GHDX Loss Wider Than Expected – Analyst Blog

Genomic Health Inc’s (GHDX) first quarter 2010 loss of 7 cents per share was wider than the Zacks Consensus Estimate of a net loss of 3 cents. The company had suffered a loss of 16 cents in the prior-year period.

Total revenues for the reported quarter came in at $41.2 million as against $33.9 million in the year-ago quarter, up 21.5% year over year. Product revenues from the Oncotype DX breast cancer test climbed approximately 20% year over year to $40.3 million in the first quarter of 2010. Contract revenues accounted for the balance.

In the first quarter of 2010, Genomic Health delivered in excess of 13,310 test results, as against more than 11,210 test results in the comparable period of 2009, representing approximately a 19% year-over-year growth.

Research and development spending for the first quarter of 2010 slipped 9.8% year over year to $7.8 million. Selling and marketing and general and administrative expenses climbed approximately 19.5% year over year to $26.3 million in the reported quarter. The increase was primarily attributable to the growing international presence of the company.

The company exited the quarter with cash, cash equivalents and short-term investments of approximately $57.7 million as against $57.4 million at the end of 2009.

Genomic Health has provided an outlook for 2010. The company expects to end 2010 with revenues within the range of $180 million-$190 million. The company projects net income of up to $2 million in 2010. Furthermore, Genomic Health expects to deliver 58,000 to 61,000 test results in 2010. The projection includes Oncotype DX breast cancer tests as well as the recently launched colon cancer tests.

Currently we are Neutral on Genomic Health. Even though the company’s weak pipeline and its dependence on Oncotype DX for growth are a concern, sales of the Oncotype DX breast cancer test continue to demonstrate impressive growth. However, the recent launch of Genomic’s colon cancer test will reduce its dependence on the breast cancer assay for generating revenues. We are also pleased with Genomic Health’s efforts to expand internationally.

Our long-term Neutral stance on Genomic Health indicates that the stock is expected to perform in line with the overall U.S. equity market over the next 6−12 months. Consequently, we advise investors to retain the stock over the time period.