By Turna Ray
Myriad Genetics is planning to stave off the impact of the recession on its business by bolstering sales force visits to OB/GYNs, ramping up its direct-to-consumer campaign in the Midwest and the South, and expanding physician-to-physician outreach efforts to spread the word about its products.
â€œWe believe that these initiatives will be beneficial to the company in combating this weak economy,â€ Myriad CEO Peter Meldrum said during an earnings call this week. â€œWe believe that the increased profits generated from these new initiatives will more than offset the costs associated with our investment.â€
According to Meldrum, the recession began to impact Myriadâ€™s business during the second half of its fiscal year, which ended June 30. In the first half of the year, revenues were growing at a clip of 55 percent, but by the second half of the year that had slowed to 40 percent growth.
â€œWhile we are being affected by the current economic recession and have experienced weaker revenue growth over the past two quarters, we completed the fiscal year with molecular diagnostic revenues of $326.5 million, a 47-percent increase over revenues of $222.9 million in fiscal 2008,â€ Meldrum said during the call. Fourth-quarter molecular diagnostic revenues rose 33 percent to $86.1 million from $64.7 million in the prior-year period.
Myriad reported fourth-quarter net income of $23.6 million, compared to $65.5 million in the comparable period of 2008, due in some part to the discontinuation of its pharmaceutical and research business, which it spun off in June. Myriad's net income for the year was $84.6 million, compared to $47.8 million in the year-ago period.
Myriad's R&D spending during the quarter fell to $4.4 million from $4.8 million, while its SG&A spending increased to $36 million from $31.6 million. Its R&D spending for the fiscal year declined to $17.9 million from $18.5 million, while its SG&A expenses climbed to $138.9 million from $110.4 million.
Myriad finished the quarter and fiscal year with $392.2 million in cash, cash equivalents, and marketable investment securities.
The economy seems to have hit sales of Myriadâ€™s flagship product, BRACAnalysis, mainly in the OB/GYN primary care market. â€œAs one would expect, the recession has had only a modest impact on our oncology sales, largely from unemployment and the resulting loss of insurance, but a significantly greater impact on our OB/GYN sales in the primary care market, primarily as a result of fewer doctor office visits,â€ Meldrum said. He did not provide further details on the falloff in BRACAnalysis sales
According to Myriad Chief Financial Officer Jim Evans, approximately 30 percent of Myriadâ€™s molecular diagnostic revenues are derived from the asymptomatic or OB/GYN market and 70 percent of revenues come from the oncology sector.
Myriad officials attributed lower revenues in the OB/GYN sector to a number of factors, including an increase in the number of women forgoing their yearly checkups due to the economic downturn, as well as the lack of urgency in getting screened in the primary care setting compared to the oncology setting.
Meldrum cited a survey from the American Academy of Family Physicians, which reported that 58 percent of physicians have seen an increase in appointment cancellations, and 54 percent are seeing fewer patients since the recession began. Furthermore, a survey by the American College of Obstetricians and Gynecologists reported that 14 percent of women have postponed their annual checkups; and a Kaiser Family Foundation survey found that 19 percent of people in the US are delaying doctorsâ€™ visits for preventive care, and 23 percent are skipping a recommended medical test or treatment.
Another event that may or may not impact future revenue from BRACAnalysis is United Healthcare's prior notification requirement for all policy holders receiving testing (see related story, in this issue).
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â€œAs we move into 2010, we expect the continued weak economy to restrain our revenue growth,â€ Meldrum said. Nevertheless, the company is maintaining its current guidance of $392 million for fiscal year 2010 revenues.
Myriadâ€™s strategy during a weak economy seems to be to sell harder.
In an effort to bolster revenue growth, Myriad accelerated the planned hiring of 50 new representatives for its OB/GYN sales force. In total, Myriad is now operating with a 300-person sales team: 150 reps in the oncology sector and 150 reps in the womenâ€™s health sector.
â€œWe found that an OB/GYN sales rep, on average, needs six visits to move a doctor to be what we classify internally as a physician customer. On average, five visits are required for an oncology rep to move an oncologist to the same status,â€ Evans said during the earnings call this week. â€œAs such we believe the continuing addition of OB/GYN sales reps will have a positive impact on our revenues.â€
Myriad also launched a DTC campaign on Aug. 17 in certain states in the Midwest. The launch of this campaign was moved up by three weeks in an effort to battle the ill effects of the economy in those markets. Furthermore, the company will continue its DTC campaign in certain Southern states, from Aug. 17 to Dec. 31.
Additionally, Myriad plans to increase awareness among OB/GYNs about its products through physician-to-physician outreach efforts, since thatâ€™s the sector where sales have been hit the hardest. â€œWe are expanding our OB/GYN speakers program, an effort to increase awareness among physicians about the new ACOG guidelines, so they can incorporate them in their OB/GYN practice,â€ Meldrum said.
Specifically, Myriad is â€œexpanding the number and scopeâ€ of peer-to-peer physician activities by hiring and educating an additional 130 physician speakers for its Speaker's Program. Once physicians are educated by Myriad, they â€œwork with our sales representatives who schedule peer-to-peer events with physicians in their respective local territories,â€ Gregory Critchfield, president of Myriad Genetic Laboratories, said during the earnings call.
â€œAs thought leaders share personal experiences with Myriad testing with their peers, we see greater adoption of our testing from physicians attending these events,â€ Critchfield added. â€œInfrequent ordering physicians have the opportunity to ask questions in non-training environments and seek to be educated by someone who routinely identifies and tests appropriate patients with BRACAnalysis.
â€œShould an uninitiated doctor have additional questions that arise during implementation of testing in his or her practice, there's a personal connection with someone who has gone through it and whose opinions and advice are valued,â€ Crichfield added.
Through its physician speakerâ€™s program, Myriad expects to contact 50 percent of physicians that its sales force targets.
Additionally, Myriad will increase the number of â€œinformalâ€ peer-to-peer breakfast and luncheon meetings, and is working with national and local professional societies, hospital networks, and academic centers to conduct formal educational sessions. â€œAll of these peer-to-peer activities are designed to help physicians understand the importance, the value and the practicality of offering testing to their patients,â€ Critchfield said.
Finally, Myriad will develop a webinar to educate OB/GYNs on ACOG practice guidelines and a webinar on genetic counseling.
â€œThis will help educate OB/GYN office staff on practical applications [for] our research cancer testing â€¦ [and] help them in identifying patients according to ACOG guidelines, insurance support, patient education materials, results interpretation and follow-up,â€ Critchfield said.