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Reporting 27 Percent Q3 Jump, Myriad Outlines Three-Pronged Plan for Diversifying Revenue Base

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After reporting a 27 percent increase in its fiscal third quarter revenues, Myriad Genetics this week outlined three strategic directives for diversifying its revenue base, including growing sales of its existing tests in the US, launching new tests and companion diagnostics in areas of unmet need, and increasing sales of its products in European countries.

For the three months ended March 31, Myriad netted nearly $130 million in revenues, compared to $102 million in the year-ago period. Although the company's flagship product is still the BRACAnalysis test, comprising 81 percent of total revenues, or $106 million, adoption of Myriad's other tests seem to be on the rise.

Revenue from the Colaris and Colaris AP tests for colorectal cancer was $11.2 million, comprising 9 percent of total revenue and an increase of 51 percent over the previous year's quarter. Revenue from the six other tests in Myriad's portfolio contributed $6.2 million, amounting to 5 percent of revenues and a 34 percent increase year over year.

"As we look at the guidance going forward, we've been very successful growing existing products in existing markets," Myriad CEO Peter Meldrum said during a conference call this week to discuss the quarterly results. "Colaris is a good example of that … and we're very excited about Prolaris."

According to Myriad officials, doctors have expressed interest in the Prolaris prostate cancer prognostic test, for which the company has several ongoing validation studies involving 3,500 patients in total. The completion of these studies should help improve reimbursement for the test, which the company hopes to list with a $4,400 price tag. Myriad officials said they would begin reimbursement conversations with insurers in the fourth quarter.

Meanwhile, Myriad believes there is still room for growth in the BRACAnalysis franchise. Company officials said the BRACAnalysis test currently has 45 percent penetration in the US oncology market and 7 percent penetration among primary care physicians and OB-GYNs.

Growth in BRACAnalysis revenues for the quarter was driven by sales of the test to gauge women's risk for developing hereditary ovarian cancer, carcinoma in situ, and triple-negative breast cancer. These indications "contributed significantly" to BRACAnalysis revenue in the quarter, which increased 57 percent over the year-ago period. The annual US market opportunity for BRACAnalysis is greater than $1 billion, the company estimates.

Third-quarter revenues from companion diagnostics developed by its Rules-Based Medicine group amounted to $6.5 million. The company acquired RBM last year for $80 million in cash, and seems open to acquiring additional companies as part of its growth strategy.

"The company is very committed to growing our business for the future and diversifying our product portfolio. We're investing in R&D … but we're also very aggressively looking at in-licensing technologies and products, or actual acquisitions of companies," Meldrum said. "So, we've remained very active on the M&A front and looked at a number of opportunities."

Meldrum reflected that for the time being, however, there aren't many acquisition targets to choose from. "We're committed to it and excited about it," he noted, adding that given the cash Myriad has on hand, there are "no financial constraints [to the company's] M&A appetite."

In the third quarter Myriad posted a profit of $29.6 million, compared to $27.9 million for Q3 2011. The firm's R&D spending rose 76 percent to $11.8 million from $6.7 million, and its SG&A expenses climbed 28 percent to $54.7 million from $42.8 million.

Myriad finished the quarter with $466.7 million in cash, cash equivalents, and marketable investment securities.

Based on the strong growth it saw in the quarter, the company increased its revenue guidance for fiscal 2012 to between $492 million and $496 million, up from its original fiscal 2012 guidance of $445 million to $465 million and a 22 percent to 23 percent increase over 2011 revenues.

Within this guidance, the company expects its molecular diagnostic revenue to be between $467 million and $471 million, a 17 percent to 18 percent increase over the previous year. Myriad officials expect companion diagnostics revenue to remain between $24 million and $26 million.

Expanding Test Pipeline

Part of Myriad's three-pronged plan to grow its business involves launching new tests in oncology, women's health, urology, dermatology, autoimmune diseases, and neuroscience. Myriad's pipeline currently includes 13 candidate tests.

One of the tests under development is one that it in-licensed from Melanoma Diagnostics, which helps doctors determine whether a skin biopsy is benign or malignant. The test was initially planned for commercial launch later this year as an immunohistochemistry-based assay.

"We are now simultaneously assessing a quantitative PCR test, which we believe will increase the sensitivity and specificity of the test, and which will be important for maximum reimbursement and rapid adoption," Meldrum said, adding that the "optimal version" of this melanoma test is slated to be launched in 2013.

Another test Myriad is developing as a tool to guide treatment strategy is the homologous recombination deficiency, or HRD, test. In studies the test has shown it can identify patients that have homologous recombination deficiencies in BRCA and other genes. "The HRD test will incorporate a tissue BRCA analysis and is designed to provide physicians a tool to determine which patients will likely benefit from DNA damaging agents such as platinum therapies and PARP inhibitors," Meldrum said.

Myriad has inked a research agreement with Stanford University to advance development of the HRD test. The molecular diagnostics firm is also in discussions with a number of major pharma companies to develop this test as a companion diagnostic. Since the homologous recombination pathway is implicated in a number of cancers, Meldrum said this test could guide therapeutic decisions for breast, ovarian, lung, pancreatic, and esophageal cancers.

The company is also in the process of clinically validating a lung cancer test to guide therapeutic decisions for patients diagnosed with stage I or stage II adenocarcinomas. Myriad has completed a study with more than 200 patient samples to see if using the test to guide therapeutic decisions impacts overall disease survival. Data from this trial will be presented at an upcoming professional society meeting, Meldrum said.

For this lung cancer test, Myriad is also planning to conduct another study involving 400 samples. The company is hoping to publish data from both this and the 200-patient study in a peer-reviewed journal in 2013.

A Myriad spokesperson told PGx Reporter that the company is planning to launch the lung cancer prognostic test as a laboratory-developed test.

"Regarding HRD, if we launch the test with as a companion diagnostic for a PARP compound, we would follow [US Food and Drug Administration] guidelines for companion diagnostics," the company spokesperson added. "If the test is launched for a class of drugs that are already on the market, like platinum[-based treatments], then most likely it would be an LDT."

International Plans

With regard to Myriad's international expansion, Meldrum said the company's efforts to advance its business in European markets are "ahead of schedule" and the firm is on track to meet its guidance of $59 million in international revenues by fiscal year 2016.

The company's lab in Munich began accepting patient samples in January. In addition to Germany, Myriad has opened offices and hired staff in Switzerland, France, Italy, and Spain. The revenue from these markets is too small to break out, but Myriad plans to do so when its tests gain more traction in these geographies.

Myriad estimates the European diagnostics market to be about three-quarters the size of the US market, "representing a significant opportunity." The BRACAnalysis, Colaris and Colaris AP tests in Europe are projected to bring in around $100 million in annual revenues.

To drive adoption of these tests in European markets, Myriad plans to educate opinion leaders in oncology, genetics, testing networks, and physicians at major hospitals. "With our laboratory now open [in Munich] we are moving forward aggressively on … these fronts," Meldrum said.

He added that Myriad has garnered reimbursement for BRACAnalysis, Colaris, and Colaris AP in all five European countries where it has opened offices.

Prolaris doesn't yet have reimbursement in these markets, but according to Myriad, there is strong interest among key opinion leaders, physicians, and hospitals for this test. "They see the benefit [of the test] for the patient and lowering the overall healthcare cost," Meldrum said.

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