Ladies and gentlemen, thank you for standing by, and welcome to the Myriad Genetics' third quarter 2014 financial earnings call. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, May 6, 2014. I'd now like to turn the conference over to Mr. Scott Gleason, VP of Investor Relations. Please go ahead, sir.

Thanks, Jamie. Good afternoon, everyone, and welcome to the Myriad Genetics' Third Quarter Fiscal Year 2014 Earnings Call. My name is Scott Gleason, Vice President of Investor Relations here at Myriad Genetics. 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 in the Investor Relations section of our website at 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 myriad.com. The call is being recorded and will be archived in the Investors 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 the 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 report on Form 10-Q and its 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. I'm pleased to announce that Myriad once again delivered double-digit top and bottom line growth this quarter. Third quarter revenues were $182.9 million, an increase of 17% year-over-year. Fully diluted earnings per share for the third quarter were $0.48, which included a one-time noncash charge associated with the acquisition of Crescendo Bioscience. In order to facilitate a more complete analysis of the company's operating results and allow for comparison of results across historical reporting periods, we are providing additional information to investors that excludes the noncash acquisition expense. Therefore, our adjusted earnings per share for the third quarter were $0.60, an increase of 31% over the same quarter of the prior year. Given our stronger-than-anticipated third quarter financial results, I am pleased to announce that we are once again increasing our financial guidance for the 2014 fiscal year. We are now projecting revenues of $770 million to $775 million, representing 20% -- 26% revenue growth over fiscal year 2013. On the bottom line, we are projecting adjusted earnings per share of $2.37 to $2.40, representing 34% to 35% year-over-year growth. Jim will provide more details surrounding our financial guidance later on in the call. I am very pleased with our strong financial performance in the third quarter, which supports our focus of growing and diversifying our business to achieve the goal of building a world-class leading molecular diagnostic company, providing exceptional patient care across all major diseases. I will begin by focusing my remarks today on Myriad's efforts to advance our strategic initiatives of expanding our core hereditary cancer market, growing our international business and launching new life-saving products. We achieved a major milestone this quarter by signing a transformational payor contract with UnitedHealthcare for our myRisk Hereditary Cancer test. Mark will talk in more detail about…

Thanks, Pete. I am happy to provide a more in-depth look at our operational performance in the third quarter. First, I would like to provide a recap of our segment performance during the third quarter, followed by some additional color on the myRisk Hereditary Cancer conversion strategy, progress on our diversification efforts through new product introductions and finally provide an update on our legacy Hereditary Cancer market. Starting with our business segment performance. Our Women's Health segment continues to perform exceptionally well and posted year-over-year growth of 53%. We remain very optimistic about our ability to continue to drive strong growth in the Women's Health channel as we remain less than 5% penetrated in a $50 billion asymptomatic patient market for hereditary breast, ovarian and colon cancers. This quarter, our oncology revenues were down 4% year-over-year. However, it is important to note that all of our Medicare revenues are recognized in the Oncology segment, which was impacted by the Medicare price reduction. We estimate this impact reduced year-over-year revenue by 6%. In the absence of this price reduction, revenues in the Oncology segment would have increased by 2%. As you are aware, Medicare recently increased its calendar year 2014 price for BRACAnalysis by 37%. Consequently, going forward, this impact will be less significant. Our myRisk launch is proceeding exceptionally well. Starting in February, we began recruiting additional physicians to use the test. Given the time for our enrollment, training and lab processing, we started to see the revenue impact from these new providers in the second half of the quarter. Additionally, in late March, we expanded the enrollment process for myRisk to all of our genetics customers. We expect to see more meaningful increases in myRisk revenues starting in the fourth quarter and continuing to gain momentum as we work…

Thanks, Mark. I'm pleased to provide an overview of our financial results in the third quarter followed by a more detailed look at our 2014 financial guidance. Third quarter total revenues came in at $182.9 million, representing top line growth of 17%. Molecular diagnostic revenue in the quarter was $176.2 million, up 19% year-over-year. As we mentioned earlier in the call, our Women's Health revenues were $80.7 million, up 53% year-over-year. We are very pleased with the continued strength of our Women's Health business. Oncology revenue declined $3.4 million year-over-year to $92.4 million. Contributing factors to the year-over-year decline in Oncology revenue include a $6 million reduction in Medicare reimbursement associated with the CMS price cut, which was subsequently increased by 37% beginning April 1, 2014, and a typical seasonality of our business during the winter quarter. Companion diagnostic revenue in the third quarter was $6.7 million, and Crescendo added an incremental $3.1 million, which represents a single month of sales, as the acquisition closed at the beginning of March. We believe, going forward, the best way to gauge the performance of our Hereditary Cancer testing franchise is to look at the aggregate growth of our Hereditary Cancer tests, including BRACAnalysis, BART, COLARIS, COLARIS AP and myRisk, since the individual product growth rates are no longer comparable on an apples-to-apples basis. Looking at our revenues this way, this quarter our overall Hereditary Cancer franchise grew approximately 16% year-over-year. Hereditary Cancer revenues consisted of BRACAnalysis and BART revenue of $140.7 million; COLARIS and COLARIS AP revenue of $14.4 million; and myRisk Hereditary Cancer revenues of $14.5 million. Other revenues were $3.5 million and grew 25% relative to the third quarter of last year. Before moving further into the income statement, I want to discuss some onetime noncash charges Myriad incurred during…

Thanks, Jim. As a reminder, during today's call, we used certain non-GAAP financial measures. A reconciliation of the GAAP financial measures to non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial guidance can be found under the Investor Relations section of our website. Now we're ready to begin the Q&A session. [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 Bill Quirk with Piper Jaffray.

First question from me is regarding the UNH contract. We're talking about the 1 million patients that have already gone through the BRACAnalysis product and the fact that they may be eligible for myRisk. Help us think a little bit about the terms here for Myriad there? Is it something where you're charging a discounted price for the balance of myRisk? Is this essentially like performing a brand-new test for someone? Just help us think about the logistics there.

Yes. Thanks, Bill. So as I mentioned, we have a million patients. Obviously, a percent of those are UnitedHealthcare patients, and that percent is roughly consistent with their share of the overall managed care market in the U.S. We don't talk about any of the pricing details as it relates either to myRisk or what we call the myRisk update. And so we can't necessarily get into any of those details, but as you mentioned, those patients do represent an additional market that historically we've not been able to tap into. I think with the 50% to 60% increase in sensitivity that we've seen with the myRisk test, we have certainly seen an increasing level of interest from health care providers to contact those patients that have been historically tested, and particularly those that had initially been identified as higher-risk. And so we think, over the coming months, that we will see physicians reach out to some of those legacy patients and provide them the opportunity for updated testing.

Our next question comes from the line of Derik De Bruin with Bank of America.

So I'm a little bit curious on the Prolaris volumes. Like can you give us a little bit more color on that, and sort of like how we sort of should think about the increase in Prolaris once you sort of get CMS approval, reimbursement for this? I'm just curious how you're thinking about that and the growth trajectory in that product.

Thanks, Derik. As I mentioned in my comments, we've continued to see very nice growth in Prolaris. We saw a 24% sequential growth in samples for Prolaris this quarter. As you're probably aware, Medicare is really the most important segment for Prolaris. That represents probably about 65% of patients, which is why we put significant emphasis on obtaining Medicare approval. What we've historically seen in molecular diagnostics is that when Medicare approval is obtained, that you see an inflection point in utilization of testing, and we would anticipate the same thing with Prolaris when we ultimately get reimbursement. As a result of that, we've already begun looking at expansion of our field sales force in anticipation of that, and we're looking to double that field sales force, which then should allow us to significantly increase our penetration into the urologists that prescribe Prolaris. So we do anticipate an inflection point. We haven't provided specific guidance around that, but you can see we've already seen very nice sequential growth even without Medicare reimbursement.

Our next question comes from the line of Eric Criscuolo with Mizuho.

Just filling in for Peter Lawson tonight. I guess, just on the R&D, it was substantially lower than what we had estimated and substantially below run rate. Now I know you've said that obviously R&D timing comes into play, but were there any programs in particular that got pushed out into later time periods that are going to hit the P&L in the coming quarters?

Thank you for the question. No, there's nothing unique or unusual about this quarter. As Jim mentioned on the conference call, R&D is dependent upon our receipt of samples, upon the timing of clinical studies and our work with both our pharmaceutical partners and our internal product development. So it does fluctuate from quarter-to-quarter. We still feel fairly confident that it will not exceed 9%, which has certainly been our goal as a percent of revenues, and are very excited about the industry-leading product pipeline that the company has. We do have about a dozen programs, new products under development in the pipeline, and again, there's quite a bit of fluctuation in terms of getting samples to do the clinical validation studies around those new products. But no, nothing unusual that would anticipate an increase, an abnormally unusual increase in future quarters.

[Operator Instructions] Our next question comes from the line of Amanda Murphy with William Blair. Amanda Murphy - William Blair & Company L.L.C., Research Division: So I have some questions on the growth rates of the 2 sides of the business: the OB/GYN and the Oncology. So I believe you said that the celebrity publicity factor was out of the numbers now. So I'm curious, first, should we look at the run rate as sustainable with that market expansion? Maybe just provide a little bit more color there. And on Oncology, you mentioned, obviously, the Medicare cuts but also some market share losses. Just looking for a little more color on -- if you could quantify that incremental amount.

Yes. Thanks, Amanda. As we mentioned, that we have, in fact, seen any of the effects from publicity really dissipated at the end of last quarter. I think we feel very confident about that. As you know, we've done a number of public awareness campaigns over the lifetime of the company, and we carefully monitor certain indicators of those awareness campaigns. The patterns we saw during this celebrity publicity period were identical to what we've seen historically, although the magnitude was certainly greater than what we've seen. But it's very clear from assessing those patterns that the effects dissipated by the end of last quarter. So you are right, this quarter is more reflective of true year-over-year without the impact from celebrity publicity. The OB/GYN segment grew 53%. We're obviously quite pleased with that. Prior to the impact from celebrity publicity, we had been seeing growth rates in the year-over-year, 30% to 40%. So while this is slightly higher than what we had seen, it's still within the realm of what we've historically seen in the OB/GYN segment. As mentioned, we are still very under-penetrated in that segment. There are still substantial opportunities for growth, and with the current changes in the colon cancer and endometrial guidance -- guidelines from NCCN, that actually expands the potential market size for OB/GYN. So we still continue to believe there is significant opportunity for growth there. As you mentioned in Oncology, we did see year-over-year revenue decline, but in the absence of the Medicare changes, would have seen a slight increase of about 2% year-over-year. This segment does bear the full brunt of the competitive pressures that we have seen, although we continue to see that market share loss really reside in that 15% of our business that is the genetic segment. We also continue to think there are opportunities for growth in the Oncology segment. As I mentioned, we are doing a couple of initiatives to try to shore up market share in that genetic segment through additional call points or additional expansions into the genetics segment, the sales team that calls on the genetic segment, so we will continue to focus on that. The other thing that we have seen is that segment is particularly interested in panel testing. And so making myRisk available to that segment is very important because it now allows them to use 1 laboratory for either single syndrome or for panel testing. And lastly, in the Oncology segment, we still continue to believe that there are opportunities to expand the indications with myRisk, potentially doubling the size of the patient population that would be eligible for Hereditary Cancer testing.

And let me just add, Amanda, to that. I think the new guideline changes at the NCCN around colon cancer and endometrial cancer testing could have a potential significant positive impact on the growth in both businesses, but certainly, in Oncology, as those guidelines are incorporated in private pay reimbursement.

Our next question comes from the line of Sung Ji Nam with Cantor. Sung Ji Nam - Cantor Fitzgerald & Co., Research Division: I just had a question on your guidance for Crescendo for the remainder of the year. You did roughly $3 million this quarter, and it seems like you're expecting kind of a flattish quarter sequentially for fourth quarter. So you've seen a lot of significant sequential growth, at least in volume, over the last several quarters. I was kind of wondering if there is more -- if I'm reading too much into that or if there might be something else going on as you're trying to integrate that business into your core business.

Yes. I think you're probably are trying to read maybe a little too much into that. We're forecasting about $13 million in revenue, which is an increase over the March quarter. But as Jim pointed out for our fiscal guidance in 2015, we're showing about $60 million in revenue growth. Crescendo finished their calendar year in 2013 with total revenues of $27 million, so both what we're forecasting in the fourth fiscal quarter and for fiscal 2016 is a significant increase over Crescendo's current run rate and historical revenues. We're very excited about Crescendo. We think it represents a significant opportunity for Myriad as we not only move and diversify into a new disease indication, but look at a product that truly will dramatically improve the quality of life of patients with a chronic disease like rheumatoid arthritis. So we remain very excited and anticipate a very good revenue contribution in growth from Crescendo going forward in the future.

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

I know you don't want to talk specifics around the UNH pricing, but can you at least talk about pricing in context to some of your prior commentary that prior payors -- private payors are -- were more receptive to your economic arguments and lower the U.S. and that sort of thing? And then for my follow-up, could you comment on whether or not the companion diagnostic-branded BRAC, if that would be part of this agreement, as well? Or if that would be a separate negotiation?

Yes. Thanks, Dan. Yes, you're correct. We can't necessarily talk about details in pricing, but we can maybe provide some commentary on that. First, when we initially laid out that myRisk strategy, I think we mentioned at that point, our goal was that we would provide substantial increase in information for no additional cost, and you can see this contract is consistent that. Payors are very receptive to the economic models. First of all, around our legacy-testing BRACAnalysis, specifically, and so when you layer on a 50% to 60% increase in sensitivity at no additional cost, I think the health economics for the payor even become that much more pronounced, and so, they have been very receptive. I think this is a true validation of that with UnitedHealthcare, which would be viewed as a pioneer in Hereditary Cancer testing for quite some time. So I think we're very pleased that we are able to demonstrate that and provide that as a model for future contracts with other payors. Specifically to BRACAnalysis CDx, which will be the branded name for the new companion diagnostic that will have premarket authorization from the FDA. Because that product has not yet been approved, we have not specifically engaged with payors on contracting for that new product, but we will certainly do so as we approach the approval and launch of BRACAnalysis CDx. It is a different product and we can explore different coding and pricing and reimbursement that are consistent with the value that, that new product brings to the marketplace.

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

On the colorectal side, can you give us some color on historical cancellation rates there given the ITC prerequisite test and just how the updated guidance might change that?

Yes. Thanks, Drew. We haven't talked specifically about cancellation. I think actually what you saw with this test was not so much an impact of cancellation, but more the fact that when a health care provider, specifically in the Oncology segment would identify a patient with colon cancer that had a family history, guidelines were such that they were really required to do tumor-based testing before they could ever order genetic testing. And so we would actually never see those tests in our laboratory because if the tumor test was done and the tumor test came out negative, then there was never genetic testing ultimately pursued with that test. This new guideline recognizes the fact that, first of all, those tumor tests aren't as sensitive. Secondly, now that the recommendation is that you should test all of the mismatch repair genes, which are all 4 of those, that tumor testing actually no longer becomes viable as a pretest and that you should move directly to a genetic test. And so these are tests we would have never historically seen, but will now be ordered directly from Myriad without a prescreen. So that's why we believe this offers the opportunity, as Pete mentioned, for expansion in the Oncology segment for colorectal cancer testing.

And let me just add to what Mark has said, and I'm in complete agreement with Mark. I don't think it will have any impact on our cancellation rates. I think those have historically remained consistent and should, going forward, in the future. These are just patients we never got to see because of the microsatellite instability testing requirement. And going through that procedure, you see a dropoff in compliance both at the physician level and at the patient level, in terms of advancing onto genetic testing. So this new guideline change, I view as extremely important and extremely beneficial in terms of patient health care and treating colon and endometrial cancer. I think we're going to see much better patient access and utilization of the testing in the future, but it really is a situation of we never got to see these patients in the first place, as opposed to any impact on our cancellation rate.

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

I just wanted to start off, hoping that you could comment on what visibility you have regarding the number of payors or the percentage of payors that you deal with who are now providing reimbursement for more than one BRAC test. And just taking that in context of the comments you had earlier regarding the fact that you really haven't seen a ton of share loss here, and obviously, you've been able to negotiate with United for a variety of things. So I'm just trying to get a sense of if we look now versus a few months ago or a year ago, the percentage of payors who are now paying effectively for multiple versions of BRAC.

Thanks, Isaac. That's really a visibility we wouldn't have. What I can say is that from our perspective, as I mentioned, that, we've seen no change in network status, no change in average selling prices. Whether or not they've contracted or paid for other laboratory tests, there's no insight I could probably have on exactly what they might be doing there. I think what we've continued to see is because they value the accuracy of the Myriad test and because we've been able to show to payors that, that additional accuracy can save a payor $2,600 per patient, we continue to see broad access in all payors with no change in network status, and we would expect that to continue.

Our next question comes from the line of Jon Groberg with Macquarie.

It's just one question and then a quick follow-up. So on -- it's just little bit on the Oncology side. And -- but you mentioned the OB/GYN, how you think you're still very underpenetrated. Could you maybe give an update of where you think you are on the penetration side on Oncology? Just given that it was a bit of a slower grower there, even if you adjust for the price decline and whatever you think the competitive impact is? And then the second question is on use of cash. I know you bought back a lot of stock, but it seems like the Crescendo acquisition is something that could be a real positive, and I'm just curious, kind of your appetite for looking at other types of deals and using your cash more for M&A than buybacks.

Yes. Thanks, Jon. I'll talk about the Oncology side and then Pete will talk about use of cash. From an Oncology perspective, we view that as the entire Hereditary Cancer portfolio, which includes breast cancer, colon cancer and endometrial cancer, all of those cancers that currently have indications. So across the entire Hereditary Cancer portfolio, we're about 33% penetrated. As Pete mentioned, part of the reason that we're at 33% is because the colon cancer side, we've been relatively underpenetrated versus the breast cancer side of the business. And so that offers some significant opportunity, particularly as we transition to myRisk. So about 33% penetrated across all of Hereditary Cancer.

With regard to our capital deployment strategy, you're correct in pointing out that even after we have repurchased about 3/4 of $1 billion worth of company stock and have completed the Crescendo transaction, so there's no additional funds that would be needed toward that, the company still has $277 million cash in the bank, and that's plenty of cash to continue our current share repurchase program. But also, we will continue to look at opportunities to grow the company through acquisitions and mergers. Our first priority, certainly, is to grow the business both by investing in R&D and, again, we've committed about 9% of revenues to the internal product development, as well as M&A. But we will have plenty of cash left over to continue the share buyback because we still do believe the stock is undervalued.

I guess I'd also throw in that we do have a very clean balance sheet. No debt on the balance sheet at the current time. So that leaves us completely wide open to be able to take advantage of opportunities that come along through the cash balance we have on hand or the ability to lever if we need to.

Thank you. That does conclude the question-and-answer portion of the conference. Mr. Gleason, I'll turn the conference back to you to continue on your closing remarks.

Thank you, Jamie. This concludes our earnings call. A replay will be available via webcast on our website for one 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 then please ask that you disconnect your lines.