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Genomic Health Posts Flat Q2 Revenues, Misses Wall Street Estimates

NEW YORK (GenomeWeb) – Genomic Health reported after the close of the market Tuesday that its second quarter revenues were flat year over year, falling short of the consensus Wall Street estimate.

The Redwood City, California-based molecular diagnostics firm had total revenues of $70.6 million for the three months ended June 30, compared to $70.5 million in the second quarter of 2014. It fell short of the consensus Wall Street estimate of $71.7 million.

As in the first quarter, all of Genomic Health's revenues in the most recent quarter came from product sales.

Genomic Health said that it delivered more than 26,060 Oncotype DX test results in the second quarter, an increase of eight percent from the 24,050 tests it performed in Q2 2014.

The company's two most recently launched tests saw even larger increases, with more than twice as many prostate tests preformed in the quarter compared to the previous year, and an 80 percent year-over-year increase in testing for ductal carcinoma in situ (DCIS), the firm announced.

Although international test volume increased 13 percent year over year, international test revenue decreased to $9.9 million in the second quarter of 2015 from $11.9 million in the second quarter of 2014. According to Genomic Health officials, this decrease was influenced by foreign exchange rate differences due to the stronger dollar as well as by differences in the timing of test reimbursement compared with the previous year's quarter.

The firm posted a net loss of $ $9.2 million, or $.29 per share, for the quarter, almost twice its loss of $4.6 million, or $.15 per share, in Q2 2014. On average, analysts expected a loss of $.27 per share.

Its R&D spending rose to $14.6 million from $12.6 million in the year-ago quarter. Its SG&A expenses also rose to $53.8 million from $50.2 million.

Despite a lack of revenue growth in the second quarter, Genomic Health officials said during a call discussing the results that an increase in test volume still signifies continued progress toward the firm's goal of delivering double-digit revenue growth by the end of the year.

Kim Popovits, Genomic Health's President and CEO, said during the call that the company reached several other milestones during the quarter that will contribute to its achieving this goal.

Importantly, Genomic Health received a favorable draft local coverage determination from Medicare Administrative Contractor Palmetto GBA recommending coverage of the Oncotype DX prostate cancer test for qualified Medicare patients throughout the United States. According to Popovits, the company expects this draft to become final in the fourth quarter of this year.

In addition, Genomic Health also finalized contracts with theUK's NHS to begin collecting payment from hospitals ordering Oncotype DX for eligible breast cancer patients as recommended by NICE.

"Both of these accomplishments ... have increased our confidence in our plan to deliver double-digit revenue growth and profitability by year end … a commitment we made in 2014, when we announced our strategic decision to invest in three large growth opportunities — prostate, DCIS, and international," Popovits said during the call.

"We believe the record growth in tests we are reporting today reflects the successful execution of those investments and is a leading indicator of future revenue growth," she added.

Finally, the firm also said that coverage of the Oncotype DX breast cancer test for patients with 1-3 positive nodes has expanded to include nearly 30 million additional lives through new policies withAetna, Emblem Health, and Carefirst. This has brought the total number of node-positive covered lives to more than 130 million.

Genomic Health announced along with its second quarter results that it is updating its financial guidance for the full year ending Dec. 31, 2015, to reflect changes in foreign currency rates.

The firm expects revenue in the range of $289 million to $302 million, down from the $292 million to $305 million initially forecast. It also predicted a net loss for the year between $19 million and $26 million, rather than the $17 million to $24 million range it predicted earlier.

"While we are adjusting our financial guidance to reflect an estimated $3 million impact on revenue from the effect of foreign exchange rates, our expectations regarding the level of Oncotype DX tests remain unchanged, reflecting the strong growth across markets that we delivered in the first half of the year," said Genomic Health COO and CFO Brad Cole.

Genomic Health finished the quarter with $23.8 million in cash and cash equivalents and $95.9 million in short-term marketable securities.

In early Wednesday trade on the Nasdaq, shares of Genomic Health were down around 1 percent at $26.00.

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