Myriad Genetics blamed "unprecedented" pricing pressures for its failure to hit fourth quarter and full-year revenue targets, the company said Tuesday. The update triggered a sell-off in shares, which plunged more than 35% in opening trade.
Echoing comments made in earlier quarters, Myriad said laboratory benefit management programs' lower reimbursement of its expanded carrier screening test hurt sales.
Myriad said prices have now stabilized but the setback dented its standing with investors, wiping out some of the gains the company made after a recent UnitedHealthcare coverage decision.
The past 12 months have been tough for Myriad. Going into fiscal 2019 expecting revenues of up to $890 million, a series of below-par quarters resulted in Myriad ultimately making only $851 million.
Pricing pressure on GeneSight, Myriad's genetic depression test, dragged on performance earlier in the year before stabilizing, only for lower average selling prices of the ForeSight expanded prenatal carrier screening test to create new problems for the company. Fourth quarter prenatal testing sales fell $25 million short of Myriad's expectations.
Mark Capone, CEO of Myriad, explained why GeneSight and ForeSight bore the brunt of reimbursement pressures in 2019.
"The reason is that those two tests don't have specific codes," he said on a fourth quarter results conference call with investors. "It's those scenarios where you don't have a specific code with a specific contract price that we've seen the interventions from a lab benefit management program. It's not something we expect for the rest of the tests that have codes and that's why we really didn't see any of that in the fiscal year with the other tests," he said.
Across 2019, Myriad said pricing pressure related to laboratory benefit management programs wiped $50 million off sales. Adding those missed sales to the actual full-year total brought the revenue figure above the top end of the range targeted by Myriad going into the fiscal year.
Myriad said the ForeSight price has stabilized at the level seen in the fourth quarter, meaning reimbursement should be less of a headwind in fiscal 2020. In the longer term, Myriad hopes to win broad reimbursement for expanded carrier screening to eliminate the pricing problem.
"There is the opportunity to shift to a code that is obviously priced, at least with Medicare, significantly higher than where we are," Capone said. "So I think this market is going to move to expanding carrier screening. I think the evidence is very striking. As it does, we're going to see, I think, a different dynamic from a pricing perspective."
In the nearer term, Myriad is looking to GeneSight for growth. Buoyed by a positive reimbursement decision from UnitedHealthcare, Myriad forecast double-digit growth of the test in 2020, although it is set to make a slow start to the year due to a change to the targeted populations.
"We made the decision to discontinue our analgesic and ADHD products because of the level of clinical evidence did not meet the same high standard set by the GeneSight Psychotropic test in the GUIDED study. In addition, a few payers expressed similar views and we wanted to eliminate any potential hurdles to commercial payer coverage for the GeneSight Psychotropic," Capone said.
The change had a negative effect on sales in the fourth quarter that's expected to continue over the first three months of fiscal 2020. However, Myriad expects performance to pick up once the UnitedHealthcare coverage decision kicks in at the start of October.