargains. The mood of the market is quite grim hit by negative blather from politicians, a strong dollar and its impact on earnings, flat wages, global terrorism threats, big concerns about global growth and falling oil prices; all despite upbeat economic forecasts for the U.S.

Here are four life science molecular companies among our focus stocks. Only two stocks in our Dx/Tools universe were green today GenMark (GNMK) and Pacific Biosciences (PACB).

Cepheid (CPHD) $32.70

Cepheid pre-announced Q4 Revenues of $147M in line with estimates but not including India results. Results were slightly impaired by the late start in the flu season.The Company has placed 9279 GeneExperts Systems since launch and consumables from these systems is a major growth driver along with an expanded menu of 23 tests. The Company has  an 8% market share in molecular diagnostics with an 18% growth rate and is #1 in many tests: MRSA, C.difficile, TB and Flu. A major TB testing collaboration was announced  with USAID to combat multi-drug resistant (MDR) tuberculosis. Many new tests will be launched in 2016: HIV viral load, Group-A Strep, HCV, BCR-ABL and a new Point of Care portable platform called OMNI. withe the current GeneXpert and OMNI testing platforms the Company sees a broader market potential of 100,000 CLIA waived labs, and 10,000 in moderately complex labs and 5400 in the hospital market. Growth expectations for 2016 are in the 15-18% range. The stock is volatile but was strong over the past 30 days until the recent market downdraft.

Pacific Biosciences (PACB)… One of a few green stocks today…$12.65

Pacific Biosciences introduced there new compact, cost effective, high throughput sequencer called SEQUEL using Single Molecule Real-Time (SMRT)Tecnology with placement 49 units in 2015. A “controlled” launch is planned for 2016 got a broad market of academic, pharmaceutical and government institutions. The SMRT provides full transcript analysis with long read frames of DNA which are important in epigenetic analysis, agricultural, microbiology/infectious diseases and cancer research and better differentiates its products from Illumina (ILMN). The stock has more the doubled since September.

Qiagen (QGEN) $22.51

Qiagen (QGEN) shares dropped after preliminary results for 2015 were disappointing. The shortfall was the result of lower revenues from companion diagnostic partnerships and a sales shortfall. Q4 Revenues were $348M and also affected by currency adjustments;EPS is in the (1.16 CER) range.  For 2016 the revenue growth is expected in the 6% range spurred by the bioinformatic franchises where the Company is a leader with 120,000 customers, QuantiFeron-TB platform sales as well as the launch of the GeneReader NGS System launched in late 2015. Qiagen is an innovator in sample preparation technology and workflow systems with several growth drivers:QIA Symphony with 1500 placements, “Liquid biopsy”-the ability to detect circulating DNA in the blood, bioinformatics and molecular diagnostics for women’s healthcare  with assays for STDs and HPV. Analysts’ revenue estimates for 2016 are in the $1.36B range a growth rate of 5.8%.

GenMark Diagnostics (GNMK) …$6.89 …soared 9.54%

GenMark Diagnostics announced Q4 results that were up 35% over prior year to $13.2M.The XT-8 installed base grew by 17 units to 633. The Company is also preparing for the launch of its ePlex “sample to answer” molecular diagnostics system that will have a larger market potential due to an expanded menu, multiplexed workflow with speed of 120 sample per batch and sensitivity/ specificity comparable to “gold standard” systems. GenMark’s eSensor technology utilizes proprietary electronic detection with gold electrodes that is less prone to sample contamination and simplifies workflow by eliminating sample preparation steps involved with optical detection systems. The ePlex system will be launched in Q1 2016 for Europe and an FDA submission will be made in Q2 2016. Revenue estimates for 2016 are in the $50M range with 27% sales growth YoY.

We wrote a post on Genmark (GNMK) last year at JPM along with Accelerate Diagnostics (AXDX) both emerging companies with potential for new product drivers.

We will update our Diagnostics and Tools Portfolio after 2015 financial reporting by mid-February.

More from our J.P.Morgan coverage later this week including our review of large cap pharmaceuticals.

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