Posting 20 percent growth in third-quarter molecular diagnostics revenues from the previous year, Myriad Genetics is keeping its focus on maintaining leadership positions for its top-selling products and growing its presence in new disease markets, such as prostate cancer.
For the three months ended March 31, Myriad reported total revenues of $156.5 million, a 21 percent increase from the third quarter in 2012. Of the total revenues, molecular diagnostics contributed $148.4 million, with BRACAnalysis bringing in the lion's share with $115.4 million; BRACAnalysis Large Rearrangement Test with $16.9 million; Colaris and Colaris AP netting $13.3 million; and the company's other diagnostics with $2.8 million.
Year-over-year revenue for BRACAnalysis grew 9 percent, while BART revenue shot up 392 percent in response to a National Comprehensive Cancer Network recommendation last year that all women eligible for the comprehensive BRACAnalysis test receive BART (PGx Reporter 11/7/2012). Myriad's BRACAnalysis test for gauging hereditary risk of breast and ovarian cancer comprised 74 percent of the total revenues, while BART, which gauges rare large BRCA 1/2 rearrangements not picked up by the original BRACAnalysis test, accounted for 11 percent of the total revenues.
Mark Capone, president of Myriad Genetics Laboratories, told investors and analysts during an earnings call this week that the company is focused on growing the use of BRACAnalysis in new indications, including triple-negative breast cancer, ductal carcinoma in situ, and ovarian cancer. Myriad is 40 percent penetrated in these markets with BRACAnalysis, he said.
Colaris, which gauges a person's hereditary risk of developing colon cancer and a woman's risk of getting uterine cancer, brought in 9 percent of the total revenues for the quarter.
Myriad is working on growing adoption of Prolaris, a genomic test that in conjunction with clinical measures such as Gleason score and prostate-specific antigen testing aims to help doctors determine whether a patient's prostate cancer is aggressive. Over the last year, Myriad has received more than 3,000 orders for its Prolaris test and 350 urologists have ordered it. Although the company doesn't have Medicare coverage yet for Prolaris, Myriad is conducting a study, called PROCEED, that it hopes will sway Medicare contractor Noridian to cover the diagnostic.
"Enrollment [in PROCEED] has taken a little longer than we initially expected, but we believe we are on track to provide data to Medicare by late summer," said Capone. Myriad expects to receive a decision from Medicare about Prolaris in the first half of calendar year 2014.
Myriad has a number of studies ongoing to investigate the specific clinical questions Prolaris can answer. Previously, the company has shown that the test can gauge biochemical recurrence of prostate cancer in patients.
At a major medical conference this week, Myriad presented data from a study which tested biopsy samples from 141 patients treated with electron beam radiation therapy and found that the test score was significantly associated with patients' outcome and provided information about disease progression beyond standard clinical measures. Although this finding needs to be further validated in a larger patient cohort, the researchers concluded that Prolaris "could be used to select high-risk men undergoing electron beam radiation therapy who may need combination therapy for their clinically localized prostate cancer."
Another area of future growth for the company is the development of companion tests with personalized drugs. During the quarter, Myriad's companion diagnostics revenues grew by 25 percent from the previous year's quarter to $8.1 million. Revenues from this segment contributed 5 percent of total revenues.
"The companion diagnostic segment again benefited from the Sanofi diabetes collaboration in this quarter," CFO Jim Evans said during the earnings call. In December, Myriad, Sanofi, and the Population Health Research Institute announced they were working together to identify protein biomarker patterns linked to the pathology of diabetes, early diagnosis, and treatment response. Myriad's Rules Based Medicine subsidiary will use its DiscoveryMAP 250+ immunoassay panel to analyze more than 8,000 serum samples collected as part of the Outcome Reduction with Initial Glargine Intervention, or ORIGIN, study (PGx Reporter 12/19/2012).
Sanofi will pay Myriad $10 million to analyze these patient samples over the next two fiscal years. Due to the work with Sanofi, Myriad raised its revenue guidance for subsidiary Myriad RBM in FY2013 to between $28 million and $30 million, compared to previous expectations of $25 million to $28 million.
Myriad also has companion diagnostic development agreements with more than 20 drug companies. It is currently developing a homologous recombination deficiency test to pick out best responders to DNA-damaging agents such as PARP inhibitors and platinum therapies. Myriad estimates that 490,000 patients annually may be candidates for DNA-damaging agents, representing a $2 billion market opportunity for the HRD test.
Myriad recently announced it was testing patients with its HRD test in a Phase II study involving a cancer drug being developed by PharmaMar. The company is investigating its BRACAnalysis test as part of other drug development programs with Abbott Pharmaceuticals, AstraZeneca, and BioMarin Pharmaceuticals.
The company is planning to launch a lung cancer prognosis test and melanoma diagnostic in the next fiscal year. Although Myriad is not expecting these tests to contribute significantly to revenues in the near term, they are a key part of Myriad's "long-term growth and diversification strategy," Capone said.
During the quarter, Myriad's net income was $37.9 million, up from $29.6 million for Q3 2012. The company reported R&D spending of $13.6 million, an increase of 15 percent from $11.8 million, and SG&A expenses of $64.6 million, up 18 percent from $54.7 million year over year. Myriad finished the quarter with $462.3 million in cash, cash equivalents, and marketable securities.
Following the Q3 results, the firm raised its revenue guidance for FY 2013 to between $595 million and $600 million, up from its previous guidance range of $575 million to $585 million.
Reimbursement stability
Since Medicare contractors are in the process of repricing new molecular pathology CPT codes from a number of molecular diagnostics, industry observers have been closely tracking where prices for Myriad's BRACAnalysis and Colaris tests will fall.
Medicare contractor Noridian, which is in charge of pricing tests in the region where Myriad's lab operates, has set a reimbursement rate of $3,382 for the integrated BRACAnalysis and BART test, which represents an 8 percent discount to the average price private payors have agreed to pay. Noridian meanwhile will pay $4,343 for Colaris, a 14.3 percent premium to the average reimbursement from private payors.
Myriad said it has finished renegotiating reimbursement for its tests with private payors, and it doesn't expect that Medicare pricing will impact its payment rates from private insurers. "The strong revenue growth this quarter is fully effective of the new Medicare reimbursement rates for BRACAnalysis, BART, and Colaris, which took effect at the start of the third quarter," Evans said. "We have completed renegotiating all of the new molecular pathology codes pricing with all private insurance companies as well. So, we anticipate reimbursement stability."
After the American Medical Association came up with new CPT codes for more than 100 genetic tests, and the Centers for Medicare & Medicaid Services decided to price these new codes using the so-called gapfill method, Medicare contractors and the lab industry have been at odds over the new prices for the tests. Because gapfill isn't commonly used to price tests, Medicare contractors have had trouble with the repricing process and have issued preliminary reimbursement rates for tests that many in the lab industry find unacceptably low.
Due to challenges with this repricing process, many Medicare contractors have delayed payment for tests (PGx Reporter 4/1/2013). For Myriad, this delay resulted in accounts receivables increasing to $93 million. This, Evans said, was "due to the fact that Noridian … did not make payments in our fiscal third quarter for testing performed in calendar 2013 as they are working to determine the reimbursement rate for the new molecular pathology codes."
However, Noridian has now begun processing those claims, Evans noted, and Myriad is again receiving payment for Medicare testing. "We expect our receivables balance to normalize over the next few quarters and our days sales outstanding to return to historical levels of approximately 45 days," he said.
Keeping up strengths
Although Myriad is currently embroiled in a high-profile lawsuit at the US Supreme Court level challenging several patents underlying its BRACAnalysis test, the company highlighted during the call that even without the help of its patents on isolated gene sequences, the company will be able to remain competitive in the BRCA testing market for hereditary breast and ovarian cancer.
"Patients and physicians are going to demand accurate, quality testing and rapid turnaround times, particularly in affected patients … so it's more than a cost component," Myriad President and CEO Peter Meldrum said. "The accuracy and the quality and the turnaround time are key attributes our customers … will demand."
Another advantage for Myriad is its large proprietary database containing information on variants whose association to cancer is largely unknown. Because the company has tested nearly a million patients on BRACAnalysis, the company claims that it has been able to determine most accurately whether many of these variants of unknown significance are deleterious.
According to Capone, Myriad's VUS rate for BRACAnalysis is under 3 percent and under 6 percent for Colaris. "Any competitor that comes out with a new test is going to face the same journey that we've faced over the last 15 years," Capone said during the call. "When we first launched BRACanalysis, we faced a 40 percent uncertain variant rate, which means that 40 percent of the time a doctor had to sit across from the table with a patient and say, 'We have identified a mutation in your gene but we're not sure what it means.' That is an unacceptable situation for both the patient and the provider."
Capone attributed the premium reimbursement for Colaris to its low VUS rate. It is "critical for a payor to know that a patient has a true negative or a true positive test result," Capone said, noting that without knowing whether a patient is truly negative for a deleterious mutation payors cannot withhold surgical interventions and expensive treatments, and as such may be spending unnecessarily to aggressively treat patients that don't need it.
According to Myriad, it has more than 500 patent claims around its BRACAnalysis test. In the case currently before the Supreme Court, Association for Molecular Patholody et al. vs. Myriad , currently only nine claims are at issue, five covering the composition of matter of isolated DNA sequences and four claims covering the composition of matter of complementary DNA, which are used as probes and primers in diagnostic testing.
Meldrum pointed out what many legal analysts already have, that most of the supporting opinions provided to the Supreme Court in the case support the validity of patents on cDNA, even if many don't believe that isolated gene sequences should be patent eligible. If the Supreme Court decides in this way – to uphold patents on cDNA but not on isolated DNA – the impact to Myriad's business and on the life sciences industry at large is unknown.
Myriad, however, believes that it will be able to remain competitive with the strength of its method of use patents and correlation claims. Meldrum told investors that the company had recently acquired worldwide rights to the MITF gene, which confers a heightened risk of hereditary melanoma and kidney cancer in those who harbor mutations in this gene. In addition to composition of matter patent claims, Myriad also has method of use patents on BRCA1, BRCA2, PMS2, RAD51C, MYH, PALB2, P16, P10, and ELAC2.
The company believes its method of use patents on these genes will help it launch a competitive multigene hereditary cancer panel based on a next-generation sequencing platform. InVitae, GeneDx, and Ambry are a few companies currently marketing NGS-based test panels for various hereditary diseases, and Myriad would likely compete with these companies.
"As we look to the future of hereditary cancer testing, we envision moving away from single-gene, single-cancer tests and believe that a pan-cancer panel, such as our hereditary cancer panel, will dominate the market," Meldrum said.