Myriad Genetics, Inc. Form 10-Q Summary
Business Context and Reporting Period
Myriad Genetics is a genetic testing and precision medicine company operating as one reporting segment. Its principal products address hereditary cancer, tumor profiling, prenatal health, and pharmacogenomics. The filing covers the three and six months ended June 30, 2022, compared with the comparable 2021 periods.
The year-over-year comparison is affected by divestitures, including Myriad RBM on July 1, 2021 and the Autoimmune business on September 13, 2021. The company also reported continuing effects from COVID-19, testing seasonality, inflation, and labor and supply-chain pressures.
Key Financial Metrics
| Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 |
|---|---|---|---|---|
| Total revenue | $179.3 million | $189.4 million | $344.2 million | $362.5 million |
| Molecular diagnostic revenue | $179.3 million | $178.7 million | $344.2 million | $338.3 million |
| Operating loss | $17.8 million | $20.8 million | $43.4 million | $67.5 million |
| Net loss | $14.1 million | $4.7 million | $34.6 million | $44.2 million |
| Loss per share | $0.18 | $0.06 | $0.43 | $0.58 |
| Cash flow from operations | Not separately provided | Not separately provided | $(96.8) million | $67.4 million |
Q2 molecular diagnostic revenue was essentially flat year over year. Pharmacogenomics increased by $10.5 million, tumor profiling by $3.2 million, and prenatal by $3.9 million, while hereditary cancer declined by $6.6 million and Autoimmune revenue declined by $10.2 million following divestiture. Pharmaceutical and clinical services revenue fell to zero from $10.7 million.
- Q2 molecular diagnostic testing costs were $49.7 million, or 27.7% of revenue, versus 26.9% in the prior year.
- Six-month molecular diagnostic testing costs were $97.7 million, or 28.4% of revenue, versus 27.2%.
- Q2 research and development expense was $20.3 million, or 11.3% of revenue.
- Q2 selling, general and administrative expense was $127.1 million, or 70.9% of revenue, compared with 71.4%.
- Six-month impairment charges were $10.7 million, consisting primarily of an $8.6 million right-of-use asset impairment and a $2.1 million leasehold improvement impairment from exiting a Salt Lake City facility.
- Income tax benefits were $3.8 million in Q2 and $9.7 million for the first six months.
Liquidity, Cash Flow, Debt, and Balance Sheet
Cash, cash equivalents, and marketable investment securities totaled $283.6 million at June 30, 2022, down $115.2 million from December 31, 2021. Cash and cash equivalents were $105.2 million, marketable securities were $99.9 million, and long-term marketable securities were $78.5 million.
- Operating cash flow was $(96.8) million, primarily reflecting legal settlement payments, lower accrued liabilities, and the absence of the prior-year tax refund.
- Investing cash flow was $(53.3) million, including $13.0 million of capital expenditures and net purchases of marketable securities.
- Financing cash flow was $(2.3) million. No share repurchases occurred.
- The company had no outstanding borrowings under its revolving credit facility at June 30, 2022.
- On July 26, 2022, the facility was amended to extend covenant waivers through maturity, reduce revolving commitments to $200.0 million and to $150.0 million by December 31, 2022, and replace LIBOR-based borrowings with SOFR-based borrowings.
- Because unrestricted cash, cash equivalents, and marketable securities exceeded $150.0 million, the company stated that future borrowings are generally restricted unless used for a permitted acquisition.
- The company reported a $150.0 million minimum liquidity covenant.
Material Changes Versus the Prior Comparable Period
- Total revenue declined 5.3% in Q2 and 5.0% for the first six months, principally because divested businesses contributed revenue in 2021.
- Core molecular diagnostic revenue increased $0.6 million in Q2 and $5.9 million for the first six months.
- Operating losses improved year over year, but net losses increased in Q2 because the prior-year period benefited from substantial other income, including a $31.2 million gain on the sale of the Myriad myPath laboratory.
- Six-month SG&A declined $43.9 million, reflecting lower legal, transformation, compensation, and amortization costs, partly offset by higher sales and marketing expenses.
- Cost pressure increased from product mix, compensation, inflation, and higher laboratory costs.
- Operating cash flow changed from $67.4 million provided in the first half of 2021 to $96.8 million used in the first half of 2022.
- The company paid $48.0 million in April 2022 to settle a qui tam lawsuit; accrued liabilities also declined by $82.9 million, largely because of legal settlement and bonus payments.
Outlook, Commentary, Risks, and Unusual Items
Management described a strategic transformation focused on innovation, enterprise capabilities, and execution, with emphasis on oncology, women’s health, and mental health. Planned initiatives include a new enterprise commercial model, a unified ordering portal, additional sequencing technologies, direct-to-consumer channels, and expanded commercial capabilities. The filing does not provide specific quantitative revenue or earnings guidance.
- Management believes existing capital resources will satisfy projected operating requirements for the foreseeable future, but cautions that cash may be consumed faster than expected and additional financing may be needed.
- Key risks include reimbursement changes, competition, regulatory and laboratory compliance, intellectual property disputes, cybersecurity, COVID-19 effects, inflation, labor availability, supply-chain disruption, and the ability to commercialize new tests.
- Legal matters include securities class action and derivative litigation, a purported class action concerning the accuracy of the Prequel prenatal test, and third-party payor recoupment requests. No legal loss accrual was recorded for pending proceedings because an unfavorable outcome was not determined to be probable and reasonably estimable.
- The $48.0 million qui tam settlement was paid in full and the related lawsuit was dismissed, without admission of liability.
- The company entered into a 15-year lease for approximately 230,000 square feet in Salt Lake City, with approximately $77.8 million of future rent payments and expected rent commencement in the third quarter of 2023.
- Disclosure controls were deemed ineffective as of June 30, 2022 because a material weakness in general information technology controls remained unremediated. The previously reported income-tax control weakness was remediated as of March 31, 2022.
Investor Verification Checklist
- Verify whether pharmacogenomics, prenatal, and tumor profiling growth can offset hereditary cancer declines and the loss of divested-business revenue.
- Monitor operating cash burn, collections, payor reimbursement assumptions, and the company’s ability to maintain the $150.0 million minimum liquidity covenant.
- Assess the effect of the reduced revolving commitment and restrictions on future borrowings.
- Review the remediation progress for the material weakness in information technology general controls.
- Track pending securities, derivative, Prequel-related, and payor recoupment matters and any resulting financial exposure.
- Evaluate the impact of inflation, labor costs, supply-chain constraints, and the new Salt Lake City lease on future margins and liquidity.