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Genomic Health's Q1 Revenues Rise 6 Percent

NEW YORK (GenomeWeb) – Genomic Health reported after the close of the market Tuesday that its first quarter revenues were up 6 percent year over year driven by increased sales for its Oncotype DX tests.

The Redwood City, Calif.-based molecular diagnostics firm brought in total revenues of $67 million for the three months ended March 31, up from $63.1 million in the first quarter of 2013 but below the consensus Wall Street estimate of $68.5 million. All of its revenue in the most recent quarter came from product sales.

Genomic Health said that it delivered 23,080 Oncotype DX test results in the quarter, an increase of 13 percent from 20,350 in Q1 2013. It said that test results for international customers grew 43 percent year over year and now represent 20 percent of total test volume.

"In the first quarter of 2014 we expanded penetration of the US breast cancer market … achieved exceptional international growth, and increased adoption of our recently launched prostate cancer test, which represents a large new market opportunity for Genomic Health," Kim Popovits, chairman, CEO, and president of Genomic Health, said during a conference call following the release of the company's financial results.

"Additionally, our international focus drove reimbursement progress and guidelines inclusions in key targeted markets, supporting increased global adoption of the Oncotype DX breast cancer test. … To date we have provided test results to patients in more than 70 countries and have secured reimbursement coverage for approximately 115 million patients outside the US," Popovits added.

The firm posted a net loss of $7.4 million, or $.24 per share, for the quarter, up sharply from a loss of $883,000, or $.03 per share, for Q1 2013. Analysts, on average, had expected a loss of $.18 per share.

Its R&D spending climbed 7 percent to $14.7 million from $13.7 million, and its SG&A expenses jumped 17 percent to $47.5 million from $40.6 million.

According to CFO Dean Schorno, increases in operating costs were "as planned," and primarily a result of accelerated investment to support expansion of the company's prostate test and international sales and marketing efforts.

"We expect to increase investment in Q2, resulting in higher operating expenses and a higher net loss," he said during the call.

Schorno also said that Genomic Health's test volume during the quarter was lower than the company expected due to extended harsh weather conditions across the eastern US.

Genomic Health finished the quarter with $28.2 million in cash and cash equivalents and $72.6 million in short-term marketable securities.

Among the recent business highlights cited by the firm was a test-specific CPT code that the American Medical Association granted for Oncotype DX breast cancer, "making it the first and only test to meet Category 1 utilization and evidence requirements for risk of recurrence and chemotherapy prediction."

Genomic Health also said that Palmetto GBA, a designated national contractor for molecular diagnostic tests, expanded its coverage policy for the Oncotype DX colon cancer test to include all qualified Medicare patients beyond stage II disease and now includes select stage III A/B patients.

During the call, COO Brad Cole said that to date more than 675 physicians have ordered Genomic Health's Oncotype DX prostate test and more than half have ordered the test for multiple patients, "underscoring the value it provides in the clinical setting." However, the test still represents only a small percentage of the company's overall test volume.

To support continuing adoption and reimbursement, Cole said that Genomic Health is on track to present results mid-year from a second validation study of Oncotype DX prostate, as well as additional data from decision impact studies. The company also expects to share results from a pivotal study of Oncotype DX breast in ductal carcinoma in situ.

"With our success to date and in anticipation of our new study results, we remain confident that we are well positioned to achieve our goal of generating $1 billion in revenue by 2020, from what we estimate to be a $3.5 billion global market opportunity with our current suite of tests," said Popovits.

In Wednesday morning trade on the Nasdaq, shares of Genomic Health were down 7 percent at $24.10.