Myriad Genetics Inc. (MYGN) reported earnings per share (EPS) of 53 cents in the fourth quarter of fiscal 2013, a beat of 20.5% over the Zacks Consensus Estimate and a robust year-over-year growth of 58%. This denotes the fourth consecutive quarterly earnings beat for the company. Apart from strong top-line growth, the EPS upside was led by lower share count and margin expansion.
Fiscal 2013 EPS rose 36% from the year-ago level to $1.77, ahead of the Zacks Consensus Estimate of $1.67. The result was higher than the company’s forecast of $1.65−$1.67.
In the fourth quarter, revenues climbed 31% year over year to $174.1 million, sailing past the Zacks Consensus Estimate of $159 million. Growth was led by further penetration and expansion of core markets, portfolio diversification and international expansion.
Fiscal 2013 revenues shot up 24% year over year to $613.2 million, surpassing the Zacks Consensus Estimate of $598 million. The top line also exceeded Myriad’s guidance range of $595−$600 million.
Quarter under Review
Myriad derives revenues from sales of Molecular diagnostic tests (contributing 95% to total revenue in the fourth quarter) and Companion diagnostic tests (contributing 5%).
Molecular diagnostic tests recorded revenues of $166.1 million, up 30% year over year. Molecular diagnostic testing revenues are derived from Oncology (up 19% to $100.2 million) and Women’s Health unit (up 51% to $65.8 million).
While Myriad markets several molecular diagnostic products, its flagship product is Bracanalysis test (representing 74% of total revenues in the quarter), which studies BRCA1 and BRCA2 genes for assessing a woman's risk of developing hereditary breast and ovarian cancers. Revenue from Bracanalysis rose 19% on a year-over-year basis to $129.6 million in the quarter. Moreover, revenue derived from Colaris and Colaris AP tests (representing 8% of revenues), which assess a patient's risk of developing hereditary colorectal and uterine cancers, shot up 26% to $14.5 million.
Revenue from BART test (representing 11% of total revenue) soared 310% to $18.8 million in the reported quarter. Revenue from other molecular diagnostic tests (representing 2% of total revenues) came in at $3.1 million, up 16% from the year-ago quarter.
Revenue from Companion diagnostic tests were $8 million, up 47% year over year. Growth was primarily driven by the company’s recent alliance with Sanofi.
Gross profit increased 31.1% year over year to $152 million. Nonetheless, gross margin during the quarter remained flat at 87.3%.
Operating expenses rose 25.3% to $86.1 million due to 26.4% increase in selling, general and administrative (SG&A) expenses (to $71.5 million) and a 20.1 jump in research and development (R&D) expenses ($14.6 million). Higher operating expenses incurred were due to the company’s attempts to support portfolio revamp and expansion, sales force expansion and deeper penetration in the international market. However, operating margin expanded 230 bps to 37.9% in the quarter.
Financial Position
Myriad exited fiscal 2013 with cash, cash equivalents and marketable securities of $531.1 million, compared with $454.2 million in fiscal 2012. The company repurchased 826,000 shares for $21.6 million during the quarter. The consistent share buyback program had a favorable impact on the company’s EPS as shares outstanding declined 4.3% year over year.
Guidance
Based on the robust growth trends, Myriad provided guidance for fiscal 2014. The company envisages revenues in the range of $690−$710 million, reflecting annualized growth of 13%−16%. The Zacks Consensus Estimate of $665 million lies below the revenue guidance.
Myriad expects EPS in the range of $1.87−$1.94, reflecting annualized growth of 6%-10%. The current Zacks Consensus Estimate of $1.86 trails Myriad’s guidance range.
Per management, the guidance for fiscal 2014 takes into account the commercialization of three novel molecular diagnostic tests including the innovative myRisk Hereditary Cancer, myPath Melanoma and myPlan Lung Cancer tests.
Our View
Myriad continues to report solid quarterly results. The company squarely beat the Zacks Consensus Estimate to end a stellar fiscal 2013. The higher-than-expected guidance for the ongoing fiscal is also encouraging.
We look forward to the commercialization of the unique myRisk test in fiscal 2014 as management expectations from this pan-cancer panel test are sky high. The company’s increasing focus on the companion diagnostic market should also work reasonably well to fuel growth over the long haul.
However, we believe that the market conversion phase for myRisk with the discontinuance of the successful legacy products warrants caution. Furthermore, we remain on the sidelines to gauge the impact of the landmark Supreme Court ruling that might bolster competition and increase pricing pressure. In our opinion, these uncertainties might bruise the stock.
Currently, Myriad carries a Zacks Rank #3 (Hold). Other stocks such as Gilead Sciences Inc. (GILD), Biogen Idec Inc. (BIIB) and Affymetrix Inc. (AFFX) are worth considering. These stocks carry Zacks Rank #1 (Strong Buy).
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