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Myriad Genetics Tops Q1 Earnings, Revenues; Keeps '15 View

Myriad Genetics Inc.MYGN reported adjusted earnings per share (EPS) of 41 cents in the first quarter of fiscal 2016, up 64% from 25 cents in the year-ago quarter. Adjusted EPS also surpassed the Zacks Consensus Estimate by a solid 17.1% and exceeded the company's guidance of 34-36 cents.

Including the one-time items, the company reported net income of $26.6 million or 37 cents per share in the reported quarter, reflecting a year-over-year improvement of 66.3% or 76.2%, respectively.

The upside in net income was driven by higher revenues, improved operational efficiencies in Myriad's myRisk Hereditary Cancer laboratory, lower research and development expenditure and leverage in sales, general and administrative expenses.

Myriad Genetics Inc. (MYGN) - Earnings Surprise | FindTheCompany

Revenues

In the fiscal first quarter, total revenue rose 8.7% year over year to $183.5 million, exceeding the company's guidance of $176 to $178 million. The top line also comfortably beat the Zacks Consensus Estimate of $181 million.

Total revenue growth in the quarter was primarily driven by massive year-over-year growth observed in pharmaceutical and clinical services revenues.

In the reported quarter, Myriad's Molecular diagnostic tests (93.7% of total revenue) recorded total revenue of $171.9 million, up 4.5% year over year, primarily derived from Hereditary cancer testing revenues (up 4% at $156.7 million), Vectra DA testing revenues (up 8% at $11.4 million) and other testing revenues (up 15% to $3.8 million).

Pharmaceutical and clinical service revenues (accounting for the rest) in the first quarter grossed $11.3 million, reflecting massive year-over-year growth of 169.8%. During the reported quarter, Myriad's German clinic generated revenues of approximately $5 million, which primarily contributed to this year-over-year improvement in this segment.

In the reported quarter, myRisk conversion increased to approximately 80% of incoming hereditary cancer samples, accompanied by completion of conversion of targeted physicians to myRisk Hereditary Cancer by the end of the quarter.

Margin Trends

Adjusted gross margin during the quarter improved 80 basis points (bps) to 80.1%, primarily on account of improved efficiencies in Myriad's myRisk hereditary cancer laboratory, partially offset by lower margin clinic revenues. Excluding the impact of the clinic in the reported quarter, Myriad's gross margin would have been 81.3%.

Adjusted operating expenses dropped 3.9% to $100.5 million due to a 24% decline in adjusted research and development expenses (to $17.1 million). However, selling, general and administrative (SG&A) expenses increased 1.6% (to $83.4 million) in the reported quarter.

Consequently, adjusted operating margin improved a massive 790 bps year over year to 25.3% in the quarter, on account of higher revenue, lower research and development costs, improved operational efficiencies in myRisk laboratory, and leverage in SG&A.

Financial Position

Myriad exited the first quarter of fiscal 2016 with cash, cash equivalents and marketable securities of $155.4 million, up from $144.8 million at the end of fiscal 2015. Myriad reported cash flow from operations of $24.9 million, up 255.7% from the year-ago equivalent of $7 million. Consequently, free cash flow from operations was $23.9 million, as against free cash outflow $4.5 million in the year-earlier quarter.

The company repurchased 1.1 million shares for $38 million during the quarter and was left with an authorization to buy back stock worth another $117 million.

Guidance

Myriad has reiterated its guidance for fiscal 2016. The company continues to envisage revenues in the range of $750-$770 million, with annualized growth of 4-6%. The Zacks Consensus Estimate of $754 million lies within the guidance range.

On the other hand, the company continues to expect adjusted EPS for fiscal 2016 in the range of $1.60-$1.65, reflecting annualized growth of 10-13%. The current Zacks Consensus Estimate of $1.64 also lies within Myriad's guidance.

Alongside, management has provided its outlook for second-quarter fiscal 2016. The company expects adjusted earnings per share of 40-42 cents on total revenue of $188-$190 million. The Zacks Consensus Estimate of adjusted EPS of 42 cents coincides with the upper end of the company provided range, while that for revenues of $194 million lies above Myriad's guidance range.

Our View

Myriad has started off fiscal 2016 on an impressive note, with both its top and bottom lines comfortably beating the Zacks Consensus Estimate in the first quarter. Further, management's confidence to complete the majority of conversion of its hereditary cancer business to myRisk by the end of fiscal 2016 buoys optimism.

On the profitability front as well, the company posted an impressive performance, improving from the past quarter levels, wherein both operating and gross margins had shown a deterioration. In addition, the company began marketing its Prolaris prostate cancer diagnostic test for the first time in the reported quarter, and witnessed a strong adoption rate for the same.

Myriad also began marketing a handful of new products like Vectra DA and the myPath Melanoma test in the first quarter, which, apart from expanding the company's test menu, we believe, will also fetch higher profits in the quarters ahead.

Zacks Rank

Currently, Myriad carries a Zacks Rank #2 (Buy). Better-ranked med-biomed/generic stocks include Actelion Ltd. ALIOF , Anika Therapeutics Inc. ANIK and CoLucid Pharmaceuticals, Inc. CLCD . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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ACTELION LTD (ALIOF): Free Stock Analysis Report

MYRIAD GENETICS (MYGN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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