By Turna Ray
Although Myriad Genetics' revenues for fiscal year 2010 increased by a smaller margin than in previous years, the company remains confident about its future growth opportunities through increased merger and acquisition activities, partnerships with drug companies to develop companion diagnostic tests, and penetration into the European market.
For its 2010 fiscal year ended June 30, Myriad reported revenues of $363 million, an 11 percent increase from $327 million it posted in fiscal year 2009. Historically, the company's seven-year annual growth rate is around 40 percent. During fiscal year 2009, the company's revenues increased 47 percent.
"This double-digit, year-over-year growth during a difficult economic environment continues to demonstrate the critical nature of the information provided by Myriad's tests," the company said in a statement. CEO Peter Meldrum attributed the year-over-year slowdown to the fact that people are out of work and visiting the doctor less, and insurers have increased their plan deductibles.
"We have not seen, as the [economic] recovery has struggled, a significant rebound in physician office visits," Meldrum said. "Since that is the point at which a physician would initiate a [BRACAnalysis] test …Myriad is impacted by that."
Despite this, the company is continuing to invest in new product development, eyeing potential acquisition targets, and focused on expanding its business in Europe by 2012.
In considering M&A targets, Myriad is looking "beyond oncology" to work with companies that will have significant impact on its current revenues.
"Myriad views itself as a molecular diagnostics company, not an oncology company," Meldrum said during a call this week to announce the company's fourth-quarter and yearly earnings. "So we're very much interested in opportunities outside of the oncology sector, particularly [central nervous system] disorders, antipsychotics for companion diagnostics, rheumatoid arthritis, and any of the major disorders where the drugs that address those disorders are very expensive and don't work in the majority of patients."
Previously, Myriad announced that AstraZeneca and Abbott, pharmaceutical companies that are developing a class of oncologics called PARP inhibitors, were using Myriad's BRACAnalysis test to stratify patients in clinical trials based on their BRCA gene mutation status. Myriad is also working with "four major pharmaceutical companies" who are using its Prezeon test to stratify patients for clinical trials involving another class of oncologics, PTEN inhibitors (PGx Reporter 06/30/10).
The company is also assessing the European market to expand its presence on the other side of the pond and recently hired Gary King as its new executive VP of international operations (PGx Reporter 07/14/10). King said during the call that Myriad is investing $2 million to assess the European market and is working with Scientia Advisors to identify growth opportunities, barriers to entry, and pricing and reimbursement strategies in different markets.
Some strategies the company is considering abroad include partnering with or acquiring local or pan-European labs to market and perform its tests; as well as leveraging alliances with drug companies for companion diagnostics development. "We don't anticipate that we'll be significantly reducing prices to penetrate [the European] market," King said. Myriad officials added that the company has not identified any "real competitive threat" overseas, since the European diagnostics market is largely comprised of small laboratory test developers.
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Finally, Meldrum also responded to the US Food and Drug Administration's recently stated intent to regulate laboratory-developed tests, an assay category that includes Myriad's tests. Meldrum maintained that the company's revenues and operations would not be negatively impacted by increased FDA oversight of LDTs.
There were "no surprises out of the LDT meeting" FDA held last month to gather public input on its stated intent to expand oversight of these kinds of tests, according Meldrum (PGx Reporter 07/28/10). He feels that the agency understands that its risk-based regulations should not restrict patients' access to tests and that the agency's requirements to laboratories should not overlap with the Centers for Medicare & Medicaid Services, which currently oversees the majority of laboratories that develop diagnostic tests.
Meldrum did not discuss the regulatory commitments the company might have to meet under FDA's expanded oversight, but presented the regulatory changes as presenting potential business opportunities for Myriad. He noted that while "future regulation will create barriers to entry" for small, independent firms, this will be an advantage for larger companies like Myriad. "Smaller companies will look to larger companies like Myriad to have those products approved and marketed," he said.
Although in the last quarter Myriad appealed a federal district court's decision that several of its BRCA patents are invalid, during the call, company officials did not discuss the case (PGx Reporter 06/23/10).
Market Growth
Some industry observers have speculated that the slowdown in the company's revenue growth may be due to the fact that Myriad has saturated the breast cancer market for the BRACAnalysis test, which comprises nearly 90 percent of its revenues. The company feels that there are still significant growth opportunities for the test, however.
The company plans to launch a direct-to-consumer marketing effort, with the help of a television ad, in the Southeastern portion of the US starting in September. This region currently represents 15 percent of the company's revenue base.
During the call, officials also discussed targeting the company' sales force toward the OB-GYN market.
"One segment that is underrepresented and represents about 40 percent of the country's OB-GYNs believes in the value of predictive medicine testing," said Myriad President Mark Capone. "However, they need tools to efficiently integrate the testing process into their practice. Our goal is to develop and provide the tools that will convert them into frequent ordering customers."
Myriad officials feel that the American College of Obstetricians and Gynecologists' guidelines for hereditary breast and ovarian cancer support the company's efforts to market to the OB-GYN community to routinely order BRACAnalysis testing for their patients. The company said that since the ACOG guidelines were issued in April 2009, 12,700 OB-GYNs have ordered BRACAnalysis. However, Myriad officials added, this sector is still not ordering the test with the frequency that ACOG guidelines recommend.
The guidelines are "not enough to get them to order exclusively but allow us to get into the conversation," Capone said. "We were pleased at the number of OB-GYNs that ordered the test… but we should get them [to] increase [their] frequency in ordering the test."
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For the full year, the company's oncology business grew 7 percent over fiscal year 2009, while its women's health product sales increased 22 percent. Although the company did not break out full-year revenues for each of its products, in the fourth quarter, BRACAnalysis accounted for $82.5 million of $93.9 million in fourth-quarter revenues.
Meanwhile, Colaris, Myriad's test for assessing a person's risk for colorectal cancer or uterine cancer, netted $7.3 million of the total fourth quarter revenues, while Melaris, TheraGuide 5-FU, OnDose, Prezeon, Prolaris, and some single-site testing accounted for the remaining $4.1 million of total quarterly revenues.
After a full year of marketing OnDose, approximately 6 percent of oncologists have ordered the test. In an effort to drive further adoption of this test, the company has submitted two papers for publications and is in discussions with Medicare.
For Prolaris, launched by Myriad earlier this year, the "interest among urologists remains high," company officials said, but inclusion in treatment guidelines and published studies will be necessary for mainstream penetration of this test.
Fourth-Quarter and Full-Year Financials
Total revenues for the three months ended June 30 climbed 9 percent to $93.9 million, compared to $86.1 million a year ago.
During the quarter, the company netted a profit of $53.3 million, a 125 percent increase from $23.7 million for Q4 2009. Last year, earnings were impacted by a $13.1 million loss from discontinued operations.
The firm spent around $5.3 million on R&D during the quarter, compared to $4.4 million in the year-ago period. SG&A costs rose to $39.8 million from $36 million a year ago.
In addition to an 11 percent increase in full-year revenues — $362.6 million from $326.5 million year over year — net income for the year rose 80 percent to $152.3 million.
The firm spent $21.9 million on R&D during the year, up from $17.9 million a year ago, and $161.4 million on SG&A, up from $138.9 million a year ago.
As of June 30, Myriad reported having $488.4 million in cash, cash equivalents, and marketable investment securities.
For full-year 2011, Myriad is forecasting total revenues of between $380 million and $400 million — growth of between 5 percent and 10 percent over fiscal 2010.