Thank you for standing by and welcome to Myriad Genetics' First Quarter 2024 Earnings Conference Call. I would now like to hand the call over to Matt Scalo. Please go ahead.

Thanks, Latif, and good afternoon and welcome to the Myriad Genetics First Quarter 2024 Earnings Call. During the call, we will review the financial results we released today, then afterwards, we will host a question-and-answer session. Our quarterly earnings release was issued this afternoon on 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; Scott Leffler, our Chief Financial Officer; Sam Raha, 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 Investors 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 Securities and Exchange Commission, specifically in 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 or forward-looking statements. I will now 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 of our strong first quarter performance, provide an update on the progress that we continue to make accelerating profitable revenue growth. First, I want to thank my Myriad teammates and our provider partners for their continued support and commitment to advancing our mission and vision to make genetic testing and precision medicine more accessible and helping people take more control of their health. We now turn to Slide 4 to talk about our highlights for the quarter. We continue to deliver on our commitment to shareholders as we achieved double-digit revenue growth in the first quarter compared to last year, reflecting both volume growth and ASP improvements across the portfolio. Our focus on profitable growth continues into 2024 as we reported positive adjusted EBITDA and we're close to breakeven on an adjusted EPS basis in the first quarter. We're excited about the ongoing execution of our near-term strategic priorities that are driving growth and efficiency across the enterprise. We are seeing early wins in both Oncology and Women's Health, related to recent market dislocation, as we continue to reinforce our Oncology offering with Precise Tumor and soon, Liquid, currently being integrated into our new labs. This morning, we announced a reorganization of our international operations that I will provide more detail on as well, as well as the progress standing up our 2 Labs of the Future. We continue to accelerate investments in clinical validation studies and EMR integrations. A large part of our transformation journey has been addressing our clinical validation data deficit. In 2024, we will continue to go to ASCO and ACOG with more publications, abstracts and posters than we've seen in a long time. Mark and Sam will speak for these and other strategic priorities on the call as well as important updates on upcoming product launches and data reviews. Next slide, please. Our strategic areas of focus are directly aligned with our customers and patients and the pillars we believe will drive long-term growth, innovation and profitability for shareholders. Every provider survey we do and every customer interaction I have only point back to five things that providers and patients expect from us. Our customers want tests that have strong clinical utility and validity as well as a lab partner with the most comprehensive testing menu that meets their needs. Our customers care about fast turnaround times and tests that do not place unnecessary burdens on their staff. They also want tests that are affordable for their patients. Our four strategic pillars address customer needs, which I will discuss on the next slide. Top-tier science and innovation are at the foundation of Myriad Genetics. We deliver products that are clinically validated and use real-world clinical settings. We've invested heavily in technology-enabled lab operations, automated, scalable and cost-effective labs that are compliant with FDA Quality Management System requirements. Our team continues to make it easier to do business with Myriad, from testing new platforms to results delivery, supported by our ongoing investment in EMR integrations, our new universal order management activities and our patient provider portals. Lining these pillars with expertise across regulatory compliance and revenue cycle management, we find ourselves in a position to serve our customers at scale and product. Next slide, please. Today, we announced the reorganization of our European operations to better align company resources to our domestic opportunities while continuing to serve key biopharma partners and patients outside the United States. As part of the reorganization, Myriad has signed a definitive agreement to sell our EndoPredict business to Eurobio Scientific. We will license the right to continue to produce and sell EndoPredict as an LDT in the United States as part of Precise Oncology Solutions. We will also license Eurobio the right to sell Polaris in vitro diagnostic kits outside the U.S. The strategic rationale for this move is part of our continued effort to accelerate profitable growth while supporting our biopharma partners more efficiently. This also allows us to better position Myriad to grow its other global businesses more effectively through strategic partnerships including licensing and distribution agreements. I would also call out that this does not affect Japan, which has been and remains an important market for Myriad Genetics. The transaction is expected to close in the second or third quarter of this year. Last quarter, we announced the acquisition of Precise Tumor and Liquid from Intermountain Precision Genomics. Sam will provide an update on the integration and the associated labs to our new Salt Lake facility, which is making steady progress. Together, these transactions represent very capital-efficient ways to optimize and enhance our Oncology portfolio. These transactions are expected to be accretive to earnings and cash flow in 2025. I will close with comments on the FDA's final rule regarding regulation of lab-developed tests. While we share many of the concerns raised by the industry regarding the use of a medical device framework for this industry oversight, we do view the final rule as generally positive for Myriad, as all of our clinical tests meet CAP, CLIA and New York State requirements. We have a strong quality assurance and regulatory affairs team as well as a long history of compliance with FDA quality panels. We plan to be proactive in working with the FDA to ensure that our products continue to meet the new regulatory requirements. Sam will cover this in more detail later on the call. Now, I'll turn it over to Mark.

Thanks, Paul. I will begin on Slide 9 to talk about our commercial teams. We continue to invest in tools and analytics that enable our commercial teams to better segment their territories and identify clinicians that could benefit from Myriad's testing portfolio. We have seen positive results from the use of these analytic tools as the commercial teams continue to drive new and sustainable revenue growth. In the second half of 2023, we realigned our commercial sales force incentives from volume-based targets to revenue-based targets. Overall, the shift better aligns our commercial teams' goals with the company's focus on reducing no-pays. We believe that the 12% revenue growth and positive ASP trend in the first quarter in part reflect our investment in these analytical tools and the realignment of our commercial team incentives, and our ongoing focus on revenue cycle management, which Scott will talk about in more detail. Most importantly, these efforts position us well for continued positive momentum throughout 2024. Next slide. Myriad continues to lead with differentiated insights offered by our MyRisk RiskScore Hereditary Cancer Test. In the first quarter, hereditary cancer testing revenue grew 16% compared to last year, with volumes up 9% year-over-year. We believe this consistent growth reflects the combination of our reputation as a leader in this area, the commercial team doing a better job driving home our differentiated messaging, improving relationships with genetic counselors, along with early competitive dislocation. Looking forward, we are excited about the omnichannel opportunity to drive MyRisk growth across all of our businesses, and we continue to accelerate our investment in clinical validation studies and EMR integration to address recent market dislocation with the most clinically differentiated hereditary cancer test on the market. Next slide. As mentioned, no part of our portfolio has more upside potential than our hereditary cancer customer. Just for the unaffected population, there are an estimated 50 million women in the United States that meet guidelines for hereditary cancer testing. We are making good use of the analytical tools as mentioned previously to better identify and serve those patients. Additionally, through partnerships with LifePoint Hospitals and SimonMed, we are expanding our reach even further. In the first quarter of this year, our Women's Health team grew our hereditary cancer testing revenue by 12% compared to last year, while our Oncology team grew hereditary cancer testing revenue by 20% over the same period. Our ability to serve more patients in both the unaffected and affected markets reflect these consistent results and there is so much more upside for us to realize. Next slide. Here at Myriad, we focus on ways to expand access to genetic testing. MyRisk with RiskScore is one of the best examples of how we are doing just that. RiskScore is a component of MyRisk that expands its benefits for people of all ancestries and is the only polygenic risk score in breast cancer validated for women of any demographic. Not only is this a major differentiator for MyRisk, but RiskScore is an example of our commitment to expanding access to genetic testing and increasing equity for care for all people. Next slide. MyRisk has been in the news a lot recently as more people become aware of the importance of genetic testing in the preventative care market. In today's patient-centric health care ecosystem, many patients want to drive their own health care journey, which is why we have invested in resources like myGeneHistory for patients to determine their breast cancer risk online for free and why we continue to provide free genetic counseling to anyone who takes a MyRisk test. Myriad is not just a lab partner; we are also a Women's Health advocate whose objective is to drive insights that help people take control of their health and increase access to genetic testing. I will now turn to Slide 14 and talk about our Prenatal business. In the first quarter, our Prenatal revenue increased 22% and volumes increased 9% compared to last year, reflecting market share gains and ongoing initiatives to improve ASPs. Our commitment to support providers negatively affected by the market dislocation continues to drive volume for this business, while our disciplined approach in adding quality accounts to the franchise has resulted in strong ASPs for both Prequel and Foresight. We see even more upside for this business as we await ACOG guideline expansion this year. We believe the expanded guidelines will improve patient health and expand the market opportunity for carrier screening, and our clinicians are already ordering larger panels from us. Once ACOG moves, we believe the rest of the market and payers will adapt as well, which will likely result in ASP improvements, considering the large number of expanded panels that we currently run that are often not reimbursed. We look forward to ACOG guideline updates and the launch of Foresight Universal Plus later this year. Next slide. In the first quarter, GeneSight revenue increased 21% year-over-year as we reported approximately 124,000 tests in Q1. ASPs improved both year-over-year and quarter-over-quarter in the first quarter, reflecting improved revenue cycle management activities. I want to end on Slide 16 and share what is in the pipeline for our products. I would remind investors of our upcoming launch, Foresight Universal Plus expanded carrier screening test in the context of anticipated ACOG expanded guidelines. This new test will feature an expanded panel as well as more efficient and cost-effective workflows. These guideline expansions would also support our multiple Prenatal screening test, FirstGene, which we hope to launch later this year. We continue to adapt to our Oncology offering with the addition of Precise Tumor and Precise Liquid from our recent acquisition. Sam will speak towards the progress we are making integrating both these tests into our new labs. We are making tremendous strides in the development of Precise MRD. Last quarter, we announced the research collaboration with the National Cancer Center Hospital East in Japan to use our highly-sensitive Precise MRD test. We look forward to speaking more on MRD at ASCO this year as well as Myriad's other areas of research included in the seven abstracts accepted by ASCO across HRD, polygenic risk scores, germline registry studies and our tumor-informed approach to whole genome sequencing.

Thanks, Mark. Let me start on Slide 18 and provide an update of our Labs of the Future program. A quick reminder that the overall objective of this program is to drive innovation and operational excellence to continue delivering high-quality testing results at scale that meet regulatory requirements while shortening turnaround time in support of our ongoing focus to improve patient provider experience, all of which continue to differentiate us from other labs. As you may recall, we completed construction of our new lab facilities in South San Francisco and Salt Lake City in 2023. Highlights from Q1 of this year include completing and passing clinical inspections at New York State in Salt Lake City, by the state of California and CLIA in South San Francisco. We also completed the validation of Prequel, our NIPS assay, in South San Francisco and completed the first stage of bringing up Precise MRD assay workflow in Salt Lake City. Our plan for South San Francisco remains to complete the move-in, workflow validation and full-scale Prenatal lab operations by the end of 2024. For our new Salt Lake City lab, we remain focused on completing the move-in process as well as the validation of sample processing for most of our Oncology assays by the end of 2024 and running those assays at scale by the end of Q3 in 2025. We are also in the process of integrating recently-acquired Precise Tumor, Precise Liquid tests into our new Salt Lake City facility. Let me talk more about that now on the next slide. You may recall that we completed the acquisition of select assets of Intermountain Precision Genomics last quarter, including lab instrumentation, workflows and Precise Tumor and Precise Liquid assays, which together, these two are genomic profiling tests for therapy selection that are part of our overall Precise Oncology Solutions portfolio. Our immediate focus has been on retaining employees associated with the acquisition as well as testing continuity for providers as we move these operations to our new Salt Lake City facility. I'm happy to share that we have seen great engagement from our new team members and that turnaround time has already been reduced under our direct oversight. We've advanced our lab transition planning and started moving some instrumentation to Salt Lake City within the quarter. We expect to start processing Precise Tumor samples in Salt Lake City in Q3 of this year as we also advanced our work on Precise Liquid. And by the end of 2024, we expect to have completed the lab move entirely and to fully be operational for sample processing, reporting in Salt Lake City. Next slide, please. Building on what Paul shared, last week, the FDA released its final rule regarding the oversight of lab-developed tests or LDTs. Adding to Paul's comments earlier, our current view is that this finalized version of the rule is more favorable than the preliminary guidance. We believe that Myriad is in a good position to work within the new framework. First of all, the rule provides a continued path for LDTs approved by New York State's Department of Health to serve the market without requiring immediate additional analytical or clinical validation through the FDA. And again, all of our on-market tests meet CAP, CLIA, New York State requirements. Second, we have a strong quality assurance, regulatory affairs organization with over a decade of meaningful experience collaborating with the FDA on regulatory submissions, including two FDA-approved tests, myChoice CDx and the BRACAnalysis CDx. We've also built and maintained a robust quality management system, which is the foundational element of all the patient samples that we process and report on. While we are optimistic about the FDA's new rule, we are also aware that the FDA intends to review labeling associated with LDTs and could review the sufficiency of analytical and clinical validation data for LDTs that are approved by New York State. Finally, I have personal experience running a business that is regulated by the FDA. And since joining Myriad, I've been working closely with our teams to prepare and plan for increased FDA oversight and how we can use the LDT rule as a competitive differentiator for Myriad. Turning to the next slide. I'd like to end with an update on select operational highlights from the first quarter. We are proud to have a high level of organizational engagement across the company, reflected in a single-digit employee turnover level. In terms of market penetration, health care providers are among our most important constituents. Their satisfaction with Myriad Genetics led to NPS or Net Promoter Score of 74 in the first quarter, up from 70 for the full year 2023, a figure that has continued to improve over the past few years. This is a testament to the focus and investments we continue to make in the patient provider experience. In terms of efficiency and productivity, this quarter, we increased commercial productivity by 11.5% compared to the last quarter as a result of the continued execution of our commercial transformation that Mark and his team are leading, including improved sales planning and process optimization. With that, let me turn it over to Scott Leffler, our CFO. Scott?

Thanks, Sam. I'll start on Slide 23. We delivered a strong overall performance in Q1, led by 12% revenue growth year-over-year. This growth was primarily driven by hereditary cancer testing, Prenatal testing and pharmacogenomics and speaks to internal initiatives such as an improving customer experience and continued execution by our commercial team. Mark provided commentary as to how the commercial team, with enhanced analytical tools, are addressing health care provider needs and more effectively generating revenue growth. We believe these activities, in addition to ongoing progress in revenue cycle management, were important drivers of our Q1 ASP improvement, up 2% over the year-ago period. Historically, ASPs in the first quarter tend to be soft due to resetting of deductibles and other adjustments at the beginning of each year. So the fact that we are starting off 2024 with such a strong ASP performance bodes well for the rest of the year. Next slide. On Slide 24, we revisit some of the revenue cycle initiatives discussed at our September 2023 investor event. We have made progress on multiple fronts, including ramping up EMR integration, improving prior authorization, automating our billing process and expanding payer coverage. Myriad has seen a number of payers recently expand coverage of average risk populations that could benefit from our tests. First quarter revenue reflects approximately $3 million from a single payer who expanded coverage of these average risk patients, as well as other immaterial favorability from out-of-period adjustments. We are pleased with this continued progress against our long-term goal to reduce our no-pay rate, complementing the volume-generating potential of the business. Moving to Slide 25. I want to highlight our financial performance by quarter. First quarter adjusted gross margin of 58.5% improved 80 basis points compared to last year, overcoming headwinds associated with the IPG lab and Precise Tumor and Liquid assets, which were acquired in February of this year and are still being integrated. First quarter 2024 adjusted OpEx of $139 million increased sequentially from the fourth quarter of 2023 but decreased by 4% year-over-year. As reflected in our full year 2024 guidance, we expect our full year OpEx run rate to be higher than the Q1 amount as we ramp up spending to accommodate growth and strategic development. Our strong revenue growth and margins in Q1 drove significant improvement in overall profitability, including an adjusted EPS loss of only $0.01 versus a loss of $0.21 in the first quarter of 2023, as well as $4 million of positive adjusted EBITDA compared to a loss of $19 million in the prior year period. Regarding financial flexibility on Slide 26, we finished Q1 in a solid position with approximately $104 million in cash, cash equivalents and marketable investment securities and have $41 million of availability under our credit facility. The first quarter is typically a high cash burn quarter due to seasonal factors. However, we saw a meaningful year-over-year improvement in adjusted operating cash flow with an outflow of only approximately $9 million in the first quarter of 2024 versus an outflow of $25 million in the first quarter of 2023. Importantly, adjusted operating cash flow is expected to be positive for the remainder of 2024. On Slide 27, we reiterate our full year 2024 financial guidance for revenue between $820 million and $840 million, representing annual growth between 9% and 11%. Our strong Q1 performance positions us well to meet or exceed our revenue guidance range, but I would also note that there are areas where we will increase spend to accelerate actionable commercial opportunities in a changing competitive landscape to further drive the top line that Mark touched upon. An example of that accelerated spend would be our EMR integration numbers, where new customer wins are often dependent on our ability to meet the IT requirements of prospective customers. Overall, we are optimistic regarding the business trends and the company's ability to grow at or above industry growth rates. We remain comfortable with full year gross margin rate between 69.5% to 70.5%, with adjusted operating expense growth between 5% and 7% and adjusted EPS between breakeven and $0.05. Now, let me turn the call back to Paul.

Thanks, Scott. We continue to build on the pillars of long-term growth and profitability that delivered our strong results in 2023 and the first quarter of this year. Our clinically differentiated products supported by technology deliver value in real-world clinical settings and enable early detection and better treatment decisions for providers and their patients. Our modernized labs and commercial engine are examples where investments in automation and advanced technology are yielding improved workflows, faster turnaround times and reduced operating costs. All of this reinforces our position as a trusted differentiated lab with specialized expertise, best-in-class quality, and a strong, scalable commercial entity underpinned by data, research and technology, with industry-leading margins and business management. We continue to energize the enterprise around our shared mission and vision to make genetic testing and precision medicine more accessible, helping people take more control of their health and to enable providers to better treat and prevent disease. I'd like to now turn it back over to Matt for your questions.

Thanks, Paul. As a reminder, during today's call, we use certain non-GAAP financial measures. The reconciliation of the GAAP to non-GAAP financial results and the reconciliation of GAAP to non-GAAP financial guidance can be found in our earnings release under the Investor Relations section of our website. Now, we're ready to begin our Q&A session.

And our first question comes from Matt Sykes of Goldman Sachs.

Congrats on the quarter. Maybe Paul or maybe Mark, just talk a little bit about the runway that you see for future market share gains in both hereditary cancer and Prenatal. You made some comments that it's sort of just at the beginning, so would love to know kind of where you see that runway and how long? And then how sticky are the new relationships that you're building? I'd assume if you get those relationships, it's probably easier to keep them over time, post-winning them. I just want to get some color around that.

Yes, Matt. Well, look, first, it's the early phase of this, particularly for large accounts, these institutions take a while to make changes. I would say what's happened, and Mark will elaborate here, is that we're in the room now, certainly with two or three other competitors and people are revisiting their choices. And as I said earlier, we're really focused on the things that they tell us they care about: ease of use, clinically-differentiated products. And that's where EMR and the other point-of-care things really matter. But you're absolutely right that these relationships I think will be stickier. I mean, you know I come from a large hospital system world. And once these institutions make changes without the disruptions that we're seeing now, it's very hard to kind of get in. Now that being said, genomic testing is not #1, 2, 3 or 10 on the list of a hospital system's priorities, but we're pretty excited. I think that expectations should be, though, that the business we hope to sign in the back half of the year certainly could give us a lot of momentum going into '25. But you really won't see the, what I think is a big opportunity, to fully come through until '25. But Mark, why don't you take it.

Yes, I would agree with that, and thanks for the question, Matt. I think, not to speak over Paul here, I think the benefit is we are at the table. Myriad is perceived as best-in-class. And so I think we are at the table. These providers, even though there is dislocation, they've got lots of other priorities. And so we think of it as it's going to take a couple of quarters for us to really accelerate. But as Paul mentioned and as I mentioned during my comments, for the MyRisk business with EMR integration and all the investments we are making, that really suits us well for the back half of the year and going into 2025.

Great. And then maybe just as my follow-up, a related question. Perhaps, again for you, Mark, just given the change in incentives for the commercial team to revenue from volume, does that help salespeople target the right customers? I'm sure in this market dislocation, there's a number of customers that might not be economically viable. And this change in incentive, does it focus your salespeople on attracting the right customers? And what has the reception been from your commercial team to this change in incentive?

Yes, Matt, you are correct. When we implement those changes, it allows our team to concentrate their efforts. We are not excluding any specific patient or provider; rather, it helps us focus. In line with Scott's comments, our initiatives in revenue cycle management ensure that orders are accurate, providers understand the guidelines, and they are informed about payer coverage. By collecting as much information as possible at the time of ordering, we can achieve increased Average Selling Price. This level of focus hasn't been present in this space before. I completely agree with you. Furthermore, the sales team has fully embraced this approach. Their compensation depends on it, and it also influences how they allocate their time in the field, ensuring they focus on areas that will benefit both the company and themselves.

We are in a strong position now. I've had discussions with the sales teams, and they recognize that sometimes sacrificing a small volume can lead to significantly greater revenue. We've become much more aligned, and you can see that shift occurring in this quarter as they align with the revenue cycle management initiative. As Mark mentioned during our various national sales meetings, we've received no resistance since we've effectively helped them embrace this change. I believe you will see the positive impact of this over the year and it will accelerate further in 2025.

Our next question comes from the line of Douglas Schenkel of Wolfe Research.

I want to start with a high-level question. Scott and Sam, it has been a few months since you joined the company, and I’m interested in your evaluation of the firm and your teams. What aspects have improved, and which ones have not? I would love to hear about your early insights and your thoughts on how you are beginning to take charge in your leadership roles at the new firm.

Sure. I'll start off and then hand it over to Sam. First of all, thanks very much for the question. I could not be more thrilled to be at Myriad, but also with everything that I've seen and learned, both about the company itself and the momentum that it has, but also in terms of the overall broader market opportunity that we see in front of us. I just feel privileged to have joined the company at what is a very special inflection point where so much great work and so much great investment has already been done. And I think you can see a lot of the fruits of that effort in our results from Q1 but also to now see the landscape in front of us in terms of the ability to accelerate growth throughout 2024 and going forward. So if there is any learning that I've had in the last three months at the company, it is how extraordinary the progress that has been made but the momentum also that we have going forward.

Thank you, Scott. I appreciate your question, Doug. I agree with what you mentioned, Scott. Coming from other larger companies, I can confidently say that our team is on the same level as any of them. Our focus, as Paul highlighted, is on understanding the patient first, the science, and ensuring operational execution to provide timely and quality results. All of these elements are crucial for the next phase of our journey. It has taken time, and it wasn't initially apparent to me from the outside, just how much transformation this company has undergone in various areas over the past two years. There is still much to gain from that. Now, with Scott and I joining this fantastic organization, we have the chance to elevate our growth. I genuinely have no regrets; this is precisely what I was hoping to see. I'm excited to be here.

And Doug, I'd only add that Dr. George Daneker has just been an incredible addition, an oncologist, physician who led a large health systems oncology business. I mean he has had such an impact just over the last couple of months and Dr. Dallas Reed on the Women's Health side. So the company build, the team build, is happening at many different levels. And these two guys have just been great. They're freeing me up to do lots and lots of other things and we saw a little bit of that this quarter with some of the strategic stuff. So I couldn't be more pleased with our new partners here.

That's fantastic. And maybe I'll just try to sneak in one more on an unrelated front. Regarding the LDT final rule, I appreciate what you shared in your prepared remarks. For whatever it's worth, my take was this actually kind of turned out to potentially be a pretty big advantage for Myriad. I'm just wondering if you guys by and large agree. And as we look forward, recognizing this is going to take a few years to phase in, does this change anything as you think about how you develop assays, how you go to market, how you think about things competitively? Again, I think this increases barriers to entry for others. And this may even boost your position as a consolidator. So I'd love to get any comments on where you agree or disagree with my initial thoughts on this.

Yes, I'll start, Doug, and Sam can add. I agree, Doug. I mean I think that this is going to be very difficult for subscale operators. We have been preparing for this though for years, quite frankly. When we began to develop our plans for Labs of the Future, it was not just a real estate play. It was an automation strategy. It was to have a quality management system with full knowledge that this was coming. We feel lucky, and that the investments we've made over the last decade in those quality management systems now can be leveraged both in our existing products, modifications to our existing products and future products. So clearly, we think this is going to be a competitive advantage. And the capital markets taken together with this, I think it's going to put a lot of pressure on folks, whether they're a health system, up-and-coming lab operators or others. Sam's doing a great job of pulling the team together and he can talk a little bit about every single one of our products is going through product management with respect to these rules that we've been working at for a while.

Yes. I mean I concur with everything Paul said. I mean he really answered your question, Doug. But just to build on what Paul was saying, we have been preparing for, very diligently going through every single product we have on market and that we're preparing to launch, some of the things that Mark talked about, with an eye to all those critical elements, right? Not only quality management systems, but what are the studies that need to be done, what is the labeling approach and all doing that while we meet the most important thing, and you heard Paul and myself talk about over and over again, right? We have to make sure the quality standards are there, that the tests are relevant, the quality is there, that the turnaround time is there, and we make the tests accessible. So I think this is going to be, you know...

I don't know how folks that are outsourcing their lab operations can get to 70% gross margins and do it consistently and meet these new requirements all at the same time. So I think it will be quite a challenge for some.

Our next question comes from the line of Dan Brennan of TD Cowen.

Congratulations on a strong quarter. You had a solid start to the year and maintained your full year guidance. You mentioned being prudent, but could you elaborate on it? It seems most of the increase was organic, with $3 million attributed to prior period benefits. Is there anything that might hinder the continuation of this strength? I'm curious why you haven't raised the guidance now.

We agree, Dan. We're just putting one foot in front of the other here. It's a really strong start to the year, particularly on the ASP side, that we see running through the year. And we certainly can build on that, hopefully exceed guidance as we go through the rest of the year, but just didn't see clear to get ahead of ourselves at this point.

Got it. And then maybe on the hereditary cancer side, the Oncology side really beat our forecast. Women's Health was strong, but more in line. Just could you elaborate a bit more on kind of how much the benefit was from the share gains that you're seeing from the dislocation versus some of the ongoing initiatives that you have? And presumably, there's still a lot more share gains ahead given the size of that business that went bankrupt. So just a little more color on kind of what you saw this quarter, teasing it out and kind of what's assumed in the guidance going forward?

Yes, Dan, this is Mark. And I think we called it out, that in Q1, most of it was just our ongoing blocking and tackling. I think we're always winning share back and forth. So we would expect, as we mentioned earlier, that any incremental gains would happen in the back half of the year.

Our next question comes from the line of Puneet Souda of Leerink Partners.

I just want to clarify, in the European EndoPredict business, if there was anything for that in the guide? And just wondering, I know you have reiterated the guide, but just wanted to clarify that point. And then I have a follow-up.

Yes. No, I would say that both of the strategic transactions, we sort of are incorporating within the guide. And so and being able to reposition the portfolio with the additions of Precise Tumor and Precise Liquid, reorganize our European operations, become much more efficient in the way we were serving that market pretty extensively. And to put a little more cash back on the balance sheet. So these are both very capital-efficient transactions and whether it's on the revenue or the profitability side, within our guidance for '24 and accretive to earnings and cash flow in '25. So we are really excited at this market and we are picking and choosing our opportunities, and we think there'll be more in terms of bolt-ons and strategic acquisitions going forward.

Got it. Okay. And then just following up on that, I mean when you look at the portfolio optimizations that you have done, the focus on Precise Liquid and expansion into therapy management and also MRD, sort of, Paul, just walk us through how you think about further either trimming of the portfolio or, as you said, potential expansion, other strategic options that you might pursue, given sort of where the state of the market is right now in diagnostics.

Yes. When I pushed George and the physicians, and we're certainly going to ASCO with these questions, like what are the key precision benefit tools you need to treat a cancer patient, breast cancer patients, et cetera, hereditary cancer always comes up first, somatic second, Liquid third, and MRG, interesting new novel technology fourth. So we're just very excited over the next couple of years, we're going to have a place where you can get those primary key tools to treat and monitor the progression of patients in one place, in an EMR with consolidated reports. And I think that is going to be a big differentiator from others who are trying to string together this, and all of a sudden, hereditary cancer seems to be interesting. When I got here, everybody thought it was a dead bounce kind of thing. So we kind of like the portfolio position. That being said, Puneet, we are investing in innovation. We're investing in building more studies as we referred to on the call. That's a place where we have to play catch-up, going to ASCO and ACOG with more studies and more readouts than we've had in years. And we'll certainly be watching the marketplace for great client innovation that fits within our portfolio. But we're going to stay pretty disciplined on the indications that we're focusing on and the channels where we think we have leverage.

Our next question comes from the line of Andrew Cooper of Raymond James.

Thanks for the question. Maybe just first kind of sticking with the OUS transaction, can you maybe just give us a little bit more of the thinking on sort of circling the wagons here on the U.S. opportunity and what our takeaways from that should be? Is it, hey, we're just really excited about the opportunity here and don't need to worry about the European efforts in the same way we have before? Like what should our takeaway really be on that decision?

Yes. I would say that the thesis is generally the complexity is a killer of growth and accountability. And operating in Europe is both complicated and expensive. Every single country has its own requirements. We were going to be forced to set up satellite labs everywhere, to go through their regulatory IVDR process, and the juice just wasn't worth the squeeze. For the Eurobio folks, that's where they live, that's where they do business. They're great at kits. And so for us to continue to serve through distribution arrangements in our LDT operations in Salt Lake, to continue to expand in Japan, where we have a growing and very profitable business. And yes, resources, we have to be very efficient. So investing in studies, investing in EMR has higher returns on bringing in this new business, new opportunity we see in terms of consolidating the market, where Europe is a much longer term and a more complicated process. So that was really what went into the strategic decision making.

Okay, that's helpful. And then maybe just shifting to the P&L a little bit. Would love a little bit of flavor, I know you shared a little bit, but on some of the ASP dynamics maybe across some of the different areas of the portfolio. And then also just if we think about the ramp in OpEx through the year, can you give us a breakout of how much of that we should think about is true kind of new product growth that you're trying to drive and new efforts versus sort of maintaining the growing base that you have?

I'll take the second one and let Scott take the first one. So we're continuing to try to get productivity gains across all OpEx, whether it's commercial, in the support center and trying to repatriate dollars to R&D, to clinical studies, and to IT, where we know we have very quick returns on investment. So we expect to stay within that 5% to 7% growth. And I'll just remind everybody, over the last couple of years, we've done exactly what we said we were going to do and we've done that again this quarter, and you're really starting to see the leverage of this operating model this quarter. And so we maintain that we can manage within that 5% to 7%. But within that, we may push the 7% growth in OpEx, but a higher percentage of that, call it, 10% to 15% growth in the R&D and tech spend, while the other areas is really wages and benefit cost that are in the 4% to 5% range all in. So that's how I would think about that. No big investments beyond that 5% to 7% range in our OpEx. You'll see some ramp-up over the course of the year, and just a great job by the team starting this year in terms of actually beating budget in the first quarter. So you will see a little bit ramp each quarter as we invest getting ahead of the launches and the studies that we're ramping.

Yes. So I'll take that, your first question on ASP. And I'll just remind you that on the last earnings call, we did talk a little bit about the fact that looking back on 2023, our overall ASP performance for 2023 actually was a little bit worse than we would typically expect. And so coming into the year, we already saw that there was an opportunity to really perform even better than we would typically hope for, just given the ability to recover some of what was lost last year, along with incremental organic improvement from the various initiatives that we've talked about. But really, I would say that it's just been an extraordinary success so far this year. And appears more or less across the board, in the individual product levels, you see outsized ASP gains. And when you look at the blended performance, where I think we called out a 2% contribution from ASPs. In some ways, a high significance, the ASP improvement has been at the individual product level because you have a little bit of product mix that is impacting that blended number, but really what we're seeing almost across the board is much greater than that 2% improvement in ASP. And that's something that we believe certainly is sustainable and based on the number of initiatives we continue to have at play, something that we can build on moving forward.

Our next question comes from the line of Rachel Vatnsdal of JPMorgan.

So first, I just wanted to dig into seasonality and Q2 expectations. Last quarter, you provided guidance for Q1 on top and bottom, so I was wondering if you could do something along those lines for Q2 as well. So first up, how comfortable are you with the Street at around $200 million of revenues and roughly $0.01 of loss per share? And then given some of the moving pieces that you highlighted today, ranging from LDT to some of the product launches and competitive dynamics, how are you thinking about the various segments performing in Q2?

So that was a lot and fast. So first, we did not give Q1 guidance and we're not giving Q2 guidance. I think directionally, the Street is a pretty good place in terms of where our estimates are for Q2, obviously building on our Q1 success. There's nothing that we're seeing in the estimates for Q2 that trouble us. I would encourage folks not to get ahead of us here. Again, since there's a lot of moving parts, with Labs of the Future and everything else going on. But on individual products, it continues to be a story of continuing to grow. Q2 is typically a stronger quarter for us in terms of volume. And as Scott just said, the ASP tailwinds that we had should continue in the year. So that does bode well for a strong year, even without big market share gains, as Mark said, which will probably happen later this year, quite frankly, creates real and strong momentum going into '25.

Great. And then just as my follow-up, around ACOG, you mentioned that ACOG guideline expansion would be upside later this year if we were to see it. So I guess, what's your latest assumption on when we could see an update from ACOG? I appreciate it's not embedded into guidance at this point. And then I just wanted to talk for a minute about market share regarding 22q. One of your peers out there has more of an opt-out strategy when it comes to 22q testing. I know you guys have focused more on the profitability side and have more of that opt-in type of strategy. So when ACOG eventually expands their guidelines, should we see that positive guideline inclusion? How do you see that playing out from a market share perspective, given that shift between opt-in and opt-out?

We recently published a study on 22q that highlighted the effectiveness of Prequel and its unique position in the market. If 22q is included in the ACOG guidelines, we believe this will provide us with another opportunity to gain market share, particularly profitable share. I want to emphasize that we are focused on profitable growth, which we have achieved this quarter and plan to maintain moving forward. You are correct that the expansion of ACOG guidelines, if it occurs, should increase adoption and enhance average selling price. The launch of Foresight Universal Plus will incorporate the genes we anticipate. We are waiting for the guidelines before we proceed, reflecting our product management strategy. We need to ensure that we are not launching products outside of guidelines and that we have a clear path to payment. The industry is recognizing that launching a product involves not just completing studies and selling to doctors but also managing payment processes and lab efficiency. Striking this balance is crucial in our product management approach. The expansion of the guidelines would significantly benefit us if they are adopted as we expect later this summer, and having 22q included would also be advantageous in that regard.

Our next question comes from the line of Subbu Nambi of Guggenheim Securities.

On reproductive health, a couple of larger players have exited the market. And you clearly have made progress in capturing share, but how are you gaining share without compromising on going forward when the business model of the market tend to really focus on the margins?

Yes. So good question. We absolutely are trying to be there for customers. As Mark said, we see patients. We don't see payer. But that doesn't mean that we are not focused on making sure that we are bringing on business with good margins, that we can do it effectively. So I think what you've seen over the last two years is our ability to grow and grow more profitability, and you saw it the last two quarters. So it is about profitable growth, maintaining those gross margins near 70%. That will fluctuate sometimes from quarter-to-quarter, depending on mix and other factors, but we've stayed in that 68% to 70%. And think we could probably do a little bit better as the year progresses here, but absolutely committed to not just bringing on business to win business, but to bring on business that is profitable and that generates cash flow. If you look at our cash flow conversion and you look at our 50 days and DSOs, we've got to convert billings into cash. And ultimately, I think that's what disciplined businesses need to do and we're trying to do here.

Super helpful. And one last one for me. On MRD, any updates on clinical data? How is the enrollment progressing? And are you still planning a commercial launch in the back half of next year?

Yes, there will be some additional studies at ASCO. We expect to receive results from our M.D. Anderson study this fall, possibly late summer. Additionally, we will be running samples for pharma in July. I believe that in Q3 and Q4, we will have a lot more to discuss regarding our progress with the study, and everything is advancing well. We anticipate receiving another patent soon. While we wish we had made more progress, we are planning to invest in more studies. So far, my understanding from Dale is that the labs are performing very well. Sensitivity is high, and our partners are pleased with the results. As Mark mentioned, we will provide more updates on this at ASCO, including with our partners at M.D. Anderson.

Our next question comes from the line of Mason Carrico of Stephens Inc.

This is Jacob on for Mason. Congrats on a strong start to the year. Most have already been covered, so I'll maybe just keep it to one here. But could you talk a bit about the early traction you're seeing within your Oncology portfolio after acquiring Intermountain? I realize launching Precise Liquid and your MRD offering will be big drivers of this opportunity, but have you maybe seen an increase in the number of docs ordering multiple tests within this segment yet?

Yes, I think we're still in the early stages. The first priority was to ensure proper integration, and Sam and the team are doing an excellent job with that. We've noticed a slight increase, but the significant impact will occur later this year once everything is fully integrated and moving into 2025. It’s not expected to be a major factor in our guidance for this year. However, we do see overall growth in Precise Tumor numbers, not just related to the Intermountain deal. We now have complete control over the P&L, which is starting to make a difference. At ASCO, you'll see a strong push from our Oncology team to prepare for hereditary cancer with Precise Tumor, laying the foundation for Liquid next year and MRD. We're looking forward to sharing more about how our portfolio integrates as precision medicine tools for oncologists, especially for breast cancer and other conditions. We’re excited about the positive feedback we've received from oncologists as we finalize our preparations.

Our next question comes from the line of Michael Riskin of BofA.

This is John on for Mike. I wanted to ask on GeneSight, it's great volume, ASP and did better than our models, so exceptionally well. Could you provide any updates you've had in terms of improving the coverage, like what states and Blue plans are next for you? And what's in your guide versus what can be an upside?

As Scott mentioned, we are currently focused on the fundamentals. We have yet to fully utilize the biomarker components. While we prefer not to specify individual states, we are increasing our efforts in certain states with the Attorney General's office and other entities. We've achieved several substantial wins, with $1 billion here and another $1 billion there. This leads to a significant increase in average selling price and enhanced coverage for GeneSight, as well as improvements in prior authorization requirements and collaboration with CMS and Medicare Advantage plans, along with other industry players. As Scott noted, this has been a comprehensive effort across all our products to find coverage opportunities, even for MyRisk hereditary cancer, where some Blues plans had been lacking coverage. Last year posed significant challenges for us regarding average selling price, but we are now seeing positive results from those changes in coding and other areas. We are optimistic that this momentum will persist, and we will continue to build on it throughout this year and into 2025.

Got it. I understand. On a different topic, could you share your thoughts on the expected volume and average selling price for tumor profiling?

Yes. Tumor profiling was affected because we had significant success in the first quarter of last year with some biopharma partners. This biopharma revenue is what influenced that performance. MyChoice has seen a slight decline as it changed to average risk. Overall, the 17% decrease was largely due to the major success in the first quarter of last year with a few large biopharma partners. The biopharma business tends to be unpredictable. We're not entirely certain when payments will come in; it's always a good business model, but sometimes revenues are concentrated in Q1 and other times in Q3. Nonetheless, we remain optimistic about expanding that business, and that’s a focus for Sam and Patrick.

Thank you. I would now like to turn the conference back to Paul Diaz for closing remarks. Sir?

Thanks, everybody. I think everyone's heard enough from me today. So I appreciate you guys spending time on the call today. I just want to thank my teammates for all their hard work. It was actually a difficult operating quarter. We had a few issues in the lab we had to work through. The team rallied. And again, we're just really pleased with the start of the year. Appreciate all of you participating in the call today and your support. And again, I hope that you are starting to see, as Scott said, just the beginning of the process here of us really starting to grow Myriad Genetics. And I think you can expect and should expect more from us as the year progresses. So thank you all.

This concludes today's conference call. Thank you for participating. You may now disconnect.