On May 2, 2018 Genomic Health, Inc. (NASDAQ: GHDX) reported financial results and business progress for the quarter ended March 31, 2018 (Press release, Genomic Health, MAY 2, 2018, View Source [SID1234525966]).
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"In the first quarter of 2018, we delivered 13 percent growth in revenue and delivered a non-GAAP profit demonstrating continued operating leverage for the 11th consecutive quarter of improved profitability," said Kim Popovits, chairman of the board, chief executive officer and president of Genomic Health. "We delivered a strong start to the year with multiple revenue drivers, including the implementation of PAMA and AJCC breast cancer staging criteria, and the recent strengthening of NCCN prostate cancer guidelines. With several additional catalysts on the near-term horizon, including ECOG’s presentation of TAILORx results at ASCO (Free ASCO Whitepaper) and the anticipated finalization of the Medicare LCD for the Oncotype DX AR-V7 Nucleus Detect test, we expect strong revenue growth in the second half of the year."
Pre-606 Adjusted Revenue
Effective January 1, 2018, the company adopted the new ASC 606 accounting standard for revenue, using the modified retrospective method, which applies the new standard prospectively and does not impact prior years’ financial statements. Since the as-reported 2017 quarterly and annual financial statements will not be restated to reflect the new accounting standard, the company has provided a supplemental financial schedule in the non-GAAP tables at the end of this release, reflecting an estimate of revenue as if the new standard had been applied as of January 1, 2017 referred to herein as "pre-606 adjusted revenue."
First Quarter Financial Results
Total revenue was $92.6 million in the first quarter of 2018, compared with pre-606 adjusted revenue of $82.3 million for the first quarter of 2017, an increase of 13 percent, and an increase of 12 percent on a non-GAAP constant currency basis. Revenue was $84.0 million in the first quarter of 2017.
U.S. product revenue was $78.9 million in the first quarter of 2018, compared with pre-606 adjusted revenue of $69.2 million for the first quarter of 2017, an increase of 14 percent. U.S. product revenue was $70.6 million in the first quarter of 2017. U.S. invasive breast revenue from Oncotype DX Breast Recurrence Score tests was $71.0 million in the first quarter of 2018, compared with U.S. invasive breast pre-606 adjusted revenue of $63.4 million for the first quarter of 2017, an increase of 12 percent. U.S. invasive breast revenue was $64.8 million in the first quarter of 2017. U.S. prostate test revenue from Oncotype DX Genomic Prostate Score (GPS) tests was $5.8 million in the first quarter of 2018, compared with $3.3 million in the first quarter of 2017, an increase of 75 percent.
International product revenue was $13.8 million in the first quarter of 2018, compared with pre-606 adjusted revenue of $13.1 million for the first quarter of 2017, an increase of 5 percent, and a 1 percent increase on a non-GAAP constant currency basis. International product revenue was $13.4 million in the first quarter of 2017.
Net loss was $3.8 million, or $0.11 per share on a basic and diluted basis, in the first quarter of 2018, compared with a net loss of $0.8 million, or $0.02 per share on a basic and diluted basis, in the first quarter of 2017. Operating loss was $4.4 million in the first quarter of 2018, compared with an operating loss of $2.8 million in the first quarter of 2017.
On a non-GAAP basis, excluding the $8.5 million one-time charge for the realignment of resources that was completed in the quarter and certain other one-time charges, net income was $4.6 million in the first quarter of 2018, compared with a $2.8 million non-GAAP net loss in the first quarter of 2017. On a non-GAAP basis, operating income was $4.2 million in the first quarter of 2018, compared with a non-GAAP operating loss of $2.8 million in the first quarter of 2017.
More than 32,440 Oncotype test results were delivered in the first quarter of 2018, an increase of 3 percent, compared with more than 31,580 test results delivered in the same period in 2017. Oncotype DX Breast Recurrence Score tests delivered in the U.S. grew 4 percent in the first quarter of 2018 compared with the same period in 2017. Oncotype DX Genomic Prostate Score tests delivered in the U.S. grew 25 percent in the first quarter of 2018 compared with the same period in 2017. International tests delivered decreased by 7 percent compared with the same period in 2017 and represented approximately 22 percent of total test volume in the first quarter of 2018.
Cash and cash equivalents and short-term marketable securities at March 31, 2018 were $130.4 million, which included the fair value of the company’s investment in marketable equity securities of $3.8 million, compared with $129.6 million at December 31, 2017, which included the fair value of the company’s investment in marketable equity securities of $3.5 million.
Recent Business Highlights
Results from the landmark ECOG-ACRIN Cancer Research Group TAILORx study were accepted for presentation at the Plenary Session at the 2018 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting (ASCO) (Free ASCO Whitepaper) on Sunday, June 3.
Multiple private insurers established new coverage for the Oncotype DX Genomic Prostate Score test, bringing the total number of U.S. covered lives to more than 71 million.
Palmetto GBA, a Medicare Administrative Contractor (MAC) that assesses molecular diagnostic technologies, issued a draft local coverage determination (LCD) for the Oncotype DX AR-V7 Nucleus Detect test.
The National Institute for Health and Care Excellence (NICE) in the United Kingdom issued a revised Diagnostics Consultation Document (DCD) including the Oncotype DX Breast Recurrence Score test for continued use to guide adjuvant chemotherapy decisions for patients with hormone receptor-positive, HER2-negative, node-negative early-stage breast cancer.
Secured tender with the UNICANCER hospital group in France for the Oncotype DX Breast Recurrence Score test increasing access to approximately 20 percent of the French market.
Established new public coverage for the Oncotype DX Breast Recurrence Score test in Germany, bringing the total number of German covered lives to more than 17 million.
Secured public coverage with the province of Manitoba for the use of the Oncotype DX Breast Recurrence Score test in early-stage breast cancer patients with node-negative disease, increasing the total number of covered lives in Canada to 35 million.
The Oncologist published positive results from a study conducted by Sunnybrook Health Sciences Centre in Canada, demonstrating a 37 percent reduction in chemotherapy among breast cancer patients with up to three positive nodes, as well as an increase in physicians’ and patients’ confidence (49 and 54 percent, respectively) when Oncotype DX was used to make adjuvant treatment decisions.
Presented results from three studies at the 11th European Breast Cancer Conference (EBCC-11) in March.
Received acceptance to present two studies utilizing the Oncotype DX Genomic Prostate Score test at the American Urological Association Annual Meeting in May.
Non-GAAP Disclosure
The company makes reference in this press release to "non-GAAP operating income (loss)" which excludes 2018 expenses resulting from the restructuring charges for the cessation of Oncotype SEQ, including the Oncotype SEQ Liquid Select test, and Oncotype SEQ product development and commercialization activities (restructuring charges). Additionally, the company references "non-GAAP net income (loss)" which excludes the Q1 2018 restructuring charges as well as fair value adjustments related to its collaborations with Biocartis and Cleveland Diagnostics in the first quarter of 2018 and the gain on sale of marketable equity securities in the first quarter of 2017. The company believes that excluding these items and their related tax effects from its financial results reflects operating results that are more indicative of the company’s ongoing operating performance while improving comparability to prior periods, and, as such may provide investors with an enhanced understanding of the company’s past financial performance and prospects for the future. The company also considers the impact of foreign currency exchange rates on its global business as described in the constant currency table accompanying this press release. The company’s management uses such non-GAAP measures internally to evaluate and assess its core operations and to make ongoing operating decisions. This information is not intended to be considered in isolation or as a substitute for income (loss) from operations or net income (loss) information prepared in accordance with GAAP. An explanation and reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this press release.
Conference Call Details
To access the live conference call today, May 2, at 4:30 p.m. Eastern Time via phone, please dial (877) 303-7208 from the United States and Canada, or +1 (224) 357-2389 internationally. The conference call ID is 2186716. Please dial in approximately ten minutes prior to the start of the call. To access the live and subsequently archived webcast of the conference call, go to the Investor Relations section of the company’s web site at View Source Please connect to the web site at least 15 minutes prior to the presentation to allow for any software download that may be necessary.