Myriad Genetics, Inc.

Good day and thank you for standing by. Welcome to the Marriott Genetics First Quarter 2025 Financial Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Scallo, Senior Vice President of Investor Relations. Please go ahead.

Good afternoon and welcome to the Myriad Genetics first quarter 2025 earnings call. During the call, we will review the financial results we released today and afterwards we will host a Q&A session. Our quarterly earnings release was issued this afternoon on form 8K and can be found on our website at investor.myriad.com. I'm Matt Scalo, Senior Vice President of Investor Relations. On the call with me today are Sam Raha, our President and Chief Executive Officer, Scott Loeffler, our Chief Financial Officer, and Mark Verratti, our Chief Operating Officer. This call can be heard live via webcast at investor.myriad.com and a recording will be archived in our investor section of our website along with this slide presentation. Please note that some of the information presented today contains projections or other forward-looking statements regarding future events or the future financial performance of the company. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the SEC, 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. I will now turn the call over to Sam.

Thanks, Matt. Good afternoon, everyone, and thank you for joining us. While I'm pleased to lead my first earnings call as president and CEO, we had a challenging first quarter with a revenue of $196 million at the lower end of our first quarter target range, representing a decline of 3% year over year. Strength in our prenatal and oncology my risk tests were offset by softness and volume for gene site and unaffected hereditary cancer tests. If we exclude the UnitedHealthcare impacted gene site, the revenue associated with the endopredictive vestiture and the one-time benefit, the retroactive coverage by a large pair for one of our tests, the first quarter of 2024, total Q1 revenue grew 5% year over year. In the quarter, we saw strong performance for a number of our tests, including foresight and prequel, which had volume growth of 10% year-over-year and continued strong demand for our MyRisk tests for cancer patients, part of our oncology business, with test volume growth of 11% year-over-year ago, period. However, We had softness in gene site test volume, which grew 2% year-over-year, impacted by UnitedHealthcare policy change-related headcount reduction and marketing spend reallocation actions we took in the quarter. Test volume of MIRIS for screening of unaffected individuals, part of our women's health business, was flat year-over-year and reflects lower-than-expected ramp in testing volume from our breast cancer risk assessment program and from customer sites that have had EMR integrations. Mark will share more about these challenges in his section. While we are actively working on actions to increase volume for gene site and my risk for unaffected individuals, we are projecting softer than planned volume for both of these tests and consequently have updated our 2025 financial guidance. We've lowered our annual revenue by 35 million from the prior midpoint and reduced OpEx by 25 million from the prior midpoint. Scott will share more about our updated guidance in his section. We've started taking deliberate steps to reduce our overall projected spending while prioritizing investments and resources on driving 2025 revenue and high-value new product development, including precise MRD and AI-enabled Prolaris. Before I transition to Mark, I want to update you on the progress we're making on our new product pipeline. First, we're on track to launch first gene, our combined carrier screening and NIPS assay within the next couple of months. Next, the precise MRD, positive clinical data was presented at the AACR conference last week and additional clinical data will be presented at ASCO in June. We are making progress on our path to launch our first MRD test in the first half of 2026. Finally, we're on track to launch our first AI-enabled Polaris test to support clinical decisions at the time of biopsy in partnership with OMIC by the end of this year. With that, I'll now turn it over to our Chief Operating Officer, Mark Verratti. Mark.

Thanks, Sam. Turning to the first quarter. First quarter total revenue declined 3% year-over-year, driven by the underperformance in GeneSight and MyRisk for the unaffected patients in our women's health channel. As Sam mentioned, our prenatal performance was a highlight in the quarter, with revenue growth of 11% over the same period and 15% excluding sneak peak. We saw healthy demand across both our carrier screen and NIPS lines and continued traction from our mid-fourth quarter launches prequel at eight weeks gestational age. Our hereditary cancer revenue was down 2% for the quarter. We saw positive growth in our oncology channel, although our hereditary business and our women's health channel continued to be impacted by EMR integrations ramping slower than expected. We have system integrations across 15-plus different vendors, including strategic partnerships with Athena, Epic, and Flatiron. We are addressing workflow disruptions account by account that can take several quarters to stabilize. As an example, we recently met with Epic to integrate our MyGene history assessment into our Epic integrations to better identify patients that qualify for hereditary cancer testing and We have also identified a handful of other workflow improvements that we have activated our teams to address over the coming quarters. While this situation continues to be a headwind to volume growth this year, we are optimistic about addressing these challenges in the coming quarters. In addition, we continue to see positive momentum from our breast cancer risk assessment programs that were implemented. However, they are not at scale yet to material impact the overall hereditary cancer performance. Turning to GeneSight. Revenue was down 20% year-over-year due primarily to the anticipated impact of UnitedHealthcare's coverage policy change effective January 1. Chainsite test volumes grew 2% over a year-ago period, impacted by our actions to reduce resources in this area during the first quarter. Moving to oncology, MIRIS remains the gold standard in the market for hereditary cancer testing. Building on this cornerstone, our strategy in oncology remains to serve the continuum of patient care from screening to therapy selection to monitoring and therapy adjustment for the most prevalent cancer indications. In the first quarter, total oncology revenue declined 2% over the first quarter of 2024. My risk-affected test volume was a highlight with 11% year-over-year volume growth. Total affected hereditary cancer testing also continues to see headwinds from further anticipated declines in BRAC CDX testing. Shifting to prostate cancer. Polaris revenue in the first quarter decreased 2% year-over-year, similar to our performance in the fourth quarter of 2024. Overall demand remains consistent with 2024 trends, and our view remains that the confusion over the updated NCCN guidelines will not create any meaningful headwinds for testing volumes. Our updated 2025 revenue guidance reflects no change to our Polaris assumptions. I would like to emphasize again that Polaris is included in the NCCN prostate cancer guidelines for low, intermediate, and high-risk patients at the time of initial biopsy. Furthermore, every test in the urology market that Polaris competes with has the same NCCN Category 2a level of evidence. Guidelines also state the need for germline and tumor profile and testing for certain prostate cancer patients. And now that we have added Pephthalmic's AI technology platform to our portfolio, Myriad will be the only company that will offer AI, biomarker, germline, and tumor profile testing. Moving to our women's health business. In the first quarter, women's health delivered 87 million in revenue, an increase of 4% over the prior year period. Prenatal testing was a highlight with 11% revenue growth year-over-year as we continue to sell deeper into current accounts and win new accounts. We continue to see growing traction from the Q4 launch of prequel eight weeks and believe this test will continue to support our positive growth moving forward. The strength in prenatal was partially offset by the weakness in unaffected hereditary cancer testing, which I mentioned earlier. However, our women's health team continues to see positive traction in hereditary cancer testing from our partnerships with J-Screen and Cancer Care. We remain optimistic about the potential contribution to overall growth from EMR integration and breast cancer risk assessment program implementations. Turning to pharmacogenomics. In the first quarter, gene site revenues were $31 million, impacted by UnitedHealthcare's coverage policy change effect of January 1. We continue to work with UnitedHealthcare, which includes submitting additional data, such as the increased economic utility data recently published in the Journal of Clinical Psychopharmacology, as well as more data to follow in the second half of the year. Our team continues to drive expansion of ordering provider base, which is over 30,000 providers in the quarter. I am proud of our GeneSight team that continues to drive growth and focus on the unmet need in mental health care treatment. Our strategy for GeneSight growth includes continuing our highly effective digital engagement from driving provider and patient awareness to provider onboarding. It also includes optimizing patient direct payment options and optimizing revenue cycle workflows to maximize reimbursement. I will now turn the call over to our CFO, Scott Leffler.

Thanks, Mark. I'll start with a recap of our Q1 consolidated financial results. For the first quarter, we reported a 3% year-over-year decline in revenue, with test volume up 1%, but average revenue per test down 4%. The underlying current period rate environment remains stable and consistent with the favorable performance we saw throughout 2024. The decline in overall revenue per test reflects the absence of any meaningful contribution from prior periods in the first quarter of 2025 compared to a $7 million benefit in the first quarter of 2024, which resulted from positive change of estimates as well as a one-time benefit from a payer who implemented coverage of one of our products on a retroactive basis. In addition, Q1 rates were unfavorably impacted by the change in UnitedHealthcare policy with respect to gene site coverage. Notwithstanding the headwind items, the stability and underlying rates across our portfolio represents another proof point for the great work being done by our revenue cycle and payer markets teams, along with others throughout the company. As Mark pointed out, the prenatal testing business saw the strongest growth in the first quarter, with revenue increasing 11% year over year. Our pharmacogenomics business saw revenue decline 20% year-over-year due to the impact of the United Healthcare coverage decision and our reallocation of commercial resources to other product lines. Even with the Q1 revenue decline, we were able to expand our gross margins by 50 basis points, delivering a 69% gross margin. This year-over-year improvement reflects lab efficiencies and is a testament to the power of our scalable business model. First quarter adjusted operating expenses increased minimally year over year and reflect the balance between greater investment in R&D and cost controls across SG&A. We continue to focus on striking the right balance between investment for future growth and profitability. In addition, I wanted to call out an income tax benefit of $29.3 million we recognized in the first quarter. While this benefit is largely excluded from non-GAAP EPS, it is especially noteworthy in that it is expected to result in approximately $13 million of cash tax refunds and interest payments to the company, anticipated to be received in the next few quarters. Next, we'll take a deeper look at the unusual items impacting our year-over-year revenue trajectory to provide a better sense for performance of the underlying business. While revenue in Q1 of this year compared to Q1 of 2024 declined 3%, you've also heard both Mark and Sam reference a first quarter 2025 revenue growth rate of 5% after adjusting for the impact of those three key items on our Q1 of 2024 baseline. UnitedHealthcare's impact on GeneSight of $10 million, the divestiture of our EndoPredict European business of $3 million, and the Q1 2024 benefit of $3 million from the payer who granted retroactive coverage to one of our products. By doing so, we're able to show what we consider to be a clearer view as to Myriad's underlying performance trends. Next, I'll discuss profitability, cash flow, and liquidity. This year, Q1 adjusted EBITDA was near breakeven. First quarter is typically a heavier cash burn quarter, and adjusted operating cash flow was a usage of approximately $10 million. We finished Q1 with $92 million of cash and cash equivalents and $42 million available under our revolver, subject to ongoing requirements. We believe that our liquidity will be sufficient to meet our projected operating requirements through 2025, but we plan to continue to evaluate opportunities to further strengthen the balance sheet to ensure a multi-year liquidity runway. Next, I'll cover our updates to full year 2025 financial guidance. For the full year 2025, we are updating the financial guidance that was previously issued in February. We now expect annual revenue of $807 million to $823 million, a gross margin range of 68.5% to 69.5%, and adjusted OPEX of between $555 million and $565 million. This results in adjusted EPS of between a loss of two cents and a gain of two cents for full year 2025. We are also targeting adjusted EBITDA of between $19 million and $27 million. We are not providing quarterly guidance, but as you think about the revenue trajectory during the rest of 2025, we are expecting modest sequential increases each quarter. This new revenue range reflects the impact of our reallocation of commercial resources away from GeneSight and towards other products, as well as the slower than anticipated ramp and volume contributions from a number of initiatives referenced by Sam and Mark impacting unaffected hereditary cancer testing volumes. The new OpEx range is reflective of deliberate steps to reduce discretionary spend without compromising our commitment to strategic growth investments in key areas, such as our commercial organization and new product development. Now, let me turn the call back to Sam.

Thanks, Scott. I want to reiterate that we understand the challenges we face in 2025 and that we have activated plans to overcome these challenges and our guidance reflects this. I'd like to end by sharing a framework that I'll be using to lead Myriad's success going forward. It's simple and based on three elements, compelling strategy, strong team and organizational design, and execution excellence. In terms of strategy, we've started looking across everything we do to determine what will best enable us to maximize profitable growth and to increase our market share by leveraging our differentiated capabilities. While our strategy refresh will take several months, we are resolute on oncology remaining the cornerstone of Myriad. And a critical part of our go-forward strategy will continue to be meaningfully serving the cancer care continuum from screening to therapy selection to treatment monitoring with our portfolio of testing products. In terms of team, I'm excited to have Mark Ferrati stepping into the COO role and being able to leverage his deep understanding of our customers and our company and to have Brian Donley joining us as our new CCO and being able to leverage his proven commercial expertise and experience domain knowledge. Over the last few months, we've also added key talent in strategic areas, including Hussein Korsmer as SVP of Oncology R&D and Lou Welleboe as SVP of our Biopharma Services and CDX business. In terms of execution excellence, areas we will focus on strengthening include product development and commercial launch planning. While we have had a disappointing start to the year, I'm as excited now as I was when I joined Myriad in December of 2023 about the potential for Myriad, the potential for sustained profitable growth, gaining market share, and positively impacting an increasing number of patient lives. The management team and I are now focused on unlocking that potential by ensuring we are pursuing a compelling strategy, strengthening our team and organizational capabilities, and improving execution. I'll now pass the call back over to Matt for Q&A.

Thanks, Sam. And as a reminder, during today's call, we used certain non-GAAP financial measures, a reconciliation of the GAAP to non-GAAP financial results and a reconciliation of GAAP to non-GAAP financial guidance. can be found in our earnings release and under the investor relations section of our website. Now we are ready to begin Q&A. In order to ensure broad participation, 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 our call.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Doug Schenkel from Wolf Research.

Hey guys, thanks for taking the questions. So, Sam, as you acknowledged, it's a disappointing quarter. It's messy. at a high level for many investors, there's just too many moving parts in the Murrieta equation. This quarter, it's weather, it's guideline debates, it's divestiture impact, it's united issues. It's just a lot, especially given the history of the company. How long is it going to take for you to simplify this and to clean this up? I mean, if I think of your prepared remarks, it's 20 minutes of lots and lots of moving parts for a company that's clearly struggling right now. How do you simplify it? How long is it going to take? And if you were to say like, hey, these are the three most important metrics to just kind of simplify it for everybody moving forward, what are those metrics? So that's a lot, but I think it's know probably the biggest thing that's on everybody's mind right now and then you know my follow-up is really on gene site back in november you talked about this being a 40 million dollar headwind um what is it now um i'm still not clear on what the guidance bridge is you know in spite of having lots of slides on it mathematically i don't know what the bridge is so if you could walk us through what's united and what's out what else is in there that would be helpful thank you yeah thank you doc i appreciate the questions and

You know, let me start with the first two that you asked, and then I'll ask Scott to jump in as it relates to the gene site question. You know, our intention is, and I think I've shared this before, that we have an opportunity to really simplify the narrative and get really more focused on the things that really accelerate growth and are tied to the core of the company. Now, it's going to take a little bit of time. You know, I think the better part is several months. to do the work and gain that clarity and be able to share that in a more definitive way. I mean, what I can tell you in advance of that, again, is that we remain absolutely resolute on the importance of oncology. It's the cornerstone of what is Myriad and really being able to serve that full continuum of cancer care. all the way from screening through to therapy selection and ultimately MRD, other things that we're adding in both organically and inorganically through partnerships such as Pathomic. We know that that remains at the heart of where Myriad goes. And while I appreciate, you know, the different parts of the business, including GeneSight and the resiliency it's showing in the face of the UnitedHealth headwinds, you know, there really are, you know, sacred cows. And we're going to look, you know, beyond oncology. We're going to be looking at everything to really look at the best way to prioritize the way that we can focus our efforts and grow in a predictable, profitable way. And so that's, you know, that's the timeline. And that's a little bit of the process, you know, probably going into You know, late Q3, Q4, before we have the absolute clarity, I mean, it doesn't mean we're not executing in the moment. We won't take opportunities to provide more clarity even as we go. You know, as it relates to, you know, maybe I'll take your second question and talk a little bit about catalysts. What should you look at for Myriad in terms of, you know, knowing that we're making progress on a new journey and our new chapter? I'll go back to the framework that I shared and my prepared comments. So strategy, one, we just addressed that, I guess, as part of your question. We are looking to gain that clarity, which will provide us the focus. Timeline on that, again, is over the next several months, late Q3 into Q4. In terms of team, it is about having the team that has the right combination of domain knowledge, execution ability, the experience that we need. again, very happy about Mark and his role in adding Brian to the team and others that we're in a very deliberate way that we're adding to the team. So there's more work to think about how, in terms of organizational design, we will be more effective, but those are milestones to continue looking for. And third, I think it is about execution. So what you look to in terms of, you know, catalysts, one, of course, that we're able to meet are updated financial guidance that you look at Polaris volume. We didn't explicitly call that out in the prepared remarks, but it's relatively steady throughout the year. That for our unaffected hereditary cancer, which is an important part of our growth narrative, that it returns to growth within the year. And then I think we have an opportunity to, you know, reset and be consistent with being able to meet our own timelines that are important, particularly on these high-value, you know, products that we intend to launch, starting with First Gene, which is, again, this combination, NIPS, carrier screening assay, being able to bring that to market by the end of July. You know, then Prolaris with PrAD. This is the pathomic AI-enabled test. first product for the time of biopsy at the end of 2025, MI-RISC expanded panel by the end of 2025 as well, and MRD with the first assay available for clinical use in the first half of 2026. So those are some of the catalysts with that. Scott, let me turn it over to you to answer the question about gene site and headwind.

Sure. Thanks, Sam. Doug, as we mentioned in our prepared remarks, there was a $10 million revenue headwind. in the first quarter relating to the change in United's coverage of G-Insight. As a reminder, what we talked about when the news was first developing around United's coverage, there were two components to the change. One component related to United's commercial policies, which was effective on January 1, and that's what is driving that $10 million headwind in Q1. There is an incremental amount that's much smaller that began in March. related to United's managed Medicaid plans at the full effect of which is not seen in the Q1 numbers yet. But generally, what I would say is that that $10 million headwind that we saw in Q1 is in line with the overall estimates that we had given for the full year impact. And of course, the full impact of that is reflected in our guidance.

Thank you. One moment for our next question. Our next question comes from the line of Puneet Sudha from Learing Partners.

Yeah, hi, guys. Thanks for the question here. So maybe I'll continue with GeneSight, just given the focus here and the challenge you're seeing. I mean, since the United announcement, could you update if you have heard from other payers or policies with respect to the test? My question is, is the guide contemplating only United, or are you expecting other payers to step away and not cover the test? I mean, I think you would agree that currently the market and the payers are under more pressure than ever before, and they're looking for savings. Some areas of diagnostics might just give them that. So I just want to understand what is in the guide and in terms of other pairs, what are you contemplating? And then second part of my question is, with respect to the providers, the physicians that are prescribing this test, are you seeing any changes in the behavior in terms of the prescription patterns just because of United and payers not covering. I'm just asking this because we're potentially maybe heading into a recessionary environment. And if that is the case, the patient pay might decline further.

Hey, Puneet, thank you for the questions. Scott, if you could take the first part of that, and then I think related to the providers and so forth. Mark, if you could take that part.

Sure. So the first part of the question related to coverage, and I know you're asking primarily about Genesight, but I think there was a little bit of the question that maybe had a carryover around the environment for coverage and reimbursement for our other products, so I'll maybe make a directional comment on those as well. But first, with respect to Genesight specifically, I'll reiterate what we had said when the news around United was first unfolding, which was that we had no reason to expect that United's coverage determination would have any impact on coverage for any other payer. And what I would say is that in the months that have passed since then is that that has proven out. We haven't seen any indication of a risk of coverage across the rest of the parent universe that covers United – I mean, that covers GeneSight. And, in fact, more recently, we have had a couple of interesting wins in terms of incremental coverage, including one on the commercial side for GeneSight. Now, of course, it's not of the same magnitude as United Coverage, but it's consistent with our general theme that we've been talking about since the beginning of last year, which is that generally we continue to see constructive opportunities to continue to build out the coverage universe for GeneSight. And that general theme also, of course, throughout all of last year and so far this year, is also applicable to generally the rest of our product portfolio. And I mentioned this in my prepared comments that generally when you look at kind of underlying current period rates outside of the headwind items that we specifically called out, we see a very favorable rate environment where we've been able to maintain the positive rate momentum that we had in 2024. And based on a number of rev cycle and payer market initiatives, we're optimistic that we'll be able to continue to make more progress in 2025. Mark?

Yeah, to answer the second part of the question, we are not seeing any meaningful change in our providers. If anything, I think the market uncertainty unfortunately continues to drive the need for a test-like gene site because the mental illness is not going away anytime soon. I would say, as we mentioned in our remarks, we did reduce spend in Q1. because of the UHC decision, and so that did have an impact and it will have an impact going throughout the year. But as far as providers reacting to any payer coverage, we're not seeing that. But that said, we need to be really mindful that we're focusing on driving growth that is profitable and not just driving growth that's going to continue to increase zero pays.

Okay, thank you. And then if I could just follow up with Sam. Sam, as you have been at Myriad for some time and now obviously in the head role, can you elaborate a little bit as to how you think about this portfolio? Is this the right portfolio? I think that's been a major question for Myriad for a very long time. The tests that have been added, have some challenges or the other, you know, every year we run into them, either if it's hereditary or a gene site. Can you elaborate on the portfolio and if there's room for divestiture here?

You know, thank you again, Suneet, for the question. I mean, it's similar. Doug was, I think, going in that direction too. I think that, again, while there'll be some time to be taken, I think it's a prudent thing to do while doing it quickly is to make sure we do the thoroughness in looking at our strategy to understand and make decisions What I can tell you, again, is we are absolutely resolute on oncology, right? And there, too, we'll provide more clarity. Though we had underperformance compared to what we'd expected or wanted in unaffected hereditary cancer, we think it's programmatic. It's more execution-related, which we're working to fix. It's just a matter of how long that takes. As a reminder, hereditary cancer for unaffected is almost a $4.5 billion market that's growing at high single digits. We are the leaders there, and there's a significant opportunity that remains, and it's for ours to go get. And it's just about the execution, which we can go into more. But beyond that, I think we're going to go through the rigor to really look at and say, you know, we are myriad the way we are and how we got here, but, you know, what are the pieces going forward? So that really support our best ability to grow in a predictable, profitable way, compete and win in the market. Maybe those sound like a lot of obvious words, but behind it is the conviction to really be thorough and make choices to help support our go forward. So I appreciate just a little bit of time for the management team and I to work through that, and we'll have some clarity for ourselves and more that we can share by Q4.

Okay. I appreciate it. Thanks for covering those.

You're welcome.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of David Westenberg from Piper Sandler.

Hi, thank you for taking the questions here. So just regarding the slower ramp on the unaffected testing in hereditary cancer due to EMR integration, sorry. Us on the sell side, or us investors, we really don't know the nuts and bolts and why this would take multiple quarters to integrate and what this disruption looks like. Can you give us a flavor for just a little bit more details on why you're certain this is the problem, why you're certain it's going to take a couple quarters to fix and you know, what that business can grow at. And, you know, again, I'm looking at this, this unaffected population, you know, volume or revenues down 4%, volumes were flat. So I just want to make sure that that's just mixed and not kind of lower payments or a lot more non, no coverage there. I have one short follow up.

Hey, Dave, thank you for the question. I'm glad you asked. It allows us to actually provide some detail, which I think will be helpful for many others on the call. And by the way, the two drivers, and I'll hand it over to Mark to really kind of go into a little bit more detail here, you know, along with the EMR, it's also just... You know, the time to the traction from our breast cancer risk assessment program, we've seen some early, you know, good results. It's the ability to scale that, too. So, Mark, you know, please provide some more.

Yeah, sure, Dave. Let me provide a little bit of clarity and try to give an example related to EMR. And first, I want to thank our EMR teams, which has been a very cross-functional group of folks within Myriad that have been actively working on this over the last 18 months. And I would say there are some positives. So when you think about our prenatal business or you think about the hereditary cancer business, On the affected side of the equation, a lot of EMR integrations just have to do with the ability to order a myriad test, right? Just simply go into Epic and press a button and to be able to order the test. What we see across all of our accounts, though, is from a workflow perspective on the unaffected side, so patients who do not have cancer, it really starts with an ability to do a family history. which is a series of asking a lot of different questions around relatives. I'm sure you've filled those out in the past. And ideally, that is a feature that needs to be added into the EMR workstream so that that process is not manual. Also, in many cases, when you think about an unaffected population, many cases those appointments are being done virtually. So the idea that also a feature built within the ENR would require pushing a button and having a kit shipped virtually. Secondarily, many of those patients require patient education because once they get the results, it's not as clear, again, within the prenatal world or within the affected side, it is a very clear answer. On the unaffected side, what do they do now that they see a number that says that they have a higher risk, right? What are their options? What is that report telling them? And so, in many cases, we need to make sure that it's either plugged into the myriad genetic counselors or it's plugged into the account patient education materials. And so those workflows, what we've seen in working with our accounts, are challenge points. And so we've systematically identified those accounts. We're going back. We're making sure that we're building on those features. The example that I called out in the prepared remarks is actually working with Epic to build a digital cancer risk assessment so that it would be built into the Epic platform, which would not only help the accounts that we've already enrolled, but would also be a feature that we could utilize moving forward as well with new accounts that we onboard. But again, that is going to take us some time because once we build those solutions, we now need to sort of get back in the queue with all those accounts so that those tech teams can also enable them on their side. So hope that provided a little bit of clarity.

Yeah, can I just, I'm not, oh God, sorry.

I think there was one other part of your question which was around the fact that volumes were largely flat but revenue was down somewhat. And I'll just say that there has been no deterioration in terms of the underlying rate environment in terms of coverage or no pay or reimbursement cycle for that category of testing. Overall, we continue to see encouraging developments and positive momentum. There's some amount of adverse mix just in terms of payer mix, and there's always going to be some ebb and flow to that. And then in the prior year period, you had some amount of favorability from change of estimates that did not favorably impact this year. But there's always going to be some amount of movement from that type of thing, and it is not a reflection on the health of the underlying rate environment.

Gotcha. Thank you very much. I'll just ask my shorter follow-up then because you did give me a lot of time here. In terms of Polaris, down 2%, what one rate were you at prior to the NCCN guidelines? What's your best assessment of what the market growth would look like? We're just trying to get a sense of comfortability with the down being 2%, being business as usual, and then you know, market growth rates. So say when you stabilize it, you know, what that might look like is essentially what I'm trying to get at. And thank you very much for all the details.

Yeah, you're welcome, David. Maybe I'll start there. And, you know, we have been in a very competitive situation, as you know, with Decipher and Verisight. And, you know, it's relatively stable. So that's our perspective on how this year, how we expect it to be. But when we, you know, through the actions we are taking, by the way, we're not standing still and just waiting for the partnership with Pathomic to develop our first AI-enabled test, which will definitely put us in a better place. Along the way, we're also now making advances on getting Simon Level 1 evidence in place. The work now with Thelmic accelerates that by a year to a year and a half. In terms of commercial teams, we've added folks. We've actually prioritized, clarified the message. We're starting to see traction there. And before maybe I hand it over to Mark, I think that that market we see as a low double-digit growth market. at least, and that's the opportunity to resume and get back to, you know, competing and winning that share. And actually part of the Thomic partnership allows us to bring a product to market in post-RP where we don't even participate today. It's a complete blue ocean, right, because our Polaris solution today is, you know, for the majority part it's for, you know, time of biopsy. But I said a lot there, Mark. You said a lot.

I'm not sure there is much to add there unless – Unless that didn't answer the question, so let me just ask.

I think Dave may be offline. Okay. All right. Thank you. Yeah. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Matt Sykes from Goldman Sachs.

Hey, guys. Thanks for taking the question. You got Will on for Matt here. Just wanted to dig a little more into the cost savings side of the guide. I know you mentioned it would be on discretionary spending rather than the pipeline or commercial organization, but any more detail you can provide on what's being cut there would be super helpful.

You know, let me start. Thank you for the question that I'll hand to Scott. Yes, it's true, right? There are some big levers that we're That we've already started to take, including incredibly careful, you know, any additions of headcount really holding steady on that being very deliberate, of course, on the traditional things on any travel entertainment, all those categories. And then there's other spend related to. You know, programmatic things, be it research studies or, excuse me, when we're actually doing market studies and other things that we may be using consultants for to really be deliberate and focus it elsewhere for growth. But Scott, please kind of take it from there.

Yeah, I'll just remind you that on the last call, we also talked about a reprioritization of spend because even our initial or previous guidance for OpEx was at a level that was kind of below the historical level of OpEx investment. And what we were really pleased to be able to communicate on the last earnings call was the fact that we were able to reprioritize spend in order to continue to invest in the more strategic parts of the business. which includes things like the EMR integrations that we have ongoing, which includes the product development efforts that we continue to prioritize, along with incremental investments in the commercial organization. And we continue to be comfortable that we can fund those strategic investments by being more efficient in other parts of the OpEx infrastructure in the way that Sam was describing.

That's helpful. And then as a follow-up, On the RCM initiatives, you guys were early to optimizing those processes. And you've talked about the underlying rate environment being relatively stable today. But how much benefit is left for future improvement in RCM? And what are you guys doing to unlock those opportunities?

Yeah, great question. Scott, I know there's more room, and we're very actively working on that in a programmatic approach, so maybe you can provide some more.

Yeah, so as a reminder, last year we talked about this throughout the year. We had come into 2024 with a no-pay rate that was around 46%. And we finished 2024 with a no-pay rate that was around 44% or 43%. And so that incremental improvement throughout 2024 really had a significant impact on our overall ASP environment coming into 2025. But really, when you take a step back, the amount of no-pay, just the sheer volume of no-pay that remains for us to go after is tremendous. And so we continue to see a very sizable opportunity there. And we do continue to make investments in our road cycle and payer markets organization in order to tap into more of that opportunity over time, including within calendar year 2025.

Thanks, guys. Appreciate the color.

Thank you. One moment for our next question. Our next question comes from the line of Tejas Sivan from Morgan Stanley.

Hey, guys. Good evening, and thanks for the time here. So maybe I'll start with one on the MRD side of things. Following the data you guys showed at AACR and in renal, what should we expect at ASCO this year? And are you still on track to submit to multi-expert coverage in breast by year end? And then last bit of that question, you know, at ACR, increasing point of focus has been higher sensitivity. So I'm just curious as to your thoughts on what is that threshold for landmark sensitivity that's needed for physicians to be comfortable in terms of using MRD to either escalate or de-escalate treatment?

Thank you for the question, Tejas. There was a number of things you had in there, so let me start, let me try to answer that. So, yeah, we are pleased by the study that was shared, the information that was shared by a collaborator, MD Anderson Cancer Center, and this was about, for those that might not be as familiar, about clear cell, renal cell carcinoma, and really showing that, you know, our ultra-sensitive MRD test found that patients who tested negative three months after radiation avoided progression to more aggressive therapy for nearly 2.5 years longer than on average in patients who tested positive. The key is that we were able to help detect and determine in a clinical set of samples very clearly something that otherwise wouldn't be detected by traditional imaging, and that's very meaningful. One of the first real clinical examples of the power of our performance Now, in terms of, I think you also asked about ASCO, We're excited at ASCO overall to have multiple seven submissions that were accepted related to myriad oncology products, including MRD products. There will be a podium presentation there by a collaborator, Dr. Hashimoto from NCC Japan. He'll be talking about pan-cancer molecular MRD assessment using our assay for personalized ctDNA panel It's going to actually, again, illustrate in a more broad set of cancers the benefit of our ultra-sensitive assay in real-life samples, if you will. To answer your question on, I think, maybe it's about sensitivity or what we'll really be important for clinicians that are choosing to use this product. Again, just as a refresh, for us in MRD, a point of differentiation, what's important is to focus in on cancers that are low shedding, meaning they have very low parts in the blood of actual tumor ctDNA, that that can be detected just by nature of those cancers. Again, for us, that's breast, ovarian, renal, prostate, and a number of other cancers. What we found from working with clinicians and the more than 15 different MRD studies that are underway and all the dialogue that we've had, that being able to detect consistently in a reproducible way down to many parts, down to two to five parts per million, will really make a difference for these low-shedding cancers. So again, our clinical studies that are underway collectively will be looking at 4,000 patients either receiving or will receive our precise MRD tests, and together that's going to generate more than 30,000 time points of data. So I hope I answered your questions.

Got it. You did, so thank you. And one follow-up, actually, So, at a high level, Sam, I know it's early days, but where do you see room for changes in strategy or perhaps even, you know, your sort of guidance or expectations management philosophy, you know, relative to Paul's tenure or essentially sort of like, you know, going to be more or less a similar approach? I know you laid out sort of the three parts, you know, to how you're thinking about it, but any kind of like initial sort of, you know, thoughts on that would be great. And then just to clean up on GeneSight, I'm just trying to get a sense of, I guess, your GeneSight performance in the quarter came in, you know, light versus where we were, certainly, versus, I think, where most street models were. And I'm just trying to, like, parse out sort of what exactly drove the weakness, because I know you had contemplated weakness in your initial guide from sort of the peer issues. But just trying to get a sense of, is it on the volume side? Was it something else? Any color would be great. Thank you.

Now, I appreciate the question. Let me start with your first question here on maybe a little bit of what this next chapter of MIRI is going to look like. And then, Mark, if you don't mind answering a little bit more on Gene's side, a little bit more color there. Listen, Tejas, what I can tell you is to get a sense of who I am and what this chapter is going to look like, I think you could look at my experiences with the last two companies I've worked at. And that includes my fundamental belief that both for the inside, first and foremost, meaning in the company, to execute with excellence, to really be able to meet our targets consistently, simplification matters, being very clear on the critical few, what we're working on, how they all tie together, and really having that clarity, including like, you know, already on this call, you know, one of our colleagues said this is just, there's always something, there's so many different parts. So I think we have the opportunity to get clearer and crisper on what Myriad is all about, and you should expect to see that in the coming quarters and years as part of Myriad. And the other thing I would add, too, is You know, I've just grown up with the training and the philosophy of, you know, a very important part of operating business, like in life, is being able to do what you say you're going to do. So, you know, setting our expectations and being able to meet those, meeting our own timelines for our sake, for the sake of our customers, the market, and for those investors that follow us. You know, those are things that we take extremely seriously, and it's part of, you know, becoming a world-class business in this next chapter of Myriad. So, Mark, could you take the gene site question, please?

Yeah, let me add a little bit of color. I think, as we've stated before, a gene site is a very market-sensitive environment just because of the low awareness level related pharmacogenomics. That said, because of the UHC hit to our revenues, we did have to make some difficult decisions around lowering the investment within Genesight. And unfortunately, the timing of us being able to respond to that actually did take place in the beginning of the first quarter. So due to that lowering of the investment having an impact as well as just the disruption, that is why we had lower than expected volumes within first quarter. But there wasn't anything about the fundamental business. Or as we talked about before, there isn't any change in our provider behaviors either moving forward. But as we did call out, we want to make sure that we're very – that we do proper diligence moving forward and that we're focused on profitable growth because, as we've called out before, a gene site does have a high zero pay rate, and so we want to make sure that we're targeting our sales organizations and our marketing efforts to the right providers and the right payers. Got it. Superb. Thanks, guys. Appreciate it.

Thank you for your questions.

Thank you. One moment for our next question. Our next question comes from the line of Sung Gina from Scotiabank. Hi, thanks for taking the questions.

I have a question on Polaris, and it's a two-parter, so I'll just count them as two questions. Just kind of curious, you know, what do you think are the biggest misperceptions that are out there amongst the customer base with regards to the NCCN guidelines? You know, are you having success in terms of having discussions with the customers and kind of clarifying kind of what you believe are the misperceptions? And then just curious, you know, obviously you're very excited about the Pythomic Partnerships. But how is that resonating, you know, with the customer base currently? I don't know if there are any early discussions underway. Thank you.

Yeah, I appreciate the questions, Mark. Why don't you go ahead and start, and I can complement as needed.

Yeah, why don't I take the first part, and then maybe I'll pass it back to Sam on the second. But related to the first part, yes, when we've met with our top providers over the quarter, there was a lot of confusion around the NCCN guidelines. Because I think as we've called out before, of the 67 different cancer guidelines that NCCN puts out, prostate is the only one that has the mention of this assignment level one evidence. And although it does have its merits, it is relatively new. Again, it is only one of 67 guidelines that actually has it included. So there was a lot of confusion around the wording. And so we did have to spend time during the first quarter correcting any confusion that any providers had. I think the good news is, for the most part, we have that behind us. Providers do understand what the guidelines say. They are also advocating to work with the NCCN writers to see if they can get that language clarified. We don't expect that clarity to happen in 2025, but we hope that the recommendations will take place going into 2026. So with that confusion behind us, we're able to focus on the merits of our test, and we do have the highest clinical utility evidence at time of biopsy. And then, as Sam mentioned, there is a lot of excitement even now as we start talking about combining Prolaris with Pathomics AI technology. So on that, I'll turn it back over to Sam.

Yeah, just to add a little bit into answering the second question that you had, we're finding, you know, a real good level of interest and anticipation for our combined test. Part of it, I think, quite frankly, is there was some concern of our level of commitment to prostate cancer. And the partnership has helped reaffirm our commitment long-term to prostate cancer and a pipeline now, both that that's going to be there starting with a time of biopsy, then post-RP. The other thing, our pathomic colleagues have a great network. This is part of why we did our diligence and we chose them in prostate cancer. A significant number of thought leaders from the space that are leaders in key academic areas. medical centers related to prostate cancer, we actually get, you know, the combined benefit of what both Myriad brings and Pathomic brings to, you know, start building a new narrative of what our combined test is going to be able to do to really serve patients.

Thank you. Thank you. One moment for our next question. Our next question comes from the line of Andrew Cooper from Raymond James.

Hey, everybody. Thanks for the time. A lot's already asked. So maybe I'll just try one more time on the gene site piece. It sounds like the impact, the actual change here isn't anything with United as much as it is your sort of reprioritization of some of the sales force. So is that correct? And then can you just frame for us the actual kind of dollars and cents impact of that 35 million guidance reduction coming from that? And then I'll have a follow up from there.

Yeah, and I appreciate the question. Scott, do you want to take the question?

Yeah, so with respect to the first part, I think you're thinking about it the right way. So there's two elements to the gene site narrative right now. There's the kind of headline ASP impact of the change in United's policy, which landed, it was an impact of $10 million for the quarter, and that's in line with what we had anticipated and what had been incorporated into our previous guidance. What is different in terms of our view on gene site right now is the reduced volume expectation, and that is a significant part of the $35 million reduction in our 2025 revenue guide. We're not going to break out the individual components, but generally what I'll tell you is that gene site volume view, the evolving gene site volume view, and the performance to slower ramp in terms of our unaffected hereditary cancer testing volumes are the two major contributors to that $35 million deferment to our revenue guide.

Okay, helpful.

And then maybe just on a positive note, you know, first gene launch, you put a pretty firm date on here by July, I think you said. So maybe, Sam, for you, you know, you talked about the kind of credibility on launch timelines and making sure you're on track. What have you learned thus far and kind of how do we think about this first team launch and what it might inform about how you approach launches, you know, still to come, uh, as we move through the next few years.

Yeah, that's a great question. And I think it, it ties to, you know, uh, in my framework, uh, the, the, the pillar on, on execution, uh, moving towards execution excellence. I think myriad has long been continues to be a company of great science, uh, and great intentions and great colleagues. but really focusing on getting in a very deliberate way better on product development all the way from planning a product, defining it, developing it, and bringing it to market to mature that in a way that a number of other companies have, including where I've clearly been and a number of my colleagues around the table have been. That's the opportunity. That's one of the big opportunities for us to get better. and I think it will drive more efficiency. It will drive on the inside, and most importantly, it will now enable us to predictably bring products to market on the time. First, Gene, it's been delayed, as you know. It will be the beginning, and it's going to be a little bit of an iterative process, but there are specific things and are programmatic in a educational way and bringing in also colleagues who have done this and who understand how to guide an organization is part of the deliberate way we're going to, you know, get a lot better in a hurry on our timelines.

Great. I'll stop there. Thank you.

You're welcome. Thank you. One moment for our next question. Our next question comes from the line of Tycho Peterson from Jefferies.

Hey, Scott, one for you just on kind of liquidity. You mentioned it's going to be sufficient to meet operating requirements to the end of the year. What do you stand relative to the fixed charge ratio requirement under the ABL and how much cash do you need to run the business day to day?

So, we are still above the fixed charge coverage ratio in terms of the ABL covenant requirements. And then, you know, in terms of day-to-day, one of the advantages of the international restructuring that we did last year is we significantly streamlined the working capital requirements of the business. I would say, you know, I don't think we're going to commit to a number that we need to run the business, but it's very modest relative to historical requirements. And I'll just emphasize what I said in the prepared comments, which is that we have sufficient liquidity to meet our projected needs for 2025. Okay.

And then follow-up is just on guidance, two things. One, you know, are you assuming kind of further pricing pressure You know, try anything kind of tied to prior, you know, catch up payments that you've flagged this quarter. And then are you saying anything about the LRP? I mean, it wasn't that long ago at JPMorgan. You did kind of lay out double digit revenue growth, 70 percent margins. What are you kind of thinking about the LRP at this point?

Maybe, Scott, you start with the first one and I could talk about the LRP after that.

Yeah, and I think there may have been some confusion over some of the drivers of ASP, but, you know, overall, we're not anticipating any – we're not experiencing, nor are we anticipating any kind of incremental headwind in our rate environment. Again, the underlying rates remain healthy. The year-over-year headwind that we have, first of all, related to GeneSight United, which was obviously known – And then also in Q1 of last year, we had some favorability, some out-of-period favorability that did not repeat in Q1 of this year. And so it created a year-over-year headwind, but it wasn't representative of any negative development this year. So we continue to be optimistic about the rate environment, and that's reflected in our full year guide.

Yeah, and quickly on the LRP, you know, though we're going to, get more clear and do the work during our strategy refresh, as I've already alluded to before. Based on our performance and our guidance that we just spoke about, the attractive markets, again, that we're participating in, our capabilities, our access into those markets, And the new products, which we've talked a little bit about, that we know are coming, the timing of those, you know, over a multi-three-year plus period, you know, at this point, feel confident in high single-digit to low double-digit. But we'll refine that more or get clearer on that as we go through our strategy refresh work over the next few months.

Thanks.

Thank you. You're welcome. One moment for our next question. Our next question comes from the line of Luli from UBS.

Great. Thank you for taking my question. Just very quick on the hereditary cancers. So I appreciate that you're giving out lots of examples in terms of like how the EMR integration. I wonder how many accounts are already being converted or meaning like adding the features. The reason I'm asking is just like how do you actually track like the timeline of the ramps? Is there any risk that it can get like pushed out like any longer? What are the risks to the guidance? Thank you.

Yeah, no, I appreciate the question. You know, at a high level before maybe, Mark, I hand it to you, you know, we, as you know, we serve thousands of healthcare providers and customers, and a subset of those are for unaffected hereditary cancer, and that's where, you know, Mark is providing the guidance, or excuse me, the detail about the, you know, the workflow-related matters that we're working through. But, you know, we've contemplated a lot of that puts and takes within our guidance, so I'll just say that at a high level. But, Mark, I don't know, what other call are you going to add?

Yeah, I'm not sure I can give any more color because as Sam just mentioned, there's literally thousands of providers. And as we stated in Q4 last year alone, we integrated over 4,500 accounts. So I guess what I would say is that the EMR integrations account by account level, it is material. to our overall unaffected hereditary cancer growth. And we are going account by account. I would say that some of the workflow challenges that I called out, we can address this year, specifically in Q2, Q3. So we will be implementing some different workflow solutions that will definitely have a positive impact. That said, across all of our account bases, it is going to be an ongoing effort. But we are expecting to see positive momentum coming from those EMR efforts as well as, as Sam mentioned, the hereditary breast cancer risk assessment programs that we've also had some positive results in in Q1 as well.

Hey, just one thing to add. This is an illustration of our intention to be even more you know, deliberate in our prioritization. You know, whereas, and it is important to continue integrating, you know, these customers, these providers onto their chosen EMRs. We are very explicitly now, we've had a number of working sessions to say, how do we solve for first and foremost for the, you know, the most important high volume customers for those workflow challenges that Mark alluded to. So that's a priority. And, you know, we will continue to add more EMR integrations, but even more so focused on ensuring that we provide customers what they need to be able to really order more tests, have a seamless experience, and therefore help us increase our volume.

Donnie, thank you. Thank you. One moment for our next question. Our next question comes from the line of Subbu Nambi from Guggenheim Securities.

Hi, this is Ricky Levitas on for SUBU at Guggenheim. Thanks for taking our questions. We have a couple on women's health. So, first, it looks like women's health ASPs were up around 10% year over year in the quarter. How much of that was from NIPT and how much of it was from carrier screening? And then on carrier screening, at a conference in March, you said you were seeing some progress with commercial payers that were starting to move towards covering expanded carrier screening. Could you elaborate on that progress and how much ASP lift you think that you could see from this reimbursement ahead of ACOG guidelines inclusion? And then I have a follow-up.

Appreciate the question, Scott.

Yeah, so yes, the overall organic underlying rate environment is very favorable for the prenatal side of the business. It's coming from both of the subcategories of testing that you were referencing. We also have some favorable mix that's impacting the ASP environment. We're not, I don't think, going to break down the individual contributions of each product, but just to say that we have positive momentum across the portfolio, and that's consistent with what we saw throughout 2024 as well. I think in terms of the incremental tailwinds that we've got, so yes, we had mentioned that we were seeing some incremental coverage wins in advance of any kind of guideline change, and we expect to continue to see more of that, but I don't think we're ready to quantify that yet.

Understood. I'm not quantifying it yet, but then just one follow-up then on the guidelines inclusion. Do you have any updated expectations with respect to ACOG guidelines inclusion for expanded carrier screening, and if you're expecting that this year still or not? Thanks.

You know, we continue to track and anticipate and be fully prepared for that inclusion. But unfortunately, I don't think we have any specific intel that isn't already out there. So we are ready and prepared. It will be a good guy when it happens.

Thanks. Thank you. At this time, I would now like to turn the conference back over to Matt Scallo for closing remarks.

Okay, thanks, Gigi. And 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. We'll talk to you soon.

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