Myriad Genetics Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 3, 2023

There are 11 speakers on the call.

Operator

Good afternoon, and welcome to the Myriad Genetics First Quarter 2023 Earnings Call. During the call, we will review the financial results we released today, and afterwards, we will host a question and answer session. Our quarterly earnings release was issued this afternoon on Form 8 ks and can be found on our website at investor. Myriad.com. I'm Matt Scalo, Senior Vice President of Investor Relations.

Operator

And on the call with me today are Paul Diaz, our President and Chief Executive Officer Brian Rigsby, our Chief Financial after Nicole Lambert, our Chief Operating Officer and Mark Baratti, our Chief Commercial Officer. This call can be heard live via webcast at investor. Myriad.com, and a recording will be archived in the Investors section of our website along with this slide presentation. Please note that some of the information presented today contains projections or other forward looking statements regarding future events or the future financial performance of the company. These statements are based on management's current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons.

Operator

We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10 ks, its quarterly reports on Form 10 Q and its current reports on Form 8 ks. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward looking statements. With that, I will now turn the call over to Paul.

Speaker 1

Good afternoon, everyone, and thank you for joining us. On today's call, we will discuss highlights from the Q1 and provide updates on strategic initiatives that are driving our long term growth plan. So many positive changes happening across our organization. I want to take a minute to thank of our Myriad teammates and our provider partners for their continued commitment to advancing our mission and vision to make genetic testing and precision medicine more accessible, helping people take more control of their health and to enable providers to better treat and prevent disease. Turning to Slide 4, AmeriGenetics had another strong quarter as we kicked off 2023 ahead of expectations.

Speaker 1

Total revenue grew 10% year over year, driven by another strong quarter of double digit volume growth in both myRisk hereditary cancer testing and GeneSight. Total volumes grew 21% year over year and 10% sequentially, excluding sneak peak. Hereditary cancer testing volumes grew an impressive 24% year over year in Q1 after growing 16% year over year last quarter. For those who may have doubted our ability to sustain GeneSight growth, we processed 110,000 tests in the Q1, a company record and saw approximately 4,000 new clinicians ordering GeneSight for the first time. We're also very excited about the progress we made in our prenatal business, which despite some interruptions in the State of California, improved test volumes 12% year over year in the quarter, excluding contributions from Gateway Genomics.

Speaker 1

This quarter gives us confidence in our ability to achieve our full year financial guidance as well as reach profitability and positive operating cash flow in the Q4 of this year. Additionally, we believe that our continued commercial execution, robust product pipeline and top tier talent will fuel our long term growth even further. In the quarter, we announced several new exciting strategic partnerships, including an expanded partnership with Illumina to combine our unique diagnostic development and commercial capabilities to expand our emerging biopharma business and broaden access to HRD testing in the United States. We also announced a new collaboration with SimonMed Imaging, of 1 of the largest independent outpatient imaging providers in the United States to improve access to our myRisk hereditary cancer test with riskScore for women of all ancestors. Nicole will speak to these new partnerships in more detail and we are excited about a number of other similar business development opportunities under discussion.

Speaker 1

At Myriad Genetics, we strive to provide best in class quality tests and scientific insights for our providers and their patients. From leading research and development in molecular and companion diagnostics to products helping to address our growing mental health crisis. We are working at the forefront of innovation in our space. We also want to ensure that we are actively removing friction points from our patients and healthcare providers to make it easier to do business with us. Nicole will talk about some of the progress we've made in improving the patient and provider experience with new tools like our unified order portal and EMR integrations later on this call.

Speaker 1

Finally, improving access to our test for patients of all demographics is extremely important to us. Serving underrepresented populations and ethnicities through our patient outreach programs is prudent to be very effective. And we are excited about our new point of care financial accessibility tools and payment program to improve access for all patients. Transitioning to Slide 6, I'd like to outline exactly why we think and what it takes to be a winner in our sector. First, we strive to have the best clients and products whose access and adoption are enabled by technology in our field.

Speaker 1

For us, this means having products that deliver real world results in clinical settings through high quality actionable and differentiated tests that help support early detection treatment decisions. 2nd, we believe we need automated, scalable and cost effective lab operations to deliver on our mission. Our Labs of the Future strategy, which Nicole will discuss later on the call, allows us to improve workflows, test turnaround time and reduce costs to advance technology and automation. Similarly, the investments we've made over the last few years in modernizing our IT platform allow us to better serve our patients and provider partners at scale across all products and channels at lower cost. 3rd, a strong commercial platform ensures that our providers and patients benefit from partnering with Myriad Genetics and that we can grow efficiently.

Speaker 1

And finally to win what needs best in class regulatory revenues and revenue cycle capabilities. Great science used to develop practical, of high quality diagnostic tests, operating in state of the art facilities that reduce costs with the ability to get paid for our efforts is key. Our payer markets team has deep industry experience and plays an integral role in the development of our product pipeline as well as our commercial reimbursement strategy. We see this as a competitive advantage that does not often receive the credit it deserves. With that, I'll turn it over to our Chief Commercial Officer, Mark Baratte to speak towards our commercial capabilities in more detail.

Speaker 2

Thanks, Paul. I'd like to start on Slide 8 and talk about our commercial team. We have made tremendous strides in our commercial we've shown over the past year, the changes made across the organization that have enabled our sales force to effectively target and penetrate both new and existing accounts. The results speak for themselves with robust volume growth over the past 2 quarters, the vast majority of which come from existing accounts. This gives us confidence in the changes that we have made in the commercial team because growth in existing accounts means that tailwinds like market dislocation have to date not been the key drivers of our commercial performance.

Speaker 2

What is driving our continued volume growth is our skilled and focused sales force. With years of experience at Myriad working alongside providers and their patients equipped with new digital tools and scientific insights that help them better serve our customers, while simultaneously attracting new accounts to the franchise. Our sales force is motivated by these new capabilities because it makes the jobs easier, which is why we've seen turnover across our entire sales force drop down below 8%, something that we are incredibly proud of. I'll now turn to Slide 9 and talk about our core business units. Our oncology business delivered $77,600,000 in revenue in the Q1.

Speaker 2

Reported test volumes were roughly 50,000. Prolaris, our market leading prostate cancer as continues to reach patients with diagnosed prostate cancer to provide them and their physicians with important information needed for better treatment decisions. In the Q1, Polaris volumes grew 22% year over year after growing 17% year over year in the Q4 of 2022. Prolaris is the only test with 2 validated thresholds at the time of diagnosis. 1, to identify which patients can safely go on active surveillance and the other to identify which patients need multimodal therapy who can safely avoid additional therapies like hormone therapy.

Speaker 2

In fact, 3rd party research shows that Polaris using active surveillance threshold identified almost twice as many patients who can safely go on active surveillance compared to our peers. Polaris is not the only highlight in the quarter for oncology business. Hereditary cancer testing volume in oncology grew 16% in the quarter year over year and we added a number of experienced leaders of the group to help drive growth even further. With improved operational efficiencies like 15% reduction in turnaround times for oncology tests compared to Q1 of last year, along with a net promoter score of 73% amongst oncology providers and a fully equipped sales force. We anticipate continued growth from our core oncology staff.

Speaker 2

Now, we'll move to women's health on Slide 10. The Myriad Genetics Women's Health Business serves women of all ancestries by assessing the risk of cancer and offers prenatal testing solutions for those who are pregnant or planning a family. In the quarter, hereditary cancer testing volumes of women's health increased 32% year over year, making 3 consecutive quarters of positive volume growth. The strong momentum reflects a combination of deeper penetration of current accounts, new customer wins and ongoing gains in addressing unaffected patients with a family history of cancer. We are also excited to announce that we have launched or unified ordering portal for the women's health business in the quarter to simplify the ordering process for our customers, especially for those ordering more than 1 Myriad product.

Speaker 2

We plan on converting all existing Myriad Women's Health customers to our new unified ordering portal by the end of the year. In prenatal, we are pleased to report a 12% increase in quarterly test volumes compared to Q1 of last year. This figure excludes any contributions from our recent acquisition Gateway Genomics and features minimal contributions from the State of California due to ongoing disruption caused by the state's revised prenatal screening program. We are very excited about this growth and look forward to continued strong performance. Let's move now to Slide 11 and talk about mental health and GeneSight.

Speaker 2

Mental illness continues to have a lasting effect on patients and their families in the U. S. As those suffering fail to receive proper medical treatment. GeneSight helps physicians better understand how antidepressants and other drugs will affect their patient. Importantly for this patient group, the test can be performed, which is a single cheek swab sample that can be taken in the privacy of their own home.

Speaker 2

In the Q1, GeneSight volumes grew 31% over the prior year as we've added approximately 4,000 new clinicians to the franchise, bringing Myriad to more than 26,000 active ordering physicians for the GeneSight test. We believe that the ongoing success of GeneSight further demonstrates the effectiveness of our new commercial capabilities, digital marketing strategies and patient centric engagement initiatives implemented over the past year. On that note, I want to turn to Slide 12 and talk about our digital platform. I've spoken about our digital capabilities before, primarily as it relates to GeneSight. And I'll give another shout out to the GeneSight team for the success they've seen in developing these capabilities and transferring them to other parts of the business, specifically in women's health and urology.

Speaker 2

Now let's look at this funnel, which should help visualize some of the examples of these digital capabilities. As you can see last year, We increased our total website traffic by over 10% and more importantly, we've learned how to convert that traffic into greater qualified leads. In other words, we've learned how to connect people who need GeneSight to our website. In 2022, we increased a number of qualified leads from website traffic by more than 50% compared to 2021 for both patients and healthcare providers. Then our inside sales, outside sales and marketing teams equipped with new digital tools and automation technologies are better able to convert those leads into actual orders.

Speaker 2

In 2022, we increased the number of leads converted to order test by more than 30% compared to 2021. These results are outstanding and I just want to thank the team again for doing such a great job developing and executing on this digital platform. As we look to 2023, We plan to leverage these proven digital capabilities and drive growth even further. I'll now pass the call over to our Chief Operating Officer, Nicole Lambert to talk about our products and key initiatives.

Speaker 3

Thanks, Mark. I'd like to start on Slide 14 and speak about our products and priorities for 2023. While we have a full pipeline of new products in development, we want to make clear that our priority for 2023 is to maximize the full potential of our current products at MyRisk, GeneSight, Prequel, ForeSight, MyChoice CDx, PreciseTumor and Prolaris. Our strong and consistent performance, particularly over the last in the next 6 months as credit to the success of these core products. And our general organizational improvements made over the last 2 years have enabled us to focus on the markets where we have a right to win.

Speaker 3

Our core products are well supported by guidelines set by organizations such as NCCN and are widely viewed as standard of care. We are excited about ACMG's support of expanded carrier screening and look forward to any further announcements and support from ACOG that may follow suit. Because they are our key drivers of growth, we continue to prioritize and invest in our core product. So while we are very excited about our new product launches, we believe that it is important to focus on areas where we can take action and win now given the low adoption rate and the competitive environment. On the next slide, I'll speak more about our operational initiatives.

Speaker 3

Herriot's operational initiatives aim at improving the customer experience and creating an environment of innovation. We talk a lot about making it easier to do business with Myriad Genetics. This means listening to our patients and providers and taking actions to address the concerns and adapt however we can. Recently, we added more genes to our primary myRisk test and announced a partnership with of ClinVar because our providers asked us to. Not only have providers responded positively to changes like these, but they know that we are listening to them and we want to hear from them.

Speaker 3

We We are pleased with the ongoing rollout of our new unified provider portal and our unified order management system, which not only ensure that we are getting the information required by payers, but they also make it much easier for providers to order our tests for their patients. It reduces the number of times we need to recontact our providers for this information. Our EMR integrations with the likes of Epic and others not only ensure that we are getting patient medical records from providers, but it also means that providers who are already in those EMR and our systems do not have to provide those documents to us outside of their normal workflow. On the next slide, we can see the tremendous progress that we have made working with using EMR integrations to deliver more test results for our myRisk hereditary cancer test. In January, we launched our new unified provider portal in women's health.

Speaker 3

And we are already seeing tremendous uptake from providers. We plan to convert all existing Myriad Women's Health customers to our new unified portal in the very near term. With that, let's turn to Slide 17 and talk about our updates to Lab of the Future. Preparations for our new Labs of the Future are on track as both new facilities, 1 in West Salt Lake City and our new headquarters in Central Lab Operations and the other in of San Francisco, the Walter Gilbert Research and Innovation Center, which is named after one of our Nobel Prize winning founders, Walter Gilbert, are both ready for move in this June. In addition, we are taking steps to exit our current headquarters building in Salt Lake and are moving lab equipment to our new headquarters as we speak.

Speaker 3

For these new facilities not only create a more cost effective approach to running our tests, but they foster an environment of innovation and collaboration amongst our commercial, support and scientific team. Next on Slide 18, I'll talk more in-depth about some strategic partnerships that we made in the quarter. As Paul mentioned, we announced several new and exciting strategic partnerships this quarter, including an expanded partnership with Illumina and a collaboration with SimonMed Imaging. As such, Alumina's TSO500 HRD test is now available in the U. S.

Speaker 3

For research only and the unique companion diagnostic that Reliance has been established to enable more clinical research for gene based targeted therapies. We look forward to working more closely with Illumina to broaden access to HRD testing in the United and update. We are equally excited about our new collaboration with SimonMed Imaging, one of the largest independent outpatient medical imaging providers in the U. S. And provide a detailed review of

Speaker 4

our financial results. Together, we plan to

Speaker 3

launch a new hereditary cancer risk assessment program that combines diagnostic imaging with genetic risk assessment utilizing myRisk with risk 4 to enable affordable access to genetic testing and deliver personalized insights to better inform clinical care for millions of patients served at SimonMed. I'll now turn the call over to Brian to discuss financial highlights in the quarter.

Speaker 4

Thanks, Nicole. I'd like to start by reviewing product volume trends on Slide 20. We generated strong double digit growth in both hereditary cancer testing and GeneSight volumes in the Q1. Prolaris saw an impressive 22% quarterly volume growth figure compared to Q1 of last year and prenatal volumes excluding contributions from sneak peek grew 12% year over year. Total Q1 volumes grew organically 21% over last year.

Speaker 4

Overall, the quarter reflected really positive broad based volume growth across the portfolio. Turning to Q1 total revenue, we generated $181,200,000 in revenue for 10% growth over the year ago period, a 2nd consecutive quarter of double digit growth in total revenue. This growth rate reflects strong volume growth, which is partially offset by product mix and a challenging year over year comparison related to out of period cash collections. Recall that Q1 2022 benefited from approximately $12,000,000 from positive out of period adjustments, which were immaterial in the Q1 of 2023. In addition, sneak peek price point creates significant product mix impact.

Speaker 4

Taking these factors into consideration, underlying ASPs were in line with our long term forecasted range of negative 3% to 5%. Healthy growth across our business units reflect a number of comments Paul, Mark and Nicole have already mentioned, including improved execution by and highly motivated commercial team as well as investments in core infrastructure and improving customer experience. 1st quarter total adjusted operating expense of $144,500,000 while above our prior commentary, reflects higher than forecasted performance based commissions and the timing of certain sales and marketing costs. We remain confident that these investments will continue to support our growth story and generate long term shareholder value. We'll turn to Slide 21 now to review our financial guidance.

Speaker 4

We are updating our 2023 guidance to reflect the strong Q1 performance. We are raising the low end of our revenue range by $10,000,000 yielding a range of $730,000,000 to $750,000,000 or 8% to 11% growth over 2022. Gross margin for 2023 remains unchanged at between 68% 70% and is expected to fluctuate in any quarter given seasonality. While our Q1 adjusted OpEx spend was higher than anticipated, it is aligned with our revenue outperformance in the quarter. We are raising our 2023 adjusted OpEx guidance by $5,000,000 to a range of $535,000,000 to $555,000,000 We anticipate quarterly adjusted OpEx decrease on a nominal dollar basis through the remainder of the year.

Speaker 4

This will be accomplished through tighter cost controls across the organization and reflect some programs sunsetting throughout the year, including certain sales and marketing expenses that were incurred in the Q1. Net net, we are narrowing our 2023 non GAAP EPS loss range to $0.24 to $0.36 with the midpoint unchanged. In addition, we reiterate our previously disclosed target of generating positive adjusted operating cash flow and profitability in the 4th quarter. Moving on in terms of the balance sheet. We ended the quarter with $109,000,000 of cash, no debt and continue to assess our capital position in the context of our overall forecast to be profitable and generate adjusted operating cash flow by Q4.

Speaker 4

Our existing credit facility expires July 31, and we intend to replace it with a secure a new secured credit facility to provide additional financial flexibility. Note that Q1 and the first half of twenty twenty three reflect an elevated level of capital expenditures associated with ongoing progress in our Labs of the Future strategy and facility build out that Nicole reviewed. We expect CapEx to return to a more normal level in the second half of the year as of these build out of these facilities is completed. I'll now turn it back over to Paul for closing remarks on the next slide.

Speaker 1

Thanks, Brian. As you've heard, we have a lot of exciting organizational change that is happening, but we remain focused and confident on reaching profitability in the of quarter this year. Balancing growth and innovation while keeping an eye on profitability is an ongoing challenge and opportunity, but one we are committed to. In closing, I'd like to offer what we believe are our strength and strategic advantage. First, we continue to grow volumes consistently every quarter across our businesses and we know how to get paid for our tests.

Speaker 1

2nd, pricing for our products remains stable and we have visibility into pricing moving forward. 3rd, we have a disciplined cost management structure as we expect to maintain our strong gross margins and manage our OpEx responsibly. 4th, we are committed to effective capital deployment in key areas that will provide the customer experience, including new technology tools and capabilities, innovation, commercial strength and our lab for the future to generate strong returns for our shareholders. 5th and finally, our growth catalysts are clear as we continue to elevate our products to their full potential and opportunistically look for tuck in acquisition of the Gateway Genomics transaction. All of this reinforcing our position as a trusted differentiated lab with specialized expertise, of best in class quality, a strong scalable commercial engine underpinned by data, research and technology with industry leading margins and business management.

Speaker 1

I also want to point out what a great job our teams have done in listening to our patients and providers. We have reapproached the way we engage with customers and they are starting to notice. A great example of this is Nicole spoke to of our open source data strategy with ClinVar, which is something that the genetic counselor community has been quite vocal about. Keeping patients and providers at the center of everything we do is starting to pay dividends and we are excited about finding new ways to make it easier to do business with us. Everything from increased price transparency and affordability for patients to the rollout of initiatives like EMR integrations with Epic and our unified order portal along with improvements to Myriad Complete, our customized suite of services and workflow solutions.

Speaker 1

With that, I'll turn it back to Matt for Q and A.

Operator

Okay. Thanks, Paul. And as a reminder, during today's call, we use certain non GAAP financial measures. A reconciliation of the GAAP to non GAAP financial results and a reconciliation of GAAP to non GAAP financial guidance can be found in our earnings release and under the Investor Relations section of our website. Now we are ready to begin the Q and A session.

Operator

Operator, we are now ready for the Q and A portion of the call.

Speaker 5

Thank you very much. Followed by the 4 on your telephone. You will hear a 3 tone prompt that acknowledges that request. Your first question will come from the line of Andrew Cooper with Raymond James. Your line is open.

Speaker 6

Hey, guys. Congrats on a nice quarter here on the top line and thanks for the questions. Maybe just first, you didn't really necessarily touch in much depth on it in the call. So just want to make sure in terms of timelines of some of the pipeline, what's working through, that everything's on track or if there's any update to the different pieces of Precise as well as First Gene and the rollout of some of these additional tests.

Speaker 1

Yes. Andrew, we continue to look at our product management across the portfolio, including the new product launches. And so to enhance the current product, we don't see any material changes in our timeline. We still expect to launch First Gene softly in Q4. What exactly that looks like?

Speaker 1

We have some enhancements to foresight that we want to do in anticipation of expanded ACOG guidelines. So there we've really instituted a product management approach, of our current portfolio and the new product launches. And so for example, we're learning and our new oncology team is working on the Precise rollout and we want to make sure that we've improved upon that before we roll out Precise Liquid. And as we've talked a little bit about, our biopharma business is really taking off and that bodes well for the interest that we've seen in for Seis MRD on the research side. So, again, I think enhancements to foresight will improve the first gene launch and it's foundational to that, but we don't have any material changes at all to kind of the pipeline or the timing that we're looking at at this point.

Speaker 6

Okay, great. That's super helpful. And then maybe secondly, maybe for Brian or Paul, whoever kind of wants to answer it, but just a little bit more color on the OpEx increase. I think one of the questions investors have had has been on the ability to do some of these things without incrementally more spend. So just How much can you give us a little bit more color on what that is?

Speaker 6

And then how much of the sunsetting that was mentioned and things like that was already planned through the year versus things that are coming in an attempt to offset higher costs elsewhere. Just a little bit of kind of explanation or color around that would be super helpful.

Speaker 4

Yes. Thanks, Andrew. I think first of all, as we said, Q1 at some incremental costs, especially as it relates to some of the selling functions given the significantly the step up in volume from Q4 to Q1. There were some costs that went along with that. Obviously, we came in, as you noted, much higher on the revenue line.

Speaker 4

Our plan for the year had always sort of and for some of the projects and initiatives that we had earlier in the year to start to sunset as we move through the year. As we go through the year, and that's how we get to the update in our guidance.

Speaker 1

Yes. And Andrew, I just want to reiterate, We had sales and marketing expenses, commissions that helped drive a lot of the growth that will sunset, some of which was the way that commissions were budgeted, quite frankly. Given seasonality, we expected allowing us to be down, not up to the level they were. And but more importantly to the other underlying question, The OpEx budget here reflects all of the investments that we anticipate that will be necessary to launch Firstgene, to advance clinical validation work for MRD and to keep everything else on track that you asked about before. So investors should be confident that there won't be any surprises in the OpEx in terms of new product launches.

Speaker 1

In fact, It's all about scaling new products on the commercial infrastructure and leveraging that. So that's what investors should count on.

Speaker 6

Great. Yes, new product or new comp bogies is a high class problem to have to deal with. So I appreciate it. I'll stop

Speaker 4

there. Thanks.

Speaker 5

And your next question comes from the line of Dave Delahunt with Goldman Sachs. Your line is open.

Speaker 2

Hey, guys. Congrats on the quarter. On the Epic EMR integration, could you tell us a bit more about how you measure the productivity increase you expect there?

Speaker 3

Yes, thanks for the question. Really, we're looking at those accounts and to say some of them are existing accounts for us to see, Okay. If we make the process that much easier, what's the lift that we should expect in each of those accounts? And we're seeing a fairly wide variability. In some clinics, The workflow just isn't all that established and so the volume stays flat.

Speaker 3

But in a lot of these clinics, the clinical buy in is already there. The physician already believes in the product. It's just a matter of making it that much easier for the staff. And so we look in the early days, we looked at those, right, like customers that we already have, what's the uplift that we can see. But I think the real power of that Epic agreement is in those clinics where we didn't already have existing customers, and we can get new customers based on the ease of which they can order and how we can just bring in a sales force to enforce the clinical utility and the value of our products.

Speaker 3

And then the uplift will be a lot faster in those clinics. So I would say we're measuring for new customers and speed to getting up to full potential and then what's the lift in existing customers.

Speaker 1

So just to add, what we have seen in the various EMR integrations, as Nicole spoke to, is about a 25% lift and volumes and wallet share. And I just want to reiterate that most of these solutions did not drive of Q4 and Q1 results. Most of these solutions are coming into place now. So it really gives us a lot of confidence in our ability to grow as we stated over the last year, our ability to grow in 2023 and going into 2024. So The other thing that's really an important enhancement here is getting paid, being able to pull medical necessity prior off get out of Epic or Cerner or the other EMRs that we're working on just that creates less friction with the payers as well and that enables us to reduce our no pay and get paid faster.

Speaker 1

So there's just a lot of benefits here. And obviously getting the reports back to the provider more quickly so they can treat the patient. So it's a winner across the board.

Speaker 7

Thanks.

Speaker 8

Thank you.

Speaker 5

And your next question comes from the line of Derik De Bruin with Bank of America. Your line is open.

Speaker 9

Hey, Paul and team. This is John on for Derek. Yes, so congratulations. First of all, strong double digit growth again this quarter. But I want to make sure, I wanted to ask how much of that growth is off, perhaps easier comps from prior year due to COVID versus as incremental, like were there any catch up payments perhaps from the new code going into effect or any one time items?

Speaker 1

No. As a matter of fact, as Brian spoke to, we had to overcome the prior $12,000,000 prior period collection, strong collections we had in Q1 of last year. So clearly, the comps were easier to achieve given Omicron last year. What I would point you to is the quarter over quarter 10% growth that we had sequentially in what is typically a 4% or 5% down quarter. So the momentum in our across all our products, myRisk hereditary cancer prenatal that grew 12% off of low performance last year, really performance across the board.

Speaker 1

And most of that, as Mark spoke to, coming from wallet here of existing customers. We're not even seeing yet the flow through of new customers that are just being onboarded. So We're feeling pretty good about the momentum here at the business.

Speaker 9

Appreciate that. So That means you still expect GeneSight to grow upwards of 20% for the year. How do you see My Choice and Prolaris and the for Unadoproducts contributing to that growth, if you're able to break down those segments?

Speaker 1

Well, We don't break down those segments, but I think what we've tried to focus everyone's attention on is over the last year and Nicole spoke to this, It is about mature products with known reimbursement in guidelines where our principal challenge was ease of use with providers and you're seeing double digit growth across all the product lines and still pretty low adoption rates. So when you think about Polaris, that segment that area is only 25% penetrated, same number for hereditary cancer. So when people talk about hereditary cancer being commoditized or of some melting ice cube on pricing. It's just not true and we're demonstrating that and particularly with a 34% growth in women's health for unaffected patients with a family history that meet guidelines, the majority of which are 25% to 45%. There's just great opportunity for patients to access myRisk with RiskCore, which is by far the best hereditary cancer test in the marketplace.

Speaker 9

Got you. Appreciate it.

Speaker 5

And your next question will come from the line

Speaker 10

of the company. Thanks. Good afternoon.

Speaker 6

Hey, Jeff.

Speaker 10

Brian, I wanted to ask you about the GeneSight ASP, just how the coding change played out in the quarter. I'm calculating and ASP of about $2.90 so down 13% sequentially. My math, I know the Medicare rate came down 15%. It was my understanding that was only like 25%, 30% of the volume though. So can you just talk about what Is my math right?

Speaker 10

And what was the remaining driver of the sequential decline?

Speaker 4

Yes. I mean, I think in total the and I look at it sequentially as well. I think that's the right math. What I would say is that over half of that sequential change was really driven by with the normal seasonality that we see as long as well as a transitory billing issue that we didn't resolve until late in the quarter and that will play out over the course of the next few quarters. So those two items were sort of over half of that change that you saw.

Speaker 4

We did see some down as we said, some downward pressure as it relates to the PLA code, but we still expect that over time long term. That's going to be a positive to have a code like that that's unique to GeneSight and recognizes. It's transparent for folks as it starts to come in and be a covered service. But that was some portion of it, but the Majority were the first two items that I mentioned.

Speaker 1

Unless we forget the revenue growth quarter over quarter in GeneSight, that at the end of the day is what we're being judged by here.

Speaker 4

Year over year, Liza.

Speaker 10

Sure. And then also wanted to ask Just about the DSOs, I think accounts receivable increased $17,500,000 sequentially. Last year, it was $10,000,000 the prior year, it was $5,000,000 Just, maybe this is related to the billing you were referencing, but just like the increase was bigger than in the past. Can you comment on that?

Speaker 4

Yes. I think 2 things. One is, when you think about the year over year by comparison that the revenue was up substantially year over year, especially when you back out the out of period cash collections out of last year that obviously would not have had an end of period AR effect. And March, typically the way the quarter falls It's the biggest month of the quarter and there's not an opportunity to

Speaker 1

collect that. So,

Speaker 4

I think the way we look at it, DSOs are right in the range that we would have expected. Really, the increase in the AR balance is driven by the increase in revenue.

Speaker 1

And we've seen that 5 day pop and worked it down every year as well. So it's sort of seasonally consistent.

Speaker 10

Okay. Thank you, guys.

Speaker 4

Thank you,

Speaker 5

Your next question comes from the line of Puneet Souda with SVB. Your line is open.

Speaker 8

Yes. Hi, Paul. Thanks for taking the question. So on was there a research contribution on the MRD side in the quarter? And wondering what's the latest update there in terms of the product launch and how are you thinking about the market overall with there are some new entrants into the market that are launching the assays prior to reimbursement.

Speaker 8

And so Obviously, the number is growing in

Speaker 10

the markets and just wanted

Speaker 8

to get your latest as to how you're thinking about this market overall?

Speaker 1

Yes, we're still incredibly excited about how we stack up in terms of the MRD assay that we're standing up operationally in our existing labs and the technologies that we have with Prequel and MiChoice. There were no MRD revenues in quarter as we talked about that we believe will happen in the back half of the year. A lot of interest though and discussions advancing with pharma on research MRD, but we do expect to see some of that go through and I think that will no pun intended, validate our assay. And importantly, I did in the quarter, we did see some nice growth in our biopharma research business, but which is not in MRD, but those relationships continue to expand. That's led to our companion diagnostic expansion.

Speaker 1

And Again, as Nicole spoke to, we think the Illumina partnership will just open up more of those conversations. So we have a growing of pharmabiopharma business and are excited about the differentiation of our MRD assay. I would underscore that The differentiation is that when we come to market, A, we will generate revenues from research, so we're confident about that and B, we can stand it up in our labs and commercialize it a lot quicker. So and we'll be talking over the next couple of quarters hopefully about some of the clinical validation work that we're doing with some academic medical centers and we hope to be talking about that here in the next several months.

Speaker 2

Got it.

Speaker 8

And then on as you look for the rest of the year, You acquired Sneak Peek later last year. Just wondering in terms of the focus, Is it continuing to be on product launches? And once you have trimmed the portfolio a bit, Is it time, opportune time to start looking at more assets in the space? Obviously, valuations have come down. Just wanted to get your latest thoughts on M and A.

Speaker 8

Thank you.

Speaker 1

Yes. I'll answer that question and just give an observation to this sector. And I'm only 2.5 years into this, but the focus on new product launches as opposed to getting to full potential of profitability on products that are leading and that have margins and margin expansion I scratch my head about quite frankly. So we have an exciting product portfolio. We've talked about that contributing to 24% and particularly 25%.

Speaker 1

We're growing at 10% plus based on our existing portfolio and we see growth on top of that. In terms of M and A, absolutely, we will continue to look for opportunistic tuck ins in the areas where we think we can win. But yes, I'm just I don't know if I have an investor hat on, I'm really thinking about the opportunity to drive profitability and growth in core mature products where adoption rates are still low and the competitive environment has gotten a lot better. That's not to say we're not excited about first gene, of MRD expanding to Precise Liquid, but we're very focused right now on GeneSight, of My Choice, Polaris, MyRisk in particular. And I guess I'd just underscore that from an investor standpoint and return on invested capital.

Speaker 8

Got it. Makes sense and congrats on a solid quarter. Thanks. Thank you, Vinit.

Speaker 5

Your next question comes from the line of Mason Kariko with Stephens. Your line

Speaker 7

Okay, this is Jake Kranviel on for Mason. Thanks for taking our questions. So You guys have talked about the cross selling opportunity for a number of your tests across channels, whether it's selling GeneSign in the women's health channel, myRisk into the urology channel. Could you just elaborate on where you've seen the most success so far with that and what you view as the most attractive opportunity on this front? And start if this has been addressed for jumping around if you could or not.

Speaker 2

Yes, Jason, this is Mark speaking. I I think as Paul mentioned, we're really in the early innings of that. So I think what you're seeing now is you're seeing the fact that we do have commercial scale across of those channels. So most importantly, they're all talking to one another. They're making sure that if a provider does want to get GeneSight, that we make sure that the GeneSight rep that's in the local area can certainly through that.

Speaker 2

I think what you're seeing is through our digital capabilities and as Paul and Nicole talked about, we're now building unified ordering portals to where we're making it easier for providers to be able to do that. And then starting within the women's health field where we've got myRisk, we have the prenatal products. And very soon we'll be able to expand GeneSight and to our other product lines. So we're still in the early innings, but as you and as we are seeing different providers from our different segments start to use all of our products across the portfolio. And you can maybe just talk about EuroSuite that

Speaker 1

we just launched that, those 3 products there.

Speaker 4

Yes.

Speaker 2

So when you think of EuroSuite, right, we do have the ability and we're the only company to be able to provide solutions for that provider. And in that case, we already have the capabilities. So I think when you think of EuroSuite, when you think of women's health, again, with myRisk as well as prenatal products, we have those types of capabilities. And I think soon you're going to see capabilities be able to think about GeneSight. The obvious choice that we've talked about previously is GeneSight going into the women's health segment, and we'll talk more about that in future quarters.

Speaker 7

Okay. Thanks. That's helpful. And then so next on hereditary cancer. Of the year.

Speaker 7

Hereditary cancer volumes have been a bright spot recently. In terms of the organizational changes and commercial optimizations that you've made within this business, Could you maybe speak to what commercial initiatives are still in front of you and what your key priorities are going forward to ensure that you continue to make these market share and wallet share gains we've been seeing more recently.

Speaker 2

Yes, sure. So there's the basic blocking and tackling that I talked about last quarter, which is better targeting better segmentation. I think there's the other pieces that we've talked about around goal setting, commissions, training, right? Those are all sort of the basics. But I think as we've talked about making us easier to work with, I think you've heard Nicole today as well as last quarter talk about many customers always liked the Myriad products, but for one reason or another, they decided to leave us.

Speaker 2

Now we're able to go back in there. We've got easier solutions. We've got better pricing. We've just got more options. And so I think as we look at the targeting across the space, there's driving depth within our existing accounts, which we talked about today, but there's also some of the new customers that we know exist both large and small and we'll start to give a little bit more color to that moving forward.

Speaker 7

Okay, got it. Thanks guys.

Speaker 5

And there are no further and questions. I'll turn the call back to Matt Scalo for closing remarks. Thank you.

Operator

Okay. Thanks, operator. This concludes our earnings call. A replay will be available via webcast on our website for 1 week. Thank you again for joining us this afternoon.

Speaker 1

Thanks, everybody.

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Earnings Conference Call
Myriad Genetics Q1 2023
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