NEW YORK – COVID-19 may have put Myriad Genetics on uncertain financial footing last year, but an executive team led by new CEO Paul Diaz is embracing the changes brought on by the pandemic to steadily increase revenues, grow test volume, and expand access to more patients.
"Dramatic changes in our healthcare system have accelerated during the COVID-19 pandemic," said Diaz during a webcast "Investor Day" presentation on Tuesday. He noted that the pandemic has spotlighted the benefits of digital engagement, telehealth, and patient-driven or consumer-centered healthcare, but at the same time exposed the need to increase access and reduce disparities among underserved populations.
Myriad executives outlined to investors how the company's strategic focus in coming months and years will be in these same directions, for example, by introducing its polygenic breast cancer RiskScore to women of all ancestries, streamlining online tools that make it easier for doctors and patients to order appropriate testing, and inking telehealth partnerships.
On Monday, Myriad posted revenues of $173.1 million for the first three months of 2021, a 6 percent increase compared to the same period last year. Diaz said the year-over-year increase in revenues and sequential test volume growth signaled that the company was on the path to financial recovery. "We expect to be profitable in Q4 of 2021," he added.
The news, for the time being, appeared to reassure market analysts, who despite the positive quarter, continued to push Myriad executives for even more transparency on the firm's strategic plans. "Stepping back, although the recovery is moving in the right direction, we continue to believe execution and consistency will be important to restore credibility," wrote JP Morgan's Tycho Peterson in a note to investors following Myriad's earnings release. Cowen's Doug Schenkel similarly wrote that Myriad had a "decent quarter" but indicated he was eager for more details on the company's Q1 performance, long-term financial outlook, and growth initiatives.
Subsequently, during its "Investor Day" webcast, Myriad still did not provide 2021 financial guidance, but executives said that ultimately, the company's goal is to deliver 8 percent to 10 percent growth over the coming years. Diaz acknowledged that in the past Myriad as a company has not paid enough attention to customer experience, has lacked R&D focus, and has not had a clear future direction.
In the nine months since he has taken the reins at Myriad, Diaz has set in motion a three-phase "comprehensive transformation plan." The first phase, which required getting the company back on stronger financial footing after the pandemic and reducing costs, is nearly complete. "We reduced our product, R&D, and technology projects by half, focusing on the highest priority areas, with the greatest impact," including women's health, mental health, and oncology, Diaz said.
Additionally, the company is expecting that forthcoming divestitures of assets will bring in $375 million in gross proceeds by the third quarter that it will put toward restructuring efforts. Toward this end, the company this week announced the sale of its Vectra rheumatoid arthritis test and related intellectual property to Laboratory Corporation of America for $150 million in cash. Last month, Myriad said it would sell the myPath Melanoma test, as well as the lab it was performed in, to Castle Biosciences for $32.5 million. These divestitures and other cost-saving measures are expected to result in $40 million to $45 million in expense reduction in fiscal year 2021.
Myriad is currently in the second phase of its restructuring efforts, during which the emphasis is on advancing a new branding and marketing strategy, launching a technology-enabled commercial model, revamping its revenue-cycle management, and improving transparency with investors. The company is also investing in new lab automation and technologies including low-cost sequencing with Illumina's NovaSeq.
"Somehow, after the last few years, the power of Myriad's science and the clinical value and differentiation of our products got lost in the minds of many physicians and patients," said Myriad CSO Jerry Lanchbury. "As we strive to make our products relevant to even more patients, we are also mindful of addressing social, economic, and ethnicity differences in access to healthcare."
He added that the company is committed to ensuring that not only do its products work for all patients but that all patients can access its tests.
For example, in the women's health segment, the company is hoping to introduce cash pricing for its products: the myRisk hereditary cancer risk test, which gauges germline alterations in 35 genes associated with increased risk for eight cancers; the 80-gene RiskScore for assessing the five-year and lifetime risk of breast cancer; the Foresight carrier screening test; and the Prequel noninvasive prenatal screening test. An out-of-pocket patient price is a strategy several companies, including competitor Invitae, have used to expand access to patients whose insurance may not cover testing.
Nicole Lambert, president of Myriad Genetic Laboratories, described how the pandemic hit sales for Myriad's myRisk test particularly hard. During the height of the pandemic, mammograms were down by around 80 percent and women weren't going to the clinic for their wellness visits. However, even before the pandemic, the company's hereditary test sales have been declining due to competition. In the first three months of this year, the company's test sales in the segment dropped to $76.1 million, an 11 percent reduction from $85.2 million in the prior year.
"I want to be direct about our hereditary cancer performance. It's not yet where we want it to be," Lambert said, explaining that Myriad is expecting pricing pressures in hereditary cancer testing in the low single digits for the next few years.
Amid executive changes, Lambert has stepped in as interim head of the women's health unit, during which she identified gaps in terms of missed opportunities, ineffective messaging, and execution of sales teams. She spearheaded efforts to coach sales teams on retaining myRisk customers, and this has led to more than 50 percent growth in myRisk test volumes since June 2020. Furthermore, in the coming weeks, Myriad will announce a new president of the women's health unit who will lead new growth efforts in this segment.
Myriad will also expand the market for RiskScore, which is currently offered to women of European and Ashkenazi Jewish ancestry who don't have a mutation in a breast cancer-associated gene assessed by myRisk. However, recognizing that minority women are more likely to get a non-actionable result from a myRisk test, Myriad is planning to introduce RiskScore for patients of all ancestries in the second half of 2021 — a milestone that Diaz said Myriad is poised to be the first to achieve in the molecular testing space. The company will present data on the development of RiskScore using large and diverse cohorts at the American Society of Clinical Oncology's annual meeting in June.
Next year, Myriad will also launch RiskScore within a direct-to-consumer model, under which Lanchbury estimated 100 million women will be able to initiate testing. It also will combine Prequel and Foresight into one next-generation product, requiring only one sample from the mother instead of multiple, and introduce micro-deletion technology to bolster the accuracy of its prenatal offerings.
In the oncology segment, Myriad and Intermountain Healthcare announced plans earlier this year to develop a combined offering that includes Myriad's myRisk and myChoice CDx, which is used to guide treatment with PARP inhibitors, and Intermountain's 500-gene TheraMap tumor profiling test. The combined offering will be launched by year-end.
Although myChoice CDx is currently used to identify ovarian cancer patients who have homologous recombination repair deficiency and will likely benefit from certain PARP inhibitors, Myriad is studying the test in all solid tumors. This, Lanchbury said, will introduce opportunities for collaborations with drug developers. Next year, in partnership with Illumina, Myriad will also launch a kit-based version of myChoice CDx, which the company is betting will spur adoption in ex-US markets.
In the mental health segment, Myriad will continue to gather data demonstrating the clinical utility of the GeneSight pharmacogenomics test, and on May 10, it will launch a new indication for guiding ADHD medications. "The ADHD population is large, and the pandemic is putting a further strain on this population," said Mark Verratti, president of Myriad's mental health unit, noting that the company has identified and added new genes tied to ADHD medication response to the panel based on extensive literature searches and in vitro experiments.
In the third phase of its restructuring, Diaz said that the company will look toward investing in R&D, new technologies, and delivering "enhanced products." For example, over the past year, with greater use of telehealth, doctors have increasingly sent GeneSight sample collection kits to patients' homes. Given this trend, Eric Santa, Myriad's chief growth officer, noted that the company will ink new telehealth partnerships, betting that patients will continue to embrace the ease of virtual care services even after the pandemic.
Santa is also working on projects to bolster test volume by better identifying and capturing consumer demand for Myriad's tests. In the past, the company hasn't been able to fully harness consumer demand. For example, Myriad used an online quiz to identify patients who may be interested in and eligible for its myRisk hereditary cancer predisposition test. Although nearly a million patients expressed interest in this test and the quiz generated nearly 300,000 qualified leads, less than 5,000 patients ultimately took a test.
With new technology-enabled targeted ads, streamlined online ordering, and more personalized follow-up with patients, Santa has a long-term goal to generate more than 2 million consumer leads that result in over 200,000 orders for myRisk. A pilot effort is already generating more leads and once fully scaled, this channel could become a significant contributor to test revenues, Santa said.
The company has also created online tools for physicians to streamline their work, including one that collects patients' family history and another that estimates patients' out-of-pocket test costs. According to Kevin Haas, Myriad's chief technology officer, the integration of these tools within a practice's electronic medical records increases test ordering from Myriad by around 20 percent, on average.
These changes in the short term place the company on a footing to return to profitability by the end of 2021, assured Myriad CFO Bryan Riggsbee. He noted that longer term, the company will focus on driving growth through new product acquisitions in its core test segments and investing in technologies to expand its market reach. "We are focused on driving growth and reinvigorating our position as a leader and innovator in the genetic testing market," Riggsbee said.