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


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Genomic Health reported a loss of $0.20 per share in the third quarter of 2014, which deteriorated substantially from the year-ago earnings figure of $0.02 but was narrower than the Zacks Consensus Estimate of a loss of $0.23. Revenues jumped 4.7% to $69.1 million, but missed the Zacks Consensus Estimate of $71 million. We are encouraged with a solid 9% hike in the number of Oncotype DX tests delivered. Moreover, the company now covers more than 86% of Canada's population a reasonable achievement in the international market. Genomic Health is also progressing well in the U.K. on the final guidance recommended by NICE. Furthermore, the 35% hike in orders of Oncotype DX prostate cancer test is also encouraging. However, challenges remain in the form of higher cost and operating expenses. We are also anxious about Genomic's major reliance on a single product. We thus remain Neutral' on the stock.


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. 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 Nov 2013, the Current Medical Research & Opinion published positive results from the Partnership for Health Analytic Research clinical utility analysis of the Onco type DX colon cancer test, demonstrating that use of the test changes treatment recommendations in 29% of stage II colon cancer patients.

In May 2013, Genomic Health commercialized 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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