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Analyst Upgrades Genomic Health

NEW YORK (GenomeWeb News) – Thomas Weisel Partners analyst Peter Lawson upgraded his rating on Genomic Health's stock from "market weight" to "overweight," citing the firm's relatively low valuation and potential upside.

Lawson said in a research note published last night that Genomic Health is trading below its broader peer group and such firms as Gen-Probe, Luminex, Cepheid, and Myriad Genetics. In addition, he said that a new colon cancer assay that is expected to be launched in early 2010 "will add significant value to current diagnostic workups."

Lawson also cited the firm's recent hiring of 20 new sales people, which should help drive breast cancer test volumes. Genomic Health's primary product is the OncoType Dx molecular assay for monitoring breast cancer recurrence and response to treatment, which Lawson said faces a limited competitive threat — from Celera and Agendia — over the next five years.

"[D]espite Genomic Health's diagnostic test for colon cancer missing the secondary end of therapeutic selection in April, we believe the primary end point of cancer recurrence will add significant value to oncologists and patients for a disease that lacks clinically validated biomarkers," Lawson wrote.

The analyst, however, also lowered his 2009 revenue and EPS estimate for Genomic Health. He said that he expects the firm to report 2009 revenue of around $146.6 million compared to his earlier forecast of $150.9 million — both of which are below analysts' consensus estimate of $152.6 million. He expects the firm to report a loss per share of $.40, up from a previous estimate of $.36 per share.

In mid-afternoon trade on Thursday, shares of Genomic Health were up 1 percent at $17.65.