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Financial Metrics Of Life Science Tools And Diagnostics: Big Winners ALR ILMN QDEL TMO

|Includes:Alere Inc. (ALR), ILMN, QDEL, TMO

Diagnostics Company Stocks Are Off Their 2013 Highs

Life science tools and diagnostics stocks are near all time highs despite stretched valuations because of a strong secular biotech bull market and perceived synergy with biopharmaceuticals. Key themes are point of care testing, companion diagnostics and molecular diagnostics. Here is a rundown of the top 5 winners and losers. Note the only real loser in the DX portfolio was Sequenom (NASDAQ:SQNM) . All other stocks could have been sold much higher near their July tops. Weaker than expected earnings have caused some stocks in the Portfolio to weaken. See our DX and Tools Portfolio picks and stock history in our July 1 posting.

Winners

Alere (ALR $31.40) up 69.73% 2013 High $35.38

ThermoFisher (TMO $90.42) up 41.77% 2013 High $91.72

Quidel (QDEL $25.52) up 36.7% 2013 High $29.75

Response Genetics (RGDX $1.88) up 35.25% 2013 High $2.30

Neogen (NEOG $54.25) up 19.7% YTD 2013 High $60.98

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Illumina (ILMN $77.69) is not included but it is a top pick and up 40% YTD.

Vermillion (VRML $2.21) a speculative pick is up 67% YTD and hit a high of $4.07.

We are still reviewing notes from the AACC Meeting including three companies: Nanosphere. Nanostring and Meridian.

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Losers (Relative)

Sequenom (SQNM $2.91) down 38% 2013 High $5.36

Cepheid (CPHD $35.02) up 3.42% 2013 High $40.72

Abaxis (ABAX $40.24) up 8.46% 2013 High $51.84

Hologic (HOLX $22.62) up 13% 2013 High $23.96

Qiagen (QGEN $21) up 15.76% 2013 High $22.20

The overall portfolio stock selection has been made on the basis of strategic positioning, value, sales growth, product line and management. Many of these diagnostic stocks look overvalued on the basis of PE and PEG, however revenue growth, product positioning and M&A potential are important considerations. In the past, 5 of our picks have been acquired at a premium to market.

Q3 earnings are not expected to beat estimates and there are concerns about test reimbursement that should play out in Q4 when more CMS guidelines are published.

Here are the metrics after Q2 Earnings:

 

 

Company Ticker Price Rev Q2Rev Price 2013 P/S PE PEG P/B Market
    May'11 2012 2013 17-Aug RevEst         Cap  
GenProbe* GPRO 80 642 143 sold 66 576 5 64 1.9 700 $B  
                         
Abaxis ABAX 28 179 43.1 39.2 199 4.66 31.6 2.1 4.86 0.872  
Alere ALR 36 2,710 764 31.5 3 0.87 n/a n/a 1 2.56  
Cepheid CPHD 30.5 331 96 34.6 383 6.45 n/a n/a 8.83 2.33  
ExactSci EXAS   4.15 1 11.95 4 188 n/a n/a 5.04 0.773  
GenomHlth GHDX 25.9 236 60.4 32.05 206 3.91 641 25 6.98 0.971  
Hologic HOLX   2,160 626 22.63 3 2.48 n/a n/a 2 6.1  
Immucor** BLUD 20.3 345 83.3 sold 27 n/a 5.5 21.2 2.2 n/a n/a  
Luminex LMNX 20 203 54.3 20.75 222 3.95 122 2.3 2.35 0.841  
Meridian VIVO 23.4 179 47.1 22.85 188 5.15 25.4 1.9 6.24 0.94 under review
Nanosphere NSPH     1.85 2.02 10.3 18.48 n/a n/a 3.31 0.113  
Neogen NEOG 40.6 194 56 54.64 232 6.28 48.8 2.6 5 1.3  
Orasure OSUR   89.4 24.4 5.13 95 3.17 n/a n/a 1.85 0.285  
Qiagen QGEN 20 1,250 346.5 20.46 1 3.86 149 20 2 4.9  
Quidel QDEL 14.6 156 29.7 25.5 180 4.82 48 2.8 3.93 0.862  
Resp Gene RGDX 2 18.1 5.6 1.93 22.2 3.1 n/a n/a n/a 0.06  
Sequenom SQNM   71.5 34 2.98 162 2.64 n/a n/a n/a 0.343 trade
SeraCare# SRLS 3.7 46.2 11 sold 4 43.5 1.84 36.3 n/a 40.3 n/a  
Techne TECH 80.5 312 81 75 339 8.9 24.6 2 3.75 2.76  
                         
** sold for $1.97B to TBG Capital #sold for $80M              
** sold for $3.7B to Hologic Names in BOLD are on focus list        
                         
                         
                         
Click to enlarge

Disclosure: I am long CPHD, ILMN, HOLX, RGDX.

Stocks: ALR, ILMN, QDEL, TMO