Myriad Genetics Inc (MYGN) 2002 Q4 法說會逐字稿

Good day all on the conference call. You are in the listen-only mode. I will turn over to your host Mr. Peter Meldrum.

Thank you and good morning. It is my pleasure to welcome you today to the Myriad Genetics earnings conference call. My name is Peter Meldrum. I am the president and chief executive officer of Myriad Genetics. I am joined today by Dr. Adrian Hobden, president of Myriad Pharmaceutical, Dr. Daniel Christianson from the University of Utah. Dr. Gregory Critchfield, president of Myriad Laboratories and (inaudible) at Myriad. I will begin with a brief review of the company's financial results for the year ended June 30, 2002. I will be followed by Dr. Hobdon who will discuss the Alzheimer's phase 1 clinical study. He will be joined by Dr. Christianson who will share his thoughts. Dr. Gregory Critchfield will review the status of the campaign for breast cancer test BRAC analysis. He will also discuss COLARIS, which was introduced in May of 2002. At the end of the presentation, I will ask the operator to begin the question-and-answer session of the conference call.

2002 was a successful year. We made great strides in therapeutic development programs and predicted medicine business. Myriad achieved majority of its goals that it set out for itself during the year, an accomplishment that builds upon our past track record. For the year ended June 30, 2002, total revenues increased to record $53.8 million, as compared to approximately $45 million for the prior year.

This increase resulted from strong demand for predicted medicine products and wider acceptance of our products by the medical community. In particular, BRACAnalysis and COLARIS enjoyed strong revenue growth. Not only did we achieve strong revenue growth in lead products, but we also extended our cancer predictive franchise to two new product introductions during the fiscal year. MELARIS, which identifies individuals at high risk for melanoma, a deadly form of skin cancer, was introduced last fall and has been well received by oncologists and dermatologist. That was in the spring of COLARIS, which predicts colon cancer. Predictive medicine revenues increased to approximately $27 million, as compared to $17 million for fiscal 2001.

The gross profit margin for predictive medicine business increased to 60% in fiscal year 2002, as compared to 56.7% in the prior year. This improvement in gross profit margin was due primarily to economies of scale that resulted from increased testing volume. The gross margins were helped by improvement in high-through put sequencing technologies. At loss for the year was under $14 million or 59 cents per share, compared with $7.2 million or 31 cents per share for fiscal 2001.

During the year, we made a substantial investment in the development of new pharmaceutical products with clinical studies now underway in prostate cancer and Alzheimer's disease. Research and development expense for fiscal 2002 increased to $36.6 million. This increase in R and D came in a large part during the fourth fiscal quarter as we advanced prostate cancer study and prepared IND submission to the FDA for Alzheimer's disease. Drs. Hobden and Christianson will discuss this new clinical study in greater detail.

Sales, general and administrative expenses grew to 25.5 million, from 17.1 million for the previous year, as the company expanded its sales force from 75 sales representatives in fiscal 2001, to 106 sales representatives in fiscal 2002. A significant portion of this increase occurred in the fourth quarter, as the company prepared its direct to consumer marketing campaign, which will be launched this fall. Dr. Crutchfield will discuss the status of the DP launch later in the conference call.

The cash flow from predictive medicine business and our modest annual net loss has enabled the company to maintain strong cash position. As of June 30, 2002, the company had over 124 million dollars in cash and investments. Additionally the company has no debt and no convertible debentures, rounding out a strong balance sheet. The company achieved a number of significant milestones during fiscal 2002. On the therapeutic front, the company initiated clinical study on prostate cancer, advanced our lead AIDS drug into late-stage preclinical trials, discovered new anti-viral target for Hepatitis C and move novel cancer drug which kills cancer cells into preclinical animal studies.

Predictive medicine front, we entered into strategic alliance with LabCorp and introduced two new commercial products. LabCorp sales force will market Myriad products to primary care physicians to help identify individuals with family history of cancer. This large at-risk population of individuals represents greatest opportunity for us as a company to make an impact in delays the onset or potentially even preventing cancer. Strategic alliances serve multiple purposes at Myriad. They validate our technology and allow us to reinvest in maintaining technology leadership. Several key alliances were formed this year that build potential for growth down the road.

In March 2002, we entered into 34 million dollar strategic alliance with Abbott Laboratories to develop new therapy for the treatment of depression. This alliance was followed in April of 2002 with a $24 million Genomics collaboration with DuPont. Earlier in the year we announced pharmacogenomics collaboration with Pharmacia. The synergy between predictive medicine and disease prevention is more widely recognized than ever. To prevent disease, a high-risk population must be identified and therapies developed to specifically address that risk. A preventive therapy must be safe and efficacious, since no disease is present. Myriad is developing such therapies today, building on our success with the identification of people at high risk for cancer.

One day soon, we hope to identify risk, treat and prevent cancer, all with Myriad-developed products. It is now my pleasure to introduce Dr. Adrian Hobden, president of Myriad pharmaceutical.

Thank you. Good morning, everybody. This morning we announced very exciting development for Myriad Genetics, submission of IND for use of flurbiprofen in (inaudible). Issued patent on flurbiprofen through the prevention of Alzheimer's disease and aspired patents elsewhere in the world. (inaudible) new disease area outside of our principal areas of focus, namely cancer and anti-viral. Therefore, the data suggesting potential utility for the drug in Alzheimer's disease has to be strong. In this case, our data support the IND is outstanding. I would like to acknowledge at this stage, the role of our collaberators, Dr. Todd Golde and Neill Graff-Radford and Dr. Edward (inaudible). They have played a great role in generating this data. Many of you will be aware, Alzheimer's disease research has focused in recent years on approaching fragment called beta amyloid 42 or Ab42. This molecule is generally regarded as cognitive agent of the disease.

Being found in amyloid plaque, it appears to be the core in which amyloid is deposited. Individuals from families demonstrating high instance of early onset Alzheimer's disease have mutations in genes involved in the processing and with higher than normal levels of Ab42 in the central nervous system.

Many pharmaceutical companies have begun to look for drugs able to reduce Ab42 levels. For example, so-called gamma secretice agents have been extensively studied and do reduce Ab42 and amapeptides. These compounds demonstrated significant toxicity in preclinical studies, probably as a result of the activity of gamma secretice in other processes. Therefore, there is significant opportunity for a drug that can reduce Ab42 by mechanism distinct from inhibition of gamma secretice. Flurbiprofen this has this capability. (inaudible) of the flurbiprofen. This antima no and therefore, lacks GI toxicity associate wide (inaudible). It has been suspected for years the patients taking (inaudible) on a regular and extended basis for arthritis had a lower than expected instance of Alzheimer's disease and indeed the suspicion was confirmed in an extensive perspective study in Europe, so called Rubber DemStudy. The instance of Alzheimer's disease in patients taking the drug was reduced compared to age-matched controls.

Since all (inaudible) are inhibitors, naturally the assumption was that the Alzheimer's effect was a result of inhibition of (inaudible). However, this assumption was challenged in a paper published in the scientific journal of nature last year. The authors on the papers were Todd Golde and Eddie Koo. They showed small subset of insights were capable of reducing Ab42 and they hypothesized this activity, rather than the inhibition of (inaudible) was the cause of the beneficial Alzheimer's effect.

Another group working independently of this group led by Dr. Greg Kole at Ucla, could slow down and even reverse cognitive decline in a mouse model of Alzheimer's. Therefore, a large amount of circumstantial evidence was accumulating that Ab42 was the important feature of the molecules. Was it possible to find evidence in man to support the hypothesis? In search of the evidence, the authors of the ramdam study decided to reanalyze their data, subdividing patients by those who received (inaudible), which did lower Ab42 and those which were inactive in lowering Ab42. The result was reported in July of this year in Stockholm at the eighth international conference on Alzheimer's and related diseases. It was stunning.

All the Alzheimer's benefits associated with long-term (inaudible) (inaudible) use were exclusively derived from the (inaudible) that cause Ab42 lowering. Myriad and collaberators have established flurbiprofen is among the most potent molecules of lowering Ab42 molecules in culture and mice and have enormous potential for the treatment and prevention of Alzheimer's disease. The problem, of course, with using NSAID (inaudible) each year of people hospitalized due to complications of long-term NSAID use and deaths attributable to the cause. Accordingly, Myriad Genetics and our collaberators in Mayo Clinic and ucsd will work together in this study to investigate the utility of flurbiprofen in Alzheimer's disease. In our submission to the FDA, we have proposed to initiate the Alzheimer's disease IND with phase I study to gather important safety and dosing information in elderly men and women.

The study envisions enrolling 48 healthy older volunteers to receive placebo or escalating doses of drug. We expect to complete the enrollment, dosing and analusis within a year. Beyond phase I study, our expectation is to initiate phase II study in early-stage Alzheimer's patients or patients exhibiting mild cognitive impairment, a condition increasingly recognized as pre-cursor to Alzheimer's. That study would likely look at patient's response to the drug over one year of dosing. Thank you for your attention. Now, I would like to introduce daniel Christianson, who kindly agreed to join us. Dan is traveling at the moment and is clinical professor of urology at the university of (inaudible) medicine acknowledged expert in the area.

Thank you. Good morning, everyone. I am pleased to have a moment of this conference for a brief overview of Alzheimer's disease and its current therapies. I have had a professional interest in Alzheimer's since the mid-70s. In recent years have worked with all of the available Alzheimer's medications through clinical trials and by prescribing these drugs to my patients. The prevalence of Alzheimer's disease in the United States and throughout the world is projected to increase dramatically in the next decades. This will occur largely because we are an aging society.

We are living longer and age is a primary risk factor for Alzheimer's. About 40% of us at age 85 will suffer from Alzheimer's. Eventually, not recognizing those we love most, unable to manage our basic needs and requiring full-time care to feed, protect, dress, bathe and even diaper us, just as our parents did as we were infants. There are now about four million Alzheimer's patients in the United States with that number projected to increase to 14 million by the year 2050. The emotional turmoil and caregiving burden is immense. The financial impact on families and the nation as a whole is enormous. Alzheimer's is a very expensive disorder.

With a cost to the nation now estimated at $75 to $100 billion per year. Throughout history mankind has desperately searched for a treatment for the failing mind, one generation favored painful injections of tissue taken from stillborn lambs. Others ran weak electrical currents through their scalps. The first modern treatments with reproducable scientific efficacy were introduced beginning in 1994, the group of medications call colon esterace inhibitors. They are available by prescription. All basically do the same thing, and all have significant limitations. Of most concern is their limited benefit at their worst, they do nothing, or cause intolerable side effects. At their best, they afford a slight delay of the disease process, providing a few months of stabilization before the deterioration of Alzheimer's proceeds relentlessly to death.

These drugs have no effect on the basic disease process. They are symptomatic and woefully inadequate. The future Alzheimer's treatments must alter the underlying disease process so that the rate of progression is greatly slow or reversed or better yet, prevented from ever beginning. At the recent Alzheimer's conference in Stockholm, major topic of discussion was the possibility that drugs that reduce this beta amyloid accumulation may have these properties slowing the disease or even preventing it. If such compounds to fulfill this promise, they will be used and the inhibitors will be abandoned or allocated to minor roles. Thank you for that brief moment. I will turn to Dr. Greg Crutchfield.

Thank you, Dan. It is a pleasure to speak to you today about recent activities in the predictive medicine business. As Pete mentioned, Myriad recognized revenue growing from $17 million to $27 million for the first fiscal year ending June 30, 2002. We attribute growth to the expansion of sales force now numbering 106 representatives, to excellent insurance reimbursement for tests and the continued increase clinical acceptance of predictive medicine testing for breast, ovarian cancer and colon cancer. (inaudible) BRACAnalysis and COLARIS product, we launched two new products, MELARIS, our test for risk of malignant melanoma and COLARIS ape. Myriad continues to expand the nothing of cancers for which it tests to include breast, ovary, colon uterus and skin. At the same time that we are seeing introduction of new products and significant growth, our gross margins are improving on products. Now at 60%, due to economies of scale, improvement in testing technology and price increases last spring.

The COLARIS ap test is important test in the fight against colorectal cancer. It is useful in individuals known as frequent polyp formers. These polyps transform into cancer if undetected and not removed. In addition to polyp formers well is familiar (inaudible) FAP. Individuals have elevated risk of having rectal cancer in the future, as high as 100%. COLARIS ap detects individuals at risk for both syndromes. Now, with COLARIS and the COLARIS ap test, Myriad offers testing to cover two major forms of hereditary colorectal cancer. Through the tests, individuals and families at high risk for the cancer can take effective steps to decrease the risk and prevent the disease.

Myriad's strategic partnership with LabCorp is working well. The training of all LabCorp field representatives has been completed. Both organizations are coordinating their efforts to expand the awareness and availability of predictive medicine testing to primary care markets. Our new COLARIS, p test is available through LabCorp. LabCorp is offering the Myriad products through 900 patient service centers throughout the U.S.. I would like to briefly discuss Myriad's direct to consumer campaign for BRACAnalysis. As you may be aware, we will launch the dtc campaign in two test markets next month, Denver and Atlanta. The two markets comprise much of the U.S. population. The dtc campaign will begin on September 12th, and run through the end of January, 2003.

Quantum is the ad agency working with Myriad on the campaign. They have significant experience in developing dtc campaigns and were responsible for the success of claritin campaign. Our ad campaign is selectively targeting women between the ages of 25 and 54, who have a strong family history of breast or ovarian cancer. Market research performed with 300 high-risk women indicate 85% would contact their doctor about having the test. 94% agreed it is a service I would want my child or mother to use. 62% felt this service would motivate me to switch to a health care professional providing it. 89% reported this service would give me the knowledge and power to better manage my health care. Ads will run on major television shows, including ER, CSI Ma'am, Oprah, regis and kelly, just to name a few. There will be advertisements on radio and in print in Better Homes and Gardens, weapon women Health and others. These ads introduce consumers to BRACAnalysis and educate them concerning the tests to help them in the early detection and possible prevention of breast and ovarian cancer.

To give you an idea of the extent of the campaign, we project the ads will reach 90% of homes in the target markets, average of 16.5 times per piece. We are working with medical and advocacy groups to launch the first campaign for previous genetic test. We anticipate that successful outcome of these markets will form the basis of future nationwide consumer campaign.

Our mission is to provide the best testing and information for professionals and the public. Myriad's predictive medicine products are helping us to achieve the mission as our business grows and provides longer and healthier lives for individuals and their families. Thank you.

Some of the information presented today may have contained projections or forward- looking statements regarding future events or the future financial performance of the company. These statements are only projections and the actual events or results may differ materially from management's expectations. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the form 10-K and form 10-Q reports. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

At this point in time, I would like to turn it back to the operator for the question-and-answer session of the conference call.

Very good. To ask a question at this time, please press 1 on your touchtone telephone. To withdraw yourself, press pound. To ask a question, press 1 now on your touchtone telephone.

We will take our first question from the site of Actar Samaud of Bear Stearns.

Couple of questions. Could you tell us what other AD drugs were tested by the groups at Mayo Clinic and what was the relative magnitude of decline in Ab42 by flurbiprofen versus the other drug.

Good morning. The - I would refer you to the nature paper for the complete details on this and would also say that not all the drugs have been tested by that group are contained with the nature paper. I don't feel able to reveal their data in advance of their publication.

To give you some sense, all the commonly prescribed NSAID have been tested, in fact all the NSAID have been tested by that group now. Some compounds that are not marketed. The order of reduction of the levels of Ab42 is up to 50 to 60%. In fact, if you go high enough, you can get higher than that. But, for - with respect to our flurbiprofen, it is the best molecule for doing this, much better than any of the other NSAID in there. The levels of reduction that you can achieve are in the order of 50%, given the levels of drug that we can get into people based on our clinical experience with this drug.

So, we are looking to believe we can get up to 50%. That of course is projections based upon data from self culture. Until we actually test in man, we don't know what will be achieved in that respect. From point of reference here, if you think 50% is not necessarily that large a number, in the families with a high instance of early onset Alzheimer's disease, which I referred to earlier on the degree of rise of Ab42 is less than 20%, closer to 10% and notwithstanding that fact, these individuals with onset of Alzheimer's disease in their 40s, and sometimes lower than that. You can see very small differences make big differences in terms of the impact on the disease instance prev lance.

Okay. Second question was could you tell us what the scientific rationale would be for nci and what (inaudible) phase II program?

NCI is reasonably recent recognition of the disease. The group that we are working with in Mayo Clinic and UCSD, major players within a consortium called Alzheimer's Disease Cooperative Study. And that is a program grant from the NIH, large program grant led by Leon Style, who is in ucsd. Leon and his group, one of their activities over the last few years, has been to find a cognitive test to define both Alzheimer's disease and mild cognitive impairment. It is a series of questions which they apply and you get a score out of it. This test has been at least for Alzheimer's disease, has been recognized by the FDA as an end-point for clinical trials.

And that was the original Alzheimer's disease test. They have more recently developed the MCI test. There are currently discussions ongoing with FDA relating to accepting those tests as being representative of progression of the disease or actually determining that a patient has MCI in the first place. Leon Style is actually part of the FDA advisory committee on this.

So, part of the thinking for us is that we want to do the studies in the group that would benefit most from our drug, not only from point of view of the drug getting a response, but also in terms of the patients recognizing benefit from it. To our way of thinking, that means we want to either have patients who have early stage Alzheimer's disease and who have essentially the majority of their mental state is maintained or even individuals or better still, individuals who have not yet got to that stage, but are high risk of moving to Alzheimer's disease. Just to give you an indication of that, 60% of individuals with MCI will have advanced to Alzheimer's disease within five years. It is significant progression rate. But, our hesitation with MCI is simply waiting for the FDA to recognize that as official disease, although we understand that is likely to happen.

Okay. My last question on the subject is if you could give us a sense - I know this may be difficult to answer, to give us a sense of what the relative magnitude of the incident might be for gi bleeds in ulcers versus end stage (inaudible) on Ab42. In other words, how does the risk benefit profile roughly compare to NSAID competitors already in the market?

None of the other drugs that are on the market can be given at the doses that we can give this drug out in order to achieve concentrations of drug of compound which actually give you significant Ab42 lowering. So, for the marketed NSAIDs, that limited group of NSAID, which do give Ab42 lowering you would have to, I think, quadruple the standard dose in order to reach the concentration of drug that give you reasonable levels of Ab42 lowering.

That would give you very unacceptable levels of GI bleeding. That is our prospective, anyway. As you are aware, we have tested this drug at those concentrations and are not seeing GI side effects. We feel confident there is not an NSAID that could compete with our compound and give you effects on Alzheimer's disease. I just want to add one extra thing to that. You didn't ask, but let me emphasize this point. The NSAIDs which have the lowest incidents of GI bleeding, the (inaudible) inhibitors, we and our collaberators have tested those compounds and have yet to find a compound that had an effect on Ab42 lowering. They do not lower Ab42. So, those with the compounds we expect to have the least gi bleeding. They don't appear to work.

Actually a recent report out in Stockholm show Viox had no activity in Alzheimer's disease.

Thank you. One last question for Pete. Could you please review the timeline for other possible IND filings expected this year, including MPI (inaudible).

Yes. Thank you, Octar. The company is working on 12 candidate drugs, most in late stage preclinical studies. We anticipate filing additional INDs and phase II study for prevention of colon polyp formation. The company is comfortable with the milestone and guidance that has been set forward for it by the research analysts.

Our next question from David Webber of First Albany. Go ahead, sir.

Thanks for taking my question. To follow-up on that, could you update us on the status of patient enrollment in the prostate cancer trial?

Thank you, David. The company, as you are aware, initiated a clinical study in prostate cancer at the end of last year. That study is progressing well. Enrollment is advancing, as we had originally anticipated. We are very pleased with the progress that study is achieving.

Thanks. On a different subject, could we get some guidance regarding fiscal 2003 operating expenses?

A number of the research analysts that cover the company this morning put out First Call's not only discussing the announcement of the IND submission on Alzheimer's and the fiscal year 2002 earnings, but also giving guidance for the coming year fiscal 2003. I believe that most of those research analysts are forecasting a loss of about 20 to 23 million for the company in this coming fiscal year.

That reflects direct to consumer marketing campaign that will be launched this September. Of course, the two clinical studies we have right now in prostate cancer and Alzheimer's and projecting at least two additional clinical studies, colon cancer and one other during the fiscal year. We are comfortable with those projections.

Thanks very much.

Once again, if you would like to ask a question, press 1 on your touchtone phone. I would like to announce if you would limit yourself to one question and a follow-up, that would be appreciated. Our next question is from Todd Nelson of RBC Capital.

Hi. Thank you for taking my question. Pete, congratulations on a productive quarter. My first question is to what extent, if you go to the FDA do you feel - Adrian, perhaps this is for you, that the Ab42 would be viewed by the FDA as primary clinical end-point for a trial? Or to what extent could it be relugated to market the way psa has been viewed. Second question is for Jay. Jay, what extent is the genetic testing business offsetting current burn and how should we view that going forward? Thanks.

Our next -

Let us answer, first.

I'm sorry.

Sorry, Todd. The question was what extent do you think Ab42 will be accepted as an end-point, is that correct?

Todd is not there. The answer on the assumption you are still around, Todd. The - it is our belief that initially Ab42 will be viewed by the FDA in the same way PSA is viewed. That is to say it is surrogate for activity of the compound. We think that measure of cognitive function will have to be the end-point in this disease. One of the attractions in working with the Mayo Clinic and ucsd group is the fact they have been the leaders in developing these measures of cognitive function, which are accepted by the FDA as end-points for the disease.

One of the things that pleasantly surprised us in considering clinical trial in this area was that the rate of cognitive decline - this is not good if you are an Alzheimer's patient, but from a clinical perspective. If you are Alzheimer's patient, the rate of decline is cig cant and measurable. You can see a very significant decline in cognitive function over one year using this test. That is why we were suggesting that a one-year clinical study is sufficient in order to measure cognitive decline. So, we would anticipate in the phase II study primarily looking at cognitive decline as measured by these various tests.

Rather than looking at Ab42 levels or other amyloid level or various other potential risk factors for Alzheimer's disease.

Todd, to answer your question, the predictive medicine business is having positive impact in reducing expenses that generated in other areas of the company. These will become even more offsetting in the year ahead. So, we are really pleased to have the predictive medicine business because, as you know, we are one of the view biotech companies out there that in fact do have a product and these are making significant increase in reducing burn rate.

Our next question from the site of derrick Dubren of UBS Warburg.

Couple of quick questions. This is typically the flurbiprofen is your typical focus of oncology and anti-viral, do you expect to partner this out during the later stages of development? Second question is, you know, over the last year, you had impressive gross margin improvement. I was just wondering when do you see the impact - or how do you see the impact of the LabCorp relationship going forward? What can we look for in terms of (inaudible)? Thank you.

Thank you, Derrick. The company, as you are aware, has primary focus in the area of cancer and anti-virals. In the area of anti-virals, strong drug candidates in HIV and Hepatitis C and of course, in colon cancer and prostate cancer on the cancer front.

The Alzheimer's opportunity is significant. The company is right now investigating whether or not it would want to seek a corporate partner and form a strategic alliance around this or whether or not it would decide to take this forward into the clinical ourselves. We do believe that this is a clinical trial the company can do without partnering. We do believe we can assemble a sales force to sell Alzheimer's drugs. We are also looking closely at the possibility of partnering this because it is outside our primary area of focus.

As you pointed out, the company experienced strong increases in gross margins ever since our products have been introduced. We anticipate seeing continued gross margin improvement as we increase testing volumes, we are still not up to full capacity. As we modify and improve technologies surrounding those products. So, I would anticipate and I think most of the research analysts are forecasting improvement in margins. We believe that once we have achieved full capacity that the gross margins will probably peak out in the 70 to 75% range. This coming year they will be in excess of 60%.

Thank you.

Our next question comes from Charles Duncan of Dresdner Kleinwort Wasserstein.

Good morning. Congratulations on a good year of testing revenue growth. Couple of questions off the AB subject. One is if you can provide us a little bit of color on some of your other new therapeutic product development initiatives, as well as testing product initiatives and give us some idea of when and what of those products you expect to pursue in the clinic this year? Then, second question is on the strategic alliance front. I will ask that after your first one.

Let me go first, Charles. You are asking about things other than Alzheimer's. We have a number of programs ongoing looking for molecules from various diseases in the area of HIV, other diseases like Hepatitis C and cancer. Cancer is one of our big areas of interest.

We have very exciting opportunities in this area. The AIDS opportunity is building off the paper we published in Nature last year on the budding mechanism for HIV virus. We continue to believe that is an exciting opportunity for new drugs which would likely escape the problems associated with viral resistance to drugs. So, that is a program progressing nicely, as Peter said earlier on in the conference call. And in the area of oncology, we have a number of different targets, one directed at specifically colon cancer and another program directed more at solid tumors looking at the induction of apetosis and which we think would have opportunities in angiogenesis. Those programs particularly to look for further information into the future.

We have compounds in animals progressing in late stage clinical development and looking forward to filing - sorry, submitting one IND in the near future.

I think I will pass to Greg.

Charles, with regard to new product development. As you know, we are currently developing the Colaris product, product for predisposition for prostate cancer. We are also developing a test for diabetes and these are going to be important tests we add to our (inaudible). If you think about the area of cancer predisposition, we already cover the great majority of cancers for which any predisposition cause is known. We see it complimenting our current offerings with products in the cancer area that rounded out completely with COLARIS. By that time, virtually all cancer will research and find generic predisposition and will be incorporated into Myriad products. We are excited about that.

Would you provide some color on the revenue breakdown of the existing products? Are the new products having a bigger impact on growth or is BRACAnalysis and COLARIS still having pretty robust growth?

Thank you, Charles. As you are aware, we don't specifically break down product line by product line. But, BRACAnalysis is still our largest growing product. It is still even though it is more mature, growing rapidly. COLARIS and COLARIS AP are two fastest growing products. COLARIS accounting for a substantial portion of the revenues. We are beginning to see now even though it has been introduced for six months, strong interest and demand on MELARIS, as well. So, I would say all products are performing extremely well and contributing to the company and we clearly with built a very exciting franchise.

Our next question from James Rosen of Brain Murray and Company.

Thank you. Quickly for Jay. Jay, can you break out what the receivables and payables were at the end of the fiscal year? Can you also possibly break out any specific IND related costs and any milestone payments you may have made or received?

let me take the milestone payment first. We had a milestone payment related to flurbiprofen that we made in the fourth quarter. And I think - I am glad you asked the question, Jimmy, because if one were to take the fourth quarter and just multiply by outlook, they are really wrong with the run rate for the company. It will not be as large as that over the next four quarters.

So, I think it is really important that we focus on that. Also, the cost that we incurred in the creative aspect of our direct to consumer campaign, we are really expensed primarily in the fourth quarter of this year. So, our selling, general and administrative expenses were a little higher than they would normally be. These creative costs, if we were able to use this on a national basis, we have already made the expense and so, I think that as we go forward and hopefully will be successful and can launch it nationally. Then, the cost will be incurred will be related to media buys. There was a bit of a one-time aspect to our fourth quarter and so, I just want to make it clear our run rate will not - you can't multiply by four and come up with a correct number. The analysts that have put out guidance for 2003, I think have it pretty much on.

Can you specify what the numbers were?

I can't specify. I don't have those in front of me. As Pete mentioned, they are in the range of (inaudible) for the year. Now, as far as the receivables go, as of the end of the year, they are roughly in the 6 and a half million dollar range. And the payables are right around the 9 million dollar range. It gives you some color there.

These will obviously be filed in our 10-K in about a month. I think that is pretty much it.

Our next question is Craig Layton of J.P. Morgan.

Hi, guys. I am just wondering why the gross margin was sequentially down when the revenues from testing were up? And what happened there? Also, could you help me understand what would a positive result of the advertising campaign be, as in quantitatively or qualitatively what you are looking for that would generate the advancement or allow you guys to advance?

Thank you. As you noted, the gross margins for the year were up substantially over the previous year, exceeding 60%, compared to 56.7%. There are minor fluctuations from quarter to quarter, but the gross margins have improved each quarter basically since we launched our first test four or five years ago. I will let Greg handle the question on the dpc campaign.

what we are looking for is comparison of the test markets before the campaign was launched and looking at rate of growth of these areas. We have controlled markets we are comparing to. We are looking at effectiveness of the various forms of advertising that we are doing. We will focus down when we go with a successful campaign nationally. We will focus down on the ones that are most effective.

We have got the measures in place to look at those things.

Our next question comes from Adam Cuttler of BOA Securities.

Could you give us an indication of what proportion of your testing revenues came through your relationship with LabCorp this quarter? On a related note, just wondering when you think is a fair time period for us to expect to see what the real impact of the relationship would be to genetic testing reference?

The relationship that we announced in the spring with LabCorp involved the training and education of all 600 LabCorp sales representatives. And as we mentioned, that has just been completed. There was essentially no contribution from the LabCorp relationship in the fourth quarter of revenues. We have, however, completed the training of the LabCorp sales representatives. They are now actively selling a Myriad product. We do anticipate a good relationship with them going forward.

Our next question comes from Mr. Matt Geller 6of CIBC.

Couple of questions about the Alzheimer's product. (inaudible) you are planning on or have established around it? Second of all, in terms of proving gi safety, can you talk about what plans you have for proving the lack of gi toxicity and when you might be able to get some indication of how well that has worked out?

Sure, Matt. The toxicity issue is obviously always a key issue. I don't think we look at gi toxity, but safety as a general issue. A part of every protocol that we submit and enter into is always important aspect of it is monitoring safety. So, in that study, this phase I study is about safety, but also about dosing because one of the things we tend to issue in is the concentration that the drug achieves within the (inaudible).

We have yet to see any significant gi toxicity which is attributable to this drug. We have safety monitoring committee looking in our prostate study exactly at that safety issues. Thus far, there has been nothing flagged to us. We have no reason to believe that there are any instances of safety issues related to this drug. We will continue to monitor it and certainly agree with your unstated question relating to the need to establish this drug is safe.

It is certainly our perspective the drug is extremely safe. Can you remind me of the other question?

Intellectual property position.

We have in the order of 10 or 11 patents on this compound, filed in various parts of the world. We have four issued patents, one of the issued patents is a U.S.-issued patent on Alzheimer's disease for this compound. Of course, we have patents pending elsewhere in the world for the same indication. We are actively looking to increase our patent portfolio around this module. We think that we have a strong patent position as we stand right now.

Very good. Thank you.

There are no further questions at this time. I will turn back to Mr. Peter Meldrum.

Thank you, everyone for attending and listen to the Myriad genetics conference call. We appreciate your attendance and will conclude it at this time. Thank you, again.

This concludes the conference call for this morning. You may now disconnect your lines and thank you for participating.