If you looks at the path Onco DX Breast took you can see this this downgrade is BS, probably meant to create a buying opportunity.
Piper Jaffray downgraded Genomic Health Inc. (NASDAQ: GHDX) from Overweight to Neutral with a price target of $32.00 (from $36.00) as they shift their focus to 2017.
Analyst William Quirk commented: "We are downgrading Genomic Health on a contrarian call as we look beyond the 2016 reacceleration to 2017 expectations. We believe revenue growth in 2017 will slow from 2016 as Prostate and OUS face tougher comps. Specifically, we believe private payer reimbursement will be limited as we remain cautious on the test's ability to predict disease recurrence. With NICE and German ODX Breast reimbursement also comping in 2017, we anticipate it will be incrementally challenging to drive accelerated growth above 2016 levels. Finally, the stock is up 43% since the recent bottom and is trading above the peer group (2.6x FY17E EV/rev vs. peers median of 1.7x) despite ~10.1% growth in 2017 (peer median is ~38% 2017 growth). Accordingly, we believe shares are fairly valued and are downgrading to a Neutral from Overweight. Our price target is now $32 (was $36) based on 2.5x FY17E EV/Rev (was 2.75x)."The firm cut FY 2016 EPS from $0.10 to $0.00 and FY 2017 EPS from $0.31 to $0.29.
For an analyst ratings summary and ratings history on Genomic Health Inc. click here. For more ratings news on Genomic Health Inc. click here.
Shares of Genomic Health Inc. closed at $31.66 yesterday.
Market getting wacked again today. Ray Dalio was on CNBC discussing how we are in a typical debt cycle. As I have mentioned before, GHDX makes sense in this environment since they are selling into over leveraged debt carrying developed markets with older populations. These governments are desperate to reign in health care spending costs. GHDX is offering tools to make these expenditures more efficiently and hopefully save money by avoiding expensive over treatment. While GHDX may take a hit in the short term as the overall markets decline, the low float will make it hard for big institutional buyers to establish positions without driving prices up. Therefore, there are huge risks trying to trade in and out of GHDX.
I tend to disagree. The uptrend at the end of December correlates almost to the day that GHDX was included into the IBB. There has been a pronounced increase in volume ever since.
That said liquid biopsy is in the news and is garnering appreciable excitement. Witness the Grail news yesterday. GHDX is not looking for the proteins that are markers of an existing cancer as Grail claims to be. Rather it appears that GHDX is going to provide a genomic profile to identify potential susceptibility to cancer and also (probably more importantly) provide a pathway as to which treatment pathway is likely to be most effective.
I believe this is GHDX's strong suit. They are focused on providing actionable data.
2016 could well be a challenging year do to macro conditions. However, as I've indicated before. companies that result in health care cost savings (by aiding in selection of the best treatment options) are likely to be in a sweet spot.
My guess is their progress with the liquid biopsy test is the main reason stock went from $20 to $35 in little over a month. This could be a game changer. It looks like ILMN is behind GHDX, there are a few very small companies like BIOC that are already selling their tests, but I'm not aware of any large players who will get to market sooner than Genomic, are you?
Given the positive liquid biopsy news, it looks like the market is using the overall weakness in biotech this morning to try to shake out some weak hands in GHDX. Probably better not to watch day to day action too closely.
While GHDX saw a nice runup a couple weeks ago when they were added to the IBB, I think we saw the opposite effect yesterday. The late day sell-off on high volume had all the earmarks of being associated with ETF's selling off tom meet redemption requests.
Either way it looks like GHDX is moving into a new growth phase just when the wheels look to be coming off the market as a whole. I thought of selling some of my position a couple days ago since I thought the downdraft could spread to GHDX. I decided against this for the following reason. The news flow is likely to start improving appreciably this quarter. With the limited float re-entry into GHDX at a later date could be expensive. We are seeing upgrades with higher target prices. The guidance that they will more than triple revenue in the next four years suggests growth in the 20%+ range. I believe we are headed into a time when growth will be hard to come by. Finally, governments across the world are in serious debt and many are facing a rapidly aging demographic population with maladies such as cancer taking a bigger bite out of their health care appropriations. How will these governments manage to both take care of their aging populations and control their budgets? By spending much more efficiently. This means limiting over spending. GHDX is ideally situated at this crossroads.
For these reasons, I've decided to hold despite the impending market turmoil.
$44 target! More interesting is that they performed a survey of urologists that indicates the Onco DX prostate test has better visibility than the MYGN Prolaris test.
I had thought of reducing my position at the end of 2015 in anticipation of overall market downdraft (nothing specific to GHDX). However, I decided that the growth over the next 4 or 5 years would make such a move too risky. The float is simply too low to risk jumping in and out.
Not that I believe much in technical analysis, however, there are others out there that do. GHDX's 50 dma just crossed the 200 dma in a bullish manner. As much as anything I think this is a function of being added to the IBB and also the expectation that the prostate test ramp will lead to profitability and growth.
We will have to wait a couple months to see how sales traction is progressing.
They have the sales force now through their last acquisition to ramp up testing on a much bigger scale. Adds to their existing lines and brings revenue. GHDX worth over $2bl so it won't come cheap but the long term trend towards genetic testing is the future of medical diagnosis, treatment and cost containment as well as achieving higher outcomes through Meaningful Use.
Today was option expiration. Hence the huge closing volume. That said it was strong all day. As I am very long I am very happy! And bakers last buy was in mid 30's if I recall. Think ghdx is now a nice takeout candidate for bigger pharma co.
It's the highest volume day in two years so it definitely looks to me like the GHDX's inclusion in the IBB is the reason. Obviously, it appears that many of the existing shareholders held firm and did not sell to grab a couple percent gain. This helped drive up the price. Since the Baker Bros hold close to 50% and have a cost basis in the neighborhood of 35, it is doubtful that it will get appreciable easier to buy shares when good news comes in.
The companies guidance is for a return to profitability during the 4th Qtr 2015) and mid 20% revenue growth for the next several years. It is possible that someone wants to buy in before earnings announcements but they would have more than 6 weeks to leg into a position, so I think this is unlikely. Because GHDX sells diagnostic tests and not drugs, it is unlikely that any news can move the stock they way it did.
Especially on an overall down day. This underscores a point I've made on numerous occasions. The share float of GHDX is simply to small to support any buy side volume without significantly moving the share price.
Back in 2013 it was estimated that Onco DX Prostate test was estimated to be priced similar to the Breast test (i.e., about $3800). Does anyone have any information on what CMS is reimbursing the prostate test at? I assume we will find out in February when 4th qtr earnings are announced.
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I don't see this as pump and dump. Look at the institutional and insider holdings. More than 90% of the shares are tied up in just a few hands. Baker Bros have an Ave pps that is probably close to $35 and this is currently a long term holding for them. The float is very constrained. Another good earnings report demonstrating traction in Europe and in the sales and reimbursements of the Prostate test will be a major catalyst. A positive update on the liquid assay could be another catalyst. Any clamoring for shares will result in significant price appreciation.
The biggest ? in my mind is what price is the prostate cancer test being reimbursed at? Has anyone seen this published anywhere?