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Myriad Genetics Inc (NASDAQ:MYGN)
Q4 2020 Earnings Call
Aug 13, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Myriad Genetics Fourth Quarter 2020 Financial Earnings Call. During the presentation, all participants will be in a listen-only mode. [Operator Instructions] And as a reminder, this conference is being recorded Thursday, August 13th, 2020. I'd now like to turn it to Scott Gleason, VP, Investor Relations. Please go ahead.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

Thanks, Keith. Good afternoon. Welcome to the Myriad Genetics fourth quarter 2020 earnings call. During the call, we will review the financial results we released today, after which we will host a question-and-answer session. If you have not had the chance to review our quarterly earnings release, it can be found on our website at myriad.com. I am Scott Gleason, the Senior Vice President of Investor Relations and Corporate Strategy and on the call with me today will be Paul Diaz, our newly announced President and Chief Executive Officer; and Bryan Riggsbee, our Chief Financial Officer.

This call can be heard live via webcast at myriad.com and a recording will be archived in the Investors section of our website. In addition, there is a slide presentation pertaining to today's call on the Investors section of our website and which will be filed following the call on Form 8-K. Please note that some of the information presented today may contain projections or other forward-looking statements regarding future events and 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 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. With that, I'm pleased to turn the call over to Bryan.

Bryan Riggsbee -- Chief Financial Officer

Thanks, Scott. This quarter, Myriad faced a significant challenge from the global pandemic and its impact on elective testing volume. These times have been challenging, but I am extremely proud of our team at Myriad who are the very best in the industry. They have done an incredible job of rising to the challenge and ensuring that we are able to continue to serve patients and providers that depend on us.

As the quarter progressed, we saw a significant recovery with volume increasing on average to 75% of pre-pandemic levels by the end of the quarter. Importantly, the biggest recovery was with our core Hereditary Cancer franchise. Much of our progress was due to new improvements in telemedicine and direct-to-patient sample collection kit shipments. We will look to continue to build upon these capabilities in the coming quarters.

Importantly, despite the challenges we faced in fiscal year 2020, we generated positive operating cash flow and our cash balances improved from the fiscal third quarter to the fiscal fourth quarter. This is due to the aggressive cost management initiatives taken by the company to mitigate cash burn at the end of the fiscal third quarter. We were excited to receive a new GeneSight LCD covering all healthcare providers licensed and qualified to diagnose the condition and prescribe relevant medications either independently or in an arrangement. And we have since received new GeneSight pricing. The net impact of these changes is expected to be neutral to slightly positive to our GeneSight average selling price and supports our primary care expansion for GeneSight in fiscal year 2021, which I will discuss in more detail later in the call.

Most importantly, I am pleased to have Paul Diaz join us as our new CEO. Paul was previously the CEO of Kindred Healthcare and has broad experiences in healthcare services across many segments. He dramatically expanded the revenue base of Kindred Healthcare during his tenure as CEO and turned the company into a Fortune 500 company prior to its acquisition. Myriad is extremely fortunate to have a leader of his caliber and experience and I look forward to working with him this year on reinvigorating the business strategy, executing on pending catalysts, and positioning the company to exit the year with increased momentum. With that, I'll turn the call over to Paul.

Paul J. Diaz -- President and Chief Exceutive Officer

Thank you, Bryan for that kind introduction. Let me begin by first thanking our Chair, Louise Phanstiel and you, Bryan, who served admirably as our Interim CEO for your leadership and support through this management transition; more importantly, for guiding Myriad through a period of unprecedented change and challenge. I'd also like to thank the entire Myriad team and our physicians and payer partners for their extraordinary efforts to continue to serve our patients through the COVID-19 crisis. I've been inspired these many months by the dedication of healthcare professionals across the U.S. and the Myriad Genetics team specifically for the difference they continue to make in our patients lives and the opportunity we have to make an even bigger impact going forward.

I'm excited to join the talented management team and Board of Directors at Myriad, an organization dedicated to helping patients and physicians identify the risk of developing disease, accurately diagnose disease, assessing disease progression, and aiding in therapy selection. Myriad has a rich history, reputation and powerful genetic tools along with a unique database of clinical and biological information that can empower patients as consumers and stewards of their own health and wellness.

Working with physicians and payers, this information can guide treatment decisions, improve clinical outcomes, and lower healthcare costs. Our company has a tremendous opportunity to transform its business and strategically position itself for sustained profitable growth. We will look to leverage the company's culture and capabilities of innovation and revitalize our approach to the commercial effectiveness of our products and improve our digital sales and marketing capabilities with the customers in mind.

Finally, there are significant opportunities to improve Myriad's financial position and invest in innovation and R&D to accelerate the launch of new products. Thank you for the opportunity to speak with you today and I look forward to reporting back to you on our progress and plans for future growth. Now I'm pleased to turn it back over to Scott for the financial results.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

Thanks, Paul. I'm pleased to provide more information on our financial trends and outlook for fiscal year 2021 starting with our Hereditary Cancer business. Hereditary Cancer revenue in the quarter was $39.9 million compared to $119 million in the fiscal fourth quarter of last year. Looking at the components of revenue change, test volumes declined 58% and pricing declined by 20% on a year-over-year basis. Volume declines in the quarter were largely attributable to the global pandemic. We ended the fourth quarter with test volume levels at 72% of pre COVID-19 baseline from early March and have held relatively steady at these levels through July.

From a pricing perspective, we saw year-over-year pricing declines to decrease from 28% in the fiscal third quarter to 19% this quarter. We expect another significant reduction in the year-over-year pricing headwind in the first two quarters of fiscal year 2021 as we annualize the CPT code transition impact with the impact of our new long-term contracts. As a reminder, this fiscal year, there will not be a negative impact on Hereditary Cancer pricing from PAMA due to provisions in the CARES Act.

Moving on to GeneSight, revenue in the quarter was $8.5 million versus $29.8 million in the fiscal fourth quarter of last year. Looking at the components of growth, test volumes declined by 69% year-over-year and pricing declined by 7% year-over-year. From a volume perspective, we saw the significant impact from the global pandemic. However, this quarter, we annualized the impact associated with the discontinuation of our GeneSight ADHD and analgesic tests which will lead to more favorable comparisons in coming quarters.

GeneSight volume increased to approximately 50% of our pre COVID-19 run rate by the end of June. In the quarter, we had adjustments of $6.3 million related to settlements of payer claims dating back as far as 2012. The identification of these elements was predominantly found by our internal review process. These adjustments negatively impacted Hereditary Cancer and GeneSight revenue and average selling prices in the quarter. These settlements were partially offset by improved cash collections, leading to a net $5.2 million in out-of-period adjustments for the quarter.

Prenatal revenue in the quarter was $16.6 million compared to $25 million in the fiscal fourth quarter last year. Test volumes in the quarter declined 11% year-over-year and by the end of the quarter were close to our pre COVID-19 run rates. From a pricing perspective, average selling prices declined 26% year-over-year. As with the Hereditary Cancer business, we expect Prenatal pricing headwinds to begin to mitigate as we transition through the first half of fiscal year 2021 especially as we hope to see the positive impact of some of our new revenue improvement programs we have implemented specifically for the Prenatal market.

Vectra revenue in the third [Phonetic] quarter was $7.2 million versus $12.2 million in the same quarter last year. Vectra volumes declined 42% year-over-year and pricing improved 2% year-over-year. Vectra volumes in the quarter increased to approximately 85% of their pre COVID-19 run rate by the end of the quarter.

Prolaris revenue in the third [Phonetic] quarter was $4.5 million compared to $6.3 million in the fourth quarter last year. Prolaris test volumes declined by 32% year-over-year due to the pandemic and pricing increased by 5%. Lastly, revenue associated with our Pharmaceutical & Clinical Services business was $9.9 million versus $18.5 million in the fiscal fourth quarter of 2019. The sale of the German clinic led to $6.2 million of the year-over-year decline in revenue. The COVID-19 pandemic did negatively impact clinical trial activity leading to lower revenue from our pharmaceutical partners. However, Myriad RBM was involved in a number of COVID-19 related clinical trials which helped to offset some of this headwind.

I would now like to discuss our financial metrics for the quarter. Adjusted gross margins were 60.9% compared to 76.8% in the third [Phonetic] quarter of last year. Adjusted gross margins were detrimentally impacted by lower fixed cost absorption due to lower test volumes associated with the COVID-19 pandemic and by year-over-year pricing headwinds. Adjusted research and development expense was $16.1 million compared to $19.3 million last year.

Adjusted SG&A expense this quarter was $83 million compared to $112.7 million in the fiscal fourth quarter of last year. Total adjusted operating expenses including cost of goods sold were $135.5 million in the fiscal fourth quarter and declined by approximately $41 million on a sequential basis and $47 million on a year-over-year basis. The expected decline in expense was offset by a quicker than anticipated volume recovery in the business and due to higher than anticipated legal expenses in the quarter.

Adjusted earnings per share were a loss of $0.31 for the fourth quarter. Earnings were positively impacted by approximately $14.6 million in one-time CARES Act stimulus payments from the U.S. government, which were reported in the other income line in the income statement. We ended the quarter with $224 million outstanding on our credit facility and $255 million in cash and cash equivalents. Our cash position benefited from $29.7 million in accelerated payments for Medicare, which will serve as prepayment for future claims.

Due to the uncertainty associated with the coronavirus pandemic, we are not providing annual or quarterly guidance at this time for fiscal year 2021. However, we would like to provide you with some commentary related to our current business trends. We are currently seeing test volumes on average at approximately 75% of normal and expect that to continue for the remainder of the quarter.

This trend has been consistent throughout late June and July. The mix is slightly unfavorable to historical trends with lower priced prenatal products performing better than the average. From an expense perspective, we are expecting our cost of goods sold to increase this quarter, but for gross margins to improve meaningfully into the high 60s given better fixed cost absorption on higher test volumes. We also anticipate a $20 million sequential increase in operating expenses as we have reinitiated direct selling and marketing activities, anticipate higher commission expenses, and are planning on bringing back some furloughed employees, consistent with increased volume.

We are currently in discussions with laboratories, employer groups, and healthcare service providers to provide COVID-19 testing services. As we noted on our last quarterly call, we are working to launch COVID-19 testing. Our Salt Lake City laboratory launched COVID-19 testing and began receiving samples in late July and our Mason, Ohio and South San Francisco, California labs will be up and running in August. We plan to exit August with capacity to run approximately 3,000 tests per day. Our goal with this launch is to help with the pandemic response and to do our part to provide testing capacity to support the national testing effort. We are currently receiving about 250 samples per day and we'll provide an update after the fiscal first quarter.

Additionally, we recently agreed on new pricing for our GeneSight test with MolDx. We're not providing details on pricing, but coupled with the expansion in coverage, we believe the net impact will be neutral to slightly positive to our GeneSight average selling prices. In the fiscal first quarter, we are completing the hiring process of 65 new sales reps with a mix of direct and inside sales personnel. In addition, we are updating our systems and processes to comply with the requirements of the LCD. Given we'll be early in the launch of the expanded sales team and the implementation of a new LCD, we do not expect to see a significant impact on GeneSight revenue from sales force expansion in the quarter, but believe this impact will increase throughout fiscal year 2021.

In terms of Prolaris, we are waiting Medicare action on our reconsideration request for coverage for non-favorable intermediate and high-risk patients. Looking at our Prenatal business, we are not assuming any positive impact from the new guidelines for average risk testing or expanded care screening guidelines. We continue to work with both ACOG and ACMG on guidelines which support standard of care testing within the industry. For the full year, we are currently assuming a gradual recovery in the business as we transition through fiscal year 2021 and while results will vary by test, we hope by the end of the fiscal year, we will have returned on average to a relatively normalized testing environment.

While we are clearly seeing a dramatic impact on our business due to the global pandemic, ultimately, this will be a transient event. We continue to believe Myriad is well positioned to achieve scale within the personalized medicine industry and a number of pending business catalysts could further improve our profitability profile. With that, I'll turn the call back over to Bryan to discuss some of the key business highlights in the quarter.

Bryan Riggsbee -- Chief Financial Officer

Thanks, Scott. Now I would like to discuss some of the key business highlights in the quarter beginning with our progress on GeneSight. This quarter Medicare issued a final LCD covering pharmacogenomic testing, which became effective on August 3rd. There have been some misunderstandings around this LCD and I would like to highlight a few clarifying points. First, GeneSight is covered under the LCD as a multi-gene panel and was one of the listed tests in the coverage articles which were recently issued. Medicare is not requiring us to make any changes to the test in order to receive coverage. As Scott mentioned, we received a new price for GeneSight from MolDX. We believe that the change in pricing along with the expansion of the market available for reimbursement will be neutral to slightly positive to our overall GeneSight average selling price.

Importantly, the new LCD expands coverage with the number of patients who will now be eligible for testing by allowing all licensed healthcare providers licensed and qualified to diagnose the condition and prescribe relevant medications either independently or in an arrangement to order the test. This enables expansion into the primary care setting where approximately 60% of antidepressant prescriptions are written in the United States. Additionally, the new LCD does not require a prior medication failure. Overall, while we are not aligned with some of the language in the LCD around combinatorial testing where GeneSight is the only pharmacogenomic test that has demonstrated the ability to improve outcomes in a large prospective study, the LCD provides us with a broader market opportunity for the product.

Based upon this LCD and coverage from UnitedHealthcare, we are currently implementing our plan to expand GeneSight into the primary care setting. We plan to complete the hiring of an additional 65 sales reps this quarter consisting of a mix of both direct and inside sales personnel. We will strategically position these reps in markets with the greatest opportunity. We also recently initiated a consumer advertising pilot focusing on social media in three key markets in the United States. Based upon the success of this campaign, we could implement further consumer marketing programs on a broader basis later in the fiscal year dependent on the investments generating a positive return on invested capital in the short-term. In early July, we launched a new version of the test collection kit for GeneSight specifically designed for home sample collection.

With the increasing prevalence of telemedicine broadly and in the field of psychiatry, this test kit is an important enabler for physicians who will not be physically present with the patient during their visit. Once the test is ordered by the physician, the patient kit is designed to be easy to use with a clear process and step-by-step instructions. The kit utilizes a buckle or cheek swab the patient can use to collect DNA from the inside of their cheek. After collecting the sample, the patient puts the swab into a confidential prepaid and pre-addressed shipping envelope to return it to our laboratory where it is paired with the healthcare providers order for processing. So far, we have seen high compliance with test kits shipped directly to the patient for the sample collection step. Moving forward, we increasingly see an important role for telemedicine and psychiatry post the pandemic and we are currently working on strategies to capitalize on this trend.

This quarter we also published a new study in psychiatric research demonstrating that GeneSight is superior to single gene testing at predicting blood drug levels. The study evaluated 191 patients from the guided study who were taking either citalopram or escitalopram, which are routine first-line treatments for major depressive disorder. Current clinical pharmacogenetics implementation consortium guidelines only make recommendations for citalopram based upon cytochrome P450 2C19 metabolizor status. However, scientific evidence supports the role of additional genes cytochrome P450 2D6 and cytochrome P450 3A4 in citalopram metabolism. In the study, using the combinatorial approach used by the GeneSight psychotropic test identified more patients with decreased metabolism and combinatorial pharmacogenomic testing explained more variance in citalopram blood levels when compared to single gene testing with almost twice the predictive power.

Moving on to our Hereditary Cancer business, I am pleased to announce that this quarter we published two new important studies on our riskScore test. The first study was the validation of the polygenic risk score component of the test, which evaluates key single nucleotide polymorphisms in a variety of genes known to be associated with higher breast cancer risk. The validation found that the odds ratio for developing breast cancer was 1.47 per unit standard deviation and the riskScore translating to women in the top 1% of patients having a three-fold higher risk of breast cancer than an average risk patient.

The second riskScore study was published in the Journal of the American Medical Association network open and demonstrates the ability of Myriad's polygenic riskScore to improve breast cancer risk stratification in women diagnosed with pathogenic mutations in common breast cancer genes. The study evaluated over 150,000 patients and approximately 10,000 patients who are carriers of pathogenic mutations in common breast cancer genes. The study demonstrated that patients with high penetrant genes such as BRCA1 and BRCA2 did not warrant changes to clinical management. However, breast cancer risks in patients with moderate penetrant genes such as CHEK2, ATM and PALB2 could vary significantly warranting different clinical management considerations.

For example, patients with a PALB2 mutation historically have been assessed to have an approximately 50% lifetime risk for breast cancer. However, after incorporating the data from the riskScore test, patient's risk varied between 26% to 79%. Myriad plans to launch the risk modification for CHEK2 this fall followed by additional genes. Myriad has the only clinically validated risk modification tool and we believe this will further differentiate our market leading hereditary cancer test.

This quarter, we launched a new AI chat bot named Gene to support our Hereditary Cancer business. The chat bot can provide certain information to patients answering over 500,000 questions and interfaces with our leading hereditary cancer quiz. Gene will interactively engage individuals online providing them with education about hereditary cancer prior to taking an online assessment to determine if they may be a candidate for genetic testing. For those who complete the preliminary assessment and meet criteria for further evaluation, Gene will automate a pre-test process that sends an educational link that displays interactive multimedia content and gives the option to start a live conversation with a patient educator who is a certified genetic counselor.

Gene can also assist in finding a healthcare provider. We plan on launching the Gene chat bot for our Foresight and Prequel prenatal test and for companion diagnostic testing in oncology later this calendar year and further integrating this technology into the patient workflow to reduce cost and increase test volume.

This quarter, we achieved a major milestone with FDA approval of myChoice CDx as a companion diagnostic in first-line maintenance therapy in ovarian cancer with Olaparib. We expect subsequent approvals in both Europe and Japan during fiscal year 2021. We are working with our pharmaceutical partners and local governments to make myChoice CDx testing available to European patients. In our Prenatal business, we recently launched our proprietary AMPLIFY technology, which further increases the already market-leading accuracy of our Prequel non-invasive prenatal screening test. The proprietary AMPLIFY process works by preferentially sequencing the shorter cell-free DNA fragments, which are predominantly associated with the fetus in the maternal blood.

This amplifies the fetal fraction, the percentage of DNA associated with the fetus in the maternal blood an average of 2.3 times and even greater amount in maternal blood samples with a problematic fetal fraction below 4%, the cut-off for many laboratories. In the analytical validation of over 1,000 pregnant women using the AMPLIFY technology, no woman had a fetal fraction below 4%. Our Prequel tests already had the lowest no call rate at one in 1,000 samples and is validated to be accurate in high-BMI women, which comprise 50% of pregnancies in the United States. We believe the AMPLIFY technology will further differentiate our non-invasive prenatal screening offering in the marketplace.

We also recently published a study in Genetics in Medicine comprising over 93,000 patients, which showed the challenges associated with ethnicity-based guidelines for carrier screening used by both the American College of Medical Genetics and the American College of Gynecology. In clinical practice, physicians struggle to implement ethnicity-based guidelines for patients of mixed descent and approximately 40% of individuals do not know the ethnicity of both their paternal and maternal grandparents. Following ethnicity-based guidelines from ACOG and ACMG would have resulted in 77% of carriers of severe genetic disease being missed in the study.

We also recently received favorable medical policies from four major payers including a top five payer in the United States for Prolaris. In aggregate, these payers added approximately 26 million covered lives for Prolaris. In addition, we received Medicare coverage for all prostate cancer patients for BRACAnalysis CDx and we're the only germline test approved for this indication. Finally, with Vectra in July, we also launched the new radiographic progression risk tool on the Vectra test report. We believe this new tool will provide an added value to physicians with the Vectra test. We plan to launch the cardiovascular disease risk tool later this year at the American College of Rheumatology Annual Meeting.

I would like to finish by saying, it has been a great honor to serve as Interim President and CEO of Myriad and I've been inspired by the dedication of our team to work through the challenges we faced in the second half of fiscal year 2020. I'm excited about what the future may bring for the company and look forward to working with Paul to return the company to long-term growth and drive shareholder value, consistent with our scale and positioning within the industry. With that, I am pleased to turn the call over to Scott for Q&A.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

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

Questions and Answers:

Operator

[Operator Instructions] And the first question is from the line of Sung Ji Nam from BTIG. Please go ahead.

Sung Ji Nam -- BTIG Research -- Analyst

Hi, thanks for taking the questions and welcome aboard, Paul. So my first question is on your telemedicine direct-to-patient sampling strategy. Just kind of curious where you are with that in terms of what percentage of your patients are currently taking advantage of that. What your capabilities and or the infrastructure or do you have the capabilities -- the infrastructure to meaningfully expand from where you are today as well?

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

Yes, Sung Ji, I don't know off the top of my head what the actual percentage of patients, but it actually got relatively high this quarter in terms of the patients that were taking advantage of kind of the telemedicine approach and not going in to actually receive a test kit from the physician. We've been working I think when we think from a strategy standpoint and where medicine is going, that's obviously going to play an increasingly important role in the future. When you look at areas like psychiatry where telemedicine lends itself exceptionally well to patient care, there's big opportunities for telemedicine and so we're currently looking at a number of strategies. Probably too early to talk about some of those, but we definitely are evaluating a number of things in that area.

Bryan Riggsbee -- Chief Financial Officer

Again, Sung Ji, I would just add, I think to Scott's point, when we first started obviously, GeneSight was one of the first that we deployed and we were -- I believe we had said we were around 60% at the time. That number has trailed off to some extent as physicians have returned to the office, but in the answer to your final question there, it's certainly something that is scalable and we would be looking to scale that broadly going forward.

Sung Ji Nam -- BTIG Research -- Analyst

Great, thank you so much. And then my follow-up is just would love to hear any updates on the private payer side for GeneSight. If you're making any progress there or has the pandemic made it more challenging to make any progress there?

Bryan Riggsbee -- Chief Financial Officer

Sure. Thanks for the question. Yeah, I think that the pandemic has made a lot of things more challenging. Everyone is focused at this point, I think really across the healthcare system on doing what's necessary for patients in order to expand COVID testing and to get patients into the physician office and get them the treatment that they need. We're certainly continuing to engage with payers, but not only payers, we've talked about PBM partnerships and other collaborations as well to look for ways that we can further deploy GeneSight and get patients that are experiencing major depression which is terrible to get them well. So nothing to report at this time, but certainly I think the team is well engaged and we've certainly made progress through the year.

Sung Ji Nam -- BTIG Research -- Analyst

Great, thank you so much.

Operator

The next question is from the line of Doug Schenkel from Cowen. Please go ahead.

Doug Schenkel -- Cowen -- Analyst

Hey guys, good afternoon. Maybe to -- with a welcome to Paul and I wanted to, it may be too early to ask this question, but I wanted to get your take on whether the combination of your addition to the team and what we've seen as the start of kind of a change over or evolution at the Board level, if you're addition and that trend in combination is likely to lead to some change in incentive structure and target metrics for the company. Maybe it's too early to answer that question, but would love to hear if you think there are changes that need to be made in that sense?

Paul J. Diaz -- President and Chief Exceutive Officer

Yeah. Thank you. So it's a little too early to get into specifics, but I would say that the Board and I and the time I've spent with the management team thus far are committed to really a bottom-up total review of our businesses, our products and that would include looking at new KPIs and just following up the discussion on telemedicine and digital marketing opportunities. I think there's a tremendous opportunity there to reach more consumers, reach more physicians and we need to be build metrics around those new initiatives as well.

So I think in the months to come we'll complete our strategic review and I'm sure that out of that strategic review will come new performance indicators that we'll be talking with you about. As Bryan said, telemedicine is a good example. These are opportunities for us to partner with people in the telemedicine business and one of the things I know that the new Board members and I are excited about and the entire Board is excited about are having more of a partnership orientation to the broader healthcare ecosystem, something I've done a lot in my career and I'm excited to move the team in that direction.

Doug Schenkel -- Cowen -- Analyst

Okay, super helpful, thank you for that, Paul and on, I guess it's I'll admit it completely unrelated follow-up. Just thinking about the Counsyl business, thinking about reproductive, there is a little bit of false precision here, but the reality is when we look at at least some of the public competitors out there that you overlap with, it does seem like you're continuing to lose a little bit of share. This deal, relative to original targets, certainly hasn't gone as planned thus far. You talked about some exciting new data and product characteristics that you think will potentially change that position. I just want to make sure that's right. Do you think what you discussed on the call today in terms of the attributes of your reproductive products are going to be enough in combination with your existing commercial team to kind of turn things around for Counsyl?

Bryan Riggsbee -- Chief Financial Officer

Yeah, Doug, I'll take the question. Yes, certainly I think that we've experienced some challenges with the reproductive business over time as we've brought that business into the fold of our women's health infrastructure and we've invested in new tools, ease of use and then some of the studies and the readouts on those that we've talked about here today. I believe the net of all that is that we believe going forward in that business as part of the women's health offering and believe that the team is perfectly capable of playing and winning in that space because we have great products and we have great science behind it.

Doug Schenkel -- Cowen -- Analyst

Okay, that's great. Thank you guys, appreciate it.

Operator

The next question is from the line of Tycho Peterson with JP Morgan. Please go ahead.

Tycho Peterson -- JP Morgan -- Analyst

Hey, thanks. Start with on GeneSight, volumes recovered to 50% of pre-pandemic levels, everything else was 75%. So why is the volume recovery lagging and then can you just help us think through the math a little bit more on why a reset on pricing with MolDX ends up being neutral as you're trying to push into the PCP channels. It's just that you have better line of sight on higher private payer ASP or why would it be neutral? Thanks.

Bryan Riggsbee -- Chief Financial Officer

Yeah, thanks, Tyco and I think the actual recovery for GeneSight was more in the 57% range. I think that was misstated, it was 57%. So still it's lagged where we've seen some of the others. I think part of that is just we've historically focused on the psychiatry channel and so I think that it's just more channel driven than anything, the nature of that interaction just does not allow for as much -- potentially as much in person person-to-person contact and so I think that's probably why you've seen some lagging there. Also, there is somewhat a -- I mean it's not as -- there is somewhat of an elective nature to that in terms of having that interaction.

With respect to the GeneSight pricing, I think the reason why we made the commentary that we believe it will be neutral to slightly positive on balance is really driven by couple of things. First of all, we run a significant number of tests today or not insignificant number of tests today for Medicare beneficiaries in the primary care channel that are not paid for and when you couple the expansion of the market covered by Medicare along with a price change that is not so significant as to bring the overall number average down, that's how we get to a place where we believe it will be neutral to slightly positive.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

Tycho, so a larger number of Medicare patients will get paid for now and so you have a higher percentage of claims paid at a slightly lower price.

Tycho Peterson -- JP Morgan -- Analyst

Got it. And then for a follow-up, just going back to Paul and the announcement tonight. I'm just curious, Paul, your background at Kindred, not necessarily in the diagnostic space, so how do you think that kind of translates over into the diagnostic world and it would be helpful if we could just hear from you a little bit more about where you see the opportunities. You mentioned telemedicine, you mentioned more partnerships. I'm just curious as you think about the business today, do you see opportunity for more M&A, portfolio reshaping, how do you think about your first year on the job or so? Thanks.

Paul J. Diaz -- President and Chief Exceutive Officer

Yeah. Thank you. Well, first, I think it is a tremendous opportunity for growth here and I was attracted to that growth opportunity through both discovery and innovation, but specifically, I think Myriad is an incredible platform to create a market leader in precision medicine. My experience in building adjacent businesses and cross-selling and doing M&A, which you referred to as well is pretty varied. I would say that my private equity experience coupled with two public companies were both bought, spun-off, merged successfully through a hostile-acquired Gentiva would give you a sense of sort of my historic ambitions for growth and expansion. And again, I think that platform here lends itself to that growth opportunity.

The other thing I would just say from a personal investment thesis that the underlying market for what Myriad does and the great reputation for its products is large and growing, that it is a trusted partner as I did my due diligence and I like the economics of the business model and that I believe there are multiple levers for growth and margin expansion. So pretty excited to be here. My experience at Kindred and in multiple other segments I think gives me a pretty good background and a wide field of vision to help this team think more aggressively about where we can succeed, but also to be more focused and I think that's one of the things we're going to examine through this strategic review to make sure that we're focused on those areas that we can win and be a leader in.

Tycho Peterson -- JP Morgan -- Analyst

Great, thank you very much.

Paul J. Diaz -- President and Chief Exceutive Officer

Thank you.

Operator

The next question is from the line of Steve Unger with Needham. Please go ahead.

Steve Unger -- Needham -- Analyst

Hi, just one quick question on -- I realize volumes may be difficult to forecast over the next couple of quarters, but I wanted to understand clearly what your pricing -- expected pricing negative impacts are for Hereditary Cancer and Prenatal let's say over the next two quarters?

Bryan Riggsbee -- Chief Financial Officer

Yeah, Steve, I think that obviously we didn't -- we weren't in a position to provide guidance either for the upcoming quarters or for the year. I think what I would point you to is the qualitative assessment that we provided relative to both of those products and that as we come to the back half of the calendar year and into next -- the first part of next calendar year, we'll lap some of the comps that really made for negative comparisons in previous quarters, namely the Hereditary Cancer code switch and then the changes that we made in the Prenatal billing area. So I think that those would be the biggest drivers of Hereditary Cancer pricing change as we look to the back half of the calendar year and then also the other factor that's out there is the PAMA delay that was part of the CARES Act. Those would be the things I think would be relevant as you think about Hereditary Cancer and Prenatal pricing.

Steve Unger -- Needham -- Analyst

Okay and then I noticed that you have roughly $33 million of deferred revenue on the balance sheet this quarter. Can you discuss what that related to and is it the CARES Act and did you receive grant money from the CARES Act?

Bryan Riggsbee -- Chief Financial Officer

Yeah, we had said on the -- during the prepared remarks that we had received advanced payments from Medicare as part of the CARES Act. So that's what that dollar figure relates to.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

It was pre-payment on future claims, Steve.

Steve Unger -- Needham -- Analyst

Got it, OK. Thanks, I appreciate it, thanks.

Bryan Riggsbee -- Chief Financial Officer

Sure.

Operator

The next question is from the line of Puneet Souda from SVB Leerink. Please go ahead.

Puneet Souda -- SVB Leerink -- Analyst

Thanks. So Paul, first of all, great to have you on board. Welcome into the seat. I appreciate your thoughts on the industry and diagnostics overall and I know it's totally early in these times, but may be wondering if you can just share some thoughts on opportunities that you see having looked at things here from a fresh perspective and sort of looking in. I mean you mentioned focus is an important aspect here and you mentioned growth as well. Could you just help us understand looking at the sort of the broader portfolio -- broader diagnostic space, is there anything that gets you more excited versus others?

Paul J. Diaz -- President and Chief Exceutive Officer

Yeah, again, look I think the company has just great tradition, great reputation and most of my observations are outside looking in, but pretty thorough in terms of my diligence and my preliminary discussions with the management team reinforce my view that we have the opportunity to execute a lot better, whether it's in our customer service and in our ease of use and solving to both physicians in a more consumer-centric way.

We've got more opportunity to partner with payers and change some of the historical dynamics around that and sort of pricing strategies and we've begun to talk about the digital marketing and telemedicine and really reenergizing how we approach the marketplace from a sales and marketing standpoint. So I think there is a lot of opportunity there and the management team and I are excited to take a fresh look top to bottom of the organization of where we can perform better and how we can manage cost better and reprioritize both opex and capital to new growth opportunities and one of my favorite people said strategy is about choices. So that's where the focus will come in as we go through that examination figuring out which of those products and which of those markets we think we really can lead in and doubling down on those efforts.

Puneet Souda -- SVB Leerink -- Analyst

That's great. Thanks for that. Bryan, if I could just get a bit of clarification on COVID testing. Could you maybe just. I appreciate you could get to 3,000 samples here per day, but could you elaborate pricing on that. I'm wondering if you are accessioning these samples yourselves or are you getting these samples from another reference lab and actually running them and returning the results?

Bryan Riggsbee -- Chief Financial Officer

Yeah, thanks, Puneet. As we said earlier, we hope to get to about a 3,000 capacity because there's obviously significant demand in the market and you've read some of the struggles for some folks in the market in terms of keeping up with demand for the testing which we think will continue to grow. Relative to where we are today and the sample flow that we have, obviously, we don't have a -- the type of logistics network built out for sample collection that many of the large reference labs and some others would have. So at this point, samples are coming in from other reference labs or other laboratories and are also marketing it to other providers that would send us samples and we would client bill effectively and so that's the way the process is working at this point. Does that answer your question?

Puneet Souda -- SVB Leerink -- Analyst

Yeah, I just wanted to make sure that you are able to extract the complete prices, if it's a $100 test rather than [Speech Overlap]

Bryan Riggsbee -- Chief Financial Officer

It would come into a laboratory, they would accession it and send it to us for testing. We would return the results to them, they would do the billing etc. So in that scenario, you would not get the full billed price, you would get some smaller amount that you had negotiated just for the process of running the test.

Puneet Souda -- SVB Leerink -- Analyst

Got it, OK, all right, thank you.

Bryan Riggsbee -- Chief Financial Officer

You're welcome.

Operator

The next question is from the line of Derik De Bruin with Bank of America. Please go ahead.

Derik De Bruin -- Bank of America -- Analyst

Hi, good afternoon. Paul, welcome. A couple of questions. So the first one is the MolDX pricing coming down. How does that impact your potential from your commercial agreements? How does this tie to -- does this potentially impact what you're going to get paid from United and your other commercial contracts you're negotiating?

Bryan Riggsbee -- Chief Financial Officer

Yes, so, thanks, thanks, Derik. I guess what I would say is it doesn't impact other commercial agreements. Obviously, we just resigned the United agreement back in January. There is no impact to that contract and we don't have broad payer coverage outside of that. So I would say at this point, there is not really a lot of talk about there.

Derik De Bruin -- Bank of America -- Analyst

Got it. And also on the United, are you seeing increases in pre-authorizations for GeneSight. I'm just sort of wondering have those ticked up just you haven't sort of talked about sort of what some of the -- how the uptake has been, sort of what the pre-authorization process has been?

Bryan Riggsbee -- Chief Financial Officer

Sure. Thanks, Derik. I would say in general for all genetic testing in our space as you know, the use of prior authorization is key for payers and it's a process we have to follow for most all of our products and so there is really no change from what we've had to deal with historically there. We have, as you know, anytime you go through something for a period of time you adapt and you improve and your yield gets better and so I would characterize it as we continue to look for areas of opportunity to improve, but there is no change or additional prior authorizations that have been put in place.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

Yeah, Derik, I would just highlight, we've been making progress on the United prior authorization program in terms of getting physicians trained. We did mention outside of the settlements of payer claims that we saw positive net cash flows for GeneSight in the quarter and so I think that's an important data point.

Derik De Bruin -- Bank of America -- Analyst

Great. Thank you.

Bryan Riggsbee -- Chief Financial Officer

Thanks, Derik.

Operator

The next question is from the line of Brandon Couillard from Jefferies. Please go ahead.

Brandon Couillard -- Jefferies -- Analyst

Hi, thanks. Good afternoon, Bryan. Just curious if you could speak to the added cost of the at-home collection kit for GeneSight and if the new dynamics are materially different using that sample collection approach?

Bryan Riggsbee -- Chief Financial Officer

Yeah, thank you for the question. It's relatively straightforward. It's just a cheek swab and it doesn't impact the cost of the test significantly. I wouldn't consider it to be material.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

Yeah, Brandon from a kit fulfillment standpoint, we still send a kit to the physician's office as well. So it's just a different format of that kit, so the cost difference is negligible.

Brandon Couillard -- Jefferies -- Analyst

Got you. And as far as the GeneSight sales force expansion goes, can you remind us how many reps you have today and do you ultimately envision needing a partner to scale into that GP market and how do you think about future growth of that sales force beyond the initial 65 reps?

Bryan Riggsbee -- Chief Financial Officer

Yeah, thanks. I think the number is 165.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

Yeah, the psychiatry sales team is about 160, 165 reps, Brandon.

Bryan Riggsbee -- Chief Financial Officer

So I think in terms of how we think about that going forward, obviously, I think one thing is important. We talked about a mix of outside and inside sales people, we talked about our digital initiatives and our direct-to-consumer initiatives. So I think that one of the things that you will see and as we start to evolve our thinking some on the sales side is just how we interact with the consumer and our physician customers. So I think over time, we'll just continue to evaluate our sales force and how we're positioned in the market and how we go to market.

Brandon Couillard -- Jefferies -- Analyst

Thanks.

Operator

The next question is from the line of Jack Meehan from Nephron Research. Please go ahead.

Jack Meehan -- Nephron Research -- Analyst

Thank you. And Paul, congratulations on the new role. Looking forward to working with you again here.

Paul J. Diaz -- President and Chief Exceutive Officer

Yeah. Thank you.

Jack Meehan -- Nephron Research -- Analyst

Wanted to go back to GeneSight. So previously, your pricing was around $2,200 per test. What do you expect your average collection per patient will be under the new policy?

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

Yeah Jack, we're not providing that level of detail. The price actually was a little bit different than what you stated there for the actual Medicare rate as well and so we're not getting into the detail around pricing and how we're coding for the test.

Jack Meehan -- Nephron Research -- Analyst

The language in the LCD document suggests that there is going to be additional documentation required for physicians to justify the genes that they're ordering and we've heard some feedback that, that could cause some challenges in order to order the test. I was curious what you're doing with the sales team around that to make sure that doesn't become a burden and what's your plan, are you going to stack multiple codes for each test for each of the genes that are required?

Bryan Riggsbee -- Chief Financial Officer

Yeah. Thanks, Jack for the question and welcome back. Glad to have you back covering Myriad.

Jack Meehan -- Nephron Research -- Analyst

Yes, thank you.

Bryan Riggsbee -- Chief Financial Officer

Yes, what I would say with respect to the sales team and well, excuse me, with respect to how we're billing for the product is we have agreed with Medicare on the price and so I think at this point, just to follow-up on your last question, we've been given clear instruction in terms of how we're billed. So with respect to stacking codes or billing for a single test etc, we have clear direction and pricing for Medicare. So really no change there. I think that relative to the other point, there is any time you see a change in the requirements for the physician, there does tend to be disruption and some training that has to happen to educate physicians on exactly how they should be complying with the requirements and following the requirements of the LCD.

So that's pretty normal, but it's also something that I think the team has become pretty adept at navigating that process and so it's not surprising that you would have heard about some disruption as this is relatively new, it was an August 3rd effective date, but it would be something that I would expect the team would be able to work through.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

And Jack from a pre-authorization standpoint, it's really the requirements have just changed, right. Previously, we had to really show that the patient had failed medication previously and that they had treatment resistant depression and provide documentation around that. The new documentation requirements are more around showing that the physician is considering medications that follow multiple gene drug interaction pathways and so we're just providing really a different level or different type of documentation.

Jack Meehan -- Nephron Research -- Analyst

Got it. If I can squeeze in one follow-up. You mentioned the combination of these factors should be neutral to positive. Just to make sure we're thinking about it right, what's the baseline you're using? Is that relative to the $74 million of revenue in 2020 or you referring more to the relative size of the market with PCP is versus the price decline in that combination. I'm just -- what were you referring to with neutral to positive?

Bryan Riggsbee -- Chief Financial Officer

Yeah, I think when we said neutral to positive, we were talking about that with respect to how the market will look going forward. That's a combination of the updated pricing for MolDX along with the expansion of the LCD in the primary care segment. As we mentioned on the call earlier, there is a population of tests there that we've run historically and gotten zeros for, that will now be covered. So there is a number of things that sort of go into that, but our expectation is that the net of all that is is neutral to slightly positive on the overall GeneSight ASP.

Jack Meehan -- Nephron Research -- Analyst

Thanks, Bryan.

Bryan Riggsbee -- Chief Financial Officer

Thanks, Jack.

Operator

There is no other questions at this time, I'll turn it back for any closing remarks.

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

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.

Operator

[Operator Closing Remarks]

Duration: 55 minutes

Call participants:

Scott Gleason -- Senior Vice President of Investor Relations and Corporate Strategy

Bryan Riggsbee -- Chief Financial Officer

Paul J. Diaz -- President and Chief Exceutive Officer

Sung Ji Nam -- BTIG Research -- Analyst

Doug Schenkel -- Cowen -- Analyst

Tycho Peterson -- JP Morgan -- Analyst

Steve Unger -- Needham -- Analyst

Puneet Souda -- SVB Leerink -- Analyst

Derik De Bruin -- Bank of America -- Analyst

Brandon Couillard -- Jefferies -- Analyst

Jack Meehan -- Nephron Research -- Analyst

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