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Myriad Fiscal Q1 Revenues Decline 17 Percent

NEW YORK (GenomeWeb) – Myriad Genetics reported after the close of the market Tuesday that its first quarter revenues for fiscal year 2015 declined 17 percent year over year.

For the three months ended Sept. 30, the Salt Lake City-based molecular diagnostics firm had total revenues of $168.8 million, compared to revenues of $202.5 million in fiscal Q1 2014. The revenues fell short of consensus Wall Street estimates of $175 million.

The company's molecular diagnostic testing revenues decreased 15 percent to $164.5 million from $192.9 in the first quarter of 2014.

Revenue from its hereditary cancer tests fell 20 percent to $150.6 million from $188.7 million in the same quarter last year. Revenue from the company's oncology segment decreased 22 percent over the previous year to $84 million.

In hereditary cancer testing, BRACAnalysis tests contributed $73.7 million in revenue; MyRisk Hereditary Cancer contributed $53.1 million; BRACAnalysis large rearrangement testing brought in $12.4 million; while Colaris and Colaris AP revenue totaled $11.4 million.

Revenues from the company's rheumatoid arthritis test Vectra DA were $10.6 million and Myriad's other tests netted revenues of $3.4 million, down from $4.3 million in the year-ago period.

Myriad CEO Pete Meldrum said during a call to discuss the earnings that unanticipated demand for its MyRisk test impacted the firm's costs, profitability, and lab capacity.

Mark Capone, President of Myriad Genetics Laboratories, also noted during that call that the company had expected a 5 percent sequential decline in the hereditary cancer business in the first fiscal quarter, due to lower test utilization during the summer months, negative insurer decisions, and some incremental share loss due to competition.

In May, two insurers, Horizon Blue Cross Blue Shield of New Jersey and Amerigroup, separately advised in-network providers to use only in-network laboratories for BRCA testing. In addition to this, Myriad's inability to keep up with MyRisk demand added to its challenges during the quarter.

Company officials acknowledged how the company broadly expanded access to MyRisk to more doctors and on an earlier time frame that initially planned. "During the quarter, we expanded MyRisk access to the top physicians in every territory in the country, which was a few months ahead of schedule," Capone said. "As we have seen previously, these physicians rapidly converted to MyRisk because of the increased sensitivity and more comprehensive patient reports. What we didn't anticipate is that other physicians in these group practices would request immediate access to MyRisk."

Approximately 50 percent of all hereditary cancer samples during the quarter were for the MyRisk test, and revenues for the test increased by 95 percent sequentially. Capone noted that the company is expanding it lab capabilities and personnel and expects to meet the growing demand for MyRisk by the third fiscal quarter.

Myriad's collaborations with pharmaceutical companies and its clinical services offerings contributed $4.3 million in the first quarter compared to $9.5 million in the same period of the prior year. "The decline in revenues was primarily due to the timing of research projects with our pharmaceutical company partners," the company said in a statement.

During the call Meldrum noted that European regulators had recently recommended approval of AstraZeneca's PARP inhibitor olaparib as a positive milestone. Myriad has developed a companion test for olaparib that gauges BRCA mutations and identifies best responders to the drug. Meldrum estimated the companion diagnostic opportunity in Europe related to an olaparib launch to be as much as $100 million. The US Food and Drug Administration, meanwhile, is expected to issue a decision regarding olaparib in January next year, and this will also impact companion testing revenue for Myriad.

Myriad's net income for the quarter was $16 million, or $.21 per share, compared to $55.5 million, or .68 per share in the first quarter a year ago. On a non-GAAP basis, EPS was $.25, lower than analyst estimates of $.32.

Research and development expenses grew 35 percent to $22.6 million in the first quarter from $16.8 million in the year-ago quarter. Meantime, SG&A expenses rose 10 percent to $85.4 million from $77.3 million in the first quarter of fiscal year 2014.

During the quarter, Myriad repurchased 1.2 million shares, or $46 million, of common stock under its stock repurchase program. Myriad ended the quarter with $213.7 million in cash, cash equivalents, and marketable investment securities.

Myriad expects to improve its revenues by the second half of the year. Meldrum noted that recent draft local coverage determination for the Prolaris prostate cancer test issued by Medicare contractor Palmetto will increase adoption of the diagnostic and add to future revenues.

Myriad is also forecasting "a more significant [revenue] contribution from Vectra DA based upon expanded payor coverage," Myriad CFO Bryan Riggsbee added during the call. Pharmaceutical and clinical services revenues will also increase in the second half of the year, Myriad expects.

Myriad is maintaining its fiscal year 2015 financial guidance of between $800 millionto $820 million in revenues, and adjusted diluted EPS of $1.90 to $2.00. Myriad also projected revenues for its fiscal second quarter of $180 million to $185 million and adjusted EPS of $0.33 to $0.36.

Shares of Myriad slipped more than 7 percent to $34.15 in Wednesday morning trade on the Nasdaq.

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