Large Caps, Small Caps Taking Advantage of Advances in Molecular Analysis

The announcement that Johnson & Johnson may sell its $2.2 billion Ortho Clinical Diagnostics division for blood and cholesterol tests was no surprise to those who watch the genetics/molecular diagnostic space. Nor was it a surprise that J&J  wants to dump this division to “focus on genetic screening to complement its drug pipeline,” according to Bloomberg Businessweek.

Graphic courtesy of UKhumanrights blog

Graphic courtesy of UKhumanrights blog

Thanks in part to the much lower cost of genome sequencing, a crowded field of health care companies is vying to take advantage of the recent significant advances in molecular analysis. The cost of genome sequencing, a hefty $300 million only 10 years ago, is now on its way down. Way, way down. A recent Motley Fool article suggested it will be less than $1,000 in the near future.

We have been watching a few small cap molecular diagnostics companies in the past few months. Here is an update on a few we selected at random and last noted in May 2012.

Carlsbad, CA-based GenMark (Nasdaq: GNMK, http://www.genmarkdx.com/) is a molecular diagnostics company that develops the testing equipment used by labs for the detection and measurement of DNA and RNA targets in patient treatments. Its eSensor detection technology enables the detection of up to 72 distinct biomarkers in a single patient sample. Its XT8 System has been cleared by the FDA and is designed to support a range of molecular diagnostic tests with a workstation and disposable test cartridges. Back on May 11, GNMK closed at $4.95 with a market cap of $106 million. It closed Feb. 1 at $11.09, up 33 cents for the day. Its market cap is now $362 million.

Menlo Park-based Pacific Biosciences of California (Nasdaq: PACB, http://www.pacificbiosciences.com/) has developed an integrated platform for genetic analysis. The company is focusing on the DNA sequencing market and has created what it  calls its single molecule, real-time (SMRT) technology to record individual biochemical events as they occur. PACB is considered a development stage company. Back on May 11 PACB closed at $2.52 with a market cap of $146.3 million. The stock closed Feb. 1 again at $2.52, up 4 cents for the day with its market cap unchanged.

San Diego-based Sequenom (Nasdaq: SQNM, http://www.sequenom.com/) made headlines last year with the announcement of its fetal Down Syndrome test. SQNM operates in two segments: molecular diagnostics and genetic analysis. The company is focused on translating the results of genomic science into solutions for biochemical research and other areas. SQNM still trades actively (a daily average of more than 4 million shares). The stock price last May 11 was $5.18 with a market cap of $593 million. It then dipped during the summer to about $2.70 but has rebounded since. It closed Feb. 1 at $4.16, up 1 cent for the day. Its market cap is now $478 million.

Mountain View, CA-based Complete Genomics (Nasdaq: GNOM, http://www.completegenomics.com/) is a life sciences company that has developed a DNA sequencing platform for human genome sequencing and analysis. Its genomic analysis platform provides its customers (academic and government research centers, biopharmaceutical companies, healthcare providers) with data to be used for genome-based research. GNOM closed May 11 at $1.98, with a market cap of $70 million. Its made a nice gain since then, closing at $3.12 Feb. 1 with a current market cap of $108 million.

Irvine, CA-based CombiMatrix Corp. * (Nasdaq: CBMX, http://www.combimatrix.com/ operates mainly in molecular diagnostics and genetic analysis with a specialty in pre-natal chromosomal microarray testing. Combimatrix focuses its efforts on the developmental (pediatric) and pre-natal markets and is the only independent public company specializing in genomic arrays.  CombiMatrix closed May 11 at $1.01 but since then has done a 1-10 reverse split of its common stock. It closed Feb. 1 at $4.34, down 58 cents on the day. Its market cap is now $4.6 million.

Los Angeles-based Response Genetics (Nasdaq: RGDX, http://www.responsegenetics.com/) develops and sells clinical diagnostic tests and pharmacogenomic tests used in the treatment of cancer. It offers tests for non-small cell lung cancer, colorectal cancer and gastric and gastroesophageal cancer. The company also develops tests for other types of cancer that identify genetic profiles of tumors that recur after surgery. RGDX closed May 11 at $1.50. It closed Feb. 1 at $1.45, down 4. Its market cap is now $47 million.

* Denotes client of Allen & Caron Inc., publisher of this blog

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