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Myriad Genetics (MYGN) Lags Q4 Earnings, New Tests Shine

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Myriad Genetics Inc. (MYGN - Free Report) reported adjusted earnings per share (EPS) of 36 cents in the fourth quarter of fiscal 2016, down from the year-ago quarter by a nickel. Adjusted EPS also missed the Zacks Consensus Estimate by 5.3%, but was in line with the lower end of the company’s guidance range of 36–38 cents. A low-single-digit decline in revenues primarily drove earnings.

Including one-time items, the company reported net income of $23.4 million or 32 cents per share in the reported quarter, exhibiting a year-over-year improvement of 25.1% and 23.1%, respectively.

For fiscal 2016, the company’s adjusted EPS came in at $1.71, up 58.3% from the equivalent figure of fiscal 2015. The full-year bottom line figure comfortably exceeded the Zacks Consensus Estimate of $1.65.

 

Myriad Genetics Inc. (MYGN - Free Report) EPS BNRI & Surprise Percent - Last 5 Quarters | FindTheCompany

 

Revenues

Total revenue dropped 1.8% year over year to $186.5 million and was approximately in line with the upper end of the company’s guidance of $186–$188 million. The top line missed the Zacks Consensus Estimate of $190 million.

The top-line decline was primarily due to less-than-expected revenues delivered by Myriad’s hereditary cancer test.

Segment-wise, Molecular diagnostic tests (93.2% of total revenue) recorded total revenue of $173.8 million, down 3% year over year, mainly on account of Hereditary cancer testing revenues which dropped 7% to $152.8 million. However, Vectra DA testing revenues grew 8% at $12.7 million, Prolaris testing revenues surged 400% to $3.5 million and other testing revenues rose 92% to $4.8 million.

On the other hand, Pharmaceutical and clinical service revenues (accounting for the rest) in the fourth quarter grossed $12.7 million, reflecting strong year-over-year growth of 14%.  

For fiscal 2016, the company delivered revenues of $753.8 million, up 4% from the equivalent figure of fiscal 2015. The top-line figure missed the Zacks Consensus Estimate of $756.6 million.

 

MYRIAD GENETICS Price, Consensus and EPS Surprise

MYRIAD GENETICS Price, Consensus and EPS Surprise | MYRIAD GENETICS Quote

 

Margin Trends

Gross margin in the quarter contracted 170 basis points (bps) to 78.6%. According to management, this decline was due to product mix with more revenue from lower margin segments such as pharmaceutical and clinical services along with lower fixed cost absorption on lower hereditary cancer revenues. Additionally, the company witnessed a one-time laboratory rework issue during the fourth quarter, which reduced gross margins. Also price reductions associated with the full implementation of long-term contracts affected gross margin.

Operating expenses dropped 5% to $110.8 million owing to 6.4% drop in selling, general and administrative (SG&A) expenses (to $19.5 million). However, research and development (R&D) expenses rose 4.3% (to $19.5 million in the reported quarter. Consequently, the operating margin remained flat at 19.1%.

Financial Position

Myriad exited fiscal 2016 with cash, cash equivalents and marketable securities of $159 million, compared with $144.8 million at the end of the fiscal 2015. At the end of fiscal 2016, cash flow from operations totaled $166.3 million, up 18.4% year over year. Consequently, free cash flow grossed $54.2 million compared with $49 million in fiscal 2015.

The company repurchased 1.6 million shares for $55 million during the quarter and was left with a buy-back authorization of $195 million under its current share repurchase authorization.

Guidance

Myriad has provided guidance for fiscal 2017. The company currently expects to deliver revenues in the range of $740–$760 million. The Zacks Consensus Estimate of $794.1 million lies above the guided range.

On the bottom-line front, the company expects to generate adjusted EPS in the range of $1.00–$1.10. The current Zacks Consensus Estimate of $1.76 is much higher than Myriad's guidance.

Alongside, management has provided its outlook for the first quarter of fiscal 2017. The company estimates adjusted earnings per share at 25–27 cents on total revenue of $168–$170 million. The Zacks Consensus Estimate for adjusted EPS of 43 cents and revenues of $193.9 million exceeds the company’s guided range.

Our View

Myriad ended fiscal 2016 on a disappointing note, with its fourth-quarter numbers missing the Zacks Consensus Estimate on both fronts. The revenue decline in Hereditary cancer testing revenue, which came in below management’s expectations, remained the major dampener in the fourth quarter, on the top line front. The declining gross margin figures played further spoilsport.

On a brighter note, Myriad made considerable progress in its recently released product line. Particularly, strong growth was observed in both Prolaris and Vectra DA testing revenues. Further, the company completed two significant acquisitions of late, including Sividon Diagnostics and Assurex Health. These companies are expected to leverage Myriad’s commercial infrastructure and in turn drive greater long-term value for the company’s investors.

Zacks Rank & Key Picks

Myriad currently holds a Zacks Rank #3 (Hold). Some better-ranked medical stocks worth a look are IDEXX Laboratories, Inc. (IDXX - Free Report) , Masimo Corporation (MASI - Free Report) and Natus Medical Inc. .  All these stocks sport a Zacks Rank #1 (Strong Buy).

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