Genomic Health Announces Second Quarter 2018 Financial Results and Reports Recent Business Progress

REDWOOD CITY, Calif., Aug. 2, 2018 /PRNewswire/ -- Genomic Health, Inc. (NASDAQ: GHDX) today reported financial results and business progress for the quarter ended June 30, 2018.

"We delivered record results in the first half of 2018, including 14 percent growth in revenue and an $8.3 million profit in the second quarter, driven by successful execution across our entire business, enhanced operational efficiency and greater leverage, strong reimbursement for the Oncotype DX Breast Recurrence Score test including the benefit from PAMA, and increased private payor reimbursement for the Genomic Prostate Score test," said Kim Popovits, chairman of the board, chief executive officer and president of Genomic Health. "With increasing reimbursement in our U.S. urology business and the global impact of the recently published landmark TAILORx results, we are on track to deliver double-digit revenue growth and full year profitability."

Pre-606 Adjusted Product 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 press release, reflecting an estimate of revenue as if the new standard had been applied to the historical 2017 product revenue portion of revenue as of January 1, 2017, referred to herein as "pre-606 adjusted revenue." 

Second Quarter and Six Months Ended June 30, 2018, Financial Results
Total revenue was $95.6 million in the second quarter of 2018, compared with pre-606 adjusted revenue of $83.8 million for the second quarter of 2017, an increase of 14 percent, and an increase of 13 percent on a non-GAAP constant currency basis. Reported revenue was $85.5 million in the second quarter of 2017. 

U.S. product revenue was $81.4 million in the second quarter of 2018, compared with pre-606 adjusted revenue of $71.0 million for the second quarter of 2017, an increase of 15 percent. U.S. product reported revenue was $72.4 million in the second quarter of 2017. U.S. invasive breast revenue from Oncotype DX Breast Recurrence Score^® tests was $72.5 million in the second quarter of 2018, compared with U.S. invasive breast pre-606 adjusted revenue of $64.2 million for the second quarter of 2017, an increase of 13 percent. U.S. invasive breast revenue was $65.6 million in the second quarter of 2017. U.S. prostate test revenue from Oncotype DX^® Genomic Prostate Score™ (GPS™) tests was $6.7 million in the second quarter of 2018, compared with $4.1 million in the second quarter of 2017, an increase of 63 percent.

International product revenue was $14.2 million in the second quarter of 2018, compared with pre-606 adjusted revenue of $12.8 million for the second quarter of 2017, an increase of 11 percent, and a 6 percent increase on a non-GAAP constant currency basis. International product reported revenue was $13.1 million in the second quarter of 2017.

Net income was $8.3 million, or $0.23 per share on a basic and diluted basis, in the second quarter of 2018, an improvement of $11.0 million, compared with a net loss of $2.7 million, or $0.08 per share on a basic and diluted basis, in the second quarter of 2017. Operating income was $7.1 million in the second quarter of 2018, an improvement of $10.2 million, compared with an operating loss of $3.1 million in the second quarter of 2017.

On a non-GAAP basis, net income was $9.4 million in the second quarter of 2018, compared with a $2.7 million non-GAAP net loss in the second quarter of 2017. Non-GAAP operating income was $9.4 million in the second quarter of 2018, compared with a non-GAAP operating loss of $3.1 million in the second quarter of 2017.

More than 33,590 Oncotype™ test results were delivered in the second quarter of 2018, an increase of 6 percent, compared with more than 31,550 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 second quarter of 2018, compared with the same period in 2017. Oncotype DX GPS tests delivered in the U.S. grew 32 percent in the second quarter of 2018, compared with the same period in 2017. The number of international tests delivered in the second quarter of 2018 was consistent with the same period in 2017 and represented approximately 23 percent of total test volume in the quarter.

Total revenue for the six months ended June 30, 2018, was $188.2 million, compared with pre-606 adjusted revenue of $166.1 million for the same period in 2017, an increase of 13 percent, with a similar increase of 13 percent on a non-GAAP constant currency basis. Reported revenue was $169.5 million for the six months ended June 30, 2017.

International product revenue was $27.9 million for the six months ended June 30, 2018, compared with pre-606 adjusted revenue of $25.9 million for the six months ended June 30, 2017, an increase of 8 percent, and a 4 percent increase on a non-GAAP constant currency basis. International product reported revenue was $26.5 million for the six months ended June 30, 2017.

Net income was $4.5 million for the six months ended June 30, 2018, an improvement of $8.0 million, compared with a net loss of $3.5 million for the six months ended June 30, 2017. Operating income increased to $2.7 million for the six months ended June 30, 2018, an improvement of $8.7 million, compared with an operating loss of $6.0 million for the six months ended June 30, 2017.

Non-GAAP net income was $14.0 million for the first six months ended June 30, 2018, compared with a $5.5 million non-GAAP net loss for the six months ended June 30, 2017. Non-GAAP operating income was $13.6 million for the first six months ended June 30, 2018, compared with a non-GAAP operating loss of $6.0 million for the same period in 2017.

Cash and cash equivalents and short-term marketable securities at June 30, 2018 were $152.9 million, which included the fair value of the company's investment in marketable equity securities of $3.7 million, compared with $129.6 million at December 31, 2017, which included the fair value of the company's investment in marketable securities of $3.5 million.

2018 Financial Outlook

The company is confirming guidance for the full year ending December 31, 2018 under ASC 606 revenue recognition standards:

Recent Business Highlights

• Results from the landmark ECOG-ACRIN Cancer Research Group TAILORx study were published in The New England Journal of Medicine and presented in the Plenary Session at the American Society of Clinical Oncology (ASCO) Annual Meeting. Results demonstrated that the Oncotype DX Breast Recurrence Score test identified 70 percent of early-stage breast cancer patients who receive no benefit from chemotherapy and can be effectively treated with endocrine therapy alone. Additionally, the trial established that chemotherapy may provide life-saving benefit to 30 percent of patients.
• Following the TAILORx study publication, the U.K.'s National Institute for Health and Care Excellence (NICE) confirmed that it has requested that the External Assessment Group (EAG) review the results before finalizing its updated guidance on tumor profiling tests, and the German Federal Joint Committee (G-BA) commissioned the Institute for Quality and Efficiency in Health Care (IQWiG) to evaluate the new evidence before making a final coverage decision in Germany.
• Established public coverage with the province of New Brunswick 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 more than 35 million. With this decision, all 10 provinces in Canada now cover the test.
• Multiple private insurers, including a top five national payor, established new coverage for the Oncotype DX GPS test, bringing the total number of U.S. covered lives to more than 92 million, including Medicare.
• Results from two studies demonstrating the positive impact of the Oncotype DX GPS test on risk assessment for better treatment decisions in clinically low-risk prostate cancer patients in real-world practice were presented at the 2018 American Urological Association (AUA) Annual Meeting.
• JAMA Oncology published a study that demonstrated that the Oncotype DX AR-V7 Nucleus Detect™ test can identify patients with metastatic castration-resistant prostate cancer (mCRPC) who may live longer if they switch from targeted androgen receptor-signaling inhibitor (ARSi) therapy, such as enzalutamide and abiraterone, to taxane-based chemotherapy.
• The company discontinued its early-stage development of the IsoPSA assay and terminated its milestone-based licensing agreement with Cleveland Diagnostics.

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 the Oncotype SEQ^® Liquid Select™ test product development and commercialization activities in the first quarter of 2018, the expenses for a milestone payment to Biocartis N.V., and the cessation of its collaboration with Cleveland Diagnostics in the second quarter of 2018. Additionally, the company references "non-GAAP net income (loss)," which also excludes fair value adjustments related to its collaborations with Biocartis, Epic Sciences and Cleveland Diagnostics in the first and second quarters 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, August 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 2089377. 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 website at http://investor.genomichealth.com. Please connect to the website at least 15 minutes prior to the presentation to allow for any software download that may be necessary.

About Genomic Health 
Genomic Health, Inc. (NASDAQ: GHDX) is the world's leading provider of genomic-based diagnostic tests that help optimize cancer care, including addressing the overtreatment of the disease, one of the greatest issues in healthcare today. With its Oncotype IQ^® Genomic Intelligence Platform, the company is applying its world-class scientific and commercial expertise and infrastructure to lead the translation of clinical and genomic big data into actionable results for treatment planning throughout the cancer patient journey, from diagnosis to treatment selection and monitoring. The Oncotype IQ portfolio of genomic tests and services currently consists of the company's flagship line of Oncotype DX^® gene expression tests that have been used to guide treatment decisions for more than 900,000 cancer patients worldwide. Genomic Health is expanding its test portfolio to include additional liquid- and tissue-based tests, including the recently launched Oncotype DX^® AR-V7 Nucleus Detect™ test. The company is based in Redwood City, California, with international headquarters in Geneva, Switzerland. For more information, please visit www.GenomicHealth.com and follow the company on Twitter: @GenomicHealth, Facebook, YouTube and LinkedIn.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the company's beliefs regarding its future performance, including guidance, the company's beliefs regarding its revenue growth for the remainder of 2018 and the drivers of growth; the commercial performance of its tests; the favorable impact of TAILORx results on revenue in 2018; the attributes and focus of the company's product pipeline; the ability of any potential tests the company may develop to optimize cancer treatment; the ability of the company to develop and commercialize and collaborate with third parties to commercialize additional tests in the future; the ability of the company to increase worldwide access through the development of in vitro diagnostic tests; expectations regarding additional public and private reimbursement coverage for our tests worldwide and the ability of additional coverage to result in additional revenue; and the company's methodology for calculating financial performance under the new ASC 606 accounting standard as compared against prior periods under the previously applicable ASC 605 accounting standard. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, and reported results should not be considered as an indication of future performance. These risks and uncertainties include, but are not limited to: the risk that the company may not achieve expected revenue growth for the remainder of 2018; the risks and uncertainties associated with the regulation of the company's tests; the results of clinical studies and their impact on reimbursement and adoption; the applicability of clinical study results to actual outcomes; the company's ability to develop and commercialize new tests and expand into new markets domestically and internationally; the commercial success of any collaborations entered into by the company; the risk that the company may not obtain or maintain sufficient levels of reimbursement, domestically or abroad, for its existing tests and any future tests it may develop; the risks of competition; unanticipated costs or delays in research and development efforts; the company's ability to obtain capital when needed and the other risks set forth in the company's filings with the Securities and Exchange Commission, including the risks set forth in the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. These forward-looking statements speak only as of the date hereof. Genomic Health disclaims any obligation to update these forward-looking statements.

NOTE: The Genomic Health logo, Oncotype, Oncotype DX, Breast Recurrence Score, DCIS Score, Oncotype SEQ, Liquid Select, Genomic Prostate Score, GPS, Oncotype DX AR-V7 Nucleus Detect, and Oncotype IQ are trademarks or registered trademarks of Genomic Health, Inc. All other trademarks and service marks are the property of their respective owners.

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SOURCE Genomic Health, Inc.

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