Genomic Health (GHDX) will present results of five studies covering breast and colon cancer at a conference during September 23-27 in Stockholm, Sweden. Presentations will include results from six countries supporting cost effectiveness of the company’s flagship product Oncotype DX.
Besides, a study conducted in Japan reconfirmed that Oncotype DX reduces the use of chemotherapy in early-stage breast cancer patients, including those with lymph node positive status. Moreover, studies from Israel and Greece emphasize that the Oncotype DX Recurrence Score (RS) cannot be predicted by traditional clinicopathologic measures.
During the second quarter of fiscal 2011, Genomic Health had delivered 16,390 Oncotype DX test results, up 17% year over year. The company has come a long way from a one-product US focused company in 2007, when 24,450 tests were delivered with a 22% penetration, to a two-product international company with a suite of 57,000 tests delivered with a penetration rate of 26%. Banking on strategies that influence greater acceptance of its tests, Genomic Health is well placed to make most of the huge market potential.
Moreover, having established a strong foothold in the US market, Genomic Health is targeting the international arena. The company has established exclusive distribution agreements for its Oncotype DX breast cancer test with distributors in 13 countries. Revenues from the international market now represent 10% of total product revenues and one-third of total revenue growth. The company expects its international product revenue to continue to be an important driver of top-line growth in 2012.
On the flip side, though Genomic Health is conducting multiple studies in the field of colon cancer (stage III), prostate (expected launch 2014), renal cell (expected launch 2013) and lung cancers, several of these programs are in the early- to- middle stages of development and are a good many years away from commercialization. Moreover, the company faces tough competition from players like Laboratory Corporation of American Holdings (LH) and Quest Diagnostics (DGX).
We currently have a Neutral recommendation on Genomic Health, which corresponds to a Zacks # 3 Rank (hold) in the short term.
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