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Greetings and welcome to the Myriad Genetics First Quarter 2022 Financial Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded today Thursday, May 5 2022.
I'd now like to turn the call over to Nathan Smith, Senior Vice President of Investor Relations. Please go ahead.
All right. Thank you Dave. Good afternoon and welcome to the Myriad Genetics first quarter 2022 earnings call. During the call, we will review the financial results we released today. And afterwards we will host a question-and-answer session. Our quarterly earnings release was issued this morning on Form 8-K and can be found on our website at investor.myriad.com.
I'm Nathan Smith, Senior Vice President of Investor Relations and Treasury. On the call with me today are Paul Diaz, our President and Chief Executive Officer; Bryan Riggsbee, our Chief Financial Officer; and Nicole Lambert, our Chief Operating Officer. This call can be heard live via webcast at investor.myriad.com and a recording will be archived in the Investors section of our website. In addition, following the call, the slide presentation will be available on the Investors section of our website.
Please note that some of the information presented today may contain projections or other forward-looking statements regarding future events or the future financial performance of the company. These statements are based on management's current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission. Specifically, the company's annual transition report on Form 10-K, it's quarterly reports on Form 10-Q and it's current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.
With that I will now turn the time over to Paul.
Thanks Nathan. Good afternoon everyone and thank you for joining us. On today's call, we will discuss our Q1 results along with highlights from the quarter and updates on our strategic transformation and growth plan.
As always, I want to thank all of our teammates for their hard work and dedication this quarter. I also want to thank our healthcare provider partners and their patients for their continued trust in us. 2022 will be an exciting year for Myriad Genetics as we continue to execute and advance our mission to improving the health and well-being of all.
Last year we began laying the foundation for long-term sustainable growth, profitability and innovation with the ongoing implementation of our transformation and growth plan. Now plan is taking form and coupled with our long-standing scientific expertise and emerging technology commercial capabilities, we expect to accelerate growth into 2022 and beyond.
We have an opportunity to reach more patients, create a more seamless user experience and combine data for millions of diagnostic results with other clinical data sets to help patient’s, health systems and payers to better manage care.
Despite challenges presented by COVID-19 and its variants in the first six weeks of the year, our quarterly operating and financial results were strong during the first quarter of 2022. In the quarter revenues of $164.9 million increased 11% year-over-year and diagnostic test volumes of 241,000 increased 10% year-over-year, demonstrating strong continued growth in our core businesses.
Average revenue per test in the quarter increased 1% compared to last year and last quarter, representing stable ASP growth for seven consecutive quarters. This stable growth in ASP is a reflection of investments made and in the execution of our revenue cycle management plan.
The success of our revenue cycle management plan has been in part due to our commitment to maintaining compliance and aligning to our payer partners, medical and reimbursement policies. We employ over 300 individuals across our payer markets billing and authorization teams, allowing us to perform the majority of our billing and prior authorization responsibilities internally versus using external vendors.
Total operating expenses in the quarter were $142.5 million, decreasing $27 million year-over-year and adjusted operating expenses decreased $7 million from last year to $120 million. Our GAAP operating loss in the quarter was $25.6 million improving $21.1 million compared to last year, with an adjusted operating loss of $2.8 million.
GAAP loss per share of $0.26 improved $0.26 compared to last year and adjusted loss per share of $0.03 improved $0.03 year-over-year. We ended the first quarter with approximately $339 million in cash, cash equivalents and investments and no long-term debt.
While the first half of the quarter limited our access to providers and patients, particularly in our hereditary cancer business, as women visited their doctors less, delayed routine screening, our path to profitability otherwise remains clear and our confidence in both our 2022 and long-term financial guidance is unchanged and reflects both the challenges we face as well as the benefits of our transformation plan.
Myriad is increasingly viewed as a trusted differentiated provider, with specialized expertise, underpinned by three strategic priorities: first, we are working to develop best-in-class products, services and accessibility to reach more patients of all backgrounds.
Second, we are building new enterprise capabilities to accelerate growth and leverage our size and scale to capture new market opportunities, including M&A. Third, we are focused on disciplined execution, as we work to deliver on a key set of initiatives to fulfill our mission, drive long-term growth, profitability and free cash flow generation. We continue to make progress on these priorities and are excited about the opportunities they create in 2022 and beyond.
As announced in March we have successfully launched Precise Tumor, our molecular tumor profiling test. We have seen a strong market response with many oncologists ordering multiple tests from our new Precise Oncology Solutions platform.
Powered by Illumina's TSO500 technology and processed by Intermountain Precision Genomics, Precise Tumor is part of Myriad Precise Oncology Solutions, a suite of offerings including our myRisk germline hereditary cancer tests, our myChoice CDx companion diagnostic tests.
And Precise Oncology Solutions helps health care providers determine the best treatment options for patients, by providing a single comprehensive report from a specialized lab. This eliminates the need for providers to order to for profiling test, hereditary cancer test and a companion diagnostic test separately, as opposed to getting a single patient with different providers.
Earlier this week, we announced an expansion of our partnership with Intermountain Precision Genomics, with plans to add a new liquid biopsy therapy selection tests to our Precise Oncology Solutions platform in 2023.
Compared to standard tissue biopsies, many oncologists prefer liquid biopsy testing to analyze traces of tumor DNA in the blood, because it can provide an often quicker, less invasive, alternative for cancer treatment selection. For many patients, liquid biopsy is necessary when tissue sampling is unfeasible and it can also be used to support the care of all patients with advanced cancer.
The addition of the liquid biopsy therapy selection test rounds out our growing oncology portfolio, providing data driven insights needed to guide more targeted treatment decisions. The Myriad Genetics liquid biopsy test will use Illumina circulating tumor TSO500 test technology and be processed by Intermountain Precision Genomics. With this expansion oncologists will continue to have the single ordering experience and easy to interpret results, with the added option of a liquid biopsy therapy selection test.
We anticipate initial utilization of our new liquid biopsy offering will be in areas such as hereditary and tumor testing for breast, ovarian, prostate and pancreatic cancers, where we already have proven capabilities, a strong product portfolio and consumer platform.
For many now, we have spoken about our plans to enter the market for MRD testing. After exploring a range of options, including M&A, we are excited to share with you all that we are currently developing a Myriad MRD test internally.
Myriad current workflow, coupled with our current technologies and commercial capabilities, gives us the best opportunity to have a market-leading MRD test that serves the current and emerging needs of health care providers.
From a high-level perspective, there are four steps in operating an MRD test that is tailored to an individual patient. The first two steps occur prior to surgical removal of the patient's tumor and identifying DNA variants specifically, found in the patient's tumor.
Importantly via our FDA-approved myChoice CDx companion diagnostic test we already possess the capability to perform these steps with clinical precision and at-production scale.
The final two steps occur after surgery and can be repeated many times to monitor reoccurrence of the original tumor. They involve sequencing cell-free DNA from the patient's plasma to search for the reappearance of variants from the original tumor. For these final two steps we can leverage tools developed in our prenatal products specifically the amplified technology from our prenatal test and the proprietary cell-free DNA capture technology powering first gen our comprehensive prenatal screening test that we hope to launch early next year.
Having these in-house tools and capabilities to create our own MRD test paired with our robust commercial engine gives us confidence in our ability to create an MRD offering with market-leading performance at a fraction of the cost than many of our other competitors have paid to acquire this capability. We expect to launch an MRD product for pharma partners in 2023, while we simultaneously gather clinical validation data needed for a commercial product to follow.
With that, I'd like to turn things over to Nicole Lambert, our Chief Operating Officer; to discuss our Q1 operating results and new innovations in more detail. Nicole?
Thank you Paul. It's my pleasure to review our core business unit performances starting with our mental health business unit. Mental illness continues to have a lasting effect on patients and their families in the US as those suffering fail to receive proper medical treatment for a variety of reasons. Trial and error are common when determining the most effective medications to treat depression anxiety, ADHD and other mental illnesses.
Our research shows that more than half of those diagnosed with depression have tried four or more medications in their lifetimes in an effort to find the right one. Negative stigma surrounding mental illness also contribute to this problem.
Our nationwide survey the GeneSight Mental Health Monitor recently revealed that more than half of surveyed women diagnosed with depression or anxiety delayed or never thought treatment because they did not want anyone to know that they were struggling.
Our GeneSight Psychotropic test addresses this mental health crisis by helping physicians better understand how antidepressants and other drugs will affect their patients with a simple cheek swab that can be taken in the privacy of the patient's own home.
Driven by GeneSight our Mental Health business unit reported $29.3 million in revenue for the first quarter of 2022, an increase of 66% year-over-year roughly 8,4000 tests processed in the quarter. The Mental Health business overcame industry-wide challenges presented in the first six weeks of 2022 to report one of its highest GeneSight volume levels ever.
We are encouraged by this performance as we believe it demonstrates the effectiveness of our new commercial capabilities digital marketing strategies and customer-centric sales initiatives that we implemented over the past year. We recently launched GeneSight Psychotropic 4.1 featuring key updates to the GeneSight task based on feedback from ordering clinicians. The update includes improved clinical considerations drug categorization additional medications and revised phenotype language for certain genes.
Shifting to our women's health business. Last year we launched our myRisk Hereditary Cancer test with risk or for all ancestries. The first and only personalized 5-year and lifetime breast cancer risk assessment for all women including those of non-European ancestry. This new capability validated by scientific research with over 270,000 women reflects our commitment to health equity and was recently cited by Fast Company when it named Myriad Genetics among the world's most innovative companies in 2022.
Since launching myRisk with risk score for all ancestries we have helped tens of thousands of women from non-European backgrounds get the genetic insights that they need from hereditary cancer testing. With risk where clinicians can gain critical insights to help treat women with increased risk for breast cancer who likely do not have an identifiable mutation in one of the breast cancer genes.
We are also excited about our recent partnership with Geno Medical to launch a virtual care service guide patients through the end-to-end process of ordering a myRisk test. This partnership is unique because it not only provides patients who select this service with effortless access to a genome medical adviser but it also provides them access to a Myriad Genetics counselor and our live chat support through the patient's journey. This partnership is designed to increase access for genetic services for those who may need additional support and it allows patients the ability to order a myRisk test from their own home as well.
In the first quarter, our Women's Health business reported $65.5 million in revenue a 19% increase year-over-year. Reported test volumes were roughly 113,000. Hereditary cancer volumes were adversely affected by challenges presented by COVID-19 and the variance including physician staffing constraints and fewer in-person office visits.
We also saw strong growth in our prenatal portfolio with revenues up 35% in the quarter compared to last year. Our prenatal products allow patients to be proactive about their health care. Our Prequel prenatal screen with Amplify technology provides results to more than 99.9% of patients. We offer microdeletion screening on an opt-in basis not as a default for the five common microdeletion syndromes.
In addition, we continue to progress towards the launch of first gene, our combined non-invasive prenatal screen and carrier screen test which is expected to be available early next year. Today only one in three patients undergo both carrier screening and non-invasive prenatal screening during pregnancy.
FirstGene combines these services into one simplifying the screening process and making it easier for patients to get the answers that they need from one single maternal blood draw. The new offering will complement our industry-leading portfolio of prenatal tests and bring services to patients who might not otherwise access foresight or Prequel.
Moving on to our oncology business unit which delivered $69.8 million in revenue for the first quarter. Reported test volumes were roughly 44,000. As Paul mentioned this past March we launched Precise Tumor for molecular tumor profiling as part of a suite of precise oncology solutions that combine our myRisk germline hereditary cancer test, myChoice companion diagnostic test and Myriad Genetics tumor profiling test powered by Illumina's TSO 500 technology.
We are excited about expanding this partnership even further to offer precise liquid a liquid biopsy therapy selection tool. With these new solutions, Myriad Genetics is advancing precision oncology by merging the power of companion diagnostics, next-gen super sequencing and world-class germline testing services. We continue to invest in our myRisk germline test offering launching new gene content in April of this year.
In addition Myriad's myRisk BRACAnalysis CDx -- sorry, Myriad's BRACAnalysis CDx received FDA approval in March as a companion diagnostic test for use with Lynparza in early-stage breast cancer treatment making it the only germline test approved by the FDA as a companion diagnostic for treatment of HER2-negative high-risk early-stage breast cancer.
We are excited about the continued success of our prostate cancer prognostic Prolaris which hit an all-time monthly high for test administered this past March. The Prolaris test is designed to assess prostate cancer aggressiveness and is the only test on the market that measures how fast prostate tumors are growing.
I would now like to turn it over to Bryan to discuss our Q1 financial results in more detail.
Thank you, Nicole. I would like to start by reviewing our financial highlights. We began the year with another strong quarter as we reported total revenue of $164.9 million up 11% year-over-year excluding revenue from divested assets. Our quarterly results were driven by stable diagnostic test volumes, which despite headwinds in the first six weeks of the quarter brought on by COVID-19 in experience increased 10% compared to last year after excluding divested assets. In addition, we continue to see improving average selling prices across our businesses.
The stability in ASP and better-than-expected cash collections on orders from prior period was driven by our improved execution on revenue cycle management, which has been a major component of our transformation and growth plan. In the first quarter, we reported an adjusted loss per share of $0.03 improving $0.03 year-over-year. Adjusted gross margin was 71.1% and adjusted operating expenses were $120 million.
We have experienced increased inflationary pressures increased labor costs due to staffing constraints and competition for talent as well as increased material cost due to global supply chain disruptions. The team has successfully managed operating expenses during this disruptive time to help mitigate those various cost increases. We did exit the quarter on pace to hit our operating expense targets that we laid out for 2022.
During the first quarter revenue of $164.9 million benefited from $12 million of better-than-expected cash collections on tests ordered in prior periods. Overall, volumes for the quarter of $241,000 came in within our original projections and organic ASP was stable.
Looking at product performance, total Q1 test volumes increased 10% compared to Q1 of last year and increased 2% sequentially from last quarter after excluding volumes from divested assets.
Excluding revenue from divested businesses, total revenue in Q1 increased 11% year-over-year and 2% sequentially. These results demonstrate strong growth in the core business despite COVID headwinds and typically weaker first quarter seasonal trends.
Turning to revenue by product. Hereditary cancer revenue in the first quarter was $70.9 million, a decrease of 7% compared to the first quarter of last year. Our hereditary cancer testing business was hit the hardest by COVID-19 and its variance in the first six weeks of the quarter.
As we factor out the disruptions caused by access constraints and staffing challenges during the quarter, we estimate that hereditary cancer volumes for the quarter would have decreased 3% year-over-year and 1% sequentially.
Prenatal revenue in the quarter increased 35% year-over-year and 6% sequentially, driven by our proprietary Amplified technology which significantly enhances the performance of our Prequel noninvasive prenatal screening test and works to reduce test failure rates so that patients may avoid unnecessary invasive procedures.
In oncology, tumor profiling revenue increased 5% compared to the same period in the prior year and increased 23% sequentially. Contributing to that growth, as Nicole mentioned, Prolaris exited the first quarter with a record-breaking number of tests ordered in March. And our myChoice HRD test continued to perform well with double-digit year-over-year and sequential volume growth.
Pharmacogenomic testing and Mental Health delivered first quarter revenue of $29.3 million, an increase of 66% year-over-year and was flat sequentially, while GeneSight volumes in the first quarter of 84,000, increased 49% year-over-year and 7% sequentially. ASP and mental health was negatively impacted primarily by annual deductible resets when compared to the first -- fourth quarter of 2021.
As we look ahead we are reiterating our 2022 financial guidance of $600 -- of revenue of $670 million to $700 million gross margins of 70% to 72% and adjusted operating expense of $470 million to $480 million and adjusted EPS of $0.00 to $0.20. In addition we reiterate our long-term financial guidance of 9% to 12% estimated organic revenue growth through 2024.
With respect to the rest of 2022, while we do not anticipate receiving the same level of cash collections from prior periods in the second quarter of 2022 compared to this first quarter, we do expect second quarter volumes to grow off of the first quarter base. We also anticipate steady ASP moving forward based on the experience that we've seen in ASP the past seven quarters across the business.
In the back half of the year, we expect to see an acceleration of volume and revenue growth due to the benefits of the investments we have made to launch our unified provider ordering portal, the initiation of our virtual care solutions partnership with Genome Medical the unveiling of our myGeneHistory platform and the introduction of new solutions to address patient and provider expectations on price transparency and affordability.
As we continue to execute our strategic transformation and growth plan, we believe we are positioned to be a high-growth profitable free cash flow generating leader in precision medicine, delivering key insights to enhance patient care.
I'll now turn it back over to Paul for closing remarks.
Thanks Bryan. We're pleased with the progress we've made this quarter and another tough operating environment. Lastly, we would like to announce that we will be hosting an Investor Day on August 11th to give an update on the company's progress.
We know our sector is facing significant market pressure and that some of our competitors are struggling to deploy a financially sustainable value proposition and growth model.
While our transformation is still underway, I'd like to emphasize that our scientific, technological, and commercial platforms are built off of a sustainable and solid financial foundation. We are continuing to take concrete steps to make our platform scalable, including investments in technology, marketing capabilities, and remote selling and we are excited to bring new products to market like Precise liquid MRD on this platform over the next several years. We are confident that this sets Myriad apart from its peers and puts the company on a trajectory for innovation, growth, and shareholder value creation.
Our focus remains on newly launched products and commercial initiatives with the goal of accelerating growth during the remainder of the year as we continue to invest in the future elevating our products to their full potential introducing new innovative offerings and more than ever we are exploring new ways to illuminate the path to better health through genetic insights. We look forward to a bright future ahead for Myriad Genetics, as we continue to work to better serve our patients, customers and deliver sustainable growth and profitability for our shareholders.
Now I'll turn it back to Nathan for Q&A. Nathan?
Thanks, Paul. As a reminder during today's call, we use certain non-GAAP financial measures. A reconciliation of the GAAP financial results to the non-GAAP financial results and a reconciliation of GAAP to non-GAAP financial guidance can be found under the Investor Relations section of our website. Now we are ready to begin our Q&A session. [Operator Instructions] Operator, we are now ready for the Q&A portion of the call.
Thank you. [Operator Instructions] The first question comes from the line of Jack Meehan with Nephron Research. Your line is open.
Thank you and good afternoon. I wanted to talk about GeneSight, saw that you had applied for a PLA code for the test. I was wondering if you could just elaborate on the strategy behind that. And what do you think will happen to the Medicare pricing once that gets finalized this summer.
Yes, Jack, I saw your note on that. We believe it's absolutely the right strep to bring more clarity as we're trying to do across all our payer market strategy and our rev cycle process. So we think this brings more stability, not less to GeneSight and potentially along with the clinical evidence that we continue to build expansion of coverage for GeneSight. And so we don't see or expect the risk that you've identified in terms of Medicare pricing compression there. And in fact, I think it's a great step to solidifying gene set pricing as we've done with other codes that we've applied for. So we actually are quite confident in what we're doing here.
And just as a follow-up on that, how will it work moving forward? So starting in 2023 will your entire GeneSight book of business get reimbursed under this new code. Just how does it work today when you're not under contract with the payer, do you code stack? I guess just confirmation of how the billing will work once the PLA goes into effect?
That's a little granular for this call. So we're happy to take that off-line Jack. I want to give you a good answer and I'm not really in a position to do that. But I don't think there's any code stacking involved, but why don't we take that offline with anything? We're happy to try to give you a clear answer.
Okay. I appreciate it. Looking forward to the Analyst Day too. Thanks, Paul.
Great. Thank, Jack.
Our next question comes from the line of Dan Brennan with Cowen. Your line is open.
Hi. Good afternoon. This is Kyle on for Dan. Thanks for taking my question. I'd like to walk through how the quarter sort of played out versus your expectations when you gave the guidance back in back in February across our four product areas. Were there any notable areas of strength/weakness that you didn't anticipate it first that were better or worse than expected?
Well, look the first six weeks we were kind of holding our breath into the rest of it. But the team really rallied. I would say, the strength of our new digital platform for GeneSight was probably the biggest surprise because GeneSight held up even during that first six-week process. And again that's where we put more of the new commercial tools in place and we think the rest of the portfolio will benefit with that over time our inside salespeople and the other investments we've made there.
No look it was just great execution on behalf of the coal and our operators. And I think you see up and down the P&L, we're growing managing our operating expenses investing in new products with high returns on invested capital. So just a lot of good blocking and tackling and most importantly, a team that was really responsive to our customer base during the quarter and their needs. And I think that's proving itself as we -- we're gaining new customers and winning back some old customers that we lost along the way. And it bodes well for the rest of the year.
That's great. And then one just on tumor profiling, so strong volume quarter revenue down a little bit year-over-year but still be consensus -- what are the key drivers for tumor profiling as it sits now there's not as much granularity anymore but what should we really be thinking about that segment?
I think what you would -- I'd have you focus on is precise oncology solutions and the platform of services that oncologists want, as we did the work for the transformation plan 82% of oncologists want a single source of information and an easy-to-use test.
And so our whole transformation is built around being more responsive to patients and our provider partners. And tumor profiling was lacking. What we're really excited about is the attachment rate that we're getting, as oncologists are not only ordering the tumor profiling tests, but they're ordering myRisk and myChoice as well.
And it's a very high level of attachment rate. And what they really appreciate is the fact that we're reconciling the test and we're giving them one report. And so it's really just about listening to the customers. And that's how I think we win.
Great. Thanks for taking my questions.
Sure. Thank you.
Our next question comes from the line of Matt Sykes with Goldman Sachs. Your line is open.
Hey Matt.
Hi. Good afternoon. This is Ivy on for Matt. On the previous earnings call you said you expected approximately 2% to 3% revenue contribution through 2024 from your oncology business, I assume that guidance did not include your expansion to liquid biopsy, but could you provide any color on mid-term growth rate expectations for this business going forward including the liquid biopsy?
Look, our guidance for 2022 is pretty clear. And what we have provided is long-term guidance of 9% to 12%. We're certainly at an 11% growth year-over-year this quarter showed and demonstrated that we can achieve that. I sort of hope that we can get to that 12% growth rate over the next two years.
Liquid and MRD, as we said in the building block slide that we provided at the conference and is in our website, specifically said that it did not include contribution from liquid and MRD. So this is really based on the rest of the products in the portfolio today and getting them all to their full potential.
Great. Thank you.
Sure. Do you have a follow-up?
No.
Okay great. Thank you.
And there are no further questions pending at present time.
Thanks a lot.
Well, Okay. Well, I get things off and everybody with our script. Go ahead Nathan wrap-up.
All right. Thank you all for joining today. This concludes our earnings call. A replay will be available via Webcast on our website for one week. And thank you again for joining us this afternoon.
And all that will conclude the call for today. We thank you very much for your participation. You may now disconnect.