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Myriad Genetics (MYGN) Beats on Earnings & Revenues in Q2

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Myriad Genetics, Inc. (MYGN - Free Report) reported adjusted earnings per share (EPS) of 31 cents in the second quarter of fiscal 2018, up 19.2% year over year. Moreover, adjusted EPS beat the Zacks Consensus Estimate by a solid margin of 29.2% and exceeded the company’s guided range of 22-24 cents.

Reported earnings came in at 45 cents per share in the quarter, compared with net 9 cents in the year-ago quarter.

Revenues

Total revenues were down 1.3% year over year to $194 million in the quarter under review. The figure however outpaced the Zacks Consensus Estimate of $189 million and was above the company’s guidance of $187-$189 million. The year-over-year decline was however caused by a fall in Hereditary cancer testing revenues owing to price reductions in long-term contracts.

Myriad Genetics, Inc. Price, Consensus and EPS Surprise

 

Myriad Genetics, Inc. Price, Consensus and EPS Surprise | Myriad Genetics, Inc. Quote

 

However, the decline was partially offset by growing new product volumes, expanded reimbursement for new products and increase in international RNA kit revenues. Moreover, this was the fourth consecutive quarter where the company witnessed year-over-year Hereditary cancer volume growth led by encouraging response to the newly launched riskScore test under its myRisk Hereditary Cancer testing portfolio.

Quarter in Details

Segment-wise, Molecular diagnostic tests (92.4% of total revenue) recorded total revenues of $179.2 million, down 2.6% year over year on account of a 11.8% decline in Hereditary cancer testing revenuesto $126.9 million. EndoPredict testing revenues grew 25% year over year to $2 million in the reported quarter. Moreover, Vectra DA testing revenues came in at $11.1 million, up 3.7% year over year, while other testing revenues declined 13.9% to $2.5 million.

In the Prolaris testing space, volumes maintained double-digit growth in the fiscal first quarter,as well as an increase in average selling price that benefited from the Medicare favorable intermediate LCD, which was put to effect on Sep 25, 2017. Prolaris tests raked in revenues of $5 million in the quarter, up 61.3%. Also, Hereditary Cancer testing revenues declined due to price reductions in the long-term contracts. However, volume growth exceeded the company’s 3% growth target on a year-over-year basis.

Pharmaceutical and clinical service revenues (accounting for the rest) in the quarter totaled $14.8 million, reflecting a year-over-year increase of 17.5%.

Margin Trends

Gross margin in the quarter under review contracted 30 basis points (bps) to 77.1%. According to management, the gross margin performance was affected by Hereditary Cancer test pricing issue, partially offset by improved efficiencies in Hereditary Cancer production process as a result of the Elevate 2020 initiatives and increasing new product reimbursement.

Operating expenses decreased 4.8% to $132 million as a 4.1% rise in selling, general and administrative (SG&A) expenses (to $115.4 million) was offset by a 9.7% slash in  research and development (R&D) expenses 9to $16.8 million) in the reported quarter.

Financial Position

Myriad Genetics exited the fiscal second quarter with cash, cash equivalents and marketable securities of $143.5 million, compared with $148.3 million at the end of the preceding quarter. Year to date, cash flow from operations totaled $56.5 million, compared with $28.5 million in the year-ago period. Year-to-date the company registered free cash flow of $54.5 million, compared with $22.7 million in the year-ago period.

Guidance

Myriad Genetics has raised the guidance for fiscal 2018 revenues to $760-$770 million from $750-$770 million provided earlier. The Zacks Consensus Estimate of $766.2 million lies within the guided range.

On the bottom-line front, the company lifted the adjusted EPS range to $1.11-$1.16 from the previous $1.00-$1.05. The current Zacks Consensus Estimate of $1.06 is below the company’s guided range.

Management has provided the guidance for the third quarter of fiscal 2018. The company estimates adjusted earnings per share of 26-28 cents on total revenues of $186-$188 million. The Zacks Consensus Estimate for adjusted EPS is 26 cents and revenues is $191.6 million.

Our View

Myriad Genetics registered a better-than-expected performance in its second-quarter fiscal 2018. However, the year-over-year decline in revenues is disappointing. On a positive note, the company observed strong growth in both GeneSight and EndoPredict testing revenues. The recent FDA approvals and encouraging test results buoy optimism.

On the flip side, unfavorable foreign currency translation continues to pose a threat. With a considerable portion of its revenues coming from outside the United States, the company faces the risk of exchange rate fluctuations.

Zacks Rank & Key Picks

Myriad Genetics has a Zacks Rank #3 (Hold).

A few better-ranked stocks that reported solid results this earnings season are PetMed Express (PETS - Free Report) , PerkinElmer (PKI - Free Report) and Becton, Dickinson and Company (BDX - Free Report) . While PetMed sports a Zacks Rank #1 (Strong Buy), PerkinElmer and Becton, Dickinson carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed recently reported third-quarter fiscal 2018 results. Adjusted earnings per share were 44 cents, up 88.3% from the prior-year quarter. Revenues rose 13.7% on a year-over-year basis to $60.1 million.

PerkinElmer reported fourth-quarter 2017 adjusted earnings per share of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million in the year-ago quarter.

Becton, Dickinson reported first-quarter 2018 adjusted earnings per share of $2.48, up 3.9% at constant currency. Revenues are $3.08 billion, up 3.7% at constant currency.

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