With Promising Cancer Drugs, Genomic Must Still Diversify Its Pipeline

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Includes: CLRT, GHDX, TMO
by: Zacks Investment Research

Recently, Genomic Health Inc. (NASDAQ:GHDX) announced data which confirmed that manual micro dissection (dissection of tissue or cells under the microscope) of biopsy cavities is essential for the accurate assessment of recurrence risk in patients with early-stage breast cancer.

Genomic Health's Oncotype DX is the only commercially available breast cancer test that makes use of manual microdissection following review by a board certified surgical pathologist with expertise in breast cancer to predict a patient's benefit from chemotherapy and risk of disease recurrence.

The results from the study revealed that the inclusion of biopsy cavities in breast cancer specimens is associated with significant changes in the expression of individual genes. Consequently, it was found that biopsy cavities had high-risk Recurrence Scores.

Genomic also presented results which demonstrated ability of Oncotype DX breast cancer test to predict the likelihood of disease recurrence in Japanese women with estrogen receptor positive early stage breast cancer. This is the first Oncotype DX breast cancer study which focuses on a specific ethnic population and provides additional evidence of the clinical utility of Oncotype DX.

As a reminder, Oncotype DX, the growth driver of the company, was launched in January 2004. In late May 2009, Genomic Health announced that more than 100,000 test results have been delivered in over 40 countries worldwide since the commercial launch of Oncotype DX. Sales of Oncotype DX came in at $108.7 million in 2008.

We expect growth for Oncotype DX to remain strong in the coming years. The company is also developing Oncotype DX for colorectal cancer. Genomic Health intends to make the colon cancer version of the test available to patients and physicians in early 2010. The company’s main competitors are Clarient, Inc. (CLRT) and Life Technologies Corporation (NASDAQ:LIFE).

Even though we are optimistic on the growth prospects of Oncotype DX, we are concerned about the company’s heavy reliance on Oncotype DX for both short-term and long-term growth. We believe the company needs to diversity its product mix further in order to sustain long-term growth.