Genomic's Useful Colon Cancer Test - Analyst Blog
January 23 2012 - 9:45AM
Zacks
Genomic Health
(GHDX) has presented positive data from the first decision making
study of the Oncotype DX colon cancer test. The study demonstrated
that Recurrence Score ("RS") result helps physicians in deciding
the course of treatment for stage II colon cancer patients. It was
observed that the RS score changed medical oncologists' treatment
recommendations in 29% of the cases.
The Oncotype DX colon cancer test
was launched in January 2010. Though the test aims to predict
individual recurrence risk in stage II colon cancer patients after
surgery, it has yet to make any significant contribution to the top
line.
Genomic Health is focused on
pursuing global adoption of and reimbursement for the test. In this
regard the positive outcome of studies should help the company.
Effective September 18, Palmetto GBA, the designated US contractor
for Genomic’s Oncotype DX colon cancer test, established a formal
coverage policy for all Medicare patients. This coverage decision
allows Medicare patients with stage II colon cancer access to
Oncotype DX.
Earlier, in November 2011, Genomic
Health’s QUASAR clinical validation study was published by the
Journal of Clinical Oncology (“JCO”). The QUASAR study, conducted
with 1,436 patients, demonstrated that Genomic’s Oncotype DX colon
cancer test predicts recurrence risk in stage II colon cancer
patients following surgery. The study also establishes that the
Oncotype DX colon cancer RS provides additional information beyond
conventional markers such as T-stage, mismatch repair (“MMR”)
status, nodes examined, grade and lymphovascular invasion.
To improve adoption of the colon
cancer test, Genomic Health is working with public and private
payors and health plans to secure coverage for the test based on
favorable clinical evidence. Adoption of the test is expected to
improve with Medicare’s decision to cover the Oncotype DX colon
cancer test. This is also expected to have a positive impact on
future revenue and the company’s ability to secure reimbursement
from private and public payors moving forward. During the most
recent quarter, colon cancer tests delivered to Medicare patients
represented nearly 1% of total test volume, which is expected to
increase substantially.
Recommendation
Genomic Health, over the recent
past, has been conducting several studies to reduce dependence on
its flagship product Oncotype DX breast cancer test. Favorable data
from the colon cancer test should help the company in this
direction. Meanwhile, 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. Genomic Health currently retains a Zacks #2 Rank
(short-term Buy rating).
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. We have a long-term
Neutral recommendation on the stock.
CEPHEID INC (CPHD): Free Stock Analysis Report
GENOMIC HEALTH (GHDX): Free Stock Analysis Report
MYRIAD GENETICS (MYGN): Free Stock Analysis Report
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