Genomic Health Inc. (GHDX)

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Genomic Health Reliant on One Drug
Monday August 11, 12:25 pm ET
By Grant Zeng, CFA

Genomic Health Inc.'s (NasdaqGM: GHDX - News) lead product is Oncotype DX, which is used for early stage breast cancer patients to predict the likelihood of cancer recurrence. The company is also conducting studies to expand the product offering of Oncotype DX for patients with colorectal cancer. Sales of Oncotype remain robust. We maintain our Hold rating on the stock with a price target of $25.00.

On August 5, the company announced its second quarter results where total revenue increased to $27.8 million compared to $14.7 million in the second quarter of 2007. It also exceeded our estimate of $24.9 million. Net loss was $4.1 million in the second quarter of 2008, compared to $7.2 million in the second quarter of 2007. Our estimate of net loss was $6.2 million.

We are optimistic about the growth of Oncotype. Clinical studies have validated the use of Oncotype. In recent months, Oncotype met the criteria set by Blue Cross and Blue Shield Association Technology Evaluation Center for women with breast cancer and its use in breast cancer treatment selection was recommended by the American Society of Oncology.

The company relies heavily on Oncotype DX for both short-term and long-term growth. We would like to gain more visibility on how Genomic Health diversifies its product offerings and how it expands internationally before we become bullish on the shares.