Update -2 Aug. 1
Draft Guidance on LDTs Coming from FDA in 60 Days: Tests Must Be Validated
More regulation coming means greater development costs and potential time delays for clinical tests in development and currently marketed as LDTs . Presumably LDT tests will be allowed to remain on the market. Potential intermediate term impact on following companies but almost all of them have established clinical utility: EXAS, GHDX, NSTG, SQNM,VRML.
Update 7/30 Hologic (HOLX) Beats by $0.03 beats on revenues: stock up 3.2% AH to $26.80.
Update 7/29 Rally Is Cut Short By New Sanctions On Russian Industry-Sell-Off at 2:15 EDT
Consumer Confidence at 90.9 vs Forecasts 85.0-Before Market Opens
Diagnostics/Tools stocks trying to rally off recent bottom: Cepheid (CPHD $39.50), NanoString Technologies (NSTG $12.46), Quidel (QDEL $23.79), Pacific Biosciences (PACB $4.83), and Response Genetics (RGDX $0.78).
Luminex (LMNX) soars 8% on affirmed guidance and 2% revenue increase over 2013 and a 9% increase in system sales.GAAP income of 11 cents a share or $4.7M. Revenue forecast is $231M for 2014.
Qiagen (QGEN) guides in-line with H1 8% sales growth, $331M Revs in Q2. Announces $100M stock buyback.
Trinity (TRIB) reports a 22% increase in revenues to $26M and a 25% increase in operating profits.
Sequenom (SQNM) reports 62% revenue growth and $13.2M loss.
Other Movers : Cardiovascular Systems (CSII $28.27) up 5.88%,
AACC Rally May Be Tepid This Year-Choppy Market in Clinical Diagnostic Stocks
The AACC Meeting in Chicago this year is usually a time of strength for clinical diagnostic stocks. But after a four year bull market and some recent earnings disappointments the market is missing upside news. Position your portfolio toward a strong Q4 finish and raise cash this summer. Q3 revenues and earnings are seasonally weak. As always we recommend a portfolio of biotech stocks or an ETF/Fund if you are not following the companies. Here is an overview of our Dx and Tools Portfolio and be sure to look at May 22 historical prices and results after Q1 correction.
- Illumina (ILMN), the leader in genetic analysis products and Next Generation Sequencing (NGS) is one of our biggest winners up 49.7% YTD. The Company raised its guidance to $2.26 EPs and Revenue up 26% to $1.8B but the stock is getting expensive at 12X P/S and Price to Future Cash Flow of 88. Stock is near all time highs so this is a good candidate for a little profit taking.
- Abaxis (ABAX) shows a steady recovery since the 2013 earnings miss and showed revenues for fiscal Q1 of $47.5M up 10% per previous Q and EPS up 50%. Sales of both human and veterinary point-of-care products were up with consumable revenues up 18% to $26.9M. The stock is at a 2014 high of $47.45 and close to its all time high of $47.98
- Exact Sciences (EXAS) an emerging molecular diagnostic with expectations for approval of their non-invasive Cologuard DNA screening test for detection of pre-cancerous lesions. FDA approval is expected by October 1 with 2015 Revenue estimates in the $75M to $90M range for 2015 assuming CMS reimbursement by year end. The stock has been on our focus portfolio list since late 2010 at a price of $6. The stock is a LT hold or buy on weakness but will be choppy near term.
- Sequenom (SQNM) an emerging genomic and genetic analysis company with a focus in prenatal diseases and chromosomal abnormalities.A new prenatal LDT (Lab Developed Test) will be launched for trisomies next month. The stock is up 62% YTD. Revenues are forecasted to grow from $197M this year to $237 M in 2015.
- Hologic (HOLX) was added in April 2013 as a turnaround/restructuring play and is up 16% YTD.The Company focuses on “women’s health” but the diagnostic products address different vertical markets such as bone density, mammography, surgery and cervical cancer screening.Revenues are forecasted to be relatively flat at $2.B with a boost in earnings to $1.50 per share. This is a potential “Icahn Effect” stock with a P/S of only 2.8. Q2 Operating results will be reported on JY 30. Hologic (HOLX) is a strong hold.
- ThermoFisher (TMO) is a large cap core holding operating in all key segments of life science tools and diagnostics . Thermo recently bought Life Technologies a major player in genetic analysis that contributed to Q2 earnings of $1.72/share with revenues of $4.32M. Revenue forecast for the year are forecasted in the $16.9B range.We first recommended the stock on 7/25/12 at a price of price of $54 and it bottomed around $115 in May but is up with earnings last week.The PEG is on the high side at 2.65 but this is the best managed Company in the sector.
- Roche Holding (RHBBY $36.75) Swiss large cap diagnostic and therapeutic Company is a core holding.
- Alere (ALR), Cardiovascular Sciences (CSII), Qiagen (QGEN), Neogen (NEOG), Pacific Biosciences (PACB) and Trinity Biotech(TRIB) are all strong holds for the long term. Alere is at new highs and can be a takeover or restructuring target now that the CEO has resigned. TRIB and PACB are new picks.
- Losers YTD: Cepheid (CPHD), Genomic Health (GHDX), Nanostring (NSTG), Quidel (QDEL), Response Genetics (RGDX). All of these companies hit highs in Q1 then disappointed on financial performance so stay away for now or look for a trading opportunity. Quidel (QDEL) for example bounced off bottom of $20.
We will look for news and moves this week during the AACC and update this post. At this time we do not see any need to add positions but technicals and financial strength are evident in ABAX, HOLX, ILMN and TMO. Here is the July 3 performance summary since inception.