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Myriad Projects Flat FY2018 Revenues; Expects New Tests to Offset Lower Hereditary Cancer Sales


NEW YORK (GenomeWeb) – In fiscal year 2018, Myriad Genetics is anticipating reduced revenues from its hereditary cancer testing business, but it is also hoping to offset those declines with sales of its new products and cost-reduction initiatives.

In discussing its fourth quarter and fiscal year 2017 earnings, Myriad estimated it will record total revenues of $750 million to $770 million and adjusted earnings per share of $1 to $1.05. "This guidance reflects both revenues and adjusted earnings that are relatively flat with fiscal year 2017," Myriad CFO Bryan Riggsbee told analysts during an earnings call Tuesday. "We are anticipating declines in our hereditary cancer revenue to be largely offset by new product growth in fiscal year 2018."

In FY2017, Myriad recorded a 2 percent increase in revenues to $771.4 million from $753.8 million in the prior fiscal year. However, revenues from the myRisk hereditary cancer test decreased 10 percent to $568.7 during the year and by 5 percent to $144.6 million in the fourth quarter, even though quarterly test volumes increased by 6 percent.

However, Myriad was able to offset lower revenues from its hereditary cancer testing business, which is facing competition from lower cost providers, with revenues from the pharmacogenetic test GeneSight and the breast cancer recurrence test EndoPredict. These are recent additions to Myriad's testing portfolio through the acquisitions of Assurex and Sividon last year. 

Over the next 12 months, the company is expecting hereditary cancer revenues to be down by 9 percent, with a 3 percent increase in volume and a 12 percent decrease in price. But the company is hoping to balance this out from a revenue standpoint by growing the company through a diverse product pipeline, increasing reimbursement, and "long-term predictable pricing." Myriad demonstrated some success in doing this in FY2017, during which time more than two-thirds of its test volume was attributable to new products, and 86 percent of its revenues are under long-term fixed priced contractors with payors.

Myriad is also hoping to bolster its business through a series of cost-saving strategies. In Q1 FY2018, Myriad is expecting revenues of $181 million to $183 million, though this range is well below the $200.5 in revenues the company recorded in Q4 2017.

"The sequential decline in revenue and profitability is driven by hereditary cancer pricing changes under the new contracts and summer seasonality, offset by new product growth and cost-reduction initiatives," Riggsbee said.

During the earnings call, Myriad announced its goal of delivering $50 million in incremental operating income by fiscal year 2020, and said it has identified 16 projects that will generate $17 million in cost savings for fiscal year 2018 and 15 projects that will yield $24 million in savings in fiscal 2019.

Riggsbee said that Myriad has already implemented some cost-saving measures in Q4 FY2017 that are expected to generate more than $3 million in quarterly incremental operating income in Q1 FY2018. For example, Myriad has launched a new digital integration strategy that the company expects will increase revenues and lower costs.

The first application is a digital ordering and reporting system aimed at simplifying data entry, increasing efficiency, and reducing test cancellations for missing information. Capone said that customers using this system have received this change favorably and likened it to an "Amazon-like experience."

Myriad has also added a new optimization step to its myRisk lab process aimed at reducing reagent usage and, according to Riggsbee, the "Assurex transition testing platform is leading to a meaningful reduction in reagent and personnel costs."

In informatics, the company is consolidating data centers and software vendor contracts, and eliminating redundant positions. "Expect to see additional headcount reductions through attrition," Riggsbee said.

Myriad's FY2018 financial guidance doesn't account for a number of events that could end up leaving it in a better position than it is projecting, company executives told analysts during the earnings call. For example, AstraZeneca in June presented positive findings from a study investigating Lynparza (olaparib) in HER2-negative, BRCA-mutated metastatic breast cancer. 

The drugmaker has said it will file for regulatory approval in the second half of this year, and Myriad is working to complete its premarket approval supplement for BRACAnalysis CDx. If this drug and companion test are approved in this indication in the coming fiscal year, the company expects that 125,000 metastatic breast cancer survivors would be candidates for its test.

Myriad is expecting double-digit volume growth for GeneSight, Vectra DA, Prolaris and EndoPredict next year. Although, EndoPredict has strong uptake outside the US, the company said it will take some time to drive full adoption in the US, and is therefore assuming a modest revenue impact.

Factoring in an administrative delay from Medicare contractor Noridian for the Prolaris prostate cancer test in the intermediate risk category, Myriad is expecting to start getting paid for claims on Sept. 25. The company is also not including any revenue from myPath Melanoma during the fiscal year, though it has submitted a dossier to payors for reimbursement in Q3 FY2017.

Myriad is only assuming known reimbursement for products in its guidance. "We're not forecasting any additional reimbursement despite the fact we believe we are making significant progress with commercial payers," Riggsbee said.

Myriad is also planning to launch a new product in the hereditary cancer testing space in the first half of FY2018, although company executives didn't provide details on what this offering would be during the earnings call. "To the extent these trends and initiatives contribute to higher volume growth, it could lead to upside to our guidance," Riggsbee said.