This story was originally published Aug. 9.
Genomic Health said last week that it has combined its clinical genetics subsidiary InVitae with privately held genome annotation company Locus Development in order to create a new standalone entity, called InVitae, which will focus on integrating next-generation sequence data into medical practice for patients with rare and common genetic diseases.
Randy Scott, who was Genomic Health's executive chairman until February, when he became CEO of the InVitae subsidiary (CSN 2/8/2012), will serve as CEO and chairman of the new entity but will no longer serve on Genomic Health's board of directors.
The new business is expected to be established by March 1 and will start providing commercial services in 2013.
"By consolidating our investment through this single organization, Genomic Health remains focused on the $3.5 billion global cancer opportunity across breast, colon, and prostate cancer, as well as developing clinical applications through next-generation sequencing and improving near-term profitability, while maintaining a valuable position in the emerging field of genetics," said Genomic Health's CEO Kim Popovits during a conference call discussing the company's 2012 second-quarter earnings.
Additionally, to further support its progress in the next-generation sequencing space, Genomic Health has hired Sam Levy, director of genomic sciences at Scripps Translational Science Institute, as its chief scientific officer. He will take over from Joffre Baker, who will now serve as senior biology fellow.
Genomic Health holds a stake in Locus Development as part of a $2.8 million investment that it made last year in Locus and informatics company Station X. At the time, Genomic Health described Locus Development as a startup that was developing "clinical tools to enable personalized, predictive, preventative, and cost-effective healthcare" (CSN 5/4/2011).
InVitae's assets will now be transferred to Locus, and the two companies will be rolled into one entity, called InVitae, completely separate from Genomic Health.
Genomic Health has committed to investing $5 million in InVitae's Series C financing round, giving it a less than 20 percent stake in the company. Genomic Health will also maintain the right to further increase its investment in future financing rounds.
Scott said that Locus has been working on "curating and annotating the human genome, in terms of identifying clinically relevant variants." It also recently received CLIA certification and is "beta-testing its first targeted genetics products" with the goal of a full commercial launch in 2013, he said
The combination of InVitae and Locus will enable the companies to "expand that effort into whole-genome sequencing as well as comprehensive genome management for physicians and patients," he said.
Aside from its investment in InVitae, Genomic Health is continuing to expand its core cancer business into next-gen sequencing. Popovits cited a recent publication in PLoS One of a transcriptome sequencing study in which the company used RNA-seq to identify previously validated and also novel markers of breast cancer recurrence risk from formalin-fixed paraffin-embedded tissue.
Genomic Health researchers presented results of the 136-patient study at last year's San Antonio Breast Cancer Symposium (CSN 11/2/2011).
The study showed that RNA-seq delivered results comparable to Genomic Health's current RT-PCR platform for analyzing 21 genes to assess breast cancer recurrence risk. Sequencing also identified 1,300 additional transcripts that are potentially associated with risk recurrence, although more than half of those fell within non-coding regions of the genome.
"Based on these data, we're moving next-generation sequencing efforts forward and expect to provide a genomic platform for clinical research and development combining whole-transcriptome profiling and mutational analysis later this year," Popovits said.
Genomic Health recognized $57.6 million in revenues in the second quarter, up 13 percent from $50.8 million in the year-ago quarter.
Net income fell to $1.8 million from $2.3 million in the year-ago quarter. The loss related to the InVitae subsidiary was around $800,000 in the current quarter, but previously planned losses of $20 million related to the subsidiary will be removed from the company's books going forward.
As a result, Genomic Health has revised its full-year guidance, and now expects 2012 consolidated income of $4 million to $7 million, "an improvement from our previous guidance of breakeven or loss of up $2 million to $3 million, reflecting the change in loss contribution from InVitae," Dean Schorno, the company's chief financial officer said on the call.
R&D costs rose 17 percent to $11.6 million from $9.9 million a year ago, and SG&A spending increased 16 percent to $35.2 million from $30.4 million a year ago.
The company exited the quarter with $57 million in cash and cash equivalents and $55.6 million in short-term marketable securities.