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Genomic Health (GHDX) Q2 Earnings and Revenues Top Estimates

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Genomic Health, Inc. (GHDX - Free Report) reported second-quarter 2018 adjusted earnings per share (EPS) of 26 cents against the year-ago adjusted net loss of 8 cents per share. The bottom line also exceeded the Zacks Consensus Estimate of 7 cents.

Reported net income came in at 23 cents per share against the year-ago net loss of 8 cents per share.

Revenues in Detail

In the first quarter, the company had adopted the new ASC 606 accounting standard for calculating revenues using the modified retrospective method. Accordingly, the metric was $95.6 million, up 14.1% from the year-ago pre-606 adjusted revenues (if the new ASC 606 standard had been applied as of Jan 1, 2017) of $83.8 million. On an adjusted constant currency basis, the top line improved 13% year over year. The quarterly number also surpassed the Zacks Consensus Estimate by 4.1%.

Genomic Health, Inc. Price, Consensus and EPS Surprise

 

Geographically, second-quarter product revenues in the United States rose 15% to $81.4 million from the year-ago pre-606 adjusted revenues. The U.S. product revenue growth was fueled by a 13% rise in U.S. invasive breast revenues from Oncotype DX Breast Recurrence Score tests and a 63% surge in U.S. prostate test revenues from Oncotype DX Genomic Prostate Score (GPS) tests.

International product revenues totaled $14.2 million in the quarter under review, up 11% year over year (up 6% at adjusted constant currency) from the year-ago pre-606 adjusted tally.

During the second quarter, the company delivered more than 33,590 Oncotype DX test results, up 6% year over year.

Margin Trend

Genomic Health’s gross margin expanded 100 basis points (bps) year over year to 84.9% in the second quarter.

The company also saw a 0.9% fall in operating expenses to $74.1 million on a 3.2% decline in research and development expenses to $15.3 million and a 1% decrease in selling and marketing expenses to $40.3 million. However, general and administrative expenses rose 0.5% to $18.5 million.

In the reported quarter, Genomic Health’s operating income came in at $7.1 million compared with the year-ago operating loss of $3.1 million.

Financial Update

Genomic Health exited the second quarter of 2018 with cash and cash equivalents and short-term marketable securities of $152.9 million, highlighting an improvement from $130.4 million at the end of first-quarter 2018.

2018 Guidance

The company has reaffirmed its earlier-provided outlook for 2018. Genomic Health expects full-year revenues in the range of $366-$382 million, reflecting 10-15% growth. The Zacks Consensus Estimate of $376.8 million is within the guided range.

Our Take

Genomic Health exited second-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, two studies supporting the favorable impact of the Oncotype DX GPS test on risk assessment for improving treatment decisions in clinically low-risk prostate cancer patients in real-world practice were presented at the 2018 American Urological Association Annual Meeting.

The company also witnessed a series of upsides for its Oncotype DX Breast Recurrence Score tests. In this regard, Genomic Health received public coverage with the province of New Brunswick for using the Oncotype DX Breast Recurrence Score test in early-stage breast cancer patients with node-negative disease.

Genomic Health continues to gain from the implementation of both PAMA reimbursement at a higher level than the 2016 invasive breast rate and AJCC staging criteria. Further, the ECOG-ACRIN Cancer Research Group TAILORx study results which have been published in The New England Journal of Medicine and presented in the Plenary Session at the American Society of Clinical Oncology Annual Meeting will also provide impetus. 

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

Zacks Rank & Key Picks

Genomic Health carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical sector which reported solid results this earnings season are Intuitive Surgical (ISRG - Free Report) , Chemed Corporation (CHE - Free Report) and Align Technology, Inc. (ALGN - Free Report) . While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), Chemed and Align Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported second-quarter 2018 adjusted EPS of $2.76, which beat the Zacks Consensus Estimate of $2.48. Revenues totaled $909.3 million, also surpassing the consensus estimate of $870 million.

Align Technology posted second-quarter 2018 adjusted EPS of $1.30, steering past the Zacks Consensus Estimate of $1.09. Revenues came in at $490.3 million, beating the consensus estimate of $462.9 million.

Chemed reported second-quarter 2018 adjusted EPS of $2.81, which trumped the Zacks Consensus Estimate of $2.68. Revenues of $441.8 million edged past the Zacks Consensus Estimate of $432.3 million.

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