Q2 2021 Myriad Genetics Inc Earnings Call
Ladies and gentlemen, please standby the conference will begin momentarily. We thank you for your patience and I ask that you. Please do me and on the line.
[music].
Yeah.
Yeah.
Greetings and welcome to the <unk>.
Myriad genetics and December 'twenty, and 'twenty earnings call. During the presentation, all participants will be in a listen only mode. Afterwards, we'll conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone.
So at any time during the conference you need to reach and operator, Please press star zero.
As a reminder, this conference is being recorded Tuesday February 'twenty, three 'twenty 'twenty, one and I would now like to turn the conference over to Scott Gleason VP Investor Relations. Please go ahead.
Thank you Malika and good afternoon welcome to the myriad genetics December quarter 2020 earnings call. During the call. We reviewed the financial results released today after which we'll host a question and answer session.
If you've not had a chance to review our quarterly earnings release, it can be found on our website and myriad dot com.
I am Scott Gleason, Senior Vice President of Investor Relations and corporate strategy and on the call with me today is Paul <unk>, our president and CEO and Bryan Riggsbee, our Chief Financial Officer.
This call can be heard live via webcast at myriad dotcom and.
And a recording will be archived on the investors section of our website and.
In addition, there is a slide presentation pertaining to today's earnings call on the investors section of our website and it's a win.
And we filed following the call on form 8-K.
Please note that some of the information presented today may contain projections or other forward looking statements regarding future events or the financial future financial performance of the company. These statements are based on management's current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time.
With the Securities and Exchange Commission, specifically the company's annual report on form 10-K.
Its quarterly reports on form 10-Q, and its current reports on form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward looking statements with that I would like to please turn now turn the call over to Paul.
Thanks, Scott and decided to speak with you today about our quarterly results and business highlights and the progress we've made advancing our transformation and growth plans and I.
And I want to thank our leadership team and all my myriad genetics teammates for all they're doing to fulfill our mission while also executing on our strategic transformation plan.
We continue to pursue our mission to advance the health and wellbeing of our patients are empowering them.
And our provider and payer partners with life changing genetic insight.
Seeing this commitment over the last six months has been incredibly motivating for me and I know what drives our 'twenty 700 teammates and <unk>.
The other we work to create a stronger myriad genetics and extend our reach to more patients who will benefit from our genetic insights.
This quarter, we delivered 6% sequential revenue growth and 7% sequential improvement and test volume.
<unk> pricing.
These results came at a time when the COVID-19 pandemic has created the most challenging market any of us have ever seen.
We also mitigated our cash burn substantially while strengthening our balance sheet and improving our liquidity.
And we also announced a new and network agreement.
But the majority of the affiliated commercial health plans and the anthem Blue Cross Blue Shield, the second largest commercial payer and the country for all of our product offerings.
We continue to focus and execute on our four point strategy roadmap by putting patients and customers first and building new technology enabled commercial capabilities. So we can elevate our core products to their full potential and.
Create new avenues for growth.
Over the last year, we have made great progress resetting our base of operations, while reducing complexity and cost and accelerating growth and.
And as we advance new commercial models at.
At the same time, we continue to work to improve teammate engagement diversity equity and inclusion and a culture focused on performance accountability and innovation.
We are now focused on meeting the needs of our patients and healthcare providers and three core markets, where we have the highest growth potential and capabilities.
Women's health oncology and mental health.
And I'm excited by several strategic initiatives and business catalysts to enhance our competitive position and accelerate growth and these core markets.
These include improving prenatal economics, and digital marketing and women's health.
Expanding capabilities like tumor testing and companion diagnostics and oncology and.
And intensifying engagement with frontline primary care providers and mental health.
We're also pleased to have recently announced the promotion and addition to our team of a diverse group of executives that will strengthen our organization and help drive our strategic transformation plan.
Kevin houses and promoted to Chief Technology Officer responsible for engineering data and analytics genetic laboratory software and improving the customer experience.
Based on <unk> has been promoted to president of myriad oncology overseeing key products, including myriad my risk ready Terry cancer, My choice CTX and Endo predict.
To drive process discipline and accelerate our growth initiatives, we are formed and enterprise transformation office under the leadership of mass Maggie and kind of.
Maggie brings deep experience, leading large scale transformation initiatives at Hewlett Packard and Dell.
Joining Maggie and David Hammer, who come to us from <unk> healthcare to lead our revenue cycle management initiatives.
Jackie Zhao to support our business development efforts and Chris Williamson has joined to lead information systems and security coming from data to logistics.
At Gallup now lead enterprise marketing communications, having served and global leadership roles across brands and PR marketing at Xerox and Philips and.
And carrying rider joined to lead our digital marketing strategy, having served and several similar roles and digital and E Commerce and ethylene Marina.
Finally, adjusted Hunter joins our corporate legal team after serving as a corporate senior counsel parsley energy raise responsibilities included SEC reporting and compliance acquisitions and divestitures.
It's exciting to see the enthusiasm these highly qualified individuals who share a passion for our mission and recognize myriad genetics as a leader and genetic testing and precision medicine.
And it's also gratifying to see myriad rated among the top places to work.
And now I'll turn it over to Brian who will cover our financial results and share our business updates and how we are elevating our products across our three core businesses.
Thanks, Paul I am pleased to provide more information on our quarterly results and business highlights.
This quarter, we reported total revenue of $154 6 million, which increased 6% sequentially.
Total test volume declined 5% year over year, but increased 7% sequentially with all major products growing on a volume basis from last quarter <unk>.
Importantly, our test pricing and only declined 1% sequentially, which was entirely mix driven with strong prenatal growth we.
We saw sequential improvements and right for both our gene site mental health and prenatal test and the quarter attributable to our focus on improved revenue cycle management, and reducing zero pay test.
We did see increased expense this quarter as we returned to a more normalized operating environment with employee furloughs, ending higher benefit costs and increased commercial activity. This mitigated some of the operational leverage we would normally expect to see associated with the increased revenue and importantly, our cash burn declined 66% sequentially.
<unk> to $24 million.
We remain focused on driving profitable growth and expect increased commercial leverage as we transition through fiscal year 2021.
I would now like to discuss the revenue for our products starting with hereditary cancer.
Military cancer revenue and the quarter was $78 7 million versus $117 7 million and the December quarter of last year.
Looking at the components of the change total test volumes declined 23% and average selling price declined 13%.
During the quarter revenue was impacted by $5 3 million due to changes associated with an increase and our payer reserve predominantly.
Associated with hereditary cancer.
The company also had immaterial net positive adjustments to revenues related to prior period.
<unk> this payer reserve changed hereditary cancer test average selling price was flat sequentially and test volumes increased 6% sequentially.
We continue to expect the year over year comparisons and hereditary cancer pricing headwinds to improve as we transition and next fiscal year and lap the unitedhealth and Panama related headwinds starting next quarter.
And mental health gene site revenue and the quarter was $18 million versus $22 5 million and the December quarter last year.
Looking at the components of the change test volumes declined by 19% year over year and average selling price declined by 2% year over year.
From a volume perspective, we saw total gene site test orders increased 13% sequentially.
And women's health prenatal screening revenue and the quarter was $21 1 million compared to $16 4 million and the same period last year.
Test volumes and the quarter increased 15% year over year and average selling prices increased 12% year over year.
Test volumes for prenatal also increased 7% sequentially.
We believe we could see additional ISP improvement next year, given several recent reimbursement catalysts and strong momentum with our proprietary amplify technology launch and additional commercial initiatives, we will discuss sales.
And urology Polaris prostate cancer testing revenue and the quarter was $8 4 million versus $6 8 million and the December quarter last year.
Polaris test volumes declined by 3% year over year, but increased by 16% sequentially test pricing increased 26% year over year, which was partially attributable to the new Medicare LCD, which took effect December six but also due to improved commercial coverage for the test.
I would now like to discuss our financial metrics for the quarter adjust.
Adjusted gross margins were 71% and increased 30 basis points sequentially based upon better fixed cost absorption and stable pricing.
Test mix did negatively impact our gross margin and the quarter with increased contribution from lower gross margin and prenatal revenue and we are and we are and the process of looking for ways to further improve efficiency and the current ongoing Nova seek transition for our hereditary cancer and prenatal tests, which will lower cost of goods sold when fully implemented.
Total adjusted operating expenses and the quarter were $119 6 million compared to 127 5 million and the December quarter of last year, a decline of $7 9 million on a sequential basis total adjusted expenses increased by $6 2 million, which was attributable to the elimination of temporary COVID-19.
19 cost reductions and higher benefit costs, which we typically see in the fourth quarter. We are currently.
Evaluating our research and tech programs and overall, we continue to seek ways to operate more efficiently will provide more detail on the impact of these programs going forward.
Adjusted earnings per share were a net loss of <unk> 12 per share for the quarter. We ended the quarter with $225 million outstanding on our $300 million credit facility and $172 million and cash and cash equivalents.
In February we received and approximately $89 million cash refund from the IRS.
This amount was included in prepaid taxes as of December 31, We also expect significant cash from the asset sales and the first half of fiscal year, 2021, which we will likely used and the near term to pay down the drawn balance on our credit facility.
This quarter, we amended our revolving credit facility, which provides increased financial flexibility going forward by waiving certain financial covenants through the June 32022 quarter.
Due to the continued uncertainty associated with the coronavirus pandemic, our business transformation and the timing of asset sales, we are not providing guidance for fiscal year 2021 for the March quarter.
However, we would remind investors that the first month of the current quarter was impacted by coronavirus activity and we have seen some impact recently from severe weather in many parts of the United States.
In addition, we typically experienced negative seasonality and the March quarter with the reset of patient deductibles.
From an expense standpoint, we typically see higher personnel related costs, and we will see higher costs related to our technology customer experience and tumor profiling product investments discussed previously.
Consequently, investors should account for these factors and their impact on our sequential revenue and earnings trends.
We also continue to make progress with the planned divestitures of myriad RPM myriad autoimmune and myriad dermatology.
We have received significant interest and these assets and will provide an update on our progress when appropriate.
We continue to believe the divestiture of these assets will likely be completed and all transactions closed by the end of the September quarter.
And I would like to discuss some of the recent business catalysts, including examples of how we are executing against our strategy to elevate our products to full potential.
I'll start with women's health, where we made some important enhancements to our prenatal tests this quarter.
This quarter, we published the validation study for <unk> for our proprietary amplify technology, which increases the fetal fraction within our maternal blood sample and average at four times.
This is important because it essentially eliminates the possibility of a no call result, which occurs in about one and 2000 test with our competitors, but also increases the accuracy of the test and patients such as obese women, which are trying to lower fetal fraction and.
Amplify also enhances the accuracy of our testing for micro deletions, which tests for the five com and micro deletions, including <unk> or day, George syndrome, and our published validation our accuracy for detecting the five com and micro deletions was 97, 2% sensitivity with 99, 8%.
Staticity, which was meaningfully better than our competition.
Given these conditions occur at rates similar to other commonly screen genetic conditions, such as down syndrome, cystic fibrosis and spinal muscular atrophy, we will be lobbying a card for inclusion of them and professional guidelines.
And with our foresight carrier screen, we launched and improvement this quarter, which increased detection rates for alpha Alpha thalassemia, and and inherited blood condition to greater than 99% versus prior detection rates of greater than 90%.
And certain populations such as people of Hispanic origin Alpha thalassemia can occur right 200 times greater than cystic fibrosis, and and historically accounted for the majority of false negative calls for fore sight.
This change reflects our mandate of expanding equal access to care for underserved populations within our healthcare system.
Moving on to our oncology business, we made significant progress with our companion diagnostics tests that help to predict response to PARP inhibitors as well as the Polaris prostate cancer tests, and our endo predict breast cancer prognostic testing.
With our companion diagnostic tests, we continue to see significant growth and the Japanese market with revenue up 167% year over year. Beginning January one we will begin receiving reimbursement for our my choice Pdx tests, and Japan, providing another catalyst for business and the country along with the recent approval of Brac analysis.
<unk> as a companion diagnostic and pancreatic and ovarian cancer.
We also announced our collaboration with Illumina to create a kit based version of my choice CTX and key international markets, which will further increase access to our proprietary technology on a global basis.
With <unk>, our new Medicare LCD for unfavorable intermediate and high risk patient doesn't took effect December <unk>.
We also had two important studies published this quarter showing the ability of Polaris to predict metastasis and men following radical prostatectomy and the ability of Polaris to predict which men will benefit from multi modality therapy.
Finally within that predict we received public reimbursement in Germany, which will take effect and the June quarter. This year currently about half of our European and I predict volume is and Germany, making it the most important country for coverage and.
And mental health, we continue to be impacted by the COVID-19, pandemic, but saw a 13% sequential growth and test volume part of this is attributable attributable to a primary care launch where we saw over 2000, new ordering physicians for gene site this quarter.
We recently had two important clinical utility publications on the <unk> site.
First study, which was published and Psychiatry research compared gene site. The single gene testing utilizing the <unk> guidelines, while both methods predicted patient drug blood levels, only gene site predicted variations and patient outcomes and a statistically significant prediction of remission response.
And symptom improvement.
And second study was a meta analysis of <unk> hundred 56 patients based upon four prospective controlled clinical trials and published and Pharmacodynamic.
And the meta analysis demonstrated statistically significant improvements and remission response, and and symptom improvement and patients treated with gene site guided care.
<unk> is actively in discussions with commercial payers and based upon these paid at positive dataset.
With that I would now like to turn the call back over to Paul for closing remarks.
Thanks, Brian.
And the early stages of our transformation journey, we have made progress on many elements of our strategic roadmap and expect to.
To continue to make steady progress improving our financial performance through disciplined execution over the course of the year.
This year, we will also expect to set the foundation for long term growth by building stronger tech enabled commercial capabilities improving Rev cycle management.
Strengthening our branding and marketing efforts and executing on a number of initiatives to make it easier for customers to do business with us.
And May we will mark the <unk> anniversary of the founding of myriad genetics with a renewed commitment to our mission that will lead us into the future and broaden access to the power of genetic testing and precision medicine to more patients, including those in underserved communities together with our provider and payer partners.
We look forward to sharing more information with you on the execution of our strategic transformation and growth initiatives at our Investor day on May 4th.
And we thank you today for your participation and then I'll turn it back over to Scott for questions.
Thanks, Paul and as a reminder, during today's call we use certain non-GAAP financial measures a reconciliation of the GAAP financial results to non-GAAP financial results and a reconciliation of GAAP to non-GAAP non.
Non-GAAP financial guidance can be found on the Investor Relations section of our website now we're ready to begin the Q&A session to ensure broad participation on today's Q&A session. We are asking participants to please ask only one question and one follow up operator, we're now ready for the Q&A portion of the call.
Thank you.
Ladies and gentlemen on the phone lines. If you would like to register for a question. Please press. The one followed by the four on your telephone and you will.
Here are three ton pump technology request. If your question has been answered and I would like to withdraw your registration you May press one to me once again, if you have a question you can press one four.
On the company.
Yes.
Our first question is from Doug Schenkel with Cowen. Please go ahead. Your line is now open.
Hey, good afternoon, everybody and thank you for taking my question on call and I'll just ask the two.
All of them.
On upfront and then just listen to your your responses. So the first is.
On reproductive testing, it's encouraging to see some improvement there as well as on some other categories, but.
Given given since the acquisition and this is at points that a little bit of a slog. It is really income.
And cards and to see some improvement I'm just wondering as we sit here today.
How much of this and you think is market improvement versus improved operations and improved focus and execution and if it's more of the latter than the market. How we should be thinking about that as we update our models for calendar 2021, and then my second topic I want to talk about kind of building off.
That is.
Right right now the street is modeling seems like mid teens growth for 2021 at the top line.
Yes that would be the most robust we've seen in years, but it's obviously impacted by a combination of improved execution improved focus and.
Unfortunately, very favorable comps because of things that we're largely out of your control.
Wondering if you could say your youre comfortable with that or maybe coming at a different way you had the last couple of quarters, if we average them.
Revenues bracket at about $150 million, that's calendar Q3 calendar Q4.
Would you say that youre comfortable with at least and expectation for an annualized number using that basis and maybe.
Maybe a little bit better than that thank you.
Yes, Doug. Thank you, it's Paul let me tackle the operational question first which I think might be more satisfying and my answer to the second question.
Look.
And are pleased with the steady progress we're making.
But in fact, the good news and my view is that we're finding more opportunities to improve execution and operations, particularly in women's health and so we're clearly benefiting from the overall market improvement along with our competitors.
And.
But I would say, particularly in women's health and particularly.
And on the hereditary cancer side of women's health.
Nicole has become the interim president there we've made some changes we've just found.
Some some challenging operational and lack of focus and discipline there.
And I am encouraged how the team is coming together and that we have an opportunity to build on what you saw the last couple of quarters. This year.
We're not giving guidance and I would like to be more helpful. In terms of the model and maybe you and Scott can talk offline a little bit.
But it's just early for us to get out there and.
And and be more responsive to the specific numbers, but I will tell you that we are seeing improvement and we're finding more opportunities as we built the budget this year and.
And are looking at really all aspects of the organization to execute better you've also seen Brian's team improve.
Our revenue cycle those were some of the issues that we had and prenatal before so we're executing better there in addition to.
To take a more conservative approach to revenue recognition and those things so.
I think as we promised we wanted to deliver steady growth that everyone can count on and build sort of the operational capabilities for long term sustainable growth and profitability and we're still we're six months and to kind of rebuilding that so I hope that's responsive.
Yes, no I appreciate it and I know you've all blame you for trying but I totally get the answer. Thanks. So much I appreciate the answers and I'll get back on the queue.
Thanks.
Thank you and our next question is from the line of Tycho Peterson with J P. Morgan. Please go ahead. Your line is open.
Hey, thanks.
I'll start with hereditary just even backing out the $5 $3 million charge change and payer reserves and net recruitment I think pricing was still down about 8% year over year. I know you said it just stabilize next quarter with the lapping of Panama and I'm curious is that still the view and how material is the new anthem.
And that should potentially help with force hereditary personal wellness and going forward.
Yes. Thanks, Tycho This is Brian Yes, I think the.
And if you look back at last year, the impact of the United contract. We gave it order of magnitude for how big that was as well as for Pam how much those impacts are so so I think getting past the march quarter will be important to lap those comparables and terms of anthem I think the biggest thing that.
And we see there is theres not a significant.
Yes pricing benefit I mean in terms of.
And in network versus out of network I think there the thing I would point more to is just the fact that it will make it easier for customers and physicians and patients to do business with us. So so thats, probably the most important aspect of getting back and network with anthem.
And I would just add that debt.
It is about patient access and along with our internal projects like Galileo.
We just see the opportunity to grow volume there by improving the patient experience.
Converting more people coming into our funnel and on to our website the anthem contract just further.
Energizes those efforts.
Broaden our reach and with what we think is stabilizing pricing there but.
No doubt we continue to have some pricing pressure there.
Okay, and then the follow up just thinking a little bit about the strategies to reignite growth I know, that's more kind of phase III and 2022, but other particular things you've got your eye on now.
And along those lines and I'm wondering if you could kind of size and micro deletion opportunity for prequel to I assume that's all kind of incremental to the plan.
Yeah, I'll take the first part and let Scott talk to the second part.
No doubt that as we have low.
<unk> launched a transformation office and the initiatives within it there are near term opportunities that we're going after as quickly as possible and we certainly hope by the back half of the year Youll see more of those and our run rate going into 'twenty two so.
We don't want to suggest that we're not trying to accelerate growth, particularly in the back half of this year.
The first half of this year, we're going to be implementing a lot of changes there.
A lot of moving parts, we have the divestitures those kinds of things. Nonetheless, I think you've seen over the last couple of quarters just.
More focus on day to day, blocking and tackling and and execution. So.
We do think across all the products.
And we're just increasing the accountability of the efficiency of the sales force arming them with more digital tools.
Some of those investments are happening in the quarters and more will happen this quarter.
And yes, we're.
We're feeling excited about it Tycho so.
We do think that we can build a lot of momentum going into next year.
And mainly on on just better execution within the three core areas and having the non core assets out of our product mix I think is going to help quite a bit.
Yes, yes, Tycho on and your micro deletion question.
We offer very accurate and micro deletion test currently and consistent with the guidelines that are out there we don't make it mandatory we have physicians opt in for the test and so.
We only have a portion of our total tests, where we run the micro deletion panel consistent with the physicians desires on that.
And obviously, if guideline change we could reconsider that but.
That's kind of currently where we stand.
Okay. Thank you.
Okay.
Thank you.
Thank you. Our next question is from Sanjay <unk> with <unk>. Please go ahead. Your line is now open.
Hi, Thanks for taking my questions just a couple of quick ones hopefully so on Polaris. Obviously, you guys are making a lot of progress there price youre looking at the commercial channel for that slightly different from what youre targeting for your entire oncology business and just kind of curious how should we think about the synergy.
In terms of commercial channel for that business with the rest of your oncology portfolio and obviously there is off the competition there.
How should we think about myriad.
Competitive positioning.
Yes, I think I think and the near term, we're just trying to take advantage of the core.
Panel and the opportunities that we have.
With the recent LCD and and but.
Clearly, we're trying to pursue the cross selling opportunities.
What I found and what we found and prenatal quite frankly is if.
And if.
And the folks are to focus on too many different products. So we're not executing well so the sales team need to be supported trained aligned with their incentive comp on the things that create the most value for us and so for example, and prenatal we have them and focusing on our my risk test quite as much as we should and we have been underperforming there.
And even though and oncology we're over performing there so.
But I think Polaris, we've got so many strong tailwind we want that team to continue to focus on that and.
And to deliver on the unit economics, better and I would say that's one thing that we've brought more disciplined across all of the products and making sure everyone understands.
As far down as the pretax with the product economics are so everyone is focusing on those things that can create the most value.
Sanjay one thing also just to think about with the.
Urology sales forces.
Last is growing and area of hereditary cancer is actually and men with prostate cancer and <unk>.
So having access to that channel is helpful. In terms of the synergies that Paul talked about.
Got you that makes sense and then.
And just on mitral and CBS could you remind me again is that and next Gen sequencing based tests that you guys offered before your partnership with Illumina and then will the kit based test developed and will that be next Gen sequencing day, and just kind of curious given that offer both day illumina kept base as well as the.
And the LDP that you currently cobalt and.
Your laboratory thank you.
Yes, so on G. So in the United States and we will offer the LDP based version of my choice.
Outside the us and select countries will offer the kit based version and certain countries like Japan, where we have a lot of growth occurring and will continue to offer the ODT version as well.
Great. Thank you so much.
Thank you.
Thank you.
And our next question is from Puneet <unk> with <unk>.
Leerink. Please go ahead your line is open.
Alright, great. Thanks, So first of all on.
Hello, a question for Paul and then maybe for Bryan and Scott.
On.
On the details of the business. So first one maybe Paul.
And obviously made a number of.
Key initiatives here progress is being made a number of fronts a number of folks who were hired into the into the positions some of that and promoted and.
It's clearly the transformation is taking place but at this point in time and what would you say, there's still somewhat of a low hanging fruit and your view and what what are.
The ones that are a little bit challenging and going to take a little bit of a long term initiative.
Yes, it's a great question and thanks for recognizing the progress and made where we're six months into this journey and I am thrilled by the caliber of people that both that I've gotten to know here at the company. There's just a lot of talent here and equally excited about the talent we have been.
To recruit and areas like revenue cycle.
And and Maggie to help run on our transformation office.
And and improve create some business development capabilities.
And all of the areas identified so.
And what I would say is the low hanging fruit continues to be on the Rev cycle side and on a more focused execution on the sales side and.
And we've got great people.
But one other things we've tried to do is when you look at the numbers our top performing sales people are our top performing sales people that the top 25% on.
Really outpacing everyone else and so we've taken some steps to make sure that they are receiving the support and.
And in consideration and that those that that productivity deserves.
So again, it's a lot of blocking and tackling right now.
On the.
And refresh branding and marketing strategy.
The call right. After this call to talk about that and how we advance that this quarter I think youll have an opportunity on may 4th at our Investor Day, where we can really showcase and <unk>.
Lot deeper level, our different strategic initiatives and more importantly, what they can mean and over what period of time I know thats what.
Everybody's kind of hungry for but as promised when I got here and it was going to take us.
A while and I think nine months is a pretty good timeframe to roll those things out.
And but I would say we have.
We have low hanging fruit and so some of the things we talked about better execution and women's health, we're seeing traction and gene site, we've got better clinical evidence there and we're taking advantage of that to get better coverage, we've got opportunity and Rev cycle to reduce no pay we've seen some progress there.
And most importantly, I'm just really proud of the team about how everybody has kind of come together and embraced changed.
And lastly, you'll see over the next several quarters how.
<unk> on high priority projects, reducing complexity and reducing associated costs will start benefiting the P&L as well and I think youll start to see that more and Q3 and Q4.
Got it that's very helpful and.
And on <unk> side.
You pointed out the sequential growth here and the orders.
And encouraging just wanted to get a sense of.
Is that where they have some commercial force sales force changes there I'm just trying to parse out.
How much of this is just recovery from Covid and how much of it is your own efforts and maybe some transformation being driven and that organization.
Yes.
So a little good and a little luck I mean, I think mark and the team are more focused and executing well and again.
We engaged 2000, new primary care physicians that have ordered <unk> site for the first time, so thats less of recovery from Covid Covid and then the work of the sales team and the sales force.
Nonetheless across the board.
Our two.
Two and a $3 60 of.
What are the people process and programs that work the best.
And making sure that across the board we're executing on those so again that commercial strategy will take more time to refine and along with the marketing branding enhancements that I think we can make and and rolling out some of the digital tools and again the team is embracing change embracing this notion of focus and.
And reducing complexity and and.
And as a byproduct reducing costs and.
And again, I think youll see more of that and the back half of this year.
Great. Okay. Thanks very helpful.
Sure. Thank you.
Thank you. Our next question is from Derik de Bruin with Bank of America. Please go ahead. Your line is open.
Yeah.
Yes.
Hi, Good afternoon, Hey, a couple of my day.
Questions. So on <unk> side can you talk a little bit about the <unk>.
Asps and.
And just is that a covered with the anthem Blue Cross Blue Shield is there any pre authorizations required.
Who can prescribe it just a little bit color on that one and then I have one follow up.
Yes, Eric So we said that were in network for all products.
And that doesn't necessarily mean that you have positive medical policy around the different tests right and so I think thats, an important distinction between and network and positive medical policy.
For the for the tests.
I think when you think about the ISP side and the positive changes that we've seen is there's been a lot of focus on reducing no pay as and when we look at the Medicare LCD better execution on that and getting more of those tests paid for and there's been changes that progress there and that's really what led to kind of the sequential improvement and pricing and thats, what we talked about last quarter that.
And the importance of the LCD was and.
And what we had not done and particularly good job over the last several years with executing right and making sure that the processes are in place too.
Support our sales team to grow but also get paid for it and I think thats, what you started to see and the quarter with stable pricing, even as some were suggesting that we'd have big drops and Asps and gene site. So that was all about good execution by Mark and the team in terms of that transition and particularly lowering.
And no pays on Medicare and now turning our attention and reducing no pay on Medicaid, which is a big opportunity for gene site.
Got it. Thank you that's helpful and can you just give us any.
A little bit of color on the potential impact to the income statement as you think about.
Removal of.
On my past melanoma, and Xetra out of the model and just sort of if you compare 2019.
Levels and what those business contributed and to.
The earnings and you think about.
And you think about going forward, just some weighted to sort of get a sense of.
What the impact of these divestitures could be I mean, obviously realize you can get some cash for the transactions.
Yes, I think what we've said Derek Thanks for the question as my path first of all it's very I would say insignificant relative to the income statement.
And certainly from a revenue perspective.
It's pretty we're pretty transparent and that shows up and the pharma line. So in terms of what the magnitude of that revenue number is.
And I think I think from a.
Bottom line perspective, I think what we've said historically, it's just that when you look at it on and a fully allocated basis.
These are roughly sort of breakeven type proposition.
And I'm, sorry, and I will just add.
And that's and that is again I just want to underscore.
And the ability to pro forma the company out we're excited to do as much as you're excited to get.
In terms of those numbers, but I would just underscore.
The divestitures will be accretive to our P&L.
Once we are able to execute on all of the direct and indirect costs.
Associated with those businesses.
And secondly that is before the redeployment of that capital whether its paying down the revolver or more importantly, focusing on new growth initiatives and new investments and M&A. So.
We're entering into those processes, they're moving quickly.
I know some folks have asked about why we haven't close some of these yet.
These processes are moving as fast as anything I've seen there is great interest.
And and.
Yes, we're going to be selling them at multiples that exceed what we trade at and so they are accretive on a number of different levels and we're very excited to put that cash back to work as we think about growth opportunities and 22% and 23. So we are.
Hard stuff with respect to the teammates and we're trying to find good homes for these assets and they're good products that didn't fit within our.
Our strategic framework.
But the industrial logic for us is incredibly sound and <unk>.
We feel even better about it today than we did when we announced the deals.
Thank you.
Thank you. Our next question is from Jack Meehan with and Nephron Research. Please go ahead. Your line is open.
Thank you good afternoon.
Wanted to dig in a little bit more on hereditary cancer testing based.
And based on the commentary I'm getting volume is down around 15% year over year is that right.
And maybe just talk about.
When I look at some and the National Labs, and they reported I think core volumes were kind of down high singles and the fourth quarter.
Can you just talk about the shape of the recovery Youre seeing and hereditary cancer testing why it might be lagging and do you think theres been any changes and the competitive environment midst COVID-19.
Yes, Thanks Jack.
I'll start and maybe Scott can provide some additional commentary.
I think it's really hard when you look at the National Labs, just because of their broadcast portfolio, it's hard to look at that and compare it with.
Hereditary cancer I think what we've seen is within our business as sort of a tale of two cities with the oncology market having recovered.
Really nicely and women's health market, when you think about the preventive care.
Discretion and somewhat discretionary obgyn and visit.
And being more severely impacted so we've seen a negative on the cider and the and the preventive care channel Women's Health Channel and then and then oncology has returned fairly well, but I think it's difficult to look at that and comparison with the national Labs, we feel really good about where we're at and the recovery and.
And again, when we look at our Q and our September quarter versus December quarter, We're happy with the growth that we saw sequentially.
And we have a number of different levers Jack.
And again I'm not sure those are fair comparisons but.
We're pretty pleased about where we are and where we're going and the opportunities that I've said to fix some of the operational issues and women's health and.
And the <unk>.
Outside from here that we have there and the leverage and our P&L as we grow that again so.
And hopefully Thats response.
Great and Paul as a follow up as you underwent the portfolio review over the last six months can you talk about how you decided where you would draw the line around assets that you'd like to keep vs divest and and.
In terms of the proceeds do you think for Vectren and for RPM youll be able to recoup what myriad initially invested you think based on the interest and Thats a good floor to think about.
I don't think thats really relevant and quite frankly and in terms of of how we're looking at this and and as I said earlier underscore the accretive nature of both the deals and the opportunities for use of proceeds and so.
I think we're moving pretty quickly and we've executed pretty quickly on a number of things over the last six months and I think over the next six months, you'll see the rest of the implementation.
And we will be able to highlight those at our Investor day and again, it's been a thorough portfolio review.
In terms of where we sit today and where we think we compete it's an ongoing review is and will be a.
On a yearly review quite frankly, because I think all companies and you know this from my prior history. We should also always be ruthlessly objective about our market position, where we compete how we deploy capital.
And and be thoughtful about that so.
And the strategic reviews are as much about figuring out where we are underperforming and executing as where they were about divestitures and <unk>.
So still a lot of learnings, even and the last 48 hours that I've been meeting with team and a couple of different things opportunities that we're finding.
And.
And different and different business units and stuff so.
It's still early innings, but.
And quite frankly I am pleased we're further ahead than I would've thought at this point in terms of the discovery and the ability to execute on new things.
Thank you.
Sure.
Thank you and there are no further questions on the phone lines.
I'll turn it back over to you, Mr Gleason and with plenty of flow.
Mark. Thank you. This concludes our earnings call a replay will be available via webcast on our website for one week. Thanks again for joining US this afternoon and thanks everybody.
Yes.
Thank you, ladies and gentlemen that does conclude today's call. We thank you for your participation and ask that you. Please disconnect your lines.
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