Positive results from Genomic Health’s (GHDX) QUASAR clinical validation study were recently published by the Journal of Clinical Oncology (JCO). The company has for quite some time been awaiting the publication of the study.
In January 2010, the company launched its Oncotype DX colon cancer test. The 12-gene diagnostic test aims to predict individual recurrence risk in stage II colon cancer patients after surgery. The company is focused on pursuing global adoption of and reimbursement for the test. Medicare had established a formal coverage policy for the Oncotype DX colon cancer test in September.
The QUASAR study, conducted with 1,436 patients, demonstrated that Genomic’s Oncotype DX colon cancer test predicts recurrence risk in stage II colon cancer patients following surgery. The study also establishes that the Oncotype DX colon cancer Recurrence Score (RS) provides additional information beyond conventional markers such as T-stage, mismatch repair (MMR) status, nodes examined, grade and lymphovascular invasion.
Although the test is yet to make any significant contribution to the company’s top line, the Genomic management is confident that the publication of peer-reviewed articles on the QUASAR clinical validation study will be a driving force for speedy adoption. Genomic noted that positive results along with Medicare covering the test should pave the way for expanded reimbursement. This in turn should result in better access to the Oncotype DX colon cancer test.
Patients with stage II colon cancer whose tumors are found to be MMR deficient have a low risk of recurrence. Based on this result, the QUASAR confirms the importance of MMR in stage II colon cancer. As a result, later this year Genomic Health plans to provide MMR IHC testing services to enable physicians assess MMR status for stage II colon cancer recurrence risk.
Genomic has also completed laboratory analysis of the gene identification study to predict the benefit of oxaliplatin chemotherapy in stage II and III colon cancer patients. The results are expected to be reported in 2012 following the completion of data analysis. These results are likely to develop a huge patient population as more than 150,000 people worldwide are diagnosed with stage II colon cancer each year.
Our Take
We believe that the recent developments could lead to better adoption of the colon cancer test going ahead. We are also encouraged by the company’s increasing focus on the international market. Further, Genomic Health is conducting several studies to expand its portfolio or increase acceptance of the tests, though many of these are in their initial stages. The stock retains a Zacks #2 Rank (Buy) in the short term.
As fallout of increased capital outlay necessary to drive these initiatives, operating expenses are set to rise. Moreover, we remain concerned about the competitive scenario with the presence of players such as Myriad Genetics (MYGN) and Qiagen (QGEN). Over the long term, we are Neutral on Genomic, in line with Qiagen.
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