Conference Transcript - MYGN 2026-09-10

Speaker 1

Thank you, everyone. Welcome to the third day of the Wells Fargo Health Care Conference. I apologize. I'm losing my voice, getting a little sick, so bear with me. But this is the end of the Life Science Tools and Diagnostics portion of the conference. And we're happy to have Mariette here, CEO of Sam Raha, CFO Ben Wheeler. and we'll kick it off here. Starting with 2Q, revenues were down 11%, ASP is down nine. You had to reduce guidance. So what changed most dramatically in the quarter and what were kind of the key takeaways for investors?

Speaker 3

Hey, first of all, Evan, thank you very much for having us. Pleasure to be here. Let me start with this. The two primary drivers, both that led to our Q2 performance as well as the guidance change, are continued softness in a prenatal testing volume and average revenue per test there, as well as pressure on reimbursement for hereditary cancer testing. Now, as we shared on our prior earnings call, we have activated and are actively working on a number of initiatives that address these challenges, as well as I think we'll set up Myriad to be in a much stronger place. Let me just kind of highlight some of these, and these are the things that really are some of the key takeaways for investors. One, though we do it rigorously on a regular basis, we are taking a strategic view of our portfolio, both products as well as business segments, to really determine which parts of our product portfolio in the business we believe really fit in this next phase of Myriad going forward. And what I can tell you is we feel like we're making good progress with this, and we hope to be able to share within the next couple of months actions that will significantly strengthen the financial position of Myriad going forward. We've also talked about an initiative called Project Ascend. It's an internal name. This is really about modernizing how we operate the company. It's about organizational as well as process optimization, all with the intention of how can we better serve customers, increase our win rate while becoming more productive, more efficient in scaling for the future. And we expect to share more on this also coming up probably on our next earnings call. Now, one of the bigger challenges that I mentioned that we faced in Q2 is our average revenue per test for hereditary cancer testing. So we have a number of initiatives here to address that. The first one's related all the way from contracting to billing and collections, focused on the revenue cycle management. I think you'll probably have some more questions. Ben can get into that a little deeper later. We're also taking a mid- to long-term view to be proactive with all our major pairs and the things we can do from a policy approach there as well. Now, all that being said, the key takeaway for investors is that we understand the challenges. We're all over it. We're making good progress. As well, the guidance that we've provided we think is adequately conservative. For example, we have not factored in any improvement in our average revenue per test in the second half. We haven't factored in any contribution from the additional salespeople that we've added, any of the new products, any of those things. And also, traditionally, if you look historically, I should say over the last several years, more than 51, almost 52% of our revenue is in the second half of the year versus the first half. But what we've done in setting our guidance is really you can multiply the first half by two, and that's close to the midpoint of what we've said. So we believe we're adequately positioned there on the guide and all these other things and the progress we're already making and seeing, I'll say, gives us pep in our step.

Speaker 1

Great. That's super helpful. So, I mean, during the quarter and on the call, you did talk about friction on the reimbursement front, prior authorizations, medical record requests and denials. And as you mentioned, there was particularly in hereditary cancer and prenatal testing. What was it about now? Like why 2Q and what actions can you realistically improve realized reimbursement?

Speaker 2

Ben? Absolutely. So from a timing standpoint, really, if I were to opine on why Q2 is the time that we encountered additional revenue cycle management friction, I'd be speaking on behalf of organizations that drove that friction, so it would just be a guess. But what I will say is, as Sam mentioned, we identified the challenge and we have deployed two initiatives that we've made very good progress over the last couple of months on. The first initiative we call the Revenue Cycle Management Optimization Initiative, and I think about that initiative as driving exceptional tactical execution as it relates to the RCM process. Making sure that we're evaluating the people, the processes, the tools in order to remove friction from the process where we're billing payers and ultimately collecting and driving better yield on those collections. So again, we went to work very quickly. This is an initiative where we've done a lot of work and there's lots more work to do, but we're really pleased with the progress that we've seen. The second initiative is related to my risk reimbursement, and I view this more of a strategic initiative that will have medium and longer term implications as we partner with payers, LBMs, other constituencies that will help us drive alignment between the way doctors are practicing medicine, using technology and services or tools provided by laboratories like us, that is ahead of where medical guidelines recommend use in some cases and then also where medical policies from a payer standpoint are aligned. And so, you know, we have an opportunity to drive alignment across technology, medical policy, and medical guidelines. And this initiative is really focused on that.

Speaker 1

Great. Yeah. I mean, so you talked about these mitigation efforts. I mean, how much of this is, you know, self-help stuff inside your control versus really dependent on these handful of payers changing their behavior?

Speaker 2

Yeah, so there's a number of things that we can do to drive different outcomes. Now, when you look at the revenue cycle management landscape, particularly for our industry, changes in payer behavior are something that happen all the time. And that's something that will continue to occur. What that means is we need to be positioned to identify those changes and pivot quickly so that we can eliminate that friction as quickly as possible and make sure that we collect on those tests that we're performing. And so there's absolutely things that we can do and we're actively working on. When I talk about evaluating people, process, tools, capabilities with that revenue cycle management optimization initiative. It's focused on addressing friction today, but it's building capabilities so that we can pivot to changes in the future as well.

Speaker 1

Great. I mean, you talked about these, I think, the three different mitigation efforts. One of those is to align medical policy with clinical practice.

Speaker 3

But you also said that the reimbursement pressure is not a result of changes in medical policy can you just kind of help us understand that yeah yeah sure yeah to clarify the the specific pressures from a handful of pairs that you know were the primary drivers of what we saw in q2 that they are not about medical policy medical policy is intact however we were talking about medical policy because with an eye to the future um you know core to what we're doing both our mission and our financial future is ensuring we stay within medical policy and how we can expand access into new medical policies or coverage for additional individuals that takes time uh it takes a lot of effort a lot of engagement so we're just being proactive

Speaker 1

this is more about the the mid and longer term opportunity to actually drive value right um i mean you didn't you didn't mention the guidance in your initial remarks um how you know first half, second half, no improvements in ASPs from 2Q. So no contribution from recent product launches and Salesforce. So how would you contextualize kind of the upside and downside scenarios from your most recent update to the guide?

Speaker 3

Yeah, let me start here and then I'll hand to you, Ben. I'll just frame by saying, listen, we understand it's very important for us to earn back trust from investors. And a important step for that is to be very prudent and thoughtful of the guide that we provide and really minimizing downside risk. And that's what we've taken into account.

Speaker 2

So Sam's touched on a couple of these things that I'm going to double click on, but just because of the implications or the way I think it's important to think about them as it relates to guidance, I'll provide some additional context. So first off, historically, when you look at myriads revenue you know the second half of the year is typically 52% of the year there about if you look at our updated guidance and you take h1 and you multiply it by two you're gonna be a couple million dollars high of the midpoint so that alone lays the framework for for being appropriately conservative when you think about seasonality or progression through the year. Sam also talked about the assumption around ASP as it relates to H2. We have assumed that the suppressed ASP that we experienced in Q2 persists. I just shared details around various initiatives that we've been focused on driving different outcomes. We've been pleased with the progress. And history suggests that when we identify opportunities to improve ASP because of a payer's change in behavior, we oftentimes are able to drive some change in the outcomes. So we've done good work, we've worked quickly, and we're pleased with the progress. The guidance assumes that we're not going to see benefit from that. And then from a volume standpoint, the assumption around adding additional headcount to our sales force is not factored in. We've talked about adding approximately 100 salespeople to our sales force in the first half of the year, it takes quarters for salespeople to be efficient and effective when you compare them to their peers. There's an assumption that there's no improvement or benefit from these incremental sales folks when we look at H2. So those things give us additional confidence in the appropriate level of conservatism in that updated guide.

Speaker 1

Gotcha. So you're saying that the guide does not assume any revenue from these additional salespeople or it's just that they're less efficient than um i would frame it the latter it assumes that that the level of efficiency that we saw in q2 persists great thanks um maybe moving to hereditary cancer um my risk continues to do to do well on the volume front um what's driving this momentum and really how much more runway remains from you know the sales force um EMR integration and just broader guidelines about? Yeah.

Speaker 3

Yeah. Well, first of all, just acknowledging what you said, we've been pleased with, you know, the volume growth that we've been able to drive with MyRisk for several quarters in a row. And there's a number of factors that, which I'll just enumerate here in a moment, which give us the confidence that there's a lot of runway to come to continue this really high single digit, low double digit for the duration. I'll start with the fact that if you look across the total hereditary cancer market opportunity, it's $7 billion, $5 billion or so of that is in the unaffected part of the market, which is less than a third penetrated. So that's just a great setup for a market and opportunity that exists. Specific to Myriad on the next one, we see the benefit and the differentiation related to some new products we put on the market, particularly as it relates to the unaffected side, we launched just earlier this year an updated polygenic risk score, we call it polygenic risk score, which helps individuals or patients and providers understand the level of risk of developing cancer over a five or a 10 year period. That's differentiated, that's having traction. Now, along with that, a decision we made, we enacted as of April one. So we took what used to be a women's health sales team and we bifurcated it. And so now we have a dedicated sales organization calling on OB-GYN and other docs related to unaffected. Focus drives results. And, you know, that's another reason for optimism. We're also driving programs to further activate the market because it is still, you know, to be grown through, we've talked about breast cancer risk assessment programs. We have other activation campaigns we've done, for example, using a TV star from Netflix to drive awareness. And we've seen interest from that, you know, coming directly through through marketing leads. I'll finally just add, you know, this is on the affected side, but still overall for my risk. You know, we also benefit when there is guideline changes or new guidelines that are added. And just in 2026, there's been a number of them, including now for anyone who has ovarian cancer. It is recommended that hereditary cancer testing is done to determine the course of care. and maybe even more significantly in terms of numbers for individuals that have both colorectal cancer and gastric cancer. Any age, you know, any stage of cancer, now it's recommended. And these are both new, net 2026. But these are the sort of drivers that we believe will continue to allow us to grow and have, you know, strong performance in respiratory cancer.

Speaker 1

Great. Moving to MRD. You've expanded into colorectal and renal breasts. You submitted to Moldex. What are kind of like the early learnings from early access sites? And what kind of things are you doing ahead of the broader launch next year?

Speaker 3

Well, yeah, just to restate for those that aren't as familiar with it, We launched what we called alpha for breast cancer in the March time frame. Middle of the year, we expanded colorectal and to renal cancer. We are to measure our success and also prepare us for a broader launch. There's a number of things we're measuring, including test utilization, customer experience, and our internal operational efficiency. I'll tell you in terms of the first one, we have seen that we've also been very intentional about how many sites we go to. before we have Moldex and reimbursement to manage our financial profile, if you will. But, you know, we're in more than a dozen sites. We have more than that in actual number of users. We've seen not only a growing number of actual orders, but we've seen many of these doctors now come back for different increasing number of patients. I think that's a really good sign. In terms of customer experience, what has really been called out is the quality of our tests, which is a great thing. You know, we've gotten some input, which we're using to improve other elements of ordering and the reporting, but this is exactly what you do in this phase before commercial launch. Internal operational efficiency-wise, you know, we're pleased with the robustness of the assay. We have a very low failure rate, which is a differentiator overall, you know, internally and externally. But, you know, we are also working on how do we become more efficient? How do we batch? How do we do other things in advance of the launch? And I'll tell you, we're on track. You know, we submitted to Moldex, you know, at the end of July. And our expectation we had shared at the beginning of this year remains that first half of 2027, we should get reimbursement for breast.

Speaker 1

We should also be submitting for colorectal and renal towards the end of this year, early next year. um speaking of reimbursement um how are those discussions um evolving across the different uh tumor types um and kind of what are the milestones i think you touched on some of them um that investors should be focused on uh to kind of track that progress yeah yeah i mean i'll start by saying our our primary focus in terms of reimbursement at this point has been medicare You know, you start there, though we're in earlier stage discussions with, you know, private pairs as well.

Speaker 3

You know, again, as I cited already, Moldex submission and ultimately approval is the important gating factor there. I won't repeat those timelines. So we're making progress as we've intended. I will also share that, you know, along the way, important drivers, which will, you know, help both in the reimbursement but in actual adoption. And I think also tied to getting into guidelines for us and as an industry are more publications and papers. We have collaborations, you know, and active studies, you know, in the teens. So the number of programs are doing across colorectal, renal, breast, ovarian, endometrial with collaborators, including MSK, MD Anderson, Hospital East in Japan and others. And we expect to have these updates on data coming out at, you know, important, like, San Antonio Breast Cancer Conference, ASCO GI in January, AACR, the next ASCO, and so forth. So, you know, those are the publications and the dates that will support the Moldex timeline that I've just outlined.

Speaker 1

Great. Early on, you talked about Ascend. As you've kind of gone through that process, realizing it's kind of early stages, it sounds like you are attacking it very quickly. What are the largest opportunities you've found? And when should these benefits become more obvious to investors?

Speaker 3

Yeah, let me start, and then, Ben, you can add anything you'd like. You know, again, to recap, Ascend is a multifaceted initiative that really is intended to make us, you know, more productive, more efficient, and scalable. We're taking a view, this is a multi-year program, but we expect the initial benefits absolutely in 2027, but also there will be other actions that we take that will go into 2028. I also want to just be clear that we see benefits in two major buckets. There is a cost-out related component of this, which is important, but there is also revenue synergy by doing things better. So for each amount of work that we do, there's more quanta value that's generated. and the areas that we're working on include, you know, all the way from, you know, how we run commercial to revenue cycle management to other factors, Ben, what would you add?

Speaker 2

Yeah, only that similar to how I described the RCM optimization initiative, looking at people, process, tools, capabilities, that's the same way that we're thinking about different components of the Ascend initiative as well and so part of the value comes when you look at process streams across the organization instead of focusing on optimizing commercial or optimizing RCM but understanding how they interact and how choices in one area have downstream impacts and we're keenly focused on making sure that we're taking a holistic view again to drive scalability across the organization through this initiative.

Speaker 1

Right kind of related I mean you also talked about the kind of the review of the whole portfolio um and as you're doing that you know i mean it sounds like you're also there's an increased focus on uh cancer cancer care um so what criteria oh my god where it is in my voice um what criteria will determine um where to invest partner divest or reduce spending yeah great question so um yes so you're absolutely right As part of the instituting a regular review cadence after I became CEO last year, the first most important decision was to declare that the Cancer Care Continuum is the most important opportunity for MIRI going forward.

Speaker 3

And therefore, our resources, our focus, and funding really have been disproportionately placed there. As we look forward, the sort of questions that are, you know, the criteria that are helping us advance our work include what is our best way to maximize value for patients, for health care providers, and for investors? What are relationships that we have with customers that we can leverage more broadly across a broader suite of products? What are the capabilities and assets that we have that we believe will allow us to compete and be the rightful owners of different components? What are the things that we have, you know, either within the company or other things we can do to drive increased profitability? You know, these sort of criteria and questions, you know, together with a bias towards action is what gives us the conviction that we hope to be able to share some of the important decisions we're making within, you know, the next couple of months. And again, the most important criteria for all of this work is how do we set up Myriad in a transformative way to be financially a lot materially stronger. And when I say stronger, I mean in terms of revenue, in terms of profitability, in terms of gross margin, which is part of profitability, and as well as liquidity. Would you add anything to that, Ben?

Speaker 2

Yeah, maybe only that when we think about the portfolio assessment, we also think about the Ascend initiative driving scalability. How do you leverage capabilities within the organization to create an efficient, more profitable organization?

Speaker 1

No, I mean, it sounds like you're taking a very strong look at the portfolio. And yeah, I mean, stay tuned, right? I mean, it sounds like it's very important. You guys are very focused on this. So it sounds like that's the message. Moving to prenatal, volumes, you know, were down 9%, remain below expectations. How much of this is attributable to sales force timing, competitive losses, and what would you, what would indicate that the business has stabilized for you guys?

Speaker 3

Yeah, well, first I'll acknowledge that, you know, our performance, our volume performance in prenatal has been disappointing for us and it has underperformed. We've stated it's, you know, a very big part of the reason we underperformed as well as our updated guidance. Now, many of the factors that you stated are contributing to that. I mean, clearly we believe competition is intensified, particularly between two of the leading providers here. And, you know, it presents a strategic challenge for us because, again, the cancer care continuum is the most important part for us. So we want to be measured the level of resourcing and other things, including how many sales reps we have there. That's been a challenge. You know, there's been just other things along the way that you've mentioned, including, you know, when we bifurcated our sales organization, many of the more tenured individuals really wanted to. We allowed them to go with hereditary cancer testing, which is, you know, important, you know, more important to us, if you will, than prenatal. So those things and changes are taking time. We will know in terms of how do we know that we're getting back to where we want. Well, first, we will lessen the level of decline that we're seeing on a quarterly basis. Two, we'll see that the number of new customers are adding with the volume coming from them is starting to balance out the losses we've seen from other important customers. And finally, of course, the volume overall, it stabilizes and we start to grow. I will point out again, though, as Ben and I have already called out, you know, our updated guidance is based on prudence and not counting on improvements to the prenatal health volume, that it will persist as it was in Q2.

Speaker 1

Gotcha. You speak of your competitors. We spoke to one of them yesterday. And one interesting thing that they talked about, they distinguish THE MARKET BETWEEN HEALTH CENTERS, SO LARGER ORGANIZATIONS WHERE YOU HAVE MULTIPLE DOCKS, YOU KNOW, HIGH VOLUME VERSUS MORE INDIVIDUAL COMMUNITY CENTERS, AND THEY TALKED ABOUT, YOU KNOW, THEY'RE HEAVILY GEARED TOWARDS COMMUNITY CENTERS, AND I WAS JUST KIND OF I'M CURIOUS, YOU KNOW, IN TERMS OF YOUR BUSINESS, WHERE YOU LEAN TOWARDS?

Speaker 3

YEAH, THE DISPROPORTIONATE FOCUS THAT WE HAVE AND THE PRESENCE IS IN THE COMMUNITY. IT'S OB-GYN, IT'S DOCS THAT ARE A PART OF THESE PRACTICES, RATHER THAN ACADEMIC CENTERS.

Speaker 1

GOT YOU. A BUNCH OF NEW PRODUCTS FOR YOU GUYS. FIRST GENE, NOW COMMERCIALLY LAUNCHED, WHAT'S THE EARLY FEEDBACK? where is the product winning accounts and how should we think about reimbursement there during the ramp?

Speaker 3

Yeah, let me start with this and then Ben, you can talk about the reimbursement part. Yeah, first sheen, as you likely know, is an innovative product which, you know, all in one is a screen that allows simultaneously from one single blood draw, the mother's status as well as for the fetus, single gene, chromosome as well as RHD status and you know what differentiates it is it has industry it could be done at industry leading eight week gestational age as well as the overall turnaround time rather than using a reflex methodology that the total results come in within 14 days so we've seen we're pleased with the the intro I mean it's it's only been launched for about a month I think on the market so it is early days commercially but what we're hearing in terms of feedback is particularly, you know, the combination of the RHD status together with the information. The other information on the fetus is really useful, how it's all received at one time. We have seen customers return to try first gene, customers that we had lost, if you will, over the last year due to some other challenges. So, you know, that's pleasing, but it's early to tell the level of impact. And again, we're not counting on first gene impact in a material way at all within our guidance. Maybe a little bit on the reimbursement side.

Speaker 2

Yeah, from a reimbursement standpoint, we bill first gene with existing codes.

Speaker 1

And then when you think about the economics around first gene, the ultimate average revenue per test that we're receiving is higher than what we see on the legacy prenatal portfolio and then from a cog standpoint it's it's consistent so ultimately first gene tests are accretive to gross margin and profitability for the organization yeah helpful um moving at uh gene site um volumes grew uh but you had this age receivables right right off um how should you know investors think about this about payer progress um and kind of What is a, you know, go forward sustainable growth rate for the franchise?

Speaker 3

Yeah. I mean, I'll start by, you know, reminding everyone that, you know, coming off about a year and a half ago, a policy decision that UnitedHealthcare made, you know, we determined as part of our new strategy and the focus on the cancer care continuum, that for us, success in mental health for our gene site test, you know, the measure of that is being able to grow at or above market. And in a way that we're able to, you know, do that with focusing a very deliberate managed level of resourcing and attention. I think the team has done actually a really nice job on that. And if you look at the underlying growth and volume for now, six quarters in a row, it's been really exactly where we want it to be. And when you, you know, this is the nature of the business. You're going to have AR and other out of period things that you have to factor in. But when you take the organic ASP or the revenue per test within the quarter, it's very strong. It's been really good. And I'll tell you that we continue to have the, we're the leading test in the market. We have extremely high NPS and we still, we're benefiting. And I think there's a lot of head tailwind to benefit from the biomarker state legislations that are going into effect now more than 21 states. Would you add anything to this?

Speaker 2

Yeah, just in connection with our Q2 earnings, when we talked about the update to guidance, when we think about specific to gene site and the aged receivable, the assumption is that the ASP that we saw inclusive of the aged receivable write-off in Q2 would persist in Q3 and Q4, but that won't persist into 2027. And then much like Sam said, if you isolate for the age receivable, we have seen significant improvement in ASP for gene site over the last six, eight quarters. Much of that is driven by our payer markets team doing fantastic work in states where biomarker laws have been passed, engaging with plans in those states and then securing coverage.

Speaker 1

None of those coverage wins are significant in isolation but in aggregate we've seen really nice gains okay so your second half guidance for ASPs for gene site assume a ten million dollar receivable that won't repeat so it's just natural it will be naturally higher but yours your guidance does not assume that is that what you're saying so essentially in Q2 we talked about a headwind of about four million dollars for gene site.

Speaker 2

We would assume a persistent headwind in Q3 and Q4 and either collect or write it off by the end of 26 is what that amounts to.

Speaker 1

Okay, that's helpful. Polaris, new product with AI. What's been their early response to that, particularly in surveillance? And how does this, you know, kind of upgrade, improve your competitive positioning?

Speaker 3

Hey, listen, I mean, you know, first of all, now that we have Prolaris plus AI on the market for a few months, you know, it is the only test that brings together the power of molecular plus AI. And for us at Myriad, we're also, you know, positioned uniquely in that we can put that together with hereditary cancer testing. We're starting to see some connectivity with MyRisk because that can better inform the course of treatment. We can also provide, you know, precise tumors So you have the genomic interface there. So all of that, I think, is going to help differentiate. You know, it's early days still, but we've seen a lot of interest, particularly for those individuals. You know, when you look at a score on a molecular basis, there are individuals, men, that fall into a threshold where, you know, a doc is uncertain exactly what to do. The AI really helps increase the confidence of if an individual should continue active surveillance or have a surgical resection. So that is driving interest. And we think this is going to be an important, you know, this offering to allow us to start gaining share again. You know, we have an industry headwind NCCN guideline related to, you know, recommending biomarker testing before you do biopsies. But overall, I think this is going to be a good guy for us.

Speaker 1

Right. We got about two minutes left. Maybe I'll end it with, you know, you guys suspended your profitability guidance with your guidance update. You have Ascend, which we talked about, portfolio review, which sounds imminent in terms of an update there. You know, in the meantime, how are you guys prioritizing cash, preservation, debt obligations, and also investments in the business through 27?

Speaker 2

Yeah, so our Q2 total liquidity at the end of Q2 was $190 million. We're very comfortable with that level of liquidity. And as Sam talked about, our focus on prioritizing investments to drive growth and success in the cancer care continuum, that's exactly how we prioritize our dollars. You also touched on the fact that when you think about the initiatives that we're focused on, we absolutely believe that they will enable us to drive profitable growth as an organization. And so just to sum up, very comfortable with the $190 million of total liquidity at the end of Q2, we recognize what opportunities we have to drive changes in the organization. We're pursuing those.

Speaker 1

Great. I mean, we have 30 seconds left. I'm not going to ask something else, but do you have anything you want to leave the audience with?

Speaker 3

Yeah, no, I just summarize, again, the key takeaways, I would say, for investors is we understand our challenges. We're taking on head-on. We're making, we believe, really good progress on the initiatives related to that. And, you know, the guide was prudently set. So, you know, the progress we're making and, you know, both in the quarter as well as on the initiatives really believes that we're on the path to transform the company and giving us conviction.

Speaker 1

Great, we're out of time. Thank you so much.

Speaker 3

Thanks for having us.