Myriad Genetics Inc (MYGN) 2003 Q4 法說會逐字稿

Good day. All sites are now on the conference line in a listen only mode. I would like to turn it over to your host, Mr. Peter Meldrum. Go-ahead please.

Thank you. Good morning and welcome to the Myriad Genetics earnings conference call for the year ended June 30, 2003. My name is Peter Meldrum and I am the President and Chief Executive Officer. I am joined today by Dr. Mark Skolnick, our Chief Scientific Officer, Dr. Adrian Hobden, President of Myriad Pharmaceuticals, Dr. Gregory Critchfield, President of Myriad Genetic Laboratories and Mr. Jay Moyes, our Chief Financial Officer. I will begin the discussion this morning with a brief review of the Company's Alzheimer's disease program. I will be followed by Mr. Moyes, who will discuss our financial results for the fourth quarter and year ended June 30, 2003. Dr. Hobden will then review the status of our other drug development programs. Dr. Skolnick will discuss the status of our research programs, and Dr. Critchfield will conclude with a review of the Company's direct to consumer marketing campaign. At the end of the presentation, I will turn it back to the operator for the question and answer portion of the conference call.

Please note that some of the information presented here today may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company. These statements are only predictions and the actual events or results may differ materially from management's expectations. We refer you to the documents the Company has filed from time to time with the Securities and Exchange Commission, specifically the Company's annual reports on Form 10-K and its quarterly reports on Form 10-Q. 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.

The Company has made significant progress during the past quarter toward its goal of developing new therapeutic and predictive medicine products. In June, we announced that we had an open enrollment for patients in our phase two clinical trial of MPC-7869 or R-Flurbiprofen for the treatment of Alzheimer's disease. The 12 month-long trial is being conducted in the United Kingdom and Canada at approximately 30 centers. It is a randomized double-blind placebo-controlled study, involving approximately 200 patients with mild to moderate Alzheimer's disease.

There are three arms to the phase two trial. The control arm will receive asitile (ph) cholinesterase inhibitors. The two treated arms will be given cholinesterase inhibitors and either 400 mg of MPC-7869 twice a day or 800 mg of Myriad's drug twice a day. Cholinesterase inhibitors are the present standard of care for the treatment of patients with Alzheimers disease. However, they do nothing to treat the cause of Alzheimers disease or slow the decline in cognitive function that is associated with this debilitating disease. The rate of cognitive decline is the same whether you are on cholinesterase inhibitors or not.

The primary outcome measure for our study is the one year change in two cognitive assessment tests. These well-defined surrogate (ph) clinical endpoints are acceptable by the FDA for drug approval and where the ones used for the approval of the cholinesterase inhibitors marketed today.

The first test is ADAS-cog, which stands for Alzheimers disease assessment scale cognitive subscale. This test scores a patient from 0 to 70 points with a score 0 representing a healthy individual with excellent cognitive function and a score of 70 indicating an individual with severe cognitive impairment. Patients enrolled in our study will generally score between 20 and 25 points. Based on previous clinical studies, we expect to see an approximate 6 point increase in the A-cog score in the control arm over the 12 month study period.

The second outcome measure is CDR-SB which stands for clinical dementia rating sum of boxes. This test is scored from 0 to 18 with 0 representing normal cognitive function and 18 indicating a severe cognitive impairment. Patients enrolled in our phase two study will generally score between 5 and 6 points. Again, given the rate of disease progression, we anticipate a 2 to 3 point increase in the CDR-SB score in the control arm over the 12 months study period.

Based on previous published studies, with two different end saves that were known to lower A-Beta 42 levels but by much less than our drug candidate, we powered our phase two study at a 90% confidence level to show statistical significance at a similar improvement in the rate of cognitive decline.

We're particularly excited about this phase two study because of MPC-7869's ability to reduce A-Beta 42 levels both in vitro and in vivo by targeting a key enzyme called gamma secretase (ph). A-Beta 42 is the abbreviation for beta ammoliod peptide consisting of 42 amino acids. As I mentioned, A-Beta 42 is the primary constituent of the senile plaques that accumulate in the brains of patients with Alzheimers disease. It is thought to be a key initiator of Alzheimers disease since this peptide has the greatest tendency to aggregate, cause neuronal damage and initiate amyloid deposits in the brain. Most genetic mutations that cause early onset Alzheimers disease in families with a history of the disease, do so by increasing production of A-Beta 42.

MPC-7869 causes a shift in the cleavage side of the beta ammoliod (ph) pre-secretase of protein by gamma secretase (ph) to produce A-Beta 38 instead of A-Beta 42. Unlike A-Beta 42, A-Beta 38 is a soluble non-toxic peptide that does not accumulate in the formation of senile plaques.

Our Alzheimer's candidate drug was further validated recently by a new research study published in August 2003 in the issue of the Journal of Clinical Investigation. The study conducted by scientists at the Mayo Clinic, the University of California San Diego and Myriad demonstrated that Myriad's Alzheimers drug candidate was the only drug tested that showed both significant A-Beta 42 lowering ability and an acceptable safety profile without the serious gastrointestinal side effects associated with many of the other drug candidates.

Dr. Tod Goldey (ph), the senior author from Mayo Clinic commented that, and I quote, "because R-Flurbiprofen reduces A-Beta 42 levels by targeting gamma secretase (ph) and has reduced side effects related to the inhibition of cyclo oxygen, it stands apart from the drugs tested as a promising drug candidate for lowering A-Beta 42 levels and potentially, preventing the cognitive decline in Alzheimers disease." Truly, we are very excited about this drug candidate.

I'd now like to turn the conference call over to Jay Moyes. Jay?

Thank you Pete. It is a pleasure to discuss Myriad's financial results for our fourth fiscal quarter and year ending June 30 2003. I am particularly pleased to report that Myriad's predictive medicine business has achieved 27 consecutive quarters of revenue growth. Predictive medicine revenues for the year ended June 30, 2003 were $34.7 million. This represents a substantial 29% increase over the $26.8 million in revenues for the prior year ended June 30, 2002. Total revenues increased to a record $64.3 million from $53.8 million for fiscal 2002.

Our gross margin percentage increased again this quarter to 65%, resulting in a gross margin of 64% for the entire year. This is a 4% margin improvement over the 60% margin of the prior year ended June 30, 2002. This achievement was realized through technology improvement such as the full implementation of capillary sequencing and gains in efficiencies from increasing the throughput in our predictive medicine laboratory.

Total research revenues for the year ended June 30, 2003 were $29.6 million compared to $27 million for the prior year, an increase of 10%. This increase is primarily attributable to substantial progress made with our strategic alliance partners. Research and development expenses for the year were $47.6 million compared to $36.3 million for the year ended June 30, 2002. This increase of 31% was primarily due to increased costs associated with our ongoing clinical trials in prostate cancer and Alzheimers disease, pre-clinical development of HIV and cancer drugs, as well as drug discovery and drug development programs. These included the HOB1 obesity gene, the first known gene to cause human obesity and the DEP-1 depression gene, which may lead to a whole new class of drug to treat depression, distinct from the current SSRIs.

Selling, general and administrative expenses for the year ended June 30, 2003 were $31.5 million compared to $25.5 million in the prior year ended June 30, 2002. This 24% increase in selling, general and administrative expenses from the prior year reflects approximately $4 million associated with our direct to consumer marketing campaign, which ran from September 2002 through February 2003. Selling, general and administrative expenses consist primarily of salaries, commissions and related personnel costs for marketing, executive, legal, finance, accounting, human resources and business development personnel, non allocated facility expenses and other corporate expenses. We expect our selling, general and administrative expenses will continue to fluctuate depending on the number and scope of new product launches in our drug discovery and drug development efforts.

Our net loss for the year was $24.8 million or 96 cents per share compared with $14 million or 59 cents per share for the year ended June 30, 2002. This increase loss is a direct result of our increased expenditures in and commitment to the area of drug development. We expect our loss to continue to increase modestly in the future as we move more drugs into the clinic but remain confident that our burn rate will remain among the lowest of our peer group in the biotech industry.

Cash, cash equivalents and marketable invested securities increased $2.1 million or 2% from the 124 million -- 124.2 million at June 30, 2002 to 126.3 million at June 30, 2003. This increase in cash, cash equivalents and marketable invested securities is primarily attributable to the public offering of our common stock in November of 2002. We again, point out that Myriad has no debt and no convertible securities and the total number of shares outstanding at June 30, 2003 is a very modest $27.1 million -- or rather, 27.1 million shares, sorry.

Thank you for your attention. I will now turn the conference call over to Adrian.

Think you Jay and good morning. As Peter has discussed, Myriad initiated a phase two clinical trial for MPC-7869 in Alzheimers disease last quarter following the acceptance of our clinical submissions to the UK and Canadian regulatory authorities. I agree with Pete that this compound has enormous potential to mediate the loss of cognitive function in Alzheimers disease patients.

At the same time, we've been working hard to ready other compounds for IND submissions. Myriad is on track to submit an IND to the FDA on our anti-HIV drug, MPI 49839 by the end of the calendar year. I'm pleased to report that we are also on track to submit at least one other IND in an oncology indication, the compounds discovered using Myriad's internal proprietary target identification and drug screening technology. We hope to do that by the end of our fiscal year, June 30, 2004.

Our lead compound, MPI 49839, is being developed for the treatment of HIV. This drug exploits the pronet (ph) pathway which Myriad published in the scientific journal Cell in October 2001. The discovery, you may recall, is related to the mechanism HIV virus uses to bud from human cells and release infectious particles, which can then go on to infect other cells. If that mechanism is blocked, immature viral particles are trapped on the cell's surface and the cycle of infection, release and re-infection is broken.

Myriad has been able to identify a large and complex pathway of viral and human interactive (ph) proteins involved in this process. We believe that no one has a better understanding of this biological process, all the better points for pharmaceutical intervention (ph) in this process than Myriad.

Uniquely, unlike the current generation of anti-HIV drugs, our small molecule drug candidate does not attack the virus directly but inhibits a human protein which results in the inhibition of HIV virus release without evident toxicity. The compound is already available in animals and it appears to have a promising safety profile.

As you may be aware, the instance of AIDS has started to rise again in the United States. This appears to be due to a combination of viral resistance to drugs and complacency about treatment options for this disease in certain populations. Strains of HIV are appearing that are resistant to all classes of existing antiviral drugs. The HIV genome has a high rate of mutation, which leads to this drug resistance. However, human genes have a very low rate of mutation, which implies that it should be more difficult, if not impossible, for HIV to become resistant to MPI 49839.

We believe that MPI 49839 has the potential to complement or even displace the current generation of anti- HIV drugs. Myriad is actively developing this compound and is currently completing a range of studies required for an IND filing later this year. At the same time, we are determining the potential of this and related molecules for other viral diseases.

In examining the pathway of interacting proteins, we realized that other viruses such as hepatitis C, which also buds from cells, appears to share these same human proteins that are inhibited by MPI 49839. We have demonstrated that inhibiting this target also inhibits the release of other viruses. We're currently determining the range of viruses that may be susceptible to the drugs of this class and we have an internal medicinal chemistry program to identify follow-up compounds which may have utility for these viral diseases.

Our anticancer drug MPI 176716 is a small molecule compound which has activity against both solid tumors and leukemia. The compound was identified by Myriad researchers as a result of our high throughput screening and medicinal chemistry programs. Myriad has filed composition of matter patents on this and related compounds.

MPI 176716 have a novel mechanism of action related to the induction of epitasis in cancer cells. We're not aware of any other company developing compounds against this target.

Myriad is particularly interested in exploiting synergies between its diagnostic products and future therapeutic products. As a result, we've explored the utility of this compound in animal models for ovarian cancer and we continue to explore its utility in other cancers. As you may be aware, ovarian cancer is a disease that is hard to detect and extremely hard to treat. There's an enormous need for new treatments.

In combination with (indiscernible), a drug approved for treatment of ovarian cancer, MPI 176716 has demonstrated that it can destroy implanted tumors in mice and achieve complete remission from the cancer. In contrast, most drugs simply reduce the rate of which such tumors grow. In line with most cancer therapies and regimes, we're working to develop MPI 176716 as an IND infusion for clinical trials. We also expect to examine the efficacy of the drug in combination with standard of care treatment. I hope to have the opportunity to talk about progress in this area and in our other early drug discovery programs in subsequent conference calls.

Thank you for your attention and I would now like to introduce Mark Skolnick.

Good morning ladies and gentlemen. It's a pleasure for me to provide an update on Myriad's research program. This has been an exciting year for us. We've made two very significant gene discoveries and we've had the opportunity to explore them as drug targets and identify actual drug candidates as I will describe shortly.

The first gene discovery was HOB1. This represents the first human obesity gene to be identified, a breakthrough discovery of an important gene for a major complex genetic disorder. HOB1 appears to provide a crucial molecular link between obesity and diabetes, two related diseases which affect nearly one-third of America.

While HOB1 was found in large (indiscernible) it's role in diabetes was demonstrated through Myriad protein protein interaction platform which placed HOB1 directly in the diabetes pathway. Fortunately, HOB1 proved to be a very addressable target and we were able to build a screen for it and run it through Myriad's high throughput screening platform. We have found several primary hits which inhibited function and these are now being studied.

As HOB1 was initially discovered as an obesity gene then discovered to be in the diabetes pathway, we are studying the drug candidates and cellular assays to understand their effect on both sugar and fat metabolism.

Since this is outside of our internal therapeutic focus, we continue discussions with various pharmaceutical companies to determine our optimal strategy for partnering our diabetes and obesity drug discovery program.

The second gene discovery was the DEP-1 gene, which predisposes carriers to major and bipolar depression. The DEP-1 gene acts as a novel pathway not previously known to be involved in depression and may lead to a novel class of antidepressant therapeutics. The DEP-1 protein and proteins in its associated pathway are not associated with serotonin synthesis, metabolism, re-uptake or core (ph) biological activity. Therefore, they are independent of the dominant class of antidepressant drugs currently used to treat depression known as selective serotonin re-uptake inhibitors such as Prozac and Zoloft.

This program has been partnered with Abbott Pharmaceuticals. The collaboration is focusing on functional validation of the proteins and the (indiscernible) pathways potential drug target using biological analysis with innovative technology for evaluating the importance of a particular protein and the cause of the disease.

The combined use of Myriad's and Abbott's technologies provides a fast and effective means of drug target evaluation. Abbott's extensive experience in drug discovery and development should enable rapid advancement of any product identified through the collaboration into clinical development.

The DEP-1 collaboration continues to be an extremely important and provable (ph) collaboration both because of the pharmaceutical novelty of the target and the quality and dedication of the research team that Myriad and Abbott have assembled.

We have also had the opportunity to successfully conclude two research collaboration recently. Our collaboration with Pharmacia has been successfully completed on schedule with our research team identifying a number of interesting drug targets. We also completed our research collaboration with Hitachi in April of this year. This was a very productive collaboration around our protein interaction (ph) technology which has created a pathway for potential collaborations with pharmaceutical companies in Japan. We are also on schedule to complete our research collaboration with DuPont in the fourth calendar quarter of this year as originally scheduled.

This year has also been the beginning of the development of new research technologies at Myriad. We're developing novel approaches to target discovery, which blends our strength in genetic analysis and protein interaction with a vast amount of data which is now available from gene expression analysis and which is beginning to emerge from protein expression analysis. This in fact, is the promise of the post genomic era and we feel we are in an excellent position to take advantage of this opportunity and accelerate our drug discovery program.

Thank you. It is my pleasure to turn the call over to Greg Critchfield.

Thank you Mark. It is a pleasure to give an update on Myriad's direct to consumer marketing campaign. We began the test marketing campaign in the test market cities of Denver and Atlanta last fall and completed in February of this year. The goal of the campaign was to determine if direct to consumer marketing would increase consumer awareness concerning the genetics of breast and ovarian cancer and move women with a family history of breast or ovarian cancer to take steps to reduce their risk of getting cancer later in life by taking a BRACAnalysis test. I'm pleased to present further information on the result of the campaign as we now have data through the end of June 2003.

To refresh your memories about the campaign, we focused on the target audience of women between the ages of 25 and 55. Approximately 1200 TV spots, 370 radio commercials, 20 full page magazine and 12 newspaper ads ran in the two test market cities over a five-month period. 92% of the target audience saw ads-- saw these ads an average of 16 and half times.

Health care providers responded well to the educational portion of the campaign that actually began before the consumer media launch. There was a 406% increase in requests for the American Medical Association Monograph on hereditary breast and ovarian cancer with nearly 4800 physicians taking part in this educational program. This education was an important part of the strategy to educate physicians on how to identify patients in their practices who can benefit from BRACAnalysis. As a result of the campaign, we saw 50% increase in the number of genetic testing centers in Atlanta and 100% increase in the number of genetic testing centers in Denver.

The consumer response was excellent with a 38 to one ratio of calls to our toll-free number from test versus control markets. Test markets also produced the majority of Web visits during the media run, about 40% of worldwide volume. Television ads generated the greatest response with the Oprah and Dr. Phil programs generating the greatest response. The positive rates in genetic testing actually increased as a result of the campaign.

We analyzed the revenue occurring as a result of the DTC (ph) campaign. The analysis was based on the BRACAnalysis tests only. Two time periods were examined, first from January 2001 through September 2002 to establish the historical growth rate and then from October 2000 -- from October 2002 to June 2003 to measure the effect of the campaign. We examined metropolitan zip code areas to ensure the proper metropolitan areas in the media markets were included in the analysis. We used a city's historical curve as its own control. We adjusted for any extraordinary events.

The campaign did increase testing revenues. We saw increased BRACAnalysis revenues of over 30% over the historical revenue level. We also saw increased growth rates compared to the control cities of Detroit, St. Louis and Kansas City. Through June 2003, we are still seeing long-term effects of the campaign. As we gather more data into the fall, we will be in a position to fully understand the staying power of the campaign efforts. We are also gathering information on the availability of counseling research and its relationship to test volume.

Our conclusions at this point -- the campaign showed that health care providers are motivated to identify and counsel patients for BRACAnalysis testing. Testing increases as consumers respond very favorably to this media campaign. Helping individuals to receive streamlined counseling services is an important element of the testing process. There are potentially economies in targeting the most effective media channels based on our data.

We still need to assess the long-term staying power of the DTC campaign to determine its cost-effectiveness. As we've established the cost benefit ratio, we will make a decision whether or not to continue DTC marketing on a national -- on a regional or national basis.

We look forward to the future as we continue to make our lifesaving testing available to individuals and families at risk of hereditary breast and ovarian cancer. The knowledge provided by our testing is powered and enables people to live longer and happier lives.

Thank you. I will now turn the time back over to Pete.

Thank you, Greg. And I would like to ask the operator to begin the question-and-answer portion of the conference call.

(OPERATOR INSTRUCTIONS). Derik DeBruin from UBS.

Hi, good morning and thank you. I just had a couple of questions here. So I'm looking at the revenues for the diagnostic testing for the quarter. I am a little bit interested to see it looks like it was not that much of a sequential increase. I am just curious as do you feel like that there is a bigger reason why there seems to be a little plateauing here. Has there been a price increase lately and I want to know what your expectations are going forward and how you -- in addition to the DTC, what other things you are doing to re-accelerate the business?

Thank you Derik. The revenues for the year of course, were up substantially as they have been since we launched the test. But we do see fluctuations from quarter to quarter and that is governed by some seasonality and many other different factors. So I don't think it is reflective of the predictive medicine growth to look at just one quarter compared to the previous quarter.

As you pointed out, the revenue growth did increase but was modest between third quarter ending March 31, 2003 and the fourth quarter ending June 30,2003. But that we view as pretty typical, just fluctuations that occur in seasonality in quarter to quarter, so we still see growth occurring in our predictive medicine business.

Okay. And are you prepared to give guidance into the next fiscal year, in terms of what you think the business is going to achieve?

No. The Company has not in the past and does not going forward, give financial guidance.

Okay. And just looking at the research revenues then, so now that the DuPont is going to be finishing and you finished the Hitachi and Pharmacia, what is the effect of having these alliances of these two collaborations completed in terms of the recent revenue stream?

Yes, you are correct in that we completed two research collaborations this year, Pharmacia and Hitachi and as Mark mentioned, are on schedule to complete DuPont toward the end of this calendar year. Myriad is focusing on its own internal drug development and I would argue that an investor should be interested in Myriad's stock because of our Alzheimers drug, because of the pipeline with HIV and other oncology products and because of the predictive medicine business, which grew 29% last year and is a profitable part of the Company as a stand-alone entity. And not because we do research collaborations from time to time with other pharmaceutical companies.

So that's a much less in my view, significant component of the Company and one that we are de-emphasizing going forward and diverting our efforts toward our own drug development programs.

Okay. Just one final question on - and looking at the drug development programs, so could you update us on the status of the Flurizan for prostate cancer and I assume that the (indiscernible) enrolling, I believe it's been about a year now since you had patients on drugs and also the fact, are we -- should we expect the results from the first Alzheimers study to come out in the near-term?

You are right. MPC-7869 initiated over a year ago enrollment for men with earlier stage prostate cancer. This study envisions enrolling approximately 400 patients at 65 sites throughout the United States and as you mentioned, we have had patients on drug now for over a year and given the most recent report from the drug monitoring safety committee, they indicated that they had no patients withdraw because of any adverse events, that the drug was being well-tolerated and strongly recommended we continue the program.

This is a long-term program because prostate cancer is a slower growing cancer. This is scheduled to go for three years, from enrollment of the prostate cancer patients in the program.

We do not as a company, historically talk about when full enrollment has been reached. There is no interim look. The study was powered such that we did not have an interim look for the prostate cancer study and so it will be of course since we've only had patients on drug for over a year, sometime before we have results in the prostate cancer study.

However, we remain very excited about the drug based on both the phase two results and all of the animal data in its ability to slow or prevent prostate cancer patients from advancing to metastatic prostate cancer.

With regard to the phase one study in Alzheimers disease, that study is going very well and once the study is completed, we will announce the results of that phase one study and that should happen probably in the first calendar quarter of next year.

Thank you.

Mark Augustine (ph) from CSFB.

Thanks so much for taking my question. Peter, I wanted to ask or maybe Jay, if you could tell us a breakout of accounts receivable by trade and other end related parties during the quarter? Thanks.

Mark, we can do that. Let me grab it here. We've got -- normally, trade accounts receivable were just over $13 million and the rest of it was primarily related to the receivables from collaborators.

Okay.

So there is -- there actually was nothing in receivables from related parties.

Repeat that? I think I might have misunderstood. Okay, got you -- no, I got you. I'm sorry. Then a question, a science question, it was mentioned earlier that the viral budding inhibition strategy in HIV might be ported over to hepatitis C and I was wondering if someone would take a moment and talk a little bit more about where the efforts stand right now in hepatitis C?

Mark, this is Adrian Hobden.

Yes, Adrien. Thank you.

If you recall, maybe a couple of years ago, what we did was we started with HIV proteins looking for human proteins to interact with it and discovered that a particular HIV protein called P6 (ph) interacted with a particular human protein called TSG (ph) 101. Subsequently, we discovered that a number of other viruses mostly of non-commercial significance, at least in Western society, also used TSG 101. However, if you follow down from TSG 101 into other interacting human proteins, you start to come to the point where you realize that other virus are interacting with the underlying machinery of the cell for budding. And although we haven't done a fully inclusive examination of this, that includes Hepatitis B, Hepatitis C, influenza, herpes simplex and just about any other virus you might conceive of as being of interest in Western medicine. And what we have been interested to do is to identify whether there are opportunities for drug discovery either at a relatively selective level. That is to say a specific HIV inhibitor or specific hepatitis C inhibitor or targets which might give you more pan viral activities. And we are also particularly interested in finding the key points where you can inhibit a human protein without obviously causing toxicity to the cell and clearly that's important to us.

So our primary program at this stage is to develop our NDA (ph) HIV compound and then follow that up with a series of compounds relating to other viruses, of which most important, we would consider the most important virus to be hepatitis C. So we have a medicinal chemistry program ongoing right now looking at the ability of compounds -- to find compounds that have the ability to inhibit both HIV as a follow-up compound and hepatitis C for example, as a new program.

Thank you very much, Adrien.

Craig Laten (ph) from J.P. Morgan.

No response.

Once again, our next question comes from Craig Laten (ph) of J.P. Morgan.

Hi, guys.

Hi Craig.

Just a quick couple of questions on predictive medicine. I guess I'm given pause by the fact that this is the slowest sequential and in fact, year-over-year growth rate for that division since you guys started it up. I just want to understand have there been any structural issues within the salesforce or anything else that might explain it?

Thank you Craig. As the company's revenues increase and the numbers get bigger, obviously we do expect the percentage growth rate to be less just because it's on a bigger base. So you are correct, it is a smaller growth. But it is still on an absolute basis, significant growth over the previous year and as I mentioned, we do see quarter to quarter fluctuations so I wouldn't read too much into the small growth between third and fourth quarters.

Specifically answering your question then, no, there have been no structural changes within the sales organization. There have been no issues or problems in any part of the sales organization for the company. In fact, we are very excited about the future of our predictive medicine business.

You still have about 100 sales reps?

Yes, we have a little over 100 sales reps.

Do you expect to grow that at all this year?

Yes, typically each year we will grow that modestly. We do have a critical mass however with over 100 sales reps and I believe in terms of of a salesforce calling on oncologists, Bristol-Myers Squibb is the largest. I think Astra-Zeneca is number two and I believe we are right in there in third or fourth position, so it's a significant a critical mass and we don't see growing that substantially in the future. We think it's adequate to address the oncology sector.

You talked about hiring some dermatology focused sales reps before and I am just wondering if that is still in the plans to focus on (indiscernible)?

Yes, we do focus in a couple of other areas that are smaller than oncology but these are clearly going to be the growth rates -- the growth areas for the Company in the future. One is gastroenterology, so we do have sales people who call on gastroenterologists for our COLARIS product. The second area is OB/GYNs and we do have some sales reps specifically addressing the OB/GYN market for BRACAnalysis and we do have as you pointed out, a small salesforce looking at dermatologists for the MELARIS product.

While we don't see significant expansion in the oncology sector because we think that's well covered, we will be adding to those three other areas in the future.

Okay. Just two quick questions then. Before you ranked the individual tests, not giving detailed numbers but at least ranking the growth rates and I am wondering -- if you might do that again, is COLARIS growing much faster than Braca (ph) or what's happening in the order of growth rates?

In terms of sales volume, BRACAnalysis is first. COLARIS and COLARIS AP are second and MELARIS is third. In terms of growth rate, COLARIS is the fastest-growing. BRACAnalysis is probably second fastest growing.

This is revenue or volume?

This would be both in revenue and test. The numbers I am using are revenue.

Okay great. And then just lastly, before you guys have talked a little bit about new tests and I guess that would be an avenue of growth for this franchise, so what are the new tests you are thinking about over the next 12 months or so?

The company is currently looking very closely at prostate cancer, given our discovery of HPC2 and our research in the prostate cancer area. We've initiated a number of clinical studies looking at the clinical utility and predictive value of the prostate cancer predisposition test. As Mark pointed out, the discovery of both the DEP-1 gene and HOB1 for not only obesity but more specifically diabetes, are very exciting potential products for the company. If you could identify an individual who was at heightened risk for diabetes early in life, that individual could modify his or her diet and lifestyle and take action that might even prevent him from getting diabetes later in life.

So we have a number of very exciting products that are under development within the predictive medicine area.

Do you expect any new tests to launch within the next 12 months?

We haven't given any guidance in terms of that, but we're certainly working diligently on bringing additional tests to market in future.

Okay. Thanks guys.

Thank you.

(OPERATOR INSTRUCTIONS). Frank DiLorenzo from Standard & Poor's.

Thanks. Just a quick question on predictive medicine. Can you give us and update on Lab Corp, if you're seeing any attraction there with that alliance? It seems like since that alliance, the sales growth hasn't really picked up or maintained prior levels.

Yes, I would be happy to talk about it. Lab Corp, as you know, is our partner to address the primary care market. Lab Corp has at least 700 sales reps that are able to address the market that we are not equipped to address by ourselves. We are excited about the prospects of that. I would say that it takes time to put things like that in place and get them going. Right now we are very optimistic that that will yield some growth in the OB/GYN area. I think that I would look to the future for us to be able to better address that market than we have been able to in the past.

Lab Corp has over 200,000 clinician clients. They call on these people everyday. It's an excellent way for us to distribute materials. We used Lab Corp extensively in the DTC campaign in the two test market cities and they helped us to achieve the numbers we talked about today.

So I think that overall I would say that we are poised to see more growth in the OB/GYN sector.

I would add to what Greg has said in indicating we are very pleased with the Lab Corp. relationship. We are very pleased with the commitment that Tom McMann (ph) has made to Myriad in this area.

It took a long time for us to train all the Lab Corp. sales force because our products are different from what they are used to selling and that training program didn't really conclude until fall of last year and Lab Corp. was not actively marketing Myriad products until the fall of last year. So it's only been six to nine months since they have been marketing products.

The product cycle, in terms of orders, is one also that unfortunately, just is more lengthy. It's not a situation where a Lab Corp. salesperson would call on a OB/GYN, take an order that day and then we would fill that order. It takes four or five calls in terms of answering questions, distributing literature, before a physician is moved to consider ordering a BRAC Analysis or COLARIS test. Once the physician has made that decision in his own mind, then he waits for a patient usually to come in who has a family history, then would discuss with that patient scheduled genetic counseling and just the ordering cycle once a physician has had his first visit with a patient, is about three to four months.

So I think it's a little bit early yet to assess how well the Lab Corp. relationship is working. We are very optimistic, we're very excited about the relationship and we'll just have to wait for a little bit more time to pass before we can really assess the value of that collaboration.

Thanks.

There appears to be no further questions. I would like to turn the call back over to management.

I would like to thank everyone for listening in and attending the Myriad Genetics earnings conference call. And we appreciate your questions and interest in the Company and this now does conclude the conference call. Thank you very much.

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