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Myriad Genetics (MYGN - Analyst Report) reported earnings per share (EPS) of 68 cents in the first quarter of fiscal 2014, registering a 47.8% beat over the Zacks Consensus Estimate and a stupendous year-over-year growth of 88%.

Net income came in at $55.5 million, surging 84% from the comparable year-ago period.

Quarter in Detail

Revenues increased 51.7% year over year to $202.2 million, sailing past the Zacks Consensus Estimate of $168 million. Growth was mainly driven by strong performance in the core markets, complemented by international expansion. Additional publicity involving celebrities was also estimated as a major factor that boosted revenues by about $35 million.

Segments in Detail

Myriad operates through two major segments. Molecular diagnostic tests contributed 95% to total revenues in the quarter while Companion diagnostic tests accounted for the remaining 5% of sales.

Molecular diagnostic tests recorded revenues of $193 million, up 52% year over year. Molecular diagnostic testing revenues were in turn, derived from the Oncology (up 30% to $108.3 million) and Women’s Health (up 93% to $84.7 million) segments.

BRACAnalysis test revenues amounted to $149.6 million, up 43% year over year. Sales from the BART test were $24.8 million, surging significantly by 225% from the prior-year quarter. COLARIS tests demonstrated consistent growth in the first quarter, with revenues increasing 19% year over year to $14.3 million. 74% of the total revenue comprised of BRACAnalysis test, while 7% of the same was constituted by COLARIS tests.

Other molecular diagnostic tests generated revenues of $4.3 million, up 66% from the comparable quarter in fiscal 2013. The increase in total revenues is primarily attributable to the myRisk and Polaris tests.

On the other hand, the Oncology segment experienced 30% growth in patient sample volumes, and is poised to propel growth going forward.

Companion diagnostic service revenues escalated 53% from the year-ago quarter to $9.4 million.

Operational Update

Gross profit increased 52.42% year over year to $176 million. Gross margin during the quarter was up by 40 basis points (bps) year over year to 87.41%.

Operating expenses rose 39.32% to $94 million. The increased expenditure was on account of a 37.6% increase in selling, general and administrative (SG&A) expenses (to $77.2 million) and a 47.3% escalation in research and development (R&D) expenses (to $16.8 million).

Operating income rose 71% year over year to $82.9 million. Nonetheless, operating margin expanded 450 bps to 40.9% compared with 36.4% in the year-ago quarter.

Financial Update

Myriad Genetics exited the quarter with cash, cash equivalents and marketable securities of $515.5 million, compared with $466.3 million at the end of fiscal 2013. Cash from operating activities improved 76% to $90 million compared with $51 million in the year-ago quarter. Myriad’s Board of Directors authorized a new $300 million stock repurchase authorization, expanding the total share repurchase program to $1 billion.

Business Highlights

The Myriad myRisk(TM) Hereditary Cancer test was successfully launched in the U.S. in September. Myriad presented data at the Collaborative Group of the Americas on Inherited Colorectal Cancer. This data demonstrated that the test significantly improved the sensitivity of colon cancer risk assessment by identifying 60% more harmful mutations in 1,133 patients who met the clinical criteria for hereditary colon cancer testing.

The Myriad myPlan(TM) Lung Cancer test was launched soon after to cater to leading oncologists throughout the U.S. Data presented at the International Association for the Study of Lung Cancer showed that patients with high-risk myPlan Lung Cancer scores resulted in approximately twice the number of lung-cancer deaths over a five year period compared to patients with a low-risk score.

Study results of the Myriad myPath(TM) Melanoma test, presented at the annual meeting of the American Society of Dermatopathology, demonstrated that the test was highly effective in differentiating melanoma from benign nevi. myPath Melanoma test achieved 89% sensitivity and 93% specificity across 464 skin biopsy lesions, which included 254 melanomas across all major subtypes.

Further, Myriad announced strategic collaborations with BioMarin, Tesaro, and AstraZeneca to advance its PARP inhibitors through Phase 3 clinical trials with the U.S. Food and Drug Administration.

Guidance

Myriad has raised its revenue outlook for fiscal 2014. It expects revenues in the range of $700–$715 million, higher than the prior forecast of $690–$710 million by 14% to 17%. The current Zacks Consensus Estimate of $692 million lags behind the company guidance.


Myriad has also increased its EPS guidance for the fiscal year. The company currently projects its earnings to vary between $1.92 and $1.97 per share, compared with the previously guided range of $1.87 to $1.94. The revised outlook reflects growth of 9% to 12%. However, the Zacks Consensus Estimate for the same is pegged at $1.90 per share, remaining below the guided range.
 
Our Take

Myriad Genetics has been consistently reporting impressive results over the past few quarters. With encouraging results from the company’s major cancer tests and forthcoming collaborations, we believe Myriad Genetics will tread steadily on the growth path going forward.

Currently, the stock carries a Zacks Rank #3 (Hold). Other stocks that are worth a look include Actelion Ltd. (ALIOF), AMAG Pharmaceuticals, Inc. (AMAG - Snapshot Report) each carrying a Zacks Rank #1 (Strong Buy) and Illumina Inc. (ILMN - Analyst Report)) carrying a Zacks  Rank #2 (Buy).

 

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