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Genomic Health Posts 13 Percent Q4 Revenue Growth; Forms New Subsidiary

NEW YORK (GenomeWeb News) – Genomic Health reported after the close of the market Monday that its fourth-quarter revenues increased 13 percent, as the firm simultaneously announced the creation of a new subsidiary focused on sequencing-based tests for genetic diseases outside of cancer.

The Redwood City, Calif.-based firm reported total revenues of $53.4 million for the three-month period ended Dec. 31, 2011 compared to $47.1 million for the fourth quarter of 2010. Almost all of that revenue came from product sales. It fell shy of Wall Street's consensus estimate for revenues of $53.8 million.

Genomic Health delivered more than 17,080 OncoType DX tests during the quarter, up 13 percent year over year.

It posted a Q4 profit of $2.6 million, or $.08 per share, compared to a profit of $1.7 million, or $.06 per share, for Q4 2010. Analysts had expected a profit of $.10 per share.

The firm spent $10.3 million on R&D in the quarter, an 11 percent increase over $9.3 million. Its SG&A spending increased 19 percent year over year to $33 million from $27.8 million.

For full-year 2011 Genomic Health brought in revenues of $206.1 million, up 16 percent from $178.1 million for 2010. It delivered more than 66,600 OncoType DX tests for the year, up 16 percent.

Genomic Health COO Brad Cole said on a conference call following the release of the financial results that the firm's international business grew more than 85 percent over 2010 and now represents around 9 percent of total product revenue. He said this increase was driven by gains in reimbursement with more than 55 million lives outside of the US now covered.

The firm's profit for the year was $7.8 million, or $.26 per share, up from $4.3 million, or $.14 per share.

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

In a separate announcement, Genomic Health said that it will establish a subsidiary by March 1 focused on common and rare genetic conditions. The subsidiary, which has yet to be named, will launch its first products as a commercial service in 2013 and will be led by Randy Scott, who will serve as CEO while remaining on the board of directors of Genomic Health.

"Investments we have 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 genomic business make this the ideal time for Genomic Health to expand into both common and rare genetic conditions," said Scott on the call.

He added that Genomic Health believes the two businesses are "synergistic with the potential to converge over time."

"This not a CLIA lab," added President and CEO Kim Popovits, who will assume the role of chairman of the board, effective March 1. But "the subsidiary will be offering services as opposed to products."

Genomic Health plans to invest up to $20 million in the new subsidiary over the next two years and has incorporated that spend into its 2012 financial outlook.

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

For full-year 2012 Genomic Health expects to report revenues of between $230 million and $240 million with net income between $5 million and $8 million before an incremental loss of up to $8 million in the new subsidiary.

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