By Turna Ray
Myriad Genetics is battling the uncertain economic environment by increasing its marketing to physicians, expanding Medicaid coverage of its tests, and offering no-interest payment plans for patients with high deductibles.
Myriad officials outlined these plans in a conference call to discuss the company's financial results for the three months ended March 31, the firm's fiscal third quarter. During the quarter, revenues rose 5 percent to $90.8 million, from $86.5 million during the year-ago period, but this increase fell well short of analysts' consensus estimate of $97.8 million.
During the call, analysts expressed clear disappointment in Myriad's performance, and investors also reacted strongly. In Wednesday morning trade on the Nasdaq, the day following the release of the company's earnings, Myriad shares tumbled 25 percent to $17.98.
Myriad officials attributed the lower-than expected revenues to a slowdown in testing due to the holiday season in December and to the resetting of deductibles with payors. Additionally, Myriad officials acknowledged that due to economic pressures and joblessness, people are making fewer visits to the doctor and are undergoing fewer medical procedures.
According to Myriad President Mark Capone, physician visits during the quarter were "below historical levels" for routine medical treatments such as mammography, which fell 20 percent below normal. Additionally, 52 percent of oncologists reported a decrease in their patient volume, with a 73 percent increase in the number of underinsured or uninsured patients. "To respond to this issue we've continued to increase our focus on consumer awareness activities," Capone said.
Myriad's solution to a weaker economy, first and foremost, is increased marketing. The company is not only continuing its direct-to-consumer advertising campaigns for BRACAnalysis in the southern and mid-western states until the end of May, but plans to launch new DTC campaigns in other parts of the country next year. In addition, the company has launched a new web campaign, called "Raise the Red Flag," dedicated to raising awareness of its Colaris test and the increased risk of hereditary colon cancer associated with Lynch Syndrome.
Myriad is eyeing the mid-Atlantic and southeastern regions of the country for a new DTC campaign. These regions comprise 15 percent of the company's revenues and include Georgia, Tennessee, Mississippi, Alabama, Virginia, North Carolina, South Carolina, Louisiana, and Arkansas.
Capone said the company expects the campaign to cost around $1 million in fiscal year 2010 for "direct-to-physician activities," and $6 million in fiscal year 2011 for advertising.
Additionally, Myriad plans to use social networking sites, such as Facebook, Twitter, and YouTube, to "cost effectively approach those patients that would otherwise forego physician visits," Capone added.
Myriad plans to focus its marketing particularly on the OB-GYN segment for its BRACAnalysis test, since it has only penetrated 10 percent of that market. Additionally, Myriad plans to push its recently launched OnDose test for optimizing dosing for 5-FU cancer therapy and Prolaris test for prostate cancer recurrence. The company launched OnDose in the middle of last year, and Prolaris earlier this year.
"Because these tests are so ... new, there is a significant amount of physician education that is required, and new guidelines have to be established by the various medical professional societies," Meldrum told investors, adding that after factoring the time it takes to get Medicare and Medicaid coverage, "meaningful impact of the newly launched products won't occur for another one to two years."
Meldrum added that the company is investing in conducting and publishing the results of studies that show the clinical utility of its newer products.
However, somewhat counter to the company's marketing strategies and concessions to customers during the poor economy, Myriad also raised the price of all its products by an average of 7 percent.
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Myriad also reiterated its plans to appeal a federal district court's decision that seven patents associated with the BRACAnalysis test are invalid, and said that this preliminary decision will not materially impact its business going forward.
"Myriad will appeal Judge [Robert] Sweet's decision in the Federal Circuit Court of Appeals and anticipates a favorable ruling from the higher court in about a year," Meldrum said. In the meantime, he emphasized that "all seven patents that are challenged under the claim remain in full force."
Concessions and Price Increases
In addition to its DTC efforts, Myriad is ramping up its sales force to visit doctors more often and is increasing physician-to-physician education efforts. While these marketing initiatives are intended to drive testing among physicians and increase sales of products, Myriad is also instating concessions to the customers during hard times, such as flexible payment plans and expanded Medicaid coverage for BRACAnalysis and other tests.
Capone noted that since patients are sensitive to out-of-pocket costs associated with testing, particularly since many insurers have increased deductibles for their enrollees, Myriad is promoting a 24-month no-interest payment plan to help patients manage their healthcare costs.
Additionally, the company now has "coverage in states which represent over 70 percent of all Medicaid patients," Capone said. "With unemployment hovering around 10 percent Medicaid will provide access to hereditary cancer testing for a significant number of patients."
Expansion of Medicaid coverage for BRACAnalysis also gives Myriad access to new customers under the reformed healthcare system that raises the Medicaid eligibility to 133 percent of the poverty level — or $29,327 for a family of four. This is expected to bring 16 million more low-income people under Medicaid coverage, making it more likely that they will visit doctors' offices for check-ups and preventative care.
While rolling out these various marketing and coverage efforts to address the weak economy, Myriad also raised the prices of its tests by an average of 7 percent. The company said it routinely raises the prices of its products every 18 months to 24 months. The last price hike occurred in September 2008, and the new price increases were implemented on April 1. "We strive to keep our test as affordable as possible," Meldrum said.
The new prices for Myriad's tests are: $3,340 for BRACAnalysis; $3,150 for Colaris; $2,050 for Colaris AP; $2,400 for OnDose; $1,175 for TheraGuide 5FU; $900 for Molaris; $500 for Prezeon, and $3,400 for Prolaris.
"We believe the clinical value of our tests greatly exceeds [their] cost," Meldrum added, citing a report by the HHS Secretary's Advisory Committee on Genetics, Health, and Society that found that the cost of BRACAnalysis was commiserate with other PCR-based sequencing tests.
Beyond its statement that it plans to appeal the federal district court's decision about its patents, neither Myriad officials nor investors brought up the lawsuit filed against the company last year by the American Civil Liberties Union and the Public Patent Foundation on behalf of researchers and individual women (PGx Reporter 05/13/09).
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However, several statements made by company officials about the company's goodwill efforts to ensure its products are affordable to those without insurance seemed to be an attempt to counter some of the negative publicity the company has received in the wake of the district court decision.
In what seemed to be a response to critics who maintain that Myriad's products are too expensive, Meldrum emphasized that as much as 96 percent of the company's revenues were billed to insurers, and 2,600 insurers reimburse BRACAnalysis and other Myriad tests. Additionally, the company claims it receives coverage from more than 80,000 separate insurance plans covering 130 million lives.
However, Myriad's marketing practices have in the past raised payor concerns that patients whose personal, medical, and family history don't suggest they should be tested with BRACAnalysis are being tested. As a result, several large insurers have put prior-authorization or prior-notification schemes in place to ensure the right patients are receiving the test. In the past, the company has said that these prior-authorization programs have not impacted uptake of the tests (PGx Reporter 11-04-09).
Although due to economic pressures insurers have increased deductibles or raised their co-payment amounts for patients, the "average out-of-pocket cost for insured patients is still under $100," according to Meldrum.
The story is somewhat different according to the numerous researchers, medical professionals, women's groups and individual women challenging Myriad's patents. The plaintiffs allege that Myriad's aggressive maintenance of its patents have shut down their research and restricted the ability of women to learn of their BRCA status from outside sources.
"Shortly after filing the lawsuit, when Myriad argued they weren't preventing our clients from getting their genes screened, I wrote a letter asking them to commit on paper that they wouldn't object to my women patient clients seeking screening from other providers," Daniel Ravicher, executive director of PUBPAT and counsel representing the plaintiffs told Pharmacogenomics Reporter in an e-mail this week. "Myriad refused to provide those
Myriad has consistently maintained that its patents have not limited research into BRCA mutations, citing the numerous published studies on the topic. During the call with analysts, Meldrum said that in past years Myriad has provided free BRACAnalysis testing to more than 3,000 women who didn't have insurance coverage or couldn't afford the test.
Meldrum said in a statement that third-quarter revenues "followed seasonal growth patterns," and acknowledged the negative impact of "macroeconomic conditions."
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The company reported net income of $33.3 million in the third quarter, a 31 percent increase from the year-ago period.
Myriad's research and development expenses increased 30 percent to $5.9 million from $4.5 million for the third quarter of 2009. The company said the increase was due to clinical studies for its current products, and research and development on "internal product candidates."
The company has said it plans to launch a new test for pancreatic cancer this fall that will prognosticate disease predisposition and predict response to therapy.
Selling, general and administrative expenses for the third quarter rose 15 percent to $40.8 million from $35.5 million. Myriad attributed this increase to costs associated with its expanded sales force, DTC marketing campaigns, and physician speakers programs.
Myriad ended the quarter with $511.2 million in cash, cash equivalents, and marketable securities. According to company officials, Myriad will reinvest this cash in expanding its molecular diagnostics business and expanding operations to Europe in the next three years.
Myriad said separately that its board of directors has authorized the repurchase of $100 million of its outstanding common stock. It expects to complete the buyback on or before Dec. 31, 2010.
Also, starting with the third quarter and going forward, Myriad will be providing its own guidance for future revenues as opposed to providing consensus guidance as it did previously. The company had previously projected that that its full-year revenues would be in the neighborhood of $380 million. However, this week, the company said it hopes to finish the fiscal year ending June 30 with revenues between $360 million and $365 million, representing an 11 percent increase over the prior fiscal year.