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Reporting Another Profitable Year, Genomic Health Considers Prostate Cancer Dx Next Big Opportunity

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By Turna Ray

Genomic Health this week reported a 16 percent increase in 2011 revenues and disclosed advances in the development of its Oncotype DX test in prostate cancer, which it considers to be the next big revenue opportunity beyond its successful breast cancer franchise.

The company also announced plans to launch a subsidiary focused on applying genomic information to clinical practice.

For the year ended Dec. 31, 2011, Genomic Health's revenues increased to $206 million from $175 million in 2010. The company also marked its second year in the black, recording a profit of $7.8 million. In 2010, the first profitable year for Genomic Health since its launch a decade earlier, it reported a net profit of $4.3 million.

Ahead of a call with analysts to discuss its 2011 revenues, Genomic Health announced plans to invest $20 million in a new genomic subsidiary that will extend its presence beyond oncology into common and rare genetic conditions. As part of this effort, starting in 2013, the company plans to launch genomic services for physicians and patients.

"Investment we've made over the past several years in the development of a robust next-generation sequencing platform, and the capabilities we have established in building a successful cancer genomics business, make this the ideal time for Genomic Health to expand into both common and rare genetic conditions," Randy Scott, executive chairman of Genomic Health's board, told analysts.

"This investment is designed to "build on the success of Genomic Health and will leverage the company's infrastructure, but will not divert resources from our core mission in cancer," he said.

When the new subsidiary is established in March, Scott will be its new CEO. Kim Popovits, Genomic Health's CEO, will take over as board chairman. Julian Baker, a director at Genomic Health, will serve as lead independent director of the subsidiary.

Although details are sparse about the specific services the company plans to offer, Genomic Health said it plans to apply internal and external R&D capabilities in next-generation sequencing and hire new employees for the venture. "With the cost of DNA sequencing rapidly decreasing, we believe we really are at a turning point in the history of medicine," Scott said. "This is a great opportunity to bring this new genomic technology, knowledge, and expertise broadly to the medical community, much like we did in cancer with our core business."

Genomic Health has been using NGS in the research setting for several years now. The company eventually plans to migrate all of its clinical diagnostics from an RT-PCR-based platform to an NGS platform. Earlier this month, Genomic Health announced it was "accelerating" its NGS research efforts into clinical development.

As part of its core oncology diagnostics business, the company recently said it is in the process of testing and validating a next-generation sequencing-based somatic mutation cancer panel for use in internal research, as well as in research efforts with partners (PGx Reporter 1/25/2012).

Popovits assured analysts during the call that although this subsidiary will extend the company's activities into rare and common genetic conditions, Genomic Health's core business will remain focused on oncology.

Genomic Health's 2011 R&D spending increased 20 percent to $39.9 million from $33.2 million in 2010. Its SG&A expenses climbed 17 percent to $124.1 million from $106.3 million.

The firm closed the year with $32.9 million in cash and cash equivalents and $67.6 million in short-term investments.

2011 Highlights

During the call, Genomic Health officials highlighted a number of steps the company took to expand its business during 2011, including the December launch of its Oncotype DX test for gauging whether patients with ductal carcinoma in situ are at risk of developing invasive breast cancer or having the disease recur in the same breast.

The company delivered more than 66,600 Oncotype DX breast and colon cancer recurrence test results in 2011, a 16 percent increase over 2010. The majority of US payors reimburse for Oncotype DX when it is used to discern recurrence and chemotherapy benefit in estrogen receptor-positive, node-negative, HER2-negative early stage breast cancer patients.

In the past year, Genomic Health established Oncotype DX reimbursement in the node-positive breast cancer population for an additional eight million US lives through policies or coverage arrangements with Blue Cross Blue Shield Michigan, Tufts Associated Health Maintenance Organization, Presbyterian Health Plan, BCBS South Carolina HMO, and Priority Health.

During 2011, the company also expanded coverage for its Oncotype DX test for assessing colon cancer recurrence risk in patients with stage II disease after surgery, establishing reimbursement contracts covering 3.8 million US lives. Results from the pivotal Quick and Simple and Reliable, or QUASAR, study, published in the Journal of Clinical Oncology in November, will likely play a role in payor discussions going forward.

The QUASAR study validated Oncotype DX for the assessment of colon cancer recurrence risk in patients with stage II disease who have been treated with surgery. The test's recurrence score was found to have prognostic value compared to other recurrence risk measures such as T-stage and mismatch repair protein status. The QUASAR study, however, did not prove that the recurrence score was predictive of chemotherapy benefit (PGx Reporter 11/9/2011).

2012 Plans

Popovits said that during the current fiscal year, Genomic Health plans to expand its sales force by 20 percent; focus on growing international reimbursement for its tests; secure reimbursement contracts for the Oncotype DX DCIS test; announce results from the validation study for the prostate cancer test; complete a study investigating the ability of the colon cancer test to predict which patients might benefit from treatment with oxaliplatin-based chemotherapy; and conduct a cooperative group clinical study using next-generation sequencing.

Genomic Health believes that its Oncotype DX test for prostate cancer, slated for launch in 2013, will be its next big revenue opportunity. In this regard, the company recently initiated a validation study for the test in collaboration with the University of California, San Francisco. The validation trial will investigate whether the multi-gene test can distinguish which patients have aggressive disease that requires surgery or indolent disease that can be managed with active surveillance. The company is hoping to announce top-line results from this validation trial later this year.

The RT-PCR-based test will analyze "very small amounts" of formalin-fixed prostate tissue obtained by needle biopsy, according to Popovits. "Our test is intended to address the well-known limitation of biopsy sampling, which leads to over treatment based on the fear of a patient's tumor being upgraded or upstaged post radical prostatectomy," she noted. "If successful, the test will allow more patients to appropriately select active surveillance, avoiding radical surgery and … complications."

The company last week presented data on the prostate cancer test at the 2012 Genitourinary Cancers Symposium. The study analyzed 416 prostate cancer samples from patients treated with radical prostatectomy at the Cleveland Clinic between 1987 and 2004, and investigated by RT-PCR the role of 76 test and five reference microRNAs in clinical recurrence and prostate-cancer specific survival.

The researchers, led by Eric Klein of the Cleveland Clinic, found 21 microRNAs associated with clinical recurrence, 13 microRNAs associated with prostate-cancer-specific survival, and eight microRNAs associated with both endpoints. In a second analysis, they identified 22 microRNAs associated with clinical response, seven with prostate-cancer specific survival, and four associated with both endpoints. There was a false discovery rate of 10 percent.

Based on this analysis, Klein et al. concluded that the "expression of some microRNAs assayed in FFPE prostate tumor tissue was associated with clinical response and prostate-cancer-specific survival after radical prostatectomy in this study, and may retain prognostic value in the face of tumor heterogeneity."

For full-year 2012, Genomic Health expects to report revenues of between $230 million and $240 million — an improvement of 11.6 percent to 16.5 percent over 2011 — with net income between $5 million and $8 million. The company further expects an incremental loss of up to $8 million due to costs associated with establishing the new genetic subsidiary.


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