Myriad Genetics Inc (MYGN) 2009 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Myriad Genetics first quarter 2009 financial earnings results call. During the presentation all participants will be in a listen-only mode.

Afterwards we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded Tuesday, November 4, 2008.

I would now like to turn the conference over to Mr. Peter Meldrum, President and CEO. Please go ahead, sir.

Thank you. Good morning, and welcome to the Myriad Genetics earnings call for our first fiscal quarter ended September 30, 2008. My name is Peter Meldrum, and I am the President and Chief Executive Officer. I am joined today by Jim Evans, our 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. Evans who will discuss our financial results. Dr. Critchfield will review the Company's molecular diagnostic business and Dr. Hobden will discuss our drug development activities. At the end of the presentation, I will turn the call 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 future events or the future financial performance of the Company. These statements are based on management's current expectations and the actual 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 & 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. 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.

This is an historic quarter in Myriad's history, our first profitable quarter from operations. Even with a significant investment this quarter in drug development and our southern direct-to-consumer marketing campaign, the Company recorded a net profit of $14.5 million, or $0.32 per share. With this first step into profitability, Myriad has embarked on an exciting new journey of sustained profitability. The accomplishment of our goal to achieve profitability is the direct result of the vision, hard work, and execution of our more than 1,000 dedicated employees.

We are a cohesive team of men and women, of diverse backgrounds, disciplines, education and nationalities. But we are united in our passion for elucidating the cause of human disease at the molecular level and in using this information to develop novel products that preserve life and enhance the quality of life. Despite the current challenging economic environment, and our ever-increasing revenue base, the Company achieved a 53% revenue increase over the first quarter of the prior fiscal year.

Our total revenues of over $73 million were dominated by molecular diagnostic sales of $70 million. We continue to experience strong revenue growth from all five of our molecular diagnostic products. In fact, this quarter every one of our products exceeded our historical annual compound growth rate of 45%. The growth in our molecular diagnostics business can largely be attributed to an increase in our sales and marketing efforts, and the continued physician acceptance and adoption of our products, particularly among OB-GYNs.

We have completed the expansion of our salesforce to 250 full time talented sales reps, an increase of 25% over last year's head count. This includes a 150-person oncology salesforce and a 100-person women's healthcare salesforce. We will not grow the salesforce further this year, but may consider an additional expansion in fiscal 2010. We continue to benefit from our DTC campaign in the Northeast, and while it is still too early to assess the full impact from the Southern DTC campaign, I am pleased to report that it is off to a great start.

Our weekly sample flow remains strong, and we have not seen any negative impact on sample flow as a result of the current weak economic conditions. Based on our present sample flow, I am confident that our molecular diagnostic business will exceed the consensus revenue projection of $309 million for fiscal 2009. In our present facility, without any additional expansion, we have sufficient capacity to generate over $400 million in annual product revenues.

In preparation for future growth, we've already begun construction on a fifth building on the Myriad campus which will add another 87,000 square feet of lab and office space. This new facility will provide us with sufficient capacity to achieve annual revenues in excess of $1 billion. To fuel this future growth, Myriad will focus on our strong internally developed product pipeline and an aggressive in-licensing program.

Evidence of our product acquisition strategy was recently announced with the deal with Saladax where we secured North American rights to their proprietary antibody technology for determining a patient's chemotherapy exposure. With over $440 million of cash we're well-positioned to take advantage of additional opportunities that may become available as other diagnostic companies struggle to raise money in these difficult economic times.

Over the years, Myriad has attracted a talented, dedicated, intelligent team of individuals across the spectrum of managerial, operational, scientific, and sales disciplines. This investment in human capital has paid dividends in the financial performance as well as in the worldwide recognition of Myriad as the global leader in the emerging field of molecular diagnostics.

In the coming years, we expect this investment to continue to provide handsome returns both to our shareholders and to the overall healthcare system as we pursue our goal of improving patient healthcare. Now it is my pleasure to turn the call over to our CFO, Jim Evans.

Thank you, Pete. It is my pleasure to present a more detailed look at Myriad's financial results for our first fiscal quarter ended September 30, 2008. Myriad's total revenues for the quarter were $73.6 million as compared to $48.3 million for the same period of the prior year. This significant growth was fueled by the 52% increase year-over-year of molecular diagnostic revenues.

Molecular diagnostic revenues for the quarter were $70 million which is an increase of $24 million over the same quarter of our previous fiscal year. This growth is particularly satisfying given the current state of the economy. As Pete mentioned, we have yet to see an economic impact on our revenue growth. Dr. Critchfield will provide you with some interesting statistics later in this call that I believe indicate that Myriad is in an exceedingly strong position to withstand the current economic downturn.

Annual product revenues of $70 million for the first fiscal quarter comfortably exceeded the average analyst projections of $67.1 million. Gross margins remained a very attractive 86% for the quarter ended September 30, 2008, as compared to 84% gross margins for the quarter ended September 30, 2007. We continue to see opportunities on the horizon that will allow gross margin improvements over the next year or two.

Net operating margins for the molecular diagnostics segment climbed to an impressive 46% for the quarter ended September 30, 2008. This result is all the more astounding when you consider that the quarter included $2.3 million of DTC expense. Previously, our best net operating margin for a quarter was 47% and that was achieved in a quarter without any DTC spend.

If one were to remove the DTC spend, the net operating margin for our first fiscal quarter would be a record 49.7%. Research and development expenses for the quarter ended September 30, 2008, were $17.1 million compared to $26 million in the same quarter of the prior year and compared to $55.2 million for the quarter ended June 30, 2008.

This reduction in research and development was directly related to Myriad's discontinuation of all CNS clinical studies and research programs. We continue to invest in developing new molecular diagnostic products and in the advancement of our drug pipeline. Since we expect to move additional drug candidates into the clinic and advance our current clinical drug programs, as well as develop new molecular diagnostic products, we believe our research and development expenses will continue to fluctuate over the next several quarters.

Selling, general, and administrative expenses for the quarter ended September 30, 2008, were $33.4 million compared to $36.4 million for the prior quarter ended June 30, 2008. The decrease over the prior quarter was primarily attributable to the reduction in advanced marketing spend on Flurizan.

During this first fiscal quarter, we increased the number of OB-GYN sales representatives by approximately 50. These reps were hired throughout the quarter so the full weight of their ongoing costs was not captured in this quarter's SG&A expense. But, of course, the positive impact on revenues these additional reps will drive has also not been realized in this quarter's results.

We expect our selling, general, and administrative expenses will continue to fluctuate depending on a variety of factors including the number and scope of new product launches, growth in molecular diagnostic revenue, and future non-cash stock option expense. Our net income for the quarter ended September 30, 2008, was $14.5 million or $0.30 per share fully diluted. While we first experienced profitability in our June 30, 2008 quarter, thanks to a one-time payment from Lundbeck, we're extremely pleased with the level of profitability in Myriad's first profitable quarter as a result of ongoing operations.

Actual net income of $14.5 million more than doubled the Thomson First Call consensus income of $6.6 million. In these difficult economic times, Myriad continues to maintain a strong balance sheet. Cash, cash equivalents and marketable investment securities once again increased over the quarter. As of September 30, 2008, Myriad's cash, cash equivalents and marketable investment securities were $443 million as compared to $420 million as of June 30, 2008.

Our accounts receivable are of a high quality and reimbursements continue to be strong. To conclude, it is my pleasure to state that Myriad has absolutely no debt and no convertible securities and that the total number of shares outstanding at September 30, 2008 was a modest 45.4 million shares or 48.3 million fully diluted shares. With that, I will now turn the call over to Dr. Greg Critchfield.

Thank you, Jim. It is a great pleasure to speak with you today about our molecular diagnostics business. As Jim and Pete mentioned, our fiscal '09 first quarter molecular diagnostics revenues were $70 million, a new record representing a 52% increase over the same quarter's revenues last year. This revenue growth was also an increase over the 49% revenue growth we reported a year ago.

Our operating margin for the quarter one fiscal '09 was a record 46% compared to 40% for the same quarter one year ago. We are continuing our focus on a growth strategy to increase penetration in the oncology market, to expand further into the women's health market segment and to develop new molecular diagnostic products. We're making comment progress in all these areas.

Given the large market potential for our current molecular diagnostics products, approximately $1.4 billion per year, and the fact that our current products make a real difference in what physicians do for patients, we anticipate significant further growth in our business from these current products. One of the most important elements in our business has been to secure widespread insurance reimbursement for our tests and at the same time minimizing the out-of-pocket expense that patients pay for our testing.

The number of insurance plans that have reimbursed for Myriad's testing is over 2,500. This includes fee-for-service plans, managed care plans and government insurance programs. We have contracted with most of the major managed care plans, and the total of managed care [covered lives] under contract with Myriad is now more than 130 million individuals.

We have received this broad insurance coverage endorsement because our products help insurance companies focus their healthcare resources where they need to be in order to achieve the best outcomes and to help eliminate wasteful spending. Prevention of cancer saves lives and healthcare dollars. Today 96% of our revenues are covered by third party payers. For individuals with insurance coverage, the out-of-pocket expense for our tests is quite modest, only $54.45.

Our success in securing this level of insurance coverage is in part a reflection of how insurance plans view these new predictive and personalized medicine tests. It is to the insurer's economic advantage and to the best interests of their members to cover these powerful tests and use information to better manage the health care of their members. We do not believe that in an economic downturn the modest average out-of-pocket expense for patients of about $50 for a potentially life saving test should become a barrier to ordering one of Myriad's tests.

We have not seen any negative impact from the present economic downturn on the demand for our products. In fact, while our second fiscal quarter is historically our strongest quarter, I have never seen our sample flows this strong so early in the quarter. The growth of our business continues to benefit from the effects of enhanced professional society guidelines, decreased turn around times, and sales and marketing efforts focused on expanding the physician customer base.

Guidelines for MRI screening of BRAC-positive patients issued by the American Cancer Society and new protocols for the genetic predisposition testing for colorectal cancer endorsed by the Society of Gynecological Oncologists further emphasize the importance of our products. We're also seeing the effect of focused sales and marketing programs that have increased our physician customer base.

We recently expanded our OB-GYN salesforce to increase the penetration for our hereditary cancer tests in the women's health market. We now have 100 individuals calling on OB-GYNs. New OB-GYN reps become profitable every bit as rapidly as their on oncology counterparts and we're already seeing positive contributions to our revenue growth by these new reps this fiscal year.

It is important to emphasize that the OB-GYN physician customer is an ideal candidate for our hereditary cancer projects given that many women use their OB-GYN as their primary care doctor and that OB-GYNs are accustomed to providing preventive healthcare services to their patients. As this market segment grows, we are experiencing strong growth through the acceptance of both our BRACAnalysis and COLARIS products among OB-GYNs who use these tests to help prevent breast, ovarian, colon, and uterine cancers.

The BRACAnalysis consumer awareness campaign is in full swing in Texas and Florida. The campaign's message is if breast cancer runs in your family, you need to speak with your doctor. BRACAnalysis is an important blood test that may help you to determine your risk for hereditary breast and ovarian cancer. We're very early in the campaign, having launched a consumer advertising phase recently in September.

Nonetheless, we are seeing interesting trends developing. For example, in some areas, physician practice groups and other healthcare delivery systems are conducting independent advertising following Myriad's public awareness messaging to let consumers know where they can have their hereditary cancer risk evaluated.

It will take several months to see a meaningful impact of the campaign, and we will conduct a formal ROI analysis as we are doing for the campaign we ran last year in the Northeast. In the area of personalized medicine, providing information to doctors that helps them to individualize the treatment specifically for a patient Myriad is engaged in both internal product development and in-licensing discussions to bring new innovative tests to market.

We recently announced the acquisition of a technology from Saladax Biomedical, and we'll be discussing more about this product opportunity at a later date. It serves as a recent example of Myriad's commitment to personalized medicine.

Our molecular diagnostics products make a significant difference in the lives of individuals at high risk for hereditary cancer and in treating cancers. We look forward to future growth of our current products and launching new innovative products that make a difference for patients. We are pleased to be helping more individuals as our business continues to grow.

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

Thank you, Greg, and good morning. We continue to make good progress with our clinical programs with Azixa in melanoma and glioblastoma. As you may recall, Azixa is a nanomolar inhibitor of tubulin and rapidly induces apoptosis in dividing cells. It has activity against a broad spectrum of tumor types. Primary brain tumors were especially sensitive with antitumor activity in the subnanomolar range.

In our Phase I studies, there were several observations of antitumor activity against a number of cancers including melanoma, ovarian and testicular. We also noticed that it disrupts the blood vessels feeding oxygen to the tumors, an observation that we were subsequently able to confirm with detailed studies in mouse xenographs. Azixa has a remarkable ability to cross the blood brain barrier and accumulate in the brain.

We have now examined this phenomenon in two animal species and find that Azixa has up to 30 times higher concentrations in the brain than the plasma. Furthermore, the drug is evenly distributed to all parts of the brain. Surprisingly, there have been no observations in animal studies or in our clinical trials' CNS toxicity.

As a result of these observations, we have concentrated our resources on metastatic melanoma where there is a very high incidence of brain metastasis, up to 90% of patients by some estimates, and on glioblastoma where patients have relapsed following surgery, radiation, and chemotherapy. We are very encouraged with early results from the clinical studies.

For example, one patient who had relapsed after numerous treatments for his brain tumor had become disabled by the time he began treatment with Azixa. After three rounds of treatment with Azixa, a total of 20 weeks, the patient's tumor has shrunk significantly and he is not only able to walk again, but he has gone back to his job as a house builder.

Our clinical development program for Vivecon is progressing very well. Vivecon is a [novel] maturation inhibitor for the treatment of HIV infection. The Phase I study has been completed and Vivecon appears to be very well tolerated. We have been able to reach drug concentrations that exceed levels that we expect to need for effective treatment.

We are proceeding to a multiple ascending dose study in HIV positive but treatment naive patients shortly. In previous earnings conference calls, I have mentioned our excitement about our novel HSP90 inhibitor, MPC-3100 that is currently in preclinical development. We expect to submit an IND for MPC-3100 shortly. We continue to be very excited by the preclinical data on this compound.

HSP90 is a molecular chaperone that stabilizes oncogenic proteins such as HER2, AKT and Bcr-Abl. HSP90 appears to be essential for the growth and survival of a wide range of tumors. In addition, oncogenes often acquire mutations that confer drug resistance or inappropriate activation, and these mutant forms depend on HSP90 to function. HSP90 inhibitors appear to be most effective when dosed on a daily schedule which means, for practical purposes, an oral drug form is essential.

MPC-3100 is a highly potent and specific inhibitor of HSP90 and has very good oral bioavailability and pharmacokinetics in animals. In head-to-head comparison with competing compounds it reduced tumor volume by approximately 50% in a xenograph model without showing any evidence of toxicity.

In contrast, a competitor's compound at its maximum tolerated dose could slow the rate of tumor growth but was not able to reduce tumor volume. The standard of care chemotherapy for this type of tumor caused significant weight loss, death of some animals, and was less efficacious.

Coupling this observation with the apparent low toxicity of the compound, we believe that MPC-3100 has the potential to have a profound impact on the treatment of cancer. Thank you for your attention. I will now hand the call back to Pete.

Thank you, Adrian, and I will turn it back to the operator for the question-and-answer period.

(OPERATOR INSTRUCTIONS) Our first question comes from the line of Geoff Meacham of JPMorgan. Please proceed with your question.

Hi, this is Matt Roden in for Geoff today. Congratulations on the quarter and thanks for taking the questions. First, I was wondering if you could talk a little bit about the South campaign, the DTC, and can you tell us or give us a sense for what inning we're in in terms of penetration of the market in the South and then we have a follow-up.

Okay. The campaign in the South began several months ago in the spring with the first phase which was a physician education phase. That phase lasted through the summer, and then we launched the consumer awareness portion of the campaign in the fall in September.

So we're very early in the campaign at this point in time. Remember, a patient needs to go in, have a conversation with the doctor, once they're scheduled for an appointment, they sit down with the physician, go through the risks, and then decide to have the test, so it takes a period of months from the time a consumer is aware of BRACAnalysis as a test for hereditary cancer to going in to see the doctor for the test. It takes several months. The South is one of the excellent areas for us to be launching this campaign.

One year prior to the campaign we filled in a number of OB-GYN sales reps in the South that were there on the ground meeting with physicians and preparing for the campaign that launched a year later.

Great. And then the follow-up is along with that in terms of the marketing spend that goes with driving the sales in the South, can you tell us where we are in terms of what, the sustainability of the operating margin that we saw the 46% this quarter?

Yes. The expense that we would expect to see in the next quarter should roughly be equal to what we saw in our first fiscal quarter. Maybe a tad bit higher up to the $3 million range, but I do believe we should be able to see our operating margins continue at the levels that we were able to reach in the first quarter.

But I think Greg said that the DTC started in size in September. Does that imply that we didn't get a full quarter's spend on the DTC reflected in the first quarter?

No, not really. We end up paying for quite a bit of the expense prior to the actual running of the ads, and so what we will see is a little bit more like I mentioned in this current quarter than what we experienced last quarter. But if we look at how the spend went last year, we actually completed the spend pretty much by the end of the December quarter and had minimal spend in the first calendar quarter even though the campaign continued through March, and so I think we should see fairly consistent spend in this current quarter.

Okay. Thanks a lot.

Our next question comes from the line of Michael Yee of RBC Capital Markets. Please proceed with your question.

Great. Thanks. Congratulations on a good quarter, as well. My question, I guess, regarding the Northeast campaign or at least the Northeast region, can you better characterize for us the pull through in terms of order flow that you saw in the quarter and kind of compare it to the prior quarter and then I have a follow-up?

Yes. I want to make sure I understand your question, Michael. We had pull through of all of our tests. As you may know in the physician education portion of the campaign doctors are taught how to evaluate patients for all hereditary cancer products that Myriad has.

The campaign focuses on BRACAnalysis yet what we saw is that OB-GYNs were ordering a large number of our other tests in addition to the BRACAnalysis tests when the campaign ran, so we're seeing the same qualitative picture now in the South than we saw in the Northeast.

So it's definitely following through on the additional products as well?

Yes, it is.

Okay. And then follow-up in terms of margins, where do you think these operating margins can go to and over what timeframe and what do you think are the important levers there?

You know, as I look forward at it, I think that we should be able to continue to see improvements both on the gross margin level as well as the net operating margins, and I could see them working up to at least the 50% levels over time.

It will depend on our ability to integrate new technologies into the lab, to continue to evaluate the DTC spend, to see if we're getting the return that we are hoping to see through those efforts or if it makes sense to make our marketing investments in other areas. But through the determination of how we're going to progress with our marketing and sales efforts and what we're able to do in improving the processes in the lab should drive improvements to that operating margin.

Great. Thanks, guys.

Our next question comes from the line of Annabel Samimy of UBS. Please proceed with your question.

Hi, this is Stacy in for Annabel. Thanks for taking the question. Back to the Northeast, or the Southern campaign, what are the differences between this campaign versus the one you performed in the Northeast? I mean, anything from what you're doing versus what you're also seeing?

Great question. First of all, the campaign itself is substantially similar to what we did in the Northeast. It focuses on women with a strong family or personal history of breast or ovarian cancer and alerts them they need to have a conversation with their doctor. That part of the campaign is unchanged.

What we're seeing, though, is there is greater uptake among physician practice groups and among network health systems who are very involved now that see the value of this campaign, and many of them are conducting their own activities to try and make consumers in their regions aware of the importance of following through and where they can get the hereditary risk assessment with our products.

We see that as a salient difference in the two areas. The other thing that's important to note is that each year goes by, there is greater awareness among the public of the value of genetic testing. There is greater awareness among physicians of the value of these tests, and so we expect that to also have a positive impact as we move forward.

Thank you.

Our next question comes from the line of Charles Duncan of JMP Securities. Please proceed with your question.

Thanks, guys, for taking the question and congratulations on a very nice quarter. I had a question regarding the sustainability of the [PM] product demand given the current economy. Thanks for the added color on the out-of-pocket expense, $54 or so on average seems pretty low to me, lower than I had anticipated.

Can you give me some additional color with regard to perhaps the percentage of patients that are fully reimbursed for the test and is that changing as perhaps a mix of patients changes slightly from one of currently diagnosed to perhaps those patients that come from the gynecologists?

Thank you, Charles. As Greg mentioned, 96% of our revenues are paid by insurance. So the out-of-pocket cost to patients is very small, and as Greg mentioned, it is about $55 per patient.

We also don't get a lot of pushback from insurers in terms of the price of the test, and in fact if you look at last quarter our average reimbursement was about 92% of list price, so we do offer a small discount to insurers for the volume that they give us, but we really don't discount our tests heavily. I think in large part that's the cost benefit, the value of the test in terms of managing a patient's healthcare and assisting the physician and the patient to better prevent or delay the on set of their cancer.

As we mentioned in the earnings call, I think because of the utility of the test, and because of the very low out-of-pocket to the patient, we really have seen no impact whatsoever given the current economic environment on our revenues. In fact, as Greg mentioned, we really have never seen stronger revenue growth this early in the quarter for this second fiscal quarter ending December 31. So we're very excited about the test that Myriad offers and anticipate a very strong year.

Thanks, Pete. Then question, do you feel that you have some pricing flexibility? It seems like you do, and then regarding the growth strategy going forward, any additional color on the type of the next test and the timing of the next test that you anticipate being able to launch?

The Company has a very strong pipeline of seven or eight products under development. Several of those are predictive medicine products. A number are personalized medicine products. The Company's goal is to launch at least one new molecular diagnostic product each year for the foreseeable future, and we do anticipate launching an additional product before the end of this calendar year.

That product will be in the oncology sector, and we're very excited about the potential of not only that product but all of the products in our product pipeline.

Thanks, Pete, for the added color.

Our next question comes from the line of Kevin DeGeeter of Oppenheimer. Please proceed with your question.

Good morning, guys, this is actually Chris [Holterhoff] in for Kevin. Just a question on the DTC campaign. You mentioned that you are seeing some spillover into some of the other products in terms of the increase you're seeing in growth. Just wondering maybe if you can quantify the growth of some of those other products and maybe talk about some of the drivers of growth?

As I mentioned on the call, all five of our products in the predicted medicine arena exceeded our historical annual compound growth rate of 45%. So everything that Myriad offers exceeded that growth rate. Our strongest product, our fastest growing product, was COLARIS. It had an exceptional quarter.

And our second fastest growing product was TheraGuide 5-FU. But even our flagship product, BRACAnalysis, exceeded that 45% historical growth rate. So we really are seeing across the board very strong uptake in demand for all of Myriad's products.

Great. Thanks a lot for taking the question.

Our next question comes from the line of Alastair Mackay of Garp Research Group. Please proceed with your question.

I am wondering with the three ongoing Azixa adaptive trials, can you say what the enrollment looks like right now, and if not, a more general question is if you could describe when it is that you see the data and as the patients progress through the trial?

Yes. We haven't discussed the enrollment numbers at the moment. In terms of your question, second question, the trial is an open label trial, so we obviously see the data on the patients as they go through the trial.

But from a point of view of analysis we're limited by certain periods even though it is an adaptive design, so we can't just do, get a positive result in a patient and call it good and do an analysis and (inaudible) statistical significance. We have to have a certain number of patients enrolled in each arm with the study before we can do the analysis, and decide whether we should -- achieve success or we need to put more patients in or we don't have a response.

So we have to find points during the trial and we have yet to do one of those analyses.

Okay. Thanks. And changing gears a bit, I wonder if on the genetic analysis side you could give us any insight into the possible transitions from Sanger sequencing to any of the different variants of NextGen sequencing as it relates to the five nucleic acid tests?

As you know, Myriad conducts capillary sequencing. This is a highly optimized system in our hands, very automated, and of course is a major contributor to the gross profit margins and the profitability of the business. We continue to look at new next generation sequencing technologies. It is a very high bar for them to replace our current platform.

We have a very focused and very dedicated internal technology development group that looks at those and at some point in time it will make sense for us to transition over to newer generation sequencing platforms. Right now the current platform performs extremely well.

This is the highest sensitivity, highest specificity, genetic test available of its kind anywhere in the world, and we're very pleased with the performance of the current technologies, but we will continue to look and at the right time of when it makes an improvement and is beneficial for the Company we would move forward to another platform.

Okay. Thanks very much.

Our next question comes from the line of William Ho of Banc of America. Please proceed with your question.

Hi, guys. Thanks for taking my question. Congratulations on the quarter again.

Just to get a little additional clarity with respect to, I guess, the risks concerning, I guess, reimbursement and the current macroeconomic environment, should unemployment pick up a little bit from where we were at how much elasticity is there in the market and how much do you think it could potentially, I guess, impact sales as well is there any ability to have a price increase at this time?

Thank you, Will. We don't formally announce price increases, but I will confirm that the Company did have a price increase effective September 1. The Company will increase the price of its products, as you're aware, from time to time and we recently had a price increase, so we wouldn't anticipate another price increase for some time.

Also, as I mentioned, there is such a strong cost/benefit argument we get very strong support from insurers, both HMOs, private insurers, and Medicare and Medicaid. So that insurance coverage is very much in place and very supportive of our tests. Myriad's tests are somewhat unique. Generally, when you develop a new drug or new healthcare product it costs the healthcare system money. Myriad's products actually save the healthcare system money.

For a $3,000 test you can identify patients who have a heightened risk for cancer and take preventive action to actually prevent the disease and save hundreds of thousands of dollars treating that patient over the rest of their lifetime. So the arguments for testing using Myriad's products are very strong.

You do raise a good point, and that is in this weak economic environment there have been a substantial number of individuals who have lost their jobs. We wouldn't anticipate to see that impact, however, for some time. Traditionally most of those individuals will remain on Cobra and keep their insurance for about 18 months. So as we mentioned in this call, we haven't seen any negative impact, whatsoever, due to the current economic downturn on demand for our products or revenues.

That's not only last quarter, which we just reported, but into this quarter ending December 31 as well, and given the availability of Cobra, I wouldn't think we would see in this fiscal year a significant impact given the current recessionary environment.

Great. Thanks, Pete. Congratulations once again. Great job.

Our next question is a follow-up from the line of Charles Duncan of JMP Securities. Please proceed with your question.

Hi, guys. Thanks for taking the follow-up. I had a question regarding the business model kind of strategic moves that you recently announced. Really nice profitability this quarter. The achievement of that, does it change your perspective on next steps and can you give us some update on incremental progress and perhaps timelines?

Thank you, Charles. The Company is 100% committed toward the separation of the molecular diagnostic core business from our pharmaceutical opportunity and feel the best way to grow our pharmaceutical business and our molecular diagnostic business is as two independent and completely separate organizations.

So the Company is moving forward with spinning off the pharmaceutical business from our core molecular diagnostic business. The fact that this was a very successful quarter does not impact our decision at all. We do feel it is in the best interests of both businesses and our shareholders that the Company very aggressively move forward in implementing the spinoff transaction.

I am pleased to report that I think we're ahead of schedule in terms of the various items that we need to undertake to accomplish the separation of these two businesses, and I feel very confident that we'll be able to achieve a separation of the molecular diagnostic and pharmaceutical businesses in the first half of next year.

Okay. Thanks, Pete.

Ladies and gentlemen, we have now reached the end of our allotted time for the question-and-answer session. I will now turn the call back over to Mr. Meldrum.

Thank you. And thank you for everyone for attending the Myriad Genetics earnings call for our first fiscal quarter of 2009. We appreciate your continued support and the interest in Myriad, and this does end the conference call. Thank you.

Ladies and gentlemen, that does conclude our conference call for today. We thank you for your participation and ask that you now please disconnect your lines.