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Genomic Health (NASDAQ:GHDX)

Q3 2012 Earnings Call

November 07, 2012 4:30 pm ET

Executives

Emily Faucette

Kimberly J. Popovits - Chairman, 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, Secretary and Member of Non-Management Stock Option Committee

Steven Shak - Chief Medical Officer and Executive Vice President of Research and Development

Kathy L. Hibbs - Senior Vice President and General Counsel

Analysts

Evan Lodes - JP Morgan Chase & Co, Research Division

Dane Leone - Macquarie Research

Isaac Ro - Goldman Sachs Group Inc., Research Division

David C. Clair - Piper Jaffray Companies, Research Division

Vamil Divan - Crédit Suisse AG, Research Division

Sylvia Chao

Scott Gleason - Stephens Inc., Research Division

Rafael Tejada

Mark Massaro - Canaccord Genuity, Research Division

Justin Bowers - Leerink Swann LLC, Research Division

Operator

Good afternoon. My name is Chuck, and I will be your conference operator today. At this time, I would like to welcome everyone to the Genomic Health Third Quarter 2012 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference 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

Good afternoon, everyone, thank you for your patience, and welcome to Genomic Health conference call to review our third quarter 2012 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 payers of our tests; growth opportunities; our planned launch of a test for prostate cancer patients; future products, product enhancements and our product pipeline; demand for our tests and drivers of demand; payer 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 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 June 30, 2012, 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 Chief Medical Officer and Executive Vice President of Research and Development; and Kathy Hibbs, Senior Vice President and General Counsel.

I'll now turn the call over to Kim.

Kimberly J. Popovits

Thanks, Emily. Good afternoon, everyone, and welcome. We delivered another strong quarter highlighted by $3.7 million in net income and a 13% increase in year-over-year product revenue, led by a significant international growth, reflecting the diversification of our business and continued progress in capturing this important global opportunity.

Further, we were especially pleased with the achievement of positive results from our large prostate cancer clinical validation study, in collaboration with leading researchers from the University of California, San Francisco, as announced in September. With these data, we are now positioned to leverage our proven commercial infrastructure in addressing a third major cancer in one of the greatest needs in medicine by making the Oncotype DX prostate cancer test available in the first half of 2013.

I will now turn the call over to Dean, Brad and Steve to provide further details on how our third quarter 2012 financial results, our worldwide commercial and operation's progress and our prostate cancer program. I will then conclude with our business priorities for the remainder of the year.

Dean?

Dean L. Schorno

Thank you, Kim. In the third quarter of 2012, we achieved 13% growth in both product and total revenue. Specifically, total revenue was $58.6 million compared with $52.1 million in 2011, and product revenue increased to $58.4 million compared with $51.7 million in the same period of 2011. Contract revenue comprised the balance of total revenue for the third quarter of 2012.

During the quarter, we delivered $3.7 million in net income compared with $3.2 million in the same period of 2011. We delivered more than 18,030 Oncotype DX tests in the third quarter, reflecting a 7% year-over-year increase. This result was a decrease compared to the second quarter of 2012, primarily impacted by lower-than-anticipated U.S. invasive breast cancer test volume, influenced by one less selling day in the quarter, along with reports of fewer patient visits, and, we believe, to a lesser extent, increased competitive activity. In light of this, we expect tests delivered to be approximately 74,000 for the year.

60% of tests delivered and 62% of product revenue were recorded on an accrual basis in the third quarter of 2012. Product revenues grew at a faster rate than test volumes during the quarter, largely due to strong international cash collections as a result of continued progress with payers in both Canada and Western Europe. We anticipate overall fourth quarter product revenue to be similar to third quarter results.

Our gross margin for the quarter of 85% was better than expected due to higher-than-anticipated cash-based revenues. Our 3 consecutive quarters of increasing net income is largely due to operating leverage, typical midyear slowdown in operating expenses and strong cash collections in the third quarter.

We expect the operating expense to increase by approximately $3 million during the fourth quarter as we continue to invest in our global commercial business, prepare for the launch of our Oncotype DX prostate cancer test and incur expenses related to the San Antonio Breast Cancer Symposium. As a result, we do not expect to report a material profit in the fourth quarter of this year.

Cash, cash equivalents and marketable securities at September 30, 2012, were $127 million compared with $100 million at December 31, 2011. Cash from operations have increased by $20 million for the year.

I will now turn the call over to Brad to review our global commercial and operation's progress.

G. Bradley Cole

Thanks, Dean. During the quarter, we achieved important commercial and clinical milestones with numerous medical meeting presentations and made progress in securing reimbursement worldwide. In September, at the ASCO Breast Cancer Symposium, we presented data from 2 studies, including the NSABP B-28, highlighting positive results from a large node-positive study, demonstrating the Oncotype DX Recurrence Score result is a robust predictor of distant recurrence, disease-free survival and overall survival in patients who are treated with anthracycline-containing chemotherapy regimens. These results add to our large body of evidence in node-positive breast cancer, now totaling more than 2,000 patient studied, establishing that the Recurrence Score provides clinical utility beyond traditional, clinical and pathologic factors for patients with node-positive disease.

Importantly, additional data on the development of the Oncotype DX DCIS Score, including information on the scaling and risk cut-off points, were also presented at this meeting. We believe these studies will strengthen our market position in node-positive disease and DCIS, both of which represent near-term growth opportunities by increasing demand for treating physicians and providing further evidence for the payer community.

At the European Society of Medical Oncology Congress in Vienna, we presented results of 3 studies that support expanded use of the Oncotype DX test to optimize treatment decisions for breast and colon cancer patients at various stages of disease. As reported earlier this year at ASCO, results from the large C-07 study with NSABP confirm the ability of the Oncotype DX colon cancer Recurrence Score to predict recurrence risk in Stage II and Stage III patients. As a reminder, physicians began utilizing the Oncotype DX colon cancer test for certain patients with Stage III disease following presentation of this data at ASCO.

Separately, a new exploratory analysis of over 700 candidate genes in this cohort, we have identified 16 genes strongly associated with the prediction of oxaliplatin treatment benefit. Additionally, at ESMO, a meta-analysis of 4 prospective studies from the United Kingdom, Germany, France and Spain, clearly demonstrate that the Oncotype DX breast cancer test is associated with a significant change in treatment decisions and an overall reduction in chemotherapy use in these European countries, regardless of local treatment traditions.

A separate study conducted in the Mexican public health system suggests that the use of the test has an impact on adjuvant treatment recommendations and may reduce the need and use of chemotherapy.

Recently, the general Journal of Medical Economics and the French Bulletin of Cancer each published studies demonstrating that the Oncotype DX breast cancer test is expected to provide cost savings in Germany and France, respectively. Presentations and publications from multiple countries at international venues like these are critical to increase physician adoption and to drive reimbursement success in local markets.

During the third quarter, we established additional reimbursement in France, Greece, Kuwait and Spain, bringing the total number of x U.S. lives covered for the Oncotype DX breast cancer test to more than 90 million lives, highlighting the large potential for future international revenue growth. This level of reimbursement is roughly equal to 1/3 of the total U.S. covered lives for node-negative breast cancer.

We continue to invest in delivering the benefits of Oncotype DX testing to patients worldwide. And as a result, our international test volume increased by approximately 30% compared to the same period last year. Additional international reimbursement success resulted in our year-over-year revenues outside the U.S. growing by approximately 60%, driven particularly by strong cash revenue from a variety of countries. International revenues represented approximately 14% of our overall product revenue in the quarter. Looking ahead, we continue to expect international revenues to be a significant contributor to overall product revenue growth.

Other future drivers of revenue in the United States include the expansion of our colon cancer and DCIS opportunities, together with further establishment of reimbursement, led by anticipated publications of both the CLAGB (sic) [CALGB] study in Stage II colon cancer and the E5194 validation study in DCIS. In the United States, we continue to make incremental reimbursement progress with 3 additional state Medicaid contracts for node-negative breast cancer, node-positive coverage for an additional 1.5 million lives and a new policy for Stage II colon cancer patients, covering an additional 1 million lives.

Importantly, over the last week, CMS released its final physician and clinical laboratory fee schedules, eliminating the prospect of a new requirement for patient co-pays and confirming that molecular pathology tests, like Oncotype DX, will continue to be reimbursed as clinical laboratory services. CMS reimbursed product revenues represented approximately 21% of our product revenue in the third quarter.

Despite current practice guidelines and a wealth of evidence, including chemotherapy benefit, approximately 2 in 5 eligible invasive breast cancer patients in the U.S. are not receiving the current standard of care of Oncotype DX. With this significant opportunity, our focus remains on changing existing practice patterns of physicians who continue to rely solely on limited traditional measures to guide critical treatment decisions. It is also important to highlight, in addition to the potential remaining in the U.S. invasive breast cancer market, we also have significant untapped opportunity for increased Oncotype DX utilization in DCIS, as well as the expansion of colon, in international markets.

Finally, we were pleased to receive acceptance for 6 studies at the upcoming San Antonio Breast Cancer Symposium in December and look forward to sharing these results upon presentation.

I will now turn the call over to Steve to discuss our prostate cancer program.

Steven Shak

Thank you, Brad. Many researchers and physicians believe the overtreatment of prostate cancer represents one of the most significant issues in men's health today. Each year, nearly 240,000 men are diagnosed with prostate cancer, the majority of which are currently classified as low or intermediate risk, using conventional measures such as Gleason score, PSA and physical exam. However, despite having a very low risk of cancer spread or death, 90% of these patients will undergo immediate treatment, such as radical prostatectomy or radiation. And as a result, most will go on to suffer unnecessary lifelong side effects, including incontinence and impotence.

The lack of a reliable test to distinguish aggressive prostate cancer from low-risk prostate cancer is the primary driver of this decision to undergo immediate aggressive treatment. Our goal is to address this critical clinical dilemma by providing a standardized, validated biopsy-based test that can distinguish more accurately between aggressive and clinically insignificant disease at the time of diagnosis, before treatment is selected.

In September, we announced positive top line results from our large prostate cancer clinical validation study. This study, performed in collaboration with leading prostate cancer researchers at the University of California, San Francisco, met its primary endpoint by demonstrating that the Oncotype DX Genomic Prostate Score was prospectively validated as a predictor of aggressive disease for patients with early-stage prostate cancer, a test result obtained without removing the prostate. Based on these results, we believe our test will increase the number of patients who can more confidently elect active surveillance, which employs careful monitoring of patients over time.

Our study collaborators have submitted an abstract for presentation at the 2013 ASCO-GU Cancer Symposium in February. Presently, we are completing the necessary work in our Clinical Reference Laboratory. Our commercial organization is preparing to make the Oncotype DX Genomic Prostate Score available to physicians and patients who will apply in the first half of 2013.

There are several distinctive factors about our prostate cancer development program, which we believe will allow us to optimally address the needs of prostate cancer patients and sets our test apart from others. Specifically, we leveraged our expertise with the Oncotype DX breast and colon cancer tests to complete a rigorous development process, including 6 feasibility and development studies where we: first, optimized our proprietary RT-PCR methodology to analyze the tiny amounts of formalin-fixed paraffin-embedded prostate tissue obtained by diagnostic prostate needle biopsies, reducing our tissue requirements by more than twentyfold compared to our breast and colon cancer tests.

Second, we address the challenge that prostate cancer is frequently a multi-focal disease, which means more than one site of tumor tissue is present in the prostate, by identifying what we believe to be the optimal genes that would predict aggressive prostate cancer in different parts of the tumor in a 700-patient study in collaboration with the Cleveland Clinic.

And finally, we have observed in the development and the validation studies that multiple biological pathways, in addition to the established role of self-proliferation, are important in the prediction of prostate cancer aggressiveness as defined by clinical recurrence and adverse pathology. We are pleased to have received significant support from leading prostate cancer advocates and physicians, including Dr. Peter Carroll, Chair of the Department of Urology at UCSF and a principal investigator of the clinical validation study, who describes the results as having the potential to change medical practice significantly.

We look forward to sharing additional details with you early next year. I'll now turn it back over to Kim.

Kimberly J. Popovits

Thanks, Steve. We believe half of the 240,000 men currently diagnosed with prostate cancer in the U.S., or approximately 120,000 annually, will be eligible for the Oncotype DX Prostate Genomic Score. This first indication, alone, represents a significant near-term opportunity for Genomic Health, once similar to that of our Oncotype DX invasive breast cancer test upon which we have built the company to date.

With the planned launch of our prostate cancer test in the first half of 2013, we move a step closer to capturing the $3.5 billion global opportunity across breast, colon and prostate cancer and, importantly, further diversify our future growth drivers. While preparing to launch our third product franchise, we will continue to invest in our proven global commercial capability that is currently generating both international momentum and increasing penetration in new markets for our breast and colon cancer tests.

In addition to this critical focus on immediate drivers of our continued business success, we remain committed to our R&D investments, driving the integration of next-generation technologies to deliver next-generation diagnostics to cancer patients around the world. We look forward to providing more detail around this leading work in the future and especially look forward to upcoming opportunities to share important new data in breast, colon and prostate cancer at the San Antonio Breast Cancer conference, ASCO GI and ASCO GU.

In closing, I'd like to emphasize the momentum we are gaining in leading the delivery of a new era of cancer treatment. With unsurpassed clinical evidence, global commercial leadership and our commitment to ensure patient access through innovative physician, payer and patient collaborations, we have never been better positioned to achieve our mission of improving outcomes in cancer.

I'd now like to open the lines for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Evan Lodes with JPMorgan.

Evan Lodes - JP Morgan Chase & Co, Research Division

I'm asking on behalf of Tycho this evening. You mentioned competition in your prepared remarks. Curious if this is more or less the first time that we've had a talk on this topic. So how are you thinking about what the ultimate market shares might look like? And you gave a number about 60% penetrated of the invasive breast business today. What do you think the overall market is at currently in your current market share?

Kimberly J. Popovits

Yes. Evan, yes, let me be clear, we still maintain a dominant share, of course, in this market. In fact, we would estimate that to be around 95%, and that really hasn't moved much. The reason that we highlighted competitive activity was simply that we had an increase in competitive noise level just based on investment in this space and players coming in. But we don't think it had a material impact overall on the quarter.

Evan Lodes - JP Morgan Chase & Co, Research Division

Okay. And then secondly, you mentioned in the press release incremental reimbursement from France. Can you talk some about where you are in particular with that geography and thoughts, going forward, on further steps to penetrate there?

G. Bradley Cole

Yes. What's -- this is Brad. The situation at France is that we have a couple of regional payers through hospital funds who are paying for the tests, and it's really a local decision that's been made to date. And we're seeing continued interest at a regional level. We don't yet have broad coverage in France. But we are in the process of applying for that and educating the broader kind of public umbrella groups on what Oncotype DX does and working with key opinion leaders in France to use the test and become more educated about the test and be a more proponent to the test. So we'll see what happens in France, but it's just the beginning.

Operator

Our next question comes from Dane Leone with Macquarie.

Dane Leone - Macquarie Research

I just wanted to maybe get a little bit more color on the slowdown in the test volume. Maybe you could correct my math. But I think one fewer day would be maybe 200 to 400 tests, which is still -- yes, the slowdown Q-on-Q was a bit more than that. And then the guidance for the full year came down another 1,000 tests. I think you said 74,000 expected for the full year now versus the midpoint of 76,000 previously. So I guess any color you can kind of provide us for the macro environment beyond the -- just the one day there? That would definitely be helpful.

G. Bradley Cole

Dane, I appreciate it. Let me start by stepping back a little bit and recognizing that there are multiple factors that contributed to this result in the quarter. You've certainly pointed out one of the expected ones. With one less day in the quarter, that would have affected the test volume. We would have expected that. The other thing that we would've expected is that summer seasonality that we've seen historically in the summer quarter would have -- would've resulted in some softness, and we did see that again. And there's always variability period-to-period on tests delivered which could go either direction. So those are the things that we expect. There were a couple in things in the quarter that were a bit unique and maybe different. Historically, Q3 has been soft in July and August, and we've seen an upturn in September. We didn't see that this quarter. As we listen to others and to our reps about anecdotal comments around patient volumes, we spent a little time confirming that notion with a number of physician practices and we're able to confirm that they've seen patient volumes slow down in the summer quarter. So those factors, together, contributed to this. Having said that, we're still expecting approximately 74,000 tests to be delivered in the quarter, which does suggest that we don't see a decline in the fourth quarter from Q3 levels. That's simply how we -- that's the math we get to from the 74,000, which is the new expectation that we have. We believe there's additional opportunity in invasive breast cancer. We've cited the 2 in 5 women who are not getting access to the Oncotype DX test, which is the standard of care these days in the United States. So we think there's plenty of opportunity still there. But sales force is focused on reaching those areas of the country that are well below the average penetration rate of 60%. There will be new data in San Antonio, which can help further drive that message. And we continue to have programs around physician education to help them see that the standard measures alone are not enough to make this critical treatment decision and to help drive patient awareness, too, which we've seen effective in continuing to penetrate the market. So we believe there's plenty of room for growth in invasive breast cancer in the coming quarters. I'd like to add to that, that there are still a number of opportunities to grow the business as a result of the fruitfulness, let's say, of our product pipeline, the investment we've made over the last number of years in broadening our product offerings. So DCIS, for example, reimbursement will drive adoption there. Publications will drive reimbursement. So we think there's major opportunity there. We're just getting started in DCIS. The opportunity in DCIS is equal to the remaining invasive breast cancer opportunity. And increasing adoption in colon and increasing reimbursement in colon is available to us through publications of the new data around Stage III and a second validation study, which should help in the private pay market in the U.S., for example. And then finally, the international momentum that we reported this quarter, with nearly 60% growth, we think, is going to continue into the fourth quarter, into the coming years, where it'll be one of the major growth drivers for the company. And then in the coming years, although it may not be in next year, with the launch of prostate, another opportunity which is equal to the entire size of our company today. So with 5 or 6 areas for growth, we think there's plenty of growth ahead. And in the short-term, areas to focus on to drive growth, even in the upcoming couple of quarters.

Dane Leone - Macquarie Research

Great. And one follow-on question would be on prostate cancer. I would like to get a bit more color on your view regarding what market share could be attained. And if a conversation with Medicare could be had to actually receive reimbursement off of the initial study that you plan to present, or will additional studies need to be generated and ran and presented to receive Medicare reimbursement?

G. Bradley Cole

This is specifically to prostate is addressed in the question.

Dane Leone - Macquarie Research

Correct.

G. Bradley Cole

Yes. Medicare has reimbursed some of our tests off of one study and others off of 2 studies, and I think there's changes going on at CMS in how they look at things. So it's likely to take more than one study in prostate. But we're just getting started, and some of these positions are evolving. The -- I think you're referring to MoDx pathway, which hasn't really been finalized, but certainly has been talked about a lot. I don't know if, Kim or Kathy, you want to add...

Kimberly J. Popovits

I would probably just jump in to say that what we do believe what the prostate cancer study that has been completed, yet not presented, that the significance of the clinical question that we asked in that study, in Peter Carroll's words, was potentially practice changing. So I think when you talk about what's enough, we're not going to be able to comment much further until we're able to talk more specifically about that data. We're very excited about having achieved that endpoint. We feel very confident that we are addressing a very critical question that there is a significant immediate need for. So I wouldn't rule out that it wouldn't be enough. I also would say that our experience has been that multiple studies that are peer reviewed and published decision-impact work is always helpful with payers. We will go through the same process that we have with breast and colon. I think we've gotten better at doing that and faster at doing that. So you can imagine those considerations are already in the works. So stay tuned. And again, I might just -- would put an exclamation on our enthusiasm around this particular study and the question that we were able to answer for these 240,000-plus men or at least half of them that get diagnosed each year that have this dilemma.

Operator

Our next question comes from Isaac Ro with Goldman Sachs.

Isaac Ro - Goldman Sachs Group Inc., Research Division

Yes. I wanted to ask a little bit about your thoughts, the latest on pricing for prostate. I know in the past you've put some numbers out there. I'm wondering if your thought process there has evolved. And as we model the ramp and the product cycle next year, how we should think about the price realization off of that ASP that you think you'll get, at least in the early days?

G. Bradley Cole

Yes. Isaac, this is Brad. We think of pricing really based on value delivered. And so we're excited about its result. We think there's great value in it, and yet the final price point won't be determined for some time until we get more input from physicians and get the data presented, but we will have a price by early next year. Recognizing that in the past, breast has been priced differently than colon for these very reasons, because what we thought the difference in value was. Well, we think the value here is significant. We think the value is certainly in the ballpark of other Oncotype DX tests, and we'll wait to see whether it would be higher or not. For the significant -- the cost associated with prostate cancer intervention are not dissimilar from what they are with breast, I mean, radiation, surgery. And other forms of intervention are expensive. I mean, they run $15,000 to $30,000 and then the follow-on costs and what have you. So there's a healthy health economic argument here. This is as good a health economic argument as we have in any of our products. So we think there's significant value.

Kimberly J. Popovits

And I think, adding to that, just the management of the significant quality-of-life issues in prostate cancer. So we will do that health economic work like we've done in breast and colon. And we just -- echo what Brad said, we think there's a significant story around value here in prostate cancer.

Isaac Ro - Goldman Sachs Group Inc., Research Division

Okay, fair enough. And if I could just ask a follow-up. As we think about the modeling on the SG&A side going to the next couple of quarters, could you give us some sense of how to pace that or the magnitude of investment you think you need to make to sort of realize this market development work?

Dean L. Schorno

Yes. So we'll give specific guidance on 2013 in February with our year-end results. As you think about the fourth quarter, we did say that we'd increase our operating expense, and that's a typical -- we see a typical fourth quarter increase. Part of that spend will be associated with the prostate launch and some of the initial sales and marketing efforts. So you will see a step-up in that sales and marketing line out of that $3 million increase.

G. Bradley Cole

Let me add to that. The international opportunity requires investment and needs investments and, certainly, the reimbursement success we've seen in this last year, the investment should turn into revenue growth as well. So we'll be investing internationally as well.

Operator

Our next question comes from Bill Quirk with Piper Jaffray.

David C. Clair - Piper Jaffray Companies, Research Division

It's Dave Clair in for Bill. Question for me, I was just curious on the volumes in the quarter. It did -- was the sequential slowdown primarily a node-negative? Or did you see that across the portfolio?

G. Bradley Cole

Well, approximately 80% of our volume is in invasive breast cancer. So you would think that that's where it would be, and in fact, that's where it was. We did see growth internationally as we cited. So this change in volume from Q2 to Q3 was -- in fact, was mostly in invasive breast cancer, but that would true in any period of any direction because it's the lion's share of the business. But with the one less day, it did affect international lines as well. So we had one less day around the world, as you might expect. But invasive breast cancer was down as well.

David C. Clair - Piper Jaffray Companies, Research Division

I was -- I mean, like colon cancer, for example, did that go up sequentially, or was that down as well?

G. Bradley Cole

It was down slightly, but it was all due to the day difference.

David C. Clair - Piper Jaffray Companies, Research Division

All right. And then quick one for Dean. So that -- the gross margin was really strong in the quarter. What was behind the gain? And is this the level we should think of going forward?

Dean L. Schorno

Yes. So the past couple of quarters, we've been at -- our gross margin's been about 84%. You're right. It stepped up to 85% this quarter. We think that, that -- it'll normalize back to that 84%-or-so range, and the current quarter, the 85%, was benefited by some strong cash collections that generated a bit of additional revenue.

Operator

Our next question comes from Vamil Divan with Credit Suisse.

Vamil Divan - Crédit Suisse AG, Research Division

So one question. Just following up on some of your comments about the upturn that you normally would see in September not returning, and I assume you've taken this into account as you gave the full year guidance now. But have you seen -- I mean, is October sort of what you would've expected a few months ago? Or was that still kind of below what the -- what you would've expected at this -- kind of before what you saw in September? Is there -- I'm just trying to get a sense of kind of what's the overall test volume tracking relative to last year taking -- based on what you set for September.

G. Bradley Cole

Right. Well, the guidance we gave in 74,000, it certainly moves you to a Q4 number, given where we are in the quarter. So you could see that we are not expecting for tests to decline from the Q3 levels. We've refrained and, I think, been disciplined about not trying to comment on the current quarter. We've even tried not to give guidance on the individual quarter. So we're going to refrain from commenting on what's happening in October and November. Typically, the second half of the quarter is better. But we're not going to really comment on what's going on.

Kimberly J. Popovits

So I think that to reiterate, this 74,000 would suggest that we're not expecting a further decline in the fourth quarter.

Operator

Our next question comes from Amanda Murphy with William Blair.

Sylvia Chao

This is actually Sylvia in here today for Amanda. I just had a follow-up on the guidance. So at this point, do you guys still maintain the revenue guidance? And if so, is it driven by better pricing from payers? Or is it just driven by the stronger cash collection?

Dean L. Schorno

Yes. The revenue guidance, we're maintaining. And within that range, it's driven by a combination of test volumes, all the factors you described, strong cash collections. And really, those strong cash collections are really generated from some really, really great progress in the international markets, in getting test volumes and then securing payments. So that's been a key driver in the quarter and, frankly, across the year in generating those revenue levels.

Sylvia Chao

Okay, got it. And then a follow-up on the competitive comment that you made earlier in your prepared remarks. So given the adoption of [indiscernible] sequencers, there seems to be an increasing number of gene panel introduced by those next-gen sequencing labs. I understand that you guys have tremendous clinical support and a proprietary [indiscernible]. But I wonder if this would be a potential risk for you guys in the long term? Or just in general, how do you guys view about those gene panels versus your Oncotype DX franchise?

Kimberly J. Popovits

Well, I think that you addressed the most important point, and it is around the clinical evidence. So what we would say is that there are many ways to answer the clinical questions. However, doing the multiple clinical studies, demonstrating the correlations, the reproducibility and, of course, having the commercial infrastructure to be able to deliver that into clinical practice is clearly where we've been maintaining our market position and believe that we will in the future. So it's hard for us to predict what questions others will answer. But to date, we don't see anything in the near term that competes with the level of clinical evidence that we have around, certainly, the breast cancer test, colon cancer test and what we're building in prostate cancer.

Operator

Our next question comes from Scott Gleason with Stephens Inc.

Scott Gleason - Stephens Inc., Research Division

I was wondering when we look at the volume growth in the quarter, would you guys be willing to break it out, I guess, U.S. versus international? I know you guys gave the sales numbers there. But can you give us the -- I guess, the volume growth U.S. and international?

G. Bradley Cole

Sure. We did supply the international. But I realize, Scott, a lot of numbers go by quickly in the -- when we're doing the script in the prepared remarks. So international tests, on a year-over-year basis, we're up about 30%.

Scott Gleason - Stephens Inc., Research Division

Okay. And what was the U.S. piece?

Dean L. Schorno

So by deduction, the U.S. was low single digits.

Scott Gleason - Stephens Inc., Research Division

Okay, great. And then I guess, Kim, just in light of kind of the de-acceleration of volumes this quarter sequentially, would you be willing to give us kind of any kind of forward look into FY '13, just kind of how you guys are thinking about, I guess, overall kind of volume growth and also sales growth and -- so we could start to kind of tweaking our models in? because I know a lot of people are focused on that this time of year.

Kimberly J. Popovits

Yes. Well, as you can imagine, Scott, I can't give guidance for 2013. We'll do that in early February. But I think what I would say is I'd reiterate what we believe those drivers will be. So one of the things that Brad commented on earlier and I think deserves a further mention is the DCIS publication is going to be key to increasing our traction with reimbursement for DCIS. And unfortunately, we had expected that we would have had that by this point in 2012, and that's been a material -- it's had a material impact on getting DCIS moving. So with the expectation that we would have that very near term, we think that's a key driver for 2013. And I would also highlight the fact that there are 2 in every 5 patients that are not getting the Recurrence Score. We think for something that's standard of care and in practice guidelines that must change, and we know, territory by territory, we have the potential to do that. So we're refocusing resources to make sure that we can address that 40% of the population that currently isn't getting Oncotype today in the invasive breast cancer area. And then, also, colon cancer, we are getting traction there. We would expect to see some increases there. That's another reimbursement issue. And pending the publication of that second validation study, we think we'll -- again, that will be a 2013 event that we'll be able to use to get traction. And then, I won't reiterate, but Brad I think nicely described the international success we're having and progress, and we would continue to expect significant increases from the x U.S. business.

Operator

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

Rafael Tejada

It's Rafael in for Derik. Just one quick clarification in terms of the test volume expectations for next quarter. Just wanted to clarify whether you've taken any -- basically, any potential impact from Hurricane Sandy in terms of test volumes and patient volumes, et cetera?

Dean L. Schorno

We haven't actually figured that into our thinking. We actually think it's too early to tell. There's no doubt that this could delay visits in the fourth quarter. We don't think it's going to have a longer-term effect on number of patients presenting, but we think it's too early to tell. It could be that things recover and that there's no impact. It could be that there's an impact. But for now, we're -- the 74,000 is our guidance without Sandy.

Rafael Tejada

And as a follow-up, we've seen some incremental news from CMS, as you noted in your prepared remarks regarding the clinical lab fee schedule. But just wanted to get, I guess, your latest thoughts on how you think the agency is going to be thinking about the clinical lab fee schedule test codes and, particularly, as it relates to reimbursement of interpolates [ph]?

Kathy L. Hibbs

Sure, this is Kathy. I think it's important to note that in the final determination, CMS clarified that their decision was specific to the new codes, which they were asking to cover, and it was not -- did not go beyond that. They also reiterated that labs, such as ours, with mod test, should consider -- continue to build those as we have in the past. And they deleted the language that I think had caused confusion because it implied that, for some reason, CMS did not recognize or could not pay for tests which contained algorithms. So we saw great improvement in the language on the clinical laboratory fee schedule. And then of course, on the comments on the physician fee schedule and its finalization, there was clear guidance from CMS with regards to the -- their direction that tests, such as ours and the many other molecular diagnostics and other laboratory tests that do not require a physician interpretation to generate the patient result, were appropriately and would continue to be paid on the clinical laboratory fee schedule.

Kimberly J. Popovits

And I would just add that we were very pleased, of course, with this result and the change in thinking from CMS on these important issues, and I think it's really reflects their commitment to working with stakeholders and really listening and collaborating in an area that they know is very important to the future of healthcare. So we, I guess, stay tuned. We certainly can't predict what the future is. But I would say that all signs are that folks are learning and working together and doing the best thing on behalf of patients.

Operator

[Operator Instructions] Our next question comes from Mark Massaro with Canaccord Genuity.

Mark Massaro - Canaccord Genuity, Research Division

This is Mark in for Jeff Frelick. I was hoping you could provide an update just with respect to commercial planning on prostate. First, when would you expect to hire sales reps to call in urologists and radiation oncologists? And what is your -- what's the estimated time that you would need to train these folks?

G. Bradley Cole

Well, we could use a lot more time. We'd love to hire them today, right, but that's not the plan. It really depends on the timing of the launch. But it's likely that we'll be putting some resources together in the first quarter, and we're going to size the sales -- the sales effort will be minimal to start, much like it was in breast, as we meter the investment around publication and reimbursement and what have you. But we think it's important to interact with the key opinion leaders, so we have lots of resources in the marketing side. There'd be resources on the medical affair side of the company to build this relationships and help share the data. We have submitted this publication for presentation -- excuse me, the study for presentation at ASCO GU in February. We don't know yet whether it will be accepted. But likely, if that's going positively, we'll be -- there'd be more resources in the first quarter than there would have been otherwise.

Mark Massaro - Canaccord Genuity, Research Division

Great. And just a follow-up. I know you've stated that you plan to launch prostate in the first half of '13. How likely is it you can get revenue in the first -- within the first quarter?

G. Bradley Cole

Very unlikely. First quarter after launch, you're referring to?

Mark Massaro - Canaccord Genuity, Research Division

First quarter of '13.

G. Bradley Cole

0.

Kimberly J. Popovits

That's definitive.

G. Bradley Cole

Yes. It's one thing I'm sure of. I mean, even the first quarter after launch, it's not impactful. There's no policy to cover it. There's no contract to pay for it. It just requires the work we've done as with other indications, which takes months, if not quarters, to get to see any revenue ramp.

Kimberly J. Popovits

And I would just say that like with breast and colon, our plan would be to launch and certainly do what we can do to provide patient access and work on behalf of patients to secure reimbursements. So even though we believe we can get immediate traction, because again, we feel that this test will answer very important questions, we would be working with patients and with physicians and with payers to get that coverage, and that could take anywhere from 12 to 18 to 24 months before we get claims through appeals, policies in place, contracts in place. So again, stay tuned on that, but we would not expect immediate revenue from the launch.

Operator

Our next question comes from Justin Bowers with Leerink Swann.

Justin Bowers - Leerink Swann LLC, Research Division

This is Justin on for Dan Leonard. Just year-to-date, it looks you've done about $6.3 million in net income, which is towards the higher end of the range you provided earlier in the year. And just kind of when we juxtapose that with your prepared remarks that you don't expect to generate a material profit in the fourth quarter, are we still thinking, at least break even for the quarter in light of the higher G&A expenses?

Dean L. Schorno

Yes. So we've -- in light of the $3 million step-up, we still believe we'll generate -- or we're expecting a profit in the fourth quarter, but albeit a small one.

Justin Bowers - Leerink Swann LLC, Research Division

Okay. And then just in terms of CapEx. What was that during the quarter? And what are you thinking for the full year?

Dean L. Schorno

So we'll report the actual quarter CapEx number with the Q in a couple of days. CapEx is in the -- for the full year is in the -- approaching $15 million number.

Justin Bowers - Leerink Swann LLC, Research Division

Okay, great. Nice cash flow this quarter.

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

Great. Thank you. We look forward to seeing all of you at some upcoming meetings, specifically maybe San Antonio.

Again, thanks for your interest in Genomic Health and for joining us today.

Operator

This concludes today's Third Quarter 2012 Conference Call for Genomic Health. You may now disconnect. Thank you.

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