On Sep 24, we issued an updated research report on genomic-based clinical laboratory services provider Genomic Health Inc. (GHDX).
The company reported better-than-expected second-quarter 2014 results with both the top and the bottom line surpassing the respective Zacks Consensus Estimate. Moreover, the company delivered a stellar performance in the international market during the quarter, with robust revenue growth of 29.3%.
Revenues increased a solid 10.7% year over year to $70.5 million, beating the Zacks Consensus Estimate of $69 million. However, loss per share of 15 cents, although narrower compared with the Zacks Consensus Estimate of loss of 28 cents, deteriorated a massive 50% from the year-ago loss of 10 cents per share.
On the international reimbursement front, currently, the company retains exclusive distribution agreements for the sale of its breast cancer tests with distributors covering more than 90 countries. At present, Genomic Health covers a population of more than 120 million people with its breast cancer test specimen.
Although the company's Oncotype DX colon cancer test is yet to contribute significantly to top-line growth, currently Genomic Health covers 5 million lives in the U.S. for Stage II colon cancer. A health economic analysis recently published in the PharmacoEconomics journal revealed that the Oncotype DX colon cancer test can potentially reduce direct medical expenses while improving patients' health. Currently, the company is approaching additional public and private payors and health plans to secure coverage for its colon cancer test, supported by clinical evidence validating the test utility.
Genomic Health's double-digit top-line performance in the quarter also generates optimism. The company's flagship product – the Oncotype DX breast cancer test –delivered impressive results in the second quarter as well, fueled by consistent international adoption and reimbursement success.
During the quarter, the company also completed its first prostate cancer decision impact study and plans to submit the results for presentation and publication soon. We expect this to boost the adoption and reimbursement for Genomic Health's prostate cancer test in the second half of 2014.
Currently, Genomic Health is focused on delivering revenue growth through constant investment for higher adoption of its tests across three major cancers. Despite an over-dependence on the breast cancer test, high operating expenses, potential risks from early-stage pipeline products and rising pricing pressure, the company expects to include new and potential opportunities on the DCIS (Ductal Carcinoma in Situ), prostate and international fronts. At present, the stock carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Some other well-placed stocks from the Med-Biomed/Generic industry include Anthera Pharmaceuticals, Inc. (ANTH), Cambrex Corporation. (CBM) and Gilead Sciences Inc. (GILD). All these stocks carry a Zacks Rank #1 (Strong Buy).
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