10-Q: Myriad Genetics Reports 11% Revenue Growth in Q3 2024, Faces Headwinds from UnitedHealthcare Policy Change

Myriad Genetics saw an 11% year-over-year revenue increase in the third quarter of 2024, driven by growth in several testing segments, but faces potential revenue impacts due to a change in UnitedHealthcare's coverage policy for pharmacogenetic testing.

Summary

• Myriad Genetics reported an 11% increase in revenue year-over-year for the third quarter of 2024, reaching $213.3 million.
• Testing volumes grew by 6% year-over-year, with pharmacogenomics leading at 10% growth, followed by hereditary cancer at 5% and prenatal at 3%.
• The company experienced a net loss of $22.1 million for the quarter, compared to a net loss of $61.3 million in the same period last year.
• For the nine months ended September 30, 2024, total revenue was $627.0 million, a 13% increase compared to $556.6 million in the same period of 2023.
• The net loss for the nine-month period was $84.8 million, an improvement from the $232.1 million loss in the prior year.
• Myriad completed the sale of its EndoPredict business for $10.0 million, resulting in a net loss of $12.4 million including transaction expenses.
• UnitedHealthcare will no longer cover certain multi-gene panel pharmacogenetic tests, including Myriad's GeneSight test, under its commercial and individual exchange benefit plans, effective January 1, 2025, which is expected to negatively impact future revenue.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant impact of the UnitedHealthcare policy change, which overshadows the positive revenue growth and improved net loss. The risk of goodwill impairment and the need for potential future financing also contribute to the negative outlook.

Positives

• Myriad Genetics experienced a significant 11% increase in revenue for the third quarter of 2024.
• The company saw growth in testing volumes across multiple product categories, including a 10% increase in pharmacogenomics.
• The net loss for both the quarter and the nine-month period improved compared to the previous year.
• The company completed the sale of its EndoPredict business, which may allow for a greater focus on core business areas.
• Myriad has secured research collaborations to study the use of MRD testing in breast cancer.

Negatives

• Myriad Genetics reported a net loss of $22.1 million for the third quarter of 2024.
• The company faces a significant challenge with UnitedHealthcare's decision to no longer cover certain pharmacogenetic tests, including GeneSight, which will impact future revenue.
• The sale of the EndoPredict business resulted in a net loss of $12.4 million.
• The company's goodwill may be at risk of impairment due to the UnitedHealthcare policy change.

Risks

• The change in UnitedHealthcare's coverage policy for pharmacogenetic testing poses a significant risk to future revenue, particularly for the GeneSight product.
• There is a risk of goodwill impairment related to the Pharmacogenomics reporting unit due to the UnitedHealthcare policy change.
• The company is subject to risks related to changes in governmental or private insurers coverage and reimbursement levels for its tests.
• Myriad faces risks related to increased competition and the development of new competing tests.
• The company may be unable to secure additional financing to fund its business, if needed, in a timely manner or on favorable terms.
• There are risks related to current and future investigations, claims or lawsuits, including derivative claims, product or professional liability claims.

Future Outlook

Myriad anticipates that UnitedHealthcare's policy change will negatively impact revenue in fiscal year 2025 and thereafter. The company plans to launch new products, such as FirstGene, Precise Liquid, and Precise MRD, to accelerate growth. Myriad is committed to disciplined management of key initiatives to drive long-term growth and profitability.

Management Comments

• Management believes that significant growth opportunities exist to help patient populations with pressing health care needs through innovative genetic and precision medicine solutions and services.
• The pillars of the company's long-term growth strategy are founded on investments in science and innovation, technology-enabled operations, an elevated customer experience, strong commercial execution, and scalable operations.
• Management believes its path to continued growth is driven by articulating clinical differentiation, raising awareness with patients, and innovation that improves clinical outcomes, ease of use, and access.

Industry Context

The announcement reflects the ongoing challenges in the genetic testing industry, including reimbursement pressures from payors and the need for continuous innovation. The policy change by UnitedHealthcare highlights the vulnerability of companies relying on specific payor contracts and the importance of diversifying revenue streams. The collaborations to study MRD testing in breast cancer indicate a focus on emerging areas within oncology.

Comparison to Industry Standards

• Myriad's 11% revenue growth in Q3 2024 is a positive sign, but it is important to compare this to the growth rates of other genetic testing companies such as Exact Sciences, which has seen significant growth in recent years, and Invitae, which has faced financial challenges.
• The impact of UnitedHealthcare's policy change is a significant concern, as it highlights the risk of relying on a single payor. Companies like Guardant Health and Foundation Medicine, which focus on liquid biopsies and cancer diagnostics, also face similar reimbursement challenges.
• Myriad's focus on innovation and new product launches, such as Precise Liquid and Precise MRD, is consistent with industry trends, where companies are investing in advanced technologies to improve patient outcomes and expand their market reach. Comparatively, companies like Illumina are also investing heavily in new sequencing technologies.
• The sale of the EndoPredict business is a strategic move that may allow Myriad to focus on its core strengths, similar to how other companies in the diagnostics space have divested non-core assets to improve profitability.

Corporate Governance

Legal Proceedings

• The company is involved in various disputes, claims, and legal actions, including class actions and other litigation.
• The company has settled stockholder derivative actions, agreeing to adopt certain corporate governance reforms and pay attorneys' fees and expenses not to exceed $0.95 million.
• The company is also involved in investigations by governmental agencies regarding its business.

Stakeholder Impact

• Shareholders may be concerned about the potential negative impact of the UnitedHealthcare policy change on future revenue and profitability.
• Employees may be affected by potential cost-cutting measures or restructuring due to the revenue impact.
• Customers may experience changes in access to or coverage for Myriad's tests.
• Suppliers may be impacted by changes in the company's financial performance and purchasing decisions.
• Creditors may be concerned about the company's ability to meet its financial obligations due to the revenue impact.

Next Steps

• Myriad will continue to engage with UnitedHealthcare regarding its decision to change its GeneSight coverage policy.
• The company plans to launch new products, such as FirstGene, Precise Liquid, and Precise MRD.
• Myriad will continue to focus on disciplined management of key initiatives to drive long-term growth and profitability.

Key Dates

Keywords

genetic testing, precision medicine, pharmacogenomics, hereditary cancer, prenatal testing, GeneSight, revenue growth, UnitedHealthcare, reimbursement, goodwill impairment