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Genomic Health Q1 Revenues Up 13 Percent

NEW YORK (GenomeWeb) – Genomic Health reported after the close of the market Wednesday that its first quarter revenues increased 13 percent year over year as the company exceeded Wall Street expectations on the top and bottom lines.

The company's total revenue for the three months ended March 31 was $92.6 million, compared to $84.0 million in the first quarter of 2017. The 13 percent revenue increase is based on 2017 revenues that were adjusted to match the ASC 606 accounting standard adopted as of Jan.1, 2018. Analysts had predicted revenues of $89 million on average.

Genomic Health's US product revenue was $78.9 million compared with $70.6 million in Q1 2017, or $69.2 million adjusted to the 606 standard. The company's invasive breast cancer testing in the US increased 12 percent to $71.0 million from an adjusted $63.4 million in the year-ago quarter.

Revenue for the company's newer prostate cancer test was up 75 percent at $5.8 million compared to $3.3 million in the same period last year.

Genomic Health said that it delivered more than 32,440 test results during the quarter, up about 3 percent from the 31,580 results it delivered in the same period last year. The company's US Oncotype DX breast cancer test volume rose 4 percent, while prostate cancer tests were up 25 percent compared to the prior-year quarter.

International test revenue rose 5 percent to $13.8 million from $13.4 million ($13.1 million adjusted) in Q1 2017, though on 7 percent less testing volume. On a non-GAAP constant-currency basis the increase was 1 percent. International testing made up approximately 22 percent of overall test volume.

Genomic Health President, CEO, and Chairman Kim Popovits explained on a call discussing the company's financial results that the reduction in international test volume was expected as part of a change in how the company delivered tests, with a greater focus on near-term reimbursement.

"Some things have changed and developed there, and some of the reimbursement pathways have been a bit delayed. But we're pretty confident now with the conversations that we're having and some of the new developments that we're on track to start to see that double-digit growth in the back half of 2018," she said.

In April, after initially releasing a draft recommending against the adoption of genomic tests like Oncotype Dx, the UK's National Institute for Health and Care Excellence, or NICE, issued a revised document that now continues to endorse Oncotype DX, as well as assays from other companies that could now compete with the firm in the UK market.

"We will continue to encourage NICE to incorporate results from TAILORx in its guidance, which is currently expected in September 2018," she said. Genomic Health will be presenting data from the trial at the upcoming annual meeting of the American Society for Clinical Oncology.

Popovits also highlighted the fact that Q1 was Genomic Health's 11th consecutive quarter of increased profitability. Recent milestones, she said, include the implementation of PAMA, which increased the company's Medicare payment rate by about 10 percent.

Based on Q1 payments, "we anticipated PAMA pricing … to have an $8 million impact on the top line in 2018," Popovits said.

She also cited recent new American Joint Committee on Cancer breast cancer staging criteria, which name Oncotype DX specifically and are "supporting increased adoption" of the company's breast cancer test; as well as the strengthening of National Comprehensive Cancer Network prostate cancer guidelines, which have supported some increases in private payor coverage of the company's GPS test.

PiperJaffray's William Quirk noted earlier this week that in updating its reimbursement database for the Oncotype DX prostate test, the investment bank found that two payors have issued new favorable coverage decisions: HealthNow New York and BCBS of Rhode Island.

In Q1 Genomic Health also launched its AR-V7 Nucleus Detect, with a draft local coverage decision from Medicare contractor Palmetto following in March.

"While it is still early, we are encouraged by the initial response [of the AR-V7 test]… and anticipate it will provide a more meaningful impact on both test and revenue growth following the finalization of the Medicare LCD," Genomic Health CFO Brad Cole added.

Genomic Health's Q1 net loss was $3.8 million, or $.11 per share, compared with a net loss of $806,000, or $.02 per share, for the first quarter of 2017. Analysts had expected a per-share loss of $.22.

The company's R&D costs in Q1 rose 13 percent to $16.8 million from $14.9 million the prior year, while SG&A costs increased 5 percent to $61.5 million from $58.3 million in Q1 2017.

Genomic Health ended the quarter with cash and cash equivalents totaling $42.1 million and short-term marketable securities of $88.3 million.