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Myriad Genetics' Q2 Revenues Climb 8 Percent

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Fiscal second-quarter revenues for Myriad Genetics rose 8 percent, driven by sales of its BRACAnalysis product, the company reported after the close of the market on Thursday.

For the three months ended Dec. 31, 2010, revenues for the molecular diagnostics firm rose to $100.4 million, compared to $92.8 million a year ago, surpassing consensus Wall Street estimates of $98.9 million.

Sales of the BRACAnalysis test for the risk of inherited breast cancer and ovarian cancer rose nearly 9 percent year over year to $89.2 million, the company said.

Revenues for the Colaris colorectal cancer test inched up to $7 million from $6.8 million a year ago, while the Salt Lake City-based firm's six other products increase around 14 percent to $4.3 million.

By segment, Myriad's Women's Health business rose 16 percent to a record $31 million, the company said.

During a conference call following the release of the company's earnings, Myriad CEO Peter Meldrum said that the company anticipates introducing one new molecular diagnostic product this year, and plans to introduce one test annually for the coming years. The company has said new product launches is one its main growth initiatives, and Meldrum said today that the company's tenth product — a melanoma test to help pathologists determine whether a mole is benign or malignant — is anticipated to be launched in the second half of calendar 2011.

In December, Myriad announced a licensing agreement with Melanoma Diagnostics for technology that will be used for the diagnosis and prognosis of malignant melanoma using genetic markers.

Meldrum disclosed during today's conference call that the company paid $1.5 million upfront for the technology and could make additional milestone payments.

In the firm's pipeline are molecular diagnostic tests for the early detection of ovarian and colon cancers; prognostic products for melanoma, lung, and colon cancer; and several personalized medicine products in oncology, said Meldrum. The company is also developing a tissue-based test for BRCA functionality directed at PARP-inhibitors that it expects to launch in 2012, he added.

Another stated growth initiative is entry into the European market, and Meldrum said that Myriad plans to establish a central laboratory in Germany to accept samples from across Europe for its BRACAnalysis test. About 7,000 BRCA tests are performed annually in Germany by companies other than Myriad, making it the largest market on the continent for such testing.

Myriad's European headquarters would be situated in Switzerland "to take advantage of the favorable business environment."

At the JP Morgan Healthcare Conference in San Francisco two weeks ago, Meldrum said that the plan is to evaluate opportunities in Europe on a country-by-country and product-by-product basis — and so far, interviews with government officials and opinion leaders have been "very positive."

To date, the company has been granted five patents covering BRCA1 and BRCA2 in Europe, but has not enforced them against other firms offering the test based on the two genes. During the call Meldrum was asked whether the company would first seek to enforce its patents in Europe before it would make its entry into that market.

In response, he said the firm is weighing that possibility, but "if I had my druthers, I would not want to go into a new market in a heavy-handed fashion trying to enforce patents."

Myriad, he added, has other competitive advantages that may make such enforcement unnecessary, including short turnaround time for results. BRACAnalysis can achieve results in about two weeks, whereas current BRCA testing being done in Europe can take one year to get results, he said.

Also, Myriad's test has greater accuracy of data, according to Meldrum. About 30 percent of current testing in Europe results in variants of unknown significance. By comparison, Myriad's rate of variants of unknown significance is less than 2 percent, he said.

"So given those two competitive advantages … I don't believe that trying to enforce the patents is either a good idea or warranted at this time," Meldrum said.

R&D costs for the second quarter rose to $6.1 million from $5.1 million, a 20 percent jump year over year, while SG&A costs inched up 4 percent to $43.7 million from $42.1 million in the second quarter of 2010.

Myriad posted a profit of $24.2 million, or $0.26 per share, meeting analysts' forecasts, but a 32 percent decline from $35.4 million, $0.36 per share, from a year ago.

Results for the second quarter of 2011 include a $14.9 million income tax provision compared to $980,000 for such a provision in Q2 last year.

During the quarter, Myriad repurchased 2.9 million shares of its common stock, and during the call Myriad CFO James Evans said the company expects to complete its remaining share buyback of $38 million by the end of the fiscal year.

As of Dec. 31, Myriad had $494.4 million in cash, cash equivalents, and marketable investment securities, it said.

The company reiterated guidance for full-year 2011 of revenues between $380 million and $400 million and EPS of between $0.95 and $1.00. Analysts had guided for $1.02 per share.

In early morning Friday trade, shares of Myriad were down around 9 percent at $20.30, which may be due to a connection with a drug in late-stage development at Sanofi-Aventis.

On Thursday after the close of the market, Sanofi-Aventis announced that in a Phase III trial its PARP-inhibitor, iniparib (BSI-201), did not meet clinical trial endpoints.

In a research note, Peter Lawson of investment firm Mizuho Securities wrote that though the news may initially negatively impact Myriad because of its traction in using BRACAnalysis in clinical trials, "we believe this actually is a positive for Myriad. Sanofi did not select patients for BRCA status in the trial – instead selecting triple negative patients, which in fact highlights the important of BRCA stratification of patients," he wrote.

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