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Myriad Genetics Adds Reproductive Tests With Counsyl Buy, Lessens Hereditary Cancer Competition


NEW YORK (GenomeWeb) – Myriad Genetics' decision to purchase Counsyl, announced yesterday, not only enables the company to enter the profitable reproductive genetic testing space, but also allows it to have one less competitor in the hereditary cancer market.

The $375 million deal marks the integration of Myriad, a leader in the hereditary cancer genetic screening market, with Counsyl, a company at the forefront of reproductive genetic screening tests. Specifically, Myriad will gain access to Counsyl's Foresight, which screens for more than 175 clinically actionable conditions across ethnicities, and its noninvasive prenatal screening test Prelude.

Myriad's decision to enter the reproductive genetics space follows a similar move by Invitae, a company that competes with Myriad in the hereditary cancer space. The San Francisco-based firm, which previoulsy focused on offering genetic testing for inherited adult and pediatric conditions, acquired Good Start and CombiMatrix last year in order to add reproductive health testing to its portfolio.

The acquisition, slated for completion in Myriad's fiscal first quarter of 2019 in the fall, also means it will no longer have to contend with Counsyl as a competitor in the hereditary cancer testing space, a segment that still comprises a significant portion of Myriad's molecular diagnostics revenues but is under increasing pressure in a crowded market.

Counsyl sells a hereditary cancer screening panel test called Reliant, which analyzes 36 cancer-linked genes, but the company had laid off its oncology sales force last year. At the time, Counsyl said that it would continue to develop and support its hereditary cancer test, but planned to focus more on its women's health business.

"I think they realized that penetrating the oncology space was a significant investment," Myriad CEO Mark Capone told investors and analysts during a call Tuesday morning. Those investents were "all designed to sell hereditary cancer [tests] … They came face to face with the Myriad team in that area and I don't think the progress was what they had hoped. So, as a result, they didn't see a line of sight for that being a profitable business."

Foresight is the leading test in Counsyl's portfolio, comprising 64 percent of its revenues. Prelude accounts for 28 percent of the company's revenues, while Reliant contributes around 8 percent. In Myriad's fiscal year 2018, the company expects Counsyl to perform nearly 300,000 genetic tests.

Myriad, which for long was known for selling the hereditary breast and ovarian cancer risk test BRACAnalysis, has been focused on diversifying its diagnostics revenues in recent years by developing and launching tests internally, as well as by acquiring new tests. In 2011, Myriad purchased Rules-Based Medicine for $80 million to strengthen its companion diagnostics capabilities, and in 2014, the company paid $245 million in cash to gain access to the protein-based rheumatoid arthritis tests Vectra DA through its acquisition of Crescendo Bioscience.

Also, in 2016, Myriad bought Assurex for $225 million in upfront payments, plus up to $185 million in performance-based milestones. The Assurex purchase gave Myriad the mental health pharmacogenetic test GeneSight, which has quickly become the top revenue earner in its portfolio after its hereditary cancer testing segment.

In purchasing Counsyl, its largest acquisition to date, Myriad is betting that the company's reproductive genetic tests will also be quickly accretive, because these tests are being rapidly adopted by physicians and are already covered by many payors. These are important considerations for the company, Capone said, as it considers which companies to buy. He highlighted that Assurex, for example, went from a run rate of $40 million in losses to profitability in the space of nine months since its acquisition.

In the last 12 months, Counsyl has garnered more than $134 million in revenues, and delivered over 280,000 reproductive genetic test results, according to Myriad.

Counsyl was also on a growth trajectory. Last November, it raised $80 million in financing and said that it had screened more than 850,000 patients. Prior to that, the firm had raised $102 million in total.

Myriad said that Counsyl's Foresight and Prelude tests already have strong coverage from commercial insurers, and have the potential for expand reimbursement. "These tests are broadly reimbursed today," said Capone. "So, unlikely most of our groundbreaking diagnostics, where we are developing a new market, we already have reimbursement coverage established."

There are also opportunities to expand the market of these tests, Capone noted, citing the example of Foresight, which currently has around 20 percent of the carrier screening market. However, there are an estimated 4.2 million pregnant women in the US annually, with carrier screening done on 900,000 of them, but they are mostly screened for a limited set of conditions, like cystic fibrosis, spinal muscular atrophy, and Fragile X.

In updated 2017 guidelines, the American College of Obstetricians and Gynecologists wrote that expanded carrier screening, testing for up to several hundred conditions at once, is an acceptable strategy for prenatal carrier screening. Additionally, there is now a new category 1 CPT code for a more comprehensive panel that will be priced next year under Medicare's clinical lab fee schedule.

"With Foresight, it is widely anticipated that the new expanded carrier screening code will be priced by Medicare at a rate that is higher than what is received on average by commercial insurers for the test today," Capone said. "If payors broadly update their guidelines to cover expanded carrier screening, this code could lead to material increases in the average selling price for Foresight." As a reference point, Myriad CFO Bryan Riggsbee noted that a CPT code for a screening panel assessing genes important in the Ashkenazi Jewish community is currently priced at around $2,000.

Noninvasive prenatal screening, the most rapidly growing genetic test, is only used in 25 percent of pregnancies, according to Capone. Such testing is increasingly being offered not just to the 20 percent of pregnant women with high-risk pregnancies, but also around 40 percent of commercial payors are covering this testing for women with average-risk pregnancies. "And this number is steadily increasing," Capone said.

He noted that Counsyl's Prelude test, which has captured 8 percent market share to date, will benefit as more private payors decide to cover such testing for average-risk women and extend coverage for microdeletion testing in the fetus. A category 1 CPT code for testing microdeletions has been priced at $759 for Medicare, and is "increasingly being reimbursed by commercial payors," Capone said.

Approximately 90 percent of Counsyl's revenues are attributable to payment from commercial insurers, and the remaining comes from Medicaid, according to Myriad. "However, approximately half of the births in the US are covered by Medicaid," Capone said. "There's significant potential to expand reimbursement in his segment of the market."

Additionally, since Counsyl is in-network with 90 percent of private payors in the country, the tie opens up opportunities for Myriad to "further strengthen relationships with commercial insurers, by offering a broader portfolio of diagnostic products," he said.