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Genomic Health Q4 Revenues Climb 14 Percent as It Targets Prostate Cancer, International Markets for Growth

NEW YORK (GenomeWeb News) – Genomic Health said after the close of the market on Tuesday that its revenues in the fourth quarter increased 14 percent year over year.

Total revenues for the three months ended Dec. 31, 2013 came in at $68.8 million, up from $60.4 million, but short of the average analyst estimate of $69.2 million. Product revenues rose 12 percent to $67.1 million from $60 million, while contract revenues rose more than four-fold to $1.8 million from $429,000.

The Redwood City, Calif.-based cancer genomics testing company said that it delivered more than 22,720 Oncotype DX test results in the quarter, up from 18,820 a year ago.

For the quarter, it saw a loss of $9.4 million, or $.30 per share, compared to a profit of $2.0 million, or $.06 per share, a year ago, and well short of the consensus analyst estimate of a loss per share of $.03.

Genomic Health said that the net loss for the recently completed quarter includes an upfront payment of $9.0 million for an in-licensing agreement with Almac. In November, the two firms reached a deal covering Almac's technology and intellectual property and the development by Genomic Health of a multi-gene test for predicting the benefits from DNA damage-based chemotherapy drugs. Excluding the payment, its net loss for the quarter was $400,000, it said.

The firm's R&D costs in the quarter were up 81 percent year over year to $24.1 million from $13.3 million, while its SG&A costs rose 20 percent to $42.4 million from $35.4 million.

On a call following the release of the company's financial results, CFO Dean Schorno said that Genomic Health made an investment into genetic diagnostics firm Invitae of an additional $6 million during the fourth quarter.

Invitae was originally formed as a wholly owned subsidiary of Genomic Health in early 2012 and became an independent company later that year, combining with genetics firm Locus Development. In December, it announced a Series E financing round that raised $40 million.

In full-year 2013, Genomic Health posted $261.6 million in revenues, up 11 percent from $235.2 million, and just short of the consensus Wall Street estimate of $261.8 million.

Product revenues increased 11 percent to $259.2 million from $233.5 million, while contract revenues rose 42 percent to $2.4 million from $1.7 million. More than 85,500 Oncotype DX test results were delivered in 2013, up from 74,520 in 2012, Genomic Health said.

The company had a loss of $12.8 million, or $.42 per share, in 2013, compared to a profit of $8.2 million, or $.26 per share, in 2012, missing the average analyst estimate of a loss of $.14 per share.

Genomic Health's R&D spending increased 35 percent to $66.3 million from $49.1 million, and SG&A costs rose 17 percent to $165.0 million from $140.6 million.

On the call Schorno said that in addition to the Almac payment, investments associated with the launch of the Oncotype DX prostate cancer test in May and continued sales and marketing investments to support international opportunities contributed to the net loss for the year.

The firm ended the year with $33.3 million in cash and cash equivalents, and $72.1 million in short-term marketable securities.

The company provided guidance of $278 million to $286 million in total revenues for 2014, and a basic net loss of between $.75 and $.95 per share. It said that it anticipates delivering between 98,000 and 102,500 Onctotype DX tests.

"Given the large prostate cancer opportunity, we are choosing to accelerate our investment to drive test volume while continuing to strategically invest in R&D programs for the long-term growth of the company," Schorno said. "Our investment in the prostate cancer opportunity is the primary driver of the planned loss in 2014."

He added on the call that in 2014 the prostate cancer test is expected to comprise about 10 percent of total tests delivered, compared to 3 percent of all tests at the end of 2013.

COO Brad Cole said on the call that more than 500 doctors and 80 percent of Genomic Health's targeted urology accounts have ordered the prostate cancer test, and more than half have ordered it for multiple patients. As a result, the firm has decided to increase its urology field team, and by the middle of 2014 it expects to expand the team to more than 30 people.

The market opportunity for the current indication of the test is 140,000 patients, or more than $400 million, in the US, he said, surpassing the invasive breast cancer space, which generated "the significant majority of the company's revenues" in 2013.

President and CEO Kim Popovits noted that in 2013 Genomic Health continued to increase adoption and market penetration of its breast cancer test in the US invasive breast cancer market, which she called "a substantial opportunity for near-term growth."

Company officials also noted expansion of the firm's international presence in 2013, as international test volume grew by more than 49 percent during the year.

"We expect international revenue growth to begin to match test growth over time as we gain additional reimbursement traction in Western Europe where we have a growing direct presence and market opportunity of approximately $400 million," Cole said.

Priorities for 2014 include publication of a prostate validation study, Popovits said, and completing and reporting top-line results from a second prostate cancer study evaluating biochemical recurrence, as well as adverse pathology in low-risk patients. The second study is expected to be completed mid-year.

Genomic Health also aims to complete and report top-line results from a second ductal carcinoma in situ study, expected to happen around mid-year, and initiate the first study of the firm's proprietary liquid platform. Another priority is completion of its next-generation sequencing gene identification study in invasive breast cancer, Popovits said.

In Wednesday morning trade on the Nasdaq, shares of Genomic Health fell 8 percent to $27.06.