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Genomic Health (GHDX) Q3 Earnings and Revenues Top Estimates


Genomic Health, Inc. GHDX reported third-quarter 2018 adjusted earnings per share (EPS) of 35 cents compared with the year-ago adjusted EPS of 3 cents. The bottom line also surpassed the Zacks Consensus Estimate of 7 cents.

Reported net income came in at 32 cents per share against the year-ago net loss of 6 cents.

Revenues in Detail

Total revenues in the quarter rose 20.9% year over year to $101.3 million, beating the Zacks Consensus Estimate by 7.2%. Growth in the United States and international markets drove the top line. Solid U.S. invasive breast cancer growth was also recorded in the quarter.

Geographically, third-quarter product revenues in the United States rose 23% to $85.8 million from the year-ago pre-606 adjusted revenues. The U.S. product revenue growth was fueled by a 24% rise in U.S. invasive breast revenues from Oncotype DX Breast Recurrence Score tests and a 28% surge in U.S. prostate test revenues from Oncotype DX Genomic Prostate Score (GPS) tests.

Genomic Health, Inc. Price, Consensus and EPS Surprise

International product revenues totaled $15.5 million in the quarter under review, up 22% year over year (up 20% at adjusted constant currency) from the year-ago pre-606 adjusted tally.

During the third quarter, the company delivered more than 34,810 Oncotype DX test results, up 10% year over year.

Margin Trend

Genomic Health’s gross margin expanded 70 basis points (bps) year over year to 84.7% in the third quarter.

The company also saw a 1.2% rise in operating expenses to $74 million on a 4.7% rise in selling and marketing expenses to $40.1 million and a 5.7% increase in general and administrative expenses to $18 .5 million. However, research and development expenses declined 10.5% to $15.4 million.

In the reported quarter, Genomic Health’s operating income came in at $11.8 million against the year-ago operating loss of $2.6 million.

Financial Update

Genomic Health exited the third quarter of 2018 with cash and cash equivalents and short-term marketable securities of $183.2 million, highlighting an improvement from $152.9 million at the end of second-quarter 2018.

2018 Guidance Updated

Genomic Health now expects full-year revenues in the range of $389-$391 million as against the prior $366-$382 million, reflecting growth of 17% (from 10-15% growth stated earlier). The Zacks Consensus Estimate is pegged at $392.3 million, above the guided range.

Our Take

Genomic Health exited third-quarter 2018 on a promising note.

We are also encouraged by the year-over-year rise in revenues, driven by solid performances in the United States and internationally. Per the company, within prostate cancer space, the company saw increasing private coverage for the Oncotype DX GPS test. Moreover, Genomic Health recently announced the publication of real-world clinical data supporting the use of the Oncotype DX GPS test, which has resulted in substantially greater use of active surveillance compared to no testing. Results of this new study were published in Reviews in Urology.

Another independent study was published by University of California, San Francisco (UCSF) researchers in the Journal of Urology.

The company also witnessed a series of developments for its Oncotype DX Breast Recurrence Score tests. In this regard, Genomic Health recently announced a positive development with regard to the newly updated National Comprehensive Cancer Network (NCCN) 2018 guidelines for invasive breast cancer chemotherapy treatment. Per the company, its Oncotype DX Breast Recurrence Score test has been identified as the only "preferred" test for making decisions regarding chemotherapy treatment for patients suffering from node-negative early-stage breast cancer.

Furthermore, Oncotype DX has been elevated into the algorithm for chemotherapy treatment of patients with micrometastases and one to three positive lymph nodes.

However, Genomic Health’s sole reliance on the Breast Oncotype DX test is concerning.

Zacks Rank & Other Key Picks

Genomic Health carries a Zacks Rank #1 (Strong Buy).

Other top-ranked stocks in the broader medical space which reported solid earnings this season are Intuitive Surgical ISRG, Stryker Corporation SYK and Merit Medical Systems, Inc. MMSI. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, outpacing the Zacks Consensus Estimate of $1.68. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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