Q2 2022 Myriad Genetics Inc Earnings Call
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Greetings and welcome to the myriad genetics second quarter 2022 financial earnings Conference 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 four on your telephone.
If at any time during the conference you need to reach an operator. Please press star Zero as a reminder, this conference is being recorded today Thursday August four 2022.
I'd now like to turn the conference over to Foster Harris. Please go ahead.
Thank you good afternoon, and welcome to the myriad genetics second quarter 2022 earnings call on the call. We will review the financial results. We released today and afterwards, we will host a Q&A session.
Our quarterly earnings release was issued this morning on form 8-K and can be found on our website at investor that myriad Dot com I am Foster Harris senior associate of Investor Relations on the call with me today are Paul <unk>, Our President and Chief Executive Officer, Bryan Riggsbee, Our Chief Financial Officer, and Nicole Lambert, our Chief operating officer.
This call can be heard live via webcast that investor Dot myriad dot com and a recording will be archived in the investors section of our website along with the slide presentation.
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 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 forward looking.
Our forward looking statements with that I will now turn the call over to Paul.
Thank you good afternoon, everyone and thank you for joining us on today's call. We will discuss our Q2 results along with highlights from the quarter and updates on our strategic transformation and growth plan.
First I want to thank all of our teammates for their hard work and dedication this quarter.
To advance our mission and our vision to make genetic testing in precision medicine more accessible.
To help people take more control of their health and enable providers to better detect treat and prevent disease.
I also want to thank our health care provider partners and their patients for their continued trust and confidence in us.
Yeah.
And is 22 remains an exciting year for myriad genetics, we continue to build the foundation for accelerated growth.
And advancing our mission of improving health and wellbeing for all.
We are pleased with the progress we made in the second quarter of 2022.
After excluding divested businesses quarterly revenues of $179 $3 million increased 7% year over year and 9% for the six months ended June 32.
<unk> 2022 in line with our long term revenue guidance.
Diagnostic test volumes of 260000 increased 9% year over year.
<unk> strong continued growth in our core business.
Average revenue per test in the quarter decreased 2% year over year.
Excluding divested businesses, primarily due to shifts in our product mix as compared to the second quarter of last year.
Despite ongoing COVID-19 disruptions and significant inflationary pressure in the quarter our team did a great job from an operation standpoint.
<unk> site Polaris and my choice CTX sell their highest quarterly volume ever this quarter.
In our hereditary cancer business is beginning to stabilize.
And our prenatal business saw healthy growth in the quarter with potential opportunities in the near future to increase market share.
Adjusted gross margins improved 30 basis points from last year to 72, 4%.
Our adjusted earnings per share of <unk> decreased 8% year over year, primarily due to income from now divested businesses, such as vector and RPM in the second quarter of 2021.
We ended this quarter with $283 6 million in cash cash equivalents and investments and no long term debt.
Positioning us to invest in the future and the strategic opportunities we see in the market.
Myriad remains a trusted differentiated partner with specialized extra expertise underpinned by three strategic priorities.
We continue to invest in innovation to develop best in class products.
Improve the quality of our services and customer experience to reach more patients of all backgrounds.
Second we are building new enterprise capabilities to improve engagement accelerate growth.
And leverage our size and scale to address new market opportunities, including M&A.
Third we are focused on disciplined execution as we work to deliver on a key set of initiatives to fulfill our mission and drive long term growth profitability and free cash flow.
We continue to make progress on each of these priorities and are excited about the opportunities they will create in 2023 and beyond.
With that I'd like to turn things over to Nicole Lambert, our chief operating officer to discuss Q2 operating results and the new innovations in more detail.
Thank you Paul.
To start with our core business unit performance, beginning with our mental health SG&A.
Let's all hope it 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 things.
Trial and error or comment when determining the most effective medications to treat depression anxiety ADHD and other mental illnesses recently in the journal of American Medical Association published results of our Prime care study the largest pharmacogenomic randon, a randomized control trial ever conducted in mental health.
Study funded and conducted by the U S Department of Veterans Affairs achieved both co primary endpoints and found that major depressive disorder remission rates were significantly improved when clinicians had access to gene site that can tropic test results. The prime care study further reinforces the body of evidence supporting the clinical utility of Pharmacogenomic test.
And the gene type test as an important tool for medications selection in the treatment of major depressive disorder and other mental illnesses.
Driven by gene site, our mental health business reported $33 $1 million in revenue for the second quarter of 2022, an increase of 46% year over year reported test volumes were roughly 95000, our highest quarterly volume for gene site ever.
We believe that the performance of gene site. This quarter demonstrates the effectiveness of our new commercial capabilities digital marketing strategies and patient centric engagement initiatives implemented over the past year.
Our gene Cytost help physicians better understand how antidepressants and other drugs will affect their patients with just a single cheek swab sample that can be taken in the privacy of their own home.
In the quarter approximately 99% of total gene type orders were made through our unified ordering portal. We are excited about the continued success of <unk> site and new initiatives that are making ordering the tests and receiving results increasingly simple.
We will talk more about these capabilities and initiatives at our Investor Day next week.
Shifting to our women's health business last year, we enhanced our my rest hereditary cancer test with risk score for all and tax rates, the first and only personalized five year and lifetime breast cancer risk assessment for all women.
Since launching this task we had helped tens of thousands of women from non European backgrounds get the information they need to effectively manage their risk of developing breast cancer.
Traditional germline testing only 5% of patients will test positive for a pathogenic mutation in one of the breast cancer genes.
The remaining 95% will be left with an unclear residual risk risk or against those women and their doctors a personalized risk assessment and allows them to plan for more aggressive surveillance surgical interventions that can prevent disease and help them live longer healthier lives.
In the second quarter, our women's health business reported $70 1 million in revenue a 4% increase year over year reported test volumes were roughly 117000.
And our prenatal portfolio revenue was up 13% in the quarter compared to last year.
Our prenatal products allow patients to understand risks to their pregnancy sooner or prequel prenatal screen with amplify technology provides results to more than 99, 9% of patients.
From micro deletions, but 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 tasks, which is expected to be available early next year, we will talk more about first seen at our Investor Day next week as well.
Our oncology business delivered $76 $1 million in revenue in the second quarter reported test volumes were roughly 47000, <unk> saw a strong quarter reporting its highest volume ever up 63% year over year. In addition, our premier prostate cancer Prognostic test reported its highest quarterly volume.
Evel ever as well.
Prostate test.
<unk> test is designed to assess the prostate cancer aggressiveness and measures how fast prostate cancer tumors are growing.
We recently launched precise oncology solution, which combines our my risk Germline cancer results.
My choice CTX companion diagnostic test and precise tumor tumor profiling test powered by Illumina, DSO 500 technology and process by inner mountain precision genomics. We're excited about the expanding partnership with Intermountain precision genomics and extending it further to offer precise liquid liquid biopsy therapy selection.
In 2023 with.
With these new solution myriad genetics is advancing precision oncology by emerging the power of FDA approved companion diagnostics Nextgen tumor sequencing and best in class Germline testing services, we will talk more about precise liquid along with our plans to develop and then minimal residual disease MRV product for our pharma partners in <unk>.
23, while we simultaneously gather clinical validation needed for commercial <unk> product as well.
Lastly, we are excited to have recently been selected to join Unitedhealthcare preferred Laboratory network. This network recognizes lab partners that have met higher standards for access cost data quality and service at Marriott. Our team is committed to delivering on our patients our providers and our payer partners. Every day, we are delighted to have been.
Recognized with this designation.
I would like to turn the call over to Brian to discuss our Q2 financial results in more detail.
Thank you Nicole I would like to start by reviewing our revenue by product total revenue in the second quarter of 2022 was $179 3 million, an increase of 7% year over year and 9% sequentially. After excluding divested businesses total revenue was adversely impacted by approximately $2 million in the quarter and $3 million.
Year to date as a result of foreign exchange rate differences compared to rates during 2021, which represents a headwind of approximately 100 basis points to these growth rates.
Hereditary cancer revenue in the second quarter was $79 4 million a decrease of 8% compared to the second quarter of last year with quarterly volumes decreasing 4% year over year.
This compared to the first quarter of 2022, when Youre regulatory cancer quarterly revenue decreased 7% year over year and quarterly volumes decreased 12% year over year shows relative stabilization in our hereditary cancer testing business further.
Further evidence of this can be seen in our sequential growth of 12% in Q2 compared to last quarter.
Sequential volume growth of 7%.
Prenatal revenue in the quarter increased 13% year over year, and 4% sequentially with ASP, increasing approximately 17% as compared to the prior year.
Improvements in ASP reflects the benefit of investments made in our revenue cycle management plan and the incredible performance of our revenue cycle team.
And oncology tumor profiling revenue increased 11% compared to the same period in the prior year and increased 3% sequentially.
<unk> to that growth, both Polaris and microwave pdx exited the second quarter with their highest reported quarterly volume levels today.
Pharmacodynamic testing and mental health delivered first quarter revenue of $33 1 million, an increase of 46% year over year and 13% sequentially.
<unk> volumes in the second quarter of approximately 95000 and set the record for the test highest quarterly volumes.
We are updating our fiscal year 2022 financial guidance, while we reiterate our revenue and gross margin guidance for the year, we are increasing our operating expense guidance by approximately $20 million.
As a result of current market conditions. This quarter, we decided to start making opportunistic incremental investments in research and development technology, and our sales and marketing programs in an effort to access market share and support various growth initiatives.
Example of this investment being our integration project with epic to integrate our full line of genetic testing solutions with FX expansive network of 600000 positions and more than 250 million patients. We believe this partnership bolsters our growth plans the scaling patient centric tech enabled commercial capabilities with over 600.
<unk> electronic health record integrations this year.
Inclusive of this additional operating expense our updated fiscal year 2022, total operating expense guidance reflects a 6% to 8% year over year increase.
In fiscal year 2021, total operating expenses, excluding divested businesses.
This remains in line with current inflationary trends and demonstrate strong cost management, even as the company invest in our growth and innovation programs.
Looking at our revenue profile for the remainder of the year, we expect the third quarter to reflect typical seasonal declines in volume from the second quarter due to summer holidays.
As in previous years, we expect the fourth quarter of this year to be our seasonally strongest quarter.
We ended the quarter with approximately $284 million in cash cash equivalents and investments as compared to $339 million at the beginning of the quarter. This decrease of approximately $56 million was primarily driven by a payment of $48 million in connection with the settlement of the qui Tam lawsuit filed in 2016.
Moving forward, we continue to focus on cost management, while we're working to return to positive free cash flow generation our.
Our cash flow balance our cash balance along with having no debt and access to the capital markets provides us with a strong capital position as we enter 2023, we expect to be profitable and generating positive cash flow from operations on an adjusted basis.
As we continue to execute our strategic growth 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 important medical information to healthcare providers to improve patient care.
I'll now turn it back over to Paul for closing remarks.
Thanks, Brian we are pleased with the progress we made this quarter in a tough operating environment.
Lastly, we'd like to reiterate that we will be hosting an investor day next week on August 11 to give an update on the company's progress on our new commercial strategy, our plans for the labs in the future.
New technology tools, and our research and development product pipeline.
We know our sector is facing significant market pressure and that some of our competitors are struggling to deploy financially sustainable value proposition and growth model.
Our transformation is still underway.
To emphasize that our scientific technological and commercial platforms are built on a sustainable 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 and we are excited to bring new products like first gene precise liquid and a mark to market on our platform over the next few years.
We are confident that this sets <unk> apart from its peers.
Puts the company on a trajectory for innovation growth and shareholder value creation.
Mentioned on the call today, we will be hosting an investor day next week in New York City.
<unk> 11 at the NASDAQ market site.
The presentation is taking place from 10, a M to 12 P M eastern.
Excited to have our speakers, including <unk>, our Chief Science officer to speak about our upcoming product launches and enhancements, Kevin Hodges, Our Chief Technology Officer will speak about the technology enablement and other projects we have been working on.
Nicole Lambert, our Chief operating officer will speak about our new lab of the future and are more customer focused operations.
Mark variety, our chief commercial officer will talk about replicating our commercial success with gene site across the rest of the business.
Brian our chief Riggsbee, our Chief Financial Officer, who will give more color and transparency into our financial performance and our short term and long term guidance.
All of these things and much more to come next week and we look forward to seeing you all there.
Finally, our focus and goal will continue to be to accelerate growth. During the remainder of this year going into 2023 as we also invest for the future elevate our products to their full potential and introduce new innovative offerings. We look forward to a bright future ahead for myriad genetics as we continue to work to better serve our patients.
And customers and deliver sustainable growth and profitability for our shareholders now.
I'll now turn it back to foster for Q&A.
Thanks, Paul as a reminder, during today's call certain non-GAAP financial measures a reconciliation of the GAAP to non-GAAP financial results and financial guidance can be found under the Investor Relations section of our website now ready to begin our Q&A session to insert abroad to ensure broad participation. We're asking that everyone. Just ask one question in.
One follow up operator, we are now ready for our Q&A.
And the first question comes from the line of.
Dan Brennan with Cowen and as a reminder to register for a question plus a one followed by the four on your telephone keypad right now Youll hear a three pronged technology will request and one moment. Please for the first question.
And the first question is from the line of Dan Brennan. Please proceed with your question.
Hey, Dan Hey, Good afternoon. This is Kyle on for Dan How's it going thanks for taking the question.
But I want to start with gene site. If we could could you provide any more color on what your expectations are for the impact of the Prime study on <unk> volumes.
Maybe attached to that what percentage of the addressable gene site opportunity today.
Isn't really accessible now due to reimbursement limitations.
Well, we think the Prime study was a very positive development, particularly given it was published in Jama, a very highly respected piece.
The initial feedback has been quite positive as we said at the time of the announcement, we think that this really enables us sustain the trajectory of the growth as we look to expand coverage.
And.
And get more adopters, both on the health care practitioner and psychiatric side.
One physician, we talked to you sort of said it best.
The treatments.
That we do to reduce symptoms where speed of recovery are measured in days and gene side helps to do that measured in weeks and months and so that's really what this is all about is <unk>.
Improving access is something that helps get patients on the right medication to reduce.
There are symptoms and get people.
Back to productive lives so we've seen great adoption.
Well again, while it's early earnings most of the feedback we've gotten is pretty positive.
Front of the clinic with clinicians and health care practitioner community.
Great. Thank you and then just on the Opex side raised total opex guidance for 2022.
Can you just.
What exactly are you seeing.
The best opportunity in the market for opportunistic investments and what could this mean for the growth trajectory over the next 12 to 18 months. Thank you.
Yes, Thanks Kyle.
I think in terms of the operating expense investments.
We have made and plan to make.
Going forward I think.
We believe there has been.
<unk> seen quite a bit of disruption in the marketplace and as we noted in our in our commentary. We believe there is the opportunity to to retain market share and really positioning the business for.
Growth in 2023, and beyond and so as we look at things like sales and marketing investments in technology.
Those are the incremental things that are I think are going to really support growth in the coming period, and we just felt like.
Now is a great time, and a great opportunity to put a little capital behind that in order to really drive growth in the upcoming year.
Yes.
Just to add we began to make those investments this quarter.
First because we saw that we were getting traction on these investments.
The marketplace, which are reacting well to them and as we will speak more in more detail at our Investor Day. These are still large underpenetrated markets.
But when we also feel is the competitive landscape has been level at the same time that we've been improving.
The quality of our products expanding genes for my risk.
And improving the ease of use.
So we've been on a path of the last 18 months, a quite frankly manage cost better. So we can reinvest in growth and this is just a continuation of that but an acceleration of some of the commercial investments that we've made in gene site that we think will prove successful in our other businesses and to get.
Behind the launch of precise liquid.
And accelerate the potential launch hopefully next year of MRP for research and that quickly to be followed with MRV for commercial use so we're pretty bullish and ultimately we hope that this pushes us to the high end of our long term.
<unk> range of 9% to 12% to 12% and beyond.
Great. Thank you so much.
And the next question comes from the line of Derik de Bruin with.
Bank of America. Please proceed with your question.
Hey, guys. This is <unk>, it's actually Derek.
[laughter] nuclear gone for Derek.
Yes, Rob I wanted to start first to start off so two straight quarters of sales beat.
Guys reiterated the guidance here again on the top line are you expecting some sort of headwinds in the back half year or is it just the seasonality again.
I mean third quarter is always seasonally slow and we continue to see the ups and downs of Covid in terms of restrictions in office and offices.
We're getting better just like everybody on adjusting to what is the new normal.
Again, the rollout of our digital tools and portals will.
We will be rolling out.
The portal for women's health in the third quarter all of that won't materialize in terms of usage as we train people into the fourth quarter.
These are all the things to sort of try to take that volatility out of access in terms of physician offices.
But.
Again. This is this is the.
The final year of our transformation of putting these capabilities in place and this summer, we're retraining sales forces and redeploying.
Our efforts and so it's really about.
As Bryan talked about.
Really picking up steam in the fourth quarter, which is usually our strongest going into 2023.
24, where we expect again to drive growth to the higher end of our long term guidance.
Got it that makes sense and then just one more quick one were there any benefits from catch up payments in the quarter.
Yes that was in our slide deck. There was it was $11 7 million in the quarter and that compared with $13 three in the prior year same quarter. So it was down and then it was down from the first quarter as well, where I think we had $12 four.
Great. Thank you.
Sure.
And the next question is from the line of Jack Meehan with the phone research. Please proceed with your question.
Thank you good afternoon.
So on <unk> the Prime care study I know you guys are excited about the results.
Some of the leading kols have voiced their opinion, which is given the lack of blinding. The remission benefit may have been driven entirely by the placebo effect.
Just to get your take or response to that.
We disagree with the Jack on that point and we'll be in a position.
Position has been a lot more time of data on our Investor Day next week that is not how the folks that we've been talking to have responded to that.
And.
Be happy to to get into that in more detail next week, but we met the two primary endpoints and we think it's just part of.
An increasing body of evidence to support gene site.
And the clinical utility and most importantly clinicians.
Our embracing gene site because it is helping manage patients it is helping reduce medication errors getting people in the right treatment.
So we're continuing to do more clinical validation work both.
Retrospective tests in future tests.
But we think this result of independent 2000 person.
Led unfunded by Us study.
Is incredibly supportive of the gene site value proposition and.
And the General response has been quite positive again happy to get into it in more detail with our scientific crew next week at our Investor Day.
Looking forward to it and then on hereditary cancer testing.
Was curious to get your thoughts on the Medicare coding. So it looks like there might be some transition that's going to take place could you just walk us through the timing on that and within guidance, what you're assuming in terms of a potential financial impact.
Yes, Jack well I think first of all the.
Transitioning the coding transition has sort of been well known that process started last year.
And so we built that into our guidance for the current year.
Yes.
Think it's something that's been well known by US. The other thing that I think is as important from US to note is that over time, a lot of the ordering clinicians have moved to the CDI.
<unk> test, which is unaffected. So there is a note that that will still utilize the same same coding is.
1162 code so.
Again, it's contemplated it was contemplated in our guidance at the beginning of the year and still could contemplate it.
Taxes at the same question same answer we gave you last time you asked so I'm not sure if youre expecting a different answer.
Well the announcement only came out at the end of May. So this is fairly new do you know when it goes effective with meridian for Utah.
I'll have to get the specific date for you on that Shack will follow up at our Investor day with that specific question Jack.
Okay.
Thank you.
Okay.
And there are no further questions at this time.
Well, great we want to thank you guys all for participating today and again, we are really pleased about the progress in the quarter. We are still in our transformation journey.
And are excited about.
Continued progress hopefully in the back half of this year and mostly the trajectory going into 'twenty. Three so thank you all for your time today and we look forward to seeing many of you at our Investor Day next week cluster and lastly, a replay of this call will be available via webcast on our website for one week following the call. Thank you.
Thank you thanks, everyone.
That does conclude today's conference. We thank you for your participation and ask that you. Please disconnect your line.
Okay.
Right.
Yes.
Okay.
Okay.
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