Myriad Genetics, Inc. Form 10-Q Summary
Business Context and Reporting Period
Myriad Genetics develops and commercializes molecular diagnostic tests used to assess disease risk, disease progression, and treatment decisions. This filing covers the three and six months ended June 30, 2021. Results benefited from recovery in diagnostic testing volumes following COVID-19-related disruption in the prior-year period. The company is pursuing a strategic transformation focused on core diagnostic products, technology-enabled commercial capabilities, product innovation, and divestiture of non-core assets.
Key Financial Metrics
| Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 |
|---|---|---|---|---|
| Total revenue | $189.4 million | $93.2 million | $362.5 million | $257.2 million |
| Molecular diagnostic revenue | $178.7 million | $83.3 million | $338.3 million | $233.8 million |
| Operating loss | $(20.8) million | $(68.3) million | $(67.5) million | $(202.0) million |
| Net loss attributable to shareholders | $(4.7) million | $(55.4) million | $(44.2) million | $(170.6) million |
| Loss per share | $(0.06) | $(0.74) | $(0.58) | $(2.29) |
| Operating cash flow | Not separately provided | Not separately provided | $67.4 million | $46.8 million |
- Q2 revenue increased 103%, while six-month revenue increased 41%. Q2 molecular diagnostic revenue increased primarily from higher volumes in Hereditary Cancer, Tumor Profiling, Prenatal, and Pharmacogenomics.
- Q2 molecular diagnostic testing cost declined to 26.9% of related revenue from 38.7%; the six-month percentage declined to 27.2% from 32.2%. Q2 pharmaceutical and clinical services cost increased to 53.3% of related revenue from 45.5%.
- Q2 operating margin improved to approximately negative 11.0% from negative 73.3%; six-month operating margin improved to approximately negative 18.6% from negative 78.6%.
- Q2 net loss included a $31.2 million gain on the sale of the Myriad myPath laboratory, partly offset by $5.9 million of purchase-commitment losses and $6.6 million of inventory losses related to divestitures.
- Cash, cash equivalents, and marketable investment securities totaled $184.3 million at June 30, 2021, compared with $171.7 million at December 31, 2020.
- Cash flow from operations was $67.4 million for the first six months, including an approximately $89.6 million federal tax refund. Investing cash flow was $9.3 million, and financing cash flow was negative $75.0 million.
- Debt was $104.1 million net at June 30, 2021, down from $224.8 million at December 31, 2020. The remaining $106.4 million principal balance was repaid on July 30, 2021, leaving no outstanding balance under the facility as of the filing date.
- Total assets were $1.36 billion and total stockholders’ equity was $902.4 million at June 30, 2021. Assets held for sale totaled $225.7 million.
Material Changes Versus the Prior Comparable Period
- Revenue recovery was substantial because Q2 2020 was materially affected by COVID-19 restrictions and reduced access to healthcare providers.
- Hereditary Cancer Q2 revenue rose to $86.0 million from $39.9 million, primarily due to a 100% volume increase. Tumor Profiling revenue rose to $29.2 million from $10.5 million, and Pharmacogenomics revenue rose to $22.6 million from $8.5 million.
- Selling, general, and administrative expense increased 26% in Q2 to $134.8 million, driven by higher stock compensation, bonuses, commissions, legal expenses, and transformation costs. Six-month SG&A increased to $280.3 million from $240.3 million.
- Six-month impairment charges declined to $1.8 million from $98.4 million in the prior-year period, which included significant goodwill and in-process research and development impairments.
- Shares outstanding increased, with 77.7 million common shares outstanding at June 30, 2021 versus 75.4 million at December 31, 2020. The company received $50.1 million from stock issued under compensation plans during the first six months.
Outlook, Commentary, Risks, and Unusual Items
- Management stated that diagnostic business fundamentals continued to improve but cautioned that COVID-19, including the Delta variant, could affect testing volumes, laboratory operations, supply chains, staffing, and liquidity.
- No specific revenue, earnings, or margin guidance is provided in the filing. Management said existing resources and expected proceeds from the Autoimmune transaction should support projected operating requirements for the foreseeable future, while noting that additional financing could become necessary if resources are consumed faster than expected.
- The company agreed to sell its Autoimmune assets, including the Vectra test, to Laboratory Corporation of America for $150.0 million; closing was expected in the quarter ending September 30, 2021. Myriad RBM was sold to IQVIA on July 1, 2021 for stated cash consideration of $198.0 million, subject to estimated adjustments of $(3.9) million.
- The Myriad myPath laboratory sale closed May 28, 2021 for $32.5 million and generated a $31.2 million gain.
- Other risks include reimbursement and coverage changes, competitive pressure, regulatory and intellectual-property risks, dependence on specialized personnel, inflationary labor and supply costs, and potential recoupment demands from third-party payors.
- The company disclosed a federal and California False Claims Act qui tam action, a securities class action, and an Illinois insurance-fraud action. For the first two matters, the company cannot estimate the likelihood or amount of a potential loss.
- Management reported that the prior-period material weakness involving intercompany transactions and foreign currency accounting had been remediated as of June 30, 2021. Disclosure controls were assessed as effective.
Important Facts for Investors to Verify
- Whether the post-quarter completion of the RBM and Autoimmune divestitures changes revenue mix, growth rates, margins, and recurring cash generation.
- Whether diagnostic volume recovery and reimbursement trends continue after the favorable COVID-19 comparison period.
- The sustainability of operating cash flow after excluding the federal tax refund and divestiture proceeds.
- The effect of elevated SG&A, stock-based compensation, transformation spending, labor costs, and supply costs on the path to profitability.
- Final cash proceeds and accounting treatment for the RBM and Autoimmune transactions, including working-capital and other adjustments.
- Developments in the disclosed legal proceedings, payor recoupment requests, reimbursement policies, and regulatory matters.