Myriad Genetics Inc (MYGN) 2006 Q3 法說會逐字稿

Good morning. At this time I would like to welcome everyone to the Myriad Genetics earnings conference call. [OPERATOR INSTRUCTIONS.] Mr. Meldrum, you may begin your conference.

Thank you. Good morning and welcome to the Myriad Genetics earnings conference call for our third fiscal quarter.

My name is Peter Meldrum and I'm the President and Chief Executive Officer. I am joined today by Jay Moyes, our Chief Financial Officer, Gregory Critchfield, President of Myriad Genetics Laboratories, Adrian Hobden, President of Myriad Pharmaceutical, and Jerry Lanchbury, Executive Vice President of Research. 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 our financial results. Dr. Critchfield will review the company's predictive medicine business and Dr. Hobden will discuss the initiation of the Phase I clinical trial for oral thrombin inhibitor. Finally, Dr. Lanchbury will review our strategic alliance with Abbott. At the end of the presentation I will turn the conference call over to the operator for a question and answer period.

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 based on management's current expectations and actual events or results 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), its quarterly reports on Form 10(Q), and its current reports on form 8(K) including the 8(K) report filed on October 28, 2005. These documents identify important risk factors that could cause actual results to differ materially from those contained in our projections or other forward-looking statements.

Myriad is aggressively developing novel first in class drugs that address major disease indications such as Cancer, Alzheimer's disease and AIDS. We current have seven human clinical trials ongoing at Myriad.

In our Alzheimer's Phase II follow-on study of Flurizan we recently presented data at about both the meeting of the American Association for gericatric psychiatry and at the meeting of the American Academy of Neurology. The data suggests that after 21 months Flurizan is still going strong as it continues to dramatically slow the decline of memory loss and cognative function in patients with mild Alzheimer's disease. As measured by the Alzheimer's disease assessment scale the Flurizan treated patients experience a 60% improvement compared with the projected slope of the placebo patients.

More importantly these same Alzheimer's patients saw 75% improvement in their memory, judgment, probable solving ability, and the ability to take care of themselves as measured by the clinical dementia rateing scale. This improvement was statistically significant with a P value of .0007. We are currently conducting a 1600 patient Phase III study of Flurizan in the United States which is on schedule to complete enrollment this summer.

Just as exciting as Flurizan is our novel drug candidate for metastatic brain cancer, Azixa. Azixa, also called MPC 6827 is current in two Phase I clinical studies to assess its safety and pharmacokinetics and to evaluate its potential to treat metastatic brain tumors. In preclinical studies Azixa also easily crossed the blood brain barrier, achieving up to 15 times higher concentration in the brain than in the plasma. Azixa is a very potent compound exhibiting activity in the low melanoma range and is not subject to multiple drug resistance. These two trials are both proceeding on schedule. The brain-met trial is now enrolling patients in its ninth cohort of increased dose. We anticipate reaching a maximum tolerated dose and moving forward into Phase II trials late this fall.

We also expect to submit any IND to the NDA for our AIDS drugs candidate MPI 49839 by the ends of the summer. MPI 49839 represents an entirely new class of direction for the HIV affected individuals. Our drug works by inhibiting the viral maturation process of HIV. There are over 1 million infected individuals in North America alone and, according to the University of California, San Francisco study, 42% will become resistant to at least one of the currently marketed drugs this year.

The preclinical data to date are highly encourageing and MPI 49839 has demonstrated significant activity against drug resistant strains of HIV. Subject to approval by the regulatory authorities, the Phase I trial will be arising, single dose study, in healthy volunteers, 18 to 65 years of age. The trial design envisions eight patients per cohort and a dose escalateing study to determine the appropriate therapeutic dose and evaluate the safety and pharmacokinetic profile of MPI 49839.

Finally the MPI 2130 Phase I study in hemotologic cancers is proceeding on schedule and Adrian will talk further about our new oral thrombin inhibitor MPV 0920, for which we recently began a Phase I clinical trial. Myriad's four predictive medicine products continue to enjoy market success and our pipeline of future products is strong. Predicted medicine revenues were $26.9 million for our third fiscal quarter. A 15% increase over last quarters record revenues and a 46% increase over the same quarter of the prior year.

I believe it's important to note that all of this growth was a result of increased volume and demand for our products. We believe this exceptional sales growth is a reflection of the value of our products to patients and positions in managing the risk of hereditary cancer. However, it is also indicative of the quality of Myriad's sales force. We have 115 talented and dedicateed salespeople who call on all of the major cancer centers and oncologist throughout the country. This is a highly educateed and sophisticated sales force and we expect each one of them to generate at least 1 million in sales. Since we are rapidly approaching $100 million this year and expect to be well over that next year, we're in the process of expanding our oncology sales force to accommodate the increased demand for our products.

As Greg will discuss later we are also being more aggressive in addressing the OBGYN market opportunity by increasing the size of that sales force. We anticipate that by the ends of the next fiscal year we will have added an additional 40 salespeople to our oncology and OBGYN sales forces with most of the growth coming in the OBGYN area.

Net operating profits for our predictive medicine business also broke all prior records totalling $9.6 million in our third fiscal quarter as compared to $4.5 million in the same quarter of the prior year, a 109% improvement in net operating profits. This strong performance by our predictive medicine group has enabled us to maintain a modest net loss and cash burn for the quarter. With our strong therapeutic pipeline and our exceptional growth in our predictive medicine products we think you will agree that Myriad's future certainly looks bright.

Now it's my pleasure to turn the call over to our CFO, Jay Moyes.

Thank you, Pete. It's certainly a pleasure to present a more detailed look at Myriad's financial results for our third fiscal quarter ending March 31, 2006. As Pete mentioned we are very pleased to report that predictive medicine revenues this quarter have once again hit a record. Predictive revenues for the quarter ended March 31, 2006, were $26.9 million. This represents a 15% increase over the prior quarter ended December 31, 2005, and a 46% increase over the same quarter in the prior year. Further predictive medicine revenues for the nine months ended March 31, 2006, are up 43% over the same nine-month period of the prior year. This impressive $26.9 million in predictive medicine revenue also exceeded the analyst consensus forecast by $2 million.

Total revenues for the quarter, which include both predictive medicine and research revenues, were $29.8 million also exceeded Thompson First Call consensus revenue estimate of $28.2 million. Our gross profit margin on predictive medicine sales this quarter was 72%, an increase of 1% over the gross profit margin in the same quarter ending March 31, 2005.

As I have noteed in the past, Myriad has made and continues to make investments in new technologies that will improve the long-term performance of our predictive medicine business. This development effort along with non-cash compensation expense from stock options may cause quarterly fluctuations in our gross margins.

Accounts receivable collections as measured by the number of days outstanding was 69 days for the quarter endsing March 31, 2006; compared to 79 days for the same quarter in the prior year. This substantial improvement is a direct result of the dedication and expertise of our internal billing and collections team. The quality of our accounts receivable continues to be excellent.

Research and development expenses for the quarter ending March 31, 2006, were $22 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 is primarily comprised of the costs associated with seven clinical studies underway at Myriad. Part of these costs include our 1,600 patient Alzheimer's trial which is the largest Alzheimer's clinical trial ever undertaken. We have also made significant expenditures in the late-stage preclinical development of our other drug candidates including our novel HIV compound.

Since we expect to move additional drug candidates into the clinic and advance our current clinical drug programs we believe our research and development expenses will continue to grow over the next several quarters. Selling, general, and administrative expenses for the quarter ending March 31, 2006, were $12.3 million compared to $9.8 million in the same quarter of the prior year. The 25% increase over the prior year was attributeable to expenses incurred to support the 46% growth in our predictive medicine revenues and our therapeutic development efforts. We expect our selling, general, and administrative expenses will continue to increase depending upon a variety of factors including the number and scope of new product launchings, our drug discovery and drug development efforts and our growth in predictive medicine revenues.

Our net loss for the quarter ending March 31, 2006, was $9.6 million or $0.24 per share. This compares with $10 million or $0.32 per share in the same quarter of the prior year. We are pleased that this result achieved the first call consensus loss per share for the quarter of $0.24 even though it included a substantial amount of non-cash stock option expense. The reduction in our net loss over the prior quarter is a direct result of the significant earnings contribution made by our predictive medicine business; which was $10.1 million before taxes, depreciation and amortization.

As a point of reference this means that if our rapidly growing predictive medicine business were a stand alone unit it would be earning nearly $1.00 per share on an annualized basis Additionally the operating margin of our predicted medicine business was 36% for the quarter which represents a significant improvement over the 25% operating margin generated in the same quarter of the prior year and the 31% operating margin of the previous quarter. Cash, cash equivalents and marketable investment securities were a healthy $229.3 million at March 31, 2006. This compares to $115.3 million for the same period in the prior year.

We again point out that Myriad has no debt and no convertible securities and that the total number of shares outstanding at March 31, 2006, was a modest 39.4 million shares. Thank you for your attention. I will now turn the conference call over to Dr. Gregory Critchfield.

Thank you, Jay. It is a great pleasure to speak to you today about our predictive medicine business. As Pete and Jay have discussed for the quarter just ended predicted medicine achieved an all time record revenue of $26.9 million, a 15% increase compared to last quarter's record sales. Predictive medicine revenues for the first nine months of fiscal 2006 were nearly $72 million, a 43% increase over the first nine months of fiscal 2005.

Our predictive medicine product revenues are currently at an annual run rate of greater than $100 million per year. The operating profit margin for this business for the most recently completed quarter was 36% compared to 31% for the quarter ending December 31, 2005. We are continuing to contribute cash to help fund clinical trials and other programs within Myriad. All the revenue growth this year has been through increased sample flow since it has been approximately two years since our last price increase.

On April 15, 2006, we just instituted price increases in our predictive medicine products. For BRACAnalysis our comprehensive breast and ovarian cancer tests we increased the price approximately 5% to $3,120. COLARIS our comprehensive colon and uterine cancer test had it's price increase from $1,950, to $2,150; a 5.1% increase. And our comprehensive test for the other colon cancer syndrome, COLARIA AP, was priced at $1,795; compared to $1,685, a 6.5% increase. We've also increased the price of our ancillary tests like the single cite test by 10% across all the Myriad product lines.

We will see the effect of these price increases over the course of a year. Since most of our contracts with the insurers allow for price increases to take effect on the anniversary date of the contract. We believe that these price increases coupled with improvements in laboratory operating efficiencies will help us maintain our attractive margins. The increase in our testing volume has been driven by sales and marketing efforts to convince new customers of the clinical value of genetic testing and to broaden utilization among current customers. This was achieved during the quarter by implement a new customer development strategy.

Last Fall we conducted market research with our most prolific test ordering physicians and identified changes need to do increase the adoption of testing in physician practices. With this new focus we saw solid quarter to quarter growth of all our products. We believe that generally greater acceptance of genetic testing is responsible for the growth in COLARIS and VOLARIS as well as BRACAnalysis products.

Last quarter we also expanded our speakers bureau which features experienced physicians who understand the importance of genetic testing as speakers to their peers. The speakers educate community based medical oncologist and surgeons by communicating both the importance and methods for implementing genetic testing programs in community settings. We plan on featuring these speakers in both current and future peer-to-peer programs. We've also seen benefits from a national account management approach whereby large oncology, large community oncology practices have embraced genetic testing as a practice-wide standard, rather than just through an individual physician decision.

This year we have expanded our women's health program which is focused on predictive medicine opportunities in asymptomatic women. This has increased the availability of our testing services in the OBGYN market segment. Women in this market segment who are candidates for the test fall in two major categories, women who have not yet been diagnosed with cancer yet, who belong to high risk families, and woman who were diagnosed with cancer many years ago before our tests were available and have returned to the ongoing care of their primary care doctors. All of these sales and marketing efforts both in oncology and in women's primary, in the women's primary care market help to lay the foundation for future direct to consumer activities. As direct to consumer campaigns build consumer awareness the presence of larger numbers of physician practices who routineing identify candidates for testing means that more patience will have access to these viable services.

Our predictive medicine business is succeeding because testing information is pivotal in managing the high risk individuals have for cancer. Armed with the information we provide these individuals can do something about their risks. Preventive measures may help them to avoid cancer and achieve better health outcomes. Volumes of literature enhance the clinical utility of our predictive medicine products as new studies support our predictive medicine paradigm. Predictive medicine makes the difference for individuals and families at high risk for cancer. We are pleased to help more individuals as this business gross. Thank you. I'd like now to pass the microphone to Dr. Adrian Hobden.

Thank you, Greg, and good morning. It's my great pleasure this morning to announce the acceptance by the FDA of our IND submission for MPC 0920 an orally available direct thrombin inhibitor. As with previous Myriad submissions to the FDA the submission was approved within the statutory 30 day period which is testament to the hard work and attention to detail of our employees. We have now begun the enrollment process of this exciting Phase I study. MPC 0920 is a selective small molecule inhibitor of thrombin with potency in the nanomolar [PH] range. In preclinical studies we were able to demonstrate oral viability together with a potent inhibition of blood clotting. The half-life of several hours in animals suggests that once or twice a day doseing in man will be possible. These properties make us optimistic that MPC 0920 could ultimately replace Coumadin as the drug of choice for the control of deep-vein thrombosis and the side effects of atrial fibrillations.

As you may know currently the only FDA approved orally available agent for the control of deep-vein thrombosis is Coumadin, which is also known as Warfarin. This compound has been around for about 50 years but it is extremely difficult to use because of its very narrow therapeutic window and interaction with a large number of drugs and indeed some foods. As a result of its tendency when overdosed to cause uncontrolled bleeding it is used as rat poison. Patients must be carefully titrated on Warfarin in order to reach a dose which controls their tendency towards thrombosis but not too high as to lead to bleeding. This process can take weeks; during which time the risk of thrombosis remains.

In addition, not only must the patient adhere to a strict diet, but those must be recalibrated whenever the patient is prescribed a new drug for another condition. These drug interactions are driven both by drug metabolism problems with Warfarin and its high protein binding. In fact, 120 approved drugs are known to exacerbate the anticoagulant of Warfarin and 43 approved drugs can suppress its effects. The aging U.S. population makes it essential that a new drug is developed to replace Warfarin.

Direct inhibition of THROMBIN is a well-established target to control of blood clotting. There are a number of FDA approved direct thrombin inhibitors which can only be administered parenterally. These compounds have demonstrated the ability to control a few thrombosis, with good therapeutic windows but are limited to acute use during and immediately after surgical procedures because they cannot be given orally.

Recently Exanta was developed as an orally available direct thrombin inhibitor and in extensive clinical trials demonstrated good chronic control of thrombosis with a wider therapeutic window than Warfarin and far less drug interaction problems. Indeed it was expected to become the standard of care drug for the treatment of deep-vein thrombosis. Exanta demonstrated the clinical utility of oral direct thrombin inhibitors. Unfortunately Exanta was not approved in the U.S. and has been withdrawn from the market in Europe because of liver toxicity concerns.

This problem was related to the nature and activation of the prodrug in the liver and not to the mode of action of the compound. Exanta is a double prodrug requiring activation both in plasma and in the liver. MPC 0920 is not a prodrug and therefore does not have these concerns. Indeed we have seen no evidence of liver toxicity in extensive preclinical testing.

We are in the process of initiating a Phase I trial of MPC 0920 in healthy volunteers. The trial will be a single ascending dose study with 8 volunteers per cohort, 6 on drug and 2 on placebo. The primary objective is to examine the safety of MPC 0920 but a secondary objective will be to study the of MPC 0920 N. animal studies we are not able to identify a low dose at which MPC 0920 did not have some effect on blood clothing time. We expect that also to be true in human studies.

Therefore unlike most Phase I studies where it is not possible to determine whether the experimental medicine has any activity, we should be able to determine a biological effect in the volunteers. We will escalate the dose in the study until we reach blood clothing times several times higher than normal and sufficient to ensure clinical utility in thrombotic conditions. We believe that MPC 0920 is an exciting addition to the experimental compounds already under development at Myriad. In addition to drugs that have huge commercial potential for serious unmet medical needs such as Alzheimer's disease and brain metastasis we can now add an oral drug to the treatment of dee-vein thrombosis.

We also anticipate moving an experimental AIDS medicine into the clinic to add to the exciting mix of drugs under development at Myriad. Thank you for your attention. I will now hand over to Dr. Jerry Lanchbury.

Thank you, Adrian. I am very pleased this morning to be able to discuss a major new initiatives that impact our future pipeline of novel therapeutics. As Myriad announced a couple of weeks ago we signed a major 5-year collaboration with Abbott Laboratories in the area of chemogenomics. Chemogenomics is the application of compounds screening and analysis to genomics research in an attempt to streamline the match between the drug target and the lead compound earlier in the discovery process.

For chemogenomics to find the collaboration in itself broad collaboration Abbott will provide the chemi- portion of the term and Myriad the genomics portion. This new relationship is a sweeping collaboration to developing a novel capability between our two organizations that crosses all disease fields and may generate sufficent lead compound to fill our respective drug development pipelines for years to come. The collaboration builds on our ongoing pharmacogenetic collaboration and early discovery partnership with Abbott in the field of major depression that led to the discovery of the involvement of mutations in [A Path I] in this important debilitateing disease. The discovery of the row of [A Path I] in depression opened up an opportunity for development of an entirely new class of drugs to treat depression. The success of this previous collaboration and our current pharmacogenetics collaboration led to discussions of broadening the scope of our relationship between our companies covering all thereaputic areas and combining the strength of the respective companies in a novel approach.

When [A Path I] was discovered by traditional genomic techniques we will give new high volume, whole-gene and scale technologies and comparative-genomics developed by Myriad for this new collaboration. Our state-of-the-art capabilities in this area enable rapid and economical discovery of complex disease genes. These genes that play a significant role in the course of disease and are differential expressed between those with and without disease provide a rich resource of pharmaceutical target discovery.

By paring this resource with Abbott's extensive medicinal capability in compounds creation, screening and analysis, and the large proprietary libraries of small molecule compounds, we hope to fill the drug development pipelines of our two firms with novel, innovative compounds to treat major diseases.

Important among these comparative genetic technologies is our use of highly parallel, single nucleotide polymorphism, or SNP to interogate many hundreds of thousands of DNA molecules across the GNM's of thousands of diseased and healthy individuals. When analysed with Myriad's proprietary and gramatic tools the difference is observed between healthy and sick across the genome allowing us to rapidly localize disease courting genes to descrete parts of the human genome and to quickly focus on a small number of promising candidates. These genes can then be screened for mutations to isolate the genes for the enhanced risk of serious common diseases. These genes identified in this way become geneticically validated pharacutical targets. It is this information that is crucial to the Abbott/Myriad collaboration as these targets and their pathways form the backbone of the screening program to deliver novel lead compounds to be shared by the two companies.

In addition genes discovered through this process have a high likelihood of forming the basis of novel future diagnostic products. In the field of cancer, for example, all rights for diagnostic development flow to Myriad exclusively and in other disease fields they follow the therapeutic rights to either collaborator.

We believe the structure of this collaboration is unique and exciting. Each company will have exclusive rights to the drug lead compounds to expand their therapeutic pipeline. Myriad will receive approximately 40% of the lead compounds along with associated drug targets identified under the collaboration. Abbott will receive approximately 60%. While Myriad's therapeutic interests center on cancer, nero-degenerative disease and viral disease, the rest of this collaboration will generate a significant number of development opportunities in other clinical fields. We anticipate being able to strengthen Myriad's future development prospects with numbers of lead compounds in strategic disease areas.

We are very excited to be entering a new phase of research at Myriad, one which builds on our past successes, leveraging Myriad's continuing strengths in genomics, genetics and pharmaceutical development. This new collaboration is designed to leverage our strength in combination with Abbott to create a stream of exciting validated lead compounds that will fill Myriad's development drug pipeline for the future. Thank you. I will now pass the microphone back to Pete.

Thank you, Jerry. And I'll turn it over to the operator for the question and answer portion of the conference call.

[OPERATOR INSTRUCTIONS.] Your first question comes from the line of Charles Duncan.

Hey, gentlemen, thank you very much for taking my question and congratulations on a great quarter. My question on predictive medicine is, can you give us some insights on current sample flows and then give us some additional color on some of the metrics of adoption with regard to your national account manager approach. How broadly are people applying the use of the BRACAnalysis testing, for example, within their practice?

Charles, this is Greg. We are seeing strong sample flows on the order of 1,100 per week. This has been something that has continued to grow as our predictive medicine products are used by people. With regard to national accounts, the approach has been to identify large practices. There are practice groups of oncologists in the United States that ban together for a variety of mechanisms to offer clinical services to patients, identifying the key large groups in these areas working with them to help them understand the predictive medicine paradigm and offer those services as an entire practice group is an approach that we are getting traction on. We have two individuals who's sole job is to identify and work with these groups and as this program becomes successful we will expand those kinds of activities.

Thank you, Greg. If I may ask a question on Flurizan quickly. Adrian, can you give us some insight on how the second trial, the [Annico's] 800 trial, has gone? Have you started to accrue and when do you anticipate completing that?

Good morning, this is Adrian. No, we haven't started enrolling patients yet but we have completed the discussion phase with the EMEA in anticipation of the trial. When had a very good meeting with the EMEA to discuss the details of the study, study design, and we're in the phase now of submitting to the individual countries within Europe for approval to start in getting the centralized ethical approvals, also. So we do anticipate initiating enrollment fairly soon but had not yet done so.

Do you anticipate to have that completed within a certain time frame or is it too early to the tell yet, Adrian?

It's really too early to the say, Charles, to be honest with you. We will have to see when we start to enroll patients how quick that will will happen.

Okay. Thanks.

Your next question is from the line of Jeff Meacham.

Hi. This is actually Christian Metropolis, thank you for taking my call. Quick question on the Flurizan final 24 month data to be presented this summer, can you give us some insight on to what details from the trial will be included in the results, whether we will see crossover data?

Chris, good morning. Yes, I think we've announced that we will present the 24 month data at the international Congress in Alzheimer's disease in Madrid in July. I think that's, I don't know, about July 12, something around there. And at that time we will because the study will now been completed we will be able to unblind the patients who were on placebo for the first 12 months of the study and so we will be able to assign those patients to either high dose drug or low dose drug. That's something which we have been unable to do up till now as you're aware. So at that time we will not be only be able to present the data for the patients who have been on drug for 24 months, continuously for 24 months, but also show what happens to the patients that have been randomized start on the high dose or low dose drug. We don't have that data yet but we will get it in time for July.

Great. Thank you.

Your next question comes from the line of Edward Tenthoff.

Great. Thank you very much and congrats on another strong quarter and all of the clinical progress. I had two quick sort of business development questions, if I may. The first one just because of the question that I get every once in awhile and I kind of want to bounce back to you guys, what is the logic of keeping Myriad and the predictive medicine business and the pharma-business and the diagnostic business together? I think some of the reasons for it certainly but just wanted to get your answer on that. And the second part of this is, as you expand the proprietary drug pipeline beyond kind of your core focus, what are your plans or what are the logical steps for some of these newer drug programs such as the thrombin one.

Thank you, Ted. As you are aware our core focus at Myriad is in Alzheimer's viral diseases and cancer. We are very excited, however, about the oral thrombin inhibitor as Adrian had mentioned. Since it's beyond our core focus we will not take that through the clinic by ourselves, but are seeking a partner. So we will generate data in Phase I and then look for a corporate partner to continue to move the oil thrombin inhibitor forward. With regards to the focus of Myriad, as you pointed out, we are somewhat unique as a biotechnology, biopharmaceuticals company, and that we have an operating business generating exciting revenues and gross profit margins on the predictive medicine front and we've coupled that with the strategies to develop drugs on our own account independent of pharmaceutical involvement. And we think there's a couple of reasons why this is a good strategy and let me just share a few of those with you.

First of all, the research that drives our two businesses develops and identifies exciting drug targets and disease causing genes that can yield products both for pharmaceutical and diagnostic opportunities. So there's a very strong synergy in terms of a common core research effort that then can drive products for both our business focuses. But we also are very cognizant of a paradigm shift that is occurring within the therapeutic industry. And that is moving away from the old paradigm of one drug treats all patients equally, recognizing that each of us had a different genetic make up, that there are many different causes for common diseases, and a drug may be effective in the subset of the population but not in all of the population.

Clearly there're going to be responders and non-responders. And what we're actually seeing in the pharmaceutical industry now is a merging of the diagnostics in the therapeutics in this pharmacogenomic profile. And so our two businesses are very complementary in terms of the downstream commercial potential of both.

Having said that we do, each year, look very closely at the company and the synergistic effects and benefits of the two businesses to make sure we are still comfortable keeping those two together. We've been asked as you have asked us today, we've been asked many times about the potential of spinning off the diagnostic group. As Jay mentioned given this third quarter result on an annualize basis, we're earning about $1.00 per share and using any sort of P/E ratio of metric you are going to get our stock price with just the diagnostic component. So clearly the company is being under valued in terms of the two components it has. But I think given the core research synergy and then the downstream commercial complementarity between the two businesses, it makes sense to keep the company together.

I agree. And thank you for that detailed update.

Your next question is from the line of Annabel Samimy.

Hi, thanks for taking my call. I just have two quick questions. The first is, are there any statistics that you can share with us about the women's health initiative pilot programs and what's come out of that to expand the program nationwide that you would be increasing your sales and marketing effort to the primary care area? And the other question was for 6827, have you reached , if it would be within a therapeutic index yet, and at what point can we expect the Phase II? I think you answered that question actually, but have you reached the therapeutic index yet?

Annabel, this is Craig. With regard to the women's health statistics I can tell you that in the early work that we've done, we keep track of how quickly a new sales rep begins generating revenues. We do this both for people in the oncology, that are focused on oncology sales, as well as women's primary care. What we found is that the uptake curves for the two groups are similar to each other. The new women's healthcare representatives that we put in place in the northeast United States came up to speed just as quickly and in some cases more quickly than their counterparts on the oncology side. And these data encourage us as we look at expanding our sales force in women's primary care.

Annabel, Adrian. Back to your question about 6827, the doses that we're getting in cohort nine are certainly compatible with the doses that we are getting therapeutic effects in mice, but we have yet to reach a maximum tolerated dose so we will continuing to go higher and remind you since we have, at least on the animal studies, 14 to 15 times higher concentration of brain than presumably in the brain we've reached doses that are way in excess of what we needed to have anti-cancer activity.

But as per the protocol we will continue to increase the dose until the physicians determine that they have reached maximum tolerated dose. So we're not there yet. When we have reached that position we will, of course, initiate the Phase II studies. We don't know when we are going to get to maximum tolerated dose. It's difficult to be precise but we believe that we're relatively close and therefor that we should start Phase II in the second half of this year.

Great. And just back on the stuff for the women's health, the uptake that you are talking about, are you talking about uptake in terms of what they are selling into that area or the demand or what exactly do you mean by that?

The primary measure we use is a revenue generated per sales rep and so we are looking at their ability to get in and to convince the OBGYN physician to order the test.

And there's definitely a similar type of demand?

It's similar, correct.

Okay. Thank you very much. That was helpful.

Annabel, one other point that I'll make, I think it's important is that we are going to be very selective as we expanded the area and continued to monitor the statistics. So it's important that we do this in a very thoughtful manner and don't jump in too rapidly but thus far the data indicate that this is a successful way for to us expand sales.

Are you looking at expanding into certain areas first and then moving broader?

Yes, that's correct.

Thank you.

Your next question is from the line of Shiv Kapoor.

Thanks for taking my questions, I have a couple. On the sales force, can you give us an update on the size of your sales force currently? How many are in oncology versus women's health and how will this look like next year?

Okay. Currently in oncology, the entire sales force has 115 individuals. In the women's primary care area we have ten people that are selling to women's primary care. We are looking at expanding this next year. We are in the process of preparing our budgets. What we are looking at is a very progressive step-wise increase in the number of people that will be calling on the OBGYN market. As I said before, we will monitor the effectiveness of the expansion as we go and anticipate adding as it proves, as it continues to producer itself successful.

Great. A couple of questions on MPC 0920, in your press release you mentioned that preclinical data possessed significant benefits over current drugs. You also talked about the liver toxicity versus [inaudible]. Can you perhaps also talk about how this drug would be different from factor 10-A inhibitor especially ones in later states clinicals from Libby and Bear?

I think we will have to see how it translate in clinical studies. As you say there are factor 10-A inhibitors in clinical development. All of these are aimed at venus-thrombosis rather than arterial-thrombosis and so we'll have to see how they stand up from a therapeutic index perspective or indeed whether the drugs may be complementary to each other. But I think the emphasis on 10-A inhibitors has been simply because it's been easier to find inhibitors oral viability in those areas rather than they perceived there's a benefit over thrombin inhibitors. Therefore I should remind you no injectable factor 10-A inhibitors available. All the injectable anti-thombotics are thrombin inhibitors.

Great. Thanks.

Your next question from the line of S. [Vermicat]

Good morning. I have a few questions which can help me fine-tune my model so these are all kind of finance questions, as an answer to previous caller, you said that the art of flow rate has been about 1,100 per week. Is this the flow rate that we are seeing in April compared to what we have seen in the third quarter? And also what should we think of as an average price per test?

The 1,100 that Greg referenced is consistent with the numbers that we've discussed in prior quarters. So that is a consistent number.

With regards to the average price per test, as Greg mentioned, with the, anywhere from 5 to 10% price increases that the company took effect on April 15, the BRACAnalysis test is just over 3,100 the average for for COLARIS is approximately 2,000. So 2,500 per test is probably a good average price.

Okay, thank you.

You have to remember that is going to be coming in over time. All prices don't increase on April 15. Some may be potentially a year from April 15. Please remember that.

Yeah, I understand. So how about 2,000 or 2,000 [inaudible] is what we should be thinking of when we're trying to model this?

That would be a good number.

In terms of 123 R, would you kindly give us the break out on that?

The break out first of all is laid out in pretty much exquisite detail in our 10(Q) that will be filed right after this meeting. But the amount for the prior quarter was right around $1 million.

About 1 million?

Right. And I mean it's slightly less than that but roughly $1 million then will be continuing to go to increase over time. So the next quarter will be greater than 1 million and than the quarter after that will be greater still. So I would be happy to talk to you off-line on that in terms if you want to try and model. I mean if you look at it over the past couple of quarters and then look at it in the quarter that we just presented I think will you come up were any fairly consistent trend that you could use.

Thank you. Regarding how operational expenses, can you kindly give us some guidance as to how, how we should think of in terms of modeling?

Could you repeat the question.

This is regarding operational expenses.

Like SG&A you mean?

Yes.

Those again I think fairly consistent as well and those tend to grow with our sales, the sales grow and both growth 'cuz we pay for new salespeople as well as new commissions on sales that we're generating and also we have to have the administrative infrastructure to support the clinical development programs. So that, again, if you trend that out over time you should come up a fairly reasonable number.

One last question. Regarding crossover revenues, is this quarter to be 27.9% versus the previous quarter of 26.8%. What kind of a range or is this what we should expect in the future quarters or is about 28% is what we should be thinking of.

This is Pete. As Jay mentioned we do anticipate with the introduction of new technology into the laboratory to see some quarter to quarter fluctuation in our gross profit margins. As we mentioned the gross profit margin is 72%. Cost of sales, 28%, which is up compared to the prior year's quarter. Over time we believe that the gross profit margins will go into the high 70s. But in the short term we do see quarterly fluctuations as we adopt new technology in the laboratory.

Thank you very much.

Your next question is from the line of David Munno.

Hi. Thanks for taking the question. Just two quick ones on the pipeline. On the ongoing Phase III trial for Flurizan, how are you doing with enrollment? Do you still expect to finish by the mid year?

Enrollment has been very consistently good, David, and it's hard to be exact about when we expect to complete enrollment but the middle of this year is the time we are shooting for certainly. And we have no reason to change that timing.

On the Abbott collaboration you've got 40% of the drugs target and they get 60. Is there any break down on disease areas? Can you give a little more clarity on how that collaboration works?

Yeah, I would be happy to. We have specified specific disease areas with Abbott that we're particularly interested in versus Abbott And so we specified cancer, neurodegenerative diseases and viral diseases. Abbott is very interested in cardiovascular disease, pain and metabolic diseases. It's a rather elaborate, almost like an NFL drafting mechanism, wherein cancer we get the first pick of the cancer-V compound that comes out. And then we alternate but it's very much waited to the benefit of Myriad. So we get more choices than they do.

On the metabolic front, which is less of an interest of Myriad and more of an interest of Abbott, they get first draft and it's weighted toward Abbott so they will draft more choices in that area. But it's a relatively elaborate process, that again is very much like an NFL draft.

Are there any rights in the agreement that if you have a drug among those, Flurizan, for example, that is going to require a primary care sales force that Abbott would have a first right of look at that before potentially having other partners look at it?

No. There are absolutely no strings attached. The drugs that Myriad essentially drafts, we have the right to commercialize completely within Myriad as we see fit. And we can do that internally if we feel we can take the drug forward ourselves or we can find a pharmaceutical partner different than Abbott. There's no priority or preference whatsoever given to Abbott.

Great. Thanks.

At this time there're no further questions, Mr. Meldrum, are there any closing remarks?

No, I'd just like to thank everybody for attending the Myriad earnings conference call and this will conclude the conference call for this morning. Thank you again.

This concludes today's conference call. You may all disconnect.