Genomic Health Announces 2017 Fourth Quarter and Year-end Financial Results, Provides 2018 Financial Outlook

Published: Mar 08, 2018

REDWOOD CITY, Calif., March 8, 2018 /PRNewswire/ -- Genomic Health, Inc. (NASDAQ: GHDX) today reported financial results and business progress for the quarter and year ended December 31, 2017.

Total revenue was $340.8 million in the full year 2017, compared with $327.9 million in 2016, an increase of 4 percent.

U.S. product revenue was $287.4 million in the full year 2017, compared with $280.1 million in the full year 2016, an increase of 3 percent. U.S. invasive breast revenue from Oncotype DX Breast Recurrence Score® tests was $259.7 million in the full year 2017, compared with $257.0 million in the full year 2016. U.S. prostate test revenue from Oncotype DX® Genomic Prostate Score™ (GPS™) tests was $17.9 million in the full year 2017, compared with $10.8 million in the full year 2016, an increase of 66 percent.

International revenue for the full year 2017 was $53.1 million compared with $46.8 million in 2016, an increase of 13 percent, and an increase of 15 percent on a non-GAAP constant currency basis.

Operating loss improved to $6.5 million for the year ended December 31, 2017, compared with $15.4 million for the year ended December 31, 2016. Net loss was $3.9 million, or $0.11 per share on a basic and diluted basis, for the year ended December 31, 2017, compared with a net loss of $13.9 million, or $0.42 per share on a basic and diluted basis, for the year ended December 31, 2016.

On a non-GAAP basis, the company recorded $0.4 million net income for the year ended December 31, 2017.

"In 2017, we delivered improved profitability, which included a $1.9 million profit in the fourth quarter, our strongest quarter of U.S. invasive breast cancer revenue and test growth in the year. As expected, we delivered a full-year profit on a non-GAAP basis, excluding transaction costs of $4.2 million from our collaborations with Biocartis and Cleveland Diagnostics," said Kim Popovits, chairman of the board, chief executive officer and president of Genomic Health. "With multiple revenue growth catalysts now in place, including the implementation of PAMA and AJCC breast cancer staging criteria, the recent strengthening of NCCN prostate guidelines and the launch of the Oncotype DX AR-V7 Nucleus Detect test, we expect to deliver double-digit growth in both tests delivered and revenue in 2018, along with significant improvement in profitability. In addition, we anticipate the near-term reporting of final TAILORx results to drive Oncotype DX to a new standard of care for patients diagnosed with early-stage invasive breast cancer, positioning us to deliver a record-setting performance this year."

2018 Financial Outlook

In positioning its business to deliver near-term growth and increased profitability, the company is directing its focus and resource allocation toward catalysts that it expects will drive further adoption and reimbursement of its portfolio globally with greater operational efficiency. Specifically, the company plans to direct resources to expand its Oncotype DX offering through the development of in vitro diagnostic (IVD) test solutions, including on the Biocartis® Idylla™ platform, to increase global access in markets where localized testing is critical for adoption and reimbursement. With this shift in focus, the company will no longer provide the Oncotype SEQ® Liquid Select™ test or further invest in non-proprietary next-generation sequencing (NGS)-based panels. Accordingly, the company will reduce positions by approximately 10 percent and take a charge of approximately $10 million in the first quarter for costs associated with personnel reductions and the write-off of certain assets associated with NGS-based panels.

"We believe this strategic direction to maximize profitable growth in the short term will result in approximately $3 million saved per quarter, enabling us to enhance operational efficiency and deliver operating leverage above 50 percent, improved over our 40 percent leverage target of the past few years," said Brad Cole, chief operating officer and chief financial officer of Genomic Health. "In 2018, we expect continued improvement in profitability on a non-GAAP basis and double-digit revenue growth. We expect to successfully execute on multiple revenue growth catalysts leading to an acceleration in revenue growth in the back half of the year and double-digit operating income as a percent of revenue in the fourth quarter."

The company is providing the following guidance for the full year ending December 31, 2018 under ASC 606 revenue recognition standards:

                          Low       High
                          ---       ----

    Revenue(1)                 $366       $382

    Revenue Growth(2)           10%       15%


    Net Income (GAAP) (1)        $0         $5

    GAAP EPS                  $0.16      $0.22


    Net Income (Non-GAAP)
     (1) (3)                    $14        $20

    Non-GAAP EPS              $0.32      $0.50
    ______________

    (1)             In millions

    (2)              The outlook for 10% to 15% revenue
                     growth in 2018 represents
                     management's estimates for 2018
                     versus 2017 reported revenues
                     adjusted to reflect the impact of
                     ASC 606 revenue recognition rules
                     which were effective January 1,
                     2018. Under the new rules, the
                     company will report most
                     uncollectible balances as a
                     reduction in net revenues;
                     historically certain uncollectible
                     amounts were classified as bad debt
                     expense and were approximately 2.5%
                     of revenue and classified within
                     selling, general and administrative
                     expenses. The company does not
                     expect ASC 606 to impact net income
                     or EPS.

    (3)              Non-GAAP net income excludes stock-
                     based compensation, charges for
                     personnel reductions and asset
                     write-offs associated with product
                     cessation, and clinical and
                     commercial development milestone
                     payments.

Additional 2017 Full Year and Fourth Quarter Financial Results

Total revenue was $87.5 million in the fourth quarter of 2017, compared with $82.7 million in the fourth quarter of 2016, an increase of 6 percent. On a non-GAAP constant currency basis, revenue increased 5 percent compared with the same period in the prior year.

U.S. product revenue was $73.5 million in the fourth quarter of 2017, compared with $70.0 million in the fourth quarter of 2016, an increase of 5 percent. U.S. invasive breast revenue from Oncotype DX Breast Recurrence Score tests was $66.2 million in the fourth quarter of 2017, compared with $63.9 million in the fourth quarter of 2016. U.S. prostate test revenue from GPS tests was $5.0 million in the fourth quarter of 2017, compared with $3.6 million in the fourth quarter of 2016, an increase of 39 percent.

International revenue was $13.7 million in the fourth quarter of 2017, compared with $12.0 million for the fourth quarter of 2016, an increase of 14 percent, and an increase of 12 percent on a non-GAAP constant currency basis.

Operating income for the fourth quarter of 2017 was $2.2 million, compared with $1.5 million for the fourth quarter of 2016. Net income was $1.9 million, or $0.05 per share on a basic and fully diluted basis, for the fourth quarter of 2017 compared with $1.4 million, or $0.04 per share on a basic and fully diluted basis, for the fourth quarter of 2016.

In the fourth quarter of 2017, more than 31,990 Oncotype™ test results were delivered, an increase of 7 percent, compared with more than 30,020 test results delivered in the same period in 2016.

More than 126,740 Oncotype test results were delivered for the year ended December 31, 2017, an increase of 7 percent, compared with more than 118,570 test results delivered in the same period in 2016. Oncotype DX Breast Recurrence Score tests delivered in the U.S. grew 3 percent in the full year 2017 compared to the prior year. Oncotype DX Genomic Prostate Score tests delivered in the U.S. grew 37 percent in the full year 2017 compared to the prior year. International tests delivered grew 11 percent for the full year compared to the prior year and represented approximately 20 percent of total test volume in 2017.

Cash and cash equivalents and short-term marketable securities at December 31, 2017 were $129.6 million, which included the fair value of the company's investment in marketable securities of $3.5 million, an increase of $32.6 million compared with $97.0 million at December 31, 2016, which included the fair value of the company's investment in marketable securities of $9.3 million.

The non-GAAP financial measures used adjust for specified items that can be highly variable or difficult to predict. An explanation and reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this press release.

Recent Business Highlights

  • Launched Oncotype DX AR-V7 Nucleus Detect™, the first and only liquid biopsy test of its kind to help prolong the lives of men with metastatic castration-resistant prostate cancer (mCRPC) by accurately detecting a splice variant of the androgen receptor protein (AR-V7) in the nucleus of circulating tumor cells (CTCs).
  • The National Comprehensive Cancer Network (NCCN) updated its guidelines for prostate cancer to now include molecular testing. Specifically, the updated 2018 guidelines include the Oncotype DX Genomic Prostate Score (GPS) test for men with NCCN low- and favorable intermediate-risk prostate cancer to provide prognostic information in order to choose active surveillance or definitive treatment.
  • Reviews in Urology published real-world clinical evidence demonstrating that the Oncotype DX GPS test increases use of active surveillance by 30 percent in low-risk patients, resulting in greater adherence to guideline-based care. These findings from a large U.S. payer system are consistent with four previously published studies demonstrating the positive effect of GPS testing on active surveillance use.
  • Established additional private coverage for the Oncotype DX GPS test, bringing the total number of U.S. covered lives to more than 67 million.
  • Announced an exclusive licensing agreement with Cleveland Diagnostics, Inc. to develop and commercialize new prostate cancer tests based on Cleveland Diagnostics' IsoPSA™ reagents and technology. Initial efforts will focus on Genomic Health's development of a high-PSA (prostate-specific antigen) reflex test to accurately predict the presence of high-grade cancer (Gleason score >7) prior to prostate biopsy.
  • Announced a multi-year research collaboration agreement with Janssen Pharmaceuticals to evaluate the GPS test for their prostate cancer drug pipeline. As part of the agreement, Genomic Health will test samples from Janssen studies to examine the association of GPS results with clinical outcomes.
  • Made a $4 million equity investment in Biocartis Group NV, further strengthening the partnership between the companies to develop an IVD version of the Oncotype DX Breast Recurrence Score test on the Idylla platform that can be performed locally by laboratory partners and in hospitals around the world.
  • Presented results from 10 studies that reinforce the unmatched value of the Oncotype DX Breast Recurrence Score test and Oncotype DX Breast DCIS Score™ test in optimizing patient treatment across the breast cancer disease continuum at the 2017 San Antonio Breast Cancer Symposium (SABCS).
  • Received acceptance to present three studies at the 11th European Breast Cancer Conference (EBCC-11), in March.

Conference Call Details
To access the live conference call today, March 8 at 8:30 a.m. Eastern Time via phone, please dial (877) 303-7208 from the United States and Canada, or +1 (224) 357-2389 internationally. The conference call ID is 8075676. Please dial in approximately ten minutes prior to the start of the call. To access the live and subsequently archived webcast of the conference call, go to the Investor Relations section of the company's web site at http://investor.genomichealth.com. Please connect to the web site at least 15 minutes prior to the presentation to allow for any software download that may be necessary.

About Genomic Health
Genomic Health, Inc. (NASDAQ: GHDX) is the world's leading provider of genomic-based diagnostic tests that help optimize cancer care, including addressing the overtreatment of the disease, one of the greatest issues in healthcare today. With its Oncotype IQ® Genomic Intelligence Platform, the company is applying its world-class scientific and commercial expertise and infrastructure to lead the translation of clinical and genomic big data into actionable results for treatment planning throughout the cancer patient journey, from diagnosis to treatment selection and monitoring. The Oncotype IQ portfolio of genomic tests and services currently consists of the company's flagship line of Oncotype DX® gene expression tests that have been used to guide treatment decisions for more than 850,000 cancer patients worldwide. Genomic Health is expanding its test portfolio to include additional liquid- and tissue-based tests, including the recently launched Oncotype DX® AR-V7 Nucleus Detect™ test. The company is based in Redwood City, California, with international headquarters in Geneva, Switzerland. For more information, please visit www.GenomicHealth.com and follow the company on Twitter: @GenomicHealth, Facebook, YouTube and LinkedIn.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the company's beliefs regarding its future performance, including the company's beliefs regarding its long-term success; financial guidance and future profitability, growth and operating leverage for the full year 2018; the commercial performance of its tests including the recently announced launch of AR-V7 Nucleus Detect; the ability of new Medicare rates under PAMA to result in additional revenue in 2018; the favorable impact of TAILORx results on revenue in 2018; the attributes and focus of the company's product pipeline; the ability of any potential tests the company may develop to optimize cancer treatment; the ability of the company to develop and commercialize, and collaborate with third parties to commercialize, additional tests in the future; the ability of the company to increase worldwide access through the development of an in vitro diagnostic version of its tests; the company's expectations with respect to the discontinuation of next-generation sequencing based panels; and the costs and benefits of the company's reduction of its workforce and restructuring. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, and reported results should not be considered as an indication of future performance. These risks and uncertainties include, but are not limited to: the risk that the company may not achieve its 2018 guidance estimates and the assumptions underlying such guidance; the risk that the expected benefits of the restructuring will not occur, the risk that the cost of any such restructuring may be higher than expected; the risks and uncertainties associated with the regulation of the company's tests; the results of clinical studies and their impact on reimbursement and adoption; the applicability of clinical study results to actual outcomes; the company's ability to develop and commercialize new tests and expand into new markets domestically and internationally; the commercial success of any collaborations entered into by the company; the risk that the company may not obtain or maintain sufficient levels of reimbursement, domestically or abroad, for its existing tests and any future tests it may develop; the risks of competition; unanticipated costs or delays in research and development efforts; the company's ability to obtain capital when needed and the other risks set forth in the company's filings with the Securities and Exchange Commission, including the risks set forth in the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017. These forward-looking statements speak only as of the date hereof. Genomic Health disclaims any obligation to update these forward-looking statements.

NOTE: The Genomic Health logo, Oncotype, Oncotype DX, Recurrence Score, DCIS Score, Oncotype SEQ, Liquid Select, Genomic Prostate Score, GPS Oncotype DX AR-V7 Nucleus Detect and Oncotype IQ are trademarks or registered trademarks of Genomic Health, Inc. All other trademarks and service marks are the property of their respective owners.

 

                                                                  GENOMIC HEALTH, INC.

                                                    Condensed Consolidated Statements of Operations

                                                        (In thousands, except per share amounts)

                                                                      (Unaudited)



                                Three Months Ended              Year Ended

                                   December 31,                December 31,
                                   ------------                ------------

                                              2017               2016                                2017 2016
                                              ----               ----                                ---- ----

    REVENUES:

    Product revenues -United
     States                                        $73,486                                       $70,034       $287,363   $280,127

    Product revenues -Outside
     of the United States                           13,678                                        11,967         53,088     46,791
                                                    ------                                        ------         ------     ------

    Total product revenues                          87,164                                        82,001        340,451    326,918

    Contract revenues                                  299                                           740            299        950
                                                       ---                                           ---            ---        ---

    Total revenues                                  87,463                                        82,741        340,750    327,868


    OPERATING EXPENSES (1)(2):

    Cost of product revenues                        13,814                                        13,651         54,718     58,828

    Research and development                        14,944                                        14,855         62,811     60,158

    Selling and marketing                           36,536                                        34,715        157,001    151,042

    General and administrative                      20,019                                        18,028         72,670     73,272
                                                    ------                                        ------         ------     ------

    Total operating expenses                        85,313                                        81,249        347,200    343,300
                                                    ------                                        ------        -------    -------


    Income (loss) from
     operations                                      2,150                                         1,492        (6,450)  (15,432)


    Interest income                                    307                                           136            934        418

    Gain on sales of marketable
     securities                                          -                                        1,199          2,807      3,208

    Other income (expense), net                      (436)                                        (558)           356      (732)
                                                      ----                                          ----            ---       ----

    Income (loss) before income
     taxes                                           2,021                                         2,269        (2,353)  (12,538)

    Income tax expense                                 142                                           917          1,504      1,381
                                                       ---                                           ---          -----      -----

    Net income (loss)                               $1,879                                        $1,352       $(3,857) $(13,919)
                                                    ======                                        ======        =======   ========

    Basic net income (loss) per
     share                                           $0.05                                         $0.04        $(0.11)   $(0.42)
                                                     =====                                         =====         ======     ======

    Diluted net income (loss)
     per share                                       $0.05                                         $0.04        $(0.11)   $(0.42)
                                                     =====                                         =====         ======     ======

    Shares used in computing
     basic net income (loss)
     per share                                      34,856                                        33,629         34,495     33,264
                                                    ======                                        ======         ======     ======

    Shares used in computing
     diluted net income (loss)
     per share                                      35,709                                        34,617         34,495     33,264
                                                    ======                                        ======         ======     ======
    ______________

    (1)              Included in operating expenses for
                     the three months ended December
                     31, 2017 were non-cash charges of
                     $8.2 million, including $5.0
                     million of stock-based
                     compensation expense and $3.2
                     million of depreciation and
                     amortization expenses, compared
                     with non-cash charges for the
                     same period in 2016 of $6.5
                     million, including $4.2 million of
                     stock-based compensation expense
                     and $2.3 million of depreciation
                     and amortization expenses.


    (2)              Included in operating expenses for
                     the year ended December 31, 2017
                     were non-cash charges of $32.0
                     million, including $20.3 million
                     of stock-based compensation
                     expense and $11.7 million of
                     depreciation and amortization
                     expenses, compared with non-cash
                     charges for the same period in
                     2016 of $27.2 million, including
                     $18.3 million of stock-based
                     compensation expense and $8.9
                     million of depreciation and
                     amortization expenses.

 

                                              GENOMIC HEALTH, INC.

                                     Condensed Consolidated Balance Sheets

                                                 (In thousands)


                                   As of                                      As of

                               December 31,                               December 31,

                                       2017                                        2016
                                       ----                                        ----

                               (Unaudited)                                         (1)


    Cash and cash equivalents                                   $45,518                  $40,404

    Short-term marketable
     securities (2)                                              84,057                   56,585

    Accounts receivable, net                                     31,161                   35,179

    Prepaid expenses and other
     current assets                                              13,524                   13,796
                                                                 ------                   ------

    Total current assets                                        174,260                  145,964


    Property and equipment,
     net                                                         46,440                   45,688

    Other assets                                                 10,917                    9,462
                                                                 ------                    -----

    Total assets                                               $231,617                 $201,114
                                                               ========                 ========


    Accounts payable                                               $156                   $2,864

    Accrued expenses and other
     current liabilities                                         39,360                   38,311

    Other liabilities                                             3,810                    3,834

    Stockholders' equity                                        188,291                  156,105
                                                                -------                  -------

    Total liabilities and
     stockholders' equity                                      $231,617                 $201,114
                                                               ========                 ========
    ______________

    (1)              The condensed consolidated
                     balance sheet at December 31,
                     2016, has been derived from the
                     audited consolidated financial
                     statements at that date
                     included in the Company's
                     Annual Report on Form 10-K for
                     the fiscal year ended December
                     31, 2016.


    (2)              Included in short-term
                     marketable securities as of
                     December 31, 2017 is $3.5
                     million of equity securities,
                     representing the Company's
                     investment in Biocartis N.V.
                     Included in short-term
                     marketable securities as of
                     December 31, 2016 is $9.3
                     million of equity securities
                     representing the Company's
                     investment in Invitae
                     Corporation. All remaining
                     shares of Invitae Corporation
                     were sold during the quarter
                     ended March 31, 2017.
 

 

                                                                             GENOMIC HEALTH, INC.

                                                                       GAAP to Non-GAAP Reconciliations

                                                                    (In thousands, except per share data)

                                                                                 (Unaudited)


                                         Three Months Ended             Year Ended

                                            December 31,             December 31,
                                            ------------             ------------

                                                       2017            2016                                   2017 2016
                                                       ----            ----                                   ---- ----


    Net income (loss) reconciliation:

    GAAP net income (loss)                                   $1,879                                        $1,352       $(3,857) $(13,919)

    Research and development -
     discount on convertible
     promissory note                                            671                                             -           671

    Research and development -
     discount for lack of
     marketability during lock up
     period                                                     322                                             -           322          -

    Research and development -
     collaboration expense: upfront
     license and option fee                                       -                                            -         3,248          -
                                                                ---                                          ---         -----        ---

    Non-GAAP net income (loss)                               $2,872                                        $1,352           $384  $(13,919)
                                                             ======                                        ======           ====   ========


    Constant Currency reconciliations:


    International Revenue:

    GAAP International Revenue                              $13,678                                       $11,967        $53,088    $46,791

       Currency exchange adjustments (1)                      (280)                                            -           654          -
                                                               ----                                           ---           ---        ---

    Non-GAAP International Revenue                          $13,398                                       $11,967        $53,742    $46,791
                                                            =======                                       =======        =======    =======

       Period over period constant
        currency increase                                    $1,431                                                      $6,951

       Period over period constant
        currency increase percentage                            12%                                                        15%


    Total Revenue:

    GAAP Total Revenue                                      $87,463                                       $82,741       $340,750   $327,868

       Currency exchange adjustments (1)                      (280)                                            -           654          -
                                                               ----                                           ---           ---        ---

    Non-GAAP Total Revenue                                  $87,183                                       $82,741       $341,404   $327,868
                                                            =======                                       =======       ========   ========

       Period over period constant
        currency increase                                    $4,442                                                     $13,536

       Period over period constant
        currency increase percentage                             5%                                                         4%

    (1)              Constant currency is a non-GAAP
                     measure that is calculated by
                     comparing the Company's
                     quarterly average foreign
                     exchange rates for the three
                     and twelve months ended
                     December 31, 2017. The constant
                     currency disclosures take
                     current local currency revenue
                     and translate it into U.S.
                     dollars based upon the foreign
                     currency exchange rates used to
                     translate the local currency
                     revenue for the applicable
                     comparable period in the prior
                     year, rather than the actual
                     exchange rates in effect during
                     the current period. It does not
                     include any other effect of
                     changes in foreign currency
                     rates on the Company's results
                     or business. The Company
                     believes this non-GAAP
                     financial measure is useful to
                     investors in assessing the
                     operating performance of the
                     business. This non-GAAP
                     measure should not be
                     considered in isolation or as
                     an alternative to GAAP
                     measures.

The Company makes reference in this press release to "non-GAAP net income" which excludes certain clinical and commercial development milestone payments for the Company's collaborations with Cleveland Diagnostics and Biocartis N.V. The Company believes that excluding these items and their related tax effects from its financial results reflects operating results that are more indicative of the Company's ongoing operating performance while improving comparability to prior periods, and, as such, may provide investors with an enhanced understanding of the Company's past financial performance and prospects for the future. In addition, the Company's management uses such non-GAAP measures internally to evaluate and assess its core operations and to make ongoing operating decisions. The Company has not provided a reconciliation of its full-year 2018 non-GAAP net income or non-GAAP EPS guidance to full-year 2018 GAAP net income and GAAP EPS guidance because certain items that are a component of net income cannot be reasonably predicted. In particular, sufficient information is not available to calculate certain adjustments required for such reconciliations, including the likelihood, timing and amount of clinical and commercial development milestone payments. These components of net income could significantly impact the Company's actual results. This non-GAAP information is not intended to be considered in isolation or as a substitute for comparable information prepared in accordance with GAAP.

GHDX-F

 

 

CONTACT: Investors: Emily Faucette, Genomic Health, 650-569-2824, investors@genomichealth.com; Media: Victoria Steiner, Genomic Health, 415-370-5804, media@genomichealth.com

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