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After Profitable Q2, Genomic Health Pushing Growth of Existing and New Dx Markets

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In reporting its second quarter financials, Genomic Health attributed an 11 percent increase in year over year revenues to the continued use of its Oncotype DX breast cancer recurrence test in the invasive breast cancer space and especially strong adoption of its tests in international markets.

For the three months ended June 30, Genomic Health reported revenues of nearly $64 million, all of which were from the use of its products, compared to approximately $58 million during the same period last year. During the year-ago period, the company had $446,000 in contract revenues in addition to product revenues.

"These results reflect higher US invasive breast cancer penetration and the continued success of our international expansion," Genomic Health CEO Kim Popovits said during a call with analysts to discuss the company's financials.

International product revenues saw a 58 percent year over year boost to $9.2 million, comprising 14 percent of total product revenues. International product revenues were driven mainly by use of the Oncotype DX breast cancer test.

During the second quarter, Genomic Health established coverage for the Oncotype DX breast cancer test with private payors in Argentina covering 4 million lives. There also was an uptick in adoption in Western Europe, according to Bradley Cole, Genomic Health's COO. "We have got reimbursement in Ireland, and in private [payors] in the UK, where we continue to see growth, and even in markets where we've had reimbursement for a while, such as Canada, we're continuing to see growth."

According to Dean Schorno, Genomic Health's CFO, the company's second quarter revenues remained relatively similar to the first quarter "due to historic seasonal patterns, along with the impact of sequestration." In the first quarter, Genomic Health reported $63 million in revenues.

Genomic Health delivered more than 20,640 Oncotype DX tests in the second quarter, marking a 9 percent increase from the 2012 quarter.

The company's net loss for the quarter was $3 million compared to net income of $1.8 million in the year-ago period. The loss was expected due to the launch of its prostate cancer test and international expansion efforts, and, Schorno added, "With these continued investments, we expect a small loss in the third quarter."

Genomic Health's R&D costs for the quarter were $13.8 million, compared to $11.6 million for the second quarter in 2012. Meanwhile, the company's SG&A spending declined 9 percent year over year to $32 million from $35.2 million.

Genomic Health finished the quarter with cash and cash equivalents of $32.8 million and short-term marketable securities of $74.4 million. Cash and cash equivalents and short-term investments at June 30, 2013 were $107.3 million, compared with $99.1 million at December 31, 2012.

Quarter milestones

In the second quarter, Popovits highlighted the launch of Genomic Health's prostate cancer test and Medicare coverage for the Oncotype DX ductal carcinoma in situ score as two milestones for the company.

Cole said during the earnings call that initial response from urologists about the Oncotype DX prostate cancer test has been positive, and the company is "pleased with the initial uptake" of the test. Genomic Health recently submitted its first validation study for the prostate cancer test for publication, which when achieved will help further drive test adoption.

Additionally, Genomic Health is already working on a second validation study for the prostate cancer test. "We executed an agreement for a second large prostate cancer study that will look at biochemical recurrence, as well as adverse pathology in low risk patients, which we expect to complete early next year," Steve Shak, Genomic Health's chief medical officer, said during the call.

Medicare contractor Palmetto GBA's decisions to cover the Oncotype DX DCIS score will also likely bolster use of that test. Cole estimated that around 50,000 patients are diagnosed with DCIS annually in the US and increasingly more women around the world are being diagnosed with this non-invasive condition.

"DCIS represents another early-stage cancer widely overtreated due to the lack of a reliable method to identify a low-risk population for whom surgical excision alone may be adequate," Shak said.

Genomic Health published a validation study recently showing that the DCIS test score can predict beyond standard measures which women are at 10-year risk of local recurrence of breast cancer or at risk for invasive cancer. As such, the company is marketing the test as a tool that doctors can use to decide whether a patient needs radiation after surgery, or whether she can do well with just surgery.

Genomic Health is conducting a large study to hone in on the specific disease characteristics of the DCIS patient population that can benefit from the test score. The company is in the process of "finalizing sample collection for another large clinical study" that will look at a broader DCIS population, including more women with larger tumors and patients with estrogen receptor-negative disease, Shak said. This study is slated for completion early next year.

Genomic Health garners more than 80 percent of its revenues currently from the use of the Oncotype DX test in the US in early-stage, estrogen receptor-positive breast cancer patients. However, data presented at the American Society of Clinical Oncology's annual meeting in early June suggested that the Oncotype DX recurrence score could be informative for women with metastatic disease.

Researchers from Genomic Health and elsewhere analyzed more than 100 samples from patients who either had cancer metastases with an intact primary tumor or metastases within three months of surgery of the primary tumor. In the study, the Oncotype DX recurrence score groups – high risk, intermediate risk, and low risk – were prognostic for time to progression in estrogen receptor positive patients and for two year survival in estrogen receptor-positive, HER2-negative patients.

The study findings suggest that "a high recurrence score may be a surrogate for endocrine resistance and could be used to select patients with estrogen receptor-positive, Stage IV breast cancer for chemotherapy," the study authors wrote in an abstract. The investigators are further analyzing the data and noted the need for a randomized trial to further look into this early finding.

During the second quarter, Genomic Health also made progress with its ongoing collaboration with Pfizer and began processing samples for a renal cell carcinoma validation study the companies are jointly conducting. "The goal of this program is to develop a prognostic test that can assist drug manufacturers in the development and potential commercialization of renal cancer therapies in the adjuvant setting," Shak said. "The commercial delivery of a test will be dependent on the outcomes of these ongoing drug studies."

This study is slated for completion in the fourth quarter of 2013. "We expect the milestone payment of $1.5 million" from this collaboration "to be recognized as revenue in the fourth quarter," Schorno said.

Finally, Genomic Health and OncoMed are working together to investigate cancer stem cell biology. This collaboration is "aimed at the development of a companion diagnostic," Shack noted.

New franchise

With the commercial introduction of the Oncotype DX prostate cancer test in May, Genomic Health launched its third diagnostics franchise.

The Oncotype DX prostate cancer test analyzes the expression of 17 genes within four biological pathways to gauge prostate cancer aggressiveness. According to Shak, the genes were determined from two Cleveland Clinic studies based on their ability to predict critical prostate cancer endpoints, such as adverse pathology, biochemical recurrence, the rise of prostate-specific antigen in blood, clinical recurrence, the development of metastasis, and prostate cancer-specific survival.

The test reports a genomic prostate score from 0 to 100; the lower the score the more certain a patient can be that he can avoid treatment and continue with active surveillance. Prostate cancer patients who are deemed to be at very low risk, low risk, or intermediate risk of disease progression by clinical factors are eligible to be tested with the Oncotype Dx test. If, based on standard clinical measures, a person's prostate cancer is considered high risk, then he is not a candidate for Genomic Health's test.

Earlier this year, researchers from the University of California, San Francisco presented data from the first validation study involving the prostate cancer test. That study –involving nearly 400 patients considered to be at low or intermediate risk of prostate cancer by standard methods such as Gleason score – showed that when the Oncotype DX score was used in conjunction with other measures, investigators identified more patients as having very low risk who were appropriate for active surveillance than when they were diagnosed without the test score.

More than one-third of the study subjects were classified from low risk to very low risk when the Oncotype DX score was factored in. Meanwhile, 10 percent of patients originally thought to be at low or very low risk, were found to have aggressive disease when the molecular test score was considered.

With the presentation of the first study, urologists responded well to the fact that the Oncotype DX test could identify patients appropriate for active surveillance, according to Popovits. "I think we're especially pleased with the reaction and the acceptance of the endpoint that we chose, which was active surveillance, being very meaningful in terms of the adverse pathology and upgrading … for these early-stage patients," she said during the call. "So, we want to also look at that endpoint in the next study, but … we're going to pursue answering additional clinical questions along with those."

The second validation study for the prostate cancer test will investigate what the test score says about not only adverse pathology, but also biochemical recurrence in low-risk patients. The impact of the Oncotype DX score on biochemical recurrence endpoint will allow insights into longer term outcomes, such as how deadly a patient's cancer is and if it will lead to metastasis.

Genomic Health is currently marketing the prostate cancer test to payors and physicians with 15 sales representatives. "We certainly understand that that's not the field team it's going to take to be the leader in the field, but it's a great place to start," Cole said during the call.

"We've had quite a good reception from urologists we've called on," he said. "In fact, we're having trouble keeping up with all the urologists who are contacting us." Cole noted that in order to realize the market potential in the prostate cancer space, the company will likely need a sales force similar to that working the breast cancer Oncotype DX market, which has more than 100 reps.

In order to get payors on board and garner coverage for the prostate cancer test, Popovits acknowledged that the company will have to publish the first validation study and do other studies looking at different clinical questions. Other than the two validation studies company officials detailed during the call, Genomic Health has six additional studies planned in prostate cancer.

"I think we feel great about the fact that where we took the first question in prostate was early-stage prostate cancer, and urologists have embraced that, because it's the question they want to answer now," Cole said. "They know patients need active surveillance, [and] it's probably … their first step in caring for their cancer. Yet they … need more tools to help them stay that course."

According to an NIH estimate, in 2010, the annual medical costs associated with prostate cancer in the US were $12 billion. It is estimated that each year 23 million men undergo testing for prostate specific antigen, a protein produced by the prostate gland that increases when a man has prostate cancer. Additionally, one million men get a prostate biopsy annually, while 240,000 men end up with a diagnosis for prostate cancer, and around 30,000 die from the disease. Although most of the men diagnosed with prostate cancer end up receiving surgery or radiation treatment, as many as half of these men will probably not progress, and their disease isn't life threatening.

In Genomic Health's interactions with urologists so far, "they've really embraced this [test] as answering that question," as to who needs active surveillance, "and they're not as concerned about Gleason 8s, or what have you, on higher-stage, higher-risk prostate cancer," Cole said.

In the prostate cancer space, Genomic Health's main competitor is Myriad. The Utah-based molecular diagnostics firm markets Prolaris to help doctors gauge prostate cancer aggressiveness. Prolaris gauges 31 cell cycle progression genes and 15 housekeeper genes. The test has been investigated in nine studies; four have been published and one has been accepted for publication (PGx Reporter 6/12/2013).

According to Myriad, most of the roughly 3,000 Prolaris orders have been primarily for treating early-stage prostate cancer, where the test is used to analyze biopsy samples at diagnosis to assess the risk of disease progression. Myriad also markets the test in the post-prostatectomy setting, where Prolaris is used to gauge which prostate cancer patients are at high risk of progression and should be followed more closely or treated with adjuvant external beam radiation therapy or systemic therapy.

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