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Despite Q3 Slump, Genomic Health Confident Tests Will Hold Ground Against Competitors

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NEW YORK (GenomeWeb) – Though Genomic Health's third quarter earnings fell short of expectations, executives expressed confidence this week that the company is preserving its hold on the early breast cancer testing market, and will see growth in its prostate testing business as it reaps the rewards of a recent coverage decision by Medicare contractor Palmetto GBA.

The firm is also in the developing its first in vitro diagnostic, with plans to begin selling kit versions of its Oncotype Dx test starting in 2019, which will impact the way the company's business progresses outside of the US.

Factors at play for the firm in breast and prostate cancer are very different. In breast cancer, Genomic Health's Oncotype DX test is widely recognized by professional guidelines, and the company's President, CEO, and Chairman Kim Popovits said this week that the company expects to see a boost in its reimbursement rates with the implementation of the Protecting Access to Medicare Act (PAMA) next year.

Genomic Health COO Brad Cole said during a call discussing the firm's earnings this week that if PAMA goes through as envisioned, the company expects to see about a 15 percent rise in its average selling price for the Oncotype DX breast cancer test, which translates to about $6 million to $8 million in revenue based on the approximately 20 percent of invasive breast cancer test volume that is [covered by] Medicare.

Genomic Health's breast cancer test revenues have continued to grow over the last several years despite the presence of rivals, including Nanostring's Prosigna and Agendia's MammaPrint.

But the company now faces new competition in the US from Myriad Genetics' EndoPredict, which the firm launched this year after acquiring German firm Sividon Diagnostics in 2016.

As Myriad has advanced EndoPredict, it has highlighted research that suggests that EndoPredict may be more accurate than Genomic Health's Oncotype DX for some types of patients.

According to authors of a 2015 study of about 1,000 patients, for example, about 6 percent of patients deemed low risk by EndoPredict experienced recurrence over a decade, while 10 percent of patients deemed low risk by Oncotype DX saw their disease return over that time.

Late last month, Myriad highlighted a new analysis presented at a scientific meeting in Japan, showing superiority for EndoPredict over Oncotype in predicting breast cancer recurrence specifically in women determined to be at intermediate clinical risk by a set of criteria called the Nottingham Prognostic Index.

Steve Shak, Genomic Health's chief scientific officer, dismissed this recent research during the company's earnings call this week.

According to Shak, Genomic Health views publications like this as opportunities to highlight the fact that various assays in the space are not all the same. More specifically, he stressed, Oncotype DX is the only test that has been validated specifically with regard to chemotherapy response prediction as opposed to patient prognosis.

He added that as the company has been speaking with sales reps and physicians in the marketplace, it isn't hearing "much movement in terms of EndoPredict."

Sales and revenue numbers are difficult to compare, since EndoPredict is used mostly outside the US right now.

Genomic Health cited US hurricanes over the quarter as contributing negatively to its revenue by about $3 million dollars. Breast cancer volume for the quarter was flat year-over-year, and revenue dropped. International testing revenue, though, was up about 7 percent.

Myriad meanwhile reported 12 percent higher revenue from EndoPredict in the most recent quarter of this year compared to the same quarter of 2016, and has said it expects double-digit volume growth for the test next year.

Prostate

In contrast to breast cancer, Genomic Health saw a solid increase in test volume and revenue last quarter for its newer prostate cancer test, despite a delay in gaining a positive reimbursement decision from Medicare for the use of the test in men who fall into an intermediate clinical risk category.

According to Cole, the company is running the test about half of the time for patients with private insurance and about half the time for Medicare recipients. The breakdown between low- and intermediate-risk patients is about 60-40, he added.

Phil Febbo, Genomic Health's chief medical officer, said during the company's earnings call that Genomic Health believes results from recent studies conducted with a cohort of patients covered by Kaiser Permanente will drive adoption of the test and also support its inclusion in professional guidelines.

"What has become very clear is that as payors move to working with benefit managers … their evidentiary review becomes really dependent on guidelines," Febbo said.

"We [believe] the strength of portfolio is in really resonating with … guidelines so we see that impacting private payors," he added.

As in breast cancer, Genomic Health competes with Myriad in the prostate cancer risk testing space. And Myriad had a head start in the intermediate-risk category this year, gaining coverage from Palmetto in May.

For now, it appears that there the market is still fluctuating. Despite Myriad's head start in coverage for intermediate-risk patients, Oncotype DX revenues nearly doubled for Genomic Health in Q3 while Myriad's Prolaris earnings remained flat during the quarter.

In partnership with Epic Sciences, Genomic Health is also anticipating launching a new test in the prostate cancer space next year, which as of yet doesn't have any significant commercial competitors.  The new assay uses Epic's platform to measure expression of the AR-V7 splice variant in circulating tumor cells to guide decisions on whether to treat advanced prostate cancer patients with anti-androgen drugs or with chemotherapy.

IVDs

Further down the line, Genomic health is also banking on a shift in its breast cancer business outside the US. The company announced in September that it had entered an exclusive agreement with Biocartis to develop an in vitro diagnostic version of the Oncotype DX breast cancer test on Biocartis' Idylla platform.

According to Popovits, the plan is to continue that work through the end of next year, with the hope of launching the IVD kits some time in 2019, starting in France and Germany.

Cole said that though the economics will be different than offering a central lab-developed test, moving to an IVD strategy is "all upside," considering the firm's evolving reimbursement situation in Europe.

"We expect it will allow us to have margin similar to what we have today [while also participating] in the value proposition with the customer," he added.