MYRIAD GENETICS INC Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Q3 Performance: Achieved 11% revenue growth, $150M gross profit, $14M adjusted EBITDA, $0.06 adjusted EPS, and $149M liquidity.
• Investor Day: Outlined commercial growth strategy, product portfolio updates including FirstGene, Precise Liquid, and Precise MRD.
• UnitedHealthcare: Engaging to maintain access to GeneSight for patients with depression, anxiety, ADHD; GeneSight revenue from United Commercial was ~$40M in last 12 months.
• Labs and Digital Initiatives: Progress in Labs of the Future and EMR integrations to improve patient/provider experience and efficiency.
• Divestiture: Closed European EndoPredict sale, removing ~$11M annual revenue but accretive to adjusted operating income.

Segment Performance

• Hereditary Cancer Testing: MyRisk shows strong growth with increased adoption and payer coverage; BRACAnalysis CDx growth impacted. MyRisk expected to continue double-digit volume growth in 2025 with stable ARPU. Revenue contribution: Hereditary Cancer testing grew 5% YTD, with MyRisk up 11% for affected population.
• Women’s Health: Prenatal revenue grew 10% YOY in Q3 and 24% TTM (excluding SneakPeek), with growth from current and new accounts.
• GeneSight: Revenues increased 34% YOY with 10% volume growth, ARPU improved due to provider demand, commercial pull-through, and payer coverage. Revenue contribution: ~$40M from United Commercial in last 12 months.
• Precise Tumor: Launched from Salt Lake City facility, with monthly volume growth expected to accelerate in 2025.
• Labs of the Future: Invested over $75M in labs, with progress in Salt Lake City and South San Francisco labs, aiming to complete moves by 2025.
• Digital Capabilities: Focus on EMR integrations, with 4,000 new provider sites integrated this year, partnering with multiple EMR vendors.
• MRD: Plan to launch first commercial offering for breast cancer in H1 2026, with ongoing research collaborations and IP strengthening.

Guidance

• 2024 Revenue: Narrowed full-year revenue range to $837M-$843M from prior $835M-$845M.
• Gross Margin: Updated to 69.8%-70.3%.
• OpEx: Expected to be $565M-$570M.
• Adjusted EBITDA: Projected $34M-$39M.
• Adjusted EPS: Expected $0.12-$0.14. Aim for double-digit long-term growth rate, considering UnitedHealthcare impact.

Risks

• UnitedHealthcare Policy Change: Surprise policy update restricting GeneSight access, potential revenue and gross profit loss, but efforts to mitigate.
• Payer Pressure: General pressure on payers to control costs, potential impact on coverage and prior auths for genetic tests.
• Market Dislocation: Competitive dynamics in hereditary cancer and other segments affecting growth and market share.

Question and Answer

• **Q: Doubts on GeneSight revenue impact from UnitedHealthcare policy change, math on gross margin, and philosophical on GeneSight's place A: Paul Diaz discussed revenue from United, gross margin impact, and commitment to GeneSight despite challenges.
• **Q: Concerns on payers viewing genetic tests as low-hanging fruit for cost control A: Paul Diaz acknowledged payer pressure but emphasized GeneSight's value in reducing total cost of care and MLR.
• **Q: Inbound from other payers after United's decision and revised long-term target for GeneSight no pay rate A: No inbound yet, but ongoing efforts to reduce no pay and confident in long-term growth.
• **Q: Clarification on Medicare rate for GeneSight and competitive landscape in hereditary cancer A: Paul Diaz confirmed Medicare rate, and opportunities to gain share due to market dislocation.
• **Q: Time line of dilution from new product launches and confidence in long-term growth without MRD A: Paul Diaz spoke about thoughtful product launch approach, and core portfolio growth supports long-term targets.
• **Q: UnitedHealthcare's data needs and confidence in other payers' coverage A: Paul Diaz said unclear on specific data needs, but confident other payers won't change coverage without justification.
• **Q: Market size of pharmacogenomics and women’s health share gain opportunity A: Paul Diaz mentioned TAM details to be clarified, but significant opportunity in women’s health due to market disruption and product differentiation.
• **Q: Guidance changes and EMR integrations impact A: Scott Leffler said minor gross margin adjustment due to product mix, and EMR integrations driving growth into 2025.
• **Q: Share gain opportunity from Ambry deal and no pay rate progress A: Paul Diaz discussed different dynamics in each deal, and ongoing progress in reducing no pay rate with potential for further improvement.
• **Q: Resource allocation for GeneSight and future investments A: Paul Diaz committed to investing in clinical evidence and product portfolio across segments for long-term growth.