Ladies and gentlemen, thank you for standing by. Welcome to the Myriad Genetics Fourth Quarter and Year End 2013 Financial Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, August 13, 2013. I would now like to turn the conference over to Mr. Scott Gleason. Please go ahead, sir.

Thank you. Good afternoon, everyone, and welcome to the Myriad Genetics fourth quarter fiscal year 2013 earnings call. My name is Scott Gleason, VP of Investor Relations here at Myriad Genetics. And during the call, we will review the financial results we've released today. After which, we will host a question-and-answer session. If you have not had a chance to review the earnings release, it can be found on the Investors section of our website at www.myriad.com. Presenting for Myriad today will be Pete Meldrum, President and Chief Executive Officer; Mark Capone, President Myriad Genetics Laboratories; and Jim Evans, our Chief Financial Officer. This call can be heard live via webcast at www.myriad.com. The call is being recorded and will be archived in the Investor Section of our website. We would encourage listeners on today's call to follow along with our prepared slides, which can be found under the Investors Section of our website at www.myriad.com. Please note that some of the information presented here today may contain projections or rather forward-looking statements regarding future events or the future financial performance of the company. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's Annual Report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K. These documents identify important risk factors that would cause the actual results to differ materially from those contained in our projections or forward-looking statements. With that, I'd like now to turn the call over to Pete.

Thank you, Scott. I'm pleased to report that Myriad delivered another strong quarter to top off what was an outstanding year for the company. Year-over-year revenue growth in the fourth quarter exceeded 30%, and represented the eighth consecutive quarter where top line growth has exceeded 20%. This outstanding performance is a testament to the dedication of our employees and I'm proud of the entire Myriad team. Again, our Women's Health business, which benefited from our protocol integration strategy, our social media targeting efforts and from recent celebrity publicity around breast cancer was a standout segment in the quarter with year-over-year growth of 51%. Our Oncology business increased 19% compared to the prior year period, generating strong double-digit growth and building upon trends we saw at the end of the third fiscal quarter. This strong revenue growth is a testament to the focus of our Oncology team and the utilization of our new targeted selling strategy. Earnings per share in the fourth quarter were $0.53, up 58% year-over-year. We are very pleased with the performance of the company and we are actively pursuing several strategies to continue to grow our business and enhance shareholder value. These strategies include expanding our core markets through our new myRisk Hereditary Cancer and myPlan Lung Cancer test. Entering new sales channels such as dermatology and pathology with our new myPath Melanoma test. And building our international business as we transition into a company with true global reach. With that in mind, I'm pleased to provide a first look at our fiscal 2014 financial guidance. We considered several factors before preparing our 2014 guidance. While the company received a benefit from the recent celebrity publicity around breast cancer, the duration of this publicity benefit is likely to be short term. Consequently, for the purpose of our…

Thanks, Pete. I am pleased to provide an update on both our current products and upcoming product launches. As Pete mentioned, this was another quarter of exceptionally strong growth for the company and while some of the strength in the fourth quarter was totally [ph] attributable to recent publicity. The majority of the success was based upon the execution of our business strategy to expand utilization in our core markets. Our Women's Health business was exceptionally strong again this quarter with revenues growing 51% year-over-year. This is attributed to our 3-part strategy of expanding utilization through protocol integration, identifying patients with interactive marketing, and expanding the sales force. In fiscal year '13, Our Women's Health business unit completed 1,272 protocol integrations, substantially exceeding our fiscal year '13 goal of 800. OB/GYN accounts that completed protocol integrations had 10x the testing volume compared to control accounts. In fiscal year '14, we plan to complete 1,200 protocol integrations. And we once again envision this program being a major growth driver for the Women's Health segment. We also have continued to see remarkable success with our interactive marketing campaigns, and especially with our Hereditary Cancer Quiz. This quarter, 115,000 individuals took our Hereditary Cancer Quiz with more than 51,000 self-identifying as having an at-risk result. Since our launch in the fall of 2012, 400,000 individuals have taken the quiz with over 150,000 at-risk results. These patients can enroll in our support 360 program and receive additional information and reminders about hereditary cancer testing and the importance of discussing the results with their healthcare provider. We will continue to expand these efforts in fiscal year '14 as they have demonstrated a very attractive return on investment. Furthermore, we continue to see broad success with our radiology expansion program. Radiology revenue grew by 68% in…

Thanks, Mark. I'm now going to provide a more detailed look into our fourth quarter and fiscal year 2013 financial results and provide additional information pertaining to our fiscal '14 guidance. Fourth quarter revenues came in at $174.1 million, an increase of 31% year-over-year. As Mark mentioned, the majority of the growth resulted from the successful implementation of our strategic initiatives such as protocol integration. But we did see added growth attributable to the recent celebrity publicity around hereditary breast cancer. We estimate that celebrity publicity positively impacted fourth quarter revenues by $7 million to $9 million. Fourth quarter revenue from our molecular diagnostic segment was $166.1 million, up 30% year-over-year and companion diagnostic revenue was $8 million, up 47% year-over-year. As previously discussed, our molecular diagnostic segment benefited from strong growth in both our Oncology and Women's Health segments. All of our product lines grew at healthy double-digit rates with BRACAnalysis revenue up over 19% year-over-year; BART up over 300% year-over-year; COLARIS revenue up 26% year-over-year; and our other revenue segment growing 16% year-over-year. The growth of our COLARIS product was particularly strong in the fourth quarter as we continued to gain market share. Moving down the income statement. Research and development spending in the fourth quarter totaled $14.6 million or 8% of total revenue, a 20% or $2.4 million increase from the same quarter of fiscal 2012. Research and development expense will fluctuate quarter-to-quarter due to the timing of clinical studies. For the full year, R&D ended close to our 9% of revenue target, and we continue to project this level of research and development spending looking forward as we work to expand and diversify our business. During fiscal 2013, our R&D investment covered 38 different research and clinical trials. For fiscal 2014, we anticipated funding 66 trials.…

Thank you, Jim. [Operator Instructions] Operator, we are now ready for the Q&A portion of the call.

[Operator Instructions] Our first question comes from the line of Amanda Murphy with William Blair. Amanda Murphy - William Blair & Company L.L.C., Research Division: So I had a question about some of the work you're doing with the pharma companies at the companion diagnostics. So there's been quite a lot of talk about competition, but I'm curious how: number one, maybe you could just talk to the process with the FDA just in terms of timing and data required to get the IDE designation? And then secondly, in terms of your relationship with some of the pharma companies, is it an exclusive arrangement in terms of your ability to be a companion diagnostic test for them once they're on the market?

Thank you, Amanda. Yes. As you pointed out, we have 6 major collaborations with pharmaceutical companies developing PARP-inhibitors. We have submitted, and it has been accepted by the FDA, our IDE. BRAC, as a companion diagnostic product, will be approved on the same clinical data and the antiparallel process with the approval of the drug itself. We are excited about this opportunity. Obviously, we don't have an exclusive from Myriad's perspective with the pharma companies. We're free to work with any of the pharma companies that are developing PARP-inhibitors. As we work through the regulatory process, we are working very closely with the pharmaceutical companies as collaborators on how best to ensure timely and rapid uptake of their particular drugs.

Our next question comes from the line of Bill Quirk with Piper Jaffray.

Just a couple of quick ones for me. One, can you just remind us the BART penetration from BRACAnalysis in the quarter? And then, Jim, maybe you can just elaborate about how you're thinking about that? Is it -- as we think about the 2014 guidance?

Bill, thanks for the question. BART penetration rates were, as we mentioned last call, we ended the quarter at around 80%. We've seen pretty consistent 80% penetration throughout the rest of the quarter through the fourth quarter. As we mentioned, we have done almost all with large or all of the large insurance companies, and they were really only some of the smaller payers that were left. And we expected that, that would take some additional time. And so we didn't see a major change in the ratio of BART to BRACAnalysis test in Q4. I think we've assumed that as we go into next year, that we will continue to see essentially that same level of BART reimbursement that we did in the fourth quarter.

Our next question comes from the line of Michael Yee with RBC Capital Markets.

This is Charmaine on behalf of Michael. We recognize there are many moving parts to guidance. But could you maybe help us understand just on the BRCA testing portion, do you anticipate your percentage share of BRCA testing overall on the market? How does that compare to year-over-year with the competitive impact, but then the market itself also growing?

Thank you. Yes. As we mentioned in the guidance, we did take into account the impact of competition in our BRACAnalysis market. So that has been factored in on our guidance this year. We don't break down specifically guidance on a product-by-product basis. Sorry, I can't comment further other than that.

Our next question comes from the line of Dan Leonard with Leerink Swann.

I was hoping to gain more insight into the pricing assumptions in your guidance. And maybe into the answer, you can weave in an update on your conversations with payers. You mentioned the health economics study was favorable for you. And also, if there's any sensitivity in this thinking to the outcome of your near-term legal process.

Thanks, Dan. Yes. As I mentioned, we have had a few conversations with some of our payers about BRACAnalysis. Generally, those have been more requesting information, some additional background information for payers. Generally, they would look for 2 different things. First, some clinical background to understand the differences between our test and other tests that may exist. As you know, there are substantial differences between tests and the clinicians at payers are well aware that there are differences. And so generally, they're trying to understand scientifically what some of those differences are. The second part of those conversations have been with the procurement side and understanding what those differences are, how they might impact the health economic performance of a payer. As I mentioned, we've been able to share with those few payers the $2,615 that Myriad would save on top of what another laboratory may charge because of the increased accuracy of our tests. And so that information has been well received by payers as they look at that. So in general, based on our payer discussions, we haven't talked specifically about what either share or pricing may -- how that may impact guidance. I think what we can say overall is we've provided the $690 million to $710 million guidance. That, of course, would combine any assumptions that we've made on either share or pricing.

Our next question comes from the line of Sung Ji Nam with Cantor. Sung Ji Nam - Cantor Fitzgerald & Co., Research Division: I was wondering -- you guys talked about pretty positive feedback from the physician community on the myRisk Hereditary Cancer Panel. I was wondering kind of what type of feedback you might be getting currently from your managed care community with respect to the panel vis-a-vis kind of some of the other drum line mutation panels that are out there, and how they're thinking about that.

Sure. The payer interactions we've had so far have been very positive as well. From a payer perspective, what we've been able to tell them is that we anticipate at least a 30% increase in sensitivity of the test. The real data to be published yet in the fall, but they will be receiving that increased sensitivity at the same pricing that they currently experience. And so that, obviously, from their perspective, is very powerful from a health economic standpoint to the extent that you can prevent that many more additional cancers, that's a very positive health economic story. And so payers have been very pleased to hear about the panel. The price point for the panel is -- relative to competitors, is very competitive. They have been appreciative to see that. And in addition, they are aware and have experienced situations where repetitive rounds of testing by other laboratories where each and every gene is built can lead to very high expenses on a per patient level, discussions of spending over $11,000 for patients for genetic testing done in a more sequential fashion. And so, I think the combination of all 3 of those have allowed us to have very productive conversations with payers to date.

[Operator Instructions] Our next question comes from the line of Derik De Bruin with Bank of America.

So I'm just a little bit more -- I'm just a little bit curious on the top line forecast. I mean, if you back out sort of the BART and the Angelina Jolie -- the sort of tailwinds from that. I'm just -- if the underlying growth was about 12% from that. I guess, could you just talk a little bit more about, I guess, how you sort of get to the 13% to 15% number? I mean, are you expecting an -- I mean, are you expecting a sort of significant growth in the BART? Are you expecting more -- are you expecting -- I'm just curious in terms of what some of your line expectations are for COLARIS, PROLARIS, the new test out there? I'm just trying to -- just help me get to the numbers a little bit?

Thank you, Derik. As we reported on the call today, we are forecasting $690 million to $710 million, that's 13% to 16% revenue growth. It does factor in what we anticipate with BART, currently about 80% penetrant, and we think eventually we'll get very close to the 100% penetration. It does certainly impact or take into consideration the impact of the recent publicity. Again, we think that publicity will wane during this quarter, and we don't anticipate any tailwind in Q2, Q3 and Q4. I'd like to help you with more of a product-by-product guidance, but unfortunately, we just give top and bottom line guidance. We don't get into the weeds, so to speak, with all of the various products.

Our next question comes from the line of Drew Jones with Stephens Inc.

You cited the COLARIS strength, really the source there being competitive gains. Can you give us some of the feedback that you're getting from those customers?

Yes. So this was -- it's COLARIS. I just want to make sure I heard right, the COLARIS gains? Yes. So I think for COLARIS, much of the competitive advantages that I articulated in the prepared comments relative to BRACAnalysis hold for COLARIS as well, things around turnaround time, the highest sensitivity tests, the assistance with reimbursement, the clarity around the report, our medical affairs support for physicians that may have questions about specific patients. So it's really that entire package of services that we are able to provide, all in the lower uncertain variant rates as well. That entire package of services are the things that have allowed us -- continued to allow us to maintain the highest market share. We believe we have over 70% of the market share in the colon cancer business. We have been showing significant growth, some of that has been shares, some of that has been overall demand. And it really is that entire suite of competitive advantages that have allowed us to continue to capture additional share and grow the market. Those are all things that we continue to experience with BRACAnalysis as well.

Our next question comes from the line of Peter Lawson with Mizuho Securities.

Peter, just on the increased competitive strength. What's factored into guidance on the revenue side for that increased strength? And has that changed any of the pricing conversations you've had either with the payers or pharma collaborators?

Thank you, Peter. As company policy, we really don't comment on matters related to litigation that it is ongoing. But as we've said in the call, we did factor in the competitive impact that we have seen and anticipate seeing throughout next fiscal year. We did indicate that we think as the quarter goes on, that impact will be more significant. And so we've indicated that we're going to see a little less seasonality in the 4 quarters of next fiscal year. But other than that, we did factor it into our guidance. You have our guidance, but we really -- we won't comment on issues around litigation beyond that.

Our next question comes from the line of Doug Schenkel with Cowen and Company.

So clearly, you have a head start in BRCA relative to competition, but I think it's less clear that you have an advantage when it comes to cancer panels. So a 4-part question: First, you said data on myRisk is going to be presented this fall, what discussions have you entered into with advisory groups on working myRisk into guidelines? The second part is when do you assume myRisk will be written into guidelines, and would you expect it to be myRisk named specifically? The third part is can you help us understand why the investment community should afford you more credit versus others for these panels when others have been marketing cancer panels for years? And the last part is with a number of companies on the verge of offering different cancer panels that include BRCA in the markers including -- that you include on COLARIS, is it inevitable that there's going to be conflicting claims made by competitors? And if so, doesn't this accelerate FDA LDT regulation?

Thanks, Doug. I'm going to take a crack, and hopefully, I got all 4 of these down. So I'll do my best. So first question is myRisk and what are our thoughts about how myRisk will be worked into guidelines. We already have engaged in discussions with numbers of guideline-setting committees. A number of those have actually been part of the studies that we have conducted so that they have an opportunity to experience the increased sensitivity firsthand with their patients. We do think, as always, that will take some time. As we have mentioned in Analyst Day, that we expect by 2016 to have a broadening of the guidelines such that the oncology market could double from the size that it is today. But we think that's about the time frame it would take in order to expand guidelines. What's important to note is that the guidelines, as they exist today in the oncology market, we're only about 45% penetrated for existing guidelines. In the preventive care market, we're less than 10% penetrated with the existing guidelines. So even with the existing guidelines today, there's ample opportunity for growth. But strategically, we're looking towards fiscal year '16 to broaden those guidelines. We don't expect those to be myRisk-specific. We expect that they would be more associated with the numbers of genes that would be appropriate and the specific identity of the genes that would be appropriate. So we don't necessarily expect that those would be called out by brand names, but of course, recognized to the extent that they are proprietary genes that are in the myRisk panel. Those would, in essence, become proprietary recommendations to the extent those genes are there. And as you know, things like BRCA1 and 2 [BRCA2], PALB2, MYH, and others, RAD51C, are all…

Our final question comes from the line of Isaac Ro with Goldman Sachs.

Let me just try and tackle the guidance item one more time in a totally different way. Can you maybe put a little bit of color regarding what is baked into your guidance with regard to pricing and market share? Anything to really help us understand as we think about the implications of competition, know what the impact might be to gross margins. That would be helpful. And I appreciate there's a large range of potential outcomes, but anything you can do regarding pricing and share will be helpful.

Thank you, Isaac. Again, I'm very sympathetic to your desire for additional information, but I think we've given very complete and thorough guidance. Certainly, on the bottom line, as both Jim and I have highlighted, we do think that will be impacted by the slightly higher tax rate, and it's actually a return to more traditional tax rate after a more favorable fiscal 2013, increased litigation expense and the launch of 3 very exciting new tests. Myriad has a very strong legacy of launching new molecular diagnostic tests. And I think, again, this is going to be very much a transformative year as we launch myRisk Hereditary Cancer, myPath Melanoma and myPlan Lung Cancer. On the top line, factoring in competition, the diminishing impact of celebrity publicity and looking at the growth we've seen across all of our products this past year and really past 8 quarters, we've given top line guidance of the $690 million to $710 million. But we clearly have looked at the impact of all of those factors on the guidance we've provided. But I very much, Isaac, appreciate your question.

This concludes our earnings call. A replay will be available via webcast on our website for 1 week. Thank you again for joining us this afternoon.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your line.