On August 3, 2023 Myriad Genetics, Inc. (NASDAQ: MYGN), a leader in genetic testing and precision medicine, reported financial results for its second quarter ended June 30, 2023 (Press release, Myriad Genetics, AUG 3, 2023, View Source [SID1234633757]). The Company also provided an update on its business performance and 2023 financial guidance.
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"Strong double-digit test volume growth in the second quarter of 2023 continues to reflect greater adoption by providers as we continue to emerge from the pandemic restrictions on access and Myriad’s improved commercial execution across our businesses. We’re pleased with ongoing share gains in our hereditary cancer testing franchise, particularly the 21% year-over-year volume growth in Women’s Health," said Paul J. Diaz, president and CEO, Myriad Genetics. "Excluding changes in estimated revenue, Myriad generated 10% year-over-year revenue growth in the second quarter of 2023, even as the company, and the diagnostics lab industry, continue to work through challenging payor dynamics that negatively impacted our second quarter revenue by approximately $4 million. We believe these dynamics are largely transitory and we remain focused on working collaboratively with payers to support reimbursement for the services we provide to healthcare providers and their patients." Mr. Diaz concluded, "In the second quarter of 2023, we generated strong gross margins, managed operating expenses and improved our financial flexibility by executing on a new credit facility. We remain confident in our ability to achieve our goal of adjusted profitability by the fourth quarter and sustainable 10%+ annual revenue growth."
Financial and Operational Highlights:
•Test volumes of 358,325 in the second quarter of 2023 increased 38% year-over-year, or 17% excluding contributions from the SneakPeek Early Gender DNA Test.
•The following table summarizes sequential and year-over-year quarterly testing volume changes in the company’s core product categories:
Three months ended
June 30, 2023 Three months ended
March 31, 2023 Three months ended
June 30, 2023
Year-over-Year Year-over-Year Sequential
Product volumes:
Hereditary cancer
20 % 24 % 8 %
Tumor profiling 8 % 5 % (2) %
Prenatal 71 % 77 % (2) %
Pharmacogenomics
23 % 31 % 7 %
Total 38 % 45 % 3 %
2
•Excluding contributions from the SneakPeek Early Gender DNA Test:
◦Prenatal testing volumes in the second quarter 2023 increased 12% year-over-year and 1% sequentially. In the first quarter 2023 prenatal testing volumes increased 12% year-over-year and 16% sequentially.
•The following table summarizes year-over-year quarterly revenue changes in the company’s core businesses by product category:
Three months ended Six months ended
(in millions)
June 30, 2023 June 30, 2022
% Change
June 30, 2023
June 30, 2022
% Change
Product revenues:
Hereditary cancer
$
76.7
$
79.4 (3) %
$
152.4
$
150.3 1 %
Tumor profiling
36.0 33.5 7 % 73.3 66.0 11 %
Prenatal 35.6 33.3 7 % 71.8 65.2 10 %
Pharmacogenomics
35.2 33.1 6 % 67.2 62.4 8 %
Total $ 183.5 $ 179.3 2 % $ 364.7 $ 343.9 6 %
•Year-over-year revenue growth in the second quarter of 2023 reflects an $11.7 million addition to revenue in the second quarter of 2022 from change of estimates1 compared to an immaterial change in estimated revenue in the second quarter of 2023.
•GAAP gross margins of 68.5% in the second quarter of 2023; adjusted gross margins for the second quarter of 2023 was 69.0%, an increase of 130 basis points from the first quarter of 2023, reflecting disciplined execution from the laboratory operations team.
•GAAP total operating expenses in the second quarter of 2023 were $239.4 million. Adjusted operating expenses in the quarter were $133.4 million. On a sequential basis, adjusted operating expenses in the second quarter decreased $11.1 million, reflecting seasonality and general cost management activities.
•GAAP operating loss in the second quarter of 2023 was $113.7 million, which factors in settlement costs for the securities class action lawsuit, which is subject to court approval, of $77.5 million; adjusted operating loss in the quarter was $6.8 million.
•Ended the second quarter of 2023 with $127.8 million in cash, cash equivalents and marketable investment securities, which includes $40.0 million of borrowings under the new asset-based credit facility.
1 Change of estimates may include both positive and negative adjustments primarily driven by changes in the estimated transaction price due to contractual adjustments, actual cash collections, and obtaining updated information from payors and patients that was unknown at the time revenue was recognized.
Business Performance and Highlights:
Oncology
The Myriad Genetics Oncology business provides hereditary cancer testing, including the MyRisk hereditary cancer test for patients who have cancer. It also provides tumor profiling products such as the myChoice CDx companion diagnostic test, the Prolaris prostate cancer test, Precise Tumor molecular profile test and the EndoPredict breast cancer prognostic test. The Oncology business delivered revenue of $80.7 million in the second quarter of 2023.
•Second quarter hereditary cancer testing volumes in Oncology grew 18% year-over-year. In addition, Prolaris continued to see strong demand as second quarter testing volumes grew 13% year-over-year.
•Named leading medical oncologist and University of Pittsburgh School of Medicine professor of medicine, Adam Brufsky, MD, PhD, FACP, as Scientific Advisor to the Oncology business unit. Dr. Brufsky is responsible for guiding clinical development and medical affairs to further elevate the Precise Oncology Solutions portfolio.
•In June 2023, we entered into a research collaboration with the University of Texas MD Anderson Cancer Center to use our minimal residual disease testing platform, a tumor-informed high-definition assay that detects circulating tumor DNA (ctDNA), to support research focused on metastatic renal cell carcinoma treatment selection and response.
•Added the Folate Receptor Alpha test as an enhancement to the Precise Oncology Solutions portfolio to help guide treatment decisions for women living with ovarian cancer.
Women’s Health
The Myriad Genetics Women’s Health business serves women of all ancestries by assessing their risk of cancer and offers prenatal testing solutions for those who are pregnant or planning a family. The Women’s Health business delivered revenue of $67.6 million in the second quarter of 2023.
•Second quarter hereditary cancer testing volumes in Women’s Health grew 21% year-over-year, driven by competitive account wins and increased adoption by providers of MyRisk for patients whose family history puts them at a higher risk for cancer.
•Excluding the contributions from the SneakPeek Early Gender DNA Test, prenatal testing volumes in the second quarter of 2023 grew 12% versus the second quarter of 2022.
•In collaboration with SimonMed Imaging, one of the largest independent outpatient medical imaging providers and physician radiology practices in the U.S., we launched a new Breast Cancer Risk Assessment Program in the second quarter of 2023. This program combines diagnostic imaging and genetic risk assessment utilizing MyRisk with RiskScore and patient education. The program is expected to enable affordable access to genetic testing and deliver personalized insights to better inform clinical decisions for millions of potential patients.
•During the second quarter of 2023, Myriad surpassed one million Prequel tests provided to-date.
Mental Health
The Myriad Genetics Mental Health business consists of the GeneSight test that covers 64 medications commonly prescribed for depression, anxiety, attention deficit hyperactivity disorder, and other psychiatric conditions. GeneSight helps physicians understand how genetic alterations impact patient response to antidepressants and other drugs. In the pharmacogenomics category, the GeneSight test recorded revenue of $35.2 million in the second quarter of 2023.
•In the second quarter, Myriad Genetics added approximately 4,000 clinicians who ordered GeneSight for the first time.
•Second quarter GeneSight revenue began to factor in reimbursement from a number of Medicaid programs and managed Medicaid plans now pricing and paying for GeneSight under the PLA code (O345U).
•Myriad continues to work on building GeneSight’s clinical data, including collaborating with Optum Genomics to create a multi-phase study designed to better understand GeneSight’s ability to improve clinical outcomes and reduce healthcare costs.
•Building on a 2020 meta-analysis of the clinical utility of the GeneSight test, which included four prospective, controlled trials and 1,556 unique patients, Myriad is incorporating additional published studies to further measure the utility of combinatorial pharmacogenomics testing for the treatment of Major Depressive Disorder (MDD).
Securities Class Action Settlement
Myriad Genetics reached an agreement to settle the securities class action lawsuit, In re Myriad Genetics, Inc. Securities Litigation, 2:19-cv-00707-JNP-DBP (D. Utah). The settlement, if approved by the United States District Court for the District of Utah, will resolve all claims brought by the plaintiff Los Angeles Fire and Police Pensions Fund, without Myriad Genetics making an admission or the finding of fault, liability, or wrongdoing by Myriad Genetics or any current and former Myriad Genetics employees. Pursuant to the terms of the settlement, Myriad Genetics has agreed to pay a settlement amount of $77.5 million, consisting of at least $20 million in cash to be paid in the third quarter of 2023, and, at Myriad Genetics’ sole election, the remaining $57.5 million in either shares of Myriad Genetics common stock or cash, or a combination thereof, upon the final court approval of the settlement, which is expected to occur in the first quarter of 2024. The company intends to pay the majority of the settlement amount in cash from its cash on hand, operating cash flow and asset based credit facility. Additional details can be found on the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 3, 2023.
Liquidity and Cash Flow
In the second quarter, Myriad established a new $90 million asset-based credit facility (the "ABL Facility") with JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. and Bank of America, N.A. The ABL Facility includes an option to increase the maximum principal amount by up to $25 million for a total of $115 million. The ABL Facility replaces the Company’s previous credit facility and matures on June 30, 2026.
(in millions)
Total cash and cash equivalents at end of second quarter of 2023 $ 127.8
Amount available to draw currently under the asset-based credit facility* 23.5
Expected initial cash payment in the securities class action settlement (third quarter of 2023)** (20.0)
Estimated capex and cash flow from operations in second half of 2023 (30.0)
Estimated total available cash and cash equivalents and availability under credit facility at year end 2023 $ 101.3
* The Company plans to increase the size of the ABL facility by $25 million to $115 million by the end of 2023.
** The remaining $57.5 million is to be paid upon the final court approval of the settlement, which is expected to occur in the first quarter of 2024. The company intends to pay the majority of the settlement amount in cash from its cash on hand, operating cash flow and asset based credit facility.
2023 Investor Event
Myriad Genetics will host its 2023 Investor Event at the Dr. Walter Gilbert Innovation Center in South San Francisco on September 19, 2023. The event will commence with a facility tour beginning at 12:00 p.m. EDT followed by a management presentation and Q&A from 1:00 p.m. to 3:00 p.m. EDT. For those unable to attend in person, a webcast will be available at the investor site on www.myriad.com.
Background on Walter Gilbert, Ph.D.
Walter Gilbert, Ph.D, a molecular biology pioneer and co-founder of Myriad Genetics served on the Board of Directors for 28 years and was the company’s first Chairman of the Board. An early proponent of sequencing the human genome, Dr. Gilbert joined Myriad as a founding scientist in 1992 and served in numerous leadership roles which positively impacted the strategic direction and growth of the company. Leading up to his work at Myriad Genetics, Dr. Gilbert won the Nobel Prize in Chemistry in 1980 for his contributions to the development of DNA sequencing technology. He also was a founder of Biogen, Inc. and its Chairman of the Board and Chief Executive Officer from 1981 to 1985, as well as the Carl M. Loeb University Professor at Harvard University.
Financial Guidance
Myriad Genetics reaffirms its 2023 revenue and non-GAAP financial guidance and updates its other GAAP financial guidance to account for the pending settlement of the securities class action lawsuit, as stated in the table below.*
(in millions, except per share amounts) FY 2023 FY 2023 Comments
Revenue $730 – $750 2023 annual growth between 8% – 11% over 2022
Gross margin % 68% – 70% GM expected to fluctuate in any quarter given seasonality
GAAP OPEX $722 – $742 Increase in the GAAP operating expense range to include expected costs of approximately $80 million associated with the settlement of the securities class action lawsuit
Adjusted OPEX $535 – $555
GAAP EPS $(2.75) – $(2.60) Increase in the GAAP EPS range to include expected costs of approximately $80 million associated with the settlement of the securities class action lawsuit
Adjusted EPS $(0.36) – $(0.24) Adjusted EPS is expected to improve through 2023, reaching positive adjusted profitability and adjusted operating cash flow in Q4 ’23
*Assumes currency rates as of August 3, 2023
Myriad Genetics’ fiscal year 2023 non-GAAP guidance begins with the comparable GAAP financial measure and excludes the estimated impact of stock-based compensation expense of approximately $40.0 million, non-cash amortization associated with acquisitions of approximately $43.0 million and special items such as costs related to transformation initiatives of approximately $24.0 million, legal settlement costs of approximately $80 million, and tax adjustments of approximately $8.0 million.
These projections are forward-looking statements and are subject to the risks summarized in the safe harbor statement at the end of this press release.
Conference Call and Webcast
A conference call will be held today, Thursday, August 3, 2023, at 4:30 p.m. EDT to discuss Myriad Genetics’ financial results and business developments for the second quarter 2023. The dial-in number for domestic callers is 1-800-954-0653. International callers may dial 1-212-231-2921. All callers will be asked to reference reservation number 22027563. 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 and slide presentation will be available through a live webcast at www.myriad.com.