Myriad Genetics, Inc. (MYGN)

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Myriad Genetics, Inc. (MYGN)

F4Q09 (Qtr End 06/30/09) Earnings Call

August 25, 2009 4:30 am ET


Peter Meldrum - President and CEO

Jim Evans - CFO

Greg Critchfield - President, Myriad Genetic Laboratories


Geoff Meacham - JPMorgan

Charles Duncan - JMP Securities

Michael Yee - RBC Capital Markets

Bill Quirk - Piper and Jaffray

Ashim Anand - Natixis Bleichroeder

Ian Sanderson - Cowen and Company

Amanda Murphy - William Blair

Kelley Roche - Leerink Swann and Company

Junaid Husain - Soleil Securities



Welcome to the Myriad Genetics fiscal 2009 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded Tuesday, August 25, 2009.

I would now like to turn the conference over to Mr. Peter Meldrum, President and Chief executive officer of Myriad Genetics. Please go ahead, sir.

Peter Meldrum

Good afternoon, and welcome to the Myriad Genetics earnings call for our fiscal fourth quarter and year ended June 30, 2009. My name is Peter Meldrum, and I am the company's President and Chief Executive Officer. I'm joined today by Jim Evans, our Chief Financial Officer and Gregory Critchfield, President of Myriad Genetic Laboratories.

I will begin the discussion this afternoon with a brief review of the past year and will be followed by Mr. Evans who will discuss our financial results. Dr. Critchfield will review the company's molecular diagnostic business. At the end of the presentation, I will turn the conference call back to the operator for a question-and-answer period.

Please note that some of the information presented here today may contain projections or other forward-looking statements regarding future events or the future financial performance of the company. These statements are based on management's current expectations, and actual events or results may differ materially and adversely from these expectations for a variety of reasons.

We refer you to the documents the company files from time-to-time with the Securities and Exchange Commission. Specifically, the company's annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current report on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

As you know, at fiscal year end, we successfully completed the spinoff of our research and pharmaceutical business, Myriad Pharmaceuticals. All of the shares of Myriad Pharmaceuticals have been distributed to our shareholders and Myriad Genetics now has no ownership in Myriad Pharmaceuticals.

As part of the spinoff, we transferred $188 million to Myriad Pharmaceuticals. However, this has still left us with a very strong cash balance of nearly $400 million. According to a private letter ruling from the Internal Revenue Service, the distribution of common stock in Myriad Pharmaceuticals to our shareholders qualifies as a tax-free distribution.

Additionally, Myriad Genetics retained all of the consolidated R&D tax credits and net operating loss carry-forwards, which will be used by us to offset future income of approximately $400 million.

With the separation of the research and pharmaceutical business now complete, we are focused exclusively on building our molecular diagnostic opportunity, and are committed to the goal of expanding our global leadership position in this exciting industry.

While we are being affected by the current economic recession and have experienced weaker revenue growth over the past two quarters, we completed the fiscal year with molecular diagnostic revenues of $326.5 million, a 47% increase over revenues of $222.9 million in fiscal 2008.

Looking at the year more closely, the current economic recession began to impact our revenue growth during the second half of the year with first half growth of 55%, decelerating to 40% in the second half of the year.

As one would expect, the recession has had only a modest impact on our oncology sales largely from unemployment and the resulting loss of insurance, but a significantly greater impact on our OB/GYN sales in the primary care market, primarily as a result of fewer doctor office visits.

Here are few statistics that support what we've been seeing in the marketplace. According to the American Academy of Family Physicians' national survey, 58% of physicians have seen an increase in appointment cancellations, and 54% are seeing fewer patients since the recession began.

According to the Gallup survey performed by the American college of Obstetricians and Gynecologists, 14% of the women have postponed their annual checkups. Finally, a Kaiser Family Foundation survey noted that 19% of Americans are delaying going to the doctor for preventive care, and 23% are skipping a recommended medical test or treatment.

As we move into 2010, we expect the continued weak economy to restrain our revenue growth. However, we are comfortable with the current research analyst consensus guidance of $392 million in revenues and $1.44 per diluted share for fiscal 2010.

As the country begins to come out of the recession, we believe our revenue growth has the potential to accelerate. As Greg will discuss in more detail, we have implemented several programs recently to bolster revenue growth. First, we have completed the expansion of our OB/GYN sales force with the hiring of 50 new sales representatives. Our sales force is now 300 strong, 150 sales reps in oncology and 150 sales reps in women's health. These sales reps have already been trained and are in the field.

Second, we accelerated the Midwest DTC campaign, which began on August 17th, 2009, three weeks earlier than originally planned. The impact of this campaign should be seen in the second fiscal quarter. Third, because of the positive response in the South DTC campaign, we reinitiated that campaign on August 17, 2009 and plan to continue it through December 31, 2009.

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