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GenomeWeb Index Surges 39 Percent in 2017, Led by Exact Sciences, Foundation Medicine

NEW YORK (GenomeWeb) – After falling 3 percent in 2016 in what was a dismal year for biotechnology stocks, the GenomeWeb Index surged 39 percent in 2017, led by nearly three-fold gains in the stock prices of Exact Sciences and Foundation Medicine.

The Index, which tracks the stock performance of 26 companies in the molecular diagnostics and omics tools space, outperformed the Dow Jones Industrial Average, the Nasdaq, and the Nasdaq Biotechnology Index, which rose 25 percent, 28 percent, and 21 percent year over year, respectively.

Overall, the Index's performance was largely positive as 19 companies saw their shares rise in 2017, and only seven firms suffered year-over-year losses. Four of the gainers saw their stocks rise by triple-digit percentages.

The year's biggest gainer was Exact Sciences, whose stock skyrocketed 293 percent. The company started gaining big in 2016 with a 45 percent year-over-year increase in share price, after its colon cancer screening test Cologuard was included in updated guidelines from the US Preventive Services Task Force. A slew of private and public insurers then issued positive coverage decisions for Cologuard, including the US Centers for Medicare and Medicaid Services, the healthcare program of the US Department of Defense, and Humana.

This year, the company repeatedly reported revenues that tripled from one quarter to the next, thanks to rapidly increasing Cologuard sales. In February, the company said the test had been included in the Medicare Advantage Advance Notice and Draft Call letter for possible inclusion in the final Medicare Star Ratings. And Cowen and Company and Leerink both initiated coverage of the firm with Outperform ratings, citing the long-term financial opportunity presented by Cologuard.

Foundation Medicine followed close behind with a 285 percent increase in share price in 2017. Foundation's year was also marked by largely positive earnings news, and an upgrade from investment bank Janney to Neutral from Sell in March. The company also signed several collaboration deals with firms such as Bristol-Myers Squibb to use its tumor profiling assays in various clinical trials.

Importantly, Foundation announced late in the year that the US Food and Drug Administration had approved the firm's NGS-based genomic profiling test, FoundationOne CDx (F1CDx), and that the Centers for Medicare and Medicaid Services had concurrently issued a preliminary national coverage determination for the test and others like it. The decisions came after the FDA and CMS considered the test under the Parallel Review Program. F1CDx was the second IVD to be approved and covered as part of that program.

Myriad Genetics rounded out the top three with a 106 percent increase in share price in 2017.

It was a different story for NanoString Technologies in 2017. The company, which was one of 2016's biggest gainers with a 52 percent year-over-year increase in stock price, saw its fortunes reversed as its shares fell 67 percent this year.

After starting the year with news of an organizational reshuffle and a $100 million shelf registration, the firm's stock tanked when its third quarter revenues fell short of its previous guidance.

Cowen then downgraded NanoString to Market Perform. Analyst Doug Schenkel noted the company's "huge Q3 miss," adding that while meeting quarterly targets has been a problem for NanoString for many years, the bigger problem now is that "several things appear to be trending in the wrong direction. While our Q3 expectations were low, this was far worse than expected. We hate reactionary downgrades, but we have no choice when trends are deteriorating and a turnaround does not seem imminent."

Things further worsened for the company when its hotly anticipated companion diagnostic development deal with Merck was terminated in November. NanoString and Merck had joined up in 2015 to validate an 18-gene immune-related expression signature, which NanoString had come to call a Tumor Inflammation Signature or TIS. But by the end of October, an interim analysis had revealed that TIS was not required to select patients for Merck's cancer drug Keytruda, and the drugmaker ended the deal.

GenMark Diagnostics (down 66 percent) and Pacific Biosciences (down 31 percent) rounded out the bottom three for 2017.