Myriad Genetics, Inc. (MYGN) Earnings Call Transcript & Summary

All right. Good morning, everybody. I'm Doug Schenkel from the Cowen Life Science and Diagnostic Tools team. It's my pleasure to welcome you to the 41st Annual Cowen Health Care Conference, which I am doing virtually from actually sunny Boston, which is not always the case in early March. It's my pleasure to welcome Bryan Riggsbee, Myriad's Chief Financial Officer; and Scott Gleason, who runs Investor Relations for Myriad. Thank you both for being here this morning. Our goal for this morning is to talk about how things are evolving under a new CEO. Lots of change that is fairly recent but rapidly evolving. So we want to talk about that a little bit. We then want to get into talking about some of the key products, how they're performing right now and how you're thinking about the outlook for those products. And then I think if we have some time at the end, we do have some loose-end questions after the most recent financial update. That being said, there were a couple of press releases out this morning. One was on an announcement with Intermountain Precision Genomics as well as Illumina. And then the other was on the timing of the 10-K. So maybe just to start with some current events. Before we get into it, thanks again, Bryan. Thanks, Scott, for being here.

Maybe we'll start on the Intermountain news. So let me take a shot at positioning that. And then hopefully, I won't mess anything up. But to the extent I do, you guys can just jump in and clean up for me. So the announcement, again, is a collaboration between Myriad and Intermountain Precision Genomics for a comprehensive offering of germline and somatic tumor testing services. And the release stated that the collaboration will combine Myriad's advanced hereditary cancer and CDx tests with Intermountain's somatic offerings within their lab, utilizing the TheraMap test powered by the TruSight Oncology 500 NGS test from Illumina. So maybe you could just talk about this collaboration, how the 3-way partnership works and why you and why we should be excited about it.

Yes. Thanks, Doug. And first of all, thank you for having us at the conference this year. We really appreciate it and look forward to that opportunity we'll have one day to hopefully be in person again. With respect to the Intermountain partnership, we're extremely excited, I guess, first and foremost, Paul's talked about this extensively, how our primary focus is on patients and our customers. And so really, the driving force behind this was demand in the marketplace for a combination tumor germline offering. And so we've been working on this for a while. We've found really great partners in Intermountain as well as Illumina to provide this offering. And it -- basically, I would describe it as a -- with respect to the fair amount portion of the offering, this will be something that we offer through our sales force nationwide. So we'll offer combo tumor germline product along with our CDx products. And then the tumor portion of the test offering will be performed using TheraMap, the Intermountain test. And then we will combine that with our myRisk and our myChoice CDx test. The physician will get one report, simple easy to use. It will be branded as Myriad. And really, I guess, I think the -- again, the primary key for us here is being responsible to patients and our physician partners. And so we look to launch that in the back half of 2021, as we said, and we're really excited about the announcement today.

And then Bryan, maybe saying the same thing a different way. But essentially, as we think about the cancer menu that -- the cancer test menu that Myriad has, Myriad was already a leader in inherited genetic profiling and germline with a role in companion diagnostics. Now you basically turbocharge your efforts in somatic for actual cancer profiling, and you're able to offer this as part of your combined or a single-test offering. Is that the right way to think about it?

Yes, I think that's exactly the right way to think about it.

Okay. And how -- is this something that's quarters away or weeks or months away in terms of market availability?

Yes. I think we gave some general idea in terms of when we would expect to be in the market. I think the key here is that all these tests are commercially available today. The TheraMap test has Medicare reimbursement. So this isn't something that is sort of a concept. I would say this is something that's probably in the nearer-term than -- versus longer term.

And probably fits pretty neatly into your existing commercial infrastructure.

Yes, absolutely. I mean, if you think about this, it's clearly aligned with our oncology efforts. We've talked a lot about how we're focusing more in 3 markets. This sits very nicely in the oncology market. It's something that we -- again, that patients and physicians have wanted, and we're being responsive to that.

And Doug, I think what we've seen in the women's health space and in the oncology space, is physicians really want a comprehensive service provider. They want to go to one lab that can get them all the answers. And so when you combine our market-leading hereditary cancer tests, our market lead myChoice CDx test, and then this is probably one of the most comprehensive offerings that an oncologist can have. So very similar to what we see in women's health, where it's important to have all the content. We see that same thing in the oncology market.

Super helpful. I can't help but ask, and I'm not sure you guys will be in a position to answer this, this morning. But I can't help but ask what this means in terms of kind of the longer-term strategic vision within cancer. Again, we talked about you having a long-time position as one of the leaders in germline and CDx. Now you boost the menu with a somatic offering. One of the things that we've kind of thought that was going to happen for a little while and seems to be happening a little more quickly than we anticipated. But it's consistent with what we thought was going to happen in the market is there's probably going to be 4, 5, 6 players that ultimately have very similar menus in cancer testing based on genetics. For you guys now, we talked about what you have. Where we don't see you planning right now is in screening, and we don't see you, I think, in MRD monitoring. Is it plausible that those are adjacencies that Myriad would have interest in, given that is what we're seeing from others, both in blood and tissue moving into all these categories?

Yes. I mean, I think, Doug, I mean, we're -- you see the market very similar to the way that we see the market and the direction that it's headed. I think this is -- show is a step in that direction. Historically, obviously, we focus primarily solely on our germline business, really in our CDx business. But I think this is evidence of us taking a step in that direction. And really with the Illumina portion of this, obviously, there's an aspect there. They have capability in other parts of that. So that's definitely something that's part of our thinking longer term.

I think -- sorry, go ahead, Scott.

No, I was going to say, I think one thing this deal shows is Myriad has a very strong distribution channel into oncology. And I think, under Paul's leadership, we're very willing to partner to bring product -- innovative products to market and to have the best offering. So I think this is kind of [indiscernible].

Yes. It's -- no, it makes sense. I mean, it's leveraging. It's kind of playing to some of your strengths, right? You have existing and strong infrastructure between sales folks as well as genetic counselors. So why not leverage that with a full menu, especially to Bryan's point earlier, which for whatever my opinion, I agree with, increasingly, providers want -- they want to limit how many providers they're working with or how many labs they're working with. So if you can build out that menu and the infrastructure to support it, why wouldn't you as long as you're doing it in a high-quality way.

Yes, absolutely. And the other element here, I think, is just -- Paul's talked a lot about his desire to further collaborations and partnerships as a way to, one, speed to market in some of these areas; and two, there's not a real need to build it yourself. There's capabilities that exist out there. So when you think about the investment required in order to get this up and running, it's not like they're starting from scratch with an R&D effort and a validation and a reimbursement and that sort of thing. So I think this is a pretty strong example of the direction that he plans to take going forward. Not to say that we wouldn't develop in-house content, but where it's appropriate.

Yes. Maybe I do want to come back to the other current event, which is the 10-K. But maybe we'll stick with build off of what we're talking about and just talk about Paul's strategy and how things are evolving. And it seems like a more natural segue. I mean, do you -- I'd be curious if either of you would be willing to speak on Paul's behalf in terms of how his thinking is evolving as he assesses the company that he's now led for only a few months, but there's been a lot of changes in that time. So I'd love to get your take on or just ask you to kind of speak on his behalf in terms of how his assessment is evolving? And then for you guys, both of you have been with the company for a little bit. What changes are you noticing already, both in terms of product focus, but also probably just as importantly when it comes to culture?

Yes. No, it's a great question, a broad question. There's a lot in there. So if I don't touch on everything, please redirect me. But what I would say is, first of all, if I back up a little bit to when Paul arrived, I think he, first of all, had done a lot of homework prior to his arrival on the company, the culture, the products, the markets. And sometimes, it's good to have someone with an outside perspective to come in and share their views. That's -- we've not only had that through the work that we've done with Bain, but also some work that we had done with KPMG in terms of assessing market and what our strategy should look like. And then I think that Paul's -- he's fairly decisive in terms of gathering information, gathering all the relevant facts, engaging with the team, the broad team, which certainly had a view in terms of where we should go as a company. And he's just been very engaging and collaborative in that approach with the team, which I think from a cultural perspective has been very well received. But he likes to gather information and take quick action. And so you saw that with our announced divestitures of businesses that we thought were noncore. You see that now in what is a pretty short amount of time, the announced collaboration today with Intermountain in the oncology space. And so I would say broadly across the portfolio, there's an excitement, enthusiasm across the team with the changes and with the direction that the company has taken. And so I think you'll hear more about this. Obviously, as we come up, there will be a great opportunity on May 4 when we have our Investor Day to share more of what that vision looks like. But I would say in the early days, Paul has been around and he's done this before in other places. And so there's a lot of credibility there. There's a really good network, very well-known across the health care sector. And so I think these are all things that have sort of led us to, I think, make a fair amount of progress in a relatively short amount of time.

One of the pillars that Paul talked about in the context of outlining his 3-stage strategy to return Myriad to growth. The first one was prioritizing product innovation. Has there already been a change in how the company approaches both investing and kind of within that, prioritizing essentially the approach that the company takes to making decisions on where to invest? And if so, is that already in place? Or is that something that's on the come in terms of deploying investment to that structure?

Yes. No, I would say, first of all, it's already been a big part of what we've done to this point. And certainly, as we think about how we evolve our cost structure, we've talked about where we expect to see some benefits going forward. That's definitely been part of it. That said, I would -- from a product innovation perspective, I would sort of characterize the approach. Again, I would go back to the overriding bar that we had on one of the slides in our recent earnings call deck, which sort of, again, puts the patient and the physician first. And so I think that -- not to speak negatively, but necessarily, but I'd say, historically, you sometimes and certainly in organizations that sort of evolve sort of out of a very research-focused organization, you can sort of go down this path of research for research sake and maybe not necessarily starting with what is the problem that the customer and the patient are really trying to solve for. And I think Paul's approach has really been to bring every one of our research projects and every one of the studies, et cetera, that we're working on across the company and bring it back and looking at it through that lens in terms of what problem are we trying to solve for our physician customers here? Do we think this is the right answer? Do we think this is something that could be broadly and widely adopted in the medical practice and the way they manage their patients' care journey? And so I think that, first and foremost, as we think about diagnostic test and innovation, that's the way we look at it, and that's already in place. I would say the other thing I would highlight is just that product innovation can be -- we think of innovation, not only in terms of the products that we bring to the market, but also how we deliver those products to the market. Paul has spoken a lot about ease of use tools, how we interact with customers and broadly with -- in terms of our DTC effort and how we engage with customers, help guide them to physicians that can help direct them going forward. And so as we think about innovation again, and that's probably a broader lens than what has been used historically at Myriad, we really are focused both on sort of the technology and the diagnostic tools that we offer, but also the tools that we offer in the physician marketplace and how we interact with patients as well.

It's interesting. I can't remember if this was with one of you guys or with Paul, but there was -- and I'm paraphrasing this probably in a somewhat clumsy way. So I apologize for that in advance. But I remember one of you saying to me, yes, listen, we acknowledge as a company we haven't done everything perfectly. And at some points, the decisions we made, they were made with the right intent. But in hindsight, we should have done something different. But at the same time, if you just started from scratch, which kind of Paul is and he said, "Hey, I get to start with a company that has a great commercial infrastructure, has meaningful share in the markets they participate in. Even though the history is not flawless, it's still a strong infrastructure to optimize off of." I mean, is that the way we should be thinking about Myriad right now under your leadership and Paul's leadership?

Yes, I think that's right. And first and foremost, I think you have to look in retrospect and you have to evaluate the decisions that have been made historically, what's been successful and what's not been successful and use that information as you plot strategy going forward. So I think we've definitely taken that view. But we also have the view that, "Hey, if I was starting from a split piece of paper with a company that had significant market share in women's health and oncology, great distribution channels, great product, that's -- there may be some issues that we have to deal with in terms of building out the portfolio with a tumor offering or enhancing our DTC initiatives or our workflow tools for the physician, but we've got a pretty good foundation, a pretty good place to start. There are a lot of people that would probably be envious of our position."

Bryan, one thing we've kind of talked about a couple of times here is portfolio optimization, and some of that is playing to your strengths, and some of that's going to be organic investment. Some of it's going to be partnerships, probably acquisitions over time as well. But part of it is also basically pruning the portfolio in places that are noncore. So you talked about this a little bit. You have publicly communicating plan -- communicated plans to divest RBM, the myPath melanoma business as well as Vectra. Can you provide any -- if not updates on how these are progressing? Is there anything you can share in terms of just the framework you're using to assess where, one, you can find the right homes for these assets? But two, what you're looking to get out of these divestitures other than more focus, because I could see a scenario where you can manage this right, this will allow you to not just get more focused, but free up some capital to invested areas that are more consistent with your new portfolio strategy?

Yes. Sure. So I guess the -- in terms of where we're at in the process, obviously, we announced the RBM and myPath divestitures back in early November. So we're further along in that process and -- than we are with Vectra. But I would say across the board, really strong interest. It's a pretty good market in diagnostics right now in general. And so there's been a lot of interest both from strategic as well as financial investors in these businesses. And we've said from the beginning, these are good businesses. We acquired the businesses originally or developed, in the case of myPath, these businesses for a reason. We believe they have a strong future. We just believe that they're not going to get the attention and the capital resources in the Myriad portfolio that they really need in order to grow and thrive. And so that's the reason for -- and we don't believe they're core to our -- what is our go-forward offering. And so that's the reason for the divestiture. But we've had really strong interest across the board. And we would expect to provide some updates when we have it, but we're certainly relatively far into the process. It's progressing just as we would have expected it would have. In terms of our portfolio assessment and our review, again, we go back to where we think we have large markets that we have a great franchise and we can really be strong and win. And the assets, whether it be Vectra, in terms of how do we incorporate that into the physician workflow or into our internal systems, they all take up bandwidth of our people, capital. When you think about how do I create a portal eventually, where I can sell all of my products, these are additional -- there's just additional resources that have to go to these, and it takes away from resources that we could allocate to oncology. And back to the earlier point where we talked about looking at things in retrospect and -- I think that's one of the things that probably we could have done differently historically has been a little -- obviously, been a little more focused in certain markets and not distracted ourselves with things that were smaller and maybe not less -- just less important to the core. So I think you're spot on in terms of not only both capital resources being consumed, but also intellectual and human resources internally at the company.

At this point, would it be surprising if there were any further notable divestitures announced? I mean, in the review of the portfolio, are you guys at the point where what you've announced is probably what's going to happen?

Yes. I think we've said -- we said on one of our releases here recently that we were substantially complete with our review of resources. That is where we're at. And it's not a simple task even to go through even the divestiture process. I mean, that consumes a lot of resources. So when we think about accounting and finance and other parts of the business, when we talk about extracting and untangling some of those resources. So I think we believe these are the right ones right now. And I think, again, we'll have more to say when we hopefully get those closed out here in the next couple of quarters and put some cash on the balance sheet.

Yes. That was going to be my next question. I mean, the goal is to get this done this calendar year, right? Maybe nice -- it'd be nice to have this behind you, presumably in an ideal world before that Analyst Day.

Well, yes. And before the analyst -- yes, the Analyst Day is right around the corner...

All right. All right. I'm pushing you to a little...

Yes, you're pushing. I think we have said, certainly, by the end of the third quarter, it would be our expectation and that they would all be closed. I think you'll likely see some closer than that given where we started the process relative to the Vectra asset.

Okay. Super helpful. I want to go back to the other current event, the 10-K announcement. So this morning, the company announced that it filed to delay the 10-K timing. And I think what you talked about was requiring additional time to review the accounting for certain transactions related to the company's international subsidiaries. Is there any detail you can provide on this review and share any vision of a time frame for when we'll actually get the 10-K? I think folks just want to know time lines and kind of what's going on here.

Yes. Yes, sure. Well, I mean, I guess, first, my real comment would just be, I think we set a fair amount in the actual filing that we did. I think it's a 15-day extension, and we would expect to have it filed within that time frame.

Okay. Great.

We also provided some commentary around what our expectation was in terms of the outcome being substantial. I think we said substantially consistent with what we had released a week or so ago. So it's just taken a little longer than I think anyone would have liked. We've, obviously, had a lot on our plate here lately and have recent -- it feels like just yesterday completed a financial statement audit. And so it's just taking a little bit longer, but we would expect it to adhere to that time frame.

And it's -- I mean, this is part of this, Bryan, just correct me if I'm wrong, but it's -- part of this is the complexity associated with the change in fiscal year, right? I mean, is that part of what's [indiscernible] compounding this?

Yes, I think change in fiscal year definitely creates some complexity given the fact that you have a shorter transition period to look at. But it's just taking longer in general to get through. And again, we would expect to be completed here in the next couple of weeks.

Okay. That's great. So for the most part, nothing to see here, just a lot of moving pieces. You need another week or 2.

Yes.

Okay. All right. That's good. All right, moving along. In terms of just thinking about the outlook for 2021, I mean on one hand, you, like everybody in the space, was impacted by COVID and especially on your women's health side where there is maybe less of an acute need for certain types of tests. Health care utilization was just delayed. I think Myriad has talked about things getting better, and you're seeing that in your financial performance. But some of your volumes in certain categories are still down year-over-year. Is that largely a function at this point in your assessment, not of shear dynamics but more just what's going on in the broader market? And if so, when should investors start to expect that you start to turn the corner on those things? Is that a quarter or 2 away? Is that the right way to think about it?

Yes. I mean, I think it's difficult to say what the time frame is. There's no real history to follow in terms of recovery from this. So I think my expectation when we look at the dynamics and we look at it, I always think oncology and looking at -- oncology and the women's health channel, is a good indicator. We've had very nice recovery on the oncology side, but on the women's health channel, where there's been -- where things have been slower to return to normal and women to go back for well women visits. I think that's where we've seen a bit of a lag. Also in products like GeneSight, where there's an interesting dynamic in terms of the -- I saw some interesting data a week or so ago around the number of -- the continued decline in in-office visits for psychiatry and the increase in sort of telephonic visits. So I think there are certain dynamics in those marketplaces that are -- that have been sustained even through this point. And in other places, prenatal being the best example. We saw -- I think we're up year-over-year on our Prequel volumes. So there's places where it just plays out differently. I think some have -- it's just something where you have to look at the individual products and compare them to same individual products in another place. And some who have tried to compare the Quest and LabCorp, the large reference lab recovery. It's just apples and oranges. But I think we feel really good about what we've seen, and we try to be responsive in terms of providing tools to help our physician customers with shipping kits directly to patients and doing other things telephonically, et cetera. But it -- so I would expect that we would return to normal just as others return to normal. So I don't think I would highlight any sort of difference.

Yes. Doug, I think it's important, what Bryan highlighted. When we look at our oncology business, this is actually where we probably face the most competition. That business has been kind of flat the last couple of quarters and actually last quarter -- the quarter before last quarter, it grew year-over-year. The women's health business where you -- Myriad really strongest from a competitive standpoint, it really was impacted, and that's really just the elective nature. Yes, I think that we're really excited, as people feel more comfortable to start going back to the doctor. In some areas, we've actually seen some exciting trends. Like, so when we look at GeneSight, total psychiatry visits are up 56%. And so as we start returning to a more normalized selling and physician environment, that actually could be an area where we could see kind of stronger demand trends because of that.

Yes. It doesn't seem -- I mean, I know we're about out of time here. But building off of that. I think what jumps out at me is I don't think your guidance bakes in a lot for meaningful improvement in some of the dynamics we talked about. So if I kind of think about the error bars around guidance, I think you guys are factoring in some improvement. But if we return to normal and then on top of it, if you see continued follow-through on new ACOG guidelines for average risk, I mean, I would view those as, if not taking it towards the higher end of the guidance, open -- certainly, opening up the possibility of getting above there. I mean, as I think about the toggles, if the world returns to normal and your women's health business picks up on the germline side, and then if on top of it, you can make a -- as average risk reimbursement picks up, I would view those as sources of upside to how we're thinking about this year.

Yes. I mean, first of all, Doug, we didn't provide guidance for the current year's...

Yes. Sorry, sorry. It's just -- or how people are modeling things. Sorry about that.

Yes. No, that's okay. But I think your point is well taken that to the extent that things recover and do better than what people have, I think the challenge is just and you've seen this with some of the commentary from others in our space, people are just struggling to know kind of how the world is going to return to normal. And as a result, they've probably been a little more conservative and how they talk about it because if you look back a year or 6 months or 8 months ago, people probably would have had a view around this quarter that's probably different on how it's actually playing out.

Yes, absolutely. Absolutely. All right. Bryan and Scott, I really appreciate you taking the time. I think we covered a lot in half an hour. So that was great. Again, thank you.

Thanks, Doug, for having us at the conference.

Thanks, Doug. Appreciate it.