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Genomic Health Prostate Cancer Business Solid, Cost Woes Stay

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On Sep 5, we issued an updated research report on Genomic Health, Inc. (GHDX - Free Report) . We are upbeat about this Zacks Rank #3 (Hold) company’s U.S. prostate cancer business, which has been consistently accelerating over the last few quarters. However, rising operating expenses on general and administrative activities continue to be a concern.

This leading developer and marketer of genomic-based clinical tests for cancer diagnosis has been outperforming its industry for the past three months. The stock has gained 20.7% compared with the industry's 4.9% growth.

Genomic Health has been witnessing increased adoption of the U.S. prostate cancer test on private reimbursement. Revenues from this business in the last reported quarter rose 63% on a year-over-year basis led by rising test volumes, expanding coverage and payments from private payers along with CMS coverage for intermediate-risk patients.

Moreover, two studies supporting the favorable impact of the Oncotype DX GPS test on risk assessment in clinically low-risk prostate cancer patients in real-world practice were recently presented.

Per management, Genomic Health continues to be the market leader in low-risk and intermediate-risk prostate cancer treatment, courtesy of its test volume performance over the last several quarters. The company has also been witnessing continued expansion of reimbursement coverage in Western Europe.

Further, Genomic Health’s considerable expansion in the international arena encourages us. During the last reported quarter, the company witnessed a slew of developments in its international business.  First, 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.

Second, Genomic Health reached an important milestone in its partnership with Biocartis-IVD by supporting the feasibility to perform the Oncotype DX Breast Recurrence Score test on the proprietary Idylla platform. 

Meanwhile, Genomic Health has adopted several strategies to improve its revenue performance. These include portfolio expansion and penetration in the international arena. So far, this has significantly bumped up costs and operating expenses for the company.

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

Key Picks

Some better-ranked stocks in the broader medical space are Integer Holdings Corporation (ITGR - Free Report) , Intuitive Surgical (ISRG - Free Report) and Masimo Corporation (MASI - Free Report) .

Integer Holdings’ expected long-term earnings growth rate is 15%. The stock sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock carries a Zacks Rank #2.

Masimo’s long-term expected earnings growth rate is 14.8%. The stock has a Zacks Rank #2.

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