We reaffirm our long-term Neutral recommendation on
) following its third-quarter 2013 results. Despite an impressive
growth trajectory, the financial results of this molecular
diagnostic company continue to depend solely on the Oncotype DX
breast cancer test - the most significant component of Genomic
Health's growth profile. The stock currently carries a Zacks Rank
Why the Reiteration?
Genomic Health reported another quarter of healthy revenue
growth. Total revenue climbed 12.5% year over year to $65.9
million, marginally ahead of the Zacks Consensus Estimate of $65
million. However, net income of $0.5 million was down a
substantial 86.5% year over year. Although earnings of 2 cents
per share significantly exceeded the Zacks Consensus Estimate of
a loss of 4 cents, the result lagged the year-ago quarter's
earnings of 11 cents per share.
Following the release of the third quarter results (Nov 5),
most of the estimates have been revised upwards for both 2013 and
2014 in the last 60 days.
The number of Oncotype DX tests - the company's flagship
product, delivered by the company during the most recent quarter
increased a significant 21% year over year with deeper
penetration in new markets.
We encouragingly note that, in the quarter, the National
Institute for Health and Care Excellence (NICE) in the U.K.
issued final guidance recommending Oncotype DX as the only
multi-gene breast cancer test suited to guide chemotherapy
treatment decisions for patients with early-stage, hormone
receptor-positive, invasive breast cancer. This marks a
significant milestone in Genomic Health's goal of reaching out to
the global market.
However, Genomic Health is conducting several studies to
expand its portfolio or increase acceptance of the tests, which
in turn, is driving operating expenses and pressurizing margins.
We are also concerned about the company's dependence on the
breast cancer test.
Moreover, Genomic Health's multiple studies in the field of
breast, colon, prostate, renal and other cancers are in the
early-to-middle stages of development and as such have attendant
risks. As a result, any hiccups in the process will weigh heavily
on the stock.
Investors interested in the medical devices industry can also
consider stocks such as
Gilead Sciences Inc.
InSite Vision Incorporated
). All these stocks sport a Zacks Rank #1 (Strong Buy).
GENOMIC HEALTH (GHDX): Free Stock Analysis
GILEAD SCIENCES (GILD): Free Stock Analysis
HESKA CORP (HSKA): Free Stock Analysis Report
INSITE VISION (INSV): Get Free Report
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