Genomic Health
(
GHDX
), an oncology based biotech company, has presented positive
results from a clinical validation study of its flagship product,
Oncotype DX, at the San Antonio Breast Cancer Symposium. The study,
conducted by the Eastern Cooperative Oncology Group, evaluated the
test in patients with DCIS (ductal carcinoma in situ of the
breast).
It was observed that a pre-specified Onco
type
DX DCIS Score is more effective than traditional clinical and
pathologic measures to predict the risk of local recurrence.
Encouraged by positive results, Genomic Health plans to launch the
Onco
type
DX DCIS Score to physicians and their DCIS patients on December 28,
2011, in line with the company's guidance. This will enable
physicians to better assess the risk of a particular patient,
facilitating the selection of the appropriate treatment option.
The multi-gene test will be able to differentiate between lower
risk DCIS patients who can be treated with surgery alone and the
higher risk category where adjuvant treatment is essential
following surgery. The successful development of the test will be
of immense benefit to a huge patient population as DCIS is an
increasingly detected subgroup of breast cancer with more than
45,000 patients diagnosed with DCIS each year in the US alone.
Genomic delivered 16,980 Oncotype DX test results during the
most recent quarter, up 15% year over year. The company has come a
long way from a one-product US focused company in 2007, when 24,450
tests were delivered with a 22% penetration. In 2010, the company
transformed itself into a two-product international company
delivering 57,000 tests with a 26% penetration rate. Banking on its
several strategies directed toward an increasing acceptance of the
test, Genomicis well placed to make most of the huge market
potential. The stock retains a Zacks #2 Rank (Buy) in the short
term.
Moreover, having established a strong foothold in the US market,
Genomic Health is targeting the international arena. During the
most recent quarter, revenues from the international market jumped
80% and now represent 10% of total product revenues. However,
securing reimbursement outside the US is a major deterrent to
expanding the overseas business. The company expects revenue from
the international market to be an important driver of top-line
growth in 2012. We believe favorable data from the various ongoing
studies might help the company in securing reimbursements.
In order to reduce its dependence on Onco
type
DX breast cancer test, Genomic Health is conducting multiple
studies in the field of colon cancer (stage III), prostate
(expected launch 2014), renal cell (expected launch 2013) and lung
cancer. However, these tests are in the early- to- middle stages of
development and are several years away from commercialization.
Apart from increased competition from players such as
Myriad Genetics
(
MYGN
),
Cepheid
(
CPHD
), operating expense is on an uptrend due to higher investments in
international expansion, pipeline development and product launches.
Over the long term, we are Neutral on the stock.
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