Shares of Myriad Genetics (MYGN -2.07%) fell over 42% today after the company reported disappointing fiscal full-year 2019 operating results. Total revenue grew 14% and adjusted earnings per share (EPS) jumped 18% compared to fiscal 2018, although sluggish fourth-quarter results weighed on the performance. The business also generated just $7.6 million in operating income in all of fiscal 2019, marking an operating margin of just 0.9% and a 94% decline compared to fiscal 2018.
The genetic testing leader also quietly disclosed through a regulatory filing that the U.S. Food and Drug Administration (FDA) requested changes to the GeneSight Psychotropic test offering, which is the company's most important growth product. A decision by UnitedHealthcare earlier this month to cover the test -- the first major insurer to do so -- sent shares soaring nearly 60%.
As of 12:49 p.m. EDT, the stock had settled to a 41.8% loss.
Today's news continues a string of disappointing quarterly financial results from Myriad Genetics. While the company has managed to offset the decline of its hereditary cancer segment with revenue growth from new products, a significant increase in operating expenses related to the marketing and selling of those new products has sapped profits.
Reversing that trend will require significant growth from prenatal tests gained during the Counsyl acquisition and GeneSight Psychotropic test. Investors should be pleased with the ongoing integration of Counsyl, which will lower operating expenses per test as cost synergies are realized, and the fact that prenatal tests comprised over 13% of total genetic testing revenue in fiscal 2019.
GeneSight is proving to be more uncertain. Revenue from the test platform dropped 10% compared to fiscal 2018. On the fourth-quarter 2019 earnings conference call, management explained that it made the "decision to discontinue analgesic and ADHD products" over a lack of clinical evidence. And the annual report filed with the SEC shows the company last attempted to address increasing scrutiny from the FDA over the GeneSight Psychotropic test on Aug. 10 by making certain changes to the product, which could have an adverse effect on sales.
Myriad Genetics is trying to pry itself loose from being caught between the past and future of the genetic testing field. The latest operating results and regulatory pushback suggests investing growth capital into new products might not deliver the inflection point in revenue and profitability that management envisions. Investors will need to closely watch if GeneSight revenue is impacted by changes requested by the FDA and if other major insurers follow UnitedHealthcare to cover the test.