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Genomic Health Inc. Message Board

  • stupid_hobo73 stupid_hobo73 Feb 10, 2010 9:52 AM Flag

    S&P

    S&P still a fan of GHI:


    We forecast 2010 total revenues of $185 million,
    representing 24% growth over 2009. In 2011, we
    expect a 21% sales rise to $224 million.We see
    GHDX building sales momentum, aided by an
    expanded sales force, an increasing list of national
    insurers (including Aetna, United Healthcare
    and CIGNA) approving Oncotype DX reimbursement,
    and industry validation from the late
    2007 inclusion in ASCO and National Comprehensive
    Cancer Network (NCCN) breast cancer
    treatment guidelines.

    We forecast 2010 gross margins of around 77%,
    as higher test volumes yield lower per-test
    costs.We see potential for slightly lower gross
    margins in 2011 as the recently launched colon
    cancer test yields reduced efficiencies. GHDX
    has increased pipeline diagnostic investments
    and has expanded test processing capacity,
    enabling 49,000 test results to be delivered in
    2009, 24% above 2008 levels.

    Our 2010 EPS estimate is $0.07, and we forecast
    EPS of $0.72 for 2011. With GHDX's $57.4 million
    in cash and positive operational cash flows as
    of the end of 2009, we believe it is on solid financial
    footing.


    Investment Rationale/Risk

    We have a positive outlook for the Oncotype DX
    breast cancer diagnostic test, as we see medical
    treatment practices shifting toward personalized
    medicine tools.We are encouraged by
    U.S. reimbursement contract growth to cover
    more than 90% of U.S. insured lives.We expect
    a modest rollout of the newly launched colon
    cancer recurrence prediction test, but expect
    wider adoption as published study data furthers
    physician awareness.We see a long-term opportunity
    for Oncotype DX utility in such cancers
    as prostate and renal cancers as well as
    expanded colon cancer use.We expect
    GHDX's global expansion to occur slowly due
    to individual country regulatory requirements.

    Risks to our recommendation and target price
    include potential for FDA regulation over
    GHDX's predictive tests, requiring clinical testing;
    emergence of new competitors; and slower-
    than-expected medical community adoption
    of predictive genetic testing.

    Our 12-month target price of $23 applies a 3.5X
    multiple (a slight premium to diagnostic peers)
    to our 2010 revenue estimate of $185 million,
    based on the recent share count.

 
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