Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 0-26642

 

 

MYRIAD GENETICS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   87-0494517

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

320 Wakara Way, Salt Lake City, UT   84108
(Address of principal executive offices)   (Zip Code)

(801) 584-3600

Registrant’s telephone number, including area code:

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Check one:

 

  Large accelerated filer   x    Accelerated filer    ¨
  Non-accelerated filer   ¨  (Do not check if smaller reporting company)    Smaller reporting company    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of April 30, 2015 the registrant had 69,451,234 shares of $0.01 par value common stock outstanding.

 

 

 


Table of Contents

MYRIAD GENETICS, INC.

INDEX TO FORM 10-Q

 

          Page  

PART I - Financial Information

  

Item 1.

   Financial Statements   
   Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2015 and June 30, 2014      3   
   Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) for the three and nine months ended March 31, 2015 and 2014      4   
   Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended March 31, 2015 and 2014      5   
   Notes to Condensed Consolidated Financial Statements (Unaudited)      6   

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      17   

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      25   

Item 4.

   Controls and Procedures      25   

PART II - Other Information

  

Item 1.

   Legal Proceedings      27   

Item 1A.

   Risk Factors      27   

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      27   

Item 3.

   Defaults Upon Senior Securities      28   

Item 4.

   Mine Safety Disclosures      28   

Item 5.

   Other Information      28   

Item 6.

   Exhibits      28   

Signatures

     29   

 

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MYRIAD GENETICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except per share amounts)

 

     March 31, 2015     June 30, 2014  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 55,209      $ 64,821  

Marketable investment securities

     79,224        121,641  

Prepaid expenses

     9,985        6,921  

Inventory

     29,359        23,919  

Trade accounts receivable, less allowance for doubtful accounts of $7,730 at March 31, 2015 and $8,968 at June 30, 2014

     92,195        81,869  

Deferred taxes

     13,460        6,445  

Prepaid taxes

     —          13,609  

Other receivables

     2,992        3,198  
  

 

 

   

 

 

 

Total current assets

  282,424      322,423   
  

 

 

   

 

 

 

Equipment, leasehold improvements and property:

Equipment

  97,595      80,685   

Leasehold improvements

  18,956      18,922   

Property

  20,075      —     
  

 

 

   

 

 

 
  136,626      99,607   

Less accumulated depreciation

  67,527      65,013   
  

 

 

   

 

 

 

Net equipment, leasehold improvements and property

  69,099      34,594   
  

 

 

   

 

 

 

Long-term marketable investment securities

  41,200      84,124   

Long-term deferred taxes

  407      3,180   

Other assets

  5,000      5,000   

Intangibles, net

  195,691      205,312   

Goodwill

  185,228      169,181   
  

 

 

   

 

 

 

Total assets

$ 779,049    $ 823,814   
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$ 17,955    $ 23,078   

Accrued liabilities

  47,879      56,410   

Deferred revenue

  1,339      1,090   
  

 

 

   

 

 

 

Total current liabilities

  67,173      80,578   
  

 

 

   

 

 

 

Deferred grants

  10,447      —     

Unrecognized tax benefits

  26,111      24,238   

Other long term liabilities

  6,420      —     
  

 

 

   

 

 

 

Total liabilities

  110,151      104,816   
  

 

 

   

 

 

 

Stockholders’ equity:

Preferred stock, $0.01 par value, authorized 5,000 shares, no shares issued and outstanding

  —        —     

Common stock, $0.01 par value, authorized 150,000 shares at March 31, 2015 and June 30, 2014, issued and outstanding 70,022 at March 31, 2015 and 73,497 at June 30, 2014

  700      735   

Additional paid-in capital

  738,040      717,774   

Accumulated other comprehensive loss

  (7,560   (1,515

Accumulated (deficit)/retained earnings

  (62,282   2,004   
  

 

 

   

 

 

 

Total stockholders’ equity

  668,898      718,998   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

$ 779,049    $ 823,814   
  

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

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MYRIAD GENETICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

 

(In thousands, except per share amounts)    Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2015     2014     2015     2014  

Molecular diagnostic testing

   $ 172,978      $ 176,191      $ 516,634      $ 565,335   

Pharmaceutical and clinical services

     7,007        6,733        16,582        24,115   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  179,985      182,924      533,216      589,450   

Costs and expenses:

Cost of molecular diagnostic testing

  33,011      23,648      100,859      67,842   

Cost of pharmaceutical and clinical services

  3,282      2,961      8,152      10,379   

Research and development expense

  16,673      13,397      56,788      47,289   

Selling, general, and administrative expense

  91,279      87,631      269,415      242,752   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

  144,245      127,637      435,214      368,262   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  35,740      55,287      98,002      221,188   

Other income (expense):

Interest income

  124      2,498      265      5,190   

Other income (expense)

  (298   (442   1,117      (1,066
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

  (174   2,056      1,382      4,124   

Income before income taxes

  35,566      57,343      99,384      225,312   

Income tax provision

  14,091      20,573      37,896      82,719   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 21,475    $ 36,770    $ 61,488    $ 142,593   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

Basic

$ 0.30    $ 0.50    $ 0.85    $ 1.87   

Diluted

$ 0.29    $ 0.48    $ 0.82    $ 1.82   

Weighted average shares outstanding

Basic

  70,696      73,821      71,985      76,173   

Diluted

  73,870      76,374      75,122      78,332   

Comprehensive income:

Net income

$ 21,475    $ 36,770    $ 61,488    $ 142,593   

Unrealized gain (loss) on available-for-sale securities, net of tax

  (6   45      (282   583   

Change in foreign currency translation adjustment, net of tax

  (3,293   (672   (5,683   (280
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

$ 18,176    $ 36,143    $ 55,523    $ 142,896   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

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MYRIAD GENETICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

     Nine Months Ended
March 31,
 
(In thousands)    2015     2014  

Cash flows from operating activities:

    

Net income

   $ 61,488      $ 142,593   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     18,389        8,291   

Loss (gain) on disposition of assets

     79        52   

Share-based compensation expense

     31,572        20,503   

Bad debt expense

     23,520        30,968   

Accreted interest on note receivable

     —          (3,337

Unrecognized tax benefits

     1,873        2,923   

Excess tax benefit from share-based compensation

     (3,199     (5,109

Deferred income taxes

     (1,043     1,827   

Changes in operating assets and liabilities:

    

Prepaid expenses

     (2,945     (837

Trade accounts receivable

     (32,239     (17,307

Other receivables

     955        (587

Prepaid taxes

     13,609        (12,360

Inventory

     (4,921     (10,395

Accounts payable

     (6,400     (5,635

Accrued liabilities

     (11,524     (2,233

Deferred revenue

     242        (77
  

 

 

   

 

 

 

Net cash provided by operating activities

  89,456      149,280   
  

 

 

   

 

 

 

Cash flows from investing activities:

Capital expenditures for equipment and leasehold improvements

  (21,905   (9,653

Acquisitions, net of cash acquired

  (20,115   (223,531

Purchases of marketable investment securities

  (55,069   (105,451

Proceeds from maturities and sales of marketable investment securities

  140,802      339,865   
  

 

 

   

 

 

 

Net cash provided by investing activities

  43,713      1,230   
  

 

 

   

 

 

 

Cash flows from financing activities:

Net proceeds from common stock issued under share-based compensation plans

  25,635      47,156   

Excess tax benefit from share-based compensation

  3,199      5,109   

Repurchase and retirement of common stock

  (165,946   (222,014
  

 

 

   

 

 

 

Net cash used in financing activities

  (137,112   (169,749
  

 

 

   

 

 

 

Effect of foreign exchange rates on cash and cash equivalents

  (5,669   964   

Net decrease in cash and cash equivalents

  (9,612   (18,275

Cash and cash equivalents at beginning of period

  64,821      104,073   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 55,209    $ 85,798   
  

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

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MYRIAD GENETICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

(1) Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by Myriad Genetics, Inc. (the “Company”) in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly all financial statements in accordance with GAAP. The condensed consolidated financial statements herein should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2014, included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014. Operating results for the three and nine months ended March 31, 2015 may not necessarily be indicative of results to be expected for any other interim period or for the full year.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Certain reclassifications have been made to prior period amounts to conform to the current period presentation. For the nine months ended March 31, 2014, a reclassification of $1.0 million from proceeds from maturities and sales of marketable securities was made to the effect of foreign exchange rates on cash and cash equivalents in the condensed consolidated statement of cash flows and for the year ended June 30, 2014, a reclassification of $0.6 million from other receivables to trade accounts receivable on the condensed consolidated balance sheet to conform to the current-year presentation.

 

(2) Marketable Investment Securities

The Company has classified its marketable investment securities as available-for-sale securities. These securities are carried at estimated fair value with unrealized holding gains and losses, net of the related tax effect, included in accumulated other comprehensive loss in stockholders’ equity until realized. Gains and losses on investment security transactions are reported on the specific-identification method. Dividend and interest income are recognized when earned. The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of security at March 31, 2015 and June 30, 2014 were as follows:

 

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(In thousands)    Amortized
cost
     Gross
unrealized
holding
gains
     Gross
unrealized
holding
losses
     Estimated
fair value
 

At March 31, 2015:

           

Cash and cash equivalents:

           

Cash

   $ 45,092       $ —         $ —         $ 45,092   

Cash equivalents

     10,117         —           —           10,117   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

  55,209      —        —        55,209   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities:

Corporate bonds and notes

  35,733      12      (11   35,734   

Municipal bonds

  71,534      104      (22   71,616   

Federal agency issues

  13,074      1      (1   13,074   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

  120,341      117      (34   120,424   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash, cash equivalents

  

 

 

    

 

 

    

 

 

    

 

 

 

and available-for-sale securities

$ 175,550    $ 117    $ (34 $ 175,633   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(In thousands)    Amortized
cost
     Gross
unrealized
holding
gains
     Gross
unrealized
holding
losses
     Estimated
fair value
 

At June 30, 2014:

           

Cash and cash equivalents:

           

Cash

   $ 45,181       $ —         $ —         $ 45,181   

Cash equivalents

     19,639         1         —           19,640   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

  64,820      1      —        64,821   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale securities:

Corporate bonds and notes

  44,449      36      (11   44,474   

Municipal bonds

  137,821      334      (3   138,152   

Federal agency issues

  23,134      12      (7   23,139   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

  205,404      382      (21   205,765   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash, cash equivalents

  

 

 

    

 

 

    

 

 

    

 

 

 

and available-for-sale securities

$ 270,224    $ 383    $ (21 $ 270,586   
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash, cash equivalents, and maturities of debt securities classified as available-for-sale securities are as follows at March 31, 2015:

 

(In thousands)    Amortized
cost
     Estimated
fair value
 

Cash

   $ 45,092       $ 45,092   

Cash equivalents

     10,117         10,117   

Available-for-sale:

     

Due within one year

     79,200         79,224   

Due after one year through five years

     41,141         41,200   

Due after five years

     —           —     
  

 

 

    

 

 

 
$ 175,550    $ 175,633   
  

 

 

    

 

 

 

 

(3) Share-Based Compensation

The Company maintains a share-based compensation plan, the 2010 Employee, Director and Consultant Equity Incentive Plan, as amended (the “2010 Plan”), that has been approved by the Company’s shareholders. The 2010 Plan allows the Company, under the direction of the Compensation Committee of the Board of Directors, to make

 

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grants of stock options, restricted and unrestricted stock awards and other stock-based awards to employees, consultants and directors. On December 5, 2013, the shareholders approved an amendment to the 2010 Plan to set the number of shares available for grant to 3,500,000. At March 31, 2015, 1,801,462 shares were available for issuance. In addition, as of March 31, 2015, the Company may grant up to 4,400,795 additional shares under the 2010 Plan if options previously granted under the Company’s terminated 2003 Employee, Director and Consultant Option Plan are cancelled or expire without the issuance of shares of common stock by the Company.

The number of shares, terms, and vesting period of awards under the 2010 Plan are determined by the Compensation Committee of the Board of Directors for each equity award. Stock options granted under the plan prior to December 5, 2012 generally vest ratably over four years and expire ten years from the grant date. Stock options granted after December 5, 2012 generally vest ratably over four years and expire eight years from the grant date. The exercise price of options granted is equivalent to the fair market value of the stock on the grant date. In September 2014, the Company began issuing restricted stock units (“RSUs”) which generally vest ratably over four years on the anniversary date of the grant in lieu of stock options to all employees and directors. The number of RSUs awarded to certain executive officers may be reduced if certain additional functional performance metrics are not met.

Stock Options

A summary of the stock option activity under the Company’s plans for the nine months ended March 31, 2015 is as follows:

 

     Number of
shares
     Weighted
average
exercise
price
 

Options outstanding at June 30, 2014

     14,238,183       $ 23.30   

Options granted

     1,000       $ 37.17   

Less:

     

Options exercised

     1,144,275       $ 20.20   

Options canceled or expired

     343,161       $ 25.70   
  

 

 

    

Options outstanding at March 31, 2015

  12,751,747    $ 23.51   
  

 

 

    

As of March 31, 2015, options to purchase 8,935,850 shares were vested and exercisable at a weighted average price of $22.55.

As of March 31, 2015, there was $24.4 million of total unrecognized share-based compensation expense related to stock options that will be recognized over a weighted-average period of 1.84 years.

Restricted Stock Units

A summary of the RSU activity under the Company’s plans for the nine months ended March 31, 2015 is as follows:

 

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     Number
of
shares
     Weighted
average grant
date fair value
 

RSUs outstanding at June 30, 2014

     —         $ —     

RSUs granted

     1,245,833       $ 37.67   

Less:

     

RSUs vested

     19,500       $ 34.22   

RSUs canceled

     100,283       $ 38.12   
  

 

 

    

 

 

 

RSUs outstanding at March 31, 2015

  1,126,050    $ 37.68   
  

 

 

    

 

 

 

The grant date fair value of an RSU equals the closing price of our common stock on the grant date. The weighted average grant date fair value of RSUs outstanding at March 31, 2015 is $37.68.

As of March 31, 2015, there was $28.7 million of total unrecognized share-based compensation expense related to RSUs that will be recognized over a weighted-average period of 2.77 years. This unrecognized compensation expense is equal to the fair value of RSUs expected to vest.

Employee Stock Purchase Plan

The Company also has an Employee Stock Purchase Plan that was approved by shareholders in 2012 (the “2012 Purchase Plan”), under which 2,000,000 shares of common stock have been authorized. Shares are issued under the 2012 Purchase Plan twice yearly at the end of each offering period. As of March 31, 2015, approximately 334,000 shares of common stock have been issued under the 2012 Purchase Plan and approximately 1,666,000 were available for issuance.

Share-Based Compensation Expense

Share-based compensation expense recognized and included in the condensed consolidated statements of income and comprehensive income was allocated as follows:

 

(In thousands)    Three months ended
March 31,
     Nine months ended
March 31,
 
     2015      2014      2015      2014  

Cost of molecular diagnostic testing

   $ 224       $ 207       $ 671       $ 639   

Cost of pharmaceutical and clinical services

     104         75         387         212   

Research and development expense

     1,201         3,042         3,218         4,670   

Selling, general, and administrative expense

     11,016         10,316         27,296         21,911   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total share-based compensation expense

$ 12,545    $ 13,640    $ 31,572    $ 27,432   
  

 

 

    

 

 

    

 

 

    

 

 

 

In October 2014, the Company and its former Chief Financial Officer entered into a resignation agreement under which the vesting of certain awards were modified such that the specified awards were vested in full. As a result of this award modification the Company recognized approximately $3.1 million in share-based compensation expense for the nine months ending March 31, 2015.

In February 2015, the Company and its Chief Executive Officer entered into a resignation agreement under which the vesting of certain awards were modified such that the specified awards were accelerated. As a result of this award modification the Company recognized approximately $5.2 million in share-based compensation expense for the three and nine months ending March 31, 2015.

 

(4) Stockholders’ Equity

Share Repurchase Program

In February 2015, the Company’s Board of Directors authorized an additional share repurchase program of $200 million of the Company’s outstanding common stock increasing the cumulative share repurchase authorization to

 

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$1.2 billion. The Company plans to repurchase its common stock from time to time or on an accelerated basis through open market transactions or privately negotiated transactions as determined by the Company’s management. The amount and timing of stock repurchases under the program will depend on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. As of March 31, 2015, approximately $199.7 million remained available for repurchases under the program. The Company uses the par value method of accounting for its stock repurchases. As a result of the stock repurchases, the Company reduced common stock and additional paid-in capital and recorded charges to retained earnings. The shares retired, aggregate common stock and additional paid-in capital reductions, and related charges to retained earnings for the repurchases for the three and nine months ended March 31, 2015 and 2014 were as follows:

 

(In thousands)    Three months ended
March 31,
     Nine months ended
March 31,
 
     2015      2014      2015      2014  

Shares purchased and retired

     1,779         1,554         4,729         8,545   

Common stock and additional paid-in-capital reductions

   $ 15,212       $ 12,384       $ 40,172       $ 67,420   

Charges to retained earnings

   $ 46,782       $ 29,506       $ 125,774       $ 154,594   

 

(5) Earnings Per Share

Basic earnings per share is computed based on the weighted-average number of shares of the Company’s common stock outstanding. Diluted earnings per share is computed based on the weighted-average number of shares of the Company’s common stock, including the dilutive effect of common stock equivalents outstanding.

The following is a reconciliation of the denominators of the basic and diluted earnings per share computations:

 

(In thousands)    Three months ended
March 31,
     Nine months ended
March 31,
 
     2015      2014      2015      2014  

Denominator:

           

Weighted-average shares outstanding used to compute basic earnings per share

     70,696         73,821         71,985         76,173   

Effect of dilutive common stock equivalents

     3,174         2,553         3,137         2,159   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average shares outstanding and dilutive securities used to compute dilutive earnings per share

  73,870      76,374      75,122      78,332   
  

 

 

    

 

 

    

 

 

    

 

 

 

Certain outstanding stock options and RSUs were excluded from the computation of diluted earnings per share for the three and nine months ended March 31, 2015 and 2014 because the effect would have been anti-dilutive. These potential dilutive common shares, which may be dilutive to future diluted earnings per share, are as follows:

 

     Three months ended
March 31,
     Nine months ended
March 31,
 
(In thousands)    2015      2014      2015      2014  

Anti-dilutive options and RSUs excluded from EPS computation

     52         5,300         41         6,978   

 

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(6) Segment and Related Information

The Company’s business units have been aggregated into three reportable segments: (i) research, (ii) molecular diagnostics and (iii) pharmaceutical and clinical services. The research segment is focused on the discovery of genes, biomarkers and proteins related to major common diseases and includes corporate services such as finance, human resources, legal, and information technology. The molecular diagnostics segment provides testing that is designed to assess an individual’s risk for developing disease later in life, identify a patient’s likelihood of responding to drug therapy and guide a patient’s dosing to ensure optimal treatment, or assess a patient’s risk of disease progression and disease recurrence. The pharmaceutical and clinical services segment provides testing products and services to the pharmaceutical, biotechnology and medical research industries. The Company evaluates segment performance based on results from operations before interest income and expense and other income and expense.

Segment revenue and operating income (loss) were as follows during the periods presented:

 

(In thousands)    Molecular
diagnostics
     Pharmaceutical &
clinical services
     Research      Total  

Three months ended March 31, 2015:

           

Revenue

   $ 172,978         7,007         —         $ 179,985   

Depreciation and amortization

     5,207         566         626         6,399   

Segment operating income (loss)

     55,198         (1,147      (18,311      35,740   

Three months ended March 31, 2014:

           

Revenue

   $ 176,191         6,733         —         $ 182,924   

Depreciation and amortization

     2,506         471         502         3,479   

Segment operating income (loss)

     70,815         (73      (15,455      55,287   

Nine months ended March 31, 2015:

           

Revenue

   $ 516,634         16,582         —         $ 533,216   

Depreciation and amortization

     15,176         1,465         1,748         18,389   

Segment operating income (loss)

     159,299         (3,941      (57,356      98,002   

Nine months ended March 31, 2014:

           

Revenue

   $ 565,335         24,115         —         $ 589,450   

Depreciation and amortization

     5,335         1,462         1,494         8,291   

Segment operating income (loss)

     266,794         2,816         (48,422      221,188   

 

     Three months ended
March 31,
     Nine months ended
March 31,
 
(In thousands)    2015      2014      2015      2014  

Total operating income for reportable segments

   $ 35,740       $ 55,287       $ 98,002       $ 221,188   

Interest income

     124         2,498         265         5,190   

Other

     (298      (442      1,117         (1,066

Income tax provision

     14,091         20,573         37,896         82,719   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

$ 21,475    $ 36,770    $ 61,488    $ 142,593   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(7) Fair Value Measurements

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates it will receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value hierarchy prioritizes the use of inputs used in valuation techniques into the following three levels:

 

Level 1

quoted prices in active markets for identical assets and liabilities.

Level 2

observable inputs other than quoted prices in active markets for identical assets

 

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and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Some of the Company’s marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities.

Level 3

unobservable inputs.

All of the Company’s financial instruments are valued using quoted prices in active markets or based on other observable inputs. For Level 2 securities, the Company uses a third party pricing service which provides documentation on an ongoing basis that includes, among other things, pricing information with respect to reference data, methodology, inputs summarized by asset class, pricing application and corroborative information. The Company reviews, tests and validates this information. The following table sets forth the fair value of the financial assets that the Company re-measured on a regular basis:

 

(In thousands)    Level 1      Level 2      Level 3      Total  

at March 31, 2015:

           

Money market funds (a)

   $ 2,616       $ —         $ —         $ 2,616   

Corporate bonds and notes

     6,999         35,734         —           42,733   

Municipal bonds

     —           71,616         —           71,616   

Federal agency issues

     —           13,576         —           13,576   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 9,615    $ 120,926    $ —      $ 130,541   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(In thousands)    Level 1      Level 2      Level 3      Total  

at June 30, 2014:

           

Money market funds (a)

   $ 13,634       $ —         $ —         $ 13,634   

Corporate bonds and notes

     —           44,474         —           44,474   

Municipal bonds

     —           144,158         —           144,158   

Federal agency issues

     —           23,139         —           23,139   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 13,634    $ 211,771    $ —      $ 225,405   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) Money market funds are primarily comprised of exchange traded funds and accrued interest

 

(8) Income Taxes

In order to determine the Company’s quarterly provision for income taxes, the Company used an estimated annual effective tax rate that is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

Income tax expense for the three months ended March 31, 2015 was $14.1 million, or approximately 40% of pre-tax income, compared to $20.6 million, for the three months ended March 31, 2014, or approximately 36% of pre-tax income. Income tax expense for the nine months ended March 31, 2015 was $37.9 million, or approximately 38% of pre-tax income, compared to $82.7 million, or approximately 37% of pre-tax income. Income tax expense for the three and nine months ended March 31, 2015 is based on the Company’s estimated annual effective tax rate for the full fiscal year ending June 30, 2015, adjusted by discrete items recognized during the period. For the three months ended March 31, 2015, the Company’s recognized effective tax rate differs from the U.S. federal statutory rate of 35% primarily due to the effect of state income taxes and the impact from the exclusion of certain losses incurred from our international operations offset by the benefits realized from the timing differences related to the recognition of the tax effect of equity compensation expense from incentive stock options and the deduction realized when those options are disqualified upon exercise and sale.

 

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The Company files U.S., foreign and state income tax returns in jurisdictions with various statutes of limitations. The Company’s New Jersey State income tax returns for the years ended June 30, 2007 through 2013 are currently under examination by the New Jersey State Department of Taxation and Finance. Annual and interim tax provisions include amounts considered necessary to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues may differ materially from the amount accrued. The Company’s U.S. federal tax return and other state tax returns are not currently under examination.

 

(9) Acquisitions

German Clinic

On February 27, 2015, the Company completed the acquisition of privately-held Privatklinik Dr. Robert Schindlbeck GmbH & Co. KG located in Germany (“Clinic”) approximately 15 miles from the Company’s European laboratories. The cash paid and preliminary total consideration transferred to acquire the Clinic was $20.1 million.

Total consideration transferred was allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their preliminary fair values at the acquisition date as set forth below. The Company believes acquisition of the Clinic may facilitate the Company’s penetration into the German molecular diagnostic market. The Clinic will allow the Company to directly negotiate reimbursement with government and private insurance providers in the German market and collaborate with hospitals and physician groups. These factors contributed to consideration transferred in excess of the fair value of the Clinic’s net tangible and intangible assets acquired, resulting in the Company recording goodwill in connection with the transaction. Under German tax law the goodwill related to the purchase of the clinic is deductible and will be amortized for tax purposes over 15 years. Management estimated the fair values of tangible and intangible asset and liabilities in accordance with the applicable accounting guidance for business combinations and utilized the services of third-party valuation consultants. The preliminary allocation of the consideration transferred is subject to potential adjustments primarily due to tax-related matters, including tax basis of acquired assets and liabilities in the foreign jurisdiction, and third party valuations of acquired assets and liabilities, including deferred grants and actuarial analysis of pension assets and liabilities. During the measurement period, the Company may record adjustments to the provisional amounts recognized in the Company’s initial accounting for the acquisition. The Company expects the allocation of the consideration transferred to be final within the measurement period (up to one year from the acquisition date).

 

(in thousands)    Estimated Fair
Value
 

Current assets

   $ 3,078   

Real property

     20,715   

Equipment

     1,625   

Other assets

     43   

Goodwill

     16,576   

Current liabilities

     (4,412

Long-term liabilities

     (6,672

Deferred grants

     (10,838
  

 

 

 

Total purchase price

$ 20,115   
  

 

 

 

The Clinic has received subsidies from the German government for assets that were previously purchased. These subsidies are recorded in deferred grants currently totaling $10.4 million as of March 31, 2015. The recognition of revenue relating to the subsidies occurs ratably over the useful life of the related assets.

The unaudited condensed consolidated financial statements include the operating results of the Clinic in the pharmaceutical and clinical services segment from the date of acquisition. Pro forma results of operations have not been presented as the Clinic’s prior-period financial results are not considered material to the Company.

 

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Crescendo Bioscience, Inc.

On February 28, 2014, the Company completed the acquisition of privately-held Crescendo Bioscience, Inc. (“Crescendo”), pursuant to an Amended and Restated Agreement and Plan of Merger, dated February 2, 2014 (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, Myriad acquired Crescendo for total consideration of $259.0 million.

The following table reconciles consideration transferred to the total cash paid to acquire Crescendo:

 

(In thousands)       

Total consideration transferred

   $ 258,950   

Share-based compensation to Crescendo employees

     6,929   

Change of control payments to Crescendo employees

     5,695   

Offset: Non-cash fair value purchase option

     (8,000
  

 

 

 

Total cash paid

$ 263,574   
  

 

 

 

The total consideration of $259 million consisted of (i) $225.1 million in cash, (ii) $25.9 million in elimination of intercompany balances related to accrued interest and the term loan the Company issued to Crescendo on September 8, 2011, and (iii) $8 million related to the fair value of the purchase option granted to the Company on September 8, 2011 by Crescendo through a definitive merger agreement (“Option Agreement”) entered into in association with the term note. Of the cash consideration, $20 million was deposited into an escrow account to fund (i) any post-closing adjustments payable to Myriad based upon differences between the estimated working capital and the actual working capital of Crescendo at closing, and (ii) any indemnification claims made by Myriad against Crescendo, for a period of time, based upon the completion of an audit of Crescendo’s financial statements, of no fewer than twelve nor more than fifteen months following closing.

Of the total cash paid, $6.9 million was accounted for as share-based compensation expense resulting from the accelerated vesting of employee options immediately prior to the acquisition and $5.7 million was accounted for as change of control bonuses paid to Crescendo employees and directors. The Company recognized the share-based compensation expense and change of control bonuses in post-acquisition consolidated statements of comprehensive income for the year ended June 30, 2014.

Total consideration transferred was allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their preliminary fair values at the acquisition date as set forth below. The Company believes that the acquisition of Crescendo facilitates the Company’s entry into the high growth autoimmune market, diversifies its product revenue and enhances its strength in protein-based diagnostics. These factors contributed to consideration transferred in excess of the fair value of Crescendo’s net tangible and intangible assets acquired, resulting in the Company recording goodwill in connection with the transaction.

The Company’s allocation of consideration transferred for Crescendo is as follows:

 

(In thousands)    Estimated
Fair Value
 

Other assets acquired

   $ 15,826   

Intangible assets

     196,600   

Goodwill

     112,331   
  

 

 

 

Total assets acquired

  324,757   
  

 

 

 

Deferred tax liability

  44,213   

Other liabilities assumed

  21,594   
  

 

 

 

Total net assets acquired

$ 258,950   
  

 

 

 

Pro Forma Information

The unaudited pro-forma results presented below include the effects of the Crescendo acquisition as if it had been consummated as of July 1, 2013, with adjustments to give effect to pro forma events that are directly attributable to the acquisition which includes adjustments related to the amortization of acquired intangible assets, interest income and expense, stock-based compensation expense, and depreciation. The unaudited pro

 

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forma results do not reflect any operating efficiency or potential cost savings which may result from the consolidation of Crescendo. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operation of the combined company would have been if the acquisition had occurred at the beginning of the period presented nor are they indicative of future results of operations and are not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated as of July 1, 2013.

 

(In thousands except per share data)    Three months ended
March 31,
     Nine months ended
March 31,
 
     2015      2014      2015      2014  

Revenue

   $ 179,985       $ 188,693       $ 533,216       $ 618,743   

Income from operations

   $ 35,740       $ 47,396       $ 98,002       $ 199,380   

Net income

   $ 21,475       $ 29,173       $ 61,488       $ 122,316   

Net income per share, basic

   $ 0.30       $ 0.40       $ 0.85       $ 1.61   

Net income per share, diluted

   $ 0.29       $ 0.38       $ 0.82       $ 1.56   

 

(10) Goodwill and Intangible Assets

Goodwill

The following summary sets forth the changes in goodwill for the nine months ended March 31, 2015:

 

(In thousands)    Gross
Carrying
Amount
 

Beginning balance at June 30, 2014

   $ 169,181   

Acquisition of the clinic

     16,576   

Translation adjustments

     (529
  

 

 

 

Ending balance at March 31, 2015

$ 185,228   
  

 

 

 

At March 31, 2015, the Company had recorded goodwill of $185.2 million, net of translation adjustments, related to the acquisitions of Myriad RBM, Inc. on May 31, 2011 (formerly Rules-Based Medicine, Inc.), Crescendo on February 28, 2014 and the Clinic on February 27, 2015.

Intangible Assets

Intangible assets primarily consist of amortizable assets of purchased licenses and technologies, customer relationships, and trade names as well as non-amortizable intangible assets of in-process technologies and research and development. The following summarizes the amounts reported as intangible assets:

 

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(In thousands)   

Gross

Carrying

     Accumulated         
March 31, 2015:    Amount      Amortization      Net  

Purchased licenses and technologies

   $ 199,100       $ (13,719    $ 185,381   

Customer relationships

     4,650         (1,790      2,860   

Trademarks

     3,000         (350      2,650   
  

 

 

    

 

 

    

 

 

 

Total amortizable intangible assets

  206,750      (15,859   190,891   
  

 

 

    

 

 

    

 

 

 

In-process research and development

  4,800      —        4,800   
  

 

 

    

 

 

    

 

 

 

Total non-amortizable intangible assets

  4,800      —        4,800   
  

 

 

    

 

 

    

 

 

 

Total intangible assets

$ 211,550    $ (15,859 $ 195,691   
  

 

 

    

 

 

    

 

 

 

 

(In thousands)    Gross
Carrying
     Accumulated         
June 30, 2014:    Amount      Amortization      Net  

Purchased licenses and technologies

   $ 201,100       $ (6,597    $ 194,503   

Customer relationships

     4,650         (1,441      3,209   

Trademarks

     3,000         (200      2,800   
  

 

 

    

 

 

    

 

 

 

Total amortizable intangible assets

  208,750      (8,238   200,512   
  

 

 

    

 

 

    

 

 

 

In-process research and development

  4,800      —        4,800   
  

 

 

    

 

 

    

 

 

 

Total non-amortizable intangible assets

  4,800      —        4,800   
  

 

 

    

 

 

    

 

 

 

Total intangible assets

$ 213,550    $ (8,238 $ 205,312   
  

 

 

    

 

 

    

 

 

 

The Company recorded amortization expense during the respective periods for these intangible assets as follows:

 

(In thousands)    Three months ended
March 31,
     Nine months ended
March 31,
 
     2015      2014      2015      2014  

Amortization of intangible assets

   $ 3,136       $ 1,146       $ 9,621       $ 1,634   

 

(11) Cost Basis Investment

As of March 31, 2015, the Company had a $5.0 million investment in RainDance Technologies, Inc., which has been recorded under the cost method as an “Other Asset” on the Company’s condensed consolidated balance sheet. There were no events or circumstances that indicated that impairment exists; therefore, the Company recorded no impairment in the investment for the nine months ended March 31, 2015.

 

(12) Commitments and Contingencies

The Company is subject to various claims and legal proceedings covering matters that arise in the ordinary course of its business activities. As of March 31, 2015, the management of the Company believes any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, operating results, or cash flows.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a leading molecular diagnostic company dedicated to making a difference in patients’ lives through the discovery and commercialization of novel, transformative tests across major diseases. We believe in improving healthcare for patients by providing physicians with important information to address unmet medical needs. Through our proprietary technologies, we believe we are positioned to identify important disease genes, the proteins they produce, and the biological pathways in which they are involved to better understand the genetic basis of human disease and the role that genes and their related proteins may play in the onset and progression of disease. We believe that identifying these biomarkers (DNA, RNA and proteins) will enable us to develop novel molecular diagnostic tests.

Our goal is to provide physicians with critical information to better guide the healthcare management of their patients by addressing four major concerns a patient may have about their healthcare: (1) what is the likelihood of my getting a disease, (2) do I have a disease, (3) how aggressively should my disease be treated, and (4) which therapy will work best to treat my disease. We have developed and are developing new molecular diagnostic tests that are designed to assess an individual’s risk for developing disease later in life (predictive medicine), accurately diagnose disease (diagnostic medicine), identify a patient’s likelihood of responding to a particular therapy and assess if a patient will benefit from a particular therapy (personalized medicine), and assess a patient’s risk of disease progression and disease recurrence (prognostic medicine).

Our business strategy for future growth is focused on three key initiatives. First, we are working to grow our existing products and markets. Second, we are expanding our business globally with an international direct sales force and through distributors. Finally, we are developing new molecular diagnostic tests across a diverse set of disease indications, complementing our current businesses in oncology, preventive care, urology, dermatology, autoimmune and neuroscience.

Products and Services

We offer fourteen commercial molecular diagnostic tests, consisting of six predictive medicine tests, three prognostic medicine tests, four personalized medicine tests and one diagnostic medicine test. We market these tests in the United States through our own sales force of approximately 500 people. We have also established commercial laboratory operations in Munich, Germany and international headquarters in Zurich, Switzerland. We currently market our myRiskTM, iBRACAnalysisTM, COLARIS®, COLARIS AP®, Prolaris®, EndoPredict® and Tumor BRACAnalysis CDxTM products in over 80 countries throughout the world through our own sales force in Europe and Canada and through distributors in other countries.

Our fourteen commercial molecular diagnostic tests include:

 

    BRACAnalysis CDxTM, our personalized medicine for use as a companion diagnostic with the PARP inhibitor LynaparzaTM (olaparib);

 

    iBRACAnalysisTM, our predictive medicine test for hereditary breast and ovarian cancer;

 

    COLARIS®, our predictive medicine test for hereditary colorectal and uterine cancer;

 

    COLARIS AP®, our predictive medicine test for hereditary colorectal cancer;

 

    EndoPredict®, our prognostic medicine test for breast cancer;

 

    MELARIS®, our predictive medicine test for hereditary melanoma;

 

    myPathTM Melanoma (myPath), our diagnostic medicine test for diagnosis of melanoma;

 

    myPlanTM Lung Cancer (myPlan), our prognostic medicine test for early stage lung cancer;

 

    myRiskTM Hereditary Cancer (myRisk), our predictive medicine test for multiple hereditary cancers;

 

    PANEXIA™, our predictive medicine test for pancreatic cancer;

 

    PREZEON®, our personalized medicine test to assess PTEN status for drug response;

 

    Prolaris®, our prognostic medicine test for prostate cancer;

 

    Tumor BRACAnalysis CDxTM, our personalized medicine test for use as a companion diagnostic with certain PARP inhibitors, platinum-based drugs and other chemotherapeutic agents; and

 

    Vectra® DA, our personalized medicine test to assess rheumatoid arthritis disease activity.

 

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We are also a pioneer in the discovery and development of companion diagnostics that help patients receive the most appropriate therapy. We believe the future of drug development is creating new therapies targeted to a subset of patients who would most likely benefit from the new therapies based on the identification of novel biomarkers and the development of companion diagnostics tests. We are currently collaborating with approximately 20 major pharmaceutical and biotechnology companies to develop new drugs based on our companion diagnostic technologies. In December 2014, we also recently received FDA approval of our BRACAnalysis CDx as a companion diagnostic test to identify ovarian cancer patients who may benefit from the PARP inhibitor LynaparzaTM (olaparib). This is the first and only FDA-approved companion diagnostic for LynaparzaTM, which we believe opens a new door in personalized medicine and represents a big step forward in tailoring treatment for women with ovarian cancer. In addition, in January 2015, we announced that we had obtained CE Marking in Europe for our Tumor BRACAnalysis CDx test, which identifies tumors that have mutations in the BRCA1 or BRCA2 genes, and launched the test as a companion diagnostic for PARP inhibitors.

Through our wholly owned subsidiary, Myriad RBM, Inc., we provide biomarker discovery and pharmaceutical and clinical services to the pharmaceutical, biotechnology, and medical research industries utilizing our multiplexed immunoassay technology. In March 2015, we announced the launch by Myriad RBM of immunoassay services based on the ultrasensitive Simoa TM (single molecule array) platform developed by Quanterix. The Simoa platform enables the accurate measurement of protein biomarkers that were previously difficult or even impossible to detect in blood samples.

Our technology enables us to efficiently screen large sets of clinical samples from both diseased and non-diseased populations against our extensive menu of protein biomarkers. By analyzing the data generated from these tests, we attempt to discover biomarker patterns that may be used to identify patients who would likely respond to a particular therapy.

Recent Developments

On February 27, 2015, the Company completed the acquisition of a privately-held Clinic located in Germany approximately 15 miles from the Company’s European laboratories for total consideration of $20.1 million. The Company believes acquisition of the Clinic may facilitate the Company’s penetration into the German molecular diagnostic market. The Clinic will allow the Company to directly negotiate reimbursement with government and private insurance providers in the German market and collaborate with hospitals and physician groups.

On February 3, 2015, we announced that Peter D. Meldrum, president and chief executive officer, notified the board of directors of his decision to retire at the conclusion of the fiscal year on June 30, 2015. Pursuant to our succession plan, the board of directors has unanimously elected Mark C. Capone, currently president of Myriad Genetic Laboratories, Inc., as Mr. Meldrum’s successor.

Use of Resources

During the three and nine months ended March 31, 2015, we devoted our resources to supporting and growing our molecular diagnostic testing and pharmaceutical and clinical services businesses, to the research and development of future molecular diagnostic and companion diagnostic candidates as well as repurchase of our stock as part of our share repurchase program. We have three reportable operating segments—research, molecular diagnostics and pharmaceutical and clinical services. See Note 6 “Segment and Related Information” in the notes to our condensed consolidated financial statements (unaudited) for information regarding these operating segments.

For the three and nine months ended March 31, 2015, we had net income of $21.5 million and $61.5 million and diluted earnings per share of $0.29 and $0.82, compared to net income of $36.8 million and $142.6 million and diluted earnings per share of $0.48 and $1.82 in the same period in the prior year. Net income and diluted earnings per share results for the three and nine months ended March 31, 2015 included income tax expense of $14.1 million and $37.9 million compared to $20.6 million and $82.7 million for the same period in the prior year.

Share Repurchase Program

In February 2015, we announced that our board of directors had authorized us to repurchase an additional $200 million of our outstanding common stock increasing the cumulative share repurchase authorization to $1.2 billion. During the three and nine months ended March 31, 2015, we repurchased $62.0 million and $165.9 million of our outstanding common

 

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stock. In connection with our stock repurchase program our board of directors authorized us to repurchase shares from time to time or on an accelerated basis through open market transactions or privately negotiated transactions as determined by our management. The amount and timing of stock repurchases under the program will depend on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. See also “Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds – Issuer Purchases of Equity Securities.”

Critical Accounting Policies

Critical accounting policies are those policies which are both important to the presentation of a company’s financial condition and results and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. No significant changes to our accounting policies took place during the period. For a further discussion of our critical accounting policies, see our Annual Report on Form 10-K for the fiscal year ended June 30, 2014.

Results of Operations for the Three Months Ended March 31, 2015 and 2014

Revenue

Revenue is comprised of sales of our molecular diagnostic tests and our pharmaceutical and clinical services. Total revenue for the three months ended March 31, 2015 was $180.0 million, compared to $182.9 million for the same three months in the prior year. The 2% decrease in total revenue is primarily due to the severe weather on the East coast. The 4% increase in pharmaceutical and clinical services revenue is primarily due to the acquisition of the Clinic in Germany.

Revenue of our molecular diagnostic tests and pharmaceutical and clinical services and revenue by product category as a percent of total revenue for the three months ended March 31, 2015 and 2014 were as follows:

 

     Three months ended
March 31,
           % of Total Revenue  
(In thousands)    2015      2014      % Change     2015     2014  

Molecular diagnostic testing revenue:

            

Hereditary Cancer Testing

   $ 158,969       $ 169,565         (6 %)      88     93

VectraDA

     10,505         3,127         236     6     2

Other tests

     3,504         3,499         0     2     2
  

 

 

    

 

 

    

 

 

     

Total molecular diagnostic testing revenue

  172,978      176,191      (2 %)    96   96
  

 

 

    

 

 

    

 

 

     

Pharmaceutical and clinical service revenue

  7,007      6,733      4   4   4
  

 

 

    

 

 

        

Total revenue

$ 179,985    $ 182,924      (2 %)    100   100
  

 

 

    

 

 

    

 

 

     

Our molecular diagnostic revenues are generated primarily in three major markets, oncology, preventive care, and rheumatology. Oncology, preventive care and rheumatology revenue was 50%, 44% and 6% of total molecular diagnostic testing revenue, respectively, during the three months ended March 31, 2015. Sales of molecular diagnostic tests in each major market for the three months ended March 31, 2015 and 2014 were as follows:

 

     Three months ended
March 31,
        
(In thousands)    2015      2014      % Change  

Molecular diagnostic testing revenue:

        

Oncology

   $ 86,090       $ 92,381         (7 %) 

Preventive care

     76,383         80,683         (5 %) 

Rheumatology

     10,505         3,127         236
  

 

 

    

 

 

    

 

 

 

Total molecular diagnostic testing revenue

$ 172,978    $ 176,191      (2 %) 
  

 

 

    

 

 

    

 

 

 

 

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Costs and Expenses

Cost of revenue is comprised primarily of salaries and related personnel costs, laboratory supplies, equipment costs and facilities expense. Cost of molecular diagnostic testing revenue for the three months ended March 31, 2015 was $33.0 million, compared to $23.6 million for the same three months in 2014. This increase of 40% in molecular diagnostic testing cost of revenue is primarily due to the transition costs associated with the myRisk test and costs associated with Prolaris, myPath Melanoma and other new tests for which reimbursement has not yet been secured. Cost of revenue was also impacted by the addition of the VectraDA test to our product line. Our cost as a percentage of revenue may continue to fluctuate from quarter to quarter based on the introduction of new molecular diagnostic tests, changes in reimbursement rates, changes in testing volumes in the molecular diagnostic markets and as we gain economies of scale and increased efficiencies through automation. Our costs of pharmaceutical and clinical services include similar items. Cost of pharmaceutical and clinical services for the three months ended March 31, 2015 was $3.3 million, compared to $3.0 million for the same three months in 2014. This 10% increase in pharmaceutical and clinical testing cost of revenue is primarily associated with the increase in pharmaceutical and clinical services revenue as well as the acquisition of the Clinic in Germany.

During the first quarter of fiscal 2015, we initiated a national launch of our myRisk Hereditary Cancer test. As a result of this launch, test volumes for myRisk have increased rapidly and we exited the quarter with myRisk representing more than 58% of all hereditary cancer samples ordered. We improved our laboratory efficiencies significantly in the third fiscal quarter which should lead to continued improvements in turnaround times in the fourth quarter of fiscal 2015.

Our gross profit margins were 80% at March 31, 2015, compared to 85% in the same three months of the prior year. Gross profit margins were impacted primarily due to the additional costs associated with the transition to myRisk, the launch of three new tests for which reimbursement has not been obtained and the addition of the VectraDA test to the product mix, which is performed at a lower margin. There can be no assurance that gross profit margins will decrease, increase or remain at current levels.

Our research and development expenses include costs incurred in formulating, improving and creating alternative or modified processes related to and expanding the use of our current molecular diagnostic tests and costs incurred for the discovery, validation and development of our pipeline of molecular diagnostic and companion diagnostic test candidates and our pharmaceutical and clinical services. Research and development expenses are comprised primarily of salaries and related personnel costs, laboratory supplies, clinical trial costs, equipment, and facilities costs. Research and development expenses incurred during the three months ended March 31, 2015 were $16.7 million compared to $13.4 million for same three months in 2014. This increase of 25% was primarily due to the following:

 

    an increase of approximately $4.7 million in internal development activities and clinical studies related to our molecular diagnostic products and pharmaceutical and clinical services;

 

    an increase of $0.4 million in research and development expenses ; and

 

    a decrease of $1.8 million in share based compensation expense.

We expect that our research and development expenses as a percentage of revenues may increase over the next several years as we continue to develop our pipeline and expand our offerings of molecular diagnostic tests and pharmaceutical and clinical services.

Our sales, general and administrative expenses include costs associated with building our molecular diagnostic and pharmaceutical and clinical services businesses domestically and internationally. Selling, general and administrative expenses consist primarily of salaries, commissions and related personnel costs for sales, marketing, customer service, billing and collection, executive, legal, finance and accounting, information technology, human resources, and allocated facilities expenses. Selling, general and administrative expenses for the three months ended March 31, 2015 were $91.3 million, compared to $87.6 million for the same three months in 2014. The increase in selling, general and administrative expense of 4% was due primarily to the following:

 

    $5.2 million in share based compensation expense relating to executive transition;

 

    an increase of $1.7 million in selling, general and administrative expenses from the acquisition of the Clinic that occurred in February 2015;

 

    a decrease of approximately $1.9 million in other general administrative expenses ; and

 

    a decrease of approximately $1.3 million in sales and marketing expense due to a decrease in commission expense.

 

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We expect that our selling, general and administrative expenses will continue to increase and that such increases may be substantial, depending on the number and scope of any new molecular diagnostic test launches, our efforts in support of our existing molecular diagnostic tests and pharmaceutical and clinical services as well as our continued international expansion efforts.

Other Income (Expense)

Other income (expense) for the three months ended March 31, 2015 was ($0.2) million compared to $2.1 million in the same period of the prior year. The $2.3 million decrease is due to interest income recorded from the note receivable from Crescendo that was extinguished with the closing of the acquisition in February 2014.

Income Tax Provision

Income tax expense for the three months ended March 31, 2015 was $14.1 million, for an effective income tax rate of approximately 40%, compared to income tax expense of $20.6 million or a 36% effective income tax rate in the same period in 2014. Our quarterly effective tax rate differs from the U.S. federal statutory rate of 35%, primarily due to a state income tax impact and an impact from exclusion of certain losses incurred from our international operations. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

Results of Operations for the Nine Months Ended March 31, 2015 and 2014

Revenue

Revenue is comprised of sales of our molecular diagnostic tests and our pharmaceutical and clinical services. Total revenue for the nine months ended March 31, 2015 was $533.2 million, compared to $589.5 million for the same nine months in the prior year. The 10% decrease in total revenue is primarily due to turnaround times associated with the transition of the hereditary cancer market to our myRisk test, the timing of research projects with our pharmaceutical partners which can fluctuate from period to period, as well as the loss of the one-time bolus generated by celebrity publicity in the nine months ended March 31, 2014 that did not continue into the nine month period ended March 31, 2015. The decrease in hereditary cancer testing was offset by the addition of the VectraDA revenue from the acquisition of Crescendo.

Revenue of our molecular diagnostic tests and pharmaceutical and clinical services by product category as a percent of total revenue for the nine months ended March 31, 2015 and 2014 were as follows:

 

     Nine months ended
March 31,
           % of Total Revenue  
(In thousands)    2015      2014      % Change     2015     2014  

Molecular diagnostic testing revenue:

            

Hereditary Cancer Testing

   $ 474,491       $ 551,683         (14 %)      89     94

VectraDA

     31,926         3,127         921     6     1

Other tests

     10,217         10,525         (3 %)      2     2
  

 

 

    

 

 

    

 

 

     

Total molecular diagnostic testing revenue

  516,634      565,335      (9 %)    97   96
  

 

 

    

 

 

    

 

 

     

Pharmaceutical and clinical service revenue

  16,582      24,115      (31 %)    3   4
  

 

 

    

 

 

    

 

 

     

Total revenue

$ 533,216    $ 589,450      (10 %)    100   100
  

 

 

    

 

 

    

 

 

     

 

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Our molecular diagnostic revenues are generated primarily in three major markets, oncology, preventive care, and rheumatology. Oncology, preventive care and rheumatology revenue was 49%, 45% and 6% of total molecular diagnostic testing revenue, respectively, during the nine months ended March 31, 2015. Sales of molecular diagnostic tests in each major market for the nine months ended March 31, 2015 and 2014 were as follows:

 

     Nine months ended
March 31,
        
(In thousands)    2015      2014      % Change  

Molecular diagnostic testing revenue:

        

Oncology

   $  253,779       $  302,298         (16 %) 

Preventive care

     230,929         259,910         (11 %) 

Rheumatology

     31,926         3,127         921
  

 

 

    

 

 

    

 

 

 

Total molecular diagnostic testing revenue

$ 516,634    $ 565,335      (9 %) 
  

 

 

    

 

 

    

 

 

 

The decline in the oncology and preventive care markets were impacted by the reduced volumes from celebrity publicity as described above, as well as increased competition.

Costs and Expenses

Cost of revenue is comprised primarily of salaries and related personnel costs, laboratory supplies, royalty payments, equipment costs and facilities expense. Cost of molecular diagnostic testing revenue for the nine months ended March 31, 2015 was $100.9 million, compared to $67.8 million for the same nine months in 2014. This increase of 49% in molecular diagnostic testing cost of revenue is primarily due to the transition costs associated with the myRisk test and costs associated with Prolaris, myPath Melanoma and other new tests for which reimbursement has not yet been secured. Cost of revenue was also impacted by the addition of the VectraDA test to our product line, which has not received full reimbursement. Our cost of revenue may continue to fluctuate from quarter to quarter based on the introduction of new molecular diagnostic tests, changes in reimbursement rates, changes in testing volumes in the molecular diagnostic segments and as we gain economies of scale and increased efficiencies through automation. Our costs of pharmaceutical and clinical services include similar items. Cost of pharmaceutical and clinical services for the nine months ended March 31, 2015 was $8.2 million, compared to $10.4 million for the same nine months in 2014. This 21% decrease in pharmaceutical and clinical testing cost of revenue is primarily due to the 31% decrease in pharmaceutical and clinical services revenue.

Our gross profit margins were 80% for the nine months ended March 31, 2015, compared to 87% in the same nine months of the prior year. Gross profit margins were impacted by the change in product mix primarily due to the additional costs associated with the transition to myRisk, the launch of new tests for which reimbursement has not been obtained and the addition of the VectraDA test to the product mix, which is at a lower margin.

Our research and development expenses include costs incurred in formulating, improving and creating alternative or modified processes related to and expanding the use of our current molecular diagnostic tests and costs incurred for the discovery, validation and development of our pipeline of molecular diagnostic and companion diagnostic test candidates and our pharmaceutical and clinical services. Research and development expenses are comprised primarily of salaries and related personnel costs, laboratory supplies, clinical trial costs, equipment, and facilities costs. Research and development expenses incurred during the nine months ended March 31, 2015 were $56.8 million compared to $47.3 million for same nine months in 2014. This increase of 20% was primarily due to the following:

 

    an increase of $7.6 million in research and development expense relating to the acquisition of Crescendo;

 

    an increase of $1.8 million in development of existing products;

 

    an increase of $1.3 million in research and development related to companion diagnostic products; and

 

    a decrease of $1.2 million in share based compensation expense.

Our research and development expenses as a percentage of revenues may increase over the next several years as we continue to develop our pipeline and expand our offerings of molecular diagnostic tests and pharmaceutical and clinical services.

 

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Our sales, general and administrative expenses include costs associated with building our molecular diagnostic and pharmaceutical and clinical services businesses domestically and internationally. Selling, general and administrative expenses consist primarily of salaries, commissions and related personnel costs for sales, marketing, customer service, billing and collection, executive, legal, finance and accounting, information technology, human resources, and allocated facilities expenses. Selling, general and administrative expenses for the nine months ended March 31, 2015 were $269.4 million, compared to $242.8 million for the same nine months in 2014. The increase in selling, general and administrative expense of 11% was due primarily to the following:

 

    an increase of $29.0 million in selling, general and administrative expenses from the acquisition of Crescendo;

 

    $8.3 million in share based compensation expense relating to executive transition;

 

    a decrease of approximately $7.6 million in bad debt expense associated with the decrease in revenue and improved collection efforts; and

 

    a decrease of approximately $3.1 million in other general administrative expenses including sales and marketing, share based compensation, international and other general expenses

Other Income (Expense)

Other income for the nine months ended March 31, 2015 was $1.4 million compared to $4.1 million in the same period of the prior year. The $2.7 million decrease is due to interest income recorded from the note receivable from Crescendo that was extinguished with the closing of the acquisition in February 2014 partially offset by foreign exchange gains relating to our pledged account.

Income Tax Provision

Income tax expense for the nine months ended March 31, 2015 was $37.9 million, for an effective income tax rate of approximately 38 %, compared to income tax expense of $82.7 million or a 37% effective income tax rate in the same period in 2014. Our quarterly effective tax rate differs from the U.S. federal statutory rate of 35%, primarily due to a state income tax impact and an impact from exclusion of certain losses incurred from our international operations offset by the benefits realized from the timing differences related to the recognition of the tax effect of equity compensation expense from the disqualification of incentive stock options. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

Liquidity and Capital Resources

Cash, cash equivalents and marketable investment securities were $175.6 million at March 31, 2015 compared to $270.6 million at June 30, 2014, a decrease of $95.0 million. This decrease in cash, cash equivalents and marketable investment securities was attributable to the purchase of $165.9 million of our common stock under our share repurchase programs and $20.1 million for the acquisition of the Clinic offset by our cash collections from sales of molecular diagnostic tests and pharmaceutical and clinical services.

Net cash provided by operating activities was $89.5 million during the nine months ended March 31, 2015, compared to $149.3 million during the same nine months in 2014. Our cash from operations was impacted by a decrease in net income compared to the nine months ended March 31, 2014.

Our investing activities provided cash of $43.7 million during the nine months ended March 31, 2015 compared to providing cash of $1.2 million during the same nine months in 2014. Investing activities were comprised of $20.1 million in cash used to purchase the Clinic, capital expenditures for equipment and facilities of $21.9 million to support expanded myRisk testing volumes, offset by the net proceeds from the maturity, purchases and sales of marketable investment securities of $85.7 million.

Financing activities used cash of $137.1 million during the nine months ended March 31, 2015 and $169.7 million in the same nine months in 2014. Cash utilized in financing activities during the nine months ended March 31, 2015 was primarily due to the purchase of $165.9 million of our common stock through our share repurchase programs partially offset by $25.6 million from cash provided primarily by the exercise of stock options.

 

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We believe that our existing capital resources and net cash expected to be generated from sales of our molecular diagnostic tests and pharmaceutical and clinical services will be adequate to fund our current and planned operations for the next several years, although no assurance can be given that changes will not occur that would consume available capital resources more quickly than we currently expect and that we may need or want to raise additional funds. Our future capital requirements, cash flows, and results of operations could be affected by and will depend on many factors that are currently unknown to us, including:

 

    increased competition in our major markets or the introduction of technological innovations or new commercial tests by our competitors;

 

    declines in revenue or margins in our molecular diagnostic testing and pharmaceutical and clinical services businesses;

 

    termination of the licenses underlying our molecular diagnostic tests and pharmaceutical and clinical services or failure to enter into product or technology licensing or other arrangements favorable to us;

 

    unexpected backlog, delays or other problems with operating our laboratory facilities;

 

    costs and expenses incurred in supporting our existing molecular diagnostic tests and pharmaceutical and clinical services;

 

    progress, results and cost of transitioning from our current single cancer tests to our cancer panel test, myRisk, as well as developing and launching additional molecular diagnostic tests and offering additional pharmaceutical and clinical services;

 

    potential business development activities, in-licensing agreements and acquisitions;

 

    our ability to successfully integrate and achieve the expected benefits of our business development activities, in-licensing agreements and acquisitions, such as our acquisition of Crescendo;

 

    decisions or changes in the government regulatory approval process for our tests;

 

    timing and amount of repurchases of our common stock;

 

    the progress, results and costs of our international expansion efforts;

 

    the costs, timing, outcome, and enforcement of any regulatory review of our existing or future molecular diagnostic tests and pharmaceutical and clinical services;

 

    the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our issued patents and pursuing or defending intellectual property-related claims;

 

    the costs, timing and outcome of any litigation against us or that we pursue;

 

    changes in intellectual property laws covering our molecular diagnostic tests and pharmaceutical and clinical services and patents or enforcement in the United States and foreign countries;

 

    changes in the governmental or private insurers’ reimbursement levels for our tests; and

 

    changes in structure of the healthcare system or healthcare payment systems.

Effects of Inflation

We do not believe that inflation has had a material impact on our business, sales, or operating results during the periods presented.

Certain Factors That May Affect Future Results of Operations

The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from

 

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those described in the forward-looking statements. These risks include, but are not limited to: the risk that sales and profit margins of our molecular diagnostic tests and pharmaceutical and clinical services may continue to decline or will not increase at historical rates; risks related to our ability to transition from our single cancer tests to our new cancer panel test, including unexpected costs and delays; risks related to decisions or changes in the governmental or private insurers’ reimbursement levels for our tests or our ability to obtain reimbursement for our new tests at comparable levels to our existing tests; risks related to increased competition and the development of new competing tests and services; the risk that we may be unable to develop or achieve commercial success for additional molecular diagnostic tests and pharmaceutical and clinical services in a timely manner, or at all; the risk that we may not successfully develop new markets for our molecular diagnostic tests and pharmaceutical and clinical services, including our ability to successfully generate revenue outside the United States; the risk that licenses to the technology underlying our molecular diagnostic tests and pharmaceutical and clinical services and any future tests and services are terminated or cannot be maintained on satisfactory terms; risks related to delays or other problems with operating our laboratory testing facilities; risks related to public concern over our genetic testing in general or our tests in particular; risks related to regulatory requirements or enforcement in the United States and foreign countries and changes in the structure of the healthcare system or healthcare payment systems; risks related to our ability to obtain new corporate collaborations or licenses and acquire new technologies or businesses on satisfactory terms, if at all; risks related to our ability to successfully integrate and derive benefits from any technologies or businesses that we license or acquire; risks related to our projections about our business, results of operations and financial condition; risks related to the potential market opportunity for our products and services; the risk that we or our licensors may be unable to protect or that third parties will infringe the proprietary technologies underlying our tests; the risk of patent-infringement claims or challenges to the validity of our patents or other intellectual property; risks related to changes in intellectual property laws covering our molecular diagnostic tests and pharmaceutical and clinical services and patents or enforcement in the United States and foreign countries; risks of new, changing and competitive technologies and regulations in the United States and internationally; and other factors discussed under the heading “Risk Factors” contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2014, which has been filed with the Securities and Exchange Commission, as well as any updates to those risk factors filed from time to time in our Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our market risk during the nine months ended March 31, 2015 compared to the disclosures in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2014, which is incorporated by reference herein.

 

Item 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

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(b) Changes in Internal Controls. There were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - Other Information

 

Item 1. Legal Proceedings

BRCA1 and BRCA2 Based Hereditary Cancer Test Patent Multi-District Litigation

As described below, we have entered into settlement agreements that conclude in its entirety the Multi-District Litigation matter in the United States District Court for the District of Utah (the “Utah Federal Court”) captioned In re: BRCA1- and BRCA2-Based Hereditary Cancer Test Patent Litigation that consolidated five lawsuits filed by us and the University of Utah Research Foundation, HSC Research and Development Limited Partnership (an affiliate of Hospital For Sick Children), the Trustees of the University of Pennsylvania, and Endorecherche, Inc. (collectively, the “Patent Owners”). The litigation included lawsuits filed by us seeking to enforce the Patent Owners’ and our rights relating to the BRCA1, BRCA2 and MUTYH genes and three declaratory judgment actions filed in other courts by third parties seeking a determination that they do not infringe various BRCA1, BRCA2 and MUTYH patent claims owned by us and the Patent Owners and that these patent claims are invalid.

As disclosed in our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2014, we and the Patent Owners have entered into settlement agreements with Laboratory Corporation of America Holdings, Pathway Genomics Corporation, Invitae Corporation, Ambry Genetics Corporation and Counsyl, Inc., providing for the dismissal of the litigation with each party and releasing each other party of its claims and counterclaims brought in the litigation. In addition, during the fiscal quarter ended March 31, 2015, we entered into settlement agreements with the remaining parties, GeneDX, Inc., Quest Diagnostics Incorporated and Quest Diagnostics Nichols Institute, providing for the dismissal of the litigation with each party and releasing each other party of its claims and counterclaims brought in the litigation. Each party is to bear its own attorney fees and costs of the litigation. The settlement agreements also provided for a covenant to not sue on the patents asserted in the litigation against each party. The Utah Federal Court has now dismissed the litigation proceedings involving all of the parties.

We are presently not a party to any legal proceedings that we believe will have a material impact on our business, financial position or results of operations.

 

Item 1A. Risk Factors

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

In February 2015, our board of directors authorized us to repurchase an additional $200 million of our outstanding common stock. In connection with this stock repurchase program, we have been authorized to repurchase shares through open market transactions or privately negotiated purchases, in each case to be executed at management’s discretion based on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. There is no specified term or expiration date for this program.

During the three months ended March 31, 2015 we acquired the following shares of common stock under our stock repurchase program and in connection with certain employee stock awards:

 

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Period

   (a)
Total Number of
Shares Purchased*
     (b)
Average Price
Paid per
Share
     (c)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs*
     (d)
Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under
the Plans or
Programs
 

January 1, 2015 to January 31, 2015

     429,352       $ 37.06         424,632         45,974,977   

February 1, 2015 to February 28, 2015

     894,733       $ 33.91         892,088         215,725,290   

March 1, 2015 to March 31, 2015

     461,888       $ 34.63         461,888         199,729,778   

Total

     1,785,973            1,778,608       $ 199,729,778   

 

* The difference between column (a) and (c) relates to shares surrendered by employees to us to satisfy tax withholding obligations in connection with the vesting of restricted stock unit awards in accordance with the terms of our 2010 Employee, Director and Consultant Equity Incentive Plan, as amended.

 

Item 3. Defaults Upon Senior Securities.

None.

 

Item 4. Mine Safety Disclosures.

None.

 

Item 5. Other Information.

None.

 

Item 6. Exhibits.

 

10.1$    Resignation Agreement between Myriad Genetics, Inc. and Peter D. Meldrum Dated January 30, 2015 (previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed on February 3, 2015 (File No. 000-26642) and incorporated herein by reference).
31.1    Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
31.2    Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
32.1    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101    The following materials from Myriad Genetics, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) the unaudited Condensed Consolidated Balance Sheets, (ii) the unaudited Condensed Consolidated Statements of Income and Comprehensive Income, (iii) the unaudited Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.

 

$ Management contract or compensatory plan or arrangement

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

MYRIAD GENETICS, INC.
Date: May 6, 2015 By:    

/s/ Peter D. Meldrum

Peter D. Meldrum
President and Chief Executive Officer
(Principal executive officer)
Date: May 6, 2015 By:

/s/ R. Bryan Riggsbee

R. Bryan Riggsbee
Executive Vice President, Chief Financial Officer
(Principal financial and chief accounting officer)

 

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