) reported earnings per share ('EPS') of 36 cents for the first
quarter of fiscal 2013. The results improved 24% year over year
and surpassed the Zacks Consensus Estimate of 32 cents.
Revenues for the quarter increased 21% year over year to
$133.4 million, well above the Zacks Consensus Estimate of $130
During the quarter, Myriad's two businesses - Molecular
diagnostic testing and Companion diagnostic services - recorded
revenues of $127.3 million (up 22% year over year) and $6.2
million (down 4.6%), respectively. The company has been offering
Companion diagnostic services following its acquisition of
Rules-Based Medicine in May 2011 which now accounts for 4.6% of
total revenues. Molecular diagnostic testing revenue is derived
from both Oncology (up 16% to $86.2 million) and Women's Health
(up 38% to $41.1 million).
While Myriad markets several molecular diagnostic products,
the company's flagship product is Bracanalysis (representing
78.7% of total revenues during the quarter), which studies BRCA1
and BRCA2 genes for assessing a woman's risk of developing
hereditary breast and ovarian cancers. This test recorded a 17%
jump in revenues to $105 million during the quarter. Moreover,
revenues derived from Colaris and Colaris AP, which assess a
patient's risk of developing hereditary colorectal and uterine
cancers, increased 26% to $12.1 million.
Over the recent past, the company has been working on
receiving reimbursements for the BART test that recorded revenues
of $7.6 million during the reported quarter. In this respect, the
company has progressed well as the Noridian Administrative
Services announced that Medicare would reimburse the test October
1, 2012 onwards for patients with a personal history of breast or
Gross profit increased 20.8% year over year to $116 million.
Gross margin, however, remained unchanged at 87%. Operating
expenses increased 23.6% during the quarter to $67.5 million due
to a 21.7% rise in selling, general and administrative expenses
($56.1 million) and a 34% increase in research and development
(R&D) expenses ($11.4 million).
Higher operating expenses incurred were a result of the
company's attempts to support portfolio expansion, sales force
expansion and deeper penetration in the international market.
Consequently, operating margin declined 110 basis points to
Myriad exited the quarter with cash, cash equivalents and
marketable securities of $466.3 million, an improvement from
$454.2 million at the end of fiscal 2012. The company repurchased
1.8 million shares for $46.2 million during the quarter. The
consistent share buyback program had a favorable impact on the
company's EPS as shares outstanding declined 3.6% year over
Myriad raised its outlook for fiscal 2013. The company now
expects to report revenues of $570−$585 million (previous
guidance was $550−$565 million), reflect growth of 15−18%
(11−14%). The raised guidance is primarily on the back of an
improved outlook for Molecular Diagnostics segment, which is
expected to gross $545−$557 million in the said fiscal. Guidance
for Companion diagnostic remained unchanged at $25-$28
The EPS for the fiscal year is likely to be in a range of
$1.50−$1.55 ($1.44−$1.48). However, the company also stated that
an important part of its customer base in the Eastern US has been
affected by the recent severe storm.
We consider Myriad's Bracanalysis as a valuable asset for
top-line growth as it has the potential to tap a widely
unexplored market. We are encouraged by the company's various
initiatives to achieve this objective. During fiscal 2012, the
company had entered into agreements with Cephalon, a subsidiary
), and Pharma Mar to conduct companion diagnostic testing for
their clinical trials.
Myriad has also entered into a loan and acquisition option
agreement with Crescendo Biosciences. The company made a $25
million debt investment in order to gain an exclusive, three-year
option to acquire it. Moreover, with a strong cash balance,
the company is well placed to expand its product portfolio and
target new territories. The stock retains a Zacks #2 Rank (Hold)
in the short term.
However, operating expenses are increasing due to the
company's focus on international expansion and product
development. As a result, margin remains under pressure, although
the bottom line should benefit from the repurchase program.
We currently have a 'Neutral' recommendation on Myriad.
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