Liquid Biopsy · @Liquid_Biopsy
1st Sep 2015 from TwitLonger
LEERINK $SQNM $ILMN --- Prenatal Testing Irrespective of Risk Becoming a Trend; Positive
for ILMN, AFFX
• Bottom Line: Following the example set a couple week ago by Anthem
[OP] (LINK), Blue Cross of California yesterday updated its non-invasive
prenatal testing (NIPT) policy to deem nucleic acid sequencing-based
testing of maternal plasma for trisomies 21, 18, and 13 (i.e., Down
syndrome and others) medically necessary regardless of risk status.
Two points make a trend, and we believe these developments represent
upside to our modeling on ILMN (OP) and AFFX (MP), suppliers of
instruments and consumables used for this testing. Providers of these
tests, such as ILMN, SQNM (NR)..., should also benefit.
We reiterate our Outperform rating on ILMN, though acknowledge that
some of the NIPT-associated upside could be baked into expectations for
a stock that trades at >55x Street 2015 EPS.
• At least two Blues now consider cell-free DNA (cfDNA)-based
NIPT testing medically necessary irrespective of risk. Blue Shield of
California’s update, dated 8/31, follows an earlier update from Anthem
on 8/10. Previously, payers such as Blue Shield of California and Anthem
had endorsed cfDNA-based NIPT testing for trisomies 21, 18, and 13 only
for those pregnancies considered high risk, as determined by maternal
age and other factors. Two points make a trend, and we now consider
it increasingly feasible that widespread reimbursement of cfDNA-based
NIPT for all pregnancies could be a 2016 event.
• NIPT in average risk expands the market opportunity for providers
meaningfully. NIPT was one of the larger components of ILMN's
professed $20B total addressable market (TAM) opportunity for nextgen
sequencing (NGS). However, the company only included ~$1B of high risk
testing opportunity in this TAM estimate. If NIPT were adopted in average
risk pregnancies, this TAM expands to $6B - $7B.
• Average risk represents upside to our modeling. We had not
contemplated cfDNA-based NIPT testing would be widely reimbursed for
all pregnancies in our 2015-2016 modeling for ILMN and AFFX. Revenues
from this testing, both consumables and service, comprise ~7% of our
2015e revenue for ILMN, and we’ve modeled growth in line with the
company average for 2016 (~20%). Widespread adoption of NIPT in all
pregnancies could represent upside to this thinking.
Read more: http://bridgeandtunnelinvestor.com/thread/1766/leerink-prenatal-testing-irrespective-risk#ixzz3kVsknyVv