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J.P.Morgan Healthcare Update #2: Rayno Life Science Stocks CPHD,ILMN, NSTG,QGEN

|Includes:CEPHEID (CPHD), ILMN, NSTG, QGEN

Biotech Rally Continues With IBB ($245) At New Highs-Up 10 Pts. From Monday's Bottom

Several Rayno Life Science picks were up after presentations at the 2014 J.P.Morgan Healthcare Conference. All of our portfolio picks are strong holds unless otherwise noted. Our objectives for Rayno Life Science in 2014 will be to:

  • Continue our portfolio approach updating stock picks and significant Company news. Alternatively investors can trade, rebalance or buy the IBB ETF or FBIOX Fidelity Select Biotechnology Fund.
  • Find new investment ideas for trading and core long term holds.
  • Track life science sector performance through fundamental and technical analysis.
  • Articulate major industry trends as we have done in the past e.g. personalized medicine, targeted therapy and molecular diagnostics.
  • Track financial reporting of our diagnostics and tools focus stocks.

Here is a brief update of selected companies presenting through Wednesday January 15:

Cepheid (CPHD $49.80 NH) Added 10/23/12 at $31.40

Cepheid has been our top pick in molecular diagnostics. 5,125 GeneXpert modular systems are in place with a 14 test menu. Cepheid is a leader in Healthcare Associated Infections (HAI). The Company believes the addressable market is growing from $1.7B to $5B as new assays are launched for virology, MRSA,TB, sexual health and women's health . With a larger test menu and modularity Cepheid believes the Xpert System can be sold to hospitals < 400 beds. Price to Sales for 2013 are a hefty 8.65. Fourth quarter financial results will be released on Thursday January 30. 2014 revenues are forecasted in the $450M range.

Illumina (ILMN $125) Added 2/2/09 at $29

Illumina is our top pick in tools and the stock is up 25% in one month. The turning point in the stock was the Roche buy offer in the $55 range as sequencing is the major tool for pharmacogenomic testing and Next Generation Sequencing (NYSE:NGS) for clinical diagnostics such as companion diagnostics. There is so much to say about Illumina that we will provide links (update later).Revenue estimates are in the $1.6B range for 2014 and $1.4B for 2013.

Nanostring (NSTG $20 NH) Added 11/21/13 at $12

We learned about Nanostring Technologies at the 2013 AACC Meeting in Houston. We reviewed the Company in November and thought it was well positioned as a new platform for early stage gene expression testing for oncology. 180 nCounter systems have been placed, with average consumable revenue of $100k. The recent major event for the Company was the 510(k) approval for CLIA-certified labs of the Prosigna nCounter Dx Prognostic Gene Signature Breast Cancer Assay that uses the gene expression profile of cells found in breast cancer tissue to assess a patient's risk of distant recurrence of disease. The method assays 50 genes with 8 controls using a limited sample size. A low cost multiplexed protein analysis system is also under development with technology licensed from Mass General Hospital. Revenues for 2013 are $31.4M with $10.1 in Q4. Three major reference labs have purchased the system. 2014 revenue forecasts are in the $47.5M range. The Company has filed on January 13 for a follow-on offering of $55M with J.P.Morgan , Robert W. Baird and Leerink Partners as bookrunners.

Qiagen (QGEN $24.75 NH) Added 3/15/10 At $21.50

Qiagen has been one of our laggard stock picks due to M&A and restructuring. Also academic sales have been weak. The Company should be over this in 2014. With $1.3B in revenues and over 500k customers globally Qiagen is broadly positioned in tools, assay systems and diagnostics for life science applications. HPV sales from the acquisition of Digene are 16% of total. 2014 focus will be pharmacogenomics and an expanding clinical menu such as a 4th generation TB test, C.diff, HSV, sexual health and genetic tests in oncology. A major collaboration was announced with Exosome Diagnostics for genetic biomarker in ling and other cancers. Exosomes are the messenger packages in a fundamental biological communication system that transmits genetic instructions from cell to cell. Exosome also has a deal with Lilly for biomarker discovery. Qiagen has 15 collaborations with pharmaceutical companies for drug discovery and companion diagnostics. 2014 Revenue estimates are about 41.4B and Price to Sales for 2013 are in the 4.5 range.

Next Updates: ALR, GHDX, NSPH plus FAB Five Large Caps BioPharmas.

Rayno Biopharma Movers: ACHN, EXEL, GILD, PCYC, REGN, SGEN, VRTX.

Disclosure: I am long CPHD, .

Additional disclosure: Long Fidelity Biotech Fund FBIOX

Stocks: CPHD, NSTG, ILMN, QGEN