) reported third-quarter 2013 earnings per share (EPS) of 2
cents, significantly surpassing the Zacks Consensus Estimate of
loss of 4 cents. However, the result lagged the year-ago
quarter's earnings of 11 cents per share. The company reported
net income of $0.5 million, sliding 86.5% from net income of $3.7
million in the third quarter of 2012.
However, total revenue climbed 12.5% year over year to $65.9
million, marginally ahead of the Zacks Consensus Estimate of $65
million. The upside was driven by a 12.6% increase in product
revenues, partially offset by a 6.9% decline in contract revenues
to $0.26 million.
The improvement in product sales came mainly on the back of
double-digit growth in test volume across all areas of the
company's business. The increased adoption of the prostate cancer
test and the approval of Oncotype DX by National Institute for
Health and Care Excellence's (NICE) also aided the successful
results. NICE recognized Oncotype DX as the sole test to predict
recommended chemotherapy benefits for patients with early-stage,
hormone receptor-positive, invasive breast cancer.
During the reported quarter, international product revenues
grew 25% year over year to $10.1 million. Genomic provided 21,790
Oncotype DX test results, up 21% from the year-ago quarter.
Gross profit increased 11.3% year over year to $55.2 million.
However, the recent prostate cancer test launch and impact of
sequestration led to a contraction of 93 basis points (bps) in
gross margin, which stood at 83.7% in the quarter. On the other
hand, with a 19.3% rise in operating expenses to $54.7 million,
the company incurred operating profit of a nominal $463 million,
down a significant 87.5% from the prior-year quarter. The rise in
operating expenses originated from higher research and
development (up 20.0% to $14.7 million), selling and marketing
(up 20.8% to $26.0 million), and general and administrative (up
15.7% to $14.0 million) expenses.
Genomic Health exited the third quarter with cash and cash
equivalents, and short-term marketable securities of $114.0
million, up from $99.1 million at the end of fiscal 2012.
Genomic reported another quarter of healthy revenue growth.
The number of Oncotype DX tests delivered by the company during
the third quarter increased 9% year over year with deeper
penetration in new markets. However, it came off as a sluggish
quarter with respect to earnings numbers. The downfall was mainly
owing to the impact of sequestration and the Oncotype DX prostate
cancer test launch in the sequentially last quarter leading to
pressure on margin.
Nevertheless, we are encouraged with the fact that NICE in the
U.K. issued final guidance recommending Oncotype DX as the only
multi-gene breast cancer test to guide chemotherapy treatment
decisions. Moreover, Genomic health established node-positive and
ductal carcinoma in situ (DCIS) coverage for approximately 1.3
million U.S. lives through a contract with a large Blue Cross
Blue Shield state plan.
Genomic Health currently holds a Zacks Rank #4 (Sell). While
we choose to advise against this stock at the moment, other
medical device stocks that warrant a look are
Osiris Therapeutics, Inc.
AMAG Pharmaceuticals, Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
ACTELION LTD (ALIOF): Get Free Report
AMAG PHARMA INC (AMAG): Free Stock Analysis
GENOMIC HEALTH (GHDX): Free Stock Analysis
OSIRIS THERAPTC (OSIR): Free Stock Analysis
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