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Genomic Health to Sell Test to Predict Breast Cancer Recurrence


Medical test maker says it has a product to help doctors assess risk in women with the earliest stage of breast cancer. Will it sell?

Medical test maker Genomic Health (GHDX) says it has a product that can help some women with early stages of breast cancer avoid radiation therapy.

In just-released data from a study, Genomic Health's genetic test effectively predicted whether cancer would come back after a tumor was surgically removed, the company said. The company's test Oncotype DX was studied in patients with ductal carcinoma in situ, or DCIS, the earliest form of breast cancer. The test assigns scores that help predict the likelihood of recurrence after a tumor is removed.

It's a breakthrough product and investors anticipated the study would validate Genomic Health's test. Shares of the company climbed by more than a third this year but were up less than 1% Wednesday, trading at $28.68.

Now the question is will the product sell? Genomic Health says it will have the tests to doctors by the end of the month. Priced at $4,175 per test, Genomic Health will have to convince docs and insurers that the product is worth the money. (Radiation therapy is considerably more costly -- potentially five times the price of Genomic Health's test.)

With 45,000 US women being diagnosed with DCIS each year, the test represents a significant market opportunity for Genomic Health and a complement to its existing diagnostic products for breast, colon and other cancer.

"We anticipate meaningful early adopter acceptance and favorable reimbursement decisions given this data as well as the established ability of the Oncotype DX platform to add value in the clinic," JMP Securities analyst Charles Duncan says in a note today.

Duncan recommends buying Genomic Health's stock and set a 12-month price target of $33 a share. He predicts the company's 2011 sales will rise to $207 million, which would be a 16% increase from 2010. The company reported net income last year of $4.3 million, or 14 cents a share.

The study of DCIS patients examined more than 300 tumor samples to validate whether the company's test works to predict future incidents of cancer. Three quarters of the patients in the study had scores indicating they were a low risk. Among the low-risk patients, 12% had a likelihood of either new invasive breast cancer or recurrence of DCIS in the same breast over a 10-year period. Patients with a high risk score had a 27% likelihood of recurrence.

The study results didn't impress every analyst. The 12% likelihood of recurrence "is a higher number than we would have thought," Leerink Swann analyst Dan Leonard says in a note today. He has a hold rating on the stock.

Full data for the study will be presented at a breast cancer conference in San Antonio Thursday. As doctors process the research, expect more predictions on potential use of the Genomic Health test and resulting sales projections.

Twitter: @brettchase

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