SAN FRANCISCO – The second day of the 42nd annual JP Morgan Healthcare Conference was marked by more business updates from genomics and molecular diagnostics companies.
Below are short summaries of presentations from select companies on Tuesday. A recap of news from the first day is available here.
Thermo Fisher Scientific
Thermo Fisher President and CEO Marc Casper discussed the company's pending $3.1 billion acquisition of affinity proteomics firm Olink, noting that it had taken advantage of declining stock prices to add what he said was a "phenomenal complementary fit to our mass spectrometry and life science solutions."
Casper said Thermo Fisher had been following Olink "for a while" but that for much of that time its valuation made it unaffordable as an acquisition target.
Casper also provided a look ahead at 2024, projecting growth of around 1 percent and noting that the company expects the upcoming year to be a "mirror image" of 2023, with a challenging first half to be followed by stronger growth in the second half.
He expressed optimism regarding Thermo Fisher's higher-end offerings, highlighting in particular its Orbitrap Astral mass spectrometer, which the company launched at the American Society for Mass Spectrometry annual meeting in June. The firm this week announced a deal with liquid chromatography firm Evosep to comarket Evosep's sample separation products with Thermo Fisher's mass spec systems, including an end-to-end sample prep workflow for use with the Orbitrap Astral.
Customer adoption of the Orbitrap Astral "has been incredibly significant," he said, adding that "even in a more constrained environment" the company has seen strong demand for the system.
"My experience from 25-plus years in the industry is that customers will find money for the high end no matter what the environment is," Casper said. "More routine instruments is where you feel the pressure when the environment is challenged."
Illumina CEO Jacob Thaysen reiterated the company's goal of resolving Grail's status by the end of Q2 2024, citing this as one of the firm's key strategic priorities for the year.
He said it remains to be seen whether Grail will be sold or spun off but noted that if financing from Illumina is necessary to facilitate a spinoff, the company would likely issue debt to complete the deal.
Thaysen also noted continued adoption of Illumina's NovaSeq X system, stating that the company expects most NovaSeq 6000 customers to transition to the new platform over time. In preliminary results released this week, the company said it shipped 79 NovaSeq X instruments in Q4 2023, well above analyst expectations. It shipped 352 NovaSeq X instruments in all of 2023, beating its original projection of 330 to 340 placements. The company also has a backlog of 38 instruments going into 2024.
Thaysen noted that the company saw an uptick in activity among customers running large-scale studies, particularly following the release of its 25B flow cell.
Despite this momentum, Thaysen said the company expects it will place fewer NovaSeq X instruments in 2024 than it did in 2023, primarily due to the large backlog with which it entered 2023. CFO and Chief Strategy and Corporate Development Officer Joydeep Goswami added that challenging macroeconomic conditions will likely "temper the speed" with which customers will take up the new instrument.
Thaysen addressed the competitive landscape in the sequencing business, noting that for the last decade or more, driving down sequencing costs was "the absolutely number one" concern of sequencing firms and their customers. More recently, the focus has shifted to the costs and ease of use of a full end-to-end workflow.
He suggested that this shift would benefit Illumina, given its investments in these areas.
Thaysen also discussed how Illumina is positioned versus its competitors who are focused on long-read sequencing. He said that while he believes long-read sequencing has its place in the market, many of the highest-growth areas within sequencing — such as analysis of formalin-fixed paraffin-embedded tumor tissue and liquid biopsies — involve sequencing fragmented DNA, making it "more aligned with short-read technologies."
Goswami also noted that short-read technologies continue to dominate large-scale population studies, with long-read sequencing typically used in these studies to analyze smaller subsets of samples.
Oxford Nanopore Technologies
Oxford Nanopore CEO Gordon Sanghera said that while clinical products remain perhaps three years out, the company is pursuing this goal in earnest.
"We are going to really drive that," he said. "Because there are so many interesting potential things that our customers want to do in the clinical space."
"We want to be ready to catch those [clinical] opportunities and really slingshot them into [becoming] revenue-generating" around 2026 and beyond, he said.
Sanghera noted that the improved accuracy enabled by Oxford Nanopore's Q20+ sequencing chemistry has been key to paving the way for clinical applications of its sequencers and to ensuring that researchers and customers in this space are comfortable with its technology.
"I didn't really fully appreciate that in order to win the confidence of existing hardcore Illumina customers, you have to give them what they already have," he said. "And in achieving that, that really is changing people's perception of what they can now do with nanopore."
The company's emphasis on clinical applications was also reflected in a new agreement it reported this week with G42 Laboratories, which supports the Emirati Genome Program, a large population genomics project sponsored by the United Arab Emirates in which Oxford Nanopore has participated. According to Oxford Nanopore, the new agreement, which replaces and lowers the total value of the company's existing multiyear contract with G42, calls for the partners to use nanopore technology "in areas of unmet clinical need such as developmental disorders, rare human genetic disease, and neonatal intensive care" and "reflects the parties' desire to refocus on clinical uses of the platform."
This week, Oxford Nanopore also reported preliminary full-year 2023 life science research tools revenues of roughly £169 million ($215 million). This was up 15 percent on a reported and constant currency basis from £146.8 million in 2022 but missed analysts' consensus estimate of £177.4 million, resulting in a steep decline of the company's stock on Tuesday.
Looking longer term, Sanghera said Oxford Nanopore envisions its technology as enabling multiomic analyses, measuring analytes including DNA, RNA, and proteins on a single platform. Regarding the company's work on nanopore-based protein analysis, he said it has demonstrated the ability to unfold proteins and translocate them through nanopores but has not yet managed detection of individual amino acids as they pass through the nanopore.
Oxford Nanopore believes it will ultimately be successful in providing a platform that can fully sequence individual protein molecules, he said. "That is the ultimate vision."
CEO Steve Chapman expanded on Natera's preliminary Q4 and FY 2023 financial results, released Tuesday, noting that revenue growth was driven largely by the Signatera minimal residual disease test, which has reached "near-peak levels" of growth, as well as significant momentum in the average selling price (ASP) of its tests.
The firm is also on track to hit cash flow breakeven in 2024, he noted, and it reduced its annual cash burn by about $200 million in 2023.
Improving reimbursement has been a key focus for Natera, and the company has taken strides to boost test payments. It has improved its billing operations to further raise its ASP, Chapman said. "Just in the core business, without new guidelines coming in, without new Medicare coverage, without going and getting new commercial coverage, we're getting paid a higher percent of the time because we're operating better."
The firm has also made multiple submissions to Medicare's MolDx program to expand Signatera into further cancer indications that will hopefully boost reimbursement, said Solomon Moshkevich, the firm's president of clinical diagnostics. "These are areas where we're already doing a decent amount of testing commercially and just not collecting as much as we will after getting the approval," he said.
Chapman also discussed upcoming clinical trial results in 2024, noting that its randomized trial ALTAIR — the circulating tumor DNA-guided treatment escalation arm of the CIRCULATE-Japan trial evaluating Signatera's utility in colorectal cancer patients — is expected to read out in the first half of the year and will potentially be a catalyst for growth. If the readout is positive, it may also positively impact reimbursement, Moshkevich added.
State biomarker laws will also likely have an effect on payments and reimbursement. Multiple states have enacted mandates for commercial payors to cover biomarker testing if it is covered by Medicare. About 60 percent of Signatera's volume is provided to beneficiaries covered by commercial payors but much of that testing is not getting reimbursed, which would change under the biomarker laws. Those changes could lead to Signatera's ASP doubling, although Natera's model is conservative because "we haven't seen this play out before," Chapman said.
Other potential catalysts include commercial payor coverage for the Prospera test for kidney transplant assessment; guideline inclusion of the firm’s women's health tests, possibly for 22q11.2 deletion testing or carrier screening; and product launches across its core business and new areas.
Chapman emphasized the innovation of its noninvasive prenatal test (NIPT) Panorama to screen for 22q11.2 deletion syndrome, which is an area of focus for the company. Panorama uses SNP-based technology to target a very small region of the genome in cell-free DNA, which Chapman said makes it able to get more than 25 times the read count at the particular region of interest than tests that use massively parallel sequencing.
In the firm's Microdeletion and Aneuploidy Registry (SMART) trial, Panorama was performed on more than 20,000 patients, 12 of whom had a fetus with confirmed 22q11.2 deletion syndrome, and Panorama detected 10 of these cases (83.3 percent sensitivity) with a positive predictive value of nearly 53 percent. Results were published in the American Journal of Obstetrics and Gynecology in 2022, and at the end of 2022, the American College of Medical Genetics and Genomics conditionally recommended that noninvasive prenatal screening for 22q11.2 deletions be offered to all patients.
The company is also expecting the initial readout of performance data for its early cancer detection test in 2024. Depending on the results, it will consider starting a clinical trial in 2025 or 2026 to support a US Food and Drug Administration submission, Chapman said.
Chapman also briefly addressed Natera's patent infringement victories in 2023, including a permanent injunction against Invitae and ArcherDx and a preliminary injunction against NeoGenomics. Chapman said that it is challenging to get injunctions and that they speak to the strength of Natera's intellectual property.
Agilent CEO Mike McMullen said in his presentation that the company expects 2024 will be a "transitory" year of recovery with lower growth in 2024 than the company's predicted long-term average growth of 5 percent to 7 percent. He also said the firm sees signs of stabilization in demand for instruments and in revenues from China despite volatility in previous years.
Agilent CFO Robert McMahon said during the presentation that the firm expects to see a trough in revenues during Q1 followed by rising revenues to end the year with growth. The firm expects modest growth in pharma revenues, which is the firm's largest market, characterized by slow recovery throughout the year.
In diagnostics, McMullen said the firm is focusing its investments on cancer testing and therapy development. Rising use of personalized therapies is driving demand for companion diagnostics with applications in pathology.
"As we all know, unfortunately, the number of cancer cases continues to go up globally, which drives the need for additional testing," he said.
Agilent also plans to increase its investment into its Cell Analysis Division, which has been growing about 10 percent on average during the past four years to become an approximately $400 million business. The firm recently moved that business into its Diagnostics and Genomics Group as part of a reorganization intended to accelerate growth.
McMullen said the Cell Analysis Division and the Diagnostics and Genomics Group share many of the same customers, and the move aligns the company's teams serving those customers and provides opportunities to connect workflows across products.
McMahon added that the company expects a slightly lower growth rate for the Diagnostics and Genomics Group with the realignment, from low- to mid-single-digit revenue growth to low-single-digit growth for the fiscal year and a mid- to high-single-digit decline in Q1.
McMullen said Agilent's revenues from pharma customers were down overall in 2023, but the industry has been a source of growth in prior years and remains the company's highest priority for investment. He also noted that the firm's pharma industry revenue grew from $1.6 billion in fiscal year 2019 to $2.4 billion in fiscal year 2023, with most of that increase coming from growth in biopharma revenues.
Meanwhile, revenues from China are expected to be down by mid-single digits in fiscal year 2024 while other markets, including the Americas, are expected to recover and grow, McMahon said. But McMullen said Agilent has seen early signs of stabilization of its revenues from China, and he predicted those revenues will return to growth, likely in 2025.
McMullen confirmed Agilent's previous guidance that it expects revenues of $1.56 billion to $1.61 billion in the first quarter of fiscal year 2024 and non-GAAP EPS in the range of $1.20 to $1.23. For full-year fiscal 2024, Agilent continues to anticipate revenues between $6.71 billion and $6.81 billion, with EPS in the range of $5.44 to $5.55.
Abbott CEO Robert Ford noted in his presentation that the firm's core base business is "once again the driving force" of its success after COVID-19 testing demand significantly declined. 2023 was a "pivotal year" for Abbott, as it "successfully transitioned back from the impacts of the pandemic, which temporarily distorted our performance for a few years," he said. Ford added that in 2024, Abbott expects the momentum from the first nine months of 2023 to continue.
Abbott will definitely be "growing faster than where we were prior to the pandemic," he said, citing the firm's global presence as an important component for the business. He noted that more than half of its revenue comes from markets outside of the US and more than one-third comes from emerging markets.
Ford also discussed the company's M&A strategy, saying that it is always looking for opportunities for capital allocation. Abbott can sustain its organic growth rate in the high-single digits with its existing portfolio and pipeline, so the company doesn't feel the "need to do M&A to be able to sustain our growth model" and is "in a position to be a little more selective, a little bit more strategic," he said. Abbott is primarily focused on diagnostics and medical devices as areas for M&A, although Ford said that if the opportunity makes sense in another segment of the business, Abbott is open to it.
"We're going to make deals that make sense strategically and financially," he said.
Revvity CEO Prahlad Singh discussed the impact of the market downturn in China, which plagued many diagnostics and life sciences companies in 2023. Although 17 percent of Revvity's revenue comes from China, the firm's revenues there grew in the mid-single digits during 2023, Singh said. This was in part due to its differentiated portfolio, he noted, as 10 percent of revenues come from the firm's diagnostics segment and 7 percent from life sciences. On the diagnostics side, the firm continued to see growth in autoimmune diseases and allergy, Singh said. For life sciences, its instrumentation business saw pressure, and more than 50 percent of its revenues came from reagents.
While the company has seen mid-single-digit price declines in China year over year, the firm's focus is on bringing "the differentiated tests into that market where we don't have that much competition and there is a necessity to have that product in the marketplace," Singh said.
The number one growth driver for Revvity in 2024 will be cross-company innovation, as the firm draws on the more than a dozen acquisitions it has made during the past two years. There is still "a lot to be done" on the integration of its acquisitions, he noted. The firm is also focused on organic and inorganic investments and deploying capital and will "continue to be diligent on acquisition opportunities and look for technologies or product portfolios that will either enhance our current offering or help fill any potential gaps," Singh said.
"We are still just plucking on early fruits as we bring these acquisitions together," he said.
Singh noted that 2023 was an outlier year but added that he is "very confident that the market is going to turn around and get back to what is a more normal phase of growth."
In light of the firm’s preliminary revenues, announced on Tuesday, Singh said that all end markets performed slightly better than expected. The firm anticipates Q4 2023 revenues of at least $690 million, above analysts' consensus estimate of $669.5 million but also an 8 percent decline in organic revenues from continuing operations. Excluding the effects of COVID-19-related business, organic revenues were down 4 percent year over year.
A downturn in the applied genomics segment was due to the reduction in spending at many clinical laboratories as well as the same budget crunch in the pharmaceutical sector as seen in the life sciences segment, Singh said.
A swing factor for the company in 2024 is spending in the pharmaceutical and biotechnology markets, which has been a headwind for multiple companies operating in the life sciences space over the past year. The immunodiagnostics business is also tentatively expected to grow in the double-digit-percent range, according to Singh.
Adaptive Biotechnologies CEO Chad Robins said the company plans to reach a decision regarding the reorganization of its minimal residual disease (MRD) and immune medicine businesses by the end of Q1 2024.
The company announced in November that it had hired Goldman Sachs to review "strategic alternatives" for the two businesses, which Robins noted are at different stages of maturity and have different natural investor bases.
A variety of options are on the table, he said, including operating the two businesses independently. He indicated, however, that the company will almost certainly not maintain the status quo.
Meanwhile, Robins pointed to a number of priorities for 2024 and beyond as it aims to grow both businesses. Regarding the company's MRD business, he said Adaptive aims to increase the percentage of heme MRD testing done in blood from 39 percent to 50 percent; to expand into new indications, particularly in non-Hodgkin lymphoma; to expand patient use cases, both currently marketed indications and upcoming ones; and to continue to integrate its tests into clinical workflows. With regard to the last priority, Robins said the company is in the middle of an electronic medical record integration with Epic, with five installations completed and another 15 to 20 scheduled for 2024.
Robins said the company believes that between its efforts to increase MRD test volume and average selling price, while reducing costs, the business will become profitable by the second half of 2025.
On the immune medicine side, Robins said Adaptive and its collaborator, Roche's Genentech, plan this year to enter the clinic with their T-cell receptor (TCR)-based T-cell therapy. He also highlighted the company's work in the autoimmune space, noting that it has identified an antigenic target in multiple sclerosis that it believes could be an effective drug target for multiple sclerosis as well as other autoimmune disorders, including type 1 diabetes, rheumatoid arthritis, and inflammatory bowel disease.
"We are doing in vitro and in vivo models to essentially further validate the target," he said.
Danaher CEO Rainer Blair said that the firm had a better-than-anticipated Q4 2023. The firm's base business core revenues declined in the mid-single digits, but all segments were modestly above expectations, he said, adding that its Cepheid subsidiary brought in more than $600 million in respiratory testing revenue, which was also above expectations.
Blair emphasized the change in the respiratory testing market since the COVID-19 pandemic, as Cepheid went from about $250 million in annual respiratory testing revenue pre-pandemic to more than $1 billion in incremental annual respiratory revenue. Cepheid has more than doubled the installed base of its molecular GeneXpert instrument since the start of the pandemic, and the firm's four-in-one respiratory virus test for influenza A/B, respiratory syncytial virus, and COVID-19 has been "very, very sticky, highly competitive, and, we believe, sustained for the long term," Blair said. He estimated that 70 percent of respiratory testing revenues came from the four-in-one test and 30 percent from the COVID-19-only test.
Blair added that he expects Cepheid to continue to take market share and that customers continue to consolidate testing platforms at the point of care. "The pandemic was quite an infomercial for Cepheid," he said. Customers have adopted other assays beyond COVID-19 on the GeneXpert platform, and Cepheid has released new assays that are seeing success, as well, which both serve as "growth levers" for Cepheid, Blair said.
The COVID-19 pandemic also provided a "cash windfall" for Danaher to conduct deals, which Blair credited for its $5.7 billion acquisition of Abcam last year and the 2021 $9.6 billion purchase of Aldevron. The firm is "well poised … to further deploy capital looking forward" and has a robust and active deal pipeline, he added.
2024 will be a transition year, particularly in the bioprocessing business that has seen headwinds due to the larger downturn in the biopharmaceutical funding environment, Blair noted. Danaher expects to see improvements in bioprocessing in the second half of 2024. Bioprocessing customers are back to more regular ordering patterns, and the company saw sequential improvement from Q3 to Q4 2023, he added.
Danaher also expects the life sciences instrumentation market to normalize eventually in 2024 although Blair noted that the market makes up less than 10 percent of sales in the company's portfolio. Some of the softness in the firm's life sciences instrumentation business was the result of a loan subsidy program in China that pulled acquisitions of many life science research tools forward to the first half of the year, resulting in orders being down in the mid-teens in Q4 2023. "We still have some time to work our way through the various dynamics affecting China, in particular in life sciences," he said.
In addition, large pharmaceutical customers have been more careful with capital expenditures, but Blair said that the issue will moderate over time as R&D budgets grow. As venture capital funding in the biotechnology market dried up, the acquisition of life science tools was impacted, but as funding improves, the market will normalize, he said. Some higher-end instruments were not as impacted in Q4, but those instruments are also "associated with longer delivery times" and thus aren't "reflective of the capital expenditure mood of the industry," Blair said.
"We believe that it will take some time for us to see a bit of a downward slope there for the larger capital expenditures, but in the meantime, we would expect the shorter-cycle life science instrumentation to pick up again," he said.
Hologic CEO Stephen MacMillan emphasized the benefits of the COVID-19 pandemic for the company’s business, as it increased Panther instrument placements across the world.
Those placements drove growth beyond COVID-19 testing. The firm’s installed base has almost doubled since 2019 to about 3,260 instruments, and it has put Hologic on the map in many countries where it was a small player, MacMillan said.
"The years ahead are all about getting more assays put onto this installed base,” he said, adding that the firm has seen growth of about 80 percent in molecular diagnostics revenues from 2019 to 2023, excluding COVID-19, and overall diagnostics revenue growth of more than 40 percent excluding COVID-19.
Hologic CFO Karleen Oberton said the new Panther placements since the pandemic have been very sticky, with more than 90 percent of placements since April 2020 running at least one other assay besides COVID-19 and more than 55 percent running at least two other assays. During the pandemic, the Panther instruments were not contracted because the firm couldn't meet everyone's demand, but as new assays have been added, contracts have been inked for at least five years, she said.
Additional assays across the menu have been taken up by customers, led by the company's bacterial vaginosis and candida vaginitis assay, she noted. In the firm's fiscal Q1 2024, Hologic saw strong performance from the BV/CV assay and its respiratory testing menu, with an uptick in respiratory testing toward the end of the quarter, correlated with the increase in respiratory illnesses in the US.
MacMillan also touted the upcoming US launch of the artificial intelligence-based Genius Digital Diagnostics system for cytology, which is expected to receive approval from the US Food and Drug Administration in early 2024. The system is already available in Europe and received CE marking in 2020.
He also touched on the firm's M&A outlook for 2024 and 2025, noting that there "will still be a lot of good stuff," including parts of bigger corporations getting spun off, as well as whole companies, private and publicly traded, that may be put on the market. MacMillan noted that he's "not sure private company resets on valuations have yet matched the public markets." He added that he thinks there will be a lot of other opportunities and that Hologic has "the luxury of being disciplined and patient" when it comes to deals.
Greg Cima contributed reporting from the Agilent Technologies webcast presentation.