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Genomic Health Says International Markets, New Oncotype Indications are Key to Future Growth

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Originally published Aug. 4.

By Bernadette Toner

Genomic Health officials said this week that after several years of rapid growth for the company's flagship Oncotype Dx assay for node-negative, estrogen receptor-positive breast cancer, it anticipates "more modest" growth for that business in the US over the next year.

However, newer markets in which the company is still working to secure reimbursement — namely, overseas, as well as the markets for node-positive breast cancer and colon cancer — still represent a significant opportunity for accelerated growth in the years ahead, officials said during a conference call to discuss the company's second-quarter earnings.

For the three months ended June 30, 2010, Genomic Health recorded its first quarterly profit — $865,000 — compared with a net loss of $3.9 million in the second quarter of 2009. It also reported an 18 percent increase in total revenue to $43.4 million from $36.6 million in the second quarter of 2009, while product revenue increased 21 percent to $42.5 million from $35.2 million in the prior-year quarter.

The company delivered 14,050 Oncotype Dx test results in the second quarter compared with more than 11,880 test results delivered in the second quarter of 2009.

These strong results were slightly dampened, however, by a revision of its previous guidance for the number of tests it would deliver this year, which it lowered to a range of 56,000 to 58,000 from previous projections of 58,000 to 61,000.

As a result, the company lowered its full-year revenue guidance to between $174 million and $178 million, from previous estimates of between $180 million and $190 million. It also lowered guidance for its bottom line, projecting a range of break-even to a net loss of $3 million. It had previously estimated full-year net income of up to $2 million.

"These adjustments reflect our expectations for more modest growth in our US node-negative business," Genomic Health COO and CFO Brad Cole said during the call. He added, however, that "newer markets where we are working to further establish reimbursement continue to demonstrate strong growth, delivering more than 100 percent year-over-year test-delivered growth."

Kim Popovits, president and CEO of the firm, also cited "significant expansion in our international, node-positive breast cancer, and colon cancer markets" in the second quarter. Combined, she said these newer markets now represent approximately 25 percent of the company's total test volume.

Specifically, the company's international business and node-positive test sales each contribute slightly more than 10 percent of total test volume, Cole said.

He added that the company is beginning to see its "first cash payments" for Oncotype Dx Colon Cancer, which it launched in the US in January. He noted, however, that the company does not expect to see "substantial revenue contribution" from that test until 2011.

Upon its launch in 2004, Oncotype Dx was validated for use in women with early-stage, node-negative, ER-positive breast cancer. Since then, the company has expanded the test's indication into node-positive women as well as colon cancer, and it has plans to apply it in new indications such as kidney cancer, ductal carcinoma in situ, and prostate cancer.

But even as it expands its reach into new markets, the company believes there is still a large addressable market for its legacy node-negative test.

"We have an opportunity to reach an additional 50,000 eligible breast cancer patients in the US who today are not benefiting from the incorporation of the [Oncotype Dx] recurrence score result in their treatment planning," Popovits said during the call. "As our market analysis reveals significant variability in usage among physicians and within regions, we are tailoring our approach to address this significant opportunity."

Cole added that the company "refocused" its sales force on the node-negative market in the second quarter after reporting a decline for that business in the first quarter. He said that the effort "resulted in modest sequential growth in node-negative breast cancer tests" for the quarter, though he did not elaborate.

Popovits said that for the remainder of the year, the firm expects "a modest increase per [sales] rep to deliver steady growth" for Oncotype Dx Breast Cancer in the US.

The company has also increased the list price of the Oncotype Dx Breast Cancer assay to $4,075. The list price for Oncotype Dx Colon Cancer is $3,200.

Overseas, the company recently hired sales representatives in Germany and Ireland, added personnel to its Geneva-based European team, and established an international call center to provide customer service outside the US, Popovits said.

She added that outside the US, more than 27 million lives are currently covered for the Oncotype Dx Breast Cancer test in regions of Germany, Canada, Israel, Greece, and the UK.

Popovits noted, however, that it will likely take "several years" to get to the same level of reimbursement in these nations as the 90 percent reimbursement level that the company now claims for its node-negative test in the US.

'Strong Growth' for Colon Cancer Test

Popovits said that the company "continued to see strong growth" for the colon cancer test during the quarter, and cited progress on a number of fronts toward accelerating that business.

For example, during the quarter, the company obtained approval from the New York State Clinical Laboratory Evaluation Program to offer the colon cancer test to patients in New York, which, she noted, makes the test available in all 50 states.

In addition, the Mayo Clinic recently began the first study to evaluate how the colon cancer test impacts treatment decisions for stage II colon cancer patients. "Based on our experience with breast cancer decision impact studies, we believe these results will provide physicians, payors, and patients even greater confidence in using the Oncotype Dx colon cancer test," she said.

In addition, she cited the recent publication in the Journal of Clinical Oncology of an analysis of four independent studies involving more than 1,800 patients that identified the 12 genes for the Oncotype Dx Colon Cancer recurrence score, along with a companion editorial that "highlighted the importance of rigorously validated multi-gene assays that quantitate recurrence risk to improve the management of patients with early-stage colon cancer."

In the editorial, Josep Tabernero and José Baselga of University Hospital in Barcelona, Spain, note that gene expression signatures for colon cancer recurrence developed by Genomic Health and several other groups "are likely to provide more robust information regarding prognosis and sensitivity to therapy."

Specifically with regard to the Oncotype Dx signature, Tabernero and Baselga note that "if the ongoing validation confirms the results of this pivotal study, this multigene assay could potentially improve our management of patients with early-stage colon cancer by better identifying those with high risk of recurrence."

During the call, Steve Shak, Genomic Health's chief medical officer, explained that the current colon cancer test, which assesses the likelihood of post-operative recurrence in stage II patients but does not predict response to chemotherapy, is "just the start of a whole new franchise" for the firm in the area of colon cancer.

He said that the company is currently progressing on two fronts in building that franchise. First, it's carrying out a second colon cancer recurrence study in stage II disease in order to further convince payors of the value of the test.

In addition, he said that the company is performing additional studies focused on predicting the benefit of chemotherapy. These studies will be targeted at oxaliplatin, which has "really become a standard in colon cancer," though it has "significant toxicity" and has only shown "modest" benefits in stage II patients, Shak said.

"The goal of our program is to understand and be able to deliver test information that will better identify who can be treated with surgery alone or lighter therapy and who does really benefit from oxaliplatin," he said.

He added that as the company performs these studies, it will not only look at the current 12-gene recurrence score assay, "but we'll also be looking at the addition of new genes that could have the ability to predict the benefit of oxaliplatin."

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