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Genomic Health Q4 Revenues Rise 22 Percent; International Efforts Expected to Push 2019 Growth

NEW YORK (GenomeWeb) – Genomic Health reported today that its fourth quarter revenues rose 22 percent year over year, beating the consensus Wall Street estimate of $101.5 million.

For the three months ended Dec. 31, 2018, the company's total revenues were $104.6 million compared to $87.5 million reported in Q4 2017 and $85.7 million adjusted to a subsequent switch to the ASC-606 accounting standard.

In the US, Genomic Health's product revenue was $88.6 million in Q4 2018, 23 percent more than the $72 million it saw in the same period in 2017, or $73.5 million as reported pre-606. Invasive breast cancer test revenue was $79.3 million, up 22 percent from a pre-606 adjusted revenue of $64.7million in Q4 2017. And prostate cancer test revenue totaled $7.4 million during the quarter, a 48 percent increase year over year.

International quarterly revenues increased 19 percent year over year to $16.0 million from $13.7 million as reported and $13.4 million adjusted for the new ASC-606. On a constant currency, non-GAAP basis, this translated to a 21 percent increase, the company added.

Overall, the firm said that it delivered more than 35,530 Oncotype test results in the fourth quarter of 2018 compared to 31,990 in Q4 2017. Breast cancer test volume grew 9 percent compared to the prior year's quarter while prostate test volume was up 19 percent. Its international tests delivered grew 15 percent and represented approximately 24 percent of total test volume in the quarter.

The company's R&D costs rose about 11 percent in Q4 2018 to $16.6 million from $14.9 million in the same quarter of 2017. Its SG&A spending was also up 11 percent at $62.8 million compared to $56.5 million.

The company reported net income of $8.9 million, or $0.23 per share, in Q4 2018, compared to $1.9 million, or $.05 per share, in Q4 2017.

Non-GAAP net income was $12.4 million in the fourth quarter of 2018, an improvement of $9.5 million from $2.9 million in Q4 2017.

Genomic Health President, CEO and Board Chairman Kim Popovits called 2018 a "record year" for the firm. "In December, we achieved a significant milestone delivering our one millionth Oncotype DX test," she said in a statement. "We expect this momentum to continue [in 2019] as we increase penetration of our Oncotype DX tests both in the US and key European markets," she added.

In a call discussing the company's Q4 and full-year earnings, Popovits also highlighted milestones for the firm's prostate cancer tests in the US, including strengthened NCCN guidelines regarding the Oncotype DX GPS assay driving new private payor reimbursement, and the Medicare local coverage determination for the AR-V7 it launched with Epic Sciences being finalized last December.

According to Genomic Health COO and CFO Brad Cole, Genomic Health expects revenue from the AR-V7 test to reach about $5 million this year.

This comes alongside progress for the firm's core breast cancer test in international markets, including an anticipated reimbursement decision from Germany's national reimbursement decision body.

Cole said that about 40 percent of the company's projected 2019 growth is expected to come from expansion internationally.

"The great uptick we saw in the international markets post TAILORx, we believe is going to continue throughout the year, particularly in markets where penetration levels aren't like the US … particularly with German reimbursement anticipated to contribute to revenues in ways that it hasn't in the past," he said during the call.

He added that the company plans to invest, albeit incrementally, in expanding its German sales team "… even in advance of the [national coverage] decision and in advance of full reimbursement."

"We demonstrated that that market can be a robust grower and be much more highly penetrated ... so I think there's an appetite certainly for the for the product and we've got people focused on driving volume especially," Cole said.

For the full year, Genomic Health posted $394.1 million in revenue compared to $340.8 million for the previous year, beating analysts' average estimate of $391.1 million. Adjusting the prior year's revenue to the new ASC 606 accounting standard, 2018 revenues increased 18 percent over $334.0 in 2017 Genomic Health said.

The company's full-year US product revenues rose 19 percent to $334.7 million from a pre-606 adjusted $281.6 million, or $287.4 million as reported at the time. Within the total US product revenues, $299.4 million came from invasive breast cancer testing compared to $259.7 million in 2017. Prostate tests contributed $26.8 million, a 50 percent increase from $17.9 million in the prior year.

International product revenue for 2018 was up 14 percent at $59.4 million compared to pre-606 adjusted $52.0 million in 2017 ($53.1 million as reported). This translated to a 12 percent increase on a non-GAAP constant currency basis, the company said.

Overall, the firm said it delivered more than 136,380 Oncotype DX test results in 2018, an 8 percent increase over the 126,730 results it distributed in 2017. Breast cancer test volume in the US was up 7 percent year over year, and prostate tests delivered were up 23 percent compared to 2017. International test volume grew 4 percent, coming to represent about 24 percent of total test volume in 2018.

The company's R&D spending for the full year rose about 2 percent to $64.2 million from $62.8 million in 2017, and its SG&A costs were $241.7 million, about five percent from $229.7 million spent the previous year.

Genomic Health saw GAAP net income of $25.7 million in 2018, or $0.68 per share, compared to a loss of $3.9 million, or $.11 per share, in 2017.

Non-GAAP net income was $39.7 million for 2018 compared to a $1.6 million net loss the prior year.

Genomic Health ended the year with cash and cash equivalents of $61.6 million and short-term marketable securities of $148.1 million.

The company provided guidance for full year 2019 total revenues between $436 million and $448 million, representing growth of between 11 percent and 14 percent compared to 2018. EPS is expected to be in the range of $1.23 to $1.38, and adjusted EPS is expected to be between $1.38 and $1.54.

In early morning trading on the Nasdaq, shares were down about 7 percent at $78.09

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