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Genomic Health Delivers First Quarterly Profit; Lowers Guidance

By a GenomeWeb staff reporter

This article has been updated from a previous version to include comments from company officials.

NEW YORK (GenomeWeb News) – Genomic Health reported after the close of the market Wednesday that its second-quarter revenues increased 19 percent year over year, and the firm posted its first-ever quarterly profit.

However, citing "market and economic conditions," the firm lowered its revenue and earnings guidance for the year.

Genomic Health brought in total revenues of $43.4 million for the three-month period ended June 30, compared to $36.6 million for the second quarter of 2009. It fell short of analysts' consensus estimate for revenues of $44.2 million.

The firm delivered 14,050 of its flagship Oncotype Dx test results during the quarter, up 18 percent year over year.

Genomic Health posted a profit of $865,000, or $.03 per share, compared to a net loss of $3.9 million, or $.14 per share, for Q2 2009. It beat analysts' expectations for a loss per share of $.02.

Genomic Health President and CEO Kim Popovits said that the profit was driven by "growth in both new markets and our US node-negative breast cancer business, as well as effective cost-control measures."

The firm's R&D spending for the quarter declined 13 percent to $8 million from $9.2 million, and its SG&A expenditures increased around 12 percent to $26.3 million from $23.4 million.

Despite the increase in revenues and turning a profit, Genomic Health said that it was lowering its guidance for full-year 2010. It now expects revenues of between $174 million and $178 million, down from previous guidance of between $180 million and $190 million. It also now expects to break even or report a net loss of up to $3 million versus earlier guidance of net income up to $2 million.

During a conference call to discuss the quarterly results, Genomic Health COO and CFO Brad Cole said that the revised guidance reflects the company's expectations for "more modest growth" in the US for its Oncotype Dx test for node-negative, estrogen-receptor-positive breast cancer.

He added, however, that "newer markets," such as overseas as well as the markets for node-positive brest cancer and colon cancer, "continue to demonstrate strong growth" for the company.

Cole added that the company "refocused" its sales force on the node-negative market in the second quarter after reporting a decline for that business in the first quarter.

He said that the effort "resulted in modest sequential growth in node-negative breast cancer tests" for the quarter, though he did not elaborate.

Genomic Health finished the quarter with $15.2 million in cash and cash equivalents, and $46.7 million in short-term investments.

In early Thursday trade on the Nasdaq, shares of Genomic Health were up 3 percent at $14.13.

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