GHDX

Genomic Health, Inc. (GHDX)

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Genomic Health (GHDX)

Q1 2013 Earnings Call

May 02, 2013 4:30 pm ET

Executives

Emily Faucette

Kimberly J. Popovits - Chairman, Chief Executive Officer, President and Member of Non-Management Stock Option Committee

Dean L. Schorno - Chief Financial Officer and Principal Accounting Officer

G. Bradley Cole - Chief Operating Officer and Member of Non-Management Stock Option Committee

Steven Shak - Chief Medical Officer and Executive Vice President of Research & Development

Analysts

Joel Kaufman - Goldman Sachs Group Inc., Research Division

Dane Leone - Macquarie Research

Vamil Divan - Crédit Suisse AG, Research Division

Daniel L. Leonard - Leerink Swann LLC, Research Division

David C. Clair - Piper Jaffray Companies, Research Division

Rafael Tejada - BofA Merrill Lynch, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

George B. Zavoico - MLV & Co LLC, Research Division

Presentation

Operator

Good afternoon. My name is Chuck, and I'll be your conference operator today. At this time, I would like to welcome everyone to Genomic Health First Quarter 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Emily Faucette, Vice President of Corporate Communications and Investor Relations. You may begin your conference.

Emily Faucette

Thank you. Good afternoon, everyone, and welcome to Genomic Health conference call to review our first quarter 2013 financial results. Before we begin, I'd like to remind you that various remarks that we make on this call that are not historical, including those about our future financial and operating results; our plans and prospects; our ability to leverage our existing infrastructure; the success of our business strategy; economic benefits and value to payors of our tests; growth opportunities including international; our planned launch of a test for prostate cancer patients; future products, product enhancements and our product pipeline; demand for our tests and drivers of demand; payor coverage and progress in reimbursement and patient access; our investment in our product pipeline, international expansion and commercial organization; clinical outcomes and timing of clinical studies and product launches; and our expectations regarding our ability to comply with potential FDA regulations constitute forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act.

We refer you to our annual report on Form 10-K for the year ended December 31, 2012, filed with the SEC, in particular to the section entitled Risk Factors, for additional information on factors that could cause actual results to differ materially from our current expectations. These forward-looking statements speak only as of the date hereof, and we disclaim any obligation to update these forward-looking statements.

Joining me on the call today are Kim Popovits, our Chairman of the Board, Chief Executive Officer and President; Brad Cole, our Chief Operating Officer; Dean Schorno, our Chief Financial Officer; Steve Shak, our Chief Medical Officer and Executive Vice President of Research and Development; and Kathy Hibbs, Senior Vice President and General Counsel.

I'll now turn the call over to Kim.

Kimberly J. Popovits

Thanks, Emily, good afternoon, everyone, and welcome. In the first quarter, we delivered strong year-over-year increases in both product revenue and tests delivered. These results reflect our continued success in expanding the U.S. invasive breast cancer market and achieving significant growth in our international business.

Additionally, we are pleased to report 2 important milestones that we believe will lead to long-term growth beyond our existing core markets: first, the Oncotype DX DCIS breast cancer validation study published online this afternoon in the Journal of the National Cancer Institute, supporting our ongoing efforts to expand reimbursement and patient access to the DCIS Score.

And as you know, next week, at the AUA meeting in San Diego, our collaborators from UCSF will present the full positive results from their landmark prostate cancer clinical validation study in an oral session on Wednesday, May 8. Today, we are excited to announce that we will make the Oncotype DX prostate cancer test available to patients and physicians immediately following the presentation, and we'll be holding an investor webinar with our UCSF and Cleveland Clinic collaborators at AUA to provide additional detail on the rigorous development, validation and expected impact of the prostate cancer test on clinical practice. We look forward to answering your questions regarding these exciting results next Wednesday.

I'll now turn the call over to Dean, Brad and Steve to provide further details on our first quarter financial results, our worldwide commercial and operations progress and our recent clinical update. I will then conclude with our business priorities for 2013. Dean?

Dean L. Schorno

Thank you, Kim. During the first quarter, we delivered total revenue of $63.1 million compared with $58.5 million in the first quarter of 2012. Product revenue was $62.7 million compared with $57.9 million for the first quarter of 2012, an increase of 8%.

As you may remember, in the first quarter of last year, we had stronger-than-expected revenue performance due to the inclusion of approximately $1.2 million of cash revenues from payments by Medicare for colon test performed prior to the establishment of coverage. Without this incremental revenue in the first quarter of 2012, year-over-year product revenue growth would have been 11%. We anticipate product revenue for the second quarter to be similar to that of the first quarter due to historic seasonal patterns along with the anticipated impact of sequestration, which is expected to be approximately $1 million for the remainder of the year. Contract revenue comprised the balance of total revenue for both periods.

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