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Genomic Health Stock Slides 5 Percent After Analyst Cites Regulatory Concern

NEW YORK (GenomeWeb News) — Share in Genomic Health were down 4.85 percent, or $1.15, at $22.57,  in mid-afternoon trading today after Lehman Brothers cut the company’s market rating to ‘equal weight’ from ‘overweight.’
According to Reuters, an analyst at the investment bank said he expects the company’s share price to fall if the US Food and Drug Administration enacts regulations that would make it more difficult for the company to sell its Oncotype Dx test.

Oncotype Dx predicts whether women with early breast cancer will respond to chemotherapy.

"While we remain optimistic regarding [Genomic Health] prospects for maintaining momentum with tests billed, gaining favorable regulatory action and staying ahead of inevitable competitors, we believe that at current valuation levels these assumptions are largely factored in," Reuters said analyst Jim Birchenough wrote in a research note today.

As GenomeWeb News sister publication Pharmacogenomics Reporter wrote last fall, the FDA issued an unscheduled draft guidance that seeks to encourage molecular diagnostic companies to file for pre- and post-market review tests that use an algorithm to generate results from multiple data points, rather than follow traditional homebrew rules.
The agency composed the draft following meetings with Genomic Health, whose Oncotype Dx uses a gene-expression profile to calculate the likelihood of breast cancer recurrence.
The document, Draft Guidance for Industry, Clinical Laboratories, and FDA Staff – In Vitro Diagnostic Multivariate Index Assays, is meant to help answer the murky question of who oversees this fairly new category of devices.
Through the draft, the agency appears to be trying to prevent other companies from taking the same regulatory route as Genomic Health took with its Oncotype Dx test. The firm began selling the test, which is performed in its own CLIA-approved lab, without seeking regulatory approval.
At the time, Genomic Health co-founder Patrick Terry said the company is “still in dialogue with the FDA over this whole space of these types of technologies” and plans to “work with the FDA in thinking through this process.”
“Obviously guidances and draft guidances don’t have the effect of law or regulations, so there’s no immediate impact,” Terry said. However, he said the company is pleased that the FDA is clarifying which areas it feels are suited to oversight.
The draft guidance can be seen here.
Genomic Health today did not immediately return a telephone call seeking comment.

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