Strong Revenue Growth Continuing for Esoteric Labs, But Bottom Line Is Mixed

Revenues for esoteric testing labs have made large gains this year, though the overall financial picture for many of these companies is mixed. Genomic Health, the Redwood City, Calif.-based laboratory that focuses on testing for prostate, breast, and other forms of cancer, reported an 11 percent increase in revenue for the second quarter, ending June 30, reaching $70.5 million, compared to $63.7 million a year ago. It reported that test volumes were up 17 percent. For the first half of 2014, Genomic Health’s revenue was $137.5 million, up from $126.4 million a year ago. However, the company remains in the red, posting a loss of $4.6 million for the quarter and $12.1 million for the half—both larger than the year-ago figures. South San Francisco, Calif.-based Veracyte, which focuses on molecular thyroid analysis, reported a dramatic increase in revenue for the quarter—at $8.7 million it was up 71 percent for the second quarter, while accessions were up 32 percent. For the first half of the year, revenue was $16.2 million, up 70 percent from the first half of 2013. But it made little headway in cutting its net losses: $6.7 million for the quarter and $13.3 million for the half, similar to last year’s numbers. The company announced an improved deal with Genzyme regarding the copromotion of its assays. But perhaps the biggest quarterly results were reported by Cambridge, Mass.-based Foundation Medicine with its genomic profiling of cancer tumors. As of June 30, test volumes were up 263 percent year over year. As a result, the company reported second-quarter revenue of $14.5 million, up 145 percent from the $5.9 million it reported in the year-ago quarter. The company’s net loss widened to $13.8 million, compared to $10 million a year ago. For the first half of the year, revenue was $26 million, more than double the $11.1 million for the first half of 2013. But its net loss was $25.9 million, compared to $17.4 million during the first half of 2013. Despite the fact that all three of the labs reported losses that were either larger or the same as a year ago, brokerage firm William Blair & Co. had decidedly different predictions for the stock performance of the three labs. William Blair analysts were most bullish on Foundation, forecasting full-year revenue of $58.1 million, an increase of about 1.5 percent. For Genomic Health, it increased its 2014 revenue forecast to $283 million, a bump of about 1 percent. However, it lowered revenue forecasts on Veracyte by about 2.5 percent because it missed projections for the second quarter. Takeaway: Although they have yet to achieve profitability, the major esoteric molecular labs are continuing to book ever-growing revenue.