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Breast Cancer Business, International Growth Drive up Genomic Health's Q2 Revenues 17 Percent

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Genomic Health reported after the close of the market on Wednesday that its second-quarter revenues climbed 17 percent year over year on the strength of its US breast cancer business and growth internationally.

For the three months ended June 30, the Redwood City, Calif., company said revenues reached $50.8 million, up from $43.4 million a year ago, short of Wall Street estimates of $50.9 million in revenues.

Product revenues increased to $50.5 million from $42.5 million, a 19 percent increase, and during the quarter more than 16,390 Oncotype Dx test results were delivered, Genomic Health said, a 17 percent increase year over year.

Contract revenues for the quarter dipped to $353,000 from $925,000 a year ago.

In a statement, Kim Popovits, president and CEO of the company, said product revenue was driven by its breast cancer operations in the US as well as "continued significant international growth, which we believe will be further supported by the St. Gallen Panel's recent decision to include Oncotype Dx in its updated published breast cancer guidelines."

On a conference call to discuss the company's earnings, COO Brad Cole said that during the quarter, the company entered into a contract with a fourth hospital in the UK for the Oncotype DX breast cancer test. International revenues in the second quarter doubled year over year and now comprise close to 10 percent of total company revenues.

International revenues "drove one-third of total revenue growth as compared to a year ago, demonstrating our success in pioneering a global infrastructure that we believe is unmatched in the laboratory industry," he said.

Popovits said on the call that the company also continues to progress in bringing next-generation sequencing capabilities into the research and clinical arenas, and Genomic Health recently completed a 130-patient specimen study using next-generation sequencing technology for whole transcriptome expression analysis.

"We believe our proven ability to translate genomic data from fixed paraffin-embedded tumor tissue into actionable clinical information will position [the company] as the application leader of next-generation sequencing," she said.

She added that Genomic Health is planning several large-scale clinical studies using next-generation sequencing to develop future products.

The company has filed a patent application for a library preparation method for next-generation sequencing, Cole said, and expects to file applications around other methodologies and transcripts that the company identifies from its development programs.

Net income in the second quarter rose 166 percent to $2.3 million, or $.08 per share, from $865,000, or $.03 a share, a year ago, edging out analyst EPS expectations of $.02.

Dean Schorno, Genomic Health's CFO, said that profits during the quarter were driven by "strong revenue growth, improved gross margins, and control of our operating expenses, as well as a one-time payment of $800,000."

During the quarter, Genomic Health took non-cash charges of $4.8 million, including $3 million of stock-based compensation expenses, and $1.8 million in depreciation and amortization expenses. During the year-ago period, the company had non-cash charges of $4.6 million.

Its R&D costs increased 24 percent to $9.9 million from $8 million, and its SG&A expenses rose 16 percent year over year to $30.4 million from $26.3 million.

Genomic Health finished the second quarter with $61 million in cash, cash equivalents, and short-term investments.

Its guidance for full-year 2011 was unchanged. The company is forecasting total revenue of between $200 million and $210 million. Its profit is expected to be in the range of $3 million to $5 million.

It expects to perform between 63,000 and 66,000 Oncotype DX tests in 2011, it said.

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