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What's Behind Myriad Genetics' Disastrous Q1 Performance

By Keith Speights - Nov 5, 2019 at 6:00AM

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Hardly anything went right for the genetic testing company in its fiscal 2020 Q1.

It's been feast or famine for Myriad Genetics ( MYGN 0.69% ) this year. The stock has skyrocketed more than 50% in a single day. And it has dropped by nearly that much in one day as well.

The genetic testing company announced its fiscal 2020 first-quarter results after the market closed on Monday. And it looks like there will be another famine. Here are the highlights from Myriad's first-quarter update.

Test tubes with images of a DNA helix in one of the test tubes.

Image source: Getty Images.

By the numbers

Myriad Genetics reported revenue of $186.3 million in the first quarter. This reflected an 8% decline from the prior-year period revenue of $202.3 million. The consensus analysts' estimate projected Q1 revenue of $202.1 million.

The company announced a net loss in the first quarter of $20.6 million, or $0.28 per share, based on generally accepted accounting principles (GAAP). This was significantly worse than Myriad's GAAP net loss of $700,000, or $0.01 per share, in the same quarter last year.

Myriad posted non-GAAP (adjusted) earnings of $0.08 per share, down 81% from earnings of $0.43 per share in the prior-year period. This came in well below the average analysts' adjusted earnings estimate of $0.32 per share.

Behind the numbers

CEO Mark C. Capone acknowledged that Myriad "had a challenging start to fiscal year 2020." He stated that the "deletion of the historical hereditary cancer CPT [current procedural terminology] codes" made a big impact on Myriad's hereditary cancer revenue accrual. Hereditary cancer revenue fell 10% from the prior-year period to $104.5 million.

That wasn't Myriad's only problem, though. Sales for the company's GeneSight gene test for antidepressants sank 22% year over year to $22.7 million. Revenue from Myriad's Vectra diagnostic test for rheumatoid arthritis also fell 15% lower to $11 million.

The only bright spot in the company's Q1 results was its prenatal genetic testing. Prenatal revenue jumped 30% year over year to $23.5 million.

Myriad's operating expenses rose 3% from the prior-year period to $207.2 million. This higher spending combined with the revenue shortfall resulted in the company's dismal bottom line.

Looking ahead

Myriad expects that revenue for full-year 2020 will be between $800 million and $810 million. The company anticipates a GAAP loss of between $0.25 and $0.15 per share. Adjusted non-GAAP earnings per share are expected to come in between $1.00 and $1.10.

For the second quarter, Myriad is looking for revenue between $210 million and $212 million. The company projects GAAP earnings per share between $0.00 and a $0.02 loss. Myriad also anticipates non-GAAP adjusted earnings per share in Q2 between $0.30 and $0.32.

Myriad definitely got off to a bad start in fiscal 2020. However, Capone said, "Despite this setback, we expect earnings to be significantly higher in the second half of the fiscal year and believe that a number of important upsides will materialize during the fiscal year generating momentum as we transition into fiscal year 2021."

It's always good to have a long-term perspective when investing in stocks. That's especially the case for Myriad Genetics as its current famine begins.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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