Myriad Genetics reported fiscal fourth-quarter results and provided guidance for 2014 that were both ahead of expectations. Longer term, analysts expect margins to decline as a result of the lower-gross-margin myRisk Hereditary Cancer test and higher marketing costs in the face of new competition. The advancement of next-generation sequencing into the clinical arena, technology risk from competitors, and continued pricing pressure pose significant challenges to the firm.
Overall, results for the fourth quarter exceeded our forecasts. Total sales were $174.1 million, an increase of 31% over last year thanks to generally strong results across all product lines and business segments. The primary revenue driver, the molecular diagnostic testing division, increased 30% year over year to $166.1 million, with growth of 51% from the women’s health group to $65.8 million being being the main contributor. BART testing growth of 310% to $18.8 was also particularly impressive. Operating margins improved from 37.9% from 35.6% last year as a result of efficiencies in SG&A and R&D spending. This resulted in earnings per share for the quarter increasing 58% to $0.53, from $0.34 last year.
For fiscal 2014, management provided guidance for revenue of $690 million-$710 million (13%-16% growth) and earnings per share of $1.87-$1.94 (6%-10% growth), which topped our expectations. Myriad’s top line will be bolstered by the launch of three new molecular diagnostic tests (myRisk Hereditary Cancer, myPath Melanoma, and myPlan Lung Cancer); however companion diagnostic revenue is expected to decrease to $25 million from $31 million because of the completion of the firm’s biomarker discovery partnership with Sanofi. Less robust bottom-line growth will be impeded by a higher tax rate and approximately $10 million in increased legal spending from recent patent infringement litigation.
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