The second quarter of fiscal 2010 turned out to be the first profitable quarter for Genomic Health (GHDX). The company reported an EPS of 3 cents, surpassing the Zacks Consensus Estimate of a net loss of 2 cents. The company had suffered a loss of 14 cents in the prior-year period.
Total revenues in the reported quarter climbed 18.6% year over year to $43.4 million. Product revenues from the Oncotype DX breast cancer test climbed approximately 21% year over year to $42.5 million in the second quarter of 2010. Contract revenues accounted for the balance.
In the first quarter of 2010, Genomic delivered in excess of 14,050 test results, as against more than 11,880 test results in the comparable period of 2009, representing a growth of 18%.
While research and development spending during the quarter slipped 13.7% year over year to $7.9 million, selling & marketing along with general & administrative expenses climbed 12.3% to $26.23 million. The increase was primarily attributable to the growing international presence of the company.
Lowers Outlook
Although Genomic reported a profitable quarter, we believe the flattening sales of Oncotype DX breast cancer tests led the company to lower its outlook. The company expects to generate revenues of $174 million-$178 million, down from $180 million-$190 million. Although Genomic earlier projected net income of up to $2 million, the company now expects to break even or generate net loss of up to $3 million.
Total revenues in the reported quarter climbed 18.6% year over year to $43.4 million. Product revenues from the Oncotype DX breast cancer test climbed approximately 21% year over year to $42.5 million in the second quarter of 2010. Contract revenues accounted for the balance.
In the first quarter of 2010, Genomic delivered in excess of 14,050 test results, as against more than 11,880 test results in the comparable period of 2009, representing a growth of 18%.
While research and development spending during the quarter slipped 13.7% year over year to $7.9 million, selling & marketing along with general & administrative expenses climbed 12.3% to $26.23 million. The increase was primarily attributable to the growing international presence of the company.
Lowers Outlook
Although Genomic reported a profitable quarter, we believe the flattening sales of Oncotype DX breast cancer tests led the company to lower its outlook. The company expects to generate revenues of $174 million-$178 million, down from $180 million-$190 million. Although Genomic earlier projected net income of up to $2 million, the company now expects to break even or generate net loss of up to $3 million.
Furthermore, the company expects to deliver 56,000 to 58,000 test results in 2010, down from the earlier projection of 58,000 to 61,000. The projection includes Oncotype DX breast cancer tests as well as colon cancer tests, launched earlier this year.
Our Recommendation
Currently, Genomic is highly dependent on the success of Oncotype DX breast cancer test. Although the company has launched Oncotype DX colon cancer test, it will take some time to be able to contribute significantly to the top line. The market for Oncotype breast cancer test is flattening. Besides, other pipeline tests at Genomic have a long way to go before commercialization. We have an Underperform rating on the stock.
Our Recommendation
Currently, Genomic is highly dependent on the success of Oncotype DX breast cancer test. Although the company has launched Oncotype DX colon cancer test, it will take some time to be able to contribute significantly to the top line. The market for Oncotype breast cancer test is flattening. Besides, other pipeline tests at Genomic have a long way to go before commercialization. We have an Underperform rating on the stock.
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