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Increased Oncotype DX Adoption, Reimbursement Helps Boost Genomic Health Q3 Revenue 300 Percent

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Greater physician adoption and a favorable reimbursement environment for Genomic Health’s Oncotype DX contributed to a 343-percent increase in third-quarter revenues, which surged to $7.1 million from $1.6 million year over year.
 
Buoyed by the results, the company said it is considering expanding the test to other countries and plans to research additional indications as part of R&D alliances with a pair of big pharmas.
 
The company also stressed that a recent US Food and Drug Administration draft guidance aiming to regulate tests like Oncotype DX and a letter from the agency suggesting the test ought to be regulated will not affect how the test is adopted.
 
Revenue from Oncotype DX comprised 97 percent, or $6.9 million, of total revenues in the quarter ended Sept. 30, compared to $1.4 million from the year-ago period, the company announced during a Nov. 2 earnings call.
 
Genomic Health attributed the revenue growth to “strong continued adoption and reimbursement” of the Oncotype DX breast cancer recurrence test service.
 
Genomic Health said Aetna had issued a "positive coverage decision" for Oncotype DX and several regional payors in the third quarter had agreed to reimburse for the product. “Other [payors] have completed favorable technology assessments,” the company added. 
 
“We billed over 3,800 tests over the quarter compared to 1,800 in the third quarter of 2005, again demonstrating increasing physician acceptance and usage,” Genomic Health Chief Operating Officer Kim Popovits said in the call. Nearly 19 percent of test services delivered in the third quarter of 2006 were for Medicare patients.
 
Popovits noted the company had recently increased its sales force in an effort to better familiarize physicians with Oncotype DX. The strategy seems to have paid off. “The majority of the usage in the quarter has come from physicians who have used the test multiple times and we are seeing increasing penetration in the physician community,” Popovits said.
 
“We are still committed to reaching out to physicians,” she said. “One of the reasons we increased the sales force is because last summer we could do a better job of penetration at the physician level. We are seeing that grow. … We expect that penetration to be even better by the end of the year.”
 
Oncotype DX Expansion
 
Genomic Health last week also disclosed a licensing agreement for one of the genes in the Oncotype DX 21-gene panel with Pfizer and the Wistar Institute. The gene panel is “subject to a patent exclusively licensed by a subsidiary of Pfizer,” Genomic Health said, adding that the recently signed agreement ends discussions that have been ongoing since 2004.
 
Although the companies did not provide additional details of the agreement, it may spur Genomic Health’s ongoing R&D efforts for Oncotype DX.
 
With Oncotype DX’s continued adoption for treatment of early stage ER-positive, node-negative breast cancer, the company appears to be confidently moving ahead with several initiatives to expand the test into other patient populations. The company wouldn’t offer details of these initiatives, but the firm’s R&D spending in the third quarter jumped 39 percent year over year.
 
According to Genomic Health CEO Randy Scott, the company is looking for better predictive markers, and looking to further investigate Oncotype DX in ER-negative patients and other tumor types.
 
Specifically, Genomic Health is studying the assay in colon cancer and breast cancer in partnership with Sanofi Aventis and Bristol-Myers Squibb. “We will choose one of those [indications] to move forward and do development with by end of this year. We’d like to announce that with our 2007 guidance early next year,” Scott said.
 
The company is also considering expanding Oncotype DX to other nations where the product “makes the most sense and has the most impact on adoption, reimbursement, and clinical utility,” Scott said.
 
“We have ongoing programs on a country-by-country basis to look at potential marketing partners in both Europe and in Asia. We’re doing extensive analysis on a country-by-country basis … [since] there is a great deal of variability in how medicine is practiced” internationally, Scott said.
 
IVDMIA Draft Guidance Impact on Oncotype DX
 
During the earnings call, Scott said that the FDA’s Draft Guidance for Industry, Clinical Laboratories, and FDA Staff – In Vitro Diagnostic Multivariate Index Assays, will not have a negative impact on the rate of Oncotype DX adoption [see 9/13/2006 PGx Reporter].
 

“The majority of the usage in the quarter has come from physicians who have used the test multiple times and we are seeing increasing penetration in the physician community.”

He also stressed that a letter the company received from the agency in January has not had an effect on Oncotype sales. “During the quarter we’ve seen steady growth across the board. We received a letter from FDA in January and continued growth,” Scott assured.
 
In the Jan. 23 letter to the company, FDA’s Office of In Vitro Devices said it considers Oncotype DX a device under section 201(h) of the Federal Food, Drug, and Cosmetic Act [see 2/1/2006 PGx Reporter]. The agency requested Genomic Health to set up a meeting with OIVD “to discuss the nature and appropriate regulatory status of your technology, and the least burdensome ways that Genomic Health may fulfill any pre-market review requirements that may apply.” 
 
The company did not say whether such a meeting with FDA regarding Oncotype DX had taken place.
 
Genomic Health began selling Oncotype DX, which is performed in its own CLIA-approved lab, as a homebrew test without first seeking FDA approval. With its current draft guidance, which defines IVDMIAs as devices under section 201(h) of the FDCA, the agency appears to be trying to rein in other firms from taking the same regulatory route as Genomic Health took with its test
 
During the earnings call, there were questions about whether the draft guidance gives differential treatment to tests that predict recurrence over those that gauge chemotherapy sensitivity.
 
“In the draft, they did say that the tests that have a predictive claim to a drug benefit versus a prognostic could be considered a Class II or III device. But [FDA] leaves themselves a lot of flexibility,” Scott said.
 
Most IVDMIAs will likely be Class II or Class III, the draft guidance states. However, “a device intended as an indicator of a patient’s risk of cancer recurrence may be a Class II device, while the same device intended to predict which patients should receive chemotherapy might require premarket approval.”
 
Oncotype DX analyzes a specific set of genes within a tumor to determine a recurrence score between zero and 100 that corresponds to a specific likelihood of breast cancer recurrence within 10 years of the initial diagnosis. The test also assesses if women will likely benefit from certain types of chemotherapy.
 
According to Popovits, Genomic Health is evaluating the draft guidance and is planning to submit comments to FDA. “We share FDA’s interest in ensuring patient safety but are concerned about the unintended consequences of FDA changing a long-standing policy of how laboratory tests are regulated,” Popovits said. “With this in mind we are encouraged that FDA is open to dialogue from appropriate stakeholders for comment.”

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