On November 9, 2020 Myriad Genetics, Inc. (NASDAQ: MYGN), a global leader in molecular diagnostics and precision medicine, reported financial results for its quarter ended Sept. 30, 2020 and provided an update on recent business performance (Press release, Myriad Genetics, NOV 9, 2020, View Source [SID1234570315]).
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Financial Highlights:
Myriad Genetics delivered total revenue in the quarter of $145.2 million which declined 22% year-over-year but increased 56% sequentially as the company continued to recover from the impact of the COVID-19 pandemic.
° Total test volumes of 209,000 declined 12% year-over-year but increased 40% sequentially. Test volumes improved to 90% of pre-pandemic levels by the end of September compared to 75% of pre-pandemic levels at the end of June.
° GAAP gross margin was 69.6% and non-GAAP gross margin was 69.8%, improving 890 basis points sequentially due to higher test volumes which led to improved fixed cost absorption and cost management.
° Total operating expenses declined $16.1 million year-over-year to $113.4 million in the September 2020 quarter.
° GAAP operating income increased $28.7 million sequentially; non-GAAP operating income increased $30.2 million sequentially.
° Identified more than $40 million in annualized cost savings which will be implemented over the next nine months. These cost savings will be partially offset by up to $20 million in strategic marketing and technology investments focused on areas such as improving the end-to-end customer experience, new sales tools, expanding consumer access to on-line genetic insights, and targeted direct-to-consumer marketing.
° GAAP earnings per share (EPS) were ($0.20) and adjusted EPS were ($0.15). Adjusted net loss per share declined 48% sequentially.
° GAAP free cash flow in the quarter was ($59.3) million, negatively impacted by normal timing of annual incentive payments as well as a large tax payment. The company ended the quarter with $190.6 million in cash and equivalents, and $123.3 million available under its existing credit facility.
° Changed methodology for calculating adjusted EPS to tax affect the add back for amortization of intangible assets associated with acquisitions. In the September quarter, this negatively impacted adjusted earnings per share by ($0.05). Non-GAAP EPS amounts have been updated to reflect this change in prior periods.
° Recognized $1.4 million in payer recoupments in the September quarter and established a $2.2 million reserve for future refunds of payments made previously by insurance carriers.
Business Performance and Highlights
Women’s Health
The Myriad Women’s Health business — which serves women who are assessing their risk of hereditary cancer, and women who are pregnant or planning a family — recorded revenue of $55.7 million in the quarter and declined 34% year-over-year. Elective testing for hereditary cancer has been disproportionately impacted by the global pandemic due to delayed elective office visits. The prenatal business has significantly recovered with test volumes increasing 7% relative to the September quarter last year.
myRisk Hereditary Cancer
° myRisk Hereditary Cancer test volumes for the Women’s Health business declined 29% year-over-year but increased 100% relative to the June 2020 quarter.
Foresight
° Evidence Street, the technology assessment organization for the Blue Cross Blue Shield Association issued a favorable medical policy decision on expanded carrier screening that may lead to improved coverage for ethnic minorities. If members of the Blues network adopt this policy and provide coverage for expanded carrier screening, a higher percentage of claims for this payer group will be paid.
Prequel
° The American College of Obstetricians and Gynecologist recently issued new guidelines recommending prenatal testing for average risk patients. The new guidelines support expanded access to these services for more women as well as test coverage by insurance providers. To date, these guidelines have led to new medical policy guidelines from payers now covering average risk testing and expanding reimbursement opportunities for 40 million covered lives.
° Launched new AMPLIFY technology further increasing the accuracy of the Prequel noninvasive prenatal screening (NIPS) test which detects fetal aneuploidies such as Down syndrome. This proprietary Myriad technology allows more women to receive highly accurate test results and avoid invasive procedures regardless of body mass index (BMI), race, or ethnicity. Following the AMPLIFY launch, Prequel test volumes increased to record volume levels by the end of September.
Oncology
The Myriad Oncology business unit provides hereditary cancer testing for patients who have cancer, and products such as the EndoPredict breast cancer prognostic test, the Prolaris prostate cancer test, and companion diagnostic tests that work with corresponding drugs. The Oncology business delivered total revenue of $58.4 million, up 8% relative to revenue of $54.2 million in the September quarter of last year. The business also realized strong growth from companion diagnostics including meaningful revenue in the quarter from its proprietary myChoice CDx test.
myRisk Hereditary Cancer
° myRisk Hereditary Cancer test volumes for the Oncology business declined 18% year-over-year but increased 55% relative to the June 2020 quarter.
Prolaris
° Received a final local coverage determination (LCD) for Myriad’s Prolaris test which provides an assessment of prostate cancer aggressiveness. The determination made by Palmetto GBA and CGS Administrators, LLC, two of the administrative contractors for the Centers for Medicare & Medicaid Services, expands benefit entitlements for patients with unfavorable intermediate and high-risk prostate cancer. The final LCD becomes effective Dec. 6, 2020 and will provide payment on a meaningful proportion of tests that currently do not qualify for reimbursement.
BRACAnalysis CDx
° Saw significant increases in BRACAnalysis CDx test volume in Japan with total revenue from the country increasing 200% year-over-year to $7.5 million.
° Received Japanese regulatory approval for BRACAnalysis CDx as a companion diagnostic for the PARP inhibitor olaparib for use in pancreatic and prostate cancer.
EndoPredict
° The German Federal Joint Committee (G-BA) recently completed the method evaluation assessment for EndoPredict, extending availability of this second-generation biomarker test to all patients with statutory health insurance in Germany. The Committee supports the use of biomarkers, now including EndoPredict, to identify those patients who will likely benefit from chemotherapy treatment. Receipt of payment on EndoPredict claims in Germany is anticipated to begin in 2021.
Mental Health
Myriad’s Mental Health business — which consists of the GeneSight Psychotropic test that helps physicians understand how genetic alterations impact response to antidepressant and other psychotropic medications — saw revenue of $11.9 million in the quarter compared to $22.7 million in the same period last year. Mental Health revenue has been significantly impacted by the COVID-19 pandemic as care providers have moved from live to virtual office visits.
GeneSight
° Received a final LCD for pharmacogenomic (PGx) testing by Palmetto GBA and CGS Administrators, LLC that expands coverage to tests ordered by all healthcare providers licensed and qualified to diagnose associated conditions and prescribe relevant medications (either independently or in an arrangement).
° Broadened access to the GeneSight test among front-line providers of mental health treatment, including primary care physicians and nurse practitioners who treat the majority of depression and anxiety patients, through the expansion of sales and digital marketing capabilities.
Autoimmune
Myriad’s Autoimmune business — which consists of the Vectra test for measuring disease activity in rheumatoid arthritis — generated revenue of $9.1 million in the quarter compared to $11.0 million in the same period last year.
Vectra
° Launched a new enhancement to the Vectra test report providing an individualized estimate of a patient’s one-year risk of rapid radiographic progression (RP). The RP result in every report is personalized based on the patient’s age, gender and body mass. The new data will help physicians more accurately assess risk for disease progression.
Other
Other revenue – comprised of Myriad RBM contract research services for the pharmaceutical industry and the myPath Melanoma diagnostic test in dermatology — was $10.1 million in the September quarter versus $14.5 million in the same period in the prior year. The decline in revenue is attributable to the previously announced sale of Myriad’s German clinic which occurred at the beginning of calendar year 2020.
° Announced the decision to pursue strategic alternatives for the Myriad RBM and Dermatology business units as part of the company’s transformation and growth plan.
Corporate Governance Changes
With the filing of its proxy statement in October, Myriad announced multiple corporate governance changes to better serve key stakeholders including a refreshment process for its Board of Directors, management objectives and compensation updates based on financial performance, and the move from a June 30 fiscal year to a calendar year end.
Financial Guidance
Given the continued unpredictability surrounding the COVID-19 pandemic and the impact it has had on the healthcare environment, customer behavior and the ability to market tests to physicians, the company will not provide financial guidance for the six-month transition period ending Dec. 31, 2020.
Conference Call and Webcast
A conference call will be held today, Monday, Nov. 9, 2020, at 5 p.m. EST to discuss Myriad’s financial results for the September quarter and business developments. The dial-in number for domestic callers is 1-800-760-5095. International callers may dial 1-212-231-2937. All callers will be asked to reference reservation number 21970797. An archived replay of the call will be available for seven days by dialing 1-800-633-8284 and entering the reservation number above. The conference call along with a slide presentation will be available through a live webcast at www.myriad.com.