Ladies and gentlemen, thank you for standing by. Welcome to the Myriad Genetics First Quarter 2014 Financial Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, November 5, 2013. I would now like to turn the conference over to Mr. Scott Gleason. Please go ahead, sir.

Thanks, Mike. Good afternoon, everyone, and welcome to the Myriad Genetics First Quarter Fiscal Year 2014 Earnings Call. My name is Scott Gleason, VP of Investor Relations here at Myriad Genetics. During the call, we will review the financial results we 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 Investor Relations section of our website at myriad.com. Presenting today for Myriad 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 myriad.com. The call is being recorded and will be archived in the Investor section of our website. Please note that some of the information presented here today may contain projections or other 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 current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. With that, I'll now turn the call over to Pete.

Thank you, Scott. To begin, I am pleased to provide highlights of our first quarter results. The revenues for the first quarter of our 2014 fiscal year increased 52% year-over-year to a record $202 million. As expected, we benefited from increased publicity during the quarter. However, even with that benefit, first quarter revenues rose 25% compared to the same period in the prior fiscal year, representing continued strong growth in our core markets. Every one of our products contributed to this excellent performance, and I am pleased to note that our international division made excellent progress, with revenues increasing 125% year-over-year. Our investments and efforts in Europe are paying dividends, and looking ahead, we see 2 potential major catalysts in this market. First is the European approval of AstraZeneca's PARP inhibitor, which represents a $100 million companion diagnostic market opportunity. The second catalyst is the European launch of Myriad myRisk Hereditary Cancer test, which will occur during the second half of this fiscal year. Net income for the first fiscal quarter was $55 million, compared to $30 million in the same quarter of the prior fiscal year, an increase of 84%. Finally, diluted earnings per share grew 89% to $0.68, compared to $0.37 in the first fiscal quarter of 2013. Given these strong results, I am pleased to increase our financial guidance for fiscal year 2014. We are now projecting revenues of $700 million to $715 million, representing 14% to 17% growth, and earnings per share of $1.92 to $1.97, representing 9% to 12% growth. These results speak to the dedication of the Myriad team, and I'm especially proud of the hard work and diligent efforts of each one of our employees for delivering this excellent performance in the face of new direct competition. The company has aggressively repurchased its…

Thanks, Pete. I am pleased to provide a more in-depth look at our operational progress during the first quarter. Before I discuss a detailed breakdown of revenue by market segment, I would like to provide an assessment about the impact of celebrity publicity in the quarter. After performing an analysis of the first quarter, we estimate the additional publicity increased our revenues by approximately $35 million. Factoring out this nonrecurring event, we delivered strong revenue growth of 25% in the quarter due to the execution of our strategic initiatives. I would like to provide a more detailed look at this execution within the Oncology segment. Oncology revenues grew 30% in the first quarter to $108.3 million, compared to $83.4 million in the September quarter last year. Much of this success is directly attributable to our initiatives focused on targeting strategic growth accounts and implementing our protocol integration strategy, while a small benefit was attributable to the increased publicity. Our oncology growth account strategy is focused on the 3,000 oncologists with relatively low BRACAnalysis testing, but high patient volumes. During the quarter, 47% of incremental testing volume came from these physicians, and our sales force call volume to these physician subsets almost doubled. We are encouraged by the early success of this program, and are expanding our efforts to a larger percentage of these customers. The second strategic initiatives in oncology is the expansion of our protocol integration strategy, which is similar to the very successful initiative implemented in the preventive care market. This quarter, we completed 200 protocol integrations in oncology and are on track to complete 800 in fiscal year 2014. In our Women's Health division, we continue to see very strong growth this quarter, with revenues increasing 93% to $84.7 million when compared to the $43.9 million in…

Thanks, Mark. As Pete mentioned, first quarter revenues were $202.5 million, representing 52% year-over-year growth. Clearly, some of this success is tied to recent celebrity publicity, which has increased awareness around BRCA testing. In an effort to provide a better assessment of our pro forma growth as a company, we believe without celebrity publicity, our first quarter revenues would have been approximately $167 million, a 25% increase over the same quarter last year. As Mark mentioned, we also believe competition negatively impacted our results by approximately $5 million in the first quarter, representing less than 3% market share loss. It should also be noted that our core markets are growing at a rate substantially greater than the current impact from competition. First quarter revenue from molecular diagnostics was $193 million, up 52% year-over-year. Companion diagnostic revenues were $9.5 million, up 54% compared to the same quarter in fiscal 2013. Looking at growth by product, BRACAnalysis revenue was $149.6 million, an increase of 42% year-over-year. BART revenue in the quarter was $24.8 million, and was up 225% year-over-year. The vast majority of our BRACAnalysis test had an accompanying BART test this quarter. COLARIS demonstrated continued growth in the first quarter, with revenues increasing 19% year-over-year to $14.3 million. Other revenue this quarter came in at $4.3 million, which was up 66% from the same quarter in fiscal year 2013. The increase in our revenue was primarily -- in other revenue was primarily attributable to myRisk and Polaris. The oncology market segment experienced a 30% growth in patient sample volumes, and while it is a more mature market, we are still seeing continued growth opportunities, especially as we expand indications with myRisk over the coming years. The women's health market is less 10% penetrated, and increased 93% year-over-year. This market segment is…

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 Tycho Peterson. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: Maybe, Jim, segueing off your last comments on guidance, can you maybe just talk about your assumptions on pricing and share for the remainder of the year, and what's baked into the revised guidance? And is the fact that you beat by 22 [ph] and only increased guidance by $0.03, are there other factors that are kind of weighing on that?

Thank you, Tycho. Let me start off with the answer to the question and I'll ask Jim to expand on it as well. I think when you look at our guidance, as Jim mentioned, the company historically has given very conservative guidance. I think the company have stated on prior earnings calls that we feel very comfortable, being able to differentiate the quality of the products that the company offers and justifying a premium price. So our guidance does not include a significant price erosion. We did see a less than 3% market share loss during this quarter. As we've mentioned on the call, we think that will increase modestly, and that was certainly factored into the guidance. And then, I think you have to take into account the fact that the publicity impact we saw this quarter is not recurring, and we're not going to see much of that impact going forward. So all of those factors were taken into account in the guidance. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then, just a follow-up on myRisk, can you maybe just give a little more color on payer discussions? How that's progressing, and maybe any milestones we should be paying attention to there?

Yes. Thanks, Tycho. We're obviously in the early access program with myRisk, and so that also means in the early stages of any discussions with payers. We just released the pivotal data on the colon cancer patients, as you know in October, have showed a 60% increase in the number of positive patients that were identified by using myRisk relative to COLARIS. The data everybody is probably even more interested in is the breast -- hereditary breast and ovarian cancer data. That data will be out next month at the San Antonio Breast Symposium. Historically, we've said we expect that to be at least a 30% increase in the number of positive patients. And I think as that data becomes available, then we will continue to have more lengthy discussions with payers about the increased sensitivity associated with myRisk. The discussions we've had with payers as we mentioned, they've been sensitized to how important this is with BART. BART showed a 7% increase in sensitivity and was very quickly adopted by physicians and by payers because that additional sensitivity is so important when you're trying to make sure that a patient gets the best answer to, as Pete described, an incredibly pressing question. And so when you talk about it, 60% increase for colon cancer patients, at least a 30% increase for breast cancer patients. This is -- those are very significant, very important numbers to payers. And from a financial perspective, it's very important for payers to adequately identify those patients that are at high risk because those are patients where we can prevent very significant downstream costs if we can prevent those cancers from happening. So, I think the payer discussions have been very productive, and we'll look forward to even more extensive discussions as the hereditary breast and ovarian cancer data comes out next month.

And our next question will be coming from the line of Sung Ji Nam with Cantor. Sung Ji Nam - Cantor Fitzgerald & Co., Research Division: Was wondering if you could provide more color around your guidance on the companion diagnostic portion of your revenue? I was wondering also is that strength this quarter, is it largely the PARP inhibitor partnerships?

We don't -- in our guidance break down companion diagnostic revenues from molecular diagnostic revenues, obviously, we did see a very nice increase in both of those 2 revenue categories. Most of the PARP inhibitor collaboration revenue is run through the Myriad Genetic Laboratories facility here in Salt Lake. So that actually does appear as molecular diagnostic revenues. So all of the growth in the companion diagnostic revenues was through our Austin lab, Myriad RBM and represented companion diagnostic collaborations with major pharmaceutical companies but focused more on protein analysis than the PARP inhibitor collaborations which are DNA sequencing analysis.

And our next question will be coming from the line of Bill Quirk with Piper Jaffray.

First off, can you elaborate a little bit around the pacing of your payer talks for BRCA, and obviously, you guys -- Mark talks about a little bit on in terms of trying to get them to understand the differences between yourself and others. But is there any maybe tangible evidence that we can point to that indeed, you're having some success with that differentiation strategy?

Sure. Yes, as I mentioned that our managed care team is proactively talking to payers to make sure that they fully appreciate the differences in quality between tests. As I often describe, there's really 2 different departments within a payer organization. One is on the clinical side and they are expressly concerned with quality of tests, the accuracy of tests and making sure their providers are adequately serviced. The other side is on a procurement side, where in the event that the clinical side were to determine that tests were identical they then turned that over to the procurement side to do whatever contracting that they might feel is appropriate. Our discussions continue to largely be with the clinical side of payers that are trying to understand the differences between quality. They've certainly been very receptive to those quality discussions and have seen ample examples where there have been differences in laboratory quality. And so they are quite keen on understanding those differences. As Pete mentioned, our guidance going forward does not include any changes to reimbursement and I think that's probably the best indicator of the nature of how those discussions have -- had gone to date.

Perfect. And then if I can sneak one other one in here, just in terms of myRisk Hereditary Cancer guides, when you launch this as a, I guess, in the broader launch, once we get out of this early access program, could you talk about what your expected VUS rates are, perhaps, year 1 and then maybe give us an idea of kind of year 2, year 3?

Yes. As you correctly pointed out, we're in that early access phase so -- through the end of September we had run 1,000 samples in the commercial program. I also mentioned that in January, we plan to go to an expanded access phase, which will significantly increase the number of test that we run. It's a little early to probably comment on exactly what the VUS rates will be per gene. We have commented that for -- and published for the major genes that we have our legacy genes, which include all our BRACAnalysis genes and all our COLARIS genes, that those genes are at 2% or less. You would expect some of the newer genes, the 14 newer genes, to start out with higher VUS rates but I think with our -- my variant classification program, you will quickly be able to see us reduce those -- those VUS rates on those newer genes down to significantly lower levels as we take advantage of the significant volumes that we will be running relative to other laboratories. So it's a little early to comment on exactly what we might see but I'm confident that we will, as we have with other genes, reduce those -- any VUSes that we see significantly rather quickly.

Our next question will be coming from the line of Doug Schenkel with Cowen and Company.

I have a, I guess, what's really 3 or 4-part question. First, do you still believe that the benefit in Q4 was only $7 million to $9 million given that $35 million was estimated to be the benefit in Q2 associated with celebrity awareness driven volumes? The second part is how did you get this surprised by the upside in this quarter when you provide guidance for Q1 on August 13, which was halfway through the quarter? This is really just a pacing and a visibility question. The third part is can you describe celebrity awareness driven volumes over the past 5, 6 weeks of this quarter, especially given you indicated your guidance assumes that there's not going to be celebrity awareness benefits moving forward? And the final part is why aren't you increasing full year guidance by at least the magnitude of the quarterly beat, especially given what you described in terms of the myRisk revenue run rate relative to your original guidance? Did you make changes in assumptions for pricing or share loss?

Yes, Doug. We are confident in the amount that we identified for celebrity publicity last quarter. As you recall, that -- the event took place near the end of the -- or mid-May, and so by the time people were able to get into their physicians, have their blood drawn, get it to Myriad, get the results turned around and back to them, the real impact was seen in this quarter. So we're comfortable with what we saw last quarter versus where we are today. We set out in our original guidance knowing that there would be an impact in the first quarter. I think if you go back, some people were concerned that Myriad might be a little aggressive in our original guidance and giving ourselves hurdles that might be difficult to overcome. I think we were able to show with this first quarter's result that we are confident in the guidance that we put out, and that we do want to make sure that we give guidance that is achievable by the company with our best vision into what's going to happen in the future.

And let me add, Doug, that the company does not give quarterly guidance. So we did not give a guidance for this first fiscal quarter. We give only annual guidance. As we look at the annual guidance, we historically have been somewhat conservative. We do not want to disappoint the Street. As we look at this year, factoring out the celebrity publicity, this quarter would've been around $167 million. If you look at the high end of our guidance, it implies an average quarterly revenue run rate of about $171 million. And I think that's appropriately conservative in light of some of the uncertainties surrounding direct competition. But I think you can read into our guidance that our core business continues to perform extremely well and that we have a lot of confidence in the company going forward this year, and we're actually able to raise guidance but obviously, since the publicity benefit is a nonrecurring event, you do have to factor out that $35 million when you think of a run rate going forward.

And our next question will be coming from the line of Isaac Ro with Goldman Sachs.

I wanted to ask a question about myRisk in terms of sort of what your plan is to convert some of the more casual primary care docs that you currently work with for BRAC to that test, and just wondering, how you expect to convert them in cases where -- in some cases, it would seem that doctors may not want all the data that they're going to get?

Yes. As we mentioned, we're in the early access program. It's been incredibly well received by physicians, overprescribed as far as numbers of physicians that wanted to participate, and half of those physicians were in the women's health or preventive care market. I think those physicians in particular who see it as their role to prevent the first cancer from happening as opposed to oncology segment where you're already dealing with the patient that has been diagnosed. It's actually not difficult to convince them that they want the most sensitive test that can avoid any possibility of a patient potentially ending up with a preventable cancer, and so they have been very receptive to using this most sensitive test. As we move into the expanded access, we will obviously broaden that out to a larger subset of the women's health physicians. Again, we expect that to be oversubscribed in the numbers of physicians that would like to participate from the preventive care side. What we see with these physicians -- and you may as well if you go out and talk to them, initially when we do micro research, we will generally hear physicians talk about things such as, you mentioned, Isaac, which is what is the information that's going to be presented, how will it be presented, how do I communicate this with patients, and those are certainly questions they have. When we present to them, 2 pieces of information: One is the increased sensitivity associated with the test and second, an example of the report that will come back with the test result. When we show them both of those pieces, we see over 90% of OB/GYNs that are willing to immediately switch to the myRisk test. And so a lot of this is making sure that the information that's presented to the physicians are something they're comfortable with, their patients would be comfortable with. And we have done many, many hours of market research to make sure that report adequately meet the needs of the physician and patients. And the feedback we have on the 1,000 tests we've done to date and the reports that have been generated has really been outstanding.

Yes, keep in the back of your mind, Isaac, that the myRisk Hereditary Cancer Panel is based on only clinically actionable genes. So unlike possibly other panels in the market, we focus on clinical actionable genes where there is good published information and literature specifically outlining actions that the physician could take to better manage the patient's health care. And as Mark pointed out, rather than having the physician see a mutation on the gene, and then wonder what to do about it or maybe have to go online and search out those publications, we actually provide all of that information in the reports. So the physician knows exactly what that means if there's a mutation in a particular gene and what current medical guidelines are recommending in terms of how you treat those patients. So as Mark mentioned, over 90% of the physicians have embraced this after seeing the report. And it's really not a situation of a physician not wanting to know that information. They very much want that information so that they can help their patients.

Sure, okay. That's helpful. And then, just switching gears back to the guidance and the competitive dynamic, just trying to understand how you guys are handicapping the expectations around competition for the balance of the fiscal year? And I noted you said that the market seems to be growing faster than the pace of new entrants are having an effect. And I don't want to misrepresent but, effectively, what I'm trying to figure out is how long do you think the market will continue to expand at that pace? Because, presumably, that's got a finite life span to it. The products in the market was already relatively well-penetrated before the entrance of new players, so as the market kind of stops this sort of short-term expansion, how do you think that will play out relative to the impact of new competition?

A very good question. But I think your assumption is incorrect. In the primary care market, we're only about 10% penetrant so it's not at all a mature or heavily pretreated market. And if Myriad is the only company out there offering hereditary cancer testing then we're a relatively small voice trying to educate physicians and create awareness among patients. One of the advantages of competition is now you have other companies also talking about the importance of a patient understanding their hereditary cancer risk. And we do think that's going to continue to grow the markets faster than any loss of market share due to that competition. So I think Myriad believes that the onset of competition is a net-net benefit to the company. We certainly believe we've seen that in this quarter. That's certainly taken into account in our guidance for this fiscal year and I would argue that, that's not going to wane. These are relatively large markets that are underpenetrated and there's a lot of room for future growth and expansion in our markets.

And our next question will be coming from the line of Amanda Murphy with William Blair. Amanda Murphy - William Blair & Company L.L.C., Research Division: So I just had a quick question on the share loss that you guys talked about. Can you just provide some more qualitative information about where you think that loss came from specifically? And then in terms of future trends there, where you think the incremental loss might come from.

Yes. As we mentioned, it was less than 3% share loss in the quarter. We make that largely confined to genetics and the academic genetic segment. That's a minority of our oncology market, which as you can see in this quarter, oncology now is about 56% of revenue, the woman's health market was 44% of revenue. So the genetics is a smaller part of the Oncology segment and it looks like that loss was generally confined to that segment. We know that the laboratories that have launched have all expressed that, that is the specific segment that they would like to penetrate. And so, as we contemplated guidance for the remainder of this fiscal year and our comments that we would expect some moderate increase to that share loss, it was with the understanding of the size of that market what we may have seen in the COLARIS market, and how we think that might translate for BRACAnalysis for the remainder of this year. Amanda Murphy - William Blair & Company L.L.C., Research Division: So in terms of that, then, just thinking about the 3% number, is there a number we can think about in terms of where that might max out?

No, I don't think we're prepared to talk about any more granularity on that. I think we can say that we obviously took that into consideration as we provided guidance and our thoughts as to what that might look like for the rest of the year. But I don't think that's -- I don't think we're prepared to provide a more detailed look at that number.

And our final question for today will be coming from the line of Derik De Bruin with Bank of America.

So I have 2 Europe related questions. Could -- according to -- yes, you said your European diagnostic business was up 125%. That, by my model, that would imply it could potentially have been down sequentially. Could you just give me a little color on what the European or x U.S. number was for the diagnostics business? And also, along those lines, what are sort of, if asked if you're expecting for answers that are kind of PARP inhibitor, are there milestones associated with that approval? Could you just talk about how sort of the economics works with the PARP?

Thank you, Derik. You're correct. The international revenues were up 125% year-over-year. They were also up sequentially. European revenues are still small, so we don't break them out specifically. The company policy is that until a revenue segment achieves at least 5% of revenues, we don't break them out specifically. But ever since we set up the labs in Europe a little over 1.5 years ago, we've seen a steady increase and improvement in revenue so we've not seen any sequentially decline. And again, we're very excited about the potential in Europe not only because of the traction we're currently seeing with the 125% revenue growth but the possibility of PARP inhibitors and the launch of myRisk in Europe, both of which have been really anticipated by potential customers. With regard to PARP inhibitors, our focus as a diagnostic company is providing the clinical data in supporting the pharmaceutical companies in terms of getting their drug approved but based on a companion diagnostic like BRACAnalysis that would receive FDA approval along with the drug. And then providing that information so the patients can benefit from a drug that there's a good likelihood they'll respond. We do not ask for any royalties from the partner company nor do they get royalties from us. We do not ask for any milestone payments. The PARP inhibitor opportunity for ovarian cancer, and remember, ovarian cancer is relatively small in terms of the number of patients who contract that particular cancer. In Europe, it's $100 million annually and that is the companion diagnostic, not the drug market opportunity. So these are very large market opportunities not only in Europe but here in the United States. And we're very excited about that opportunity and don't look for milestones or bile duct type arrangements with our collaborations.

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.

And 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.