Myriad Genetics Inc (MYGN) 2006 Q1 法說會逐字稿

Good morning. My name is Paula and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Myriad Genetics first-quarter 2006 financial conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions). Thank you. Mr. Meldrum, you may begin your conference.

Good morning and welcome to the Myriad Genetics earnings conference call for our first fiscal quarter, which ended September 30, 2005. My name is Peter Meldrum, and I'm the President and Chief Executive Officer. I am joined today by Jay Moyes, Chief Financial Officer; Gregory Critchfield, President of Myriad Genetic Laboratories; and Adrian Hobden, President of Myriad Pharmaceuticals.

I will begin the discussion this morning with a brief review of the past quarter and will be followed by Mr. Moyes, who will discuss the financial results for the first quarter of our 2006 fiscal year. Dr. Critchfield will review the Company's predictive medicine business, and Dr. Hobden will discuss the status of our clinical trials program and our preclinical drug candidates. At the end of the presentation, I will turn the call back over to the operator for the question-and-answer period.

Please note that some of the information presented here today may contain projections or other forward-looking statements regarding the future events or financial performance of the Company. These statements are based on management's current expectations, and actual events may differ materially and adversely from those expectations for a variety of reasons.

We refer you to the documents the Company files from time to time with the Securities and Exchange Commission, specifically the Company's Annual Report 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.

Our first fiscal quarter is typically our weakest quarter due to the seasonality of our business. However, this was an exceptionally strong quarter with, once again, record product revenues, record gross profit margins and record net operating profit in our predictive medicine business. As a result of our increased sales and marketing and publications that reinforced the clinical utility of our, products we enjoyed increased market penetration across all four of our product lines.

Product revenues totaled 21.5 million for the quarter, the highest in our Company's history. Our strategy of combining a strong therapeutic development focus with a profitable operating business in predictive medicine appears to be succeeding. These complementary life science opportunities enable us to take maximum advantage of our scientific breakthroughs, while reducing the risk to the Company and maintaining a modest cash burn.

Again, this strategy is reflected in our performance. The growth of our predictive medicine business generated 6.7 million of net profits for this quarter. That's more than 2 million each month. Furthermore, even with six clinical trials underway, our loss for this quarter as compared to the same quarter last year decreased by 9%.

This fiscal year, we expect to have three potential first-in-class drugs in human clinical trials. Each of these drug candidates address major market opportunities with significant unmet medical needs.

Drug-resistant strains of the AIDS virus are rapidly increasing and becoming a medical problem. In fact, a University of California study estimated that 42% of AIDS patients will develop a drug-resistant form of the disease this year. Myriad's viral maturation inhibitor, MPI-49839, represents a new class of HIV drugs that stops viral particles from budding and reaching maturity, thus preventing the virus from infecting others cells. In preclinical studies, MPI-49839 has shown to dramatically reduce the viral load of all of the HIV strains that we have tested, including many of the drug-resistant strains of HIV.

More than 10 million Americans are living with cancer today. Despite steady progress in the treatment of primary tumors, cancer cells frequently spread to other parts of the body. This metastatic process often results in multiple brain tumors. According to Dr. Lauren Abrey at Memorial Sloan-Kettering Cancer Center, treating brain tumors has proven to be one of the greatest challenges in cancer therapy.

Myriad's first-in-class therapeutic for metastatic brain disease, MPC-6827, has not only demonstrated excellent tumor inhibition activity in animal models, but it easily crosses the blood/brain barrier to get at the brain tumors. Additionally, our cancer drug candidates is not removed from cancer cells by MDR pumps that cause multiple drug resistance -- a serious problem with other chemotherapeutic drugs. As Dr. Abrey has noted, MPC-6827 has shown the potential in preclinical models to cross the blood/brain barrier and achieve therapeutic levels. We will complete Phase I testing of MPC-6827 later this fiscal year.

Alzheimer's disease isn't a natural, acceptable part of the aging process. It is a terrible disease that destroys an individual's ability to think, steals their memories and even robs them of their personality. Today, 4.5 million cases of Alzheimer's disease are projected to triple to over 14 million by the year 2050. Unfortunately, none of the current drugs on the market can slow the rate of disease progression in Alzheimer's patients. They can only provide temporary symptomatic relief.

By attacking the cause of Alzheimer's disease, Myriad's first-in-class selective beta-amyloid-lowering agents, Flurizan, actually slows the rate of decline in mild Alzheimer's patients by as much as 45% in our Phase II study. The potential of this drug is reflected in the words of one of the patients in our Phase III study, Norm Bassett (ph) of Rhode Island, who recently said, "Son of a gun, I started to remember stuff. I'm getting back to where I was. I cook; I clean house, too. You can't explain how good it feels. It's like being born again."

It's my pleasure now turn the call over to our CFO, Jay Moyes.

Thank you, Pete. It certainly is a pleasure to present a more detailed look at Myriad's financial results for our first fiscal quarter ending September 30, 2005. As Pete mentioned, we're very pleased to report the predictive medicine revenues for the quarter ended September 30, 2005, were $21.5 million. This result represents a 49% increase over the same quarter in the prior year and a modest increase over the previous quarter, which is historically one of our stronger quarters. Once again, this excellent result exceeded the analysts' consensus predictive medicine revenue forecast for the quarter.

Despite the disruption caused by the recent hurricane activity in the Southeast region of the United States, the sample flows observed since September 30, 2005, continue to be strong, with patients sample flows ranging between 900 and 1000 samples per week.

Our gross profit margin on predictive medicine sales this quarter was 73%, an increase of 2% over the 71% margin in the same quarter ending September 30, 2004. The increase in the gross margin was primarily attributable to the expiration of the PCR patent.

As I noted last quarter, Myriad has made and continues to make investments that are designed to improve the long-term performance of our predictive medicine business. During the quarter ended September 30, 2005, we completed the comprehensive implementation of a state-of-the-art customer relationship management or CRM system, which will enable us to more efficiently coordinate the relationships we have with healthcare providers, insurers and patients.

Accounts receivable collections, as measured by the number of days sales outstanding, was 78 days for the quarter ending September 30, 2005, compared to 103 days for the same quarter in the prior year. This substantial improvement is a direct result of information technology enhancements combined with the dedication of our internal billing and collections team. The quality of our accounts receivable remains excellent.

Total revenues for the quarter ended September 30, 2005, were $25.1 million, which represents a 50% increase over the same quarter in the prior year. This strong result exceeded the research analysts' consensus estimate of $23 million. As I mentioned earlier, the primary reason for this excellent performance was the growth in predictive medicine revenues. However, research revenues for the three months ended September 30, 2005, also increased by 57% over the same quarter in the prior year to $3.6 million. We anticipate that our research revenues will fluctuate from quarter to quarter as we continue to deemphasize external research programs and focus our efforts on drug development.

Research and development expenses for the quarter ending September 30, 2005, were $18.5 million. This represents a 41% increase over the same quarter in the prior year and an increase of 15% over the prior quarter. This increase was primarily due to costs associated with the three Phase I trials for Myriad's cancer drug candidates, as well as our late-stage human clinical trials in prostate cancer and Alzheimer's disease.

We have also made significant expenditures in the late-stage preclinical development of our other drug candidates, including our novel HIV compound and our oral thrombin inhibitor. Since we have six human clinical trials underway and one or two more trials planned for this fiscal year, we expect our research and development expenses to continue to grow over the next several quarters.

Selling, general and administrative expenses for the quarter ending September 30, 2005, were $10.9 million, compared to $10 million in the same quarter of the prior year. The 9% increase over the prior year was largely attributable to expenses incurred to support the 49% growth in our predictive medicine revenues, along with our drug development programs. We expect that our selling, general and administrative expenses will continue to increase depending on a variety of factors, including the number and scope of new product launches, our drug discovery and drug development efforts, and our growth in predictive medicine revenues.

Our net loss for the first fiscal quarter ending September 30, 2005, was $9.2 million or $0.30 per share. This compares with $10 million or $0.33 per share for the same quarter in the prior year. We were pleased that this result was better than the research analysts' consensus loss for the quarter of $0.35 per share. This modest quarterly net loss is a direct result of the significant earnings contribution made by our predictive medicine business, which was $7.2 million before taxes, depreciation and amortization.

Additionally, the operating margin of our predictive medicine business for the quarter ending September 30, 2005, was 31%, which represents a significant improvement over the 14% operating margin generated in the same quarter of the prior year and the 25% operating margin for the prior quarter.

The impact of the implementation of FASB 123R, Accounting for Stock Options, on our first fiscal quarter was $239,000. All of our costs centers were impacted, including our cost of goods sold; research and development expense; and selling, general and administrative expense. As of September 30, 2005, there was approximately $5.2 million of unrecognized share-based compensation that will be expensed over the vesting period of the underlying options.

Cash, cash equivalents and marketable investment securities was $103 million at September 30, 2005. This compares to $113.8 million in the prior quarter. We again point out that Myriad has no debt and no convertible securities and that the total number of shares outstanding at September 30, 2005, was 30.9 million shares.

Thank you for your attention, and I will now turn the conference call over to Dr. Gregory Critchfield.

Thank you, Jay. I'm pleased to echo Pete and Jay's excitement over our record $21.5 million in predictive medicine revenues for this past fiscal quarter. What was even more impressive to me was the net profit -- the net operating profit of 31% and the 7.2 million earnings contribution before taxes, depreciation and amortization that we generated last quarter.

As our testing volumes grow, we're continuing to upgrade our internal capabilities to improve quality and increase capacity. As an example, during the last quarter, we installed a new 384-well pipetting robot that enhances our ability to prepare large quantities of reagent plates that are used in our sequencing process.

Another improvement we have recently implemented is the new software system that supports our sales force. This system allows us to capture critical customer historical data, improving the efficiency of our sales force and helping us to better respond to our clients' needs.

We are also in the process of developing advanced robotics and state-of-the-art capillary sequencing capabilities on newer technology platforms that will be installed in the laboratory later this fiscal year. We see all of these efforts as ways to improve quality and throughput in our testing processes.

Our predictive medicine business is growing because, armed with our information, individuals identified at high risk for cancers can do something about it. Preventive measures may allow individuals to escape what would otherwise be a tragic destiny. Patients, patients' families and doctors use this information to benefit those that need it most. The clinical utility of our predictive medicine products continues to grow as new studies publish research that supports our predictive medicine paradigm. A few recent examples are illustrative.

Fitch (ph) and colleagues reported in the Journal of Gynecological Oncology that 4.4% of BRCA mutation carriers who had the ovaries removed to reduce future cancer risk had a previously clinically undetectable cancer that would not have otherwise been found until it reached a more dangerous and advanced stage of disease.

From the University of Chicago, Dr. Oloparde and collaborators recently published an article in the Journal of the American Medical Association, showing that BRCA analysis testing in the management of high-risk African-American families is important irrespective of their ancestry.

Dr. Rebek at the University of Pennsylvania and a team of international researchers published a paper in the Journal of Clinical Oncology reporting that the risk reduction in breast cancer rates conferred by ovary surgery is preserved in patients who receive hormone replacement therapy.

In the Journal of Gastroenterology, Campbell and colleagues at the University of Ohio found that the age of onset of cancer in HNPCC patients -- this is one of the major colon cancer syndromes -- tested for Myriad's Colaris product may be higher than previously thought and that testing may be warranted in older patients.

The MYH gene, an exclusive part of Myriad's Colaris AP product, is becoming an important component of the genetic assessment of the other major colon cancer syndrome, where patients tend to form many polyps. Individuals who form polyps run the risk of developing colorectal cancer. Nielsen and colleagues in the Netherlands reported in the Journal of Medical Genetics that patients with MYH mutations had polyp counts that were similar to those in the classical and attenuation polyp-forming syndromes and they recommended that biannual endoscopy be performed in these patients.

A report by Jo and others from the Harvard Medical School in Clinical Gastroenterology and Hepatology showed that individuals who are considered clinically to have the other colon cancer syndrome may in fact carry MYH mutations. The authors recommended that "MYH testing can thus be considered" for these patients who are not found to carry mutations for the other syndrome.

In an Australian study by Karrapan (ph) and colleagues reported in the International Journal of Cancer, an additional 16% of polyps cases are explained by MYH mutations.

As additional studies continue to expand the clinical utility of our tests, we're better able to educate doctors and patients about the value of testing.

We spoke last quarter about several new initiatives we have undertaken to grow our business. One of these important initiatives is the education of individual physician practices on how to identify and test patients at risk for hereditary cancer. This work involves efforts with professional societies such as ONS, SGNO, SGNA to develop educational programs and train advanced practice nurses in genetic education. To date, these educational effort have trained over 1500 healthcare workers so they can provide patient counseling and education.

On the insurance front, we're continuing our efforts to expand coverage and streamline insurance reimbursement processes to benefit patients. The discussions with insurers cover topics such as eliminating cumbersome preauthorization, broadening coverage criteria to additional patients covered by insurance plans and executing contracts to increase our presence in managed care settings. As our efforts continue to meet with success, we expect that these improvements in insurance coverage will support greater growth of our products.

Predictive medicine makes a difference for individuals and families at the highest risk for cancer. Our predictive medicine business continues its growth, powered by increasingly greater clinical utility, greater physician and patient awareness, and widespread insurance reimbursement. We look forward to helping more individuals as this business grows.

Thank you. I would like to now pass the microphone to Dr. Adrian Hobden. Adrian?

Thank you, Greg, and good morning. This morning, I will provide an update on the progress with our clinical trials and provide a little more information on two exciting compounds that we have in preclinical development. We expect to submit INDs on one or both of these compounds as early as the end of this fiscal year -- that is before June 30, 2006.

I'm pleased to announce that enrollment into our U.S. Phase III Flurizan trial is proceeding well and on schedule. We're continuing to see great interest in the trial, both from patients and investigators. This interest is the result of the activity of the compound that we saw in the Phase II trial, the patient-friendly protocol -- patients can stay on their current Alzheimer's medications -- and the low side effects profile of Flurizan. In fact, several patients have been on the highest dose of Flurizan for over three years, and the data monitoring committees have not raised any safety concerns.

As you may be aware, patients in Canada were allowed to enroll in a follow-on study to our Phase II trial. Over 80% of eligible patients chose to enroll. In the follow-on phase, all patients are on drug. Patients who were on the highest dose through 12 months remained on that dose. Patients on the lower dose remained on that dose. And placebo patients were randomized to high or low dose. Neither the patient nor the doctor knows the current or previous drug status of the patient. In that way, we can see whether there is a difference in response to high or low drug and eliminate bias.

Professor Gordon Wilcox, the principal investigator on the Phase II trial, recently reported the 15-month data at a scientific conference in Stockholm. Remarkably, patients on the highest dose saw an improvement in their cognitive score from 12 months to 15 months. In contrast, patients on the lower dose had a continuing decline. This difference between the two groups argues strongly against the placebo effect or investigator or patient bias. The positive data is available on Myriad's website.

On November 15, Dr. Sandra Black, the principal investigator for the Phase II trial in Canada, will present the 18-month data from the follow-on study at the Society of Neuroscience meeting in Washington, D.C.

Of course, Flurizan is not the only drug that Myriad has under clinical development. We have two cancer drugs -- MPC-6827 and MPC-2130 -- in Phase I trials. We are studying MPC-6827 for its ability to treat patients with solid tumors and especially people with metastases in the brain. MPC-2130 is being studied primarily in blood cancers, but also in those patients who have advanced metastatic disease.

Both drugs, while acting by different molecular mechanisms, have strong anticancer activity in animal models, and they are also not substrates for multiple drug-resistance pumps. Furthermore, MPC-6827 is more able to cross the blood/brain barrier and enter the brain more efficiently than any approved cancer drug.

The concentration of MPC-6827 in the brains of mice was an extraordinary 1500% of plasma levels. We are very excited about the potential of MPC-6827 to be a first-in-class drug for the treatment of brain metastases. As Pete has already indicated, there are currently no FDA-approved drugs for the treatment of brain metastases, a condition which affects 170,000 Americans per year.

At present, both drugs are in dose escalation studies. The objectives of these Phase I trials is to assess the safety of these drugs and identify the maximum tolerated dose. Unfortunately, we have yet to reach the maximum tolerated dose, and therefore we are unable to report any data from these trials. However, we expect to be able to report some results from these compounds later this fiscal year.

We've also been very busy in preclinical development and discovery biology. We have a number of compounds that have the potential to enter the clinic in the near future, including our HIV maturation inhibitor, MPI-49839. We have solved the earlier formulation issues with this compound, and it is now on track for an IND filing as early as the end of this fiscal year.

MPI-49839 is an orally available small molecule with a potency of approximately 5 nanomole against a variety of HIV strains. Oral bioavailability exceeds 90%, and the half-life in animals suggests that once-a-day oral dosing in man would be appropriate.

We believe that MPI-49839 is a new class of HIV drug and will be a very exciting addition to the compendium of drugs being used to treat this life-threatening condition. I would also remind you that this compound arose from Myriad's interest in viral maturation and budding from human cells.

We have several earlier programs with compounds that may affect other viruses of significant therapeutic and commercial interest, such as Hepatitis-C.

MPC-0920 is another exciting compound in preclinical development at Myriad. We expect to submit an IND filing as early as the end of this fiscal year for this orally available thrombin inhibitor for the treatment of thrombotic conditions. MPC-0920 has been shown to be a selective and potent direct thrombin inhibitor, with oral bioavailability in a number of animal species.

Furthermore, we have completed several toxicology studies without identifying any safety concerns. As you may be aware, there is a considerable unmet medical need for an oral treatment for thrombotic conditions such as deep vein thrombosis and atrial fibrillations. As the population ages, this need becomes even more critical.

There is currently only one FDA-approved oral medication for these conditions -- warfarin. This compound has been available for about 50 years and has serious side effect issues. Warfarin is used as a pesticide for the control of mice and rats due to its ability to cause uncontrolled bleeding. Indeed, warfarin has a narrow therapeutic window and serious drug interaction problems. Patients are titrated very carefully onto warfarin so as not to cause excessive bleeding, and this process can take several weeks, during which time the patient's thrombotic condition is not well-controlled. We believe that our thrombin inhibitor will have a much wider therapeutic index and will, therefore, be far easier to use than current medications.

In conclusion, Myriad has again been extremely busy and productive in extending our portfolio of experimental drugs. Taken together with Flurizan, which has the potential to revolutionize the treatment of Alzheimer's disease, and our cancer drugs, which may change the way cancers of the brain are treated, the future is bright.

Thank you for your attention, and I will now turn the call back to Pete.

Thank you, Adrian, and I will turn it back to the operator for the Q&A session.

(Operator Instructions). Shiv Kapoor, Montgomery & Co.

Thanks for taking my question, and great quarter. I've got a couple of questions on the leverage of your predictive medicine business. There has been some fluctuation in the SG&A lately. There was a big difference between last quarter and this quarter. Is the underlying growth rate of 9% that we saw this quarter, is that consistent with what we will see in the future?

This is Jay. I believe that that is a relatively consistent increase that you will continue to see throughout the remainder of the fiscal year.

And just a follow-up to that. What were the cash flows from the predictive medicine business this quarter?

We actually don't compute that directly. But the earnings contribution before amortization, depreciation and taxes was $7.2 million.

David Munno, Merrill Lynch. I'm sorry, sir, his line has disconnected. Obed Zapeda (ph).

Concerning predictive medicine revenues, can you give any more color on how individual products are performing? I believe you indicated a gain in all four products.

Yes, that's correct. We saw substantial increases compared to the prior year's quarter in all four of our product lines. And we're seeing the greatest increases in the Colaris products. They are newer and their growth rates are stronger than the other product lines.

But we also saw a very strong growth in Melaris this quarter, our predictive medicine test for melanoma. BRAC analysis is our largest-selling test, and it also did extremely well, and we're seeing double-digit growth in BRACAnalysis as well compared to the quarter of the prior year. So we're actually seeing very strong growth in all four of the products and are very pleased with their performance.

Congrats on that. I have one more follow-up. Concerning collaborative research revenue, it was a bit higher this quarter. Can you explain maybe and sort of reiterate the increase, and also do you expect this to be a onetime gain or a potential base moving forward?

This is Jay. We actually record revenues when deliverables have been -- when the research or data that we are compiling has been delivered to the collaborator, which is based on the new accounting standards. In the past, we've used -- tried to more closely match revenues with expenses, but unfortunately, the FASB decided that this was not an appropriate measure of revenues. So when we deliver the data, we record the revenue and we delivered -- had a milestone -- not really a milestone in the purest sense, but we had a deliverable that we processed this quarter and that is why the revenues were increased.

This is Pete. Let me interject just two thoughts. You probably are going to see a larger revenue -- research revenue line through the next several quarters based upon the work that we are completing for our collaborators. But I would like to point out that we have deemphasized external collaborations in favor of developing drugs for our own account within Adrian's group. So we're deemphasizing the research revenue component of our business. However, you will see that larger than the previous year for the next several quarters going forward.

Matthew Murray, Rodman & Renshaw.

Actually, my question has already been asked and answered. But if I could, can I just follow up, Pete, on your response to the last question, which was on that research revenue line. So you have been averaging about 3.5 million a quarter this year. Is that something we should continue forward at that rate for the next couple of quarters?

Yes, that's about right. I think that would be a good figure for the next several quarters going forward.

William Ho, Piper Jaffray.

Just a couple questions. First, as a follow-up, can you by any chance tell me how many ongoing collaborations you have?

The Company has three right now -- ongoing collaborations -- one with Abbott in the area of depression, one with DuPont and a third collaboration that slips my mind, but as I mentioned, we are deemphasizing external collaborations in favor of internal direct development.

Also, with your predictive medicine, the revenue growth that you gained so far, you had mentioned that a lot of that was marketshare gain. Do you expect to gain from price increases in this fiscal year?

The Company -- all of that gain was from increased sample volume. The Company has not had a price increase since April of 2004. The Company does from time to time, usually about every 18 months or so, increase the price of its tests. We've been fortunate -- there has been very little pushback from insurance companies and HMOs in terms of reimbursement of the test.

And so the Company is right now taking a look at each of its product lines and will consider the possibility of a future price increase next calendar year. But all of the gains were increased marketshare. There was no price increase that affected the current revenue line.

Just a final question. Jay, is there any reason why the SG&A declined quarter over quarter?

As you know, we have fluctuations in our selling expense, and part of that is reflected in -- particularly in the fourth quarter because the commission structure is set up so that there is in some respects a catch-up in the fourth quarter that reflects the results of the prior quarters. But we don't know that until the fourth quarter. So that's the primary thing I think you're observing.

This is Pete. Let me clarify that just a little bit. Our sales force are given quarterly sales goals in addition to an annual sales goal. And so at the end of the first quarter, the commissions are accrued based upon their ability to achieve the first-quarter sales quota, and that's what we did this quarter, of course. We do that on second quarter; we do that third quarter.

On fourth quarter, though, they have not only the fourth-quarter sales goal, but then the year-end sales goal. And so in essence, they get an extra portion of commission that quarter based upon achieving not only the fourth-quarter sales goal, but the year-end sales goal as well. So, traditionally, our fourth quarter is higher than the other quarters in terms of the commission expense.

Perfect. Thank you and congrats on a great quarter.

Charles Duncan, JMP Securities.

Let me add my congratulations on a good quarter as well. I had a question on predictive medicine revenue. I'm wondering if you could provide us some additional color on really where, for example, within each product line some of the growth opportunities lie? Are they with patients who have demonstrated a familial history of cancers, or are they for other areas of cancer or patient populations, and whether or not there's been any impact on reimbursement of some of the recent retrospective analyses in BRACAnalysis?

Thank you, Charles. Basically, we have three types of patients that take advantage of Myriad's predictive medicine test. The first group, which has been growing nicely, are presymptomatic women who do not yet have cancer that have a family history of the disease. And we've seen good growth based in part upon articles like Dr. Oloparde's article out of the University of Chicago.

The second group of patients, of course, are newly diagnosed patients with cancer, particularly if that's at a younger age, significant of a hereditary cancer, and that has traditionally been one of our strongest parts of our market.

But, one of the areas that we're seeing quite a bit of new growth in are older women and men who have been diagnosed with cancer maybe 15 or 20 years ago. The cancer has come back and begun to spread. They have metastatic disease. And there is more evidence now that these tests help guide the selection of the appropriate chemotherapy for those patients. So we're actually seeing quite good growth across all of those lines, and in all of those cases, it is reimbursed by insurance. Let me have Greg add a little bit to that.

Charles, the other thing that we're seeing with the retrospective analyses is that they actually reinforce what our strategy have been from the beginning, and that is identify individuals who are at high risk. The recommendations by ASCO, by the American Gastroenterological Association and others all emphasize the need to focus on individuals that are at high risk of having cancer and that those are the individuals that are worked up and are tested and get the benefits of predictive medicine.

This has been our strategy from the beginning, and the recent publications only reinforce that strategy. We're not seeing any adverse impact from insurers. In fact, what we're seeing is that insurers are broadening the coverage to groups of patients that need it.

So pretty compelling pharmacoeconomics. My follow-up question is actually on a different subject. It's on Flurizan. I know that you gave the update that things are going well, Adrian, but I'm wondering if you could be a little more quantitative in terms of either number of patients enrolled or number of sites started up. And then as a follow-on to that, whether or not the current R&D volume trend is going to continue into next year or for the rest of this year and what we should expect year-end R&D to be.

In terms of the sites, Charles, I think we've stated publicly that we have approximately 130 sites. I think it's 133 if we're going to be precise about it. And almost all of those are up and enrolling patients. I think there may be a couple still waiting for IRB approval. But other than that, we're going.

And the enrollment is coming along nicely. We have never issued numbers in the middle of a trial. But I think you have already projected when we would complete enrollment, and we feel comfortable with that projection.

And Charles, the Company will announce when it's put the last patient on drug and completed enrollment. In terms of the R&D spend, we do see that continuing to grow. As we enroll more patients in the Phase III study, we continue the follow-on Phase II study, as we have three Phase I studies underway now in human clinical trials. And, as Adrian mentioned in his talk this morning, we plan to move one to two more drugs into the clinic this year, the HIV drug and the thrombin inhibitor, of course, being the two that are furthest along.

Ted Tenthoff, Piper Jaffray.

Sticking with the drug pipeline, can you give us an update on Flurizan in prostate cancer? As I recall, enrollment's completed there and we're really just waiting for that follow-up phase to complete. So can you tighten up maybe when we could see early prostate data next year?

You're absolutely right. The involvement was completed some time ago, so we're dealing with patients that have been on drug for a number of years now, actually. And that's where the patients who've been on drug for over three years came from in my introductory talk that we had -- a significant amount of safety data being generated from the trial --admittedly all in men, but elderly men with an average age which is very equivalent to our Alzheimer population.

They continue to be taking drug on a daily basis, and the trial is scheduled to complete in I think May or June of next year, 2006. And so it will take this about two to three months to get the data out from that. But other than that, the only thing I can say is that we do have a regular data monitoring committee that reviews that data and they met fairly recently without any issues.

David Munno, Merrill Lynch.

I just wanted to ask on the pipeline, you have obviously a number of drugs coming up in the preclinical as well as the cancer compounds that you're testing in Phase I right now. So is there going to be a focus on a particular disease area, and if not, which of these compounds might be ones that you would look to potential partner out?

Myriad is focused very much on cancer, and we have three cancer clinical studies under way. Alzheimer's, of course, with the Flurizan drug and antivirals, as Adrian mentioned -- not only HIV, which we anticipate will enter human clinical trials this fiscal year, but also working on Hep C and other antiviral compounds. So that is the Company's focus, and in those areas, we intend to take those drugs forward into clinical trials through the regulatory process and NDA filing, if we're fortunate to have those drugs continue to perform well.

Our technology, however, is very broad and applies through many disease states. For example, our recent publications of Apaf-1 in depression, which is very exciting because most of depression is focused on serotonin, its metabolism and reuptake. And with that publication, we noted that actual programmed cell death of neurons is a an important component of understanding major depression.

And the thrombin inhibitor would also fit in that class that is outside our primary area of focus. So in those areas, we do tend to partner with major pharmaceutical companies. We have partnered Apaf-1 with Abbott and we will move the thrombin inhibitor into a Phase I study. But we would hope to partner the thrombin inhibitor before going further down the clinic.

And for the Alzheimer's and for the AIDS program, which are more typically pharma-based products, would you look to partner those as well and retain some copromote rights, or are you planning to commercialize them entirely within Myriad?

In the three areas that we focus on -- cancer, antivirals and Alzheimer's -- we really do tend to want to keep those drugs pretty much to ourselves, with one exception, which I will address in a minute.

Cancer is pretty obvious. We have a large oncology sales force -- over 115 full-time, dedicated Myriad employees selling our cancer predictive medicine products. That same sales force can sell the cancer drugs if they are approved by the FDA.

The reason we like oncology is it's a small, concentrated market of physicians. And that can be said about HIV as well. HIV docs are a small, concentrated group, and we can certainly build a sales force to address the HIV market opportunity. So, we do not intend to partner that same strategy as with cancer. But instead, we build our own HIV sales force.

Alzheimer's, as you've noted, is a little different. About 30% of the scrips are written by neurologists. And we do intend to build a neurology sales force. That, again, is a smaller, more concentrated group of physicians and one that we think we can handle with our own internal sales force.

But, that does leave about 70% of the scrips, which are written by primary care. And of course, there's no way Myriad can build a primary care sales force. That would not make sense. So we will have to partner the Alzheimer's drug to address the primary care physician market.

But we intend to do that at a late stage, post-Phase III, so that we can command more value for the Company. We're very capable, I think, financially and with the human resources in completing the Phase III clinical trial, and that would be the most appropriate time, we believe, to enter into partner discussions in terms of Alzheimer's. But we would take a very active role in terms of marketing the drug to neurologists and leave it to our pharmaceutical partner to address primary care.

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. Mr. Meldrum, are there any closing remarks?

No, other than to thank everyone for their participation in the Myriad Genetics earnings conference call. We appreciate that very much.

This concludes today's Myriad Genetics conference call. You may now disconnect.