Greetings, and welcome to the Myriad Genetics Fourth Quarter 2022 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, February 28, 2023. I would now like to turn the conference over to Matt Scalo. Please go ahead.

Okay. Good afternoon, and welcome to the Myriad Genetics' Four Quarter and Full Year 2022 Earnings Call. During the call, we will review financial results we released today. And afterwards, we'll host a Q&A session. Our quarterly earnings release was issued this morning in Form 8-K and can be found on our website at investor.myriad.com. I'm Matt Scalo, Senior Vice President of Investor Relations. And on the call with me today are Paul Diaz, our President and Chief Executive Officer; Bryan Riggsbee, our Chief Financial Officer; Nicole Lambert, our Chief Operating Officer and Mark Verratti, our Chief Commercial Officer. This call can be heard live via webcast at investor.myriad.com. And a recording will be archived in the investor section of our website along with this slide presentation. Please note that some of the information presented today contains 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 SEC, specifically, the company's annual report on Form 10-K, it’s quarterly reports on Form 10-Q and the 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 turn the call over to Paul.

Thanks, Matt. Good afternoon, everyone. And thank you for joining us. On today's call, we will discuss highlights from the fourth quarter and full year. We will also provide updates on the strategic initiatives that are driving our long-term growth plan. First, I want to thank all of our teammates at Myriad for their hard work and dedication this year to advance our mission and our vision to make genetic testing and precision medicine more accessible to help people take more control of their health and enable providers to better detect, treat and prevent disease. With so many positive changes happening across the organization, I'm incredibly proud of how our teams have kept their focus on our patients and providers. Myriad Genetics ended the year with a strong fourth quarter performance. Total revenue grew 11% year-over-year driven by double-digit volume growth in both MyRisk Hereditary Cancer Testing and GeneSight. We believe these results reflect the market's growing response to our commercial initiatives and we are confident in our ability to achieve our financial guidance as well as reach profitability and positive operating cash flow in Q4 of this year. Additionally, our continued commercial execution, robust pipeline, strong capital structure and top tier talent will fuel our long-term growth even further. Transitioning to slide five. We closed and have successfully integrated the acquisition of Gateway Genomics, and are excited to be working with Chris Jacobs as CEO and the entire Gateway team. The SneakPeek early gender DNA test continues to perform well across all of its commercial channels. In 2023, we will continue to look for cross-selling opportunities with other Myriad products and aim to increase SneakPeek's attachment rate to our NIPS test prequel without disrupting SneakPeek's performance. We entered 2023 with a tremendous amount of positive momentum as we take…

Thanks, Paul. I'd like to start on Slide eight, with our enterprise commercial platform. First, I'd like to give a special shout out to our commercial team, which is made up of almost 1000 teammates from our outside and inside sales, marketing, medical and customer service personnel. In the quarter, the commercial team reached over 42,000 providers and helped hundreds of thousands of patients. We've been working tirelessly over the past two years while making significant investments in technologies that aim to improve our engagement with patients and providers to help solve their medical needs across our product lines. Turning to slide nine. We've done our best to help visualize the progress that the team has made. Especially in the last six months across multiple capabilities. We've made improvements in product management, customer targeting, digital experience, and learn how to better troubleshoot and use our market intelligence to evaluate what is and what is not working. It's important to note, we're not starting from scratch with this commercial platform, it's really a story of going from good to great. And the key to reaching great is to continuing to execute and constantly improve in these areas. The landscape is ever changing and the commercial team is constantly working to adapt and improve our ability to connect providers and patients directly to our products. Coming out of the pandemic, we've learned that providers don't have as much time on their hands as they've had in the past. We've learned that our outside sales team doesn't have the same access they once had either. Physicians and patients are spending more of their own time researching to better understand healthcare products and solutions. For example, we've rebuilt our sales infrastructure with new salesforce tools and dashboards. So our commercial teams know exactly who…

Thanks, Mark. I'd like to start on Slide 16, and talk about changing perceptions of Myriad Genetics among our healthcare practitioners. In addition to the new commercial processes and capabilities that Mark discussed, we also have been doing a much better job of listening to our patients and providers. And we are seeing the results of that improved customer engagement in our quarterly results. They know that we're listening and that we want to hear their feedback. We want to hear what we can do better, what needs to change and what we should keep doing. For example, we heard that we needed to expand our gene content. So we added more genes to our primary MyRisk test and customers responded. We heard that we needed to be more engaged with sharing our data and contribute more holistically to the broader medical community, so we recently announced a partnership to share data with ClinVar and customers responded, especially the genetic counseling community. Everything from improving our customer service as measured by our net promoter scores to the faster turnaround times that providers depend on, we are listening to customers and taking action to make it easier to do business with us. Turning to Slide 17. We are proud of the fact that we've increased various perception among healthcare providers relative to our peers over the last year, and the general instability at our market over the same period has created a tremendous amount of opportunity for us to get into new accounts with the Myriad that we are today versus who we were six months ago. This gives us a lot to look forward to in 2023 with our approach of continuous improvement while keeping patients, providers and payers at the center of everything we do. Now on slide 18,…

Thanks, Nicole. I'd like to start by reviewing product volume trends on Slide 22. As Paul mentioned earlier, hereditary cancer testing and GeneSight volumes each saw double-digit growth in the fourth quarter. This paved the way for about a 26% quarterly testing volume growth figure compared to Q4 of last year, as well as the 14% full year testing volume growth rate in our core product categories from 2021. Also in the quarter, prenatal volumes increased 40% year-over-year, including contributions from our recent Gateway Genomics acquisition. Excluding Gateway, prenatal volumes increased to modest 2% sequentially from the prior quarter. Now on Slide 23, our full year 2022 revenue of $678 million represents a 6% increase from 2021. Excluding revenue from divested businesses and we continue to maintain industry leading gross margins. 2022 was a year of strategic investment as we deployed our strong balance sheet in a disciplined manner. In addition to the acquisition of Gateway, we have invested in product innovation, core infrastructure, automated customer journey and new talent. We remain confident that these investments will materialize in a way that complements our current strength and sets us apart from our peers. Turning to Slide 24 now to discuss our financial guidance. As released today, we are providing financial guidance for both the full year and first quarter of 2023. While we don't anticipate offering quarterly guidance on a regular basis, going forward, there's been significant volatility in the capital markets recently and we felt compelled to provide additional transparency with respect to Q1. Therefore, we believe our top-line growth assumptions for the year position us well to reach our long term revenue goal of 10% growth in 2024. We have successfully maintained strong gross margins throughout our transformation and plan to continue our focus there this year. Going…

Thanks, Brian. On Slide 26, we have laid out time lines for most of the initiatives discussed today on the call. On the commercial side, as Mark discussed, a renewed focus on sales operation and execution is setting up for a great 2023 and 2024. Nicole touch on the improved perceptions of Myriad Genetics among healthcare providers, not just because we are starting to really listen to our patients providers, but because we are taking action and showing our customers that we are listening. We're also excited about a number of differentiating features of our Liquid and MRD technologies, and how we can uniquely position them in a fast growing market to win share. With so many ongoing organizational changes happening at once, we remain focused and confident on reaching profitability in Q4 of this year. Balancing growth and innovation while keeping an eye on profitability is no small task and it's certainly not something that can be measured quarter-by-quarter. Before we move to the Q&A portion of the call, I want to summarize five key takeaways on slide 27 in the context for our strength and strategic advantages. First, we are growing volumes consistently every quarter and we know how to get paid for our test. Second, pricing for our products is stable. And we have visibility into pricing moving forward. Third, we have a disciplined cost management structure as we work to maintain our strong gross margins and manage our CapEx, which specifically targets opportunistic investments, which we've laid out today in a previous event this year. Fourth, we are committed to effective capital deployment in key areas that will improve the customer experience, including new tech enabled tools and commercial capabilities, product innovation and our labs of the future. Threat and finally, our growth catalysts are clear as we continue to elevate our products to their full potential and roll out new solutions like FirstGene, MRD and liquid, and opportunistically look for strategic tuck in acquisitions like Gateway Genomics. All of this reinforcing our position as a trusted, differentiated lab with specialized expertise, best-in-class quality, a strong scalable commercial engine underpinned by data, research and technology with leading industry margins and business management. With that, I'll turn it back over to Matt for Q&A.

Thanks, Paul. And as a reminder, during today's call, we use certain non-GAAP financial measures. A reconciliation of the GAAP to non-GAAP financial results and a reconciliation of GAAP to non-GAAP financial guidance can be found in our earnings release and under the Investor Relations section of our website. Now, we're ready to begin a Q&A session to ensure broad participation. We are asking participants to please ask only one question and one follow-up. Operator, we're now ready to start Q&A.

Thank you. [Operator Instructions] Our first question comes from the line of Tom Stevens with Cowen and Company. Your line is open.

Hi, all. Thanks for taking the question here. Just on your 2023 guidance, I was hoping you could walk through some more of the puts and takes on that, kind of areas that could prove a little conservative, given it's a bit below your long run plan? So if we start there and I'll go one more follow-up.

Yes. Thanks for the question. I think we didn't give product specific guidance in the long-term guide, but I would say that we're focused on the top end of the guidance range, which is at 11% growth year-over-year and that's in line with our long-term plan. So we feel good about really where we start -- where we're starting the year and the momentum that we've seen in Q4.

Yes. And that's primarily driven by continued adoption and growth in MyRisk, our hereditary cancer tests, which again beginning in Q3, we really started to see an inflection point as Mark pointed out. That continued momentum in Q4 and how that's continued here in Q1. That is clearly the product where we have the right to win and both share But I think the market is also opening up just generally for most providers and we're seeing that I think in many of the reports over the last couple weeks. GeneSite, we continue to think we'll grow at 20% plus. And so those two products will continue to lead, but I'd underscore the growth in MyChoice and Prolaris. And the turnaround we've seen in our prenatal products, particularly over the last couple of months, so lots of different products contributing to the growth. And again coupled with disciplined cost management will get us to the guidance and hopefully to the upper end of the guidance, as Brian said, as we get through the next few quarters.

Great. That was very, very useful. And just a quick follow-up. Have you got any - I mean, what kind of expectations for any newer tests have you got contemplated in your guide today?

There's nothing in 2023 for our new guide at all. We have soft launches for new products in the back half of the year. We'll beta test some of those, whether it's first team. We do have a nice pipeline of conversations happening on the biopharma side. Both for our existing companion diagnostics as well as a lot of interest in MRD for research. But there's roughly $20 million budgeted for that all in and there's upside to that going into 2024 as well. But the new products are not contemplated to be big contributors to 2023 guide.

Great. Thanks so much. I'll hop back in the queue.

Thank you.

Your next question comes from the line of Matt Sykes with Goldman Sachs. Your line is open.

Hey, Matt.

This is Prashant [ph] on for Matt. Congrats on the quarter. Could you tell us more about the competitive landscape of mental health psychotropic tests? And where particularly GeneSight stands within that? How much market share is it capturing to date?

Yes, sure. I'll be happy to comment on GeneSight. So within the GeneSight space, GeneSight has been the market leader and has continuing to pull away and maintain its market leadership by over 50% market share. We do have competition from LabCorp Quest and other individuals that have tried to enter the market. But we continue to execute and continue to make GeneSight the best test in the market and easiest to use for our providers.

Got it. Thank you. And one follow-up. How are you thinking about the revenue contribution of FirstGene in the back half of 2023 post launch? And then if at all any thoughts on how you expect that revenue contribution to progress in 2024 and 2025?

Well, modest contribution in the soft launch in Q4 with some investment. So there'll be front end investment there that's contemplated in the guidance, some of which is already in our product management process that we've instituted is starting to happen. So as I said before, diminimus contribution in Q4 to the FirstGene launch. But real excitement about the differentiation of that product particularly around ease of use to be able to collect the sample from maternal mom and be able to get both NIPS test and carrier screening test. It's just great science making it more accessible to more patients. So, we'll talk more about that later in the year, but -- so we think it will contribute to 24% and 25%, but certainly won't be a meaningful contributor in 2024, probably more so by 2025.

Great. Thank you.

And your next question comes from the line of Derik De Bruin with Bank of America. Your line is open.

Hey, guys. This is [Indiscernible] on for Derik. So, maybe I wanted to start off HCT volumes came in pretty strong. Can you provide any color on how you plan to manage some of these continuing competitive pressures in the market into 2023? I know we talked about the PLA code last quarter. How should we kind of think about that into 2023?

I'll start. So, we have more visibility on MyRisk, hereditary cancer tests than pretty much anything. The fact that we got a MyRisk specific code because of the strength of the MyRisk technically. And the fact that MyRisk comes with risk score, which gives the PRS test with more about future risk for breast cancer is differentiating as Nicole said, we've expanded the panel size there. We actually think without calling out anybody specifically, the competitive landscape there has gotten easier, but the bigger opportunity quite frankly is for unaffected women that meet guidelines and you're seeing that in our women's health channel. We're also growing in where we gave enough share over the years to our competitors for affected patients. So, we think we have a lot of visibility and to continuing to grow MyRisk in 2023 and would you add more?

Yes. The only thing I would add to that is exactly what Paul stated. When we look at our volume increases in Q4 and the momentum into Q1, we're seeing it coming from all three segments. We're going deeper with our current customers and we're adding new customers that are both by expanding the market, as well as stealing from the competition. So nothing else to add there other than we feel really good about how the team is executing and really about the way the new Myriad is showing up for our customers.

Great. Maybe one more looking forward. So, on MRD, it's a test with a lot of investor focus. It's good to see the Research Use Only launch in the middle of 2023. How do you kind of think about the timing of the full commercial launch versus some competitors that might have been in the market a little bit sooner?

Yes. I mean, it's probably the biggest opportunity for precision medicine as we see it. And as Dale presented at JPMorgan, we really do think that we'll have a very competitive product. Our analytical validation work has gone well. We'll be announcing shortly the clinical work that we're doing with a couple of academic medical centers on the clinical validation. But we have a lot of interest on the research side already, and that coincides with our other biopharma work on companion diagnostics as I mentioned before. So we're looking for 2023 to start that research, contribute more meaningfully in 2024, and then a commercial launch in 2025. I think that's a realistic timeframe. And I do think some of the great work some of our competitors have done have paved the way quite frankly for us to be able to get reimbursement. And that's a great expertise of the company. Our proudness may be overstating a little bit. But one of our strength is clearly reimbursement, regulatory and working through FDA and other channel. So it's a big market. We think there'll be room for many of us. And quite frankly, I'm really focused with some of our big customers on not only the clinical piece, but how does it get integrated into practice? And how do we make a good case for payers that in the course of treatment they should pay for it. I think this industry has struggled with not answering those last two questions, and those are front and center of our product management deliberations. We've got to have a really good product, but it has to be something that fits into the clinic, into the course of treatment and payers need to be able to see the value proposition as well in terms of their total cost of care.

Got it. Thank you.

[Operator Instructions] And your next question will come from the line of Jack Meehan with Nephron Research. Your line is open.

Thank you. Good afternoon. I had a two part question on GeneSight. So first, Can you talk about the sequential trends in the quarter? Look like volume and revenue were down a touch, haven't seen that move in volume in a while. So just was there anything notable there? And then second, Paul, you talked about 20% plus growth kind of long-term. Is that inclusive of 2023?

Yes. I mean, there are quarterly variations for different reasons. And so, I -- look, we have to report out things quarterly, but we don't run company that way and the healthcare system doesn't really work that way, Jack. So we are plus 20 start for the year through January and February on volume. Deductibles affect things in the first quarter. There's a lot of moving parts in the first quarter. A lot of volume that we got to push through the labs. So our folks are working overtime and weekends to make sure that the demand is actually gets by the end of the quarter reported. So there's a lot of work happening. And keep in mind that this is all happening while we're trying to stand up our labs of the future and all of that and keep turnaround times at an industry 5.5 days. But there is nothing with GeneSight other than upward momentum. And we're making great progress on the coverage front as well and we'll probably be able to talk about that over the next couple of quarters.

Superb. Okay. And then, wanted to ask about the implementation of the PLA code this year. So Medicare seems relatively straightforward in terms of the reimbursement rate. Was curious on the non-Medicare side, whether they're you've seen any impact on collections there where you might have been previously under some other method?

Zero impact there. We think it's all supportive of our payer market strategy. And so far good dialogue with United and other payers across all of our product portfolio. And so, as we said at the beginning of the call, we've got really good visibility within that 3% to 5% range on ASP. And as we've talked about today, increasing confidence in our 10% top line growth number, and hopefully better going into 24%, but certainly feel more confident about that. After a little bit of a bumpy Q3, we're right back on track and January and February, point to further evidence of that. And as Bryan said, confident, we can reach profitability and operating free cash flow by Q4.

Got it. And Bryan, is there any color you can share in the forecast for CapEx this year? Thank you.

Yes. Thanks, Jack. Yes, I think the only thing I would add is just that, obviously, you've seen capital increase in the back part of last year as we've been building out our laps of the future. We expect to take possession of those laboratories around the middle part of the year. So we would expect for those to be completed substantially in 2023 and for 2024 to return to more of a normalized sort capital type year.

Yes. And for – to add to that part of the savings, as we think about 2024 and 2025, rents coming down. So, as we move out of more expensive space and into more cost effective, more efficient space, where we can automate. And it's going to take a lot of work to maintain these 70% gross margins, but that's where the automation and the process improvement will come from.

And your next question comes from the line of Mason Carrico with Stephens Incorporated. Your line is open

Hey, guys. This is Jacob on for Mason. Thanks for taking question. I'll just ask a quick one here and apologize if it was covered earlier in the call. I've been hopping around a few calls at night. So looking at that profit, looking at this year and into 2024, how should we think about the proportion of growth in GeneSight revenue coming from volume growth versus ASP moving higher from expanding coverage or reducing the no pay rate?

Yes, that's a great question. Again, we expect to continue to grow at 20% on the volume side. And we do expect ASP improvement as we improve coverage over the course of the year and again, lot of more updates there. But we're absolutely making progress with a couple of payers that we hope to be talking about here soon. But we haven't really broken out. But maybe in a couple of quarters, we'll be able to give you some more details around that. But ASP is stable, volume is growing and it's dropping to the bottom line. That lab is incredibly efficient. DaVita and the team there do a great job. Our COGS there are really tight and we're trying to get more productivity on the sales force. So our customer acquisition cost is coming down with more inside sales and the digital conversions that we're getting that Mark talked about. So, lots of leverage on GeneSight, but clearly more coverage on no pays drops to the bottom line. So that's some we're focused on across the portfolio.

All right. Got it. Thanks guys.

Thank you.

And I hope that does conclude the question and answer session for today. I'll turn it back to your presenters for closing remarks. Thank you very much.

Okay. Thanks, operator. 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.

And that will conclude the call for today. We thank you very much for your participation. You may now disconnect.