Genomic Health, Inc. (GHDX): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Genomic Health reported an overall loss of $0.24 per share in the first quarter of 2014, declining seven fold from the year-ago loss and wider than the Zacks Consensus Estimate of loss of $0.18. Although revenues were up 6.2% to $67 million, the number missed the Zacks Consensus Estimate of $69 million. On the bright side, we are encouraged by the 13% increase in the number of Oncotype DX tests delivered. Moreover, the company established international breast cancer coverage for an additional 5 million lives. Genomic Health is also keeping well with the final guidance recommended by NICE. Furthermore, the timely launch of the Oncotype DX prostate cancer test has allowed the company to serve a $1.6 billion global market. However, challenges remain in the form of higher cost and operating expenses. We are also anxious about Genomic's reliance on a single product. We thus remain Neutral' on the stock.

Overview:

Genomic Health Inc., founded in 2000 and headquartered in Redwood City, CA, is a global cancer company with a focus on advanced molecular diagnostics. The company is involved in the development and commercialization of genomic-based clinical tests for cancer diagnosis that enables physicians to make individualized treatment decisions.

Genomic's first product, the 21-gene Oncotype DX breast cancer test launched in Jan 2004, is used to predict the likelihood of cancer recurrence, patient survival within 10 years of diagnosis and chemotherapy benefit for early stage breast cancer patients. In late Dec 2011, the Oncotype DX was launched for patients with ductal carcinoma in situ (DCIS), a pre-invasive form of breast cancer to predict the likelihood of local recurrence. Effective Jul 1, 2012, the list price of the Oncotype DX breast cancer test was increased from $4,175 to $4,290. At present, Onco type DX has been extensively evaluated in invasive breast cancer in fifteen clinical studies involving more than 5,000 breast cancer patients worldwide.

In Jan 2010, the company launched its Oncotype DX colon cancer test with a list price of $3,200 which was hiked to $3,640 effective Jul 1, 2012 (from $3,280 Jul 1, 2011). The 12-gene diagnostic test aims to predict individual recurrence risk in stage II colon cancer patients after surgery although the test is yet to make any significant contribution to the top line. In Jun 2012, based on the positive results of our NSABP C-07 validation study (presented in Sep 2012) the Oncotype DX colon cancer test was offered to patients with stage III disease treated with oxaliplatin-containing adjuvant therapy.

In May 2013, Genomic Health commercialized its lead pipeline candidate Oncotype DX prostate cancer test. The launch of the prostate cancer test, developed in collaboration with the University of California, San Francisco (UCSF) and Cleveland Clinic was based on the disclosure of positive clinical validation study at the 2013 American Urological Association (AUA) Annual Meeting in San Diego. Besides clinical elements such as PSA and biopsy Gleason Score, the results from the clinical validation study affirm that the test's ability to predict the aggressiveness of the cancer in patients.

Renal cancer: Genomic, in collaboration with Pfizer, is working on developing a genomic test for estimating the risk of recurrence following surgery, in patients with stage I-III renal carcinoma (clear cell type) that has not spread to the other parts of the body. The clear cell type of renal carcinoma is the most common type of kidney cancer in adults. In Jun 2010, results from the first renal gene identification study were presented, which demonstrated a strong correlation between gene expression and recurrence risk in this patient population. Consequently, the company plans to move forward with a clinical validation study to evaluate a potential renal cancer product.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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