Myriad Genetics, Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
Myriad Genetics is a genetic testing and precision medicine company operating as one reporting segment across Oncology, Women’s Health, and Pharmacogenomics. The filing covers the three months ended March 31, 2024, compared with the three months ended March 31, 2023. Results are unaudited and seasonality may affect first-quarter comparisons.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Testing revenue | $202.2 million | $181.2 million | 12% increase |
| Gross profit | $137.6 million | $122.0 million | 13% increase |
| Gross margin | 68.1% | 67.3% | 80 basis points higher |
| Operating loss | $27.9 million | $52.2 million | $24.3 million improvement |
| Operating margin | (13.8%) | (28.8%) | Improved |
| Net loss | $26.0 million | $54.7 million | $28.7 million improvement |
| Basic and diluted loss per share | $0.29 | $0.67 | Improved |
| Cash used in operating activities | $18.6 million | $33.2 million | $14.6 million less cash used |
Revenue increased primarily from higher testing volumes. Hereditary Cancer revenue rose 16% to $88.1 million, Prenatal revenue rose 22% to $44.3 million, and Pharmacogenomics revenue rose 22% to $38.9 million. Tumor Profiling revenue declined 17% to $30.9 million.
Testing volumes increased 9% year over year, including GeneSight up 13%, Hereditary Cancer up 9%, and Prenatal up 9%; Tumor Profiling volumes declined 16%. A $3.0 million retroactive payor coverage change for a prenatal product contributed to revenue in the quarter.
Cost of testing revenue was $64.6 million, or 31.9% of revenue, compared with 32.7% in the prior-year quarter. Research and development expense increased to $24.9 million from $22.5 million. Selling, general and administrative expense declined to $140.6 million from $151.7 million, partly because the prior-year period included $5.7 million of accelerated depreciation related to the former headquarters.
Cash, cash equivalents, and marketable securities totaled $104.3 million at March 31, 2024, down from $140.9 million at December 31, 2023. Total cash, cash equivalents, and restricted cash ended at $105.6 million. Capital expenditures were $6.7 million, and internal-use software capitalization was $1.9 million.
Long-term debt was $38.7 million net of debt issuance costs, representing $40.0 million outstanding under the asset-based revolving credit facility. The facility has a $115.0 million maximum commitment, matures June 30, 2026, and carried a weighted-average borrowing rate of 8.71%. Availability was $41.3 million. The facility requires minimum liquidity of $60.0 million and minimum availability of $25.0 million under specified conditions.
Material changes versus the prior comparable period
- Revenue growth accelerated across Hereditary Cancer, Prenatal, and Pharmacogenomics, while Tumor Profiling declined due largely to lower MyChoice CDx activity.
- Operating and net losses narrowed substantially because of revenue growth, improved cost of testing revenue as a percentage of revenue, and lower SG&A.
- Operating cash burn improved, although cash declined by $35.3 million during the quarter.
- Stock-based compensation increased to $12.0 million from $7.5 million.
- The company acquired selected assets of Intermountain Precision Genomics for an immaterial amount and recognized a $2.2 million gain.
- The company terminated a Salt Lake City facility lease and recognized a $1.2 million net gain in SG&A.
Guidance, outlook, risks, contingencies, and unusual items
The filing does not provide a specific quantitative revenue, earnings, or cash-flow guidance range. Management stated that existing capital resources are expected to fund projected operating requirements for at least the next 12 months, but cautioned that faster cash consumption, litigation costs, operating needs, capital expenditures, or reduced borrowing access could require spending reductions or additional financing.
Management plans to expand existing products and launch or develop products including Foresight Universal Plus, FirstGene, Precise Liquid, and Precise minimal residual disease testing. The company expects to launch Foresight Universal Plus in the second half of 2024.
Key risks include reimbursement and payor changes, competition, profitability and cash-burn risk, FDA regulation of laboratory-developed tests, potential changes affecting GeneSight, intellectual-property disputes, cybersecurity, supply-chain and single-source supplier dependence, foreign exchange, interest-rate exposure, and compliance with ABL Facility covenants.
The company accrued $29.0 million related to the Ravgen settlement, comprising $5.0 million in current liabilities and $24.0 million in long-term liabilities. It also accrued $950,000 for a proposed settlement of stockholder derivative actions, subject to court approval. The company disclosed that other legal matters could have a material adverse effect if resolved unfavorably.
Subsequent to quarter-end, the company amended its west Salt Lake City headquarters lease for approximately 63,000 additional square feet, with approximately $18.2 million of future rent payments and an expected 2026 commencement. On May 7, 2024, it agreed to sell the EndoPredict business to Eurobio Scientific for $10.0 million plus contingent consideration, subject to customary closing conditions.
Important facts for investors to verify
- Whether revenue growth and improved margins continue after the $3.0 million retroactive prenatal payor adjustment.
- Whether Tumor Profiling volumes and revenue stabilize or continue to decline.
- Cash burn, liquidity, borrowing-base availability, and compliance with the ABL Facility’s minimum liquidity and availability requirements.
- The timing and amount of payments under the Ravgen settlement and the status of the stockholder derivative settlement.
- The operational and financial impact of the FDA’s final laboratory-developed-test rule and any related litigation or legislative changes.
- Execution and commercialization of planned launches, including Foresight Universal Plus, FirstGene, Precise Liquid, and MRD products.
- Completion and proceeds of the EndoPredict sale, including contingent consideration and related licensing arrangements.