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Genomic Health: Test Volume Impresses, Margin Woes Persist

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On Sep 9, 2015, we issued an updated research report on California-based Genomic Health, Inc.GHDX - a global cancer company with a focus on advanced molecular diagnostics.

Genomic Health delivered a dismal financial performance in the second quarter of 2015, missing the Zacks Consensus Estimate on both the top and bottom-line fronts. The company's trimmed financial guidance for 2015 also worries us, as it primarily reflects the company's inability to cope with a strengthening U.S. dollar.

However, during the second quarter, Genomic delivered a record number of prostate cancer tests, up 100% from the comparable period last year. We believe reimbursement for the prostate cancer test, which is expected in the fourth quarter of 2015, will help the company considerably reduce its production cost, thereby ushering in positive gross margin growth.

Moreover, Genomic continues to make considerable progress in its Oncotype DX DCIS score. Interestingly, Genomic's DCIS score has, as yet, penetrated only less than 10% of the 50, 000 patient-strong breast cancer market.

In the international market as well, the company continued its growth streak with test volumes up 13% in the quarter. Moreover, tests delivered in the five largest markets of Western Europe grew 27%. Currently, Genomic is making progress in gaining broad public access in Western Europe, which it believes will play a critical role in its international endeavors.

On the flip side, Genomic's strong reliance on a single product - the Oncotype DX breast cancer test - can pose challenges. Also, higher cost of production continues to weigh heavily on the company's gross margin.

Currently, Genomic carries a Zacks Rank #3 (Hold).

Key Picks in the Sector

Some better-ranked stocks in the med-biomed/generic space are Gilead Sciences Inc. GILD , Neogenomics Inc. NEO and Nexvet Biopharma Public Limited Company NVET . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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GILEAD SCIENCES (GILD): Free Stock Analysis Report

GENOMIC HEALTH (GHDX): Free Stock Analysis Report

NEOGENOMICS INC (NEO): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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