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Genomic Health Q1 Revenues Up 4 Percent

NEW YORK (GenomeWeb) – Genomic Health reported after the close of the market Tuesday that its first quarter revenues rose 4 percent year over year, falling short of the consensus Wall Street estimate.

The company's total revenue for the three months ended March 31 was $84.0 million, compared with $80.9 million in the first quarter of 2016, mainly supported by growing prostate cancer and international test sales. Analysts had predicted revenues of $86.2 million on average.

US product revenue was $70.6 million compared with $70.5 million in Q1 2016. The company's invasive breast cancer testing in the US grew slightly to $64.8 million from $64.1 million in the year-ago quarter.

Revenue for the company's newer prostate cancer test, however, rose 27 percent to $3.3 million from $2.6 million in the same period last year. 

Genomic Health said that it delivered more than 31,000 test results during the quarter, 7 percent more than the 29,510 results it delivered in the same period last year. The company's Oncotype DX breast cancer tests grew 1 percent, while prostate cancer tests grew 40 percent compared to the prior year's quarter.

International product revenue rose 29 percent to $13.4 million from $10.4 million in Q1 2016, and rose 33 percent on a constant currency basis.

The company delivered 17 percent more international tests than in Q1 2016, and international testing made up approximately 25 percent of the firm's overall test volume.

"Strong demand for our Oncotype tests in the first quarter of 2017 was due, in part, to growth across our US prostate and global invasive breast business, including 4 percent sequential growth in US invasive breast cancer," Genomic Health President, CEO, and Chairman Kim Popovits said in a statement.

"Additionally, last week Palmetto GBA issued a draft local coverage determination that recommends Medicare coverage expansion for the Oncotype DX Genomic Prostate Score to include intermediate-risk patients. Reimbursement progress remains a critical growth driver as we aim to deliver double-digit revenue growth in the second half of the year with continued profitability improvement," she added.

In a call discussing the firm's earnings on Tuesday, Popovits added that based on strong prostate test performance in the quarter and market research Genomic Health conducted earlier this year the company believes that it continues to lead the market in prostate cancer test adoption for low- and intermediate-risk patients.

"Combined with expected near-term reimbursement for intermediate risk, this sets us on a path to deliver our goal of 30 percent prostate test growth contributing to 40 percent of revenue growth in second half of this year," she said.

Despite the entry of a new competitor in the breast cancer space in the form of Myriad Genetics' recently launched EndoPredict, Popovitz reiterated that Genomic Health believes its market share remains strong.

"The issue is around the ability of the test to predict chemotherapy benefit, and there is not another test that can do that … so we think we are in good shape there," she said.

Genomic Health's Q1 net loss was $806,000, or $.02 per share, compared with a net loss of $6.4 million, or $.19 per share, for the first quarter of 2016. Analysts had expected a per-share loss of $0.07 per share.

The company's R&D costs in Q1 dropped to $14.9 million from $15.6 million the prior year, while SG&A costs rose to $58.3 million from $57.9 million in Q1 2016.

During the firm's earnings call, Genomic Health COO Brad Cole said that based on Q1 results, the company is expecting about $86 million in revenue during the second quarter of this year, primarily due to an adjusted view on the timing of CMS reimbursement for intermediate-risk prostate cancer testing.

"We are pleased with 26 percent growth this quarter, and our plan calls for growth through year, but the CMS delay will negatively impact Q2 revenue by about $2 million," he said.

Genomic Health ended the quarter with cash and cash equivalents totaling $40.8 million and short-term marketable securities of $53.6 million.

In Wednesday morning trade, the company's shares were down about 5 percent at $31.15.