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Myriad Genetics (MYGN) Q2 Earnings & Revenues Miss Estimates

Zacks Equity Research

Myriad Genetics, Inc . MYGN reported adjusted earnings per share (EPS) of 38 cents in the second quarter of fiscal 2019, up 5.6% year over year. However, adjusted EPS missed the Zacks Consensus Estimate of 41 cents and coincided with the high end of the company’s guided range of 36-38 cents.

Meanwhile, on a reported basis, the company’s EPS came in at 3 cents in comparison with 43 cents in the year-ago quarter.

Revenues

Total revenues were up 15.4% year over year to $216.8 million in the quarter under review and were almost in line with the low end of the company’s guidance of $216-$218 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. Moreover, this was the eighth consecutive quarter in which the company witnessed year-over-year Hereditary Cancer testing volume growth.

Myriad Genetics, Inc. Price, Consensus and EPS Surprise

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

Quarter in Detail

Segment-wise, Molecular diagnostic tests (93.6% of total revenues) recorded total revenues of $203 million, up 17.3% year over year.  Hereditary Cancer testing revenues rose 3.7% to $126.7 million.

EndoPredict testing revenues increased 10% year over year to $2.2 million in the reported quarter. Vectra testing revenues were $11.8 million, up 6.3% year over year while other testing revenues declined 47.4% to $1 million. Further, GeneSight testing revenues declined 24.3% year over year to $24 million in the reported quarter. Prolaris tests raked in revenues of $6.1 million, up 45% year over year. Prenatal testing revenues came in at $31.2 million.

Pharmaceutical and clinical service revenues (accounting for the rest) in the quarter under review totaled $13.8 million, reflecting a year-over-year decline of 7%.

Margin Trends

Gross margin in the quarter under review contracted 40 basis points (bps) to 76%. However, adjusted gross margin came in at 76.3%, down 20 bps year over year. According to management, benefits from reduction in reagent costs derived by initiating new process enhancement for the DNA, RNA, and protein laboratories were offset by the inclusion of the prenatal business with lower gross margin.

Adjusted operating income was $7.1 million, down 63.2% year over year. Research and development (R&D) expenses rose 33.3% year over year (to $22.4 million) along with a 25.9% increase in selling, general and administrative (SG&A) expenses (to $135.2 million) in the reported quarter. The adjusted operating margin came in at 3.3%, compared with operating margin of 10.3% a year ago.

Financial Position

Myriad Genetics exited second-quarter fiscal 2019 with cash, cash equivalents and marketable securities of $165.4 million compared with $167.5 million at the end of the fiscal first quarter. For the six months ending Dec 31, 2018, cash flow from operations totaled $45.6 million compared with $56.5 million a year ago. Further, the company registered free cash flow of $41.5 million in the same period, compared with $52.8 million a year ago.

Guidance Reiterated

Myriad Genetics has reiterated the guidance for fiscal 2019 revenues. The company expects fiscal 2019 revenues in the range of $855-$865. The Zacks Consensus Estimate of $872.1 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 $1.78 is above the company’s guided range.

Management has provided the guidance for the third quarter of fiscal 2019. The company estimates adjusted EPS of 42-44 cents on total revenues of $216-$218 million. The Zacks Consensus Estimate for adjusted EPS is 42 cents, coinciding with the low end of the guided range. Our consensus estimate for revenues is $219.4 million, above the company’s guided range.

Our View

Myriad Genetics exited second quarter fiscal 2019 on a dull note. The company saw a decline in revenues from GeneSight tests in the quarter in spite of solid demand. Firstly, the company had to meet the documentation requirements implemented by Medicare in September 2018. Furthermore, the test experienced $4.2 million revenue adjustment in the quarter.

The company observed strong growth in EndoPredict, Vectra, Hereditary Cancer and Prolaris testing revenues. The recent FDA approvals and encouraging test results buoy optimism. We are upbeat about Myriad Genetics’ expectation to witness a stable pricing trend in the same to continue throughout fiscal 2020.

Zacks Rank & Key Picks

Myriad Genetics currently has a Zacks Rank #3 (Hold). Some better-ranked MedTech companies which have reported solid quarterly results are Varian Medical Systems VAR, AngioDynamics ANGO and CONMED Corporation CNMD.

Varian reported fiscal first-quarter adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which surpassed the consensus estimate by 2.9%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here .

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million beat the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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