Ladies and gentlemen, thank you for standby. Welcome to the Myriad Genetics Fourth Quarter 2018 Financial Earnings Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, August 21, 2018. I would now like to turn the conference over to Scott Gleason, Vice President, Investor Relations. Please go ahead.

Thanks, Mike. Good afternoon. And welcome to the Myriad Genetics fiscal fourth quarter 2018 earnings call. My name is Scott Gleason. I am the Vice President of Investor Relations. 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 in the Investor Relations section of our website at myriad.com. Presenting from Myriad today will be Mark Capone, President and Chief Executive Officer; and Bryan Riggsbee, 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. In addition, there is a slide presentation pertaining to today’s earnings call on the Investors section of our website and which will be filed following the call on 8-K. Please note that some of the information presented 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 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 could cause the actual results to differ materially from those contained in our projections and forward-looking statements. With that, I am pleased to return the call to Mark.

Thanks, Scott. I would like to start today’s call by providing key highlights for our fiscal year and the fourth quarter, after which Bryan Riggsbee will provide details regarding our financial results and guidance, and then I will finish the call by providing additional information on our initiatives to drive an inflection in our current business trends in fiscal 2019. In the fourth quarter, we once again exceeded expectations with revenues of $200.9 million and adjusted earnings per share of $0.38. For the full year, we reported revenue of $773 million and adjusted earnings per share of $1.20, which significantly exceeded our initial guidance and what is in line with our most recent revised guidance. For the fiscal year, earnings increased by 17% on a slight increase in revenue, which highlights the success of our efforts to reengineer our cost structure. As a company, one of our fundamental values is a commitment to pioneering science and fiscal 2018 represented another significant year in scientific achievement. Having pioneered the field of hereditary cancer testing more than 20 years ago, we remain committed to research that will enhance our understanding of future cancer risks. This commitment culminated in the launch of riskScore in September, which began the fourth major EPIC and hereditary cancer testing. In the field of neuroscience, we successfully completed the GUIDED study, which is the largest pharmacogenomics prospective study ever conducted in mental health. In companion diagnostics we received approval for BRACAnalysis CDx for metastatic breast cancer patients in the U.S. and Japan. We have committed more than 10 years of research to understand how best to select patients for PARP inhibitors and we are extremely pleased to help bring this class of pharmaceuticals to a broader group of patients. In the field of rheumatoid arthritis, we completed landmark…

Thanks, Mark. I would like to start by providing a more in-depth overview of our fiscal fourth quarter financial results. Fourth quarter total revenues of $200.9 million were up 1%, compared to the $199.6 million we reported in the same period in the prior year, with year-over-year declines in hereditary cancer pricing being offset by new product and hereditary cancer volume growth. Hereditary cancer revenue in the quarter was $126.8 million, with volumes up 3% sequentially and year-over-year volume growth increased for the sixth consecutive quarter, and once again exceeded 3% growth. Notably, pricing has been stable on a sequential basis for three consecutive quarters and we anticipate continued stable pricing throughout fiscal year 2019. GeneSight revenue in the quarter was $33.9 million and grew 33% year-over-year. Once again, volume in the quarter achieved a new record and we ended the year at a run rate well in excess of 300,000 tests per year. As Mark mentioned earlier in the call, this was on the hills of record total ordering physicians and record new ordering physicians, which was largely attributable to the strong incremental interests from doctors following the presentation of the GUIDED study at the American Psychiatric Association Annual Meeting. We believe these physicians ordering trends are strong leading indicators for future growth. Vector DA revenue in the quarter, in the fourth quarter was $15.1 million and grew 47% year-over-year. Polaris revenue in the fiscal fourth quarter set a new record at $7 million and was up 133% relative to the fiscal fourth quarter of 2017. Growth was primarily driven by the recent expansion in Medicare coverage to favorable intermediate patients and double-digit volume growth. EndoPredict revenues in the fourth quarter also set a new record at $2.8 million growing 40% year-over-year. Growth in the EndoPredict revenue in the…

Thanks, Bryan. I am excited to discuss more details around our execution to create an inflection in our current business grounds from a hereditary cancer perspective our guidance assumes relatively nominal growth rates in hereditary cancer volumes. Yet we do see important new growth opportunities in fiscal 2019. First, given changes in the National Comprehensive Cancer Network guidelines in fiscal 2018, more than 121,000 additional patients per year will meet criteria in fiscal 2019. Significant changes were made for pancreatic cancer patients or unaffected patients with a family history of pancreatic cancer that increased eligibility by 40,000 patients per year. Additionally, NCCN recently broadened its guidelines on high risk colorectal cancer syndromes that will lead to an incremental eligibility for 41,000 colon cancer patients per year. Finally, in July, NCCN updated its prostate cancer hereditary cancer testing guidelines to include all metastatic patients and all patients with the family history of breast cancer, which increase eligibility by 40,000 patients per year. Another continued growth opportunity in fiscal 2019 will be driving deeper penetration into the women’s health market by leveraging riskScore. This year we will launch further enhancements to riskScore including expansions into new ethnic groups, the inclusion of additional relevant clinical data to further enhance the predictive power of the test and additional validation data to expand the ability of riskScore into broader populations. We already saw an impact in fiscal 2018 with double-digit growth rates for patients with less extensive family histories that represent 60% of the market. Lastly, from a companion diagnostic perspective, we continue to see new opportunities for growth. We have already seen 13% sequential growth in metastatic breast cancer volumes following the Lynparza launch in fiscal third quarter. Marketing efforts will increase this fiscal year as Pfizer and Myriad have filed applications with the…

Thanks, Mark. As a reminder, during today’s call, we use certain non-GAAP financial measures. A reconciliation of the GAAP financial results to non-GAAP financial results and reconciliation of GAAP to non-GAAP financial guidance can be found under the Investor Relations section of our website. Now, we are ready to begin our Q&A session. In order to ensure broad participant in today’s Q&A session, we ask participants to please ask only one question and one follow-up. Operator, we are now ready for the Q&A portion of the call.

Thank you. [Operator Instructions] One moment please for the first question, which comes from the line of Amanda Murphy with William Blair. Please go ahead.

Hi. Thanks. So, just a question on GeneSight, so obviously, making some progress there in terms of reimbursement. I just was curious as you have had conversations with payers, just kind of what got you over the line, so to speak, with CareFirst, what kind of got them to cover the assay? And then also some of the projections we have gotten just more from the investor community, is just around obviously, the various endpoints. And I am just curious in your conversations if you feel like payers are kind of where they stand with the data thus far. And then also maybe I am throwing in a bunch here so just kind of this idea of generally a lot of companies in the diagnostic space have been doing tests almost for free at this point as they are building up the data and so kind of the idea that why would payers cover it at this point if the testing is being done already kind of thing, so just curious if you could get some perspective there?

Thanks, Amanda. I hope I get to all of these if I miss something…

Sorry.

… please follow up, okay. I will cover the rest, okay. First, I think, from a CareFirst perspective and I actually personally had a chance to interact with them and get to see their response. First of all, it starts with the clinical evidence. They were very impressed with the clinical evidence. To your second question, the thing that really impresses payers the most is remission in response rates reflect on that for a couple reasons. The first data is well known that if you look at what it cost to treat a patient in remission that that’s treatment resistant depressed patient it’s about $20,000 per year. If you can get that patient into remission, you save $20,000 a year, if you get that patient to respond you save $10,000 a year. And so payers to without exception have really focused on remission and response as the endpoints that matter, because those are the ones that drive value for patient, those are the ones that drive value for physicians, those the endpoints that are in guidelines and those are the ones that are ultimately going to save them money. And so, they were very impressed with that, particularly when you compare to an active drug arm. It’s data they had never seen before. It’s just never really been produced in prospective studies like this. I think -- and that’s really been consistent across the board as we have talked to all payers that continue to focus on remission and response. The other thing to note is that when they are looking at HEDA scores it is remission and response that are the two endpoints that matter as they try to generate higher star ratings. And so, again, it plays into exactly what they are looking to from a clinical perspective and a health economic perspective. Now, from a standpoint of why cover this, as we mentioned, we are not currently marketing to the primary care setting, recognized that that primary care physicians prescribe over half of the antidepressants in this country. And so, if in fact you are going to see both the patient benefit and the financial benefits you really need to do that in the primary care setting and that’s something that we will only do once we have sufficient reimbursement to justify that. Secondarily, even in our psychiatry call point, we only call on a portion of the psychiatry market at this point. We don’t reach the 40,000 psychiatrists, and so, again, with reimbursement, there is an opportunity to expand much further into the psychiatry market as well all of which again will just tell patients and increase the health economic advantage for a payer. So, let me stop there see if you have a follow up, Amanda.

Yeah. I guess, I was -- I won’t keep asking since I have asked three basically in that one question. But, I guess, it was a broader question around the space at a higher level where you have, I think, payers have been reluctant to cover tests for so long and so companies like Myriad and others have been doing the tests anyway. And I guess, I am just curious at what point do you sort of push back and say, look, we are going to test regardless and you have, obviously, talked about the volume levels that you are performing. So, just curious the give and take there with coverage versus actually still performing the test for patients?

Yeah. Again, I think their perspective is there is large swaths of the market that right now are not getting the benefit of GeneSight, which is the majority of psychiatrists and all of primary care. That’s really their focus. Was that they want to look at ways to get this into a broad market and that’s only something that we are going to do once we have a chance to get additional reimbursement. So that their perspective is there is a benefit to them if we can work together and get this to a much, much broader set of patients than we currently do today.

Got it. Okay. Thanks so much.

The next question comes from the line of Drew Jones with Stephens. Please go ahead.

Thanks. Good afternoon, guys.

Good afternoon, Drew.

Mark, maybe you could -- just kind of following up on GeneSight, could you give us an update on our RCT publication, time lines, maybe any insight on what’s going on there?

Yeah. Thanks, Drew. As I noted in the prepared remarks, the RCT which is now got GUIDED is the actual official name of the study. We are in the latter stages of review for that. Obviously, we had initially had hoped that we would get more accelerated review with publication at the beginning of this fiscal year. I think what we have seen is particularly with summer months in a large number of authors and the typical review process that it hasn’t really been accelerated review. I think we are on a more traditional time line at this point. But we continue to obviously be encouraged with the publication, so we work through this as quickly as we can. But a typical publication process has multiple rounds of review response by authors and this complexity with it. So, I think, what we are seeing is a typical time line right now. But, again, we are encouraged that and focused on getting this published as soon as we can.

Okay. And then last one from me. Do you guys have any better visibility in terms of CDx contribution to growth maybe in the back half of fiscal ‘18 and especially once met breast came on later in the third quarter and how is that trajectory, if you can see that far in, how is that trajectory look as the year progressed?

Well, the approvals for the met breast indication really came in the middle of the third quarter. So, I think, the first read we could really get on that is the data point that I provided in the prepared remarks that we saw 13% sequential increase from Q3 to Q4 in patients with metastatic breast cancer. So we obviously saw a nice increase in uptake for those patients. I think as we turn the page here to fiscal ‘19, we have got a couple of other contributors to growth. Japan where we are the only approved product there with BRACAnalysis CDx. That obviously just came online here in the first quarter. And as I mentioned, we have already seen a ramp up in samples from Japan. So that’s going to be another opportunity. We will also see a substantial increase in marketing effort as Pfizer gets approval for a talazoparib in the same indication in metastatic breast cancer and will be the companion diagnostic there and our PDUFA date is in December and so now you are doubling the number of salespeople that will be out there talking about the importance of doing BRACAnalysis testing for metastatic breast cancer patients. So we saw a nice growth from Q3 to Q4, but I think we are really just in the early stages of that as we bring on Japan, as we bring on another pharmaceutical manufacturer in the middle of the year.

Thanks, guys.

The next question comes from the line of Derik de Bruin with Bank of America. Please go ahead.

Hey. This is Amy [ph] on for Derik de Bruin. Just a question on Counsyl. So, there are many companies offering carrier screening services, a good part which was acquired by [inaudible] and it mentioned higher detection rate, et cetera for the product. I just wanted to see what are some competitive differences between ForeSight and the other vendors and maybe you can update us on the investment situation a little bit more? Thank you.

Yeah. Thank you for the question. I don’t know if I caught every -- all of that. Your line was a little choppy. But I think the question was really around ForeSight and what do we see as some of the advantages. One of the things that we were very attracted to Counsyl is their ability to integrate all of this into a very smooth workflow process and that includes ForeSight and Prelude, and now, of course, we will be adding in our hereditary cancer test. So the complete integration of that in an OB/GYN office is, we have already heard just in a few weeks that we have owned the asset just how important that is, that they would like a single solution for those tests and they want the highest quality test they can and now with the launch of Myriad women’s health, they are going to have an opportunity for exactly that, a very clear smooth workflow with the best tests. ForeSight, clearly have some advantages and in fact Counsyl was the pioneer in the expanded carrier screening test and so as the pioneer they have got advantages and their ability to deliver accurate results and more results to patients than they might see with other laboratories. So, I think, it’s really that that ability for an integrated workflow, it’s the much expanded reach that we can now provide as Myriad women’s health broader organization and if that reputation for quality. I think all of those things are going to be opportunities for us to show advantages relative to others that are in the market.

Thank you. If I could squeeze in one more just housekeeping. So why did you suddenly decide to exclude the Stockholm, the $0.30 from FY19? From what I understand it’s not common practice with other life sciences or diagnostics company to exclude this, just wanted to see what’s your rationale behind that? Thank you.

Yeah. Thanks. Yeah. Thanks for the question. I think based on the look that we had relative to peers in the industry I think it is relatively common to exclude it. Also we have started providing information through the course of last year on our free cash flow per share, which is dramatically understated as we look at our adjusted earnings per share more and more investors and the questions we get are around the free cash flow generation of the business and that’s really what they are focused on and we felt that by excluding that it provided a better measure of the ultimate earnings power of the business. So that was really the thinking behind that.

Okay. Thank you.

Next question comes from the line of Sung Ji Nam with BTIG. Please go ahead.

Hi. Thanks for taking the questions. Mark, I was wondering if I could probe further into the self-funded market -- self-funded employee market. Sounds like it’s obviously a significant opportunity there, do you see it as equally important in terms of going after that as you would see with the commercial payers? And in terms of the criteria where the hurdles, do you think there are kind of different sets of price for hurdles that you need to address for both parties? And if, for example, is the publication of the GUIDED study as important for the self-funded employee market?

Yeah. Thank you, Sung Ji. We are excited about the progress we have already made in that given -- and Myriad is a good example, we are self-funded from a health care perspective as well. And for us what matters most is employee wellness and productivity and ultimately we pay for all of these funds anyway and a payer is really just the administrative portion of that. And so we are in the decision-making seat when it comes to what’s best for our employees and what’s best to control our health care costs. So that’s part of the reason we are excited because they have a complete lens on this whereby from a payer perspective, they don’t capture productivity improvements and those types of things. So we have had a very warm reception. This is just something we started in 2018. So, I think we are in the early stages. I think the opportunity is significant and how significant, I think, we will have to see how the rest of the year plays out as Chip Parkinson and his team begin to focus more on that. But the endurance level has actually been very significant. And in fact you see big efforts from employer groups actually now joining together to try to find different solutions to our healthcare challenges in this country. And so we are playing into that dynamic. I think from the hurdles perspective, they generally look at things very much like another payer would. They may not have it as extensive of a tech assessment approach, but they use literature, they rely on guidance documents that are out there for medical professional societies. So there is still some similarities between that. I can say their view on GeneSight for example is very similar to commercial payers and that they are looking for remission and they are looking for a response, because again, we are trying to get our employees well and those are the things that matter and so that’s been a very consistent theme in our discussions with those self-funded employers.

Okay. That’s very helpful. And just a quick one for Bryan, for the ASC 606 adjustment that you provided, is that for revenues especially -- is that largely impact -- attributable to hereditary cancer or other product lines, just curious for modeling purposes.

Sure. Yeah. I would say it’s largely attributable hereditary, the other business lines were already on a model that was relatively consistent with ASC 606.

Okay. Great. Thank you.

The next question comes from the line of Jack Meehan with Barclays. Please go ahead.

Hi. Good afternoon, everyone. Mark, I was wondering if you could give us some color on any conversations you have had with CMS-related GeneSight and the GUIDED and IMPACT studies and what you think is the potential timeline for an update from them related to the primary care market?

Yeah. Thanks, Jack. It was very early on actually that obviously CMS provided coverage for the psychiatry-only market and the feedback even back then was that we would like to see how well primary care physicians do using this tool compared to psychiatrists. And so that’s really the genesis of the entire IMPACT study was specifically to answer that question from CMS, obviously the data is outstanding. They did even better. And it’s probably not a surprise because they were probably more diligent at following the results from the test report. So we, obviously, were waiting for that publication to approach Medicare with that and that’s what we will be doing. Our plan is to approach Medicare with that study and with the GUIDED publication and so because they are interested they have seen all of the topline results on GUIDED. They were very impressed with those results as well, but we want to go forward with both of those publications to discuss then the potential expansion of the LCD into the primary care market. So as that GUIDED publication happens, you can assume we will be approaching them immediately after that with both of these. So, we think this data answers all of their questions and excited to get to talk to them about it.

Great. Thanks for the color. Just as a follow-up, I was hoping you could help me with within 2019 guidance what the assumption is related to the contribution from hereditary cancer that can grow or decline in 2019 and any thoughts on the pricing environment would be helpful? Thank you.

Yeah. Yeah. Jack, this is Bryan. I think the few comments that we have made are one as we have seen three consecutive quarters of stable pricing. We expect that to continue through next year and we -- I would say that hereditary cancer will be increased nominally through the year just given the fact that we have got some stable pricing locked in. But again that would get offset by lower RBM revenue and then a contributor next year will also be the double-digit increases for our new products. But relative to hereditary cancer, I think, the assumption would be relatively stable through FY19.

Very helpful. Thanks, Bryan.

Yeah.

The last question comes from the line of Patrick Donnelly with Goldman Sachs. Please go ahead.

Great. Thanks, guys. Maybe just another quick clarification on the guidance. Can you just talk through the assumptions on Counsyl, I know we only get 11 months of it in a year. Can you just talk through what growth assumptions are there, any revenue synergies, it doesn’t seem like you are baking in a lot and leaving most of it to the upside, but I am just curious kind of what’s baked in for Counsyl this year in ‘19.

Yeah. Patrick, I guess, the commentary that we have had around Counsyl is just that in terms if we are going to own the asset for 11 months, we expect it to be at $130 million number for next year, obviously, any time you do an acquisition like that there is some revenue disruption that occurs, but in terms of upside relative to our revenue synergies we have left those out of the guide.

So, Patrick, we basically just assume current run rate in a very simplistic way and part of that is because growth opportunities we expect to be offset by some of the disruption, as Bryan mentioned. So we have assumed just run rate for next fiscal year. Now, obviously, we have only had the asset for a few weeks so that’s probably a prudent assumption at this point. But you can imagine our focus is on something much different than that, particularly with the opportunity to penetrate 9,000 OB/GYNs that we haven’t called on at all, but which is not building any of that in the guidance at this point.

Okay. And is the revenue disruption primarily around kind of that 8% a rev that they have tied to hereditary cancer, it kind of seemed like that was potentially going to be cannibalized in a way, but I am just trying to figure out, is that kind of the relation there?

No. It’s not that. It’s just any time you bring two sales teams together and as you begin to integrate those and assess territories, there is just typically historically, some sort of disruption when you are doing that and it’s just the result of merging two sales teams. It’s not related to their hereditary cancer. Obviously we have an opportunity with the hereditary cancer product where we are assessing exactly what we are going to do with that right now. But obviously, myRisk is the market leaders so it gives us an opportunity to look to shift volume -- more volume into the myRisk product. So those are the things we will be working on immediately to try to make that happen. But the disruption we mentioned is really just that that bring two sales forces together as you look at territories and allocate those, typically there is some disruption.

Okay. And then maybe one more just quick one on the Counsyl side, can you just talk through the cost synergy opportunity, I know again, you have only been kind of behind the curtains for a few weeks here. But still expecting to be neutral to 2019 EPS and you may give the dilution number for 1Q, but just expectations there and kind of what you have seen in the first few weeks here?

Yeah. Sure. I think you are right. It is early days relative to owning the asset. I think the few data points or the few comments I would have would be. One, yeah, relative to the first quarter, it’s really hard to get anything accomplished and have an impact in the first 60 days. That really has an impact to the quarter. So I think we are still very comfortable with the fact that it will be neutral earnings for the year, but it’s going to take us a little bit of time to get projects ramped up. I think relative to the opportunity, as you think about this and compare and contrast relative to Assurex, the fact that we have channel overlap here that we didn’t have with respect to that acquisition. We obviously believe there is significant opportunity for synergies, but it’s just going to take a little bit of time to get that executed.

Okay. Thank you.

There are no further questions at this time. I will now turn the call back to you. Please continue the presentation and your closing remarks.

Thank you. 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 participation and ask that you please disconnect your line.