Greetings, and welcome to the Myriad Genetics Third Quarter 2021 Financial Earnings Call. During the presentation all participants will be in a listen-only mode. Afterwards we’ll conduct a question-and-answer session. [Operator Instructions] As a reminder this conference is being recorded Tuesday, November 2, 2021. I would now like to turn the conference over to Nathan Smith, Senior Vice President, Investor Relations. Please go ahead.

All right. Thank you Kevin. Good afternoon and welcome to the Myriad Genetics third quarter 2021 earnings call. During the call, we will review the financial results we released today, and after which we will host a question-and-answer session. Our quarterly earnings release was furnished this morning on Form 8-K and can be found on our website at investor.myriad.com. I'm Nathan Smith, the Senior Vice President of Investor Relations and Treasury. On the call with me today are Paul Diaz, our President and Chief Executive Officer; and Bryan Riggsbee, our Chief Financial Officer. This call can be heard live via webcast at investor.myriad.com and a recording will be archived in the Investors section of our website. In addition the following call -- in addition following the call, the slide presentation will be available on the Investors section of our website. 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 upon 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 transition 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 or forward-looking statements. With that, I will now turn the call over to Paul.

Thanks Nathan and good afternoon everyone. Thank you for joining us. On today's call, we will discuss our Q3 results along with highlights from the quarter and our continued progress on our strategic transformation and growth plan. Before we walk through our quarterly results and the business highlights, I want to thank our 2,400 Myriad Genetics teammates who continue to advance our mission of improving the health and well-being of all of our patients by revealing the answers inside each of us. Because of their hard work and dedication, we are expanding access to vital genetic insights for more patients every day. At the same time, we are enabling health care providers to better detect, treat and prevent disease. Our work matters and all of us at Myriad Genetics are driven by this mission and vision. Despite COVID-19 headwinds and typical seasonal softness, our quarterly operating and financial results were strong. In the quarter, revenues of $167.3 million increased 15% year-over-year and diagnostic test volumes of 252,000 were up 15% compared to last year. Excluding the impact of our divested assets, revenue increased 27% year-over-year, demonstrating strong growth in our core business. For the fourth quarter in a row, average revenue per test remained stable year-over-year and quarter-over-quarter, excluding the positive impact of prior period collections of $18 million year-to-date and $8 million in the quarter. Total operating expenses were $199.4 million and adjusted total operating expenses decreased $1.6 million sequentially to $121.5 million. Our GAAP operating loss in the quarter was $79.7 million with an adjusted operating loss of $1.4 million and an adjusted loss per share of $0.02. At the end of this quarter, we have $413.6 million in cash, cash equivalents and investments on our balance sheet. And as noted last quarter, our progress towards long-term profitability…

Thank you, Paul. I would like to start by giving you an update on our divested businesses. During the quarter, we completed the sale of our RBM business to Q2 Solutions for $197 million in cash and Vectra our autoimmune business to LabCorp for $150 million in cash. Our team has done an excellent job of executing on all three divestitures and we are now in a great position to invest the proceeds back into key growth initiatives. Our plan is to use the gross divestiture proceeds of $380 million to strengthen our balance sheet, as well as to fund investments in technology our new commercial operating model, commercial model, and potential acquisitions. We had another solid quarter as we reported total revenue of $167.3 million, up 15% year-over-year. Our quarterly results benefited from strong test volumes, which increased 15% year-over-year. Additionally, we continue to see stable average selling prices across our portfolio of products. In the quarter, we did report an adjusted loss per share of $0.02, but remain on track to return to profitability and deliver more consistent growth going into 2022. Adjusted gross margin was 71.7% and total adjusted operating expenses were $121.5 million. Like many others, we are experiencing increased inflationary pressures, including increased material costs due to global supply chain disruptions as well as increased labor costs, due to staffing constraints and increased competition for talent across the organization. Turning to revenue for our products, Hereditary cancer revenue in the quarter was $79 million versus $81 million in the third quarter of last year. Our hereditary cancer test volumes were flat year-over-year and down 7% sequentially. ASP was flat sequentially, excluding positive revenue adjustments related to better-than-expected cash collections on tests ordered in prior periods. A sequential decrease in volumes is largely attributable to constraints…

Thanks Bryan. We're pleased with the progress we have been able to make so far this year in a very difficult operating environment. Our primary focus is now accelerating growth going into 2022. We continue to invest in our business and work to elevate our products to their full potential and introduce new offerings next year while we're pursuing strategically sound acquisitions and new partnerships. Now more than ever, we are exploring new ways to eliminate the path to better health and wellness through genetic insights and look forward to a bright future ahead for Myriad Genetics to better serve our patients and customers and deliver sustainable and profitable results for all of our shareholders. And now I'll turn it back to Nathan for Q&A.

Thanks, Paul. 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 a 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. To ensure broad participation in today’s Q&A session we are asking 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. So first question is from Dan Brennan with Cowen and line is open.

Hi, good afternoon. This is Kyle [ph] on for Dan today. Thank you for taking the questions. So you mentioned during the call today on the focus for driving growth and included in that is potentially strategically aligned acquisitions. Do you think you can maybe elaborate on that a little bit here. Maybe any gaps in the portfolio you think you'd like to fill or specific areas?

Well I think there are sort of three areas. One is finding really good products within our areas of expertise that we can add value to. We want to have a proprietary view about how we can help grow nascent products in the marketplace. And so we're – I think we're now feeling confident that we can begin to look for those kinds of opportunities to expand our product portfolio and leverage the channels that we have in Women's Health and primary care and Oncology. I think we're looking for ways to accelerate our tech enablement that as we've talked about has been an area of underinvestment historically and where we've made up a lot of ground. And lastly, how we can leverage data to better differentiate our product offerings and deliver more than tests, right deliver the insights and the expectations of our customers for more interpretive data that they can use as part of a holistic care plan. And so those are sort of the areas that we're focusing on. And as we've talked about with $413 million of cash on the balance sheet, $230 million or so undrawn on the revolver, it really gives us the financial flexibility to become more ambitious there and fund our internal investment activities as well.

Got it. Thank you. And on another note, so hereditary cancer volumes, specifically in the women's health portion of hereditary cancer testing. Can you provide any color on how both volume and pricing has trended year-over-year and sequentially?

Well, I'll start with the operations part of it and Bryan to add more color around the numbers. As we've talked about in previous quarters, this was an area of underperformance. We made a leadership change. We were not doing a particularly good job of selling prenatal tests and hereditary cancer test out of our bag of products. One of the opportunities we see longer term is doing a better job of leveraging the channels and selling multiple products in the same channels. Melissa Gonzales, who is an experienced health care executive in the women's health channel is really bringing the team together, we stabilized the sales force. We've got people on the ground now and a lot of open territories and just bringing a lot of much needed energy, enthusiasm and discipline to the business. Really excited about the budget presentations she made last week and the opportunities for 2022. So the Women's Health business has very much been a turnaround story and there's a lot of opportunity there for us to participate in the underlying 8% or 9% growth of the marketplace. And we think we can capture more than our fair share of that over time. But again Melissa is five months into it and we're feeling optimistic about the opportunities for that segment in 2022.

Yes. And Kyle, I would just add on the ASP side. We've continued to see through the course of the year and Paul referenced in his remarks $18 million of positive out of period cash collections. I mean really attributable to the great work of the rev cycle team here at Myriad and all their efforts over the course of last year. And what that's really led to is stability across the portfolio in terms of our pricing and hereditary cancer through the course of the year has been stable as well and we've talked about that through the course of the year. So, I think to the extent that you can see return of well preventive care visits and an inflection in volume with stable pricing I think that's a good combination.

Yeah. And I'll just echo, just from the operator's perspective, cash matters it really reassures me that our revenue recognition is tied to cash collections and should give investors confidence that some of the issues that we had a couple of years ago on ASP and volatility there, and challenges we had in collecting prenatal the team has just done a great job. KPMG has been helpful. We're really working to build a world-class payer markets and rev cycle capability here, which we think will be really important as we look to scale and grow the company and bring on new products and launch new products.

Got it. Thank you.

Sure. Thank you.

Next question is from Sung Ji Nam with BTIG. Please go ahead.

Hi. Thanks for taking the questions. Paul, could you talk about -- just a clarification for the combined test you're launching the hereditary cancer tumor profiling next year. You talk about for ovarian cancer. Do you have a plan to launch for the other indications throughout next year as well, or how should we think about that from the timing standpoint?

Yeah. So definitely hope to launch for the ovarian early next year Q2 probably something like that. We just want to -- we want to get it, right. I mean one of the things that we've committed to is we're not going to launch, unless we can launch successfully and Faith and the team Patrick, I mean the support we're getting from KOLs and others. We're just doing a lot of more thoughtful groundwork, before we come out in the marketplace and make sure our sales teams are prepared to do that. And really appreciate the partnership with Illumina and Intermountain to bring really the best of the three companies together for a seamless customer experience in a single report with all the interpretations. That's big. It's really -- 85% of oncologists want one report. They don't want to have to figure out two or three different reports and that's differentiating in the marketplace. We are absolutely doing work to expand that, to breast, pancreatic, prostate that's going to take some more time. Those are bigger total addressable markets, but that is clearly in the work stream. Too early to tell when we'll be able to launch those offerings, but absolutely part of what we're working on in our R&D and tech development group.

Got you. Great. And then my follow-up is, we'd love to get more color around -- I realize there's still limited access to the health care providers. Would you be able to kind of give us more color in terms of -- or the oncology channel, versus women's health, versus the psychiatrist as far as the level of access you currently have, versus prior to the pandemic?

Yeah. I mean to some extent, I think we're all recognizing that we're sort of in a new normal here. And so I think the Q3-to-Q3 comparisons are the right ones you sort of had a stable -- a relatively stable COVID situation. And then this quarter was a little tougher quite frankly just because of the Delta variance. But look, at some level some of these barriers are going to continue to exist. I would point you to the great work we've done in GeneSight and with the support of Bain of moving to a more modern commercial model, 65 fewer external salespeople, 30 internal salespeople that are really increasing the velocity and the turnaround time and the customer satisfaction. 30% of the kits are home. And we need to bring the science to people where they can access it, when they can't get into the office a lot done in the patient portal there. And so now we're extending those commercial and technological capabilities to our other product lines. Next year we should see more unified ordering platforms, more back-end platforms on billing and customer service. So a lot of work to improve the customer and the provider experience. And so, we generally feel as we've talked about, that we can achieve our long-term growth rates organically of 8% to 10% and that we've got a lot of different ways to get there. But anticipate bumps along the way. I mean it's a pretty volatile world. And as Bryan talked we've got probably a little increasing inflationary pressure than we talked about at our Investor Day presentation. We're good cost managers here and we're working on finding ways to lower sequencing costs. But across all of our product lines it's sort of a little different story. As I said in women's health it's more of a resettling a lot of open territories helping people learn how to sell myRisk as well as our prenatal products in that same channel. One of the challenges quite frankly is we have to send patients to two different ordering platforms to do that. So, we're fixing that. So, there are just little things that create unnecessary friction points that will be solved here over the next couple of quarters that we think should support growth and ease of use for our customers.

Great. Thank you.

Thank you.

[Operator Instructions] Next question is from Puneet Souda with SVB Leerink. Please go ahead.

Yes. Hi, thanks for taking the questions. So, I'll try to ask both of mine together if I could. And just wanted to just following up on the somatic germline test. I mean just when you look at the overall competition in the space and given sort of the penetration levels sort of just to help us understand how do you position with multiple companies that are providing somatic testing in the marketplace. And then on GeneSight if you could maybe just elaborate a bit on the coverage there where do you stand and your ability to raise pricing there? Thank you.

Well, so on the first we certainly have some competition out in the marketplace. We think our offering will be differentiated. Some of those competitive offerings are really more marketing partnerships where people are doing the germline tests and the tumor test and then trying to send the report separately but together. And so we think this is highly differentiated again combining Illumina's TSO 500 capabilities along with the great work of Intermountain and then our sales force our rev cycle on the commercial side. And this is the kind of partnerships that I think we all need to think about more so we can bring more products to market faster and more effectively and more cost efficiently. So, we think it will be differentiated both in terms of the accuracy and quality. No one else has the myChoice FDA approved. That's absolutely differentiating part of the three-piece puzzle here. And as you've seen we've got great traction and on myChoice CDx. And so I think if you look at the combined offerings that we're bringing together under one roof and the ease of use that we're going to make this for oncologists it's we should be able to capture more than our fair share of the marketplace and have previously discussed hopefully extend this beyond ovarian in the not-too-distant future. On GeneSight, we continue to work with payers across the landscape Medicare Advantage plans with the benefit of the LCD with more Medicaid plans where we think there's a great opportunity in expanding coverage. And quite frankly, it's less about trying to get the highest price but getting a price where we can expand coverage on a broader population that needs this test, particularly given how efficient we are and the great work Mark's team has done. I think our COGS are $336 for this product or even--

COGS are about $65.

I got that wrong Puneet $65 for this product. So, we've got a lot of margin on GeneSight. And so quite frankly, I'm pushing the team for broader access this goes right to the social determinants of health and disparities. Mental health is pervasively an issue across all social economic and affecting young people and we need to be part of addressing that. And what I'm excited about is the nurse practitioners. They are the ones who really see that secondary diagnosis of mental health issues. And we see it for seniors I've been in that part of the world for many, many years. It's a secondary diagnosis but often the one that causes a rehospitalizations. And so, we just see great runway for GeneSight and its adoption and our focus on coverage broadly across all payer types.

Next question is from Matt Sykes with Goldman Sachs. Please go ahead.

Hi, Matt.

Hey thanks for taking my questions. Appreciate it. Maybe just following up on Puneet's question on GeneSight maybe a bigger picture question. But as for mental health, telehealth has been a huge benefit. And I think there's some thought that that might remain fairly sticky in terms of, how people choose to get treated. If it does, what kind of impact do you think that would do to broaden the population? There's some pretty large underdiagnosis that goes on within mental health. But if telehealth were to kind of remain sticky at high levels for mental health. What do you think that would do for GeneSight, from a positive or maybe negative impact?

Absolutely supportive of our investment thesis. If you go to our website, you'll see some connectivity to connecting you to telehealth partners. We have a number of discussions with Eric Santa our Chief Growth Officer, who did a lot of this at Rally Health at Optum on the telehealth side at Optum and he's leading that charge along with Mark and the Mental Health team. So we think this absolutely can help sustain the growth there. And there are a number of potential partnerships with telehealth and with some of the payers that focus on mental health issues, as well, where we think there's great opportunities. So we're in the early innings here, but it is the adoption by the nurse practitioners that to me is the most encouraging. They're the ones really dealing on the front line of this. And so improving the ease of use and access to the test through our portal, through telehealth partnerships, that's absolutely, how we think we can sustain growth in this business unit and continue to expand.

Great. Thanks a lot. And then just you talked about the increase in inside sales for Mental Health in particular. Can you use that kind of same recipe for other -- your other segments and other tests, or are there certain specificities with those markets where that might not be the right solution?

No. I think -- Matt I think we talked about this a little bit. We are in the process of rolling out, not exactly the same commercial model but a more segmented approach using inside sales using a lot more digital and social media awareness to have people come into the office and ask for our test or be informed about our test. So we're in the early innings of extending that into oncology and women's health, particularly in women's health, where so many women -- that's where they do their primary care we see opportunities there. And ultimately honestly, we see the opportunity to cross-sell GeneSight into the women's health channel as well. So we're a year away from being able to execute on that, but that's certainly an opportunity that OB/GYNs and their advanced practice nurses face every day as well. So lots of fun stuff to do here.

Got it. Thank you.

Next question is from Derik De Bruin with Bank of America. Please go ahead.

This is Wolf [ph] on for Derik. Thanks for taking the question. I just -- another one to follow up on those couple of GeneSight questions. For those payers that are not reimbursing yet what data do they still need to see? And if the patients that are ordering test at home screening more self-pay or how does that work?

Yes. So that's an evolving picture for sure. We are making progress with payers and getting through and showing the meta study and other things. We have a BA study it should come out soon that will be very supportive for veterans with PTSD. It was referenced in a congressional report excited about the possibilities of extending GeneSight into the VA. And the team continues to validate the clinical efficacy. The more powerful story here is that clinicians need it, want it, and they're validating it. And we've got programs with Rush and a few other institutions where we're doing some collaborative work, with them and some projects where we think we'll have some real-time, data to support the clinical efficacy. And the financial efficacy quite frankly of getting people to the right medication sooner, quite dramatic for people that have to go through three or four different medications to solve to their ADHD and depression and anxiety. And there isn't any family in America who doesn't have somebody in their family who is struggling with these things. So it's not holding us back but we continue to build the clinical case and the validation points there. But the need and the desire for this as part of a solution of helping manage mental health is very clear and very pronounced in all the markets where we are entering.

Great. And then just as a quick follow-up. On the combined carrier screening NIPT test how are you thinking about pricing there? And I believe you said that was maternal only? And if so what are you doing for the father and the carrier screen?

Yes. Thanks for the question. It is only one sample. That's the unique -- part of the uniqueness of the test is that you would only -- you're able to run and get the result from -- just from mother. And with respect to pricing, we haven't really talked about that but I think that we'll share more details on that as we get closer to launch.

Next question is from Tycho Peterson with JPMorgan. Apologies it looks like that line disconnected. That would make our next question Jack Meehan with Nephron Research. Please go ahead.

Hey Jack.

Thank you. Good afternoon. Hello. First just a couple of clarifications. For the $8 million of out-of-period sales can you provide the breakdown by product? And then was the $4 million milestone payment incremental to that?

Yes. No, the $4 million would have been incremental that stands alone that's very different. The -- because it was earned in the current period so it was recorded in the appropriate period. Of the $8 million, I think about $4.5 million of that was related to hereditary and the rest is sort of spread across the other products mainly prenatal.

Got it.

Yes, mainly prenatal but some across the other.

Okay. And then I appreciate the commentary around 2022. One other data point I was hoping you could provide is, what portion of your hereditary cancer testing book renews with payers or maybe kind of different way do you think price declines will be in the 3% to 5% range you talked about at the Analyst Day?

Yes. We're still feeling pretty good about the 3% to 5% overall pricing. And generally, we feel pretty good about kind of where we're positioned with hereditary cancer. I know that's been a source of insecurity and concern for folks. But as we've talked about the out-of-period collections, just bolster our confidence in our revenue recognition and the quality of that. And we're seeing pretty good stability there. That's been a question that you've had. And we think we can build on the volumes and really start creating a lot more leverage there particularly in women's health. So, we see -- again overall 3% to 5% pricing pressure next year. Some of that is PAMA unless that's extended. And no particular contracts of any note expiring and still signing contracts at pretty favorable rates in some places where people think we have a superior product and are willing to pay for it. Now I personally as I've talked about before, I want to make sure that our pricing is accessible. And that we have a lot more leverage in our P&L driving volume, not just holding on the price, a little philosophical change around here. But right now, we're feeling pretty good about pricing and feeling really good about our rev cycle capabilities.

Great. And just as a final question, I guess, can you help us with some of the moving parts on the path to profitability next year? I mean, I look at the quarter there was a cash EBIT loss of around $1 million. You had about $12 million, that were onetime nature and another and we're talking about somewhere to the tune of $25 million in price reductions next year kind of at the midpoint. And I was also hoping to get some color on the inflationary factors just, what's the path to profitability?

Well, yes. So, we're not giving guidance today Jack as you know. I think the path is consistent with what we've talked about. We're in a position now to really start growing volumes. The clarity of mission with the divestiture is behind us. The stability that we're seeing in the sales force, the improved go-to-market on our value proposition, the work on ease of use and transparency with patients at the point of care, which is another thing that we work on, where we're eliminating a lot of the competitive barriers that we have had. And I think we've demonstrated ability to be disciplined cost managers in terms of getting synergies and managing OpEx and managing the industry-leading gross margins. And so, we just want to recognize which I know you and others do that, we've got increasing inflationary pressures going into next year. But as Bryan reiterated, we lost $0.02 in the most seasonally weak quarter. We were profitable last quarter, which is more representative of sort of the year. And so this quarter, we also had a bunch of legal expenses associated with the key TAM. There's always puts and takes in this thing as you well know. So overall, we believe we have a clear path on revenue, COGS, OpEx to reach stable profitability next year. There's just a lot of puts and takes in any given quarter.

Thank you, Paul.

Thank you, Jack.

We do have a question from Tycho Peterson with JPMorgan. Your line is open.

Great. Hi. This is Rachel on for Tycho. Thanks for taking the question. So first NIPT we've had broad coverage of average risk for about a year now and then another player exited the market earlier this spring. So, can you just talk about how share has shifted in that market and where you stand now?

I'm not sure, if I can give a specific answer to that question other than, I think we're getting our fair share and we have the ability to execute better. And those things take a while to play out. Bryan's comment on that in prior calls, the expansion of guidelines and things, they don't just sort of materialize in a quarter. They take a year or two to work themselves through the ether of ordering physician footprint.

Yes, I was just going to add I think that relative to share, it's hard to tell on the data that's available in the market. But what I would say -- I would say just that with respect to the average risk, most folks were already ordering the test anyway, so it's more of a reimbursement sort of playing you've seen nice recovery in our prenatal ASP over the course of the year. A lot of that is driven by the fact that we're now getting paid for tests that we weren't previously. So, I think that's really where we've seen the benefit of that `over the course of last year.

Yeah. And as we've talked about one of our goals is to reduce no pays, right? And so that's particularly important for GeneSight, but important in all of our -- it's one of those weird industry things that I've been trying to put my head around here is how many tests we don't get paid for, but it's something we're very focused on and continue to make progress on a number of different fronts, whether it's coverage, patient portions and other things. So it's just an opportunity to make sure that our tests are both priced and affordable and accessible, but that we can cover our costs. And again, we've done a really good job of reducing COGS across and particularly sequencing costs across the enterprise. So just have the ability that volume can really drive a lot of value creation for shareholders here a lot of leverage in the P&L.

Great. And then my follow-up is on GeneSight. You guys have mentioned the inside sales team a few times on this call. And I believe during the Analyst Day, you mentioned that that was in the piloting phase. So can you just give us some color on the progress and any early trends that you're seeing? And also, just how much further would you expand that inside sales force for GeneSight? Thanks.

I think we've added another 17 people or so. I think we're up to 35, 36 something like that and we're starting to do that in the other business units as well. And these folks solve to the friction in the system, particularly while we're building more technology to solve to the friction. And that's what we want. We just want -- if a patient or a doctor has a question or their nurse practitioner, we want to answer it on the spot. We want to solve a problem. We want to be a company that gets you your results as quickly as possible. And that means, you get their order next time. And so those folks have just done an incredible job in Mason, I'd clone them all if I could. And we've just added a lot of capability there. And as I said, they've more than made up for the external 65-person more expensive external salespeople in that division. And something that people that couldn't be done, but in other industries has been done and now we are doing it.

Great. Thank you.

Thank you. Anybody else on deck?

No one else on deck.

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

Thanks for your support, everyone.

And that does indeed conclude our call for today. We thank everyone for participating and you may now disconnect.