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Positive Data from Genomic Health

Zacks Equity Research

Genomic Health (GHDX) recently announced positive data from three new studies of its flagship product Bracanalysis. The studies evaluated cost effectiveness of the test within the healthcare systems of Germany and Hungary. Another study from Israel dealt with the significance of the test on deciding treatment decisions in early-stage invasive breast cancer patients with lymph-node positive status. The company will present these data at a breast cancer conference, currently underway in Vienna, Austria. 

Results from the study, conducted in Germany, with 366 patients found that the Oncotype DX test changed initial recommendations in 33% of the cases resulting in increased survival rates. Besides, the test was found to be cost effective in both the studies conducted in Germany and Hungary. The study carried out in Israel demonstrated that the use of the Oncotype DX test in patients with estrogen receptor-positive, node-positive, breast cancer is likely to reduce use of chemotherapy.

While Genomic currently has two products in its portfolio, Oncotype DX breast and Oncotype DX colon cancer tests, the latter has yet to make any significant contribution to the top line. Banking on its several strategies directed toward an increasing acceptance of the Oncotype DX test, Genomic is well placed to make most of the huge market potential.

Genomic Health also diversified its offering with the launch of the Oncotype DX DCIS Score at the end of 2011. Besides, we are encouraged by the progress made by the company on the reimbursement front. Consequently, we expect the growth momentum to continue for the time being. However, the company faces tough competition from players such as Myriad Genetics (MYGN) and Cepheid (CPHD), among others.

Given the huge market opportunity in DNA sequencing, we are impressed with Genomic’s decision to set up a wholly owned genetics subsidiary by this month. This decision will involve an investment worth $20 million over the next two years. Genomic was drawn to the sequencing business in the wake of reduced costs for sequencing a genome and the frontiers that can potentially open up in medical applications influencing millions of lives. Genomic expects this business to be a long-term contributor to its growth profile.

We currently have a Neutral recommendation on Genomic Health. The stock retains a Zacks #3 Rank (“hold”) in the short term.

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