Genomic Health Announces Third Quarter 2017 Financial Results and Reports Recent Business Progress

 

Delivered 2 Percent Increase in Revenue; 5 Percent Increase in Test Volume
Reported Net Loss of $2.2M; Delivered $1.1M Profit on a Non-GAAP Basis
Announced Collaboration with Biocartis to Develop IVD Version of Oncotype DX Breast Cancer Test with a $3.2M Transaction Cost in the Third Quarter
Reiterates Full-year Revenue Guidance, Excluding Impact from Hurricane Disruption
Expects Full-year Profitability, Excluding Cost of Biocartis Transaction

 
[08-November-2017]
 
 

REDWOOD CITY, Calif., Nov. 8, 2017 /PRNewswire/ -- Genomic Health, Inc., Inc. (NASDAQ: GHDX) today reported financial results and business progress for the quarter ended September 30, 2017.

Total revenue was $83.8 million in the third quarter of 2017, compared with $82.3 million in the third quarter of 2016, an increase of 2 percent. Revenue was negatively impacted by approximately $3 million due to the hurricane disruption in certain regions of the United States.

U.S. product revenue was $70.9 million in the third quarter of 2017, compared with $70.0 million in the third quarter of 2016. U.S. invasive breast revenue from Oncotype DX Breast Recurrence Score® tests was $63.1 million in the third quarter of 2017, compared with $64.6 million in the third quarter of 2016. U.S. prostate revenue from Oncotype DX® Genomic Prostate Score™ (GPS™) tests was $5.5 million in the third quarter of 2017, compared with $2.3 million in the third quarter of 2016.

International product revenue was $12.9 million in the third quarter of 2017, compared with $12.1 million in the third quarter of 2016, an increase of 7 percent.

"In the third quarter, we generated solid results including a 2 percent increase in revenue and a 5 percent increase in test volume, despite disruption in U.S. regions affected by hurricanes. We also reported a net loss of $2.2 million, and on a non-GAAP basis delivered a $1.1 million profit in the third quarter. Importantly, we expect to deliver full-year profit, excluding transaction costs from our collaboration with Biocartis," said Kim Popovits, chairman of the board, chief executive officer and president of Genomic Health. "We look forward to significant revenue drivers in 2018 including a new higher Medicare rate under PAMA and anticipated TAILORx results, while we expand our business model to increase worldwide access through the development of an in vitro diagnostic, or IVD, version of the Oncotype DX breast cancer test."

More than 31,580 Oncotype™ test results were delivered in the third quarter of 2017, an increase of 5 percent, compared with more than 29,990 test results delivered in the same period in 2016. U.S. test volume was negatively impacted by approximately 3 percent due to the hurricane disruption in certain regions of the country. Oncotype DX Breast Recurrence Score tests delivered in the U.S. were consistent with the third quarter of the prior year. Oncotype DX Genomic Prostate Score tests delivered in the U.S. grew 39 percent compared with the third quarter of the prior year. International tests delivered grew 14 percent compared with the same period of the prior year and represented approximately 26 percent of total test volume in the third quarter of 2017.

Operating loss for the third quarter of 2017 improved to $2.6 million, compared with $3.0 million for the third quarter of 2016. Net loss was $2.2 million, or $0.06 per share, for the third quarter of 2017, compared with a net loss of $2.8 million, or $0.08 per share, for the third quarter of 2016. Basic and diluted net loss per share was $0.06 for the third quarter of 2017, compared with basic and diluted net loss per share of $0.08 for the third quarter of 2016.

Total revenue for the nine months ended September 30, 2017 was $253.3 million compared with $245.1 million for the nine months ended September 30, 2016, an increase of 3 percent. On a constant currency basis, revenue increased 4 percent compared with the same period in the prior year.i

International product revenue was $39.4 million for the nine months ended September 30, 2017, compared with $34.8 million for the nine months ended September 30, 2016, an increase of 13 percent, and an increase of 16 percent on a constant currency basis.i

Operating loss improved to $8.6 million for the nine months ended September 30, 2017, compared with an operating loss of $16.9 million for the nine months ended September 30, 2016. Net loss was $5.7 million, or $0.17 per share, for the nine months ended September 30, 2017, compared with a net loss of $15.3 million, or $0.46 per share, for the nine months ended September 30, 2016.

Cash and cash equivalents and short-term marketable securities at September 30, 2017 were $119.0 million, compared with $97.0 million at December 31, 2016 which included the fair value of the company's investment in a marketable security of $9.3 million at December 31, 2016.

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

2017 Financial Outlook

  • The company expects to deliver full-year profit, excluding the $3.2 million cost of the Biocartis transaction.
  • The company expects to meet the low end of its full year revenue guidance, which is $345 million, excluding the estimated hurricane impact on revenue of approximately $3 million in the third quarter.

Recent Business Highlights

  • Palmetto GBA, a Medicare Administrative Contractor (MAC) that assesses molecular diagnostic technologies, issued a positive final Local Coverage Determination (LCD) that became effective on October 9, 2017 to expand Medicare coverage of the Oncotype DX Genomic Prostate Score test to qualified patients with favorable intermediate-risk prostate cancer throughout the U.S.
  • Established additional private coverage for the Oncotype DX Genomic Prostate Score test, bringing the total number of U.S. covered lives to more than 66 million.
  • Established new private coverage for the Oncotype DX Breast Recurrence Score test in Germany, bringing the total number of German private covered lives to 15 million.
  • Announced an exclusive agreement with Biocartis Group NV to develop an IVD version of the Oncotype DX Breast Recurrence Score test on Biocartis' Idylla platform that can be performed locally by laboratory partners and in hospitals around the world to broaden future global patient access.
  • European Urology published results from a large, community-based, multi-center clinical validation study conducted at Kaiser Permanente. The results confirmed that the Oncotype DX GPS test is a strong independent predictor of prostate cancer-specific death and metastases at 10 years in men with localized prostate cancer.
  • Presented results from four studies that provide additional evidence of the unmatched value of the Oncotype DX Breast Recurrence Score test in accurately predicting outcomes in early-stage breast cancer patients at the European Society for Medical Oncology (ESMO) 2017 Congress.
  • Nature Partner Journals Breast Cancer, a peer-reviewed journal published by Nature, published two articles highlighting results from a large prospectively designed registry conducted by Clalit Health Services, the largest Health Maintenance Organization in Israel. The results reinforce the ability of the Oncotype DX Breast Recurrence Score test to predict clinical outcomes in both node-negative and node-positive patients.
  • Received acceptance to present nine studies at the 2017 San Antonio Breast Cancer Symposium (SABCS) in December.

Conference Call Details
To access the live conference call today, November 8, at 4:30 p.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 5697809. 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 800,000 cancer patients worldwide. Genomic Health is expanding its test portfolio to include additional liquid- and tissue-based tests, including the recently launched Oncotype SEQ® Liquid Select™ 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 achieving its financial guidance for the full year 2017; the commercial performance of its tests; 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 estimated impact of the recent hurricanes on the company's business; 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; and the ability of the Company to increase worldwide access through the development of an in vitro diagnostic version of its tests. 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 2017 guidance estimates and the assumptions underlying such guidance; 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 June 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.

i Constant currency is a non-GAAP measure that is calculated by comparing the company's quarterly average foreign exchange rates for the nine months ended September 30, 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.

 

                                                         GENOMIC HEALTH, INC.

                                           Condensed Consolidated Statements of Operations

                                               (In thousands, except per share amounts)

                                                             (Unaudited)


                                     Three Months Ended                               Nine Months Ended

                                     September 30,                                September 30,
                                     -------------                                -------------

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

    REVENUES:

    Product revenues - United
     States                                $70,881                              $70,041                              $213,878     $210,092

    Product revenues - Outside
     of the United States        12,940                  12,095                   39,409                    34,824
                                 ------                  ------                   ------                    ------

    Total product revenues                  83,821                               82,136                               253,287      244,916

    Contract revenues                 -                    122                        -                      210
                                    ---                    ---                      ---                      ---

    Total revenues               83,821                  82,258                  253,287                   245,126


    OPERATING EXPENSES (1)(2):

    Cost of product revenues     13,433                  13,425                   40,904                    45,177

    Research and development     17,212                  14,746                   47,868                    45,303

    Selling and marketing        38,303                  38,838                  120,464                   116,327

    General and administrative   17,505                  18,268                   52,651                    55,243
                                 ------                  ------                   ------                    ------

    Total operating expenses     86,453                  85,277                  261,887                   262,050
                                 ------                  ------                  -------                   -------

    Loss from operations        (2,632)                (3,019)                 (8,600)                 (16,924)

    Interest income                 263                     117                      627                       282

    Gain on sales of marketable
     securities                       -                      -                   2,807                     2,009

    Other income (expense), net     340                   (111)                     792                     (174)
                                    ---                    ----                      ---                      ----

    Loss before income taxes    (2,029)                (3,013)                 (4,374)                 (14,807)
                                 ------                  ------                   ------                   -------


    Income tax expense              162                   (193)                   1,362                       464
                                    ---                    ----                    -----                       ---

    Net loss                              $(2,191)                            $(2,820)                             $(5,736)   $(15,271)
                                           =======                              =======                               =======     ========

    Basic and diluted net loss
     per share                             $(0.06)                             $(0.08)                              $(0.17)     $(0.46)

    Shares used in computing
     basic and diluted net loss
     per share                   34,675                  33,391                   34,373                    33,141
                                 ======                  ======                   ======                    ======

    (1)              Included in operating expenses for
                     the three months ended September
                     30, 2017, were non-cash charges
                     of $8.1 million, including $5.0
                     million of stock-based
                     compensation expense and $3.1
                     million of depreciation and
                     amortization expenses, compared
                     with non-cash charges for the
                     same period in 2016 of $7.0
                     million, including $4.7 million of
                     stock-based compensation expense
                     and $2.3 million of depreciation
                     and amortization expenses.


    (2)              Included in operating expenses for
                     the nine months ended September
                     30, 2017, were non-cash charges
                     of $23.8 million, including $15.2
                     million of stock-based
                     compensation expense and $8.6
                     million of depreciation and
                     amortization expenses, compared
                     with non-cash charges for the
                     same period in 2016 of $20.8
                     million, including $14.1 million
                     of stock-based compensation
                     expense and $6.7 million of
                     depreciation and amortization
                     expenses.

 

                                              GENOMIC HEALTH, INC.

                                      Condensed Consolidated Balance Sheets

                                                 (In thousands)


                                     As of                                      As of
                                                                            December 31,
                                September 30,
                                                                                    2016
                                         2017
                                         ----

                                 (Unaudited)                                         (1)



    Cash and cash equivalents                                     $43,019                  $40,404

    Short-term marketable
     securities (2)                    75,942                                      56,585

    Accounts receivable, net           35,584                                      35,179

    Prepaid expenses and other
     current assets                    11,506                                      13,796
                                       ------                                      ------

    Total current assets              166,051                                     145,964


    Property and equipment, net        47,411                                      45,688

    Other assets                        9,522                                       9,462
                                        -----                                       -----

    Total assets                                                 $222,984                 $201,114
                                                                 ========                 ========




    Accounts payable                                               $8,475                   $2,864

    Accrued expenses and other
     current liabilities               35,947                                      38,311

    Other liabilities                   3,867                                       3,834

    Stockholders' equity              174,695                                     156,105
                                      -------                                     -------

    Total liabilities and
     stockholders' equity                                        $222,984                 $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, 2016 is $9.3
                     million of corporate 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                            Nine Months Ended

                                              September 30,                                September 30,
                                              -------------                                -------------

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


    Income (loss) from operations
     reconciliation:


    GAAP (loss) from operations        $(2,632)              $(3,019)                  $(8,600)            $(16,924)


      Research and development -
       collaboration with Biocartis,
       upfront license and option fee     3,249                      -                     3,249                     -


      Selling and marketing -
       impairment charge for
       previously capitalized software        -                 2,600                          -                2,600
                                            ---                 -----                        ---                -----


    Non-GAAP income (loss) from
     operations                            $617                 $(419)                  $(5,351)            $(14,324)
                                           ====                  =====                    =======              ========



    Interest and other income
     (expense), net reconciliation:


    GAAP interest and other income
     (expense), net                        $603                     $6                     $4,226                $2,117


      Non-recurring gain on sale of
       marketable securities                  -                     -                   (2,807)              (2,009)
                                            ---                   ---                    ------                ------


    Non-GAAP interest and other
     income (expense), net                 $603                     $6                     $1,419                  $108
                                           ====                    ===                     ======                  ====



    Income tax (benefit) expense
     reconciliation:


    GAAP income tax (benefit)
     expense                               $162                 $(193)                    $1,362                  $464


      Reduced income tax expense from
       the sale of marketable
       securities                             -                     -                     (821)                (347)
                                            ---                   ---                      ----                  ----


    Non-GAAP income tax (benefit)
     expense                                         $162                                 $(193)                        $541  $117
                                                     ====                                  =====                         ====  ====



    Net income (loss)
     reconciliation:


    GAAP net (loss)                    $(2,191)              $(2,820)                  $(5,736)            $(15,271)


      Research and development -
       collaboration with Biocartis,
       upfront license and option fee     3,249                      -                     3,249                     -


      Selling and marketing -
       impairment charge for
       previously capitalized software        -                 2,600                          -                2,600


      Non-recurring gain on sale of
       marketable securities                  -                     -                   (2,807)              (2,009)


      Reduced income tax expense from
       the sale of marketable
       securities                             -                     -                       821                   347

    Non-GAAP net income (loss)           $1,058                 $(220)                  $(4,473)            $(14,333)
                                         ======                  =====                    =======              ========

 

                                              GENOMIC HEALTH, INC.
                                  GAAP to Non-GAAP Reconciliations (continued)
                                      (In thousands, except per share data)
                                                   (Unaudited)


                                       Three Months Ended                         Nine Months Ended

                                         September 30,                              September 30,
                                         -------------                              -------------

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



    Non-GAAP adjustment
     summary:


       Research and development
        expense adjustments              $3,249                $                -               $3,249  $         -


       Selling and marketing
        expense adjustments                   -                            2,600                     -       2,600


       Gain on sale of marketable
        securities                            -                                -              (2,807)     (2,009)
                                            ---                              ---               ------       ------


    Total non-GAAP adjustments
     before tax                           3,249                             2,600                   442          591


       Income tax effect                      -                                -                  821          347
                                            ---                              ---                  ---          ---


    Total non-GAAP adjustments
     after tax                           $3,249                            $2,600                $1,263         $938
                                         ======                            ======                ======         ====

The Company makes reference in this press release to "non-GAAP net income" which excludes research and development expense recorded for a one-time upfront license and option fee, for the Company's collaboration with Biocartis N.V.; and certain other non-recurring income and expenses. 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. This information is not intended to be considered in isolation or as a substitute for income (loss) from operations, net loss or other income (expense) information prepared in accordance with GAAP.

GHDX-F

 

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SOURCE Genomic Health, Inc.

 
 
Company Codes: NASDAQ-NMS:GHDX
 

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