Genomic Health (Redwood City, California) has raised $46.5 million in a public offering to fund development and expansion of its genomics-based clinical diagnostic tests in cancer applications.

The company sold 3 million shares at $15.50 a share. Underwriters have an option to purchase up to 450,000 additional shares to cover overallotments. Genomic Health’s stock gained $1.22 Tuesday, or 7.8%, to close at $16.91.

Genomic Health in 2004 launched its first test, Oncotype DX, which is used to predict the likelihood of cancer recurrence, the likelihood of patient survival within 10 years of diagnosis and the likelihood of chemotherapy benefit in early stage breast cancer patients. The company, founded in 2000, went public in September 2005, raising about $60.2 million in an IPO at $12 per share.

The Oncotype DX test uses quantitative genomic analysis in standard tumor pathology specimens to provide tumor-specific information, or the oncotype, of a tumor, to improve cancer treatment decisions. The clinical laboratory service entails analyzing the expression levels of 21 genes in tumor tissue samples, which generates a recurrence score based on tumor’s aggressiveness, a score believed to be correlated with the likelihood of chemotherapy benefit. The test costs $3,460.

Genomic Health is conducting clinical studies in an attempt to expand the clinical utility of Oncotype DX in breast cancer, and is developing the product for similar diagnoses in patients with early stages of colon, prostate, renal cell and lung cancers and melanoma.

In the first three months of this year, more than 5,450 tests were delivered for use in treatment planning, compared to more than 2,900 for the year-earlier quarter. The company in its prospectus said factors that would drive broader adoption of Oncotype DX are acceptance by health care providers of its clinical benefits, demonstration of cost effectiveness, expanded reimbursement by third-party payers, expansion of its sales force, increased marketing efforts and the establishment of industry guidelines for its use.

The product’s initial launch was for use in early stage, node-negative, estrogen receptor-positive breast cancer patients who will be treated with tamoxifen.

One study, to be reported at the upcoming meeting of the American Society of Clinical Oncology (Alexandria, Virginia), was completed in node-positive breast cancer. Data support further investigation for prediction of recurrence, Genomic Health said. It also plans a second study focused on identifying patients more likely to benefit from anthracycline-based chemotherapy regimens. If successful, the company said, the studies could support launch for the expanded use in those patients in 2008.

Other studies are testing the utility of gene scores, the use of the product in other patient populations, and use with different chemotherapy classes.

Genomic Health also is developing a second-generation product with additional genes and gene combinations, designed to increase Oncotype DX’s predictive power.

The company said its strategy is to identify treatment decisions that can benefit from, and be guided by, the patient’s individual genomic information. A goal is to make its genomic-based tests a standard of care, delivering information after diagnosis but prior to the decision to undergo a specific cancer treatment. It said treatment decisions now are being made with little understanding of the molecular profile of each tumor, resulting in economic inefficiencies.

Genomic Health expanded its sales team in the first quarter to 50 representatives, and said it is in the process of expanding further, with a goal of 60 representatives by the end of this quarter.

Genomic Health said it already has reimbursement contracts with several national payers, including United HealthCare Insurance Co., Aetna, Inc., Kaiser Foundation Health Plan Inc. and Cigna HealthCare. It estimated up to 20 percent of future test volume would come from Medicare patients.

Genomic Health had revenues of $14.1 million in the first quarter, with $13.1 million of it coming from sales of Oncotype DX (vs. $5.1 million and $4.2 million, respectively, for the first quarter of 2006). Its first-quarter loss was $6.85 million. The company earlier provided full-year revenue guidance of $57 million to $63 million. Full-year losses were projected at $27 million to $30 million.

Genomic Health on March 31 reported cash and equivalents of $35.1 million. Following the offering, it had about 27.6 million shares outstanding, as well as options outstanding on another 3 million shares at an average exercise price of $9.94.