) reported third quarter 2012 net income of $3.7 million, up from
$3.2 million in the year-ago period. The company's reported
earnings per share (EPS) of 11 cents surpassed the Zacks
Consensus Estimate of 6 cents, and were a penny higher than the
year-ago quarter results.
Total revenue in the reported quarter climbed 13% year over
year to $58.6 million, but missed the Zacks Consensus Estimate of
$60 million. Product revenues climbed at the same pace to $58.4
million in the quarter, while Contract revenues accounted for the
balance. The improvement in product sales was mainly on the back
of significant international growth with diversification of
business and successful utilization of an important global
opportunity. In the reported quarter, Genomic provided more than
18,030 Oncotype DX breast cancer test results representing a
growth of 7% year over year.
Gross profit increased 15.7% year over year to $49.6 million
with a 225 basis point (bps) improvement in gross margin to
84.6%. However, a 16.3% rise in operating expenses to $45.9
million led to a 20 bps contraction in operating margin to 6.3%.
The rise in operating expenses was based on higher research and
development (27.6% to $12.2 million), selling and marketing (6.8%
to $21.5 million) and general and administrative (24.9% to $12.1
In the fourth quarter, Genomic expects operating expense to
increase by $3 million as the company plans to keep on investing
in its global commercial business as well as work on the market
release of Oncotype DX prostate cancer test in the first half of
2013, and incur expenses related to the San Antonio Breast Cancer
Symposium. All these are likely to keep margins under
Although Genomic derives the majority of its revenues from
Oncotype DX breast cancer test, contribution from the colon
cancer test should gradually improve with additional
reimbursement decisions. We are also encouraged with the
company's third-quarter performance. However, the expansion plans
involve higher expenses, which in turn will adversely affect
margins. Besides, over the recent past, we have witnessed a lot
of activity in the market targeting this specific niche of
) are among the significant players in this business.
The stock carries a Zacks #3 Rank ("Hold") in the short term.
Over the long term, we maintain our 'Neutral' recommendation on
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