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Myriad Genetics (MYGN) Beats on Q1 Earnings & Revenues

Myriad Genetics, Inc. MYGN reported adjusted earnings per share (EPS) of 26 cents in the first quarter of fiscal 2018, up 13% year over year. Moreover, adjusted EPS beat the Zacks Consensus Estimate by 23.8% and surpassed the company’s guided range of 19-21 cents.

Reported net income came in at $81.1 million or earnings of $1.15 per share in the quarter, against a net loss of $1.2 million or loss of 2 cents per share in the year-ago quarter.

Revenues

Total revenues rose 7.2% year over year to $190.2 million in the first quarter. The figure also outpaced the Zacks Consensus Estimate of $182.3 million and the company’s guidance range of $181-$183 million. The year-over-year rise in the top line was primarily on account of strong demand for Hereditary Cancer and GeneSight tests.

 

Myriad Genetics, Inc. Price, Consensus and EPS Surprise

 

 

Quarter in Details

Segment-wise, Molecular diagnostic tests (94% of total revenue) recorded total revenues of $178.8 million, up 8.3% year over year, mainly on account of a 300% rise in GeneSight testing revenues to $28.8 million. EndoPredict testing revenues grew 11.8% year over year to $1.9 million in the reported quarter. Moreover, Vectra DA testing revenues came in at $16 million, up 37.9% year over year, while other testing revenues rose 4.2% to $2.5 million.

In the Prolaris testing space, volumes continued to grow double digits in the fiscal first quarter. However, Prolaris tests registered revenues of $2.9 million in the quarter, flat year over year. Also, Hereditary Cancer testing revenues dropped 9% year over year to $126.7 million, while volumes grew year over year for the third consecutive quarter with pricing at par with expectations.

Pharmaceutical and clinical service revenues (accounting for the rest) in the quarter totaled $11.4 million, reflecting a year-over-year decline of 8.1%.

Margin Trends

Gross margin in the quarter under review contracted 10 basis points (bps) to 77.4%. According to management, the gross margin performance was adversely affected by Hereditary Cancer test pricing issue but partially offset byimproved efficiencies in Hereditary Cancer production process, rising margin from GeneSight business and increasing new product reimbursement.

Operating expenses rose 1.3% to $133 million owing to a 2.9% rise in selling, general and administrative (SG&A) expenses to $115.2 million. Research and development (R&D) expenses, however, declined 8.2% to $17.8 million in the reported quarter. Overall, operating margin increased 400 bps to 7.5%.

Financial Position

Myriad Genetics exited the fiscal first quarter with cash, cash equivalents and marketable securities of $148.3 million, compared with $150.7 million at the end of fiscal 2017. Year to date, cash flow from operations totaled $23.5 million, as against net cash used for the same of $2.9 million in the year-ago period. Also, during the quarter, the company registered free cash flow of $22.7 million, compared with $4.6 million in the year-ago period.

Guidance

Myriad Genetics has reiterated the guidance for fiscal 2018. The company continues to expect revenues in the range of $750-$770 million. The Zacks Consensus Estimate of $764.2 million lies within the guided range.

On the bottom-line front, the company expects to generate adjusted EPS in the range of $1.00-$1.05. The current Zacks Consensus Estimate of $1.04 is within but near to the higher end of the company’s guidance range.

Management has provided the guidance for the second quarter of fiscal 2018. The company estimates adjusted earnings per share of 22-24 cents on total revenues of $187-$189 million. The Zacks Consensus Estimate for adjusted EPS of 25 cents and revenues of $190 million exceeds the company’s guided range.

 Our View

Myriad Genetics kick started fiscal 2018 on a solid note with its first-quarter numbers exceeding the Zacks Consensus Estimate. The company observed strong growth in both GeneSight and EndoPredict testing revenues along with continued year-over-year growth in Hereditary Cancer volumes with pricing at par with expectations.

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. Additionally, macroeconomic uncertainty and higher expenses owing to extensive pipeline of some tests may impact the company’s margins.

Zacks Rank & Other Key Picks

Myriad Genetics has a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader medical sector are PetMed Express, Inc. PETS, Luminex Corporation LMNX and Intuitive Surgical, Inc. ISRG. Notably, PetMed and Luminex sport a Zacks Rank #1 (Strong Buy), while Intuitive Surgical carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed reported earnings per share of 43 cents in the second quarter of fiscal 2018, up 79.2% from the year-ago quarter’s 24 cents. Also, gross margin expanded 548 bps year over year to 35.2% in the reported quarter.

Luminex reported adjusted earnings per share of 19 cents in the third quarter of 2017, up 216.7% year over year. The company’s revenues in the quarter increased almost 4.1% year over year to $74.1 million.

Intuitive Surgical posted adjusted earnings of $2.77 per share in the third quarter of 2017, up 34.5% on a year-over-year basis. Also, revenues increased 18% year over year to $806.1 million.

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