Genomic Health: A Prostate Play Helping Investors Get Ahead Of The Curve?

• The share price of Genomic Health, Inc. GHDX has appreciated 36.28 percent over the past month, from $21.42 on October 20.
• Cowen and Company’s Doug Schenkel has upgraded the rating on the company from Market Perform to Outperform, while raising the price target from $27 to $35.
• Schenkel expects the company’s revenue growth to rapidly accelerate in 206, driven by its prostrate product, the genetic testing potential of which could also drive upside.

Analyst Doug Schenkel elaborated that Genomic Health’s revenue growth has stagnated at an average rate of 4 percent over the past seven quarters, while ranging from 0 to 2 percent in three of the last four quarters.

This stagnation has been driven to a large extent by moderation in revenue growth for the OUS and Invasive Breast segments, along with limited revenue contribution from the company’s new products.

However, Schenkel believes that all this is poised to change, driven by Oncotype DX for Prostate Cancer, which is now part of the clinical guidelines, “is being reimbursed in certain indications by CMS, and is positioned for expanded coverage by CMS and private payers over the coming quarters.”

The prostate revenue opportunity in the U.S. is estimated at $600 million and there are only two major products in the market for pre-surgery testing.

According to the Cowen report, the other growth drivers for Genomic Health include “(1) broader access to and reimbursement for Oncotype DX for Breast Cancer in Europe, (2) expanding indications for and coverage of invasive breast cancer, DCIS, and colon cancer testing in the US, and (3) a longer-term opportunity in liquid biopsy.”