Genomic Health
(
GHDX
) has presented positive data from the first decision making study
of the Oncotype DX colon cancer test. The study demonstrated that
Recurrence Score ("RS") result helps physicians in deciding the
course of treatment for stage II colon cancer patients. It was
observed that the RS score changed medical oncologists' treatment
recommendations in 29% of the cases.
The Oncotype DX colon cancer test was launched in January 2010.
Though the test aims to predict individual recurrence risk in stage
II colon cancer patients after surgery, it has yet to make any
significant contribution to the top line.
Genomic Health is focused on pursuing global adoption of and
reimbursement for the test. In this regard the positive outcome of
studies should help the company. Effective September 18, Palmetto
GBA, the designated US contractor for Genomic's Oncotype DX colon
cancer test, established a formal coverage policy for all Medicare
patients. This coverage decision allows Medicare patients with
stage II colon cancer access to Oncotype DX.
Earlier, in November 2011, Genomic Health's QUASAR clinical
validation study was published by the Journal of Clinical Oncology
("JCO"). The QUASAR study, conducted with 1,436 patients,
demonstrated that Genomic's Oncotype DX colon cancer test predicts
recurrence risk in stage II colon cancer patients following
surgery. The study also establishes that the Oncotype DX colon
cancer RS provides additional information beyond conventional
markers such as T-stage, mismatch repair ("MMR") status, nodes
examined, grade and lymphovascular invasion.
To improve adoption of the colon cancer test, Genomic Health is
working with public and private payors and health plans to secure
coverage for the test based on favorable clinical evidence.
Adoption of the test is expected to improve with Medicare's
decision to cover the Oncotype DX colon cancer test. This is also
expected to have a positive impact on future revenue and the
company's ability to secure reimbursement from private and public
payors moving forward. During the most recent quarter, colon cancer
tests delivered to Medicare patients represented nearly 1% of total
test volume, which is expected to increase substantially.
Recommendation
Genomic Health, over the recent past, has been conducting
several studies to reduce dependence on its flagship product
Oncotype DX breast cancer test. Favorable data from the colon
cancer test should help the company in this direction. Meanwhile,
having established a strong foothold in the US market, Genomic
Health is targeting the international arena. 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. Genomic Health currently retains a Zacks #2 Rank
(short-term Buy rating).
Besides facing increasing competition from players such as
Myriad Genetics
(
MYGN
) and
Cepheid
(
CPHD
), operating expense is on an uptrend due to higher investments in
international expansion, pipeline development and product launches.
We have a long-term Neutral recommendation on the stock.
CEPHEID INC (
CPHD
): Free Stock Analysis Report
GENOMIC HEALTH (
GHDX
): Free Stock Analysis Report
MYRIAD GENETICS (
MYGN
): Free Stock Analysis Report
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