Genomic Health, Inc. (GHDX)

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Genomic Health (GHDX)

Q4 2013 Earnings Call

February 04, 2014 4:30 pm ET


Emily Faucette

Kimberly J. Popovits - Chairman of The Board, 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 - Executive Vice President of Research & Development


Justin Bowers - Leerink Swann LLC, Research Division

Jeffrey Frelick - Canaccord Genuity, Research Division

Katherine Blanton - Jefferies LLC, Research Division

J.P. McKim

Isaac Ro - Goldman Sachs Group Inc., Research Division

Rafael Tejada - BofA Merrill Lynch, Research Division

Jordan McKinnie - JP Morgan Chase & Co, Research Division

Nicholas Jansen - Raymond James & Associates, Inc., Research Division



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 Fourth Quarter and Year End 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's conference call to review our fourth quarter and year end 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 and prostate cancer tests, future products, product enhancement and our product pipeline, demand for our test 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 or other regulation constitute forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act. We refer you to our quarterly report on Form 10-Q for the quarter ended September 30, 2013, 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 Executive Vice President of Research and Development; and Kathy Hibbs, Senior Vice President and General Counsel by phone.

I'll now turn the call over to Kim.

Kimberly J. Popovits

Thanks, Emily. Good afternoon, everyone and welcome. In 2013, we strengthened our position as the world's leading provider of genomic based cancer diagnostic tests with the successful launch of our third product franchise, the Oncotype DX prostate cancer test and continued international expansion. We delivered 15% growth in full-year test volume and 11% year-over-year growth in revenue, driven by continued strength in our global business. Importantly, we continue to increase both adoption and penetration in the U.S. and base of growth cancer market, which remains a substantial opportunity for near-term growth. We also gained publication and expanded reimbursement for our Oncotype DX DCIS score, which will enable greater access for the 50,000 newly diagnosed patients in the U.S. alone each year. With these achievements, we believe we are well positioned for diversification and significant growth towards a $3.5 billion opportunity worldwide with our current Oncotype DX test while enhancing our pipeline efforts in later-stage disease, including response to therapeutics and monitoring.

This is an especially exciting time for Genomic Health as we accelerate our investment and continue to lead the genomics diagnostics industry with a successful core business, multiple commercial opportunities for near-term growth and a pipeline aimed at expanding our impact across the cancer patient's journey.

I will now turn the call over to the team to provide further detail on our fourth quarter, and year-end financial results, our worldwide commercial and operations progress and recent pipeline and clinical updates. I'll then conclude with our business priorities for 2014. Dean?

Dean L. Schorno

Thank you, Kim.

During the fourth quarter, we delivered product revenue of $67.1 million compared with $60 million for the fourth quarter of 2013, an increase of 12%. International product revenue grew 16% to $10.1 million compared to the fourth quarter of 2013 and represented 15% of product revenue during the quarter. Total revenue for the fourth quarter increased to $68.8 million compared with $60.4 million in the fourth quarter of 2013 and included $1.8 million from our collaborations with Pfizer and OncoMed, which completes our existing agreements with both.

For the full year 2013, we delivered product revenue of $259.2 million compared with $233.5 million in 2012. Total revenue for the year ended December 31, 2013, increased to $261.6 million compared with $235.2 million in 2012, an increase of 11%. In the fourth quarter of 2013, more than 22,720 Oncotype DX tests were delivered, an increase of 21% compared with more than 18,820 tests delivered in the same period in 2012. As a reminder, third quarter test volume also increased by 21% compared with the same period in 2012. During the fourth quarter, our tests delivered were approximately distributed as follows: U.S. breast and colon cancer was 77% of tests delivered; international was 20%; and U.S. prostate cancer was 3%. In 2013, more than 85,500 Oncotype DX tests were delivered, an increase of 15% compared with more than 74,520 tests delivered in 2012. Included in this increase was a 7% increase in U.S. invasive breast cancer tests, along with a 49% increase in our international test volumes. 62% of tests delivered and 72% of product revenue were recorded on an accrual basis in the fourth quarter of 2013. Net loss was $9.4 million for the fourth quarter of 2013 compared with net income of $2 million in the fourth quarter of 2012 and includes the upfront payment of $9 million for the Almac in-licensing agreement. Excluding the Almac payment, the net loss was $400,000 for the quarter. Net loss for the year ended December 31, 2013, was $12.8 million compared with net income of $8.2 million for the year ended December 31, 2012. This is primarily a result of the Almac agreement, investments in our prostate launch and continued sales and marketing investment to support international opportunities.

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