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Genomic Health Inc. Message Board

  • pilgrimfromconstantinople pilgrimfromconstantinople Feb 7, 2007 7:02 PM Flag

    The Real Story

    NEW YORK-BASED INVESTMENT FIRM Baker Brothers Investments bought more shares of genomic health inc com even as news that the maker of diagnostic breast-cancer tests won a contract with Aetna sent the stock to record highs.
    During the first five days of the December, Baker Brothers plunked down $14.06 million to purchase 682,750 Genomic shares in the open market on behalf of various funds, according to Tuesday's Securities and Exchange Commission filings. Shares were priced from $18.95 to $22.55.
    This boosts the firm's collective holdings to nearly 2 million shares, or an 8.1% stake, up from the 1.3 million shares, or 5.4%, held at the end of the third quarter. There were 24.5 million outstanding shares of Genomic as of Oct. 31.
    The firm is run by biotechnology savvy investors Julian and Felix Baker, who manage a family of investment funds for large university endowments and foundations focused on publicly traded life-sciences companies.
    Julian Baker has been a director at Genomic since 2001 and sits on the boards of Incyte Pharmaceuticals Inc. Incyte is Genomic's second-largest shareholder with a 5.4% stake.
    Genomic Health declined to comment, Baker Brothers didn't return a phone call seeking comment.
    Oncotype is considered the first genetic test that uses tissue samples from a biopsy to quantify the likelihood of breast-cancer recurrence and how beneficial chemotherapy would be for a particular patient.
    Rusty Szurek, general manager of InsiderScore.com, says that it is notable in itself that Baker Brothers is increasing its Genomic position "on really significant strength."
    But Julian and Felix Baker also have a strong track record investing in biotech companies. "They are what in the business we call smart insiders," says Szurek.
    He points to timely investments in Seattle Genetics [SGEN] at around $4 a share back in August. In the past 30 days, Baker Brothers has also spent $5.8 million to purchase 130,000 shares of allos therapeutics inc com
    ALTH the maker of small-molecule drugs for improving cancer treatment. Its shares have rallied to a record high of $7.24 yesterday from around $2 a year ago.
    Although Genomic's stock has raced from $9 to more than $24 since last December, it will continue to benefit as the company's single diagnostic tool on the market steadily gains traction.
    David Lo, a senior equity research analyst at ThinkEquity Partners, expects Genomic to ship out 14,000 of the Oncotype DX diagnostic tool by the end of 2006 instead of the 13,500 estimated by the company.
    Each genetic test costs health-benefits companies an average of $3,000, but Lo notes the cost benefit of performing the test before doctors recommend chemotherapy treatments that generally cost $20,000 to $50,000.
    Chemotherapy indiscriminately kills healthy and cancerous cells, which can lead to severe medical complications. Lo says Genomic's test lets breast-cancer patients decide whether this is worth the risk if they only have a 4% chance of recurrence after hormone therapy, for example.
    Genomic is not expected to launch other medical-diagnostic tolls for at least two years or turn a profit till 2009, says Lo. But he expects the stock to rise on stronger patient and physical adoption, gains in reimbursement coverage from insurers and "peer review publications that further clinically validate Oncotype DX."
    Genomic is presented five abstracts at the Annual San Antonio Breast Cancer Symposium. Oncotype is being tested for other cancers as well.
    Although pricey with the stock trading at a price-to-sales multiple of 7.5 times when life sciences range from 5 times to 10 times, Lo says Genomic "is the fastest growth revenues" among industry peers.
    As for the Baker Brothers, Lo expects them to be long-term investors. "To me that's a positive sign," he says.

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