CPHD Cepheid (MM)

Over the recent past, Genomic Health (GHDX), an oncology based biotech company, has been working on several pipeline programs to reduce dependence on its flagship product, Oncotype DX breast cancer test. The company to that end initiated a large validation study of its prostate cancer test in collaboration with the University of California, San Francisco.

The study hopes to determine whether a multi-gene test can help distinguish an aggressive disease (that will require surgery) from a less aggressive one in patients with early-stage prostate cancer. Complete results are expected to be presented in early 2012. A positive outcome could lead to the launch of the Oncotype DX prostate cancer test in 2013. This will enable physicians to better assess the risk of a particular patient, facilitating the selection of the appropriate treatment option.

Genomic Health is also progressing with its Next Generation Sequencing (NGS) program with the initiation of clinical development studies. The studies will examine both RNA-Seq expression and mutation analysis. This decision comes on the back of a successful clinical outcomes study for biomarker discovery using NGS for whole transcriptome profiling of archival FFPE tumor specimens.

The CEO at Genomic Health, Kim Popovits will provide a business update today at the JP Morgan Healthcare Conference. He will highlight the company's achievements and its priorities for 2012. The company’s recent achievement includes the successful launch of the Oncotype DX DCIS Score and MMR colon cancer testing service. 

Having established a strong foothold in the US market, Genomic Health is targeting the international arena. However, securing reimbursement outside the US is a major deterrent to expanding the overseas business. The company expects revenue from the international market to be an important driver of top-line growth in 2012. We believe favorable data from the various ongoing studies might help the company in securing reimbursements.

Besides facing increasing competition from players such as Myriad Genetics (MYGN) and Cepheid (CPHD), operating expense is on an uptrend due to higher investments in international expansion, pipeline development and product launches.

Genomic Health currently retains a Zacks #3 Rank (short-term Hold rating). We also maintain our long-term Neutral recommendation on the stock.

 
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