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Mixed Results for Omics, MDx Stocks in August Amid Rebound from Cool July

NEW YORK (GenomeWeb) – Stocks in the omics research tools and molecular diagnostics space were mixed in August as the GenomeWeb Daily News Index moved up almost 3 percent from July, but nearly half of the firms in the index suffered a loss in share price month over month.

The index rebounded from a tepid July, which saw a 5 percent drop month over month as 25 of the 29 companies in the GWDN Index fell from June. But the recovery in August was uneven as some companies saw sharp increases, while others experienced precipitous declines. In total, 14 companies in the index saw their stock prices narrow during the month, with Nanosphere's shares shedding almost 45 percent of their value and CombiMatrix's stock taking a 15 percent hit, while Veracyte's stock saw a 12 percent loss.

The gainers were paced by Exact Sciences (+34 percent) and Pacific Biosciences (+28 percent), while Genomic Health's shares rose 17 percent month over month.

Nanosphere's drop was precipitated by an announcement at the start of the month that it was lowering its full-year 2014 revenue guidance, as well as its guidance for instrument placements for the year, leading to a selling surge by investors. The day after the guidance was revised, the company's shares took a 32 percent hit.

The new guidance came as the firm announced a 42 percent increase in its second quarter revenues year over year. At the same time, though, Nanosphere CEO Michael McGarrity said that instrument sales fell "well short of expectations due to timing of hospital capital budgets and a continued lengthy customer implementation process."

In August, CombiMatrix also reported a notable increase in its second quarter revenues, but the news was tempered by remarks from CFO Scott Burrell that the start of a lawsuit in June will "dramatically" increase its legal expenses in 2014 compared to prior periods. The lawsuit was brought by a former CombiMatrix employee who alleged the firm submitted false and fraudulent insurance claims that led to a $25 million settlement to CombiMatrix in 2010.

Meanwhile, Veracyte's decline followed a 16 percent drop in July. Last month, the company said that its second quarter revenues improved 71 percent month over month, but it missed the consensus analysts' estimate. It also announced that it and Genzyme amended a co-promotion deal covering Veracyte's Afirma Gene Expression Classifier test in order to provide Veracyte greater financial flexibility. Veracyte will pay lower fees to Genzyme while taking on greater responsibility for new-account sales conversion. Additionally, the companies agreed to amend their deal "to optimize their joint presence internationally with a country-by-country decision to co-promote or to revert exclusivity back to Veracyte."

Veracyte also lowered its fine needle aspirate volume guidance for full-year 2014 to a new range of 66,000 to 73,000 from a prior range of 76,000 to 83,000, which could partially explain the 8 percent drop in its stock the day after its second quarter financial results were announced. In a research note, though, Cowen & Co. analyst Doug Schenkel said that the guidance reduction is the result of a change in customer mix between academic and institutional clients and doctors' offices, rather than underlying market weakness or competition.

Among the gainers, Exact Sciences' shares were lifted by the US Food and Drug Administration's approval of the company's Cologuard colorectal cancer screening test. At the same time, the Centers for Medicare and Medicaid Services issued a proposed national coverage determination for the test.

Following FDA and CMS's decisions, the Mayo Clinic became the first health system to offer the test.

PacBio, meanwhile, reversed a 26 percent drop in its share price in July. It started August by disclosing in its Form 10-Q a $20.6 million financing through the sale of its common stock, and last week the company said that it received a $10 million payment from Roche after achieving a milestone that is part of a 2013 agreement between the companies.

Lastly, Genomic Health said in August that its revenues for the second quarter were up 11 percent year over year and beat the average analyst estimate on the top and bottom lines.

Overall, the GWDN Index kept pace with the Dow Jones Industrial Average, which was up 3 percent compared to July. The index trailed the Nasdaq, which rose 5 percent, and the Nasdaq Biotech Index, which improved 10 percent month over month in August.