As a new kid on the public block, Genomic Health is trying to be more than a one-hit wonder.
The company made its initial public offering on the Nasdaq exchange last month and released promising third-quarter revenues driven by strong sales of its Oncotype Dx breast-cancer recurrence diagnostic amid strong votes of confidence from two influential US Food and Drug Administration officials.
This, and the company's month-long record of share prices suggests that investors may be warming up to the company [see table]. Its burden now is to produce a strong sophomore effort, and perhaps its efforts to produce a diagnostic predicting response to Bristol Myers Squibb's and ImClone's colorectal cancer drug Erbitux represent a move in that direction.
Genomic Health's total revenue for the period ended Sept. 30 grew more than 9-fold to $1.59 million from $167,000 for the third quarter of 2004.
Sales involving Oncotype Dx brought in a total of $1.4 million, or around 87 percent of total receipts, during the recent period, while $216,000 of the quarter's revenue stemmed from contracts. Product revenue in the third quarter of 2004 was $67,000, and contract revenue for that period amounted to $100,000.
The company's net loss increased 31 percent to $7.45 million from $5.67 million year over year.
Genomic Health's R&D expenses declined $2.3 million in the recent quarter from $2.4 million in the third quarter of 2004. As of Sept. 30, the company had $17.2 million in cash and cash equivalents.
The company's share price has only a one-month history, but in that time it has fluctuated considerably. Genomic Health's stock dropped from an Oct. 4 introductory price of $11.72 per share to $8.85 on Oct. 20, a 24-percent decline. Since that time, the company's stock has rebounded to $10.38 in mid-day trading on Wednesday, or about 89 percent of its introductory value.
Four investment banks announced this week that their analysts would begin covering the company: Piper Jaffray, JMP Securities, Lehman Brothers, and JP Morgan.
Genomic Health will continue to focus on products, rather than licensing, as its primary income stream, Randy Scott, the company's chairman and CEO, told Pharmacogenomics Reporter this week. "In the short term, we are focused on our business as a central reference laboratory, meaning all the tests will be done in house [in Redwood City, Calif.]," he said. "I think over the long haul, a natural part of the business and product life-cycle would be in fact for the test to be distributed much more broadly, for example, in a kit," but that might not happen for "many years," he added.
A Shot in the Arm
Genomic Health said it has billed for more than 1,850 Oncotype tests during the third quarter, and since the product's launch in January 2004 it has gained more than 1,900 physician users, Scott said in a recent statement.
The company likely received a shot in the arm in the spring when Larry Lesko, director of the Office of Clinical Pharmacology and Biopharmaceuticals at the US FDA's Center for Drug Evaluation and Research, said Oncotype Dx was an example of a promising model for pharmacogenomics-based diagnostics, and noted that although the test had not yet been submitted to the FDA for approval, the agency would "like them to bring it in."
The comment, made in May during the Bio-IT conference in Boston, was certainly an off-hand remark, but it proved Oncotype's visibility and was the only commercial product that Lesko mentioned during his talk.
"In the short term, we are focused on our business as a central reference laboratory, meaning all the tests will be done in house. I think over the long haul, a natural part of the business and product life-cycle would be in fact for the test to be distributed much more broadly, for example, in a kit." But that might not happen for "many years."
Not long after that, a second FDA official gave his own nod to the test. "In a case like [Genomic Health's test], it's definitely movement in the right direction for personalized medicine," Felix Frueh, associate director of CDER and head of the FDA's Interdisciplinary Pharmacogenomics Research Group, told Pharmacogenomics Reporter in a May interview several days after the meeting. "I'm not partial to any of these tests — [the Oncotype is] one that seems to be useful," he said. "We would like to see more of those, and review the performance of these, because this is very early in the game, and we're thinking that this might be setting a trend for seeing more of these," he added.
Also in May, Genomic Health presented the Oncotype test in three independent studies at the American Society of Clinical Oncology meeting, held in Orlando, Fla., one of which was selected by the ASCO Cancer Education Committee for the "Best of Oncology" session.
The test is believed to be a model of the likely future of expression analysis in clinical oncology because it was developed into an RT-PCR diagnostic from research conducted using microarrays, Richard Simon, chief of the US National Cancer Institute's Biometric Research Branch, told Pharmacogenomics Reporter at the April American Association for Cancer Research meeting in Anaheim, Calif.
Genomic Health developed the test using tissue from the NCI's NSABP studies to identify genes capable of estimating recurrence risk in women on tamoxifen with node-negative, estrogen-receptor-positive breast cancer. The 21-gene-expression PCR test is now run only in Genomic Health's CLIA-approved lab.
The field of breast-cancer molecular diagnostics is gradually becoming more crowded, but so far Genomic Health is not affected by much of it. "There's one clear competitor that's in the market today, and that's Agendia," said Scott.
Agendia, a Dutch company, said last week it had registered its MammaPrint as a medical device with the Dutch Healthcare Inspectorate The company said the registration complies with Dutch law on medical devices and enables the diagnostic to bear the CE mark.
In September, Agendia received ISO 17025 accreditation for MammaPrint, which assesses the risk of metastasis in breast cancer patients with a 70-gene profile. The Molecular Profiling Institute, the commercial arm of the Translational Genomic Institute, has an exclusive license to provide the MammaPrint breast cancer prognostic in the United States.
First Breast, Now Colorectal
Genomic Health won't say very much about its research collaborations, but its third-quarter earnings report notes that the firm is trying to "develop a genomic test to predict the likelihood of response to [the colorectal cancer drug] Erbitux" with Bristol-Myers Squibb and ImClone, the drug's developers.
Terms of that alliance, disclosed in the company's Nov. 3 third-quarter earnings report, call for Genomic Health to receive research funding support and milestone payments, along with commercial rights to diagnostic tests that result from the collaboration, the company said.
Genomic Health is also currently engaged in a second partnership involving the discovery of predictors of drug response, said Scott. He declined to name the other entity involved, or provide further details on either partnership. BMS and ImClone could not be contacted before this issue went to press.
"Prostate, lung, colon, melanoma, renal cell are all programs we have ongoing in house, so we're not purely a breast-cancer company."
"We do have programs in multiple other cancers internally," Scott said. "Prostate, lung, colon, melanoma, renal cell are all programs we have ongoing in house, so we're not purely a breast-cancer company," he said.
The firm's third-quarter earnings also mentioned a collaboration with the National Surgical Adjuvant Breast and Bowel Project to use its clinical development platform in colon cancer. "This is the same group with which we conducted our successful clinical validation studies in breast cancer which led to our Oncotype Dx product," the company said.
Helping Out Erbitux
Erbitux is an antibody-based drug approved for the treatment of metastatic colorectal carcinoma that, like AstraZeneca's Iressa and Tarceva, made by Pfizer, Genentech, and OSI Pharmaceuticals, targets EGFR.
It may be to BMS's and ImClone's advantage that Genomic Health has gene-expression experience. An August Journal of the National Cancer Institute article reported that the presence of an EGFR mutation did not predict response to the drug in non-small cell lung cancer cell lines. Pasi Jänne, an author of the paper and an assistant professor of medicine at the Dana-Farber Cancer Institute, told Pharmacogenomics Reporter at the time that there is not yet a molecular marker to predict response to Erbitux.
Currently, DakoCytomation sells an antibody-based EGFR-expression test for predicting response to Erbitux in colorectal cancer.
— Chris Womack ([email protected])