On February 7, 2017 Myriad Genetics, Inc. (NASDAQ:MYGN), a global leader in molecular diagnostics and personalized medicine, reported financial results for its fiscal second-quarter 2017, provided an update on recent business highlights, updated its fiscal year 2017 financial guidance and issued fiscal third-quarter 2017 financial guidance (Press release, Myriad Genetics, FEB 7, 2017, View Source [SID1234517654]).

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"Revenues this quarter reached their highest level in the last three years, driven by a return to sequential growth in hereditary cancer revenue and strong results from GeneSight," said Mark C. Capone, president and CEO, Myriad Genetics. "Importantly, our diversification strategy is working with new products now contributing more than two thirds of testing volume. We also made steady progress on increasing reimbursement that will ultimately unlock significant operating leverage and long-term shareholder value."

Financial Highlights

The following table summarizes the financial results and product revenue for our fiscal second-quarter 2017:

Revenue
Fiscal Second-Quarter
($ in millions) 2017 2016 %
Change
Molecular diagnostic testing revenue

Hereditary cancer testing revenue $ 143.9 $ 165.6 (13%)

GeneSight testing revenue 21.7 NA NM

Vectra DA testing revenue 10.7 11.3 (5%)

Prolaris testing revenue 3.1 1.9 63%

EndoPredict testing revenue 1.6 0.9 78%

Other testing revenue 2.9 2.9 0%

Total molecular diagnostic testing revenue 183.9 182.6 1%

Pharmaceutical and clinical service revenue 12.6 10.7 18%

Total Revenue $ 196.5 $ 193.3 2%

Income Statement
Fiscal Second-Quarter
($ in millions) 2017 2016 %
Change
Total Revenue $ 196.5 $ 193.3 2%

Gross Profit 152.1 152.7 (0%)
Gross Margin 77.4% 79.0%

Operating Expenses 138.9 107.5 29%

Operating Income 13.2 45.2 (71%)
Operating Margin 6.7% 23.4%

Adjusted Operating Income 23.6 48.4 (51%)
Adjusted Operating Margin 12.0% 25.0%

Net Income 5.9 37.1 (84%)

Diluted EPS 0.09 0.50 (82%)

Adjusted EPS $ 0.26 $ 0.45 (42%)

Business Highlights

myRisk Hereditary Cancer
– Delivered sequential hereditary cancer growth of three percent in the fiscal second-quarter with hereditary cancer revenue of $144 million.
– Oncology volumes grew on a sequential basis fueled by preferred provider agreements, the customizable myRisk panel launch and improved sales force productivity.
– Signed a contract with Highmark Blue Shield to remain an in-network provider for hereditary cancer testing; ended the quarter with 65 percent of revenue under long-term contracts and greater than 95 percent of insurance plans in network.

GeneSight
– Volume grew 61 percent year-over-year to approximately 57,000 tests performed in the fiscal second-quarter.
– Anticipate completing enrollment this month and ahead of schedule in a 1,200 patient clinical utility study evaluating GeneSight in patients with treatment resistant depression.
– Presented a health economic analysis at the Neuroscience Education Institute Conference comparing the total costs for patients with anxiety whose medications were congruent versus incongruent with their GeneSight test report. The results showed that medication cost savings were $6,747 higher per member per year for patients that followed the GeneSight test recommendations.
– Completed a payer demonstration project using the Optum healthcare informatics platform from United Health that demonstrated substantial cost savings associated with the use of GeneSight. Initiated similar demonstration projects with Humana and Anthem Blue Cross Blue Shield.

Vectra DA
– Volumes declined three percent in the second-quarter year-over-year with approximately 37,000 tests performed.
– Demonstrated that the AMPLE study when analyzed in a conventional way corroborates prior studies showing Vectra DA can predict radiographic progression with high statistical significance. This analysis along with data from 25 published clinical studies will be presented to refute a draft local non-coverage determination (LCD) issued by Medicare.
– Published an important clinical utility study for Vectra DA in Arthritis and Rheumatology. The study evaluated the ability of Vectra DA to predict response to biologic or non-biologic therapy in methotrexate incomplete responders. In the study, patients with a low Vectra DA score were statistically significantly more likely to respond to triple therapy relative to a biologic, and patients with high Vectra DA scores were statistically significantly more likely to respond to a biologic than triple therapy.
– Vectra DA was included in the United Rheumatology professional guidelines that represent approximately 10 percent of rheumatologists in the United States.
– Initiated our first payer demonstration project with an independent practice association in Southern California. This project will evaluate the impact of Vectra DA on patient outcomes and healthcare costs in a real world setting and will be used to support potential coverage of the test.

Prolaris
– Volumes grew 33 percent year-over-year with approximately 4,700 tests ordered.
– Received a draft LCD from Palmetto GBA for favorable intermediate patients that would represent a market expansion of approximately 30,000 patients per year in the United States. Prolaris is the only test to receive proposed Medicare coverage in this patient population.

EndoPredict
– Revenues grew 78 percent year-over-year to $1.6 million in the fiscal second-quarter.
– Received a favorable technical assessment for EndoPredict from the Blue Cross Blue Shield association tech assessment organization Evidence Street. In total, we have received positive coverage decisions from payers that represent 70 million lives.
– The Integrated Oncology Network (ION) recently made EndoPredict its preferred test for their physicians. ION is the largest physician service organization in oncology representing 50 percent of community oncologists in the United States.
– Confirmed that EndoPredict will be launched in the United States in fiscal year 2017.

myPath Melanoma
– The third clinical validation study and second clinical utility study were accepted for publication. Myriad intends to submit its reimbursement dossier to Medicare and private payers by the end of fiscal year 2017.

Companion Diagnostics
– Completed the submission of the myChoice HRD pre-market approval (PMA) application to the FDA for review in conjunction with niraparib.
– Data from the AstraZeneca SOLO2 study, which compared maintenance therapy with olaparib versus placebo in patients with platinum-sensitive relapsed ovarian cancer met its primary endpoint. These results further validate that BRCA status as determined by BRACAnalysis CDx test can identify patients who are likely to benefit from therapy with olaparib.

International
– International revenue grew to five percent of total product revenue.
– Signed an agreement with AstraZeneca in Japan to submit BRACAnalysis CDx for approval by Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) in parallel with the PMDA review of AstraZeneca’s novel PARP inhibitor, olaparib.
– Signed an agreement with AstraZeneca to perform Tumor BRACAnalysis testing in six Latin American countries.

Share Repurchase
– During the quarter, the Company repurchased approximately 600,000 shares, or $10 million, of common stock under our share repurchase program and ended the quarter with approximately $161 million remaining on our current share repurchase authorization.

Fiscal Year 2017 and Fiscal Third-Quarter 2017 Financial Guidance
Below is a table summarizing Myriad’s updated fiscal year 2017 and fiscal third-quarter 2017 financial guidance:

Revenue GAAP Diluted
Earnings Per
Share Adjusted
Earnings Per
Share
Fiscal Year 2017 $745-$755
million $0.31-$0.36 $1.00-$1.05

Fiscal Third-Quarter 2017 $188-$190
million $0.08-$0.10 $0.23-$0.25

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. The Company will provide further details on its business outlook during its conference call today to discuss the fiscal second-quarter financial results and fiscal year 2017 and fiscal third-quarter 2017 financial guidance.