MYRIAD GENETICS INC

Previous wording

Myriad, the Myriad logo, BRACAnalysis, BRACAnalysis CDx, Colaris, ColarisAP, MyRisk, Myriad myRisk, MyRisk Hereditary Cancer, myChoice, Tumor BRACAnalysis CDx, MyChoice CDx, Prequel, Prequel with Amplify, Amplify, Foresight, Foresight Universal Plus, Precise Tumor, Precise Oncology Solutions, Precise Liquid, Precise MRD, FirstGene, SneakPeek, SneakPeek Early Gender DNA Test, SneakPeek Snap, Urosuite, Mygenehistory, Health.Illuminated., RiskScore, Prolaris, GeneSight, and EndoPredict are registered trademarks or trademarks of Myriad. Solely for convenience, trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks.

Current wording

Myriad, the Myriad logo, BRACAnalysis, BRACAnalysis CDx, Colaris, MyRisk, Myriad myRisk, MyRisk Hereditary Cancer, myChoice, Tumor BRACAnalysis CDx, MyChoice CDx, Prequel, Prequel with Amplify, Amplify, Foresight, Foresight Universal Plus, Precise Tumor, Precise Oncology Solutions, Precise Liquid, Precise MRD, FirstGene, SneakPeek, SneakPeek Early Gender DNA Test, SneakPeek Snap, Urosuite, Mygenehistory, Health.Illuminated., RiskScore, Prolaris, and GeneSight are registered trademarks or trademarks of Myriad. Solely for convenience, trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks.

Previous wording

•risks related to changes in governmental or private insurers’ coverage and reimbursement levels for our tests or our ability to obtain reimbursement for our new tests at comparable levels to our existing tests;

Current wording

•risks related to changes in governmental or private insurers’ coverage and reimbursement levels for our tests or our ability to obtain reimbursement for new tests at comparable levels to our existing tests, including risks to our business and financial results associated with UnitedHealthcare's recent update to its medical policy for pharmacogenetic testing to no longer provide coverage for certain multi-gene panel pharmacogenetic tests, such as GeneSight, under its commercial and individual exchange benefit plans, effective January 1, 2025, and our pursuit of a resolution with respect thereto that may benefit the company and patients that could benefit from GeneSight;

Previous wording

•other factors discussed under the heading "Risk Factors" contained in Item 1A of our Annual Report on Form 10-K filed with the SEC on February 28, 2024, our Quarterly Report on Form 10-Q filed with the SEC on May 8, 2024, and this Quarterly Report on Form 10-Q.

Current wording

•other factors discussed under the heading "Risk Factors" contained in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on February 28, 2024, as updated in Part II, Item 1A of our Quarterly Report on Form 10-Q filed with the SEC on May 8, 2024, and subsequent filings we make with the SEC.

Previous wording

Personalized genetic data and digital and virtual consumer trends are converging to change traditional models of care. We believe significant growth opportunities exist to help patient populations with pressing health care needs through innovative genetic and precision medicine solutions and services. Our focus is on innovation and growth in three key areas where we have specialized products, capabilities, and expertise: Oncology, Women's Health, and Pharmacogenomics. The pillars of our long-term growth strategy are founded on investments in science and innovation, technology-enabled operations, an elevated customer experience, strong commercial execution, and scalable operations. We believe our path to continued growth is driven by articulating our clinical differentiation, raising awareness with patients who we believe would benefit from our testing products, and innovation that improves clinical outcomes, ease of use, and access. By investing in technology-enabled commercial tools, new laboratory facilities, advanced automation, and standardized processes and technology, we believe we will be able to reduce complexity and cost while enhancing our ability to scale and grow. In June 2024, we launched the Universal Plus Panel to our Foresight® Carrier Screen (the "Foresight Universal Plus Test") which is an expanded carrier screening test. We also plan to launch new products, such as FirstGene, Precise Liquid, and Precise minimal residual disease, which we expect will help accelerate our growth. We intend to develop and enhance our products and services to support growth, improve patient and provider experience, and reach more patients of all backgrounds. We are committed to disciplined management of a key set of initiatives to fulfill our mission and drive long-term growth and profitability.

Current wording

Personalized genetic data and digital and virtual consumer trends are converging to change traditional models of care. We believe significant growth opportunities exist to help patient populations with pressing health care needs through innovative genetic and precision medicine solutions and services. Our focus is on innovation and growth in three key areas where we have specialized products, capabilities, and expertise: Oncology, Women's Health, and Pharmacogenomics. The pillars of our long-term growth strategy are founded on investments in science and innovation, technology-enabled operations, an elevated customer experience, strong commercial execution, and scalable operations. We believe our path to continued growth is driven by articulating our clinical differentiation, raising awareness with patients who we believe would benefit from our testing products, and innovation that improves clinical outcomes, ease of use, and access. By investing in technology-enabled commercial tools, new laboratory facilities, advanced automation, and standardized processes and technology, we believe we will be able to reduce complexity and cost while enhancing our ability to scale and grow. In June 2024, we launched the Universal Plus Panel to our Foresight Carrier Screen or the Foresight Universal Plus Test, which is an expanded carrier screening test. We also plan to launch new products, such as FirstGene, Precise Liquid, and Precise minimal residual disease, or MRD, which we expect will help accelerate our growth. We intend to develop and enhance our products and services to support growth, improve patient and provider experience, and reach more patients of all backgrounds. We are committed to disciplined management of a key set of initiatives to fulfill our mission and drive long-term growth and profitability.

Previous wording

•Revenue growth of 15% year-over-year for the quarter ended June 30, 2024.

Current wording

•Revenue growth of 11% year-over-year for the quarter ended September 30, 2024.

Previous wording

•Second quarter 2024 testing volumes grew 9% year-over-year, driven by 12% growth year-over-year in Prenatal test volumes, 10% growth year-over-year in Pharmagenomics test volumes, and 3% growth year-over-year in Hereditary Cancer test volumes, partially offset by a 13% decrease year-over-year in Tumor Profiling test volumes.

Current wording

•Third quarter 2024 testing volumes grew 6% year-over-year, driven by 10% growth year-over-year in Pharmacogenomics test volumes, 5% growth year-over-year in Hereditary Cancer test volumes, and 3% growth year-over-year in Prenatal test volumes.

Previous wording

Test revenues increased $28.0 million for the three months ended June 30, 2024 compared to the same period in the prior year primarily due to an increase in the average revenue per test across the majority of our products, due in part to changes in contracted price and operational improvements, as well as an increase in test volumes. Hereditary Cancer revenues increased $14.8 million for the three months ended June 30, 2024 compared to the same period in the prior year due to a 16% increase in average revenue per test and a 3% increase in testing volume. Prenatal revenues increased $8.8 million for the three months ended June 30, 2024 compared to the same period in the prior year due to an 11% increase in average revenue per test and a 12% increase in testing volume. Pharmacogenomics revenues increased $7.8 million for the three months ended June 30, 2024 compared to the same period in the prior year due to an 11% increase in the average revenue per test and due to a 10% increase in testing volume. Tumor Profiling revenues decreased $3.4 million for the three months ended June 30, 2024 compared to the same period in the prior year due primarily to a decrease in volume for MyChoice CDx, which was largely driven by MyChoice CDx studies in the prior year.

Current wording

Test revenues increased $21.4 million for the three months ended September 30, 2024 compared to the same period in the prior year primarily due to both an increase in testing volumes and an increase in the average revenue per test, due in part to changes in contracted price and operational improvements. Pharmacogenomics revenues increased $12.0 million for the three months ended September 30, 2024 compared to the same period in the prior year due to a 22% increase in the average revenue per test and a 10% increase in testing volume. Average revenue per test increased primarily due to a change in estimate. We expect that Pharmacogenomics revenues in fiscal year 2025 and thereafter will be negatively impacted by UnitedHealthcare's recent change in GeneSight test coverage under its commercial and individual exchange benefits plans. Hereditary Cancer revenues increased $4.0 million for the three months ended September 30, 2024 compared to the same period in the prior year primarily due to a 5% increase in testing volume. Prenatal revenues increased $4.0 million for the three months ended September 30, 2024 compared to the same period in the prior year due to a 6% increase in average revenue per test and a 3% increase in testing volume.

Previous wording

Cost of testing revenue for the three months ended June 30, 2024 increased $6.6 million compared to the same period in the prior year primarily due to an increase in volumes in Pharmacogenomics, Hereditary Cancer, and Prenatal tests.

Current wording

Cost of testing revenue for the three months ended September 30, 2024 increased $5.9 million compared to the same period in the prior year primarily due to an increase in testing volumes in Pharmacogenomics, Hereditary Cancer, and Prenatal tests.

Previous wording

There were no legal settlements in the three months ended June 30, 2024. The three months ended June 30, 2023 included $77.5 million of accruals related to the securities class action settlement.

Current wording

There were no legal settlements in the three months ended September 30, 2024. Legal settlements in the three months ended September 30, 2023 consisted of $34.3 million in connection with accruals for pending settlements.

Previous wording

Other income (expense), net decreased for the three months ended June 30, 2024 as compared to the same period in the prior year due primarily to the prior period loss on the sale of investments.

Current wording

Other income (expense), net remained consistent for the three months ended September 30, 2024 as compared to the same period in the prior year.

Previous wording

Our tax rate is the product of a U.S. federal effective rate of 21.0% and a blended state income tax rate of approximately 3.3%. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from period to period.

Current wording

Our tax rate is the product of a U.S. federal effective rate of 21.0% and a blended state income tax rate of approximately 3.4%. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from period to period.

Previous wording

For the three months ended June 30, 2024, there was $0.5 million income tax benefit and our effective tax rate was 1.3%. For the three months ended June 30, 2023, there was no income tax expense or benefit and our effective tax rate was 0%. For the three months ended June 30, 2024 and 2023, our effective tax rate differs from the U.S. federal statutory rate primarily due to the recognition of valuation allowances and uncertain tax positions. Due to our cumulative loss and the exhaustion of future taxable income from the reversal of taxable temporary differences, our estimated annual effective tax rate for the current year includes a valuation allowance against the majority of the current year increase in deferred tax assets.

Current wording

For the three months ended September 30, 2024, there was $0.9 million income tax expense and our effective tax rate was (4.2)%. For the three months ended September 30, 2023, there was $0.1 million income tax expense and our effective tax rate was (0.2)%. For the three months ended September 30, 2024 and 2023, our effective tax rate differs from the U.S. federal statutory rate primarily due to the recognition of valuation allowances. Due to our cumulative loss and the exhaustion of future taxable income from the reversal of taxable temporary differences, our estimated annual effective tax rate for the current year includes a valuation allowance against the majority of the current year increase in deferred tax assets.

Previous wording

The results of operations for the six months ended June 30, 2024 and 2023 are discussed below.

Current wording

The results of operations for the nine months ended September 30, 2024 and 2023 are discussed below.

Previous wording

Test revenues increased $49.0 million for the six months ended June 30, 2024 compared to the same period in the prior year primarily due to an increase in the average revenue per test across the majority of our products, due in part to changes in contracted price and operational improvements, as well as an increase in test volumes. Hereditary Cancer revenues increased $27.2 million for the six months ended June 30, 2024 compared to the same period in the prior year due to an 11% increase in average revenue per test and a 6% increase in testing volume. Prenatal revenues increased $16.9 million for the six months ended June 30, 2024 compared to the same period in the prior year due to a 12% increase in average revenue per test and a 11% increase in testing volume. Pharmacogenomics revenues increased $14.7 million for the six months ended June 30, 2024 compared to the same period in the prior year due primarily to an 11% increase in testing volume and a 9% increase in the average revenue per test. Tumor Profiling revenues decreased $9.8 million for the six months ended June 30, 2024 compared to the same period in the prior year due primarily to a decrease in volume for MyChoice CDx, which was largely driven by MyChoice CDx studies in the prior year.

Current wording

Hereditary Cancer revenues increased $31.2 million for the nine months ended September 30, 2024 compared to the same period in the prior year due to an 8% increase in average revenue per test and a 5% increase in testing volume. Pharmacogenomics revenues increased $26.7 million for the nine months ended September 30, 2024 compared to the same period in the prior year due primarily to a 13% increase in the average revenue per test, which was partially due to changes in the estimated revenue per test related to prior periods, and an 11% increase in testing volume. We expect that Pharmacogenomics revenues in fiscal year 2025 and thereafter will be negatively impacted by UnitedHealthcare's recent change in GeneSight test coverage under its commercial and individual exchange benefits plans. Prenatal revenues increased $20.9 million for the nine months ended September 30, 2024 compared to the same period in the prior year due to a 10% increase in average revenue per test and an 8% increase in testing volume. Tumor Profiling revenues decreased $8.4 million for the nine months ended September 30, 2024 compared to the same period in the prior year due primarily to a decrease in testing volume for MyChoice CDx, which was largely driven by MyChoice CDx studies that occurred in the prior year period.

Previous wording

Cost of testing revenue for the six months ended June 30, 2024 increased$11.9 million compared to the same period in the prior year primarily due to an increase in volumes in Pharmacogenomics, Hereditary Cancer, and Prenatal tests.

Current wording

Cost of testing revenue for the nine months ended September 30, 2024 increased $17.9 million compared to the same period in the prior year primarily due to an increase in testing volumes in Pharmacogenomics, Hereditary Cancer, and Prenatal tests.

Previous wording

Research and development expense for the six months ended June 30, 2024 increased by $9.0 million compared to the same period in the prior year primarily due to a $6.0 million increase in compensation costs. Compensation expense increased in part due to estimated higher attainment of short-term incentive pay and an increase in the average cost per employee for the current period compared to the prior period.

Current wording

Research and development expense for the nine months ended September 30, 2024 increased by $13.5 million compared to the same period in the prior year primarily due to additional investments in research and development, consisting of an $8.1 million increase in compensation costs and $4.5 million increase in laboratory expenses. Compensation expense increased in part due to an increase in the average cost per employee for the current period compared to the same period in the prior year.

Previous wording

The three months ended June 30, 2024 included $10.2 million of impairment expense as the result of the definitive agreement entered into by us in May 2024 to sell the EndoPredict business to Eurobio Scientific. There were no corresponding impairment charges in the prior period.

Current wording

Goodwill and long-lived asset impairment charges in the nine months ended September 30, 2024 included $12.4 million of losses in connection with the sale of the EndoPredict business. There were no corresponding impairment charges in the same period of the prior year.

Previous wording

Other income (expense), net increased for the six months ended June 30, 2024 compared to the same period in the prior year due primarily to the $2.2 million gain recognized on the February 2024 Precise acquisition in the current period, an additional $1.1 million loss due to foreign currency fluctuations in the current period and the prior period including an additional $1.4 million in expense from the sale of investments.

Current wording

Other income (expense), net increased for the nine months ended September 30, 2024 compared to the same period in the prior year due primarily to the $2.2 million gain recognized on the February 2024 acquisition of Precise assets and laboratory from Intermountain Health in the current period, an additional $1.3 million loss due to foreign currency fluctuations in the current period and the prior period including an additional $1.4 million in expense from the sale of investments.

Previous wording

Our tax rate is the product of a blended U.S. federal effective rate of 21.0% and a blended state income tax rate of approximately 3.3%. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from period to period.

Current wording

Our tax rate is the product of a blended U.S. federal effective rate of 21.0% and a blended state income tax rate of approximately 3.4%. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from period to period.

Previous wording

Income tax benefit for the six months ended June 30, 2024 was $0.4 million and our effective tax rate was 0.6%. For the six months ended June 30, 2024 and 2023, our recognized effective tax rate differs from the U.S. federal statutory rate primarily due to valuation allowances and uncertain tax positions. Income tax expense for the six months ended June 30, 2023 was $2.1 million and our effective tax rate was (1.2)%.

Current wording

Income tax expense for the nine months ended September 30, 2024 was $0.4 million and our effective tax rate was (0.5)%. Income tax expense for the nine months ended September 30, 2023 was $2.2 million and our effective tax rate was (1.0)%. For the nine months ended September 30, 2024 and 2023, our recognized effective tax rate differs from the U.S. federal statutory rate primarily due to the recognition of valuation allowances. Due to our cumulative loss and the exhaustion of future taxable income from the reversal of taxable temporary differences, our estimated annual effective tax rate for the current year includes a valuation allowance against the majority of the current year increase in deferred tax assets.

Previous wording

Our primary sources of liquidity are our cash, cash equivalents and marketable investment securities, our expected cash flows from operations, and, in certain circumstances as discussed below, amounts available for borrowing under our asset-based revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent and issuing bank, and the other lender parties thereto (the "ABL Facility"). As of June 30, 2024, we had cash, cash equivalents and marketable investment securities of $97.3 million and availability under the ABL Facility was $41.5 million, subject to the minimum availability requirement under the ABL Facility. Our capital deployment strategy focuses on use of resources in the key areas of research and development, technology and acquisitions. We believe that investing organically through research and development and new product development or acquisitively to support our business strategy provides the best return on invested capital.

Current wording

Our primary sources of liquidity are our cash and cash equivalents, our expected cash flows from operations, and, in certain circumstances as discussed below, amounts available for borrowing under our asset-based revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent and issuing bank, and the other lender parties thereto, or the ABL Facility. As of September 30, 2024, we had cash and cash equivalents of $99.9 million and availability under the ABL Facility was $48.8 million, subject to the minimum availability requirement under the ABL Facility. Our capital deployment strategy focuses on use of resources in the key areas of research and development, technology and acquisitions. We believe that investing organically through research and development and new product development or acquisitively to support our business strategy provides the best return on invested capital.

Previous wording

Our ABL Facility has a total maximum principal commitment of $115.0 million. The ABL Facility requires that we and our subsidiaries guaranteeing the indebtedness, on a consolidated basis, maintain minimum liquidity of $60.0 million and minimum availability of $25.0 million at all times before achieving a fixed charge coverage ratio of 1.0 to 1.0 and, thereafter, to maintain a fixed charge coverage ratio of 1.0 to 1.0 until achieving availability under the ABL Facility of greater of (a) $10.6 million and (b) 12.5% of the lesser of the maximum commitment amount and the borrowing base for a period of 30 consecutive days. As of June 30, 2024, we had $40.0 million outstanding under the ABL Facility and availability under the ABL Facility was $41.5 million, subject to the minimum availability requirement under the ABL Facility.

Current wording

Our ABL Facility has a total maximum principal commitment of $115.0 million. The ABL Facility requires that we and our subsidiaries guaranteeing the indebtedness, on a consolidated basis, maintain minimum liquidity of $60.0 million and minimum availability of $25.0 million at all times before achieving a fixed charge coverage ratio of 1.0 to 1.0 and, thereafter, to maintain a fixed charge coverage ratio of 1.0 to 1.0 until achieving availability under the ABL Facility of greater of (a) $10.6 million and (b) 12.5% of the lesser of the maximum commitment amount and the borrowing base for a period of 30 consecutive days. As of September 30, 2024, we had $40.0 million outstanding under the ABL Facility and availability under the ABL Facility was $48.8 million, subject to the minimum availability requirement under the ABL Facility.

Previous wording

The decrease in cash, cash equivalents and marketable investment securities as of June 30, 2024 as compared to December 31, 2023 was primarily driven by $16.0 million in cash used by operations, $11.9 million in cash used for capital expenditures, $5.6 million in cash used for the capitalization of internal-use software, and $6.2 million in cash used for the payment of withholding tax for the issuance of common stock, net of proceeds from the issuance of common stock.

Current wording

The decrease in cash, cash equivalents and marketable investment securities as of September 30, 2024 as compared to December 31, 2023 was primarily driven by $15.3 million in cash used by operations, $15.4 million in cash used for capital expenditures, $8.4 million in cash used for the capitalization of internal-use software, and $9.2 million in cash used for the payment of withholding tax for the issuance of common stock, net of proceeds from the issuance of common stock. The decrease in cash was partially offset by $8.8 million in cash received from the sale of our EndoPredict business.

Previous wording

We used less cash for operating activities for the six months ended June 30, 2024 compared to the same period in the prior year, primarily due to an improvement in core operations driven by a 13% increase in revenues and a 9% decrease in expenses as a percentage of revenue, excluding non-cash expenses for goodwill and long-lived asset impairment charges and accrued legal settlements. This increase in cash flows was partially offset by the receipt of $16.3 million in tenant improvement allowance reimbursements in the prior period.

Current wording

We used less cash for operating activities for the nine months ended September 30, 2024 compared to the same period in the prior year, primarily due to an improvement in core operations which drove a 13% increase in revenues and an 8% decrease in expenses as a percentage of revenue, excluding non-cash expenses for goodwill and long-lived asset impairment charges and accrued legal settlements. In the nine months ended September 30, 2023, we received $16.3 million in tenant improvement allowance reimbursements that did not reoccur during the nine months ended September 30, 2024.

Previous wording

The decrease in cash flows used in investing activities for the six months ended June 30, 2024 compared to the same period in the prior year was primarily due to the $84.7 million decrease in cash flows from marketable investment securities, partially offset by a $30.4 million decrease in capital expenditures in connection with the build-out of new facilities in the prior year.

Current wording

The decrease in cash flows used in investing activities for the nine months ended September 30, 2024 compared to the same period in the prior year was primarily due to the $94.7 million decrease in cash flows from maturities and sales of marketable investment securities in the current period, partially offset by a $37.8 million decrease in capital expenditures in the current period in connection with the completion of the build-out of new facilities in the prior year.

Previous wording

The decrease in cash flows used in financing activities for the six months ended June 30, 2024 compared to the same period in the prior year was primarily due to proceeds of $40.0 million under the ABL Facility in the prior period.

Current wording

The decrease in cash flows used in financing activities for the nine months ended September 30, 2024 compared to the same period in the prior year was primarily due to proceeds of $40.0 million under the ABL Facility in the prior year period.

Previous wording

Inflation has had, and may continue to have, an impact on the labor costs we incur to attract and retain qualified personnel, costs to generate sales and produce testing results, and costs of laboratory supplies. Inflationary costs have impacted our profitability and may continue to adversely affect our business, financial condition and results of operations. In addition, increased inflation has had, and may continue to have, an effect on interest rates. Increased interest rates may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, additional funding.

Current wording

While inflation continues to return to more moderate levels in 2024, inflation has had, and may continue to have, an impact on the labor costs we incur to attract and retain qualified personnel, costs to generate sales and produce testing results, and costs of laboratory supplies. Inflationary costs have impacted our profitability and may continue to adversely affect our business, financial condition and results of operations. In addition, increased inflation has had, and may continue to have, an effect on interest rates. An increase in interest rates in the future may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, additional funding.

Previous wording

Critical accounting estimates are those policies which are both important to the presentation of a company’s financial condition and results and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a further discussion of our critical accounting estimates, see our Annual Report on Form 10-K filed with the SEC on February 28, 2024. Other than the policy on held for sale assets and liabilities described in Note 1, “Basis of Presentation” in the Notes to Condensed Consolidated Financial Statements included herein, no significant changes to our accounting policies took place during the three months ended June 30, 2024.

Current wording

Critical accounting estimates are those policies which are both important to the presentation of a company’s financial condition and results and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a further discussion of our critical accounting estimates, see our Annual Report on Form 10-K filed with the SEC on February 28, 2024. No significant changes to our accounting policies took place during the three months ended September 30, 2024.