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Genomic Presents Oncotype Results - Analyst Blog

Posted
12/13/2012 10:50:00 AM
By: Zacks.com
Referenced Stocks:GHDX;MYGN

Genomic Health ( GHDX ), an oncology based biotech company, presented the results from 6 studies of the Oncotype DX breast cancer test at the San Antonio Breast Cancer Symposium earlier this month. The company has been recording robust revenue growth over the last few quarters banking on its flagship product, Oncotype DX breast cancer test.

This test is used to predict the likelihood of cancer recurrence, patient survival within 10 years of diagnosis and chemotherapy benefit for early stage breast cancer patients. Genomic Health believes that these latest studies will fortify the impact of this test providing physicians with better treatment options in node-negative and node-positive invasive early-stage breast cancer. Also, two of these studies have proved the cost effectiveness of this test in invasive breast cancer and ductal carcinoma in situ (DCIS).

Genomic Health has undertaken several studies to expand the use of Oncotype DX. In September 2012, the company announced positive results from a large clinical validation study of its biopsy-based prostate cancer test. Accordingly, the commercial launch of the Oncotype DX prostate cancer test is expected by the first half of 2013.

In the same month, the company also announced positive data supporting the extended use of the Oncotype DX tests in optimizing treatment decisions for breast and colon cancer patients at various stages of the disease. Successful development of the test will be of immense benefit to a huge patient population as DCIS is an increasingly detected sub-group of breast cancer, and more than 45,000 patients are diagnosed with DCIS each year in the U.S. alone.

The number of Oncotype DX tests delivered by Genomic Health, during the most recent quarter, increased 7% year over year with deeper penetration in new markets. We encouragingly note that, in the quarter, the company established reimbursement agreements with three additional state Medicaid programs for node-negative breast cancer patients. Although the colon cancer test, launched in January 2010, is yet to make a significant contribution to the top line, the situation is gradually improving with Medicare's decision to cover the Oncotype DX colon cancer test. We believe that favorable data from the worldwide studies might help the company in securing reimbursements.

We are also encouraged by the company's increasing focus on the international market. In the last reported quarter, the company secured incremental international reimbursements for the Oncotype DX breast cancer test in France, Greece, Kuwait and Spain. Further, Genomic Health is conducting several studies to expand its portfolio or increase the acceptance of the tests.

However, the expansion plans involve higher expenses, which in turn will adversely affect the margins. Additionally, the company's newly formed subsidiary InVitae Corporationwill require substantial investment. The company faces tough competition from players such as Myriad Genetics ( MYGN ), among others.

Currently, Genomic Health retains a Zacks #3 Rank (short-term 'Hold' rating). We have a 'Neutral' recommendation on the stock over the long term.



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