Genomic Health Management Discusses Q4 2013 Results - Earnings Call Transcript

Feb. 4.14 | About: Genomic Health, (GHDX)

Genomic Health (NASDAQ:GHDX)

Q4 2013 Earnings Call

February 04, 2014 4:30 pm ET

Executives

Emily Faucette

Kimberly J. Popovits - Chairman of The Board, Chief Executive Officer, President and Member of Non-Management Stock Option Committee

Dean L. Schorno - Chief Financial Officer and Principal Accounting Officer

G. Bradley Cole - Chief Operating Officer and Member of Non-Management Stock Option Committee

Steven Shak - Executive Vice President of Research & Development

Analysts

Justin Bowers - Leerink Swann LLC, Research Division

Jeffrey Frelick - Canaccord Genuity, Research Division

Katherine Blanton - Jefferies LLC, Research Division

J.P. McKim

Isaac Ro - Goldman Sachs Group Inc., Research Division

Rafael Tejada - BofA Merrill Lynch, Research Division

Jordan McKinnie - JP Morgan Chase & Co, Research Division

Nicholas Jansen - Raymond James & Associates, Inc., Research Division

Operator

Good afternoon. My name is Chuck and I'll be your conference operator today. At this time, I would like to welcome everyone to Genomic Health Fourth Quarter and Year End 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Emily Faucette, Vice President of Corporate Communications and Investor Relations. You may begin your conference.

Emily Faucette

Thank you. Good afternoon, everyone, and welcome to Genomic Health's conference call to review our fourth quarter and year end 2013 financial results.

Before we begin, I'd like to remind you that various remarks that we make on this call that are not historical, including those about our future financial and operating results, our plans and prospects, our ability to leverage our existing infrastructure, the success of our business strategy, economic benefits and value to payors of our tests, growth opportunities, including international and prostate cancer tests, future products, product enhancement and our product pipeline, demand for our test and drivers of demand, payor coverage and progress in reimbursement and patient access, our investment in our product pipeline, international expansion and commercial organization, clinical outcomes and timing of clinical studies and product launches, and our expectations regarding our ability to comply with potential FDA or other regulation constitute forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act. We refer you to our quarterly report on Form 10-Q for the quarter ended September 30, 2013, filed with the SEC. In particular, to the section entitled Risk Factors for additional information on factors that could cause actual results to differ materially from our current expectations. These forward-looking statements speak only as of the date hereof and we disclaim any obligation to update these forward-looking statements.

Joining me on the call today are Kim Popovits, our Chairman of the Board, Chief Executive Officer and President; Brad Cole, our Chief Operating Officer; Dean Schorno, our Chief Financial Officer; Steve Shak, our Executive Vice President of Research and Development; and Kathy Hibbs, Senior Vice President and General Counsel by phone.

I'll now turn the call over to Kim.

Kimberly J. Popovits

Thanks, Emily. Good afternoon, everyone and welcome. In 2013, we strengthened our position as the world's leading provider of genomic based cancer diagnostic tests with the successful launch of our third product franchise, the Oncotype DX prostate cancer test and continued international expansion. We delivered 15% growth in full-year test volume and 11% year-over-year growth in revenue, driven by continued strength in our global business. Importantly, we continue to increase both adoption and penetration in the U.S. and base of growth cancer market, which remains a substantial opportunity for near-term growth. We also gained publication and expanded reimbursement for our Oncotype DX DCIS score, which will enable greater access for the 50,000 newly diagnosed patients in the U.S. alone each year. With these achievements, we believe we are well positioned for diversification and significant growth towards a $3.5 billion opportunity worldwide with our current Oncotype DX test while enhancing our pipeline efforts in later-stage disease, including response to therapeutics and monitoring.

This is an especially exciting time for Genomic Health as we accelerate our investment and continue to lead the genomics diagnostics industry with a successful core business, multiple commercial opportunities for near-term growth and a pipeline aimed at expanding our impact across the cancer patient's journey.

I will now turn the call over to the team to provide further detail on our fourth quarter, and year-end financial results, our worldwide commercial and operations progress and recent pipeline and clinical updates. I'll then conclude with our business priorities for 2014. Dean?

Dean L. Schorno

Thank you, Kim.

During the fourth quarter, we delivered product revenue of $67.1 million compared with $60 million for the fourth quarter of 2013, an increase of 12%. International product revenue grew 16% to $10.1 million compared to the fourth quarter of 2013 and represented 15% of product revenue during the quarter. Total revenue for the fourth quarter increased to $68.8 million compared with $60.4 million in the fourth quarter of 2013 and included $1.8 million from our collaborations with Pfizer and OncoMed, which completes our existing agreements with both.

For the full year 2013, we delivered product revenue of $259.2 million compared with $233.5 million in 2012. Total revenue for the year ended December 31, 2013, increased to $261.6 million compared with $235.2 million in 2012, an increase of 11%. In the fourth quarter of 2013, more than 22,720 Oncotype DX tests were delivered, an increase of 21% compared with more than 18,820 tests delivered in the same period in 2012. As a reminder, third quarter test volume also increased by 21% compared with the same period in 2012. During the fourth quarter, our tests delivered were approximately distributed as follows: U.S. breast and colon cancer was 77% of tests delivered; international was 20%; and U.S. prostate cancer was 3%. In 2013, more than 85,500 Oncotype DX tests were delivered, an increase of 15% compared with more than 74,520 tests delivered in 2012. Included in this increase was a 7% increase in U.S. invasive breast cancer tests, along with a 49% increase in our international test volumes. 62% of tests delivered and 72% of product revenue were recorded on an accrual basis in the fourth quarter of 2013. Net loss was $9.4 million for the fourth quarter of 2013 compared with net income of $2 million in the fourth quarter of 2012 and includes the upfront payment of $9 million for the Almac in-licensing agreement. Excluding the Almac payment, the net loss was $400,000 for the quarter. Net loss for the year ended December 31, 2013, was $12.8 million compared with net income of $8.2 million for the year ended December 31, 2012. This is primarily a result of the Almac agreement, investments in our prostate launch and continued sales and marketing investment to support international opportunities.

Total operating expenses for the fourth quarter of 2013 were $77.3 million compared with total operating expenses of $58.4 million for the comparable period in 2012. Operating expenses in the fourth quarter of 2013 included $9 million of Almac, research and development expense. Cash and cash equivalents and short-term investments at December 31, 2013, were $105.3 million compared with $99.1 million at December 31, 2012. During the quarter, we made an additional $5 million investment in InVitae.

Turning now to our financial outlook for 2014. We expect total revenue of $278 million to $286 million, reflecting 7% to 10% growth in product revenue. Basic net loss between $0.95 per share and $0.75 per share, Oncotype DX test delivered of between 98,000 and 102,500 tests, reflecting 15% to 20% growth. We expect prostate contribution to overall tests delivered to be approximately 10% of total tests by the end of 2014 as compared to the fourth quarter in 2013 when they represented 3% of total tests. We anticipate gross margin to be approximately 82% in 2014 due to expected increases in test volumes related to our increased investments in the prostate and international markets. We expect to increase our sales and marketing costs by more than $25 million as we continue to expand both our prostate and international sales and marketing efforts. Additionally, in the first quarter of 2014, we expect increases in operating expenses to typically occur at the beginning of each year. We expect our full-year tax expense to be less than $1 million and of note, no revenue-generated collaborations are incorporated at this time.

I'll now turn the call over to Brad to review our global, commercial and operations progress.

G. Bradley Cole

Thanks, Dean. In 2013, we continued to advance our global business with the achievement of multiple commercial and international milestones, including: the launch of our Oncotype DX prostate cancer test; NICE's exclusive recommendation for Oncotype DX as the only multi-gene breast cancer test to guide chemotherapy decisions; and Medicare coverage of the Oncotype DX DCIS score. We are pleased to report that more than 500 physicians and 80% of our targeted urology accounts have ordered our Oncotype DX prostate cancer test. More than half of these physicians have ordered the test for multiple patients, underscoring the value it provides in the clinical setting. Based upon this encouraging uptake, we recently increased our urology field team. The expected loss in 2014 is primarily driven by the increased investment in our U.S. prostate business through field headcount, as well as clinical and marketing programs directed at developing this large opportunity in advance of reimbursement. We anticipate further expanding the U.S. urology field team to approximately 30 people by midyear and expect prostate's contribution to overall test volume to more than triple by the end of 2014.

As a reminder, the opportunity for the current indication of the Oncotype DX prostate cancer test is more than 140,000 patients or more than $400 million per year in the U.S. alone, larger than the invasive breast cancer market, which generated the significant majority of the company's revenue in 2013. With prostate cancer studies completed, evaluating tumor biology -- excuse me, with 10 prostate cancer studies completed evaluating tumor biology and clinical and analytical performance, we continue to broaden our understanding of information provided by the Oncotype DX prostate cancer test.

During the fourth quarter, BMC Genomics published the Cleveland Clinic's analytical validation study, which demonstrated that Oncotype DX is a reliable assay, even with very limited RNA inputs, enabling successful performance using scant amounts of cancer tissue, typically available from prostate needle biopsies. Additionally, we have received a notice of allowance from the U.S. patent office for patent claims related to the Oncotype DX prostate cancer test algorithm.

I would now like to highlight our efforts to capture the significant international opportunity. Our international business contributed significantly to our growth in 2013. International test volume increased by approximately 49% in 2013 compared to last year. And as Dean described, international product revenue represented 15% of total product revenue in 2013 and grew by 35% compared to the prior year. We expect international revenue growth to begin to match test growth over time as we gain additional reimbursement traction in Western Europe, where we have a growing direct presence and a market opportunity of approximately $400 million. We recently established international breast cancer coverage for an additional 7.5 million lives through contracts with insurers in the Czech Republic, Mexico and Peru, bringing total covered lives outside the U.S. to more than $115 million. With the NICE guidelines, we believe we will be able to address up to 17,000 patients diagnosed with early-stage node-negative disease in the U.K. alone and are now working with NHS healthcare providers and commissioners to provide broad access to the test in 2014. Beyond this impact in the U.K., NICE's recommendation also serves as a catalyst for conversations with payors throughout Western Europe, which represents more than a $400 million market opportunity in invasive breast cancer and is where we expect to focus most of our attention and incremental international commercial resources in 2014.

On the U.S. reimbursement front, we established node-positive and DCIS breast cancer coverage for an additional 2 million lives through contracts with large Blue Cross Blue Shield state plans. In colon cancer, we believe the recent Journal of Clinical Oncology publication of the third successful validation of Oncotype DX in patients with Stage II disease and the first validation in patients with Stage III disease combined with new data presented last month at ASCO GI support increased adoption, reimbursement and patient access to our colon cancer test.

Looking ahead to 2014, embedded in our guidance for tests delivered is our expectation for continued growth in the U.S. breast market. Strong growth in international markets and a full year of prostate tests with an expanded commercial investment. Similar to the early days of our U.S. launch in breast cancer, we expect international and prostate revenue growth to live tests delivered as international markets gain further reimbursement traction and we complete additional studies in prostate to secure U.S. reimbursement. We expect these 2 significant opportunities to be revenue drivers for the company in the coming couple of years.

Finally, we recently completed an important platform migration within our clinical reference laboratory, which provides significant operational capacity in the same footprint and further increases the quality and reliability expected and required for the practice-changing information that Oncotype DX tests provide.

I will now turn the call over to Steve to discuss recent clinical milestones and pipeline updates.

Steven Shak

Thanks, Brad. During the fourth quarter, we announced an exclusive in-licensing agreement with the Almac Group for technology and intellectual property to further develop, validate and subsequently commercialize a multi-gene test to predict benefit from DNA damage based chemotherapy drugs, such as the commonly used anthracycline-based regimens in breast cancer. Working with Almac, we have the opportunity to gain further insight into the role of DNA repair and drug efficacy, which may provide clinical utility to help select which breast cancer patients benefit from specific chemotherapy drugs and regimens.

Over the past 10 years, Oncotype DX has played a critical role in predicting the benefit of chemotherapy in general, regardless of drug regimen for more than 400,000 estrogen receptor-positive breast cancer patients. This potential new test may address another unmet need by providing additional information specific to the benefit of anthracycline-based regimens for high-risk estrogen receptor-positive patients who are eligible for chemotherapy based on their Oncotype DX recurrence score and possibly those with triple negative breast cancer as well. We are designing and planning the clinical study to validate this DNA damage gene signature.

At the San Antonio Breast Cancer Symposium in December, we announced the results of multiple new Oncotype DX studies reinforcing the unique and unmatched benefit of the test to patients and physicians worldwide. Among the data presented was the fourth head-to-head comparison where dealing important distinctions between Oncotype DX, the only test demonstrated to predict chemotherapy benefit, and other tests limited to breast cancer prognosis. Specifically results from the study presented at San Antonio demonstrated more than 44% discordance with 2 other assays compared to Oncotype DX, highlighting the potential to misclassify and mistreat patients with those tests. These findings are consistent with results reported previously at ASCO, the San Antonio Breast Cancer symposium and the ASCO Breast Cancer symposium, and reinforce why Oncotype DX is the only test included in treatment guidelines for the prediction of chemotherapy benefit.

In colon cancer, we recently announced results for multiple Oncotype DX studies at the ASCO GI symposium. Presentations highlighted the robust body of clinical evidence, the Oncotype DX colon cancer test and its real life impact on patient and physician treatment decisions underscoring the practice-changing value of the test. Specifically, a prospective evaluation demonstrated that the Oncotype DX colon cancer test greatly increased concordance between physician and patient treatment choice from 66% to 96%. Furthermore, it showed that the quantitative information provided by the Recurrence Score result influenced 85% of patients' treatment decisions and 69% of physicians' treatment recommendations. The study also reported increased physician confidence and reduced patient anxiety about their decision, which has the potential to improve adherence to their treatment plan and ultimately lead to better health outcomes.

In addition, results from 3 colon decision impact studies with a total of 502 patients showed that the test changed treatment recommendations in 29% to 45% of stage 2 colon cancer cases, leading to a net reduction in adjuvant chemotherapy use.

Finally, we are making significant pipeline progress in 2 of our largest near-term opportunities, DCIS and prostate cancer. With regard to DCIS, we have initiated sample processing for a large study to confirm and extend the observations of the published DCIS study performed by ECOG. We expect that the results of this study, which includes both patients treated with surgery alone and patients treated with surgery plus radiation increase the adoption and reimbursement for our DCIS test. For prostate cancer, we are using the same overall strategy that we use to obtain widespread adoption and reimbursement in invasive breast cancer by performing a suite of studies. We have initiated sample processing for a second large prostate cancer study to reinforce the value of the Oncotype DX test in predicting adverse pathology and to further demonstrate its role in predicting biochemical recurrence. A longer-term outcome is also associated with aggressive disease. In addition to this study, we now have 2 contracts in place to perform clinical studies to demonstrate the value of Oncotype DX in patients on active surveillance. These additional studies will evaluate the likelihood of progression for men on active surveillance and further expand the growing number of strong relationships and partnerships we are developing in urology.

Over the past decade, Genomic Health has redefined personalized medicine through the innovation of the Oncotype DX platform, making Genomics an indispensable part of breast, colon and prostate cancer diagnosis and treatment. And in doing so, we launched a new industry, focused on using genomic information to make cancer care smarter. In the next decade, we aim to lead the transformation of cancer into a manageable disease by developing a pipeline of tests that interpret a patient's unique genomic signature at each of the many stages of cancer from diagnosis and treatment, to monitoring for disease progression or recurrence to choosing the best therapy if the cancer recurs. This may include: new applications of our existing Oncotype DX tests to predict aggressiveness, intensity and duration of specific treatments; development of new tests to answer additional questions at diagnosis or later in disease; and development of a proprietary liquid platform to offer noninvasive tests for potentially all tumor types that can be performed on blood or urine to quantify the presence and/or burden of cancer, as well as the sensitivity or resistance to specific drugs in a revolutionary way. We are excited that we will initiate the first study with our proprietary liquid platform in 2014 and look forward to sharing more later this year.

I'll now turn the call back to Kim.

Kimberly J. Popovits

Thanks, Steve. 2014 marks the 10th anniversary of Oncotype DX, representing a decade of progress in eliminating the one-size-fits-all approach to breast cancer treatment. To date, we have generated more clinical evidence than any company in the world around genomics. We have also demonstrated that our breast, prostate and colon cancer tests are changing treatment decisions by addressing the overtreatment of early-stage cancer. While early-stage cancer clearly represents a significant opportunity with near-term potential, we have now set our sights on expanding our business focus beyond early-stage treatment to later-stage disease, including response to therapeutics and drug monitoring. Many patients diagnosed with cancer are not early-stage and they, too, can benefit from genomics test to guide critical decisions in managing their disease. While we are very excited about those longer-term opportunities, our focus today remains on executing the following 2014 priorities including: Publishing the prostate validation study; completing and reporting top line results of the second prostate study evaluating biochemical recurrence, as well as adverse pathology in low-risk patients around midyear, which we expect will both drive public and private reimbursement for Oncotype DX prostate cancer tests; completing and reporting top line results of a second DCIS study also around midyear, which we expect will be instrumental in expanding reimbursement; initiating the first study with our proprietary liquid platform; and completing our next-generation sequencing gene identification study in invasive breast cancer.

Further, we are focused on capturing the following near-term, large revenue opportunities for existing Oncotype DX tests, which include: Further increasing the U.S. invasive breast cancer market penetration, a $350 million existing opportunity; increasing adoption and reimbursement for our DCIS score; addressing a U.S. market opportunity of over $150 million; expanding our investment in Western Europe, representing a $400 million opportunity in breast cancer; and accelerating our prostate cancer investment in the U.S., which represents an opportunity of more than $400 million.

With the strength of our core business, progress in new large markets and our track record of success, we believe we are well positioned to deliver both near and long-term growth as we continue to shape a world in which genomic information is truly life-changing.

I would now like to open the line for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Dan Leonard with Leerink Partners.

Justin Bowers - Leerink Swann LLC, Research Division

This is Justin on for Dan. Was just hoping you could talk about the components of your growth forecast for 2014, if not hard numbers then just kind of maybe what's going to contribute more on a relative basis just for U.S. invasive breast, international and then DCIS.

Dean L. Schorno

Yes. So it sounds like you're looking for some color around the revenue and the top line growth that we expect for next year. We will continue to see growth in the U.S. invasive breast cancer market but like in 2013, that will be single-digit growth and we continue to expect greater growth outside the United States where, large opportunities still begin that we've just begun to scratch the surface of. The contribution for the international markets in terms of revenue growth in 2013 and the U.S. invasive breast cancer ARPU are approximately equal. We see that similar frame going forward. We do expect that the large opportunity in DCIS will be realized when we get expanded reimbursement. Today, we have reimbursement for Medicare and a second study that Steve spoke about is key to further reimbursement. So in 2014, we don't expect significant contribution from DCIS, although the market opportunity is significant, though mainly driven by continued penetration in the U.S. invasive breast cancer market and continued contribution at a higher level of growth with similar dollar contribution from the international markets.

Operator

Our next question comes from Jeff Frelick with Canaccord.

Jeffrey Frelick - Canaccord Genuity, Research Division

Brad, you mentioned about some patent allowances that were measured to you guys. Just curious, any infringement you see on the patents currently or are you seeking to maybe licensing some of the technology, just how are you thinking about that?

G. Bradley Cole

That was issued or is allowed, I should say. It's very excited for us, it's an algorithm patent much like we have in breast and in colon, and these allow us to have the freedom to operate and offer our tests free and clear of other obstructions. It's not something we out license to others and we would not think of it that way. We think of it as protecting and allowing us to deliver these tests that are unique to Genomic Health and providing unique value. So recognition by the patent office is helpful in that regard.

Jeffrey Frelick - Canaccord Genuity, Research Division

Okay. And then just maybe for Dean. The prostate test, you talked about maybe a percentage of the volume. Just curious, repeat orders, where do they stand in the quarter for prostate?

G. Bradley Cole

Yes, I can take that one. I think I referred to repeat orders. About half of the physicians who are ordering are repeat orders and you think in the early stages of launch, that's remarkable actually because you're adding new physicians every quarter and every week. So we're seeing even now as we exit the year, about half the orders are coming in from repeat physicians -- excuse me, half the physicians are ordering a second time and a third time and so on. So we think that speaks well to the traction we're getting and that acceptance of the tests.

Kimberly J. Popovits

And I would just add, it's been a -- it's a significant incentive in our decision to really expand the salesforce ahead of where we actually had planned to go based on this positive feedback that we received.

Jeffrey Frelick - Canaccord Genuity, Research Division

So, Kim, you mean -- so because of the expanded salesforce, the -- you're actually hitting the accounts a bit more frequently and driving repeat orders?

Kimberly J. Popovits

Well, no. Actually, I was more referring to because of the success of the launch and the early feedback that we've gotten and the number of repeat orders has really encouraged us to broaden our reach to more physicians. So as you know, we launched with a very small salesforce. We had said that we would increase it over time in small amounts. So we've actually decided to be a little bit more aggressive based on this early positive news and some of the milestones that we believe that we'll hit this year related to the publication of the study, the presentation of the clinical utility work. We want to make sure that we've got adequate coverage out there. So we're going to actually be a little more aggressive in growing the salesforce in 2014.

Operator

Our next question comes from Brandon Couillard with Jefferies.

Katherine Blanton - Jefferies LLC, Research Division

This is actually Kate in for Brandon. Just turning to the competition for a sec, could you maybe discuss some of your counter detailing efforts on the invasive breast front against competition in the market and maybe some of the claims being made by various tests and also any expectations for market share changes in 2014?

Kimberly J. Popovits

Yes. Thanks for the question. Actually, the -- we have said for years now, we really believe that this is going to come down to clinical evidence and that, in fact, is what's happening. So when you look across the guideline committees, the independent review boards, clearly, there is one test only that is recommended to predict chemotherapy benefit, which is the fundamental question that physicians and patients need answered. I think what has really created another dialogue, though, are these recent studies that have been presented that really demonstrate the lack of concordance when you try to use a prognostic-only test to make a predictive decision. And when those data are presented to physicians, it's actually very compelling that Oncotype DX is the test they should be using if they're asking a question around chemotherapy benefits. So while that is a message that we have always believed and have talked about, this recent evidence is really hard for, I think, physicians to ignore. So that's what we're focused on and it has been quite effective. We believe that we can continue to grow the invasive breast business and we have continued to do it over the past couple of quarters.

Katherine Blanton - Jefferies LLC, Research Division

Okay. Also, just turning back to the operating expenses. Can you maybe parse out the increased spend between prostate international and elaborate on some of the investments internationally?

G. Bradley Cole

Yes, I can do that. I think Dean cited that significant investment increase next year is in sales and marketing and is primarily directed at these big opportunities that we see in front of us in prostate in the international markets. Primarily in prostate, the significant majority is going to prostate. In advance of revenue tractions, you might imagine this might -- looks much like the early days of breast where you invested in physician awareness and adoption and experience with our test as we move -- also moved forward with reimbursement. So in advance of that, we -- the majority of the investment next year and the change from last year, this year primarily, is in the prostate investment. Internationally, we're continuing to invest in Western Europe. We now have a presence there growing. We have more direct people and activities on the ground than we've ever had before and these recommendations, the recent recommendation and the movement we're seeing in the U.K. and the overflow to the other markets in Western Europe, we think this is the time to invest in order [indiscernible] the reimbursement traction can be garnered over the next year or 2 outside of even in the U.K. So it's an opportune time to be investing in both places.

Operator

Our next question comes from Amanda Murphy.

J.P. McKim

It's actually J.P. in for Amanda. I just have a couple of questions on guidance you provided for 2014. I'd say kind of the testing volume was a bit higher than we expected but the revenue was slightly below. Is that going to be based on reimbursement certainly around prostate or is there some reimbursement pressure for the core breast test or where is that coming from? Kind of like an average.

G. Bradley Cole

You notice the differential in growth rates and that's really driven by prostate in international. We're seeing really nice test growth, as we cited in 2013 in international. And with the increased investment and the nice uptick post-launch in prostate, we expect to see continued growth in prostate tests. We don't see any change in the fundamental reimbursement that we have in the U.S. for a long time, Medicare and private payors, all covered essentially and 95% of patients in the U.S. are covered. We see that continuing to go forward. And growth in the U.S. breast market will be more tied to tests. There's a new day coming in these other markets, much like there was in breast where a time will come when reimbursement success is achieved, where revenue growth in prostate international will more match tests and we'll see an acceleration in revenue growth after 2014.

Kimberly J. Popovits

And I would just maybe add to that. This is a decision that actually probably wasn't that difficult for us because as we look at where we are today, this is really an ideal time to invest ahead of where we think we're going to get revenue because we realize we need to drive reimbursement first. But when you look at the evidence that we have in hand today and I'll start with just the strength of the U.S. breast business on top of the new DCIS opportunity and then you layer in prostate and the traction that we're getting in on the international front, we have enough in hand to believe that we're hitting this tipping point and we definitely want to go for it. And this, if you add those buckets up that I spoke about earlier in the year and we did again today, we're looking at over $1 billion, it's actually about $1.3 billion of additional opportunity that adjusts with the existing test that we have in the marketplace. So we're extremely excited to deliver on this but as Brad said, we will be investing ahead of where we will be seeing the significant revenue growth but that's why you see tests delivered out in front of revenue.

J.P. McKim

Okay. And then just a follow-up on prostate. Can you kind of speak to the comparative dynamic there and these 30 kind of sales -- additional sales staff, where are you guys hiring most of those, or what's kind of the ramp for those -- that sales staff?

G. Bradley Cole

Our primary thinking on prostate is that the opportunity is enormous, larger than breast and that -- with that kind of opportunity to under invest today would be the wrong thing to do, as Kim has described. So our expansion, our recent expansion and our expansion by midyear, up to 30 people in the field is really a function of making sure we drive up our awareness and adoption in advance of some of these reimbursement wins so that we're in a great position to reap the benefit of the reimbursement success that we anticipate. So it's less about competition, more about the opportunity in our minds.

Kimberly J. Popovits

And as we've done -- I think you asked about the type of rep that we're bringing in, as we've done with -- both in breast and in colon. We're looking for folks that have the clinical experience that are capable of changing standard of care like we did in breast cancer, that have urology backgrounds. So we brought on a very strong team thus far and we'll plan to hire reps that are in that profile going forward.

J.P. McKim

Great. And then, if I could, just another one. International growth. I mean, is there anything that changed your strategy internationally, or what are kind of some markets there that you're excited about going into 2014?

G. Bradley Cole

Yes, there's no real change there. We've been investing internationally for quite some time. I think the thing that's maybe a little bit different is that we've got a presence in Western Europe now as a result of our continuing strategy, but with a NICE recommendation in the fall, it's clear that there's an opportunity in Western Europe maybe more near-term than we would have thought 2 or 3 years ago. So there's -- the opportunity is sizable and we've got the right people on the ground now to take advantage of it. So no change in our outlook, just more of the same.

Kimberly J. Popovits

Well, and I think the biggest change is really that we've always recognized Western Europe as the biggest market opportunity outside the U.S. and the NICE guidelines really did change the conversation, not just in the U.K. but outside the U.K. So with that as a bit of a tipping point late in 2013, we really saw that as the catalyst to start to aggressively invest and be able to realize that big opportunity there.

Steven Shak

Speaking about the conversation and how it's changed, being over there recently, it was very gratifying to see that instead of the conversation being what is Oncotype DX, it was more about how should I use it and the physicians themselves pushing for access, and that's really different today than it was 2 or 3 years ago, which is great.

Operator

Our next question comes from Isaac Ro with Goldman Sachs.

Isaac Ro - Goldman Sachs Group Inc., Research Division

I wanted to touch for a little bit, if I could, to start on the assumptions you're making for the ramp in prostate. You mentioned that it's ultimately bigger than breast. So just trying to think about how you guys look at country by country, where the opportunity is the strongest overseas in the next year or so? And as we think about 2014, just trying to figure out kind of where we could see the strongest pockets of initial growth.

G. Bradley Cole

Yes, our initial focus, as you might imagine, like it was in breast is here in the U.S. We are, I would say, solely focused outside the United States on breast but we're being opportunistic with prostate. So we don't have any real color to add where the big opportunities are in prostate over the next 12 months. Our team is focused on delivering access and reimbursement in the breast markets outside the United States, primarily the biggest one is in Western Europe. With multiple clinical studies and data to come over the next couple of years, we'll expand our reach outside the United States but we're primarily focused on the breast program outside the United States.

Isaac Ro - Goldman Sachs Group Inc., Research Division

Okay, got it. And then maybe just on Almac, I don't think that's gotten the kind of attention, but you guys are obviously working with them on some interesting new stuff and I'd be curious to know if you could talk a little bit about the investment there in terms of what you guys expect to be spending over the next few quarters. And then maybe just sort of timing-wise, when we might start to see more tangible fruits from that relationship.

G. Bradley Cole

Yes, we're excited about the opportunities there. I think Steve cited in the call that it's really about identifying the right cohort and beginning the process of working with them. So in the short term, there won't be a ton of investment but there's a level of investment that gets us quota identified and working with our partners. So this is not an announcement in 2014 but -- Steve, do you want to add anything?

Steven Shak

The other thing to add is that the investment and the money that we already put in actually is being used by a group of very talented folks there that we'll be collaborating with on their gene signature and leveraging their skills and the insights that they've already made. So this is a great opportunity to gain leverage in an area that everyone really is excited about. Can we identify beyond where we are today, a test that would actually tell us what specific drug to use as opposed to in general, chemotherapy or not?

Isaac Ro - Goldman Sachs Group Inc., Research Division

Got it. And just to be clear, I think what Brad's comment was, did I understand correctly that you're saying we should not expect to see announcements from this in 2014?

G. Bradley Cole

Yes, that's right. And limited impact on OpEx over the course of our R&D spend, there's not a big impact on our spend this year.

Operator

Our next question comes from Derik De Bruin with Bank of America Merrill Lynch.

Rafael Tejada - BofA Merrill Lynch, Research Division

It's Rafael in for Derik. Just a couple of more on the outlook to, say, assumptions, please. Just wondering if you're assuming any abnormal seasonality as 2014 unfolds, especially with some of the, I guess, unusual weather that we've been having recently. And just a follow-up on that also, what are -- can you remind us what the ASPs are, U.S. and what you're looking at for Western Europe, too, please?

G. Bradley Cole

Okay. Well, the fourth quarter came and went and we had nice results and there was a lot of weather in the fourth quarter. So I wouldn't know what to predict what the rest of this quarter would hold. Today is a pretty cold day on the East Coast. So really, it hasn't really made a material impact. On my comment on ASPs -- well Western Europe, I'll start with Western Europe, western Europe is early. We've got private coverage in Ireland and in the U.K. and limited coverage in the large markets in Western Europe. So ASPs there are, well, very -- they're quite very -- quite small although the overall ASP for international is where we like it. But as reimbursement happens in Western Europe over the next quarters and the year, we should see a ramp in our Western European ASP, may not impact our overall ASP dramatically. Do you want to comment just for U.S.?

Dean L. Schorno

So our ASP across the business is about in the $3,000 range. From an international perspective, and ASP internationally, as Brad refers to really depends on mix of whether we work with a collaboration partner or a direct country. In those direct countries, we then get into is it reimbursed or not reimbursed. All of that said, our international ASP is in the mid-$2,000 range, so less than the U.S., but strong and an important contributor to the business.

G. Bradley Cole

The U.S. is about $3,000.

Rafael Tejada - BofA Merrill Lynch, Research Division

And the test volume ramp as 2014 unfolds, is that assuming some positive coverage decisions for DCIS and prostate, any comments there?

G. Bradley Cole

Our guidance around test growth is really about resources and investment and the positive uptake.

Rafael Tejada - BofA Merrill Lynch, Research Division

I should have said product revenue by the way, I'm sorry.

G. Bradley Cole

Reimbursement traction, there will be some gains in these, I guess, like there had been over this year. But the study that we'll announce top line results in the year will drive to a presentation later in the year, a publication later. So this is not a significant event in terms of policy contracts in '14 but it's certainly very significant for the market to see this data, as Steve described. And in prostate, it's going to take a couple of studies, which will be out later in the year and that's going to take some time as well. So we're not expecting significant announcements around reimbursement in '14 but to follow.

Rafael Tejada - BofA Merrill Lynch, Research Division

Okay. And this might be more for Steve. In the prepared remarks, you were talking about the liquid biopsy initiative. I was wondering if you could give us a little bit more detail, realizing that it's still early innings but can you talk -- I think you mentioned that it's proprietary system. I was wondering if there was a process or indeed an internal box that the company was developing and also wondering what -- I guess, what are, in your view, some of the advantages that you have at hand here with that initiative versus, I guess, some other players that are also pursuing this opportunity.

Steven Shak

Yes, great. Well, to put some color around this, in oncology, there are already a couple of examples. I guess, in leukemia, it might be the best example, where because you can actually look at leukemic cells in the blood, you have a noninvasive test that can allow you over the course of a patient's disease to better understand what drugs are working, what drugs aren't working, to what degree has the disease been treated or not. In a way, very analogous to the revolution that occurred in addressing HIV in the last century where the viral load test allowed us to come up with a combination therapy, which completely changed the face of that disease. As we think about what we can do differently, I'd ask you to all think about, well, what has been different about us for the past 10 years. There was a lot of research 10 years ago on paraffin and on doing micro reassays and many different assays in tumors that led to a lot of publications but very few of those efforts ended up with a product. Of course, now a suite of products out of paraffin that have changed practice in 3 major tumor types. So with liquid biopsy, the thing to think about in terms of what's likely to be proprietary might be not that we're going to create a box that no one else has. In fact, we buy our boxes. But ultimately, these assays are very complicated and sophisticated. There's a great need for standardization and scale up so that you can deliver it, not just for a research study in a small number of patients, but ultimately use it globally to treat and monitor cancer worldwide. So I know I didn't give you the whole answer yet but I think we're at an early stage and that's the opportunity we see ahead of us.

Operator

[Operator Instructions] Our next question comes from Tycho Peterson with JPMorgan.

Jordan McKinnie - JP Morgan Chase & Co, Research Division

This is Jordan McKinnie in for Tycho. I was wondering, roughly how much of the sales and marketing, the $25 million is new hires and do you have plans to further increase that as you ramp?

G. Bradley Cole

Well, you might imagine that there's a mixture because we described growing the prostate team but we also growing the international teams. So there's a mixture and I'd hate to put a number out here that I'd retract but it's both programs, marketing programs, awareness programs, study programs and the costs associated with reps. And just people on the ground are expensive and -- but they're also other -- we're certainly then, with marketing and clinical programs, we think are meaningful and will provide access and experience to the test, be it a breast test in Europe or be it a prostate test in the U.S. or some other market.

Jordan McKinnie - JP Morgan Chase & Co, Research Division

Okay. And then just, I guess, a broader question. What do you see, longer term, are the key variables to a path to $1 billion revenue?

Kimberly J. Popovits

Well, if we look at the areas that we just outlined, those in and of themselves, which are available to us today, just with the existing products can clearly get to $1 billion and if you layer on that some of the other things that we're working on to include other applications for the existing tests, other markets that aren't included in Western Europe or the U.S. where we're also seeing growth, I mean, I think we definitely have a case here for clearly well more than $1 billion and I think we're focused today on the right buckets for the greatest near-term gain. I mean, I -- and I would say, too, I think the team just feels very confident that we can deliver this based on our track record. We wrote this playbook for breast cancer. We were able to execute on it, we understood that it was going to take a little bit longer to get reimbursement. We made that investment. We took that bet and we're taking it again but when you think about the size of the prostate market around the world or even just in the U.S. layered on top of breast, adding the DCIS in there, I mean, clearly, $1 billion is not a stretch. So we're very excited to deliver that.

Operator

Our next question comes from Nicholas Jansen with Raymond James.

Nicholas Jansen - Raymond James & Associates, Inc., Research Division

A quick one for me. In terms of the international revenue growth in the quarter, it was a little bit slower than what it's been kind of year-to-date prior to 4Q. So I was wondering if there was anything abnormal that you saw intra-quarter, which made you decide to maybe step up your investment there to capitalize on the bigger opportunity you see in '14 and beyond.

G. Bradley Cole

No, there really wasn't any activity in the fourth quarter that drove this decision. We've been taking a long view and have been in focus on Western Europe for a long time. I just attribute maybe the little bit of tick down there to the lumpiness of revenue, that technical term we use over the years, things come and go just through various cash and accrual accounting. The thing that really has even pushed our confidence and our resolve around Western Europe is what's happened with NICE in the late third quarter. So nothing in the short term has deterred our resolve to seeing Western Europe be a big part of our future.

Nicholas Jansen - Raymond James & Associates, Inc., Research Division

Okay. And then looking at the balance sheet, kind of looking -- given the projected losses that you're seeing in '14 and I would assume '15 is another kind of investment year before prostate revenue really starts meaningfully impacting the business. How should we think about your desire to kind of invest given where you are in a cash position today?

Dean L. Schorno

So our projected loss for 2014 will largely be offset by non-cash charges. So we'd expect a small reduction in the $105 million of cash we have to date but not significant. So we think we're in good shape from a cash perspective to make the necessary investments in the future.

Operator

And at this time, I'm showing no further questions. I would like to turn the call back over to Kim Popovits for closing remarks.

Kimberly J. Popovits

Okay, great. Well, thanks for joining us today and for your interest in Genomic Health. We'll look forward to seeing some of you at some of the future upcoming investor conferences.

Operator

And this concludes today's fourth quarter and year end 2013 conference call for Genomic Health. You may now disconnect. Thank you.

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