Genomic Health's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Genomic Health, Inc. (GHDX)

Q2 2012 Earnings Call

August 8, 2012 4:30 pm ET

Executives

Emily Faucette – Senior Director, Corporate Communications and Investor Relations

Kimberly Popovits – Chairman of the Board, Chief Executive Officer and President

Bradley Cole – Chief Operating Officer

Dean Schorno – Chief Financial Officer

Steven Shak – Executive Vice President of Research and Development and Chief Medical Officer

Kathy Hibbs – Senior Vice President & General Counsel

Joffre Baker – Chief Scientific Officer

Randal Scott – Founder and Director, Genomic Health and Chief Executive Officer,

InVitae Corporation

Analysts

Dane Leone – Macquarie Research

Tycho Peterson – JPMorgan

David Clair – Piper Jaffray

Amanda Murphy – William Blair

Dan Leonard – Leerink Swann

Kevin DeGeeter – Ladenburg Thalmann & Co.

Scott Gleason – Stephens Inc.

Laura McGuigan – B. Riley

Nicholas Jansen – Raymond James

Presentation

Operator

Good afternoon. My name is Chuck, and I will be your conference operator today. At this time I would like to welcome everyone to Genomic Health’s Second Quarter 2012 Financial Results Conference Call. All participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. (Operator instructions)

I would now like to turn the call over to Emily Faucette, Senior Director of Corporate Communications and Investor Relations. You may begin your conference.

Emily Faucette

Thank you. Good afternoon everyone and welcome to Genomic Health conference call to review our second-quarter 2012 financial results. Before we begin, I would like to remind you that various remarks that we make on this call that are not historical, including those about our future financial and operating results, our plans and prospects, our ability to leverage our existing infrastructure, the success of our business strategy, economic benefits and value to payers of our tests, growth opportunities, future products, product enhancements and our product pipeline, demand for our tests and drivers of demand, payer coverage and progress in reimbursement and patient access, our investments in our business, clinical outcomes and timing of clinical studies, and product launches, and our expectations regarding our ability to comply with potential FDA regulation constitute forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act.

We refer you to our quarterly report on Form 10-Q for the quarter ended March 31, 2012, filed with the SEC, in particular to the section entitled risk factors for additional information on factors that could cause actual results to differ materially from our current expectations. These forward-looking statements speak only as of the date hereof, and we disclaim any obligation to update these forward-looking statements.

Joining me on the call today are Kim Popovits, our Chairman of the Board, Chief Executive Officer and President; Brad Cole, our Chief Operating Officer; Dean Schorno, our Chief Financial Officer; Steve Shak, Executive Vice President of Research and Development and Chief Medical Officer; Kathy Hibbs, Senior Vice President and General Counsel; Joffre Baker, Senior Research Fellow; and Randy Scott, Genomic Health Co-Founder.

I will now turn the call over to Kim.

Kimberly Popovits

Thanks Emily. Good afternoon everyone and welcome. We delivered strong financial results in the second quarter highlighted by a 16% year-over-year increase in test volume, and a 13% increase in revenues. These results were driven by worldwide growth in tests delivered across all products and notably from new markets, including DCIS breast cancer, colon cancer and international. Our growth in tests and revenue, along with net income generated in the quarter, exemplify the strength of our business model and delivering personalized genomics to patients around the world.

In the second half of the year, we plan to continue investing in our prostate cancer program, the development of clinical applications for next-generation sequencing, and the ongoing expansion of our international commercial business. Additionally as announced today, we have concluded that the best path forward to optimize our investment in the field of clinical genetics is to support the combination of InVitae with a private company, Locus Development, to form a separate independent genetics company under the leadership of Randy, which I will discuss a bit more in detail at the end of the call.

I will now turn the call over to Dean and Brad to provide further details on our second quarter 2012 financial results and our commercial and operations progress worldwide. I will then conclude the highlights of our research and development programs, including anticipated milestones and business priorities for the remainder of the year. Dean.

Dean Schorno

Thank you Kim. In the second quarter of 2012, we achieved 13% growth in both product revenue and total revenue. Specifically total revenue was $57.6 million, compared with $50.8 million in 2011, and product revenue increased to $57.2 million compared with $50.5 million in the same period of 2011. Contract revenue comprised the balance of total revenue for the second quarter of 2012.

As a reminder, first-quarter product revenue was higher due to the inclusion of approximately $1.2 million of cash revenues from payments by Medicare for colon tests performed prior to the establishment of coverage. Without this incremental revenue, first quarter product revenue would have been approximately $56.7 million. All areas of our business fuelled our 16% year-over-year growth in test volume as we delivered more than 19,020 Oncotype DX tests during the quarter.

The difference in test volume and product revenue growth rates reflect the continued diversification of our business, and our success in penetrating new markets, including DCIS, colon, and international, where we continue to focus on establishing coverage and consistent reimbursement.

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