Q1 2022 Myriad Genetics Inc Earnings Call
And all please continue to stand by your myriad genetics call will begin in approximately two minutes time, we thank you very much for your patience. Please remain connected your call will begin in approximately two minutes. Thank you.
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Greetings and welcome to the myriad genetics first quarter 2022 financial earnings call. During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press. The one followed by the poor near telephone should you require operator assistance at any time. Please press star Zero as a reminder, this call is being recorded today Thursday May 15, 2022, I'd now like to turn the call over to Nathan Smith Senior Vice.
<unk> of Investor Relations. Please go ahead.
Alright. Thank you David Good afternoon, and welcome to the myriad genetics first quarter 2022 earnings call. During the call. We will review the financial results. We released today and afterwards, we will host a question and answer session.
Our quarterly earnings release was issued this morning on form 8-K and can be found on our website at investor Dot Marriott Dot com.
I'm Nathan Smith, Senior Vice President of Investor Relations and Treasury on the call with me today are Paul D. As our President and Chief Executive Officer, Bryan Riggsbee, Our Chief Financial Officer, Nicole Lambert, our Chief operating officer.
This call can be heard live via webcast at Investor Dot married Dot Com and a recording will be archived in the Investor section of our website. In addition, following the call. The slide presentation will be available on the Investor section of our website.
Please note that some of the information presented today may contain projections or other forward looking statements regarding future events or the 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.
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.
<unk> or forward looking statements with that I will now turn the time over to Paul.
Thanks, Nathan and good afternoon, everyone and thank you for joining us.
On today's call, we will discuss our Q1 results along with highlights from the quarter.
On our strategic transformation and growth plan.
As always I want to thank all of our teammates for their hard work and dedication in this quarter.
Also want to thank our health care provider partners and their patients for their continued trust in us.
2022 will be an exciting year for myriad genetics as we continue to execute and advance our mission to improving the health and wellbeing of all.
Last year.
We began laying the foundation for long term sustainable growth profitability and innovation with the ongoing implementation of our transformation and growth plan.
No.
Plan is taking form and coupled with our long standing scientific expertise in emerging technology commercial capabilities we.
We expect to accelerate growth into 2022 and beyond.
We have an opportunity to reach more patients create a more seamless user experience.
Combined data from millions of diagnostic results with other clinical datasets to help patients health systems and payers better managed care.
Okay.
Despite challenges presented by COVID-19, and its variance in the first six weeks of the year, our quarterly operating and financial results were strong during the first quarter of 2022.
In the quarter revenues of $164 9 million increased 11% year over year in diagnostic test volumes of 241000 increased 10% year over year.
[noise] demonstrating strong continued growth in our core businesses.
Average revenue per test in the quarter increased 1% compared to last year and last quarter.
Presenting stable ASP growth for seven consecutive quarters.
This stable growth and a S. P is a reflection of the investments made in the execution of our revenue cycle management plan.
The success of our revenue cycle management plan has been in part due to our commitment to maintaining compliance and in line to our payer partners medical and reimbursement policies.
We employ over 300 individuals across our payer markets billing and authorization teams, allowing us to perform the majority of our billing and prior authorization responsibilities internally versus using external vendors.
Total operating expenses in the quarter were $142 5 million decreasing 27 million year over year.
And adjusted operating expenses decreased $7 million from last year to $120 million.
Our GAAP operating loss in the quarter was $25 6 million.
Proving $21 1 million compared to last year.
With an adjusted operating loss of $2 8 million.
GAAP loss per share of 26 cents improved 26 cents compared to last year and adjusted loss per share of three sons improved <unk> year over year.
We ended the first quarter with approximately $339 million in cash cash equivalents and investments and no long term debt.
While the first half of the quarter limited, our access to providers and patients, particularly in our hereditary cancer business.
As women visit their doctors less delayed routine screenings.
Our path to profitability otherwise remains clear.
Our confidence in both our 2022 and long term financial guidance is unchanged.
Flex those the challenges we face as well as the benefits of our transformation plan.
Myriad is increasingly viewed as a trusted differentiated provider.
Specialized expertise underpinned by three strategic priorities.
First we're working to develop best in class products services and accessibility to reach more patients of all backgrounds.
Second we are building, new enterprise capabilities to accelerate growth and leverage our size and scale to capture new market opportunities, including M&A.
Third we are focused on disciplined execution.
Work to deliver on a key set of initiatives to fulfill our mission will drive long term growth profitability and free cash flow generation.
We continue to make progress on these priorities and are excited about the opportunities they create in 'twenty two and beyond.
As announced in March we have successfully launched precise tumor.
At her tumor profiling tests, we have seen a strong market response with many oncologists ordering multiple tests from our new precise oncology solutions platform.
Powered by Illumina T S O 500 technology and process by inner mountain precision genomics.
Nice tumor as part of myriad precise oncology solutions, a suite of offerings, including our my risk Germline hereditary cancer tests.
Our my choice C Dx companion diagnostic tests.
And precise oncology solutions help health care providers determined the best treatment options for patients by providing a single comprehensive report from our specialized lab.
This eliminates the need for providers to order a troop of profiling test relatively cancer test and a companion diagnostic test separately.
As opposed to getting a single patient.
Different providers.
Earlier this week, we announced the expansion of our partnership with inner mountain precision genomics with plans to add a new liquid biopsy therapy selection tests to a precise oncology solutions platform in 2023.
Compared to standard tissue biopsies, many oncologists prefer liquid biopsy testing to analyze traces of tumor DNA in the blood because it can provide them often quicker less invasive.
Alternative for cancer treatment selection.
For many patients liquid biopsy is necessary when tissue sampling isn't feasible.
It can also be used to support the care of all patients with advanced cancer.
The addition of liquid biopsy therapy selection tests rounds out our growing oncology portfolio, providing data driven insights needed to guide more targeted treatment decisions.
Your generic liquid biopsy tests will use illumina circulating tumor T. S. O 500 chest technology that'd be processed by inner mountain precision genomics.
With this expansion oncologists will continue to have the single ordering experience and easy to interpret results, where the added option of a liquid biopsy therapy selection tests.
We anticipate initial utilization of our new liquid biopsy offering will be in areas, such as hereditary and tumor testing for breast ovarian prostate and pancreatic cancers, where we already have proven capabilities, a strong product portfolio and consumer platform.
For many months now we've spoken about our plans to enter the market for <unk> testing.
After exploring a range of options, including M&A, we are excited to share with you.
All that we are currently developing a mirrored EMR D test internally.
Married current workflow, coupled with our current technologies and commercial capabilities gives us the best opportunity to have a market leading EMR D test that serves the current and emerging needs of health care providers.
From a high level perspective, there are four steps in the operating and EMR D test that is tailored to an individual patient.
The first two steps occur prior to surgical removal of the patients tumor and identifying DNA variance specifically found in the patient's tumor.
Importantly, B R. F D. A approved my choice C. Dx companion diagnostic tests, we already possess.
Possessed you cause it capability to perform these steps with clinical precision.
And then at production scale.
The final two steps occur after surgery and can be repeated many times to monitor reoccurring of the original tumor.
They involve sequencing cell free DNA, when the patient's plasma to search for the reappearance of variance from the original tumor.
For these final two steps, we could leverage tools developed in our prenatal products specifically the amplified technology from our prequel prenatal test.
The proprietary cell free DNA capture technology powering firsthand.
Our comprehensive prenatal screening test that we hope to launch early next year.
Having these in house tools and capabilities to create our own M. D test paired with our robust commercial engine gives us confidence in our ability to create and muggy offering with market leading performance at a fraction of the cost that many of our other competitors who have paid to acquire this capability.
We expect to launch an EMR D product for pharma partners in 2023, while we simultaneously gather clinical validation data needed for our commercial products to follow.
With that I'd like to turn things over to Nicole Lambert, our chief operating officer.
Our Q1 operating results and new innovations in more detail.
Nicole.
Thank you Paul It's my pleasure to review, our core business unit performances, starting with our mental health business unit.
And that's the one that continues to have a lasting effect on patients and their families in the U S. As those suffering failed to receive proper medical treatment for a variety of reasons.
<unk> are a common when determining the most effective medications to treat depression anxiety ADHD and other mental illnesses.
Our research shows that more than half of those diagnosed with depression have tried four or more medications and their lifestyle and their lifetimes and effort to find the right one.
Negative stigma surrounding mental illness also contribute to this problem or a nationwide survey that gene cell gene site mental health monitor recently revealed that more than half of surveyed women diagnosed with depression or anxiety delayed or never sought treatment because they did not want anyone to know that they were struggling.
Our genes <unk> psychotropic test addresses this mental health crisis by helping physicians better understand how antidepressants and other drugs will affect their patients with a simple cheek swab that can be taken in the privacy of the patient's own home.
Driven by gene site, our mental health business unit reported $29 3 million in revenue for the first quarter of 2022, an increase of 60%, 66% year over year with roughly 84000 tests processed in the quarter the mental health business overcame industry wide challenges presented in the first six weeks of 2022.
A report one of its highest gene site volume levels ever.
We are encouraged by this performance as we believe it demonstrates the effectiveness of our new commercial capabilities digital marketing strategies and customer centric sales initiatives that we implemented over the past year.
We recently launched gene site Psychotropic 4.1, featuring key updates to the gene site task based on feedback from ordering clinicians. The update includes improved clinical consideration drug categorization additional medications and revised phenotype language for certain genes.
Shifting to our women's health business last year, we launched our my risk hereditary cancer test with risk score for all ancestry is the first and only person like five year and lifetime breast cancer risk assessment for all women, including those with non European ancestry. This new capability validated by scientific research.
With over 270000 women reflect our commitment to health equity and was recently cited by fast company when it named myriad genetics among the world's most innovative companies in 2022.
Since launching my risk with risk score for all ancestry, we've helped tens of thousands of women from non European backgrounds get the genetic insights that they need from hereditary cancer testing.
With risk, where clinicians can gain critical insights to help treat women with increased risk for breast cancer, who like they do not have an identifiable mutation in one of the breast cancer genes.
We're also excited about our recent partnership with genome medical to launch a vertical for virtual care service that guides patients through the end to end process of ordering of my risk test.
This partnership is unique because it not only provides patients who select this service with effortless access to a genome medical adviser, but it also provides us access to a myriad genetics counselor and our live chat support through the patient's journey.
The partnership is designed to increase access for genetic services for those who may need additional support and it allows patients the ability to order my risk cost from their own home as well.
In the first quarter, our women's health business reported $65 5 million in revenue, a 19% increase year over year.
Reported test volumes were roughly 113000 hereditary cancer volumes were adversely affected by challenges presented by COVID-19, and the variance including physician staffing constraints. If you were in part in person office visits.
We also saw strong growth in our prenatal portfolio with revenues up 35% in the quarter compared to last year.
Our prenatal products allow patients to be proactive about their health care.
Our prequel prenatal screen with amplify technology provides results to more than 99, 9% of patients we offer micro deletion screening on an opt in basis not as a default for the five common micro deletion syndrome.
In addition, we continue to progress towards the launch of first gene are combined noninvasive prenatal screen and carrier screen test, which is expected to be available early next year.
Today only one in three patients undergo both carrier screening noninvasive prenatal screening during pregnancy.
First gene combines these services into one simplifying the screening process and making it easier for patients to get the answers that they need from one single maternal blood draw.
The new offering and will complement our industry, leading portfolio of prenatal test and bring services to patients who might not otherwise access sports foresight or prequel.
Yeah.
Moving onto our core oncology business unit, which delivered $69 8 million in revenue for the first quarter reported test volumes were roughly 44000.
As Paul mentioned this past March we launched precise tumor for molecular tumor profiling as part of a suite of precise oncology solution that combined.
Sure My risk Germline hereditary cancer test my choice companion diagnostic test and Iberia genetics timber for tumor profiling tests powered by Illumina is P. S O 500 technology.
We are excited about expanding this partnership even further to offer precise liquid a liquid biopsy therapy selection tool.
With these new solutions myriad genetics is advancing precision oncology by merging the power of companion diagnostics, Nextgen tumor sequencing and world class germ line testing services.
We continue to invest in our my risk Germline test.
Test offering launching new gene content in April of this year.
In addition, marriott's my risk break analysis CTX.
Sorry, myriad BRCA analysis, the Dx received FDA approval in March as a companion diagnostic test for use with limb part of that in early stage breast cancer treatment, making it the only germline test approved by the FDA as a companion diagnostic for treatment of her two negative high risk early stage breast cancer.
We are excited about the continued success of our prostate cancer prognostic Polaris, which hit an all time monthly high for test administered this past March the Polaris test as it is designed to assess prostate cancer aggressiveness and is the only test on the market that measures how fast prostate tumors are growing.
I would now like to turn it over to Brian to discuss our Q1 financial results in more detail.
Thank you Nicole I would like to start by reviewing our financial highlights.
We began the year with another strong quarter as we reported total revenue of $164 9 million up 11% year over year, excluding revenue from divested assets. Our quarterly results were driven by stable diagnostic test volumes, which despite headwinds in the first six weeks of the quarter brought on by COVID-19, and it's varied.
<unk> increased 10% compared to last year. After excluding divested assets. In addition, we continue to see improving average selling prices across our businesses the stability in ASP and better than expected cash collections on orders from from prior periods was driven by our by our improved execution on revenue cycle management, which is.
A major component of our transformation and growth plan.
In the first quarter, we reported an adjusted loss per share of <unk> improve.
Improving three cents year over year.
Adjusted gross margin was 71, 1% and adjusted operating expenses were $120 million.
We have experienced increased inflationary pressures increased labor costs due to staffing constraints and competition for talent as well as increased material costs due to global supply chain disruptions. The team has successfully managed operating expenses. During this disruptive time to help mitigate those various cost increases we did exit the quarter on page.
To hit our operating expense targets that we laid out for 2022.
During the first quarter revenue of $164 9 million benefited from $12 million of better than expected cash collections on tests ordered in prior periods overall volumes for the quarter. A 241000 came in within our original ex projections and organic ASP was stable.
Looking at product performance total Q1 test volumes increased 10% compared to Q1 of last year and increased 2% sequentially from last quarter after excluding volumes from divested assets.
Excluding revenue from divested businesses total revenue in Q1 increased 11% year over year and 2% sequentially. These results demonstrate strong growth in the core business, despite COVID-19 headwinds and typically weaker first quarter seasonal trends.
Turning to revenue by product hereditary cancer revenue in the first quarter was $70 9 million a decrease of 7% compared to the first quarter of last year, our hereditary cancer testing business was hit the hardest by COVID-19 and experience in the first six weeks of the quarter as we factor out the disruptions caused by access constraints.
And staffing challenges during the quarter, we estimate the hereditary cancer volumes for the quarter would have decreased 3% year over year and 1% sequentially.
Prenatal revenue in core in the quarter increased 35% year over year, and 6% sequentially driven by our proprietary amplified technology, which significantly enhances the performance of our prequel noninvasive prenatal screening test and works to reduce test failure rates. So that patients may avoid unnecessary invasive procedures.
In oncology tumor profiling revenue increased 5% compared to the same period in the prior year and increased 23% sequentially contributing to that growth as Nicole mentioned Polaris exited the first quarter with a record breaking number of tests ordered in March and our my choice HRD tests continued to perform well with.
Double digit year over year and sequential volume growth.
Pharmacogenomics testing and mental health delivered first quarter revenue of $29 3 million, an increase of 66% year over year and was flat sequentially, while gene site volumes in the first quarter of 84000 increased 49% year over year and 7% sequentially.
S. P. A mental health was negatively impacted primarily by annual deductible resets when compared to the first fourth quarter of 2021 as.
As we look ahead, we are reiterating our 2022 financial guidance of 600 of revenue of $670 to $700 million gross margins of 70% to 72% adjusted operating expense of $470 million to $480 million and adjusted EPS of zero to 20.
In addition, we reiterate our long term financial guidance of 9% to 12% estimated organic revenue growth through 2024.
With respect to the rest of 2022, while we do not anticipate receiving the same level of cash collections from prior periods in the second quarter of 2022 compared to this first quarter. We do expect second quarter volumes to grow off of that first quarter base. We also anticipate steady a ASP moving forward based on the experience that we've seen in.
ASP for the past seven quarters across the business in.
In the back half of the year, we expect to see an acceleration of volume and revenue growth due to the benefits of the investments we have made to launch our unified provider ordering portal the initiation of our virtual care solutions.
Hartner ship with genome medical the unveiling of our my gene history platform and the introduction of new solutions to address patient and provider expectations on price transparency and affordability.
As we continue to execute our strategic transformation and growth plan. We believe we are positioned to be a high growth profitable free cash flow generating leader in precision medicine, delivering key insights to enhance patient care.
Now I'll turn it back over to Paul for closing remarks.
Yeah.
Thanks, Brian we're pleased with the progress we've made this quarter and another tough operating environment.
Lastly, lastly, we'd like to announce that we will be hosting an investor day on August 11th to give an update on the company's progress.
We know our sector is facing significant market pressure and if some of our competitors are struggling to deploy a financially sustainable value proposition and growth model, while our transformation is still underway I'd like to emphasize that our scientific technological and commercial platforms are built off of a sustainable.
<unk> and solid financial Foundation, we are continuing to take concrete steps to make our platform scalable, including investments in technology marketing capabilities and remote selling well.
We are excited to bring new products to market like precise liquidity that Marty on this platform over the next several years.
We are confident that this sets it apart from its peers and puts the company on a trajectory for innovation growth and shareholder value creation.
Our focus remains on newly launched products and commercial initiatives with the goal of accelerating growth during the remainder of the year as we continue to invest in the future elevating our products to their full potential introducing new innovative offerings.
More than ever we are exploring new ways to illuminate the path to better health through genetic insights. We look forward to a bright future ahead for myriad genetics, because we continue to work to better serve our patients customers and deliver sustainable growth and profitability for our shareholders now I'll turn it back to Nathan for Q&A.
Okay.
Thanks, Paul as a reminder, during today's call we use certain non-GAAP financial measures a reconciliation of the GAAP financial results to the non-GAAP financial results and a reconciliation of GAAP to non-GAAP financial guidance can be found under the Investor Relations section of our website.
Now we're ready to begin our Q&A session to ensure broad participation. 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 if you would like to register a question. Please press the one followed by the four on your telephone you will hear three tone prompt to knowledge that request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three once again to register for a question. It is one four can you tell us.
So keep at the first question comes from the line of Jack Meehan with Nephron Research. Your line is open.
Thank you and good afternoon.
I wanted to talk about gene site.
I saw that you had applied for P. L. A code for the test I was wondering if you could just elaborate on the strategy behind that and what do you think will happen to the Medicare pricing once that gets finalized this summer.
Yeah, Jack I saw your note on that.
We believe it's absolutely the right strategy to bring more clarity as we're trying to do across.
All our payer market strategy in a row cycle processes. So we think the springs.
Hum.
More stability not lust to gene site and potentially along with the clinical evidence that we continue to build.
Janssen of coverage for gene site.
And so.
We don't we don't see or expect the risk that you've identified in terms of Medicare pricing compression there and in fact, I think it's a great step to solidifying gene set pricing as we've done with other codes that we've applied for so we actually are quite confident in what we're doing here.
Okay.
And just as a follow up on that.
Is it work moving forward so starting in 2023 will your entire gene site book and Bill business get reimbursed under this new code.
Just how does it work today, when you're not under contract with a payer do you cold stack them I guess, just confirmation of how the billing of work once the poa goes into effect.
That seems a little granular for this call. So we're happy to take that offline Jack I wanted to give you a good answer and I'm not really in a position to do that but I don't think there's any code stacking involved but why don't we take that offline with NATO and we'll happy to try to give you a clear answer.
Okay I appreciate it looking forward to the analyst day too thanks, Paul.
Great. Thanks, Jack.
Our next question comes from line of Dan Brennan with Cowen Your line is open.
Hi, Good afternoon. This is Kyle on for Dan Thanks for taking my questions.
I'd like to walk through you know, how how the quarter sort of played out versus your expectations. When you gave the guidance back in back in February across your four product areas.
Were there any notable.
Areas of strength slash of weakness that you didn't anticipate at first that were better or worse than expected.
Well you know look the first six weeks, where we were kind of holding our breath.
So the rest of it.
But the team really rallied I would say the strength of our new digital platform for gene site was probably the biggest surprise because gene side held up even during that first six week process and again it is.
That's where we've put more of a new commercial tools in place and we think the rest of the portfolio will benefit without overtime, our inside salespeople and any other you know.
Investments we've made there no look it was just great execution on behalf of the coal and our operators and.
And I think you'll see up and down the P&L where.
Growing managing our operating expenses investing in new products with high returns on invested capital. So it's just a lot of good blocking and tackling and and most importantly.
Team that was really responsive to our customer base during the quarter and their needs and I think that's proving itself as we were.
You know were gaining new customers and winning back some old customers that we lost along the way and it bodes well for the rest of the year.
That's great. Thank you and then one just on tumor profiling, so a strong volume quarter revenue down a little bit year over year, but still beat consensus.
What are what are the key drivers for tumor profiling.
It sits now I know theres not as much granularity anymore, but what should we really be thinking about that segment.
I think what you would have you focus on is precise oncology solutions and a platform of services that oncologist want as we did the work to the transformation plan, 82% of oncologists want a single source of of.
Information in an easy to use test.
Our whole transformation is built around being more responsive to patients and our provider partners and tumor profiling with locking but we're really excited about is the attachment rate that we're getting.
As oncologist or not all are only ordering the tumor profiling tests with their ordering my risk and my choice as well and it's a very high level of attachment rate and what they really appreciate is the fact that we're reconciling the tests and we're giving them one report and so it's really just about listening to the customers.
And and that's that's how I think we win.
Great. Thank you for taking my questions.
Sure. Thank you.
Our next question comes from the line of Matt <unk> with Goldman Sachs. Your line is open.
Hey, good afternoon. This is E P on for Matt.
On previous earnings call. You said, you expected approximately 2% to 3% revenue contribution through 'twenty 'twenty four from your oncology business.
Assume that guidance did not include your expansion into liquid biopsy, but could you provide any color on midterm growth rate expectations for this business going forward, including the liquid biopsy.
[laughter].
Our guidance for 2022 is pretty clear and what we've provided as long term guidance of 9% to 12%.
We're certainly at a 11% growth year over year. This quarter showed and demonstrated that we can achieve that.
I certainly hope that we can get to that 12% growth rate over the next two years liquid and EMR D. Well as we said in the building block fly that we provided at the conference and is in our website that specifically said that it did not include contributions from liquid at M. D. So this is really based on.
On the rest of the products in the portfolio today and getting them all to their full potential.
Great. Thank you.
Sure do you have a follow up.
I know.
Okay, great. Thank you.
And all there are no further questions pending at present time.
Wow.
Okay.
Well thank.
Thank you everybody with our script.
Go ahead.
Alright.
Thank you all for joining today. This concludes our earnings call a replay will be available via webcast on our website for one week and thank you again for joining us this afternoon.
Okay.
And all of that I will conclude the call for today. We thank you very much for your participation you may now disconnect.
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