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Integrated but Separate: Myriad Combines Comprehensive, BART BRCA Analysis; Pricing Remains Split

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Originally published Nov. 6.

Myriad Genetics will combine its Comprehensive BRACAnalysis test and BRCA large rearrangement testing into one commercial product, but continue to price it as two separate offerings, company officials told analysts during a call discussing first-quarter financials for the firm's 2013 fiscal year.

The $3,340 Comprehensive BRACAnalysis test includes complete sequencing of the BRCA 1 and BRCA 2 genes and detects five common large rearrangements in the BRCA 1 gene. Not included in the Comprehensive BRACAnalysis test is the BRACAnalysis Large Rearrangement Test, or BART, which gauges additional large rearrangements in the BRCA 1 and BRCA 2 genes. BART has a separate list price of $700.

The combined product will be called Integrated BRACAnalysis, but will be billed using different medical claims codes that describe the BART and comprehensive platform separately. According to company officials, Myriad generally offers payors an 8 percent discount on the list price for the BRACAnalysis test. It expects that the payor discount for the BART portion will be deeper than for its other tests.

By combining the two tests into one, the company is taking a step toward addressing the concerns of patient groups who have accused Myriad of false advertising by marketing a test called Comprehensive BRACAnalysis that doesn't live up to its namesake unless BART is included. The move, however, falls short of addressing further criticisms from these groups that it is unethical to charge separately for BART and the Comprehensive BRACAnalysis test (PGx Reporter 8/3/2011).

After the National Comprehensive Cancer Network earlier this year recommended that all women eligible for the comprehensive test receive BART, Myriad predicted that more payors would reimburse for these two diagnostics at their separate price points (PGx Reporter 8/15/2012). Myriad's bet appears to be paying off.

This week, Myriad officials reported that BART was a key revenue driver for the three months ended Sept. 30. BART revenue grew 188 percent year over year and brought in $7.6 million in the first fiscal quarter, comprising 5.7 percent of the company's $133 million in total revenue.

"Historically, if a customer wanted to order BART, they would on a test request form … check the Comprehensive BRACAnalysis box and they would write in that they were also interested in the BART," Jim Evans, Myriad's chief financial officer, told analysts during the call. "They were two distinct ordering points on our test request form. We will be rolling out a new test request form that now integrates those two."

Evans reported that around 35 percent of patients who got the comprehensive test in the first quarter also received BART and the additional test was covered by insurers. In the second quarter, the company expects that more than 50 percent of patients deemed appropriate for Comprehensive BRACAnalysis testing will be reimbursed for BART.

"They do have separate list prices," Evans noted. "And they will continue to be billed as separate codes, because in the new molecular pathology coding they are identified as separate tests."

The American Medical Association has issued more than 100 new CPT claims codes for genetic tests that providers can submit for reimbursement starting in 2013. The Centers for Medicare & Medicaid Services has indicated that it will likely use the gapfilling process to determine pricing for tests described by the new codes. Myriad's tests have identifiers under AMA's newly released code set for genetic tests. Wall Street analysts have projected that under these new reimbursement negotiations, BRACAnalysis and Myriad's other tests could see small pricing reductions.

Specifically, as Myriad holds discussions with Noridian to set pricing for its new test codes, the company may end up providing BART at a discount to the $700 list price. "We have seen about an 8 percent discount off of list prices for Comprehensive BRACAnalysis," Evans said. "We expect for BART that we will see a higher discount off of list price and we will provide more clarity on that as we continue to get more reimbursement from more payors in the future."

Myriad officials couldn't provide more guidance on the level of uptake they expect to see for BART throughout the fiscal year. However, they noted that patients usually don't want to pay for BART separately out of pocket, so the uptake of this portion of the integrated test will track with how well it is being reimbursed by payors.

Driving BRACAnalysis Growth

In the first quarter, Myriad netted $105 million in revenue from sales of its BRACAnalysis test, a 17 percent increase from the year-ago period and comprising close to 79 percent of the company's total revenues. The company's Colaris and Colaris AP tests for colorectal cancer risk garnered $12 million in revenue, a 26 percent increase from the first quarter in fiscal year 2012. The other molecular tests in Myriad's portfolio, meanwhile, contributed $2.6 million to first-quarter revenues, marking 17 percent growth year-over-year.

Myriad claims that it has penetrated less than 50 percent of the market for its flagship product BRACAnalysis and much less of the market for its Colaris product, and "significant opportunities" remain for growth for these tests. In the first quarter, Meldrum noted, there was "particularly impressive" growth in the women's health segment of around 38 percent. Myriad's oncology segment, meantime, grew 16 percent year-over-year.

"The growth was driven by three main initiatives: new indications, expansion of the patient-specific specialties sales force, and the initiation of protocol integration programs," Mark Capone, president of Myriad Genetics Laboratories, said during the call.

In recent months, Myriad has focused on growing the use of BRACAnalysis, particularly in women with a family history of triple-negative breast cancer, carcinoma in situ, and ovarian cancer. Sales of the test in these three indications accounted for approximately half of the growth in BRACAnalysis revenues in the fiscal quarter.

Additionally, the company has also split its oncology sales team into a breast cancer-specific sales force and a colon cancer-focused sales force. "[W]e're pleased to see that the year-over-year growth rate for those teams significantly exceeded the national average," Capone said.

The breast cancer specialist reps saw an increase of 22 percent in revenue, while the colon cancer team doubled its sales. Based on the success of these specialist sales teams, Myriad has added two sales groups. The company now has 25 breast cancer and 25 colon cancer specialist reps, and 100 general reps in the oncology segment.

Lastly, during an earlier call with investors to discuss the firm's fiscal-year 2012 earnings, Myriad officials said the company was initiating a program to analyze how to best integrate genetic counseling in OB-GYN and oncologists' offices. "This program is focused on a systematic analysis of a physician's practice to develop the most effective and efficient ways to identify and counsel patients at risk for hereditary cancers," Capone said at the time. "This is particularly important in an oncology practice that likely orders genetic tests, but not on all appropriate breast and colon cancer patients."

After the company established these so-called "protocol integration programs" in OB-GYN offices, it resulted in a six-fold increase in physician ordering of Myriad's genetic tests. Now, Myriad is hoping to replicate this success in the oncology segment, by aiming to establish 600 protocol integration programs in oncologists' offices in fiscal year 2013. The company, during the last fiscal quarter, initiated around 200 such programs. In the women's health segment, Myriad established 600 of these programs last year and plans to set up a total of 900 more in fiscal year 2013. In the following months, Myriad officials will track how these programs are impacting the sales of BRACAnalysis and Colaris tests.

Noting the marked growth in revenue coming from the women's health segment, Capone attributed the growth to the fact that the sales teams have been focusing on marketing tests to new territories, establishing new protocol integration programs, interactive media campaigns, and marketing tests to imaging centers.

Imaging centers "perform mammograms and MRIs for large numbers of women, many of which are at high risk for breast cancer," Capone said. The women's healthcare sales team is targeting "progressive" imaging centers and implementing protocol integration programs in these practices. "This initiative is important because it allows Myriad to access women outside of our current physician reach," Capone said.

Pipeline Update

For some time now, Myriad has been pushing to diversify its pipeline of products beyond BRACAnalysis, which still accounts for the majority of its revenues.

Partnerships with drug developers to develop companion diagnostics for personalizing treatments represent one area of future growth for Myriad. The company reported that its companion diagnostic service revenue brought in $6 million in the first fiscal quarter, comprising nearly 5 percent of its total revenues and remaining relatively flat from the prior year.

Myriad highlighted that it has partnerships with five pharmaceutical firms – Abbott Pharmaceuticals, AstraZeneca, BioMarin, Cephalon, and Pharma Mar – to develop companion diagnostics for their PARP inhibitor drugs. The company is developing the homologous recombination deficiency, or HRD, test as a tool that oncologists can use to determine which patients will likely benefit from DNA-damaging agents such as platinum therapies and PARP inhibitors.

Genetic defects hindering homologous recombination – the process by which cells repair DNA breaks – have been shown to predispose people to breast and ovarian cancer. In a study published in the British Journal of Cancer earlier this month, researchers analyzed 57 cancer cell lines – 21 ovarian, 32 breast, 3 colon, and 1 pancreatic – in an attempt to determine whether Myriad's HRD test score correlated with loss of heterozygosity, which often causes the inactivation of tumor suppressor genes and drives cancer (PGx Reporter 10/17/2012).

Myriad is also conducting a prospective clinical trial to investigate whether its BRACAnalysis test can be used to predict whether breast cancer patients would benefit from treatment with platinum-containing drugs. This study, being conducted by researchers from Myriad, the Beth Israel Deaconess Medical Center, and the Dana Farber Cancer Institute, will gauge whether patients with BRCA mutations benefit from platinum-based treatments, which are not currently used as first-line agents in breast cancer.

"If this study is successful, it may be appropriate for every woman with breast cancer, who is considering chemotherapy, to have a BRACAnalysis test," Meldrum said, adding that researchers expect to begin enrolling patients for this study this month.

In Myriad's pipeline, the company is advancing diagnostic products for lung cancer, bladder cancer, and melanoma. The company also has under development tests in the neuroscience arena. One such test may be able to differentiate patients with major depression from those with bipolar disease, while another test is being developed as a tool with which doctors can identify patients with mild cognitive impairment who are at high risk for Alzheimer's disease.

Melapath, one product highlight by Myriad officials during the earnings call, is slated for launch in calendar year 2013. Myriad estimates that each year US pathologists have trouble determining whether around 275,000 skin biopsies are malignant. The company hopes to market Melapath to pathologists as a tool for determining whether a skin biopsy is benign or malignant.

Melapath, the company estimates, will have a $4 million annual market opportunity, based on an average selling price of $1,500. In anticipation of Melapath's launch, Myriad is planning to hire in the second half of the fiscal year a new sales manager and six account executives who will call on high-prescribing pathologists in California, Texas, Florida, the Northeast, Mid-Atlantic, and Midwest.

Lastly, Myriad's expansion into the European market is another focus area for future growth. The company said it has signed 16 distributors in 30 EU countries, and is on target to achieve greater than $50 million in revenues from European sales by fiscal year 2016.

Financials

Myriad's fiscal first-quarter revenues increased 21 percent year over year to $133 million. Based on the strong first-quarter financial performance, marked growth in the women's healthcare segment, and the "quicker than expected" reimbursement for BART, Myriad increased its year-end guidance from an initial range of between $550 million and $565 million to a new range of $570 million to $585 million.

The firm's R&D spending increased by 34 percent to $11.4 million from $8.5 million, and its SG&A expenses grew 22 percent to $56.1 million from $46.1 million.

Myriad reported net income of $30 million, or $.36 per share, for the first quarter compared to $25.1 million, or $.29 per share, for the year-ago period. The company finished the quarter with $466.3 million in cash, cash equivalents, and marketable securities.

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