Myriad Genetics Inc (MYGN) 2010 Q1 法說會逐字稿

Welcome to the financial results for first quarter 2010 conference call. (Operator Instructions) I'd now like to turn the conference over to Mr. Peter Meldrum, President and CEO of Myriad Genetics, Incorporated. Plead go ahead, sir.

Thank you. Good afternoon and welcome to the Myriad Genetics earnings call for our first fiscal quarter ended September 30, 2009. My name is Peter Meldrum and I'm the President and Chief Executive Officer. I'm joined today by Jim Evans, our Chief Financial Officer, and Gregory Critchfield, President of Myriad Genetic Laboratories. I will begin the discussion this afternoon with a brief review of the past quarter. I will be followed by Mr. Evans, who will discuss our financial results and Dr. Critchfield, who will review the Company's molecular diagnostic business. At the end of the presentation, I will turn the call back to the operator for the Question & 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 events or results may differ materially and adversely from these 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, it's quarterly reports on Form 10-Q and it's 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.

Now, let me turn to the results for our first fiscal quarter. Molecular Diagnostic revenue for our first fiscal quarter grew 22% to $85.1 million from $70 million for the same period of the prior year. As you know, our first fiscal quarter is historically the weakest quarter of the year, due to seasonal summer vacations in July and August and this year was no exception. In fact, with Labor Day falling later than usual, on September 7 this year, the vacation period was extended about a week, which we believe cut into our typically stronger September revenues. At the same time, the Company continues to be impacted by the weakened economic conditions.

Several dynamics are converging, however, that give us continued confidence in our revenue plans for the year. First, we have noticed a recent uptick in patient visits to the physician's office and it looks as if the economy is improving.

Second, we have seen a marked increase in weekly testing volume during the latter half of September and continuing through October.

Third, as we reported on our last earnings call in August, the Company recently initiated several actions to enhance sales. These include expanding our Women's Health Care sales force, accelerating our direct-to-consumer campaign in the Midwest Region, renewing our DTC campaign in the South Region and expanding our OB/GYN speakers program.

As Greg will discuss in more detail, these new initiatives are gaining traction and proceeding well. In particular, the direct-to-consumer marketing campaigns are beginning to show results. However, it is important to remind investors that the major impact on our revenues from these new initiatives will be seen in the second half of this fiscal year.

Fundamentally, Myriad's business is strong. Our products provide critical information to patients and physicians and we are well positioned to be a major player in the emerging field of Molecular Diagnostics. As the economy improves, we are confident that our revenue growth will improve right along with it. Given the recent improvement in weekly testing volumes, a stabilizing economy and the recent marketing efforts that we have made to drive sales, I am confident that the Company will achieve or exceed the first call consensus revenue and earnings per share projections for fiscal 2010.

Operating income grew 27% to $29.7 million over the $23.4 million achieved in the same quarter of the prior year. Earnings per diluted share more than doubled to $0.31 compared with $0.15 for the first quarter of last year. Investors should realize, however, that while the initiatives we've undertaken to grow revenues and penetrate the Women's Health Care market are vitally important to our long-term success, we have incurred additional expenses in the first quarter which has reduced the Company's profitability. As we begin to see the benefit of these sales and marketing investments, we expect to see the improvement in our Company's profitability.

As you are probably aware, yesterday we learned that the Federal District Court ruled against the United States Patent and Trademark Office and Myriad's procedural motion to dismiss the pending ACLU litigation. This lawsuit seeks to overturn 7 of Myriad's 23 patents, covering our Breast and Ovarian Cancer Predisposition Test, BRACAnalysis. While we were disappointed in the ruling, we are optimistic the court will up hold these patents granted to Myriad by the United States Patent and Trademark Office and we will now proceed forward with defending the substantive issues in this case.

As we previously stated, Myriad has a goal of launching at least one new product each year. During the past two years, we were slightly ahead of schedule on this pace, having introduced three new products, TheraGuide, [Presion], and OnDose. This commercial flow of new products from our research pipeline is critical to the Company's ability to continue to grow revenue and maintain it's leadership position in the field of Molecular Diagnostics.

To further that goal, we recently acquired exclusive rights to patents surrounding the Pancreatic Cancer Gene, PALB2 Combined with Myriad's own BRCA2 and P16 genes, this will form the basis of a new Genetic Disposition Test for pancreatic cancer. Armed with this knowledge, physicians may be able to detect this deadly cancer at an earlier stage, which may be critical in improving patient survival. We plan to launch this test later in 2010.

More immediately, we are still on schedule to launch a separate oncology product in the first calendar quarter of 2010. I firmly believe that Molecular Diagnostics will revolutionize the practice of medicine and dramatically improve patient healthcare and outcomes while lowering the overall healthcare costs. It will shift the focus of healthcare from just treating disease, to also focusing on preventing disease. It will identify patients who will respond to certain classes of drugs and differentiate them from the non-responders who should be given other therapies. It will ensure that patients receive an optimal dose of drug, so that their disease is treated effectively without unnecessary toxicity or side effects.

Myriad continues to be a Pioneer in this field and expects to be the global leader in Molecular Diagnostics. And now I'd like to turn the call over to our Chief Financial Officer, 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, 2009. As Pete mentioned, Myriad's revenues for the quarter increased 22% to $85.1 million compared with $70 million for the same period last year. Although we are very pleased with our ability to drive continued year-over-year revenue growth, we continue to see the impact of the recession on our business. Clearly, while there appears to be a generally more optimistic outlook from Wall Street, we believe that consumer confidence on Main Street has lagged, impacted by continual increases in unemployment and understandable caution after the difficult events over the past year. This, when layered on top of Myriad's seasonally weak first fiscal quarter, resulted in a decrease in a slight 1% decrease in revenue over the quarter ended June 30, 2009.

Historically the first fiscal quarter is our weakest for revenue growth. In fact, Myriad experienced a 14% quarter-over-quarter revenue decline in our first quarter of fiscal 2004 and relatively flat quarter-over-quarter revenue growth in our first quarter of both fiscal 2003 and 2006. As we look ahead to our second fiscal quarter, I will reiterate Pete's comment that we have seen a definite improvement in sample flow recently. Therefore, I'm encouraged about our return to revenue growth in this current quarter.

Gross margins remained at a very attractive 87% for the first fiscal quarter, compared with 86% gross margins in the prior year. We continue to see opportunities on the horizon that will allow gross margin improvements over the next few years. Research and Development expenses for the quarter ended September 30, 2009 were $5.7 million compared with $4.4 million of Continuing Operations R&D expense, in the same quarter of the prior year. This increased investment in R&D reflects Myriad's efforts to develop additional Molecular Diagnostic tests and to expand markets for our existing tests through clinical trials and collaborative research products. We believe our Research and Development expenses will continue to grow from the current year run-rate of approximately $25 million by approximately 15% per year.

At Myriad we have two separate teams within Research and Development. Our Research team of approximately 50 dedicated scientists, mathematicians and programmers are charged with identifying and bringing to life new Molecular Diagnostic tests. Our Development team of an additional 14 highly specialized employees, then scales up the tests for high through put, commercial volume and quick turn around times. This same team continues to work on enhancements to all of our tests to increase their utility and market potential.

Selling, General and Administrative expenses for the quarter ended September 30, 2009 were $38.7 million compared with $32.4 million in the first quarter of fiscal 2008. This increase was primarily attributable to the hiring of 50 new sales representatives to address the OB/GYN market. The early initiation of the direct-to-consumer campaign in the Midwest and the (inaudible) of the direct-to-consumer campaign in the South. Expenses related to our sales force expansion alone grew $1.7 million in the first fiscal quarter of 2010 or the June 2009 quarter. We spent approximately $2.5 million on the DTC campaigns from their kick-off in mid-August through the end of the first fiscal quarter.

We expect our Selling, General and Administrative expenses will continue to increase during the second fiscal quarter as a result of these initiatives. In fact, we anticipate that the DTC expenses for our second fiscal quarter will slightly exceed $4 million.

Additionally, as Greg will discuss in a moment, we are ramping up our Physicians Speaker program and will incur an estimated $1 million for this program. We do, however, believe that these are sound investments and should produce increased revenues, particularly in the second half of the fiscal year.

Income from Continuing Operations increased 24% to $30.4 million from $24.5 million for the first quarter of fiscal 2009. Our net income for the quarter ended September 30, 2009 improved 111% to $30.4 million or $0.31 per share fully diluted from $14.5 million or $0.15 per share, fully diluted for the first fiscal quarter of 2009. $10 million of this improvement is the result of the Company's decision to spin-off the pharmaceutical subsidiary, who's expenses impacted the first quarter of fiscal 2009, but had no impact on the first quarter of fiscal 2010.

Myriad continues to maintain a strong balance sheet. Cash, cash equivalents and marketable investment securities increased $24.8 million over the prior quarter ended June 30, 2009 to $417 million. We continue to feel very good about the quality of our accounts receivable. With the vast majority of Myriad's revenues being paid by insurance companies, we have not experienced a noticeable impact to the collectibility of our outstanding receivables.

Finally to conclude, it is my pleasure to state that Myriad has absolutely no debt and no convertible securities. With that, I will now turn the call to Dr. Greg Critchfield.

Thank you Jim. It is my pleasure to update you today on our Molecular Diagnostics business. During our last conference call, we discussed the impact of the economic recession on our business. We believe that the headwinds from the economic downturn continue to suppress our revenue growth. To combat these headwinds in today's challenging economic environment, we launched several initiatives during the first quarter to stimulate revenue. I'd like to remind you of a few of them.

We have hired 50 new sales representatives, we have expanded our direct-to-consumer marketing campaign, we have expanded our physician's speakers program, we are offering OB/GYN physician education on new ACOG guidelines and we are offering a new implementation education for office staff as an activity.

We completed the hiring and training of 50 new OB/GYN sales representatives in August, well ahead of schedule. They are beginning to generate revenue for the Company and our experience tells us that they become productive and reach an overall breakeven between 6 and 9 months. We would expect this during our third and fiscal fourth quarters. This is a particularly talented group of sales professionals. Many, having advanced degrees or considerable experience in detailing pharmaceutical products.

We've expanded our DTC activities. Television, print and direct mail activities, first by initiating the Midwest DTC campaign early, which began on August 17, 2009 and will continue through March 31, 2010. Second, we relaunched the South DTC campaign in Texas and Florida. It also began on August 17 and is scheduled to run through December 31, 2010.

Third, we launched a direct mail marketing program in the Northeast campaign region, which will run through December 31, 2009. It takes about 2 to 3 months for a DTC campaign to take affect, but we are already seeing increases in visits to our DTC website and increases in the number of requests for our [BReady] kits. Our expanded campaign activities have already generated approximately 180 million impressions and the new campaign is performing very well compared to previous campaigns.

We are expanding the number and scope of peer-to-peer physician activities are identifying and educating additional physician speakers for our speakers programs. Individuals are selected for the program based on their experience and knowledge of BRACAnalysis Testing and because they are regional thought-leaders who can play an important role in educating their peers. We have scheduled three educational seminars during the months of November and December where these individuals will receive two days of education from a nationally respected key opinion leader.

We have stepped up our peer-to-peer field activities. First, by increasing our spending to generate a greater return on our investment in conducting more peer-to-peer events. As a result, 370 meetings were held during the first fiscal quarter, with another 600 to be conducted during the current fiscal quarter. We believe, that as local thought leaders share their personal experiences with Myriad testing, we should see greater adoption of our testing from physicians attending these events.

All of our peer-to-peer activities are designed to help physicians understand the importance, value and practicality of offering testing to their patients. We believe the major impact of this initiative will be felt in the second 1/2 of the fiscal year.

We have designed and will soon be offering a nationwide Hereditary Breast and Ovarian Cancer Webinar to educate OB/GYNs about recent ACOG guidelines with four events scheduled during the month of November. The program will feature a key thought leader who will educate physicians on the guidelines and their impact on the clinical management of patients.

We've also designed, and are deploying an office implementation webinar for OB/GYN practices that'll be presented during November. This program will help educate OB/GYN office staffs on practical applications of Hereditary Cancer Testing. Tools and education will be presented to help them in the identification of patients according to ACOG guidelines, insurance support, patient education materials and results and interpretation, and follow-up.

As Pete mentioned earlier in the call, Myriad recently announced the exclusive licensing of a gene involved in Pancreatic Cancer predisposition from Johns Hopkins. Pancreatic Cancer is a deadly disease, affecting 42,000 individuals each year in the US alone. It is typically diagnosed late when doctors and patients have few options to treat the disease effectively. Approximately 10% of pancreatic cancer is familial. The PALB2 Gene was recently identified as a susceptibility gene for familial pancreatic cancer by scientists at the Sol Goldman Pancreatic Cancer Research Center at Johns Hopkins.

Other commonly mutated genes that play a role in familial pancreatic cancer include BRCA2 and P16, to which Myriad also holds exclusive rights under ten issued US patents. If an individual has a mutation in one of the BRCA2, PALB2 or P16 Genes, the risk of developing pancreatic cancer by age 70 may be as high as 10 to 20 times higher or greater than that of the general population.

New advances in chemotherapy and in imaging technologies make it more important to find ways to know who is at high-risk of developing pancreatic cancer to give them options and strategies to fight this disease. A test to identify individuals at risk for pancreatic cancer could enable a physician to better manage a patient's healthcare by increasing surveillance to catch the cancer at an earlier stage when it is more treatable and prognosis is more favorable.

We plan to launch this test later in 2010 after the launch of our already announced eight Molecular Diagnostic product during the first calendar quarter of 2010.

Myriad's products are vital to the healthcare management of patients with cancer or family history of cancer. Our products have the potential to save lives and save healthcare costs. Although the economy still remains uncertain, we believe that our initiatives will enable us to capture the large potential for growth that exists, both in Oncology and -- in the Oncology and the OB/GYN segments. We look forward to continuing to make a tangible difference in healthcare where the potential to improve lives and patient outcomes is vitally important. With that review, I would like to turn the call back over to Pete.

Thank you Greg and I'll turn the call over to the Operator for the Question & Answer portion.

(Operator Instructions) Our first question comes from the line of Geoff Meacham with J.P. Morgan. Please proceed with your question.

Hey guys, thanks for taking the question. I was wondering if you could talk about the volume metrics in the Southeast and Midwest, in a way to give us a little bit harder numbers versus other regions that you don't have the DTC campaign?

I'll ask Greg to comment on this as well, but as I mentioned in the beginning of the call, it really does take about 2 to 3 months for a DTC campaign to start showing results in terms of sample flow. We are beginning to see those results, but we are early on in the cycle. So, I think it's hard to give you more specific data, other than to say we are seeing improved sample flow from the DTC territories as compared to the rest of the country.

Yes and just a little more on that -- what we typically do is we look at the rest of the country where the DTC campaign is not running. We know what the growth rates are in those areas and by comparing that to what we see in the campaign areas, it gives us an idea of what we're achieving as a result in the campaign. That being the principle difference between the, the two regions of comparison.

And a follow-up question, just on reimbursement. Have you guys heard of any discussion in terms of changing the reimbursement criteria? And the second question is, anything on the prior authorization side that you think may have impacted the quarter?

Again, let me start off and I'll let Greg add to that. I have heard of nothing in terms of the change of criteria for reimbursement. Of course, that's the more important facet that we're concerned with. In fact, many of the insurance companies, including United Healthcare, use NCCN guidelines for the reimbursement criteria for affected individuals and that has recently been relaxed. The old guidelines stated that any woman diagnosed with breast cancer, under the age of 40, should be tested, regardless of family history and that guideline now has been increased so that now, any woman under the age of 45 should be tested. Again, regardless of family history. So, we have seen nothing in terms of a change in guidelines from the insurance companies and some of the professional societies have actually relaxed or improved those guidelines.

With regards to the prior authorization by United Healthcare, I think that has gone very smoothly. And, I want to congratulate United Healthcare on implementing that program very efficiently and I don't believe it had a material impact on the revenues this year, but I'll ask Greg to comment on that as well.

The first comment, I'll just reinforce what Pete said with regard to professional societies. As more data accumulates, it becomes more important to identify individuals at risk for heredity cancer. And not only are we seeing a relaxation of guidelines on the breast and ovarian cancer side, we're beginning to see that on the Colon Cancer side as well. So, that is a trend that we've watched over the last several years, we expect that to continue as more data come forward.

With regard to the recent prenotification process with United, as you know Myriad work very closely with United Healthcare. Again, the burden on the physician has not changed, the physician filled out our test request forms, our test request forms are used for documentation of the medical necessity of the procedure and that process is going well.

Great, thanks a lot.

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

Hi, guys, thanks for taking the question. Pete, I was kind of wondering about BRCA revenues in the past and perhaps even this year if you could break those out? And if not, if you could provide us a little bit more granular information on what products you're seeing an increase in demand or what kind of settings -- is it the Oncology office or the OB/GYN office?

Thank you, Charles. As we had mentioned on our last earnings call, we do believe that the slowing in revenue growth that we've seen year-over-year is as a result of the recession and part of the rationale for that is we're not seeing geographical differences in terms of a revenue growth in, in different parts of the country, nor are we seeing differences, by product line. So, all of our products, all seven products Myriad currently offers, have seen the impact of the recession and are being affected by it. We don't see one being affected greater than the other and that certainly includes the flagship product of BRACAnalysis.

With regards to the second part of your question, could you run that by me one more time?

Yes, I was -- I was wondering if there is a return of demand early on in this quarter, primarily at the Oncology office level or OB/GYN level, and if you could give us some sense of the quantification of that, is it like up 10% or a little more granularity on that?

Yes, again, as we mentioned in the prior earnings call, we are seeing the impact of the recession on both the Oncology setting and the OB/GYN setting, however, by far and away the major impact is on the more discretionary market, the OB/GYN setting. As we mentioned in this call, we have seen a market increase, the last uh, six weeks or so in testing. And that's coming from both Oncology and OB/GYN, but certainly more so from the OB/GYN setting which was impacted greater when the recession began. So, we are very optimistic about this quarter and the sample flow that we're seeing. We're seeing increased flows both from Oncology and OB/GYN and that certainly bodes well for this quarter.

May I ask a follow-up on the Pancreatic Cancer tests that you mentioned, that looks like a pretty interesting test. It sounds like that's going to be predispositioned, but is it possible it could migrate into either therapeutic utility or prognosis with those particular genes?

Yes, again, I'll have Greg expand on my initial thoughts, but the pancreatic test is an exciting one, because not only is it a genetic predisposition test that would identify patients with this 10 to 20 times greater risk of getting pancreatic cancer than the general population, but because of the genes involved, are involved in DNA repair, it may be that DNA damaging agents are the superior therapeutic for pancreatic patients.

And with BRCA2, as a member of that foundation of three genes that we talked about, as you know, the data have shown that approaches with novel targeted therapies, such as PARP inhibitors work in BRCA2 mutation carriers. So, that's a scientific hypothesis at this point with pancreatic cancer and future data may support that as a very viable strategy. We'll have to wait and see.

Thank you.

And our next question comes from the line of Lucy Lu with Citigroup. Please proceed with you question.

Great. Thank you. The first question is, can you please give us a little more detail on the AIDS test you were launching in calendar 1Q next year? Is it a genetic predisposition test?

Thank you, Lucy, we don't give a lot of information on tests prior to launch because we don't want to create any physician backlash by preannouncing a test too early. What I can tell you, however, is two things. Number one, it is an oncology product that would be sold through our existing oncology sales force and specifically an answer to your question, no it's not a genetic predisposition test.

Okay and then Pete, can you give us an update on the launch of OnDose. It's only been on the market for a few months, but just based on the last few months of experience, has the commercial potential for that test changed in your view, in Myriad's view?

Lucy this is Greg. The market potential is unchanged, we believe with the way the test would be used, the total potential market is approximately $420 million a year. That is unchanged and we're very early in the launch of OnDose. Our initial work with the oncologists shows a great deal of excitement over this. The ability to have a target to shoot for in administering a drug that is accompanied by significant toxicity and the ability to properly dose patients so they get a better response is something that resonates with the oncologists.

Again, I think one of the reasons we're so excited about OnDose as one of our future major products is the clinical data that supports OnDose. In a clinical study published in the Journal of Clinical Oncology, patients who received OnDose dosing compared to the standard of care lived six months longer than patients who were given exactly the same drug that received just a body surface area standard of care dosing.

Also, the toxicity was dramatically reduced in the OnDose patients. That saves the healthcare system a lot of money because you don't have to treat those patients for those adverse events.

So, no our enthusiasm for OnDose is still extremely high, but I will echo Greg's comment that we only launched this product about 5 or 6 months ago, so it's a little early for it to be making a big impact on our review growth.

Alright, thank you.

Our next question comes from the lining of Derrick [Debreuin] with UBS. Please proceed with your question.

Hi. Good afternoon. This is Rafael in for Derrick. How are you? Couple of questions for you. The first one is, I know you don't provide quarterly guidance, but as we head into another holiday season, I was just curious to know how you were preparing for any fluctuations in sample volume flow and what other items might you bake that into your assumptions for revenue growth for the year? And actually, can you spell out the actual numbers that you're quoting for consensus estimates for fiscal year 2010? Thank you.

Thank you. You're absolutely correct, the Company doesn't give guidance on a quarterly basis. We give only the annual guidance and we are very comfortable with the first call consensus that numbers for both revenues and earnings per share. With respect to this quarter, I can tell you a couple items about this quarter. Number one, as we mentioned on this call, we've seen a marked increase in sample flow beginning the latter part of September and continuing through October. So, we are optimistic that if that continues through November and December, we'll have a good quarter.

Also, the second fiscal quarter, ending December 31, historically has been one of our stronger quarters because patients have met deductibles and those companies that offer cafeteria plans where you set aside pretax dollars to pay for medical expenses, those employees have to use that money or lose it by year-end. So, we do tend to see a stronger quarter in the December quarter.

I will caution, those two comments, however, with the fact that while we are seeing improved patient visits to the doctors, we're not out of the recession yet and the recession still does represent a fairly strong headwind to the Company and that the activities that we've undertaken to boost sales in light of these weakened economic conditions, really the majority of those don't take effect until our third and fourth fiscal quarters. So, we won't see much impact from that during this current December quarter.

Having said that, we remain optimistic about meeting the consensus guidance for the year.

Again, what are those numbers, exactly that you're quoting for consensus? I just want to be clear about the figures.

So, looking at the first call consensus number coming into this call, the annual revenue number was $389.93 million. That's again, top-line revenue. And for the earnings, let's see, it looks like it's $1.54 for the earnings per share.

Okay, thanks, I'll jump back in the queue.

Our next question comes from the line of David Claire from Piper Jaffray. Please proceed with your question.

Hi, everybody, it's Dave Claire here for Bill Quirk. How are you?

Great, thank you.

Good, I appreciate the comments about the economy -- the impact on the whole portfolio. I was hoping you could give us some color though, on how the various tests performed? Were there some getting a little harder than others?

No, not really. We've seen the impact pretty uniformly across all seven of the Company's products, again, which leads us to believe it is the overall economy that is causing this slow down in revenue growth. We have noticed, however, that in different market segments we've seen a different impact and again that reinforces our belief that it is the current economic conditions.

While we've seen impact in both the Oncology segment of our market and the Women's Healthcare segment of the market, the bigger impact by far is on the Women's Healthcare sector. When you have a woman diagnosed with cancer, the economic impact one would expect to be much less significant than for a woman who does not yet have cancer and it's a little more discretionary and she can put off going to the doctor for six months or nine months. So, we have not seen any differential impact across the product lines. It's been quite uniform, but we have definitely seen a bigger impact on our OB/GYN segment.

Okay, thank you. And during the last conference call, you mentioned that there was a slight strategy change -- you're going to try to increase testing and utilization within the existing physician base, I was just hoping you could give a little bit of color on how that transition is going?

Sure. One of the things we talked about is that moving physicians from infrequent test orders to frequent test orders is one of our goals. We have incentives in place among our sales force to do that and a series of analytics that we're working on in programs to do that. So, those -- those programs, we believe, will give people, the experience who are infrequent orderers a chance to use Myriad tests where we actually have a clinical experience program for those physicians that will help them to become accustomed to ordering the tests and learning about it and we believe that will transition into having them become more frequent test orders.

Okay, thank you.

And our next question comes from the line of Amanda Murphy with William Blair. Please proceed with your question.

Hi good afternoon. I just had a quick follow-up on the Pancreatic Cancer tests. I'm curious, are we sort of starting at ground zero with that product or can you leverage your doctor your relationship and and potentially your current insurer contracts with that test?

That's a very good question, Amanda. First, on the insurance side, of course, we have the ability to add new products automatically in a large number of contracts we have with insurers and leverage our relationship with the payors to bring new products on board. So, that clearly happens. The call point for someone who is treating a pancreatic cancer patient is very much the same. For -- as we have with, with our breast cancer or colon cancer products. And so, our belief is that launching this product will not require us to be calling on a substantially different group of individuals and we'll be seeing many of the same people that we, that we actually call on for our current products. So, it gives us the ability to take yet another important test to the physician who is already thinking about predisposition.

Let me just echo what Greg said in that we can leverage our existing oncology sales force very effectively to sell the new pancreatic test and we can do it much more efficiently at reduced costs for the Company.

With regards to the reimbursement, I would like to use OnDose as an example. We launched OnDose in the end of April of this year, within about two months of launching OnDose we already had over 100 million lives under contract that were covered by OnDose. So, the fact that we have contracts with so many of the insurers and that allows for reimbursement of new tests introduced by Myriad gives us a tremendous advantage in terms of getting good reimbursement for a new test right out the door. And we anticipate the same thing with the pancreatic tests.

So how does incorporation into guidelines impact that reimbursement? I'm assuming it obviously makes it better, but you're still getting reimbursement even without the guidelines, is that fair?

When you launch a new test, oftentimes the guidelines haven't been established yet. We work with thought leaders who are doing research that actually will create data from which organizations will look at the data and say it's time to make this part of the guidelines and that -- that is -- that part of the strategy with any new product is to identify a network of individuals who are involved in the research who can help move it forward. And we, we do this with all our products. If you remember, in the early days of BRACAnalysis there were no guidelines after the gene discovery. It took time to develop those networks and with the experience we have, we can do it faster today than we could even then.

I will also note that the definition of family history of cancer is relatively consistent across Breast Cancer, Ovarian Cancer, Colon Cancer, Uterine Cancer and Melanoma. And so I think the physicians until good professional society guidelines are in place, we'll probably use the general definition of family history that are used for the other cancer predispositions.

Okay, and just switching gears, quickly here, can you just provide an update on your international expansion efforts? I know it's a longer term goal for you, but I'm curious if there's new information you have there?

No, there's new information in terms of our goal of establishing a presence in Europe, within the next three years. That is still a very important goal for the Company. As you pointed out, it's not going to happen quickly, but it will take some time. The Company is exploring a variety of options, including partnering with a group in Europe. Acquisition of laboratories in the major market countries in Europe and building laboratories from scratch ourselves. So, it's a very important part of our long-term strategy, but it will take time to either establish these partnerships or seek out attractive acquisition opportunities and we'll certainly update you as we progress along that path.

Okay, thanks very much.

Our next question comes from the line of Marshall Urist with Morgan Stanley. Please proceed with your question.

Hey guys, good afternoon, thanks for the call. So, first question. I just wanted to ask about the seasonality question again. Obviously the December quarter, as you mentioned is strong, but from your comments it seems like people, you're trying to suggest that maybe the kind of high single-digit, well into double-digit sequential growth that people have seen in the past probably given the macro headwinds that you've talked about, probably should not be what we're expecting in the next quarter? Is that fair?

I think Marshall, what's fair, is we're not trying to guide you in any way, because we really don't give quarterly guidance. What we are trying to do is lay out some of the factors that influence this quarter in a positive or negative fashion, but we're really not trying to guide this quarter to any specific expectation.

Okay, thanks. And then, second question, on the consensus for the full-year, I might be wrong about this, but I think that the full-year consensus number actually kicked down a little bit since you guys discussed it on the year-end call. So, I'm just curious, is the year, so far, sort of unfolding consistent with your expectations or is -- is confirming sort of the slightly lower number saying that some of that is reflected in -- is reflected in consensus in your expectations or have your expectations for the full-year not really changed?

Our expectations for the full-year have really not changed. You're right. There was a very slight decrease in revenue from $392 million to essentially $390 million and a slight uptick in the earnings per share number, but the year is unfolding about as we expected it. If you look at revenues last year of $326.5 million, the consensus, $390 million is about a 20% increase year-over-year and our first quarter was a 22% increase year-over-year. So, we are not changing our expectations in any way in terms of our confidence for the fiscal year.

Okay, great, thanks. And then just one last one on expenses, Jim, I just wanted to be clear, I appreciate the granularity you gave on the different pieces, are those incremental expenses from what you guys had talked about last time or are those things that are just going to hit the first half and then maybe as some of the DTC expenses fall off, the run-rate might change modestly as we get into the second half of the year?

Yes, I was trying to point out specifically some of the spends that we had done for those particular programs. If you were to add up some of those numbers that I gave for the SG&A, for example, the amount that we spent on these programs is greater than the difference of SG&A from last quarter to this quarter. Obviously, there were some things we did last quarter that we did not do again. We talked previously about the spend on the separation that we incurred last quarter. So, it's not necessarily a run-rate that I'm pointing to, but just giving some guidance on what we spend our money on and I think that does give you an idea of what we would be ongoing type expenses. So, some of them, the sales force expansion, obviously, those sales representatives will continue with us throughout the year, but once we spend that money on the DTC campaign, that wouldn't go forward through those quarters that we do not have DTC campaigns in the future. So, there's a little bit of both tied up in, in the numbers that we talked about today.

Okay, great, thanks guys and thanks for taking the questions.

Uh-huh.

Our next question comes from the line of Mike Yee with RBC. Please proceed with your question.

Thanks, Pete. A question for you guys on DTC campaigns. When you think about potentially launching other DTC campaigns, beyond what you've already announced, what would drive your thinking to drive to start a new one or potentially to start one outside of your September to March window? And then what specific metrics are you looking at in the ongoing DTC campaigns that would potentially drive the decision to go forward with more?

Okay, Michael, the thing we look for is the performance of the -- of our history, of our historical campaigns, how they run, certainly paid close attention to the ones that are running currently. The metrics we use, as I mentioned before, we ultimately -- you want to know whether there is a difference that is attributable to DTC activities and to do that you have to have a baseline growth and we model that with the areas that are not part of the DTC campaign and compare what the historical growth rates in those areas with what we are seeing in campaigns that are running.

That helps us to know that we're seeing an impact of the campaign. When we decide to go into an area, we look at several factors. We want to know what the insurance reimbursement situation is. We want to make sure it is fully staffed by our salespeople. We find that having salespeople there ahead of the campaign actually makes for a better campaign and that's the theme that we've seen over the last three years as we run campaigns. So, that's something we look for.

We want to make sure that the physician and medical community is prepared ahead of the campaign to be able to accept the patients coming in and talking with them. So, all of those things go into a decision to decide where we want to place the campaign.

We look at geographies, according to the size of markets. We tend, as you know, as you've noticed, we tend to focus on larger metropolitan areas. Those are the ones we go to first because it's more efficient for us to run the campaign in those areas. So, all of those are the factors we use to decide where we go next.

Is there any thinking about running stuff outside your September to March window or you've looked at that previously?

Sorry, I didn't answer that one. We actually like the September to March window, let me tell you why. If you -- looking at Myriad's historical growth patterns, as we mentioned, the first quarter, the summer quarter is historically slower. We like to get through that quarter and going into the fall is a time when people are out of vacations, for many people, kids are back in school, things reach a point and then we go -- we're able to catch the headwinds and the updraft from all the activities around, around National Breast Cancer Awareness Month and what we find is that is a very good time for us to stimulate things. That coupled with the insurance situation, it's a good time for us to actually launch the campaign. So, our feeling is that we're launching it at a very good, a good time of year and we like doing it then, historically it's worked.

How far away are you from thinking about running the DTC for another product? Are we pretty far away from that?

We have a lot of interesting discussions about that. I think as genetic testing becomes more common and more a part of medical care and as guidelines get to a point where it could be supported, we would look at those -- at other areas as possibilities.

The direct-to-consumer marketing campaigns are primarily focused on the Women's Healthcare segment and not the Oncology segment where the test does tend to be a little more discretionary. The other major product we're thinking about and kicking around a DTC campaign is the Colaris, a Colon and Uterine Cancer product. I can't give you any guidance as to when, but we're definitely beginning serious thought to a DTC campaign in the future at some point in time around Colaris.

Do you think that's more than a year out?

Hard to say right now, but I think one thing you have to take note of, we have covered right now about 45% of the country with our DTC campaigns around Breast Ovarian Cancer. So, we still have the West Coast, the Northwest and the Mid-Atlantic regions to cover. Whether or not we tackle two DTC campaigns, simultaneously, one based on BRACAnalysis and one based on Colaris is again something we'll have to weigh the expense in and our ability to handle.

Okay, thanks.

Unfortunately, we are out of time for the Q&A session today. Mr. Meldrum, I will now turn the call back to you. Please continue with closing remarks.

Thank you very much, we appreciate everyone who has participated and listened in on the conference call. This does conclude the conference call for our first quarter earnings of fiscal 2010. Thank you.

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