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Myriad Genetics (MYGN) Beats on Earnings in Q1, Revenues Lag

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Myriad Genetics, Inc. (MYGN - Free Report) reported adjusted earnings per share (EPS) of 43 cents in the first quarter of fiscal 2019, up 48.3% year over year. Moreover, adjusted EPS beat the Zacks Consensus Estimate of 30 cents by 43.3% and exceeded the company’s guided range of 28-30 cents.

Meanwhile, on a reported basis, the company incurred loss per share of a penny as against earnings of $1.12 a year ago.

Revenues

Total revenues were up 13.1% year over year to $202.3 million in the quarter under review and were almost in line with the high end of the company’s guidance of $200-$202 million. The figure, however, missed the Zacks Consensus Estimate by 0.8%.

The year-over-year growth was driven by growing new product and hereditary cancer volumes, offsetting adverse impacts from price reductions in long-term contracts related to Hereditary cancer testing. Moreover, this was the seventh consecutive quarter in which the company witnessed year-over-year Hereditary cancer testing volume growth.

Myriad Genetics, Inc. Price, Consensus and EPS Surprise

 

Quarter in Detail

Segment-wise, Molecular diagnostic tests (93.4% of total revenues) recorded total revenues of $189 million, up 12.9% year over year.  Hereditary Cancer testing revenues declined by 0.6% to $116.3 million. Furthermore, Hereditary Cancer testing revenues declined due to price reductions in long-term contracts.

EndoPredict testing revenues rose 33.3% year over year to $2.4 million in the reported quarter. Vectra DA testing revenues were $13 million, down 7.1% year over year while other testing revenues rose 94.7% to $3.7 million. Further, GeneSight testing revenues rose 1.7% year over year to $29.3 million in the reported quarter. Prolaris tests raked in revenues of $6.2 million, up 59% year over year. Prenatal testing revenues came in at $18.1 million.

Pharmaceutical and clinical service revenues (accounting for the rest) in the quarter under review totaled $13.3 million, reflecting a year-over-year increase of 16.7%.

Margin Trends

Gross margin in the quarter under review contracted 60 basis points (bps) to 75.4%. However, adjusted gross margin came in at 77.1%, up 100 bps year over year. According to management, the gross margin performance was led by reduction in reagent costs derived by initiating new process enhancement for the DNA, RNA, and protein laboratories.

Adjusted operating income was $1.6 million, down 85.2% year over year. Research and development (R&D) expenses rose 18.5% year over year (to $21.1 million) along with a 21.2% increase in selling, general and administrative (SG&A) expenses (to $129.9 million) in the reported quarter. The adjusted operating margin came in at 0.8%, compared with operating margin of 6% a year ago.

Financial Position

Myriad Genetics exited first-quarter fiscal 2019 with cash, cash equivalents and marketable securities of $167.5 million compared with $180.6 million at the end of fiscal 2018. For the three months ending Sep 30, 2018, cash flow from operations totaled $7.8 million compared with $23.5 million a year ago. Further, the company registered free cash flow of $6.5 million in the same period, compared with $21.9 million a year ago.

Guidance Updated

Myriad Genetics has updated the guidance for the fiscal 2019 revenues. The company now expects fiscal 2019 revenues in the range of $855-$865 million compared with $880-$890 million stated previously. The Zacks Consensus Estimate of $901.9 million lies above the guided range.

On the bottom-line front, the company continues to expect adjusted EPS of $1.70-$1.75. The current Zacks Consensus Estimate of $1.73 is within the company’s guided range.

Management has provided the guidance for the second quarter of fiscal 2019. The company estimates adjusted EPS of 36-38 cents on total revenues of $216-$218 million. The Zacks Consensus Estimate for adjusted EPS is 43 cents and revenues is $226.2 million. Our estimates for both the metrics are above the company’s guided range.

Our View

Myriad Genetics started off fiscal 2019 on a mixed note. The company observed strong growth in GeneSight, EndoPredict and Prolaris testing revenues. The recent FDA approvals and encouraging test results buoy optimism. Further, management believes that Hereditary cancer pricing has remained stable on a sequential basis for four consecutive quarters. We are upbeat about Myriad Genetics’ expectation to witness a stable pricing trend in the same to continue throughout fiscal 2019.

Moreover, the company seems to be well positioned to deliver strong financial results in fiscal 2019, on solid performance by new products, a re-designed cost structure, synergies from the Counsyl buyout along with augmenting reimbursements for the tests.

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 currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space which reported solid earnings this season are Intuitive Surgical (ISRG - Free Report) , Stryker Corporation (SYK - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, outpacing the Zacks Consensus Estimate by a penny. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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