) reported earnings per share (EPS) of 60 cents in the third
quarter of fiscal 2014, registering a remarkable 30.4% beat over
the Zacks Consensus Estimate as well as the year-over-year adjusted
number. EPS growth was boosted by a strong top line and a reduced
share count. Without these adjustments, reported EPS came in at 48
cents, up 4.3% year over year.
However, despite outperforming all estimates, shares of Myriad
slashed 9.8% to close at $36.87 following the earnings release.
Quarter in Detail
Revenues increased 17% year over year to $182.9 million, sailing
past the Zacks Consensus Estimate of $174 million. Growth was
mainly driven by strong performance in the core markets,
complemented by international expansion. According to the company,
it is perfectly in sync with the strategic initiatives of expanding
core hereditary cancer market, growing international business and
launching new life-saving products. The company noted that, this
quarter is more reflective of a true year-over-year performance
sans the impact from additional publicity involving celebrities,
which had otherwise acted as a major factorboosting revenues for
the past few quarters.
Segments in Detail
Myriad operates through two major segments. Molecular diagnostic
tests contributed 96% to total revenue in the quarter while
Companion diagnostic tests accounted for the remaining 4% of
Molecular diagnostic tests recorded revenues of $176.2 million,
up 19% year over year. Molecular diagnostic testing revenues were,
in turn, derived from the Oncology (down 3.5% to $92.4 million) and
Women's Health (up 53% to $80.7 million) segments. Myriad noted
that, the year-over-year decline in Oncology sales resulted from
aMedicare reimbursement reduction of $6 million for BRAC
, effective from Jan 1, 2014. However, the company is looking
forward to the 37% increase in reimbursement rate that is now in
effect since Apr 1, 2014.
The Hereditary Cancer test generated revenues of $169.6 million
in the third quarter, up 16% year over year. Under this segment,
revenues grossed $119.7 million, BART revenues were $21.1 million,
myRisk(TM) Hereditary Cancer revenues totaled $14.5 million, and
Colarisand Colaris APrevenues came in at $14.4 million.
Other molecular diagnostic tests generated revenues of $3.5
million, up 25% from the comparable quarter in fiscal 2013.
Companion diagnostic service revenues declined 17% from the
year-ago quarter to $6.7 million. According to the company, this
segment may reflect fluctuation in sales performance going forward
due to the timing of research projects with Myriad's pharmaceutical
Adjusted gross margin in the reported quarter declined 130 basis
points (bps) to 85.7% due to the inclusion of revenues from the
Crescendo acquisition, which at current volumes has lower margins.
Adjusted research and development expenses declined 29.5% to $9.5
million while adjusted selling, general and administrative expenses
increased 21.2% to $78.1 million. This led to a 40 bps expansion in
adjusted operating margin to reach 37.8%.
Myriad Genetics exited the quarter with cash, cash equivalents
and marketable securities of $277.7 million, compared with $531.1
million at the end of fiscal 2013. Myriad's Board of Directors
repurchased 1.6 million shares for $41.9 million during the
Banking on core market growth that led to another solid quarter
and several recent positive takeaways including the recent
acquisition of Crescendo Bioscience; the three-year contract with
United Healthcare to provide coverage for Myriad's myRisk
Hereditary Cancer test; and the collaboration with Tesaro for the
use of Myriad's proprietary HRD test to identify tumor subtypes
that may respond to Tesaro's investigational new PARP inhibitor
niraparib, Myriad has raised its revenue outlook for fiscal
The company expects revenues in the range of $770-$775 million,
higher than the prior forecast of $740-$750 million implying
annualized growth of 26% (from earlier 21% to 22%). The current
Zacks Consensus Estimate of $776 million remains marginally ahead
of the company's guidance.
Myriad has also hauled up its EPS guidance for the fiscal year.
The company currently projects its earnings to vary between $2.37
and $2.40, up from the previous range of $2.09 to $2.12. The
revised outlook reflects growth of 34% to 35% as compared to the
earlier range of 18% to 20%. However, the Zacks Consensus Estimate
for EPS is pegged at $2.22, which falls below the guided range.
Myriad Genetics has been consistently reporting impressive
results over the past few quarters. The higher-than-expected
earnings guidance for the current fiscal is also encouraging. With
positive results from the company's major cancer tests and the
recent acquisitions and collaborations, we believe Myriad Genetics
will tread steadily on the growth trajectory going forward.
However, as Myriad rolls out its myRisk hereditary cancer test
in the U.S., it plans to gradually discontinue its legacy products
including BRACAnalysis, Colaris, Colaris AP, Melaris and Panexia.
In line with its strategy to replace these legacy products with the
more innovative myRisk, Myriad plans to convert the hereditary
cancer testing market by the summer of 2015. Per the company, the
period 2013-2015 will serve as the conversion phase toward the
Although the company expects to increase its addressable market
with myRisk in the near future, we remain cautious owing to the
market conversion phase with the discontinuance of the company's
successful legacy products.
Currently, the stock carries a Zacks Rank #1 (Strong Buy). Some
other top-placed stocks that are worth a look include
Alexion Pharmaceuticals, Inc.
Gilead Sciences Inc.
). While ALXN and GILD sport a Zacks Rank #1 (Strong Buy), AFFX
carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
AFFYMETRIX INC (AFFX): Free Stock Analysis
ALEXION PHARMA (ALXN): Free Stock Analysis
GILEAD SCIENCES (GILD): Free Stock Analysis
MYRIAD GENETICS (MYGN): Free Stock Analysis
To read this article on Zacks.com click here.