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Myriad's Q4 Revenues, Forecast Fall Short of Expectations; Stock Tumbles

This article has been updated with additional information about Myriad's stock performance and analysts' notes. 

NEW YORK (GenomeWeb) – Myriad Genetics reported after the close of the market on Tuesday that its fiscal fourth quarter revenues dipped 2 percent year over year.

Myriad's surprising results and forecast sent its shares tumbling to a 52-week low.

For the three months ended June 30, total revenues were $186.5 million, compared to $189.9 million in the year-ago period and below analysts' expectation of $187.9 million.

Revenues from molecular diagnostic testing were $173.8 million in fiscal Q4, down 3 percent from $178.8 million. Within molecular diagnostic testing, hereditary cancer testing revenue decreased 7 percent to $152.8 million.

"While revenues in the quarter were within the range of our previously provided financial guidance, hereditary cancer revenue came in below our expectations," Myriad CFO Bryan Riggsbee told analysts during an earnings call.

Riggsbee explained that hereditary cancer revenues declined by 2 percent sequentially due to some market share loss in the oncology segment, and down 7 percent year over year to volume and pricing declines related to implementation of certain long-term contracts Myriad has negotiated with payors. Myriad said it ended the fourth quarter with 65 percent of revenues from its hereditary cancer testing business coming from long-term payor contracts.

Meanwhile, revenues for Vectra DA grew 8 percent to $12.7 million during the fourth quarter and Myriad performed 41,300 tests. Prolaris revenues increased by 400 percent to $3.5 million, and physicians ordered 4,750 tests. Myriad's other tests brought in revenues of $4.8 million, marking a 92 percent increase.

During the fourth quarter, Myriad said revenues from its international business nearly doubled and comprised 6 percent of total revenues. Myriad's goal is to make international testing revenues 10 percent of total revenues.

Myriad also reported $12.7 million in revenues from pharmaceutical and clinical services, a 14 percent increase from $11.1 million in the year-ago period.

Its R&D spending in the quarter increased to $19.5 million from $18.7 million in the fiscal Q4 2015, while SG&A expenses decreased to $91.3 million from $97.5 million.  

Myriad recorded a profit of $23.4 million, or $.32 per share, for the quarter, a 25 percent increase from $18.7 million, or $.26 per share, a year ago. On an adjusted basis, EPS was $.36, short of analysts' consensus estimate of $.38 per share.

During the quarter, Myriad repurchased around 1.6 million shares, or $55 million, in common stock under its repurchase program.

For the full fiscal year, Myriad reported a 4 percent increase in revenues to $753.8 million from $723.1 million, under analysts' estimate of $755.5 million. Molecular diagnostic revenues totaled $705.7 million, up 2 percent from $695.5 million a year ago, with hereditary cancer testing revenues essentially flat at $632.3 million. The company's pharmaceutical and clinical services revenues increased 74 percent to $48.1 million from $27.6 million in fiscal year 2015.

Its net income for the year was $125.3 million, or $1.71 per share, a 56 percent increase compared to $80.2 million, or $1.08 per share, a year ago. On an adjusted basis, fiscal 2016 EPS was $1.63, falling short of the Wall Street estimates of $1.65 a share.

Myriad spent $70.6 million on R&D for the year compared to $75.5 million the prior year, and $359.1 million on SG&A compared to $366.0 million in the prior year. 

The company finished fiscal year 2016 with $68.5 million in cash and cash equivalents, and $90.5 million in marketable investment securities.

Myriad is expecting revenues of between $168 million and $170 million in the first fiscal quarter of 2017, and EPS of $.14 to $.16. Those numbers are well below analysts' consensus forecast for revenues of $189.3 million, and EPS of $.43.

For FY 2017 the company said it expects $740 million to $760 million in revenues and EPS of $.47 to $.57, also short of analysts' expectations for $788.9 million in revenues and EPS of $1.78.

Myriad CEO Mark Capone said during the call that the firm is adding three new genes to myRisk Hereditary Cancer panel — GREMM1, POLE, and POLD-1 — which were recently added to National Comprehensive Cancer Network's clinical guidelines for colon cancer risk. The company is evaluating whether to remove the NBN gene from the panel, based on guidelines suggesting limited utility.

Additionally, Capone said in the first quarter of FY2017, Myriad will introduce a new option for genetics experts to customize the myRisk panel and order an analysis on a subset of the genes on the panel. Myriad has inked a new agreement retaining in-network status with Blue Shield of California, and Capone said the firm is having discussions with other payors that are evaluating their hereditary cancer portfolios. Capone also discussed the company's plans in fiscal year 2017 to conduct new studies on its HRD test, Vectra DA, and the GeneSight pharmacogenetic test, which came to Myriad recently with its acquisition of Assurex.

Following the release of Myriad's results investment banks Wells Fargo and Piper Jaffray downgraded shares of the firm.

Wells Fargo Securities analyst Tim Evans downgraded Myriad's stock from Outperform to Market Perform, citing market share loss in its core hereditary cancer testing franchise "more rapidly than we foresaw." He cut his valuation range on Myriad's shares to $20 to $22 from a previous range of $42 to $45.

Piper Jaffray analyst William Quirk said in a note that he expects "reimbursement risk combined with sales force losses will put pressure on the organization for the near term." He downgraded Myriad to Neutral.

"[The Protecting Access to Medicare Act] could be a long-term benefit for Myriad, but we expect the turnaround could play out over several quarters," Qurik added in his note. "The risk to our downgrade is better than expected contribution from new products and acquisitions."

Meanwhile, Cowen & Co. cut its price target on Myriad's shares to $20 from $32, while Goldman Sachs cut its price target to $24 from a previous $39.

In Wednesday morning trading on Nasdaq, Myriad's shares tumbled 30 percent to $20.64.