Myriad Genetics' CEO Hosts Annual Day (Transcript)

| About: Myriad Genetics, (MYGN)

Myriad Genetics, Inc. (NASDAQ:MYGN)

Analyst Day Call

May 9, 2013 9:00 AM ET


Pete Meldrum – President and CEO

Mark Capone – President, Myriad Genetics Laboratories, Inc.

Jerry Lanchbury – Chief Scientific Officer

Lloyd Sanders – Head, Oncology Division

Alec Ford – Head, Preventive Care Business Unit

Scott Gleason – IR

Bill Rusconi – Head, Urology Division

Gary King – EVP, International Operations

Jim Evans – CFO


Isaac Ro – Goldman

Peter Lawson – Mizuho Securities

Doug Schenkel – Cowen & Company

Vamil Divan – Credit Suisse

Tycho Peterson – JP Morgan

Chip Skinner – Royce Funds

Derik De Bruin – Bank of America

Michael Yee – RBC Capital Markets

Sung Ji Nam – Cantor Fitzgerald

Scott Gleason

Welcome to the 2013 Myriad Genetics Investor and Analyst Day. I’m Scott Gleason, Director of Investor Relations. And we’re really excited today to share with you guys a little bit about our strategy and Vision for the coming future.

Before we get started, we need to go through our forward-looking statements. We will be making some forward-looking statements commentary today. Please note that some of the information presented here today may contain projections or other forward-looking statements regarding future events or the future financial performance of the company. These statements are based on management’s current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons.

We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company’s Annual Report on Form 10-K, its quarterly report on Form 10-Q, and its current reports on form 8K. 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’m very pleased to present Pete Meldrum, our Chief Executive Officer. Thank you.

Pete Meldrum

Thank you, Scott. And it’s my pleasure to welcome you to Myriad Genetics Analyst and Investor Day. And we’re excited to share with you the company vision and talk a little bit about some of the products that are coming out through our pipeline.

Myriad Genetics is dedicated to saving lives and improving the quality of life of patients through the discovery and development and commercialization of novel transformative molecular diagnostic products across major disease indications. We’re really focused on every aspect of the continuum of patient care. To getting with the assessment of risk of disease, so that the physician and patient know how aggressively to treat the disease if a patient has and take preventive action if a patient has an increase risk over the general population for that disease.

We’re also very much focused on ensuring the patients get the most accurate and rapid diagnosis and predicting disease recurrence and disease progression and finally ensuring that the patient gets the most appropriate therapy using companion diagnostics to ensure that the patient gets the right drug at the right time. And this really represents the complete continuum of patient care that Myriad is focused on.

We have three major strategic growth initiatives as the companies involved in, the first is to grow our core business and expand our current market. And I think from our last earnings call, you can see the company has been implementing this, the strategy effectively. We now have achieved our seventh consecutive top line growth of over 20%. We also are very much focused on expanding our markets globally. We now have a marketing presence in over 80 different countries and are in full operations with our laboratory in Munich, Germany.

And finally, we’re going to be launching new products and that’s really what we’re going to be talking a lot about today, as we talk about our hereditary cancer panel and our HRD product as ways of growing the company and the future. All of these areas then will fuel the top line revenue growth of the company continues to expand.

We’re also focused on a variety of disease states, currently we have sales and marketing presence in Oncology, preventive care and urology. But we’re also expanding into dermatology and we’ll be launching our first dermatology product Melapath later this calendar year. We’re going to expand into auto immune diseases and we have entered into an auction to acquire a company called Crescendo Biosciences which has a very exciting Rheumatoid Arthritis product.

And we’re also going to be moving into the neuron science arena with the Acquisition of Rules-Based Medicine focusing on depression, major bipolar disease and schizophrenia. So the company is really going to be focusing across multiple disease indications to apply our technologies and launch products that improve patient care and stabilize.

Myriad’s vision is to become a trusted advisor for the physician to answer the patient’s most pressing concerns. And that really represents the complete continuum of patient care. Beginning at the top with risk assessment, answering the patient’s concern, what is myRisk of getting disease later in life, moving on to the concern of do I have disease, and then how aggressive is my disease, how aggressively should it be treated. What is the risk that my disease my progress?

And finally, what do you do with treating my disease, what is the best therapy. We really view Myriad as a trusted advisor and as the single source for answering all of the physicians questions about these important areas.

Let me talk about each one separately now. And the first patient concern is what is myRisk of getting disease later in life. Well, Myriad has been a pioneer in risk assessment or hereditary cancers. And all of these cancers we have test on the market today that are very important in terms of saving lives by identifying those patients who have a heightened risk or disease.

If we take for example, Colorectal cancer, the general population risk is about 5%, an individual has a 5% probability of developing colorectal cancer later in life. However, if you’d inherited a gene from your parents that predisposes to colorectal cancer, your risk can be as high as 82%. However, on to that information, you can take preventive action to prevent or delay the onset of the disease. And using preventive measures can actually lower your risk down to the general population or sometimes even below the general population risk.

While, this is a very exciting panel of products, we really see the future of predictive medicine moving from single cancer test to a pan-cancer disease panel. And this is Myriad’s very exciting product myRisk Hereditary Cancer. And you’ll hear more about myRisk Hereditary Cancer from Mark Capone, but I am pleased to say that we will be launching this product this year.

Myriad, as I mentioned is a pioneer in predictive medicine. We discovered the first gene for a major common disease, that being breast cancer and launch the first test that was a full DNA sequence based test, identifying all of the mutations in a particular population group.

This was a great improvement from the state of predictive medicine only a few years before our discovery of the breast cancer gene, whereas individuals really looked at linkage analysis or looked at a handful of common mutations and focused primarily on the rare genetic disorders.

So this really moved into common disease with Myriad’s discovery. But as I mentioned we see the future of predictive medicine, moving away from single cancer test to Pan disease cancer panels and applying it not only in cancer but across many different types of disease. And the launch of myRisk Hereditary Cancer will be the first comprehensive pan-cancer panel.

The second patient concern is do I have a disease? Cancer diagnosis today is very subjective and involves considerable judgment on the part of the physician. We believe the future of cancer diagnoses will be moving from this more subjective vision assessment to applying molecular diagnostic techniques to really provide a more accurate and objective measure.

14% of all skin biopsies are classified as indeterminate. This affects over 275,000 patients annually. The physician really can’t looking at the cells under a microscope determine whether or not the patient has a malignancy. Melapath is a very exciting product that we will launch this calendar year that will be able to assist the physician in determining whether or not the skin biopsy represents a benign nevi or a malignant melanoma, really improving the diagnoses and saving lives.

The third patient concern is how aggressive is my disease? Today physicians have a difficult time accurately determining how aggressive a disease is going to be and how that disease is going to progress. As a result of that physicians have a hard time knowing how aggressively to treat a patient. And frequently they air on the side of caution by over-treating patients. And prostate cancer I think is a perfect example.

85% of the man diagnosed with prostate cancer today will have aggressive therapy either removal of the prostate or radiation treatment. And yet, only 20% to 30% of those man need that aggressive therapy. But this is no good way today of assessing how aggressive a man’s prostate cancer is until Myriad’s launch of PROLARIS. The first test that actually predicts a man’s probability of surviving his prostate cancer, if that cancer is left alone and the man undergoes active surveillance or watchful waiting.

As shown in this clinical study, 90% of the man, with a low PROLARIS score survived their cancer for 10 years without any treatment. However, if a man had a high PROLARIS score and there you need aggressive therapy because only 22% of those men survived.

Myriad is an innovator in prognostic medicine with the launch of the first prognostic prostate cancer test. We’re very excited about this and we think this will gravely improve the healthcare of man because for 50 years physicians have had to rely on clinical parameters like Gleeson Score. And these adverse pathology indications are really willfully and adequate in terms of predicting how aggressively a man’s prostate cancer is going to be and therefore how aggressively to treat it.

A good example of how poor of an indicator these clinical parameters are is the United States Preventive Services Taskforce recently came out with a recommendation of doing away with PSA screening. They said it basically did more harm by over-treating the vast majority of patients and the good by treating those patients who actually needed aggressive therapy.

And even more recently, the American Urological Association came out with new guidelines, changing the PSA screening from any man over the age of 40 to only men between the ages of 55 and 69. So, again a test like PROLARIS is very much needed so that we can improve healthcare through man and treat only those man who need aggressive forms of treatment for their cancer.

We will launch a lung cancer prognostic test next fiscal year to compliment our prognostic medicine platforms and we will move this into other disease indications in the future as well. The first patient concern is what therapy is best, how do you treat my disease? Many medicines today are really prescribed on a trial and error basis. Only about 30% of the cancer patients will actually benefit from the chemotherapy that’s given to them.

And we view the future of drug development and medicine focusing on from hanging diagnostics that can identify those individuals who respond versus those who will not respond to a particular therapy. And our HRD test is very exciting, this was data presented recently at the San Antonio Breast Cancer Symposium in patients with triple negative breast cancer who are given carboplatin therapy. And one might expect about 30% response rate.

If those individuals with a high HRD score which is indicative of positive response, so 70% of those patients have their tumors shrink to the point where a cancer was not detectable. Yet a low PROLARIS score which was indicative of not responding well to carboplatin and DNA damaging based agents only 12% responded.

So, we’re very excited about being able to guide patient-care, identify individuals who respond effectively to the new classes of drugs that are coming on to the market. And Myriad has done a trailblazer in personalized medicine. Personalized medicine began by focusing mostly on how we metabolize drugs, recognizing that we all have a different genetic make-up and we all metabolized drugs slightly differently.

And then we moved on to a single gene or protein based test like the HER2/neu gene, or breast cancer testing. But at Myriad, we see the future of companion diagnostics not focusing on one or two genes that might be predictive as response but looking at an complete pathway, looking not at the powers but at the end result, the ability of the tumor to not prepare effectively DNA damage, and that’s exactly what the HRD test is.

And when we launched this test in calendar 2015, it will it’s first half way based companion diagnostic test. Myriad does have collaborations with 20 major pharmaceutical companies. These collaborations are exciting and represent $1 billion mark at opportunities for diagnostic, companion diagnostic products. But I’d like to point out that a lot of these products are very late stage. We have eight collaborations on drugs in phase 2 clinical trials, three of the drugs are in phase 3 and three additional studies which are very near term for phase 4 or post marketing studies.

So, Myriad’s strategic direction is to focus on answering the four major questions a patient has, what is myRisk of disease, do I have disease, how aggressive is that disease going to progress and how do you treat that disease. And doing that across multiple disease indications from oncology to preventive care, urology, dermatology other immune diseases and the neuroscience area.

And as you can see by this chart, we have a number of products already on the market addressing these critical concerns and a very strong product pipeline that is also filling out this matrix.

Myriad as I mentioned I think is a pioneer in genetic testing for common diseases. And we have products on the market for breast cancer, colon cancer, ovarian endometrial cancer as well as melanoma and pancreatic cancer. We’re also trailblazing the future of molecular diagnostics, with the development of pan-cancer panels and then moving beyond cancer to pan disease panels and other medical specialties.

We’re also an innovator in companion diagnostic and are an advisor to assist physicians and ensuring that the patients get the right drug at the right time. And we have the complete technology package for this. If you look at the development of biomarkers, there is three main technologies employed, DNA sequencing, RNA expression and protein analysis.

And Myriad has excellent expertise and capabilities in all three of these areas, so that we can uncover the cause and understand the cause of the genetics of human disease.

Myriad is also the only diagnostic company focused on this vision of complete patient care, becoming a single source provider to the physician to answer all of the physician and patient’s question about their disease. So a physician doesn’t need to send a sample to three or four different laboratories like and use Myriad as a single trusted advisor to answer these questions of predicting disease risk, ensuring the most accurate diagnosis, guiding optimal treatment and assessing how aggressive a disease is likely to be and the probability of recurrence.

Myriad is going to expand our strength in Oncology across many major disease indications and we are going to do this on a global scale.

I’d like to now introduce Mark Capone, who is President of Myriad Genetic Laboratories. And he’s going to tell you a little bit more about our very exciting hereditary cancer panel, myRisk Hereditary Cancer. Mark?

Mark Capone

So, thank you Pete, and good morning to everybody. Thank you for being here on a rainy day. And we appreciate you making the effort. Yeah, it is my privilege to announce one of our next product launches which is myRisk for Hereditary Cancer. This significant the hereditary cancer panel that we’ve been talking about for the last few years or few months. But in this – and we really believe this product is going to revolutionize hereditary cancer testing. So, I’m excited to provide an update and the timing around launch of this particular product.

We’ll talk first about our product overviews, secondly I will go into the evolution of the marketplace and then lastly just some brief discussion on the technologies that we will be using.

Now, why is myRisk important? Well, there are clinical dilemmas that physicians face that we’ve known for some time. Those two dilemmas are, first, what gene should I order and secondly how should I manage patients when I have mutations. The problem is that we know that there are multiple genes that are indicated for a certain cancer like breast cancer which is on your, the left had side of the slide, and BRCA 1&2 are the predominant genes but there are 12 other genes that are known to be linked hereditary breast and ovarian cancer.

Second concern on your right hand side is that we also know that there are multiple cancers that are linked to a specific gene. And because of all this overlap, this genetic overlap between genes and disease, it’s very difficult for a physician know what should I order and how should I manage my patient. And myRisk will solve those two clinical dilemmas.

Now, let me give you a couple of case studies that these are actual patients that have been run through the myRisk panel at this point, and just to give you some early evidence of how important this product will be for the treatment of hereditary cancers.

This first patient is a breast cancer patient and you can look at their family history. There is other breast cancers that have appeared throughout the family. You would initially look at this and you would be inclined to order BRCA 1&2 at that point. This patient was tested through myRisk and we found to have an MFH2 mutation. Now MFH2 is known to be a colon cancer gene. So, this patient is actually at risk for colon cancers but it also maybe that MFH2 is implicated in their familiar breast cancer as well.

Patient number two, this is a patient that’s been diagnosed with early adenomas and polyps and if you actually look to the family history, a variety of colon cancers and smattering of other cancers, you would typically look at this as a physician you would be inclined to order COLARIS to see if in fact this patient has hereditary colon cancer.

It turns out this patient actually has a BRCA2 mutation, so this patient is at significant risk for hereditary breast and ovarian cancer and in fact BRCA may have some implication in the familiar colon cancer as well.

Last patient, this is a patient that was diagnosed with pancreatic cancer. And you can see throughout the family of pancreatic and prostate cancer, this would be one that our physicians would probably think as a no-brainer for BRCA2 which has been implicated in these cancers. But for this particular patient, P16 mutation was identified. That means this patient is at risk for skin cancer because P16 is typically associated with melanomas but again, maybe implicated in pancreatic cancers and prostate cancers as well.

So I think these three examples are just at the very early insights we have and how important myRisk will be to provide a much more comprehensive understanding of patient’s cancer risk.

Now, the product profile for myRisk, this is a 25 gene panel. It will include the 11 genes we currently sequence as well as 14 other genes that will be added to the panel. It will include both sequencing and large rearrangements. All of the genes on the panel are known to be clinically actionable as it relates to hereditary cancers. Our initial focus for the panel will be our current cancer indications but then in the future we plan to expand those into other cancer indications as we accumulate additional clinical data.

Our turnaround time would be 14 days or less. This price would be $4,000 to $4,500 and we will be able to use the current molecular codes and the current reimbursement for myRisk. And lastly projected gross margins should be at around 87%.

Now, the question I think most of you ask is when this will happen as Pete mentioned, we’ve been rather busy this launch will occur in fall of 2013, so within the next six months we will launch this product. Our goal would be to convert the entire hereditary cancer market by the summer of 2015 to the myRisk panel. This will then mean that we phase out our single gene products of BRACAnalysis, COLARIS, MELARIS and PANEXIA as we will transition the market by summer 2015 to myRisk.

The proprietary genes that will be on this panel initially are BRCA 1&2, RAD51C, PALB2 P10, you can see all those genes up there. We will be evaluating additional genes to be added to the panel. We announced this week the exclusive license of MITF, that would be added to the panel in the future, ELAC2 which is a prostate cancer gene Myriad discovered and there will be others that we either discover internally or license from the outside that will continue to be part of the evolution of this myRisk product.

Now, myRisk is also important because it gives us the opportunity to significantly expand the market beyond where we are today. So the first opportunity for expansion is to take out – is to expand the number of eligible patients for the cancer indications that we currently test by leveraging the increased sensitivity of this assay.

Second thing is we can then expand cancer indication to beyond where we are today by the addition of other genes to the panel. And third, we can improve the health economics of this test by demonstrating that we can more comprehensively provide risks, additional risk information about cancer that a patient maybe susceptible to.

The combination of these three we believe will allow us to more than double the size of this market by fiscal year ‘16.

So, second point I’d like to go into is just how we believe this market is going to evolve over the next three years. We divide this up into three different phases, 2013 to 2015 will be a conversion phase where we’re taking current indications and converting that. 2016 to 2018 is an expansion phase, where as I mentioned expect more than double the size of this market. And then 2018 and beyond when we begin to lose some of the pan protection on the BRCA 1&2 genes, is the differentiation phase. And I’m going to go into each of these phases and a little of detail as to what should transpire over the next few years.

First, in the conversion phase, we’ve done quite a bit of market research already to this point I think what we’ve heard back from our customers, they view this as a very significant improvement to BRACAnalysis and Claire’s, it’s coming from the trusted advisor that provides and answers today. And the information will be clinically actionable and easy to understand for both physicians and patients. And those all are critical points that will allow us to rapidly convert this market into myRisk.

More specifically we’ve done quantitative research and ask physicians their intentions as it relates to this myRisk product profile that I mentioned a few slides ago.

On the oncology side of the market, 86% of oncologists said they would rapidly convert to the myRisk product and that’s because they appreciate the improved sensitivity that comes with this new product.

On the women’s health side, 93% of OBGYN said they would rapidly convert to this. The thing that they were most focused on and most appreciated is the comprehensive report that will be provided that allows them to have better job of managing their patients. And then genetic counselors, 90 plus percent of those they would rapidly convert, they’re most focused on the rapid turnaround time that we can provide and the ability to classify variance in more comprehensive ways that others could possibly do.

So, this is one of those unique settings where we believe the demand for this product may in fact outstrip our ability to supply that, there is very significant interest in myRisk because the clinical dilemmas that I mentioned upfront have been well known.

Now, in the expansion phase, so we’re now into that 2016 to 2018 timeframe, this is what believe the market will evolve to. Today, if you look on the oncology segment, about 300,000 patients per year are appropriate for our current hereditary cancer indications. That includes both survivors and newly diagnosed patients. For example, with our 30% impressed newly diagnosed breast cancer patients are appropriate for current BRACAnalysis testing.

We believe by 2016 we can double the size of that market to 600,000 patients per year by doing some very straight forward prevalent studies in populations that are currently not eligible for hereditary cancer testing. By way of example, for breast cancer, currently any woman under the age of 50 that gets diagnosed with breast cancer is appropriate for hereditary cancer testing.

If we were able to move that to any woman under the age of 65 that was appropriate for breast – for hereditary cancer testing, that would double the size of the market and 60% of women, newly diagnosed women would be eligible for the myRisk product.

We believe the increased sensitivity that we have seen in this assay and the data we’ve already generated is going to be sufficient to allow us to accomplish this type of market expansion by fiscal ‘16.

And lastly, our technologies evolve as price points of all, we do see a time where every cancer patient is going to be tested for hereditary cancers into the future.

Now, in that expansion phase, we have opportunities in the preventive care prior to the business as well. Currently about 3% of the population are appropriate for hereditary cancer testing, 4% of women are for breast cancer and 1% of the entire population for colon. We see by fiscal year ‘16, again with some prevalent studies in other patient groups that we can lessen the family history requirements for these patients and potentially expand that to about 5% of the population that would be appropriate for hereditary cancer.

And if you wanted to tear into your crystal ball and look out a few years, again with technology and price point evolution, there will be a time and this maybe out a few years but there will be a time where this is potentially available to the entire population as extreme for hereditary cancers.

Now, the last phase I want to move into is a differentiation phase that’s post 2018, after we begin to see some erosion of some of our earlier BRCA patents. There are still going to be four what believe critical differentiators between Myriad and others that may try to offer these types of products.

The first of proprietary genes that are shown on the left hand side, and as I mentioned, we expect to expand this list with other genes that we are currently looking at internally or potentially that we will license.

The second critical area is in customer service. We currently have over 600 people dedicated to customer service, focused primarily on two things, either physician education or reimbursement. And because of that we truly are trusted advisors to these physicians that have integrated our testing and our sales people, our genetic counselors, everybody into their practice. And so we believe that level of customer service is required and we’ll continue into the future.

By way of example, we have over 15% of the cancer genetic counselors in this country work at Myriad helping physicians integrate hereditary cancer testing into their practices.

The second part that’s important is that the buckle product that we’ve been able to develop. This is an oral solution – this is an oral sample as opposed to blood sample, over 40% of our testing now is down with that oral sample that buckle sample. The technology there is pretty significant but for physicians that don’t have access to blood draw, that’s actually a very important product format. And it’s become well appreciated by many of our customers.

The third area is in turnaround time. Our goal would be 14-days turnaround time for the myRisk’s product, this is critically important when you’re making real-time surgical decisions or when – for patients that want to avoid the anxiety of waiting three months for a test result.

Now, just to quantify this, I mentioned on the earlier side that 86% of oncologists were interested in rapidly converting to myRisk. That said, this 14-day turnaround time, were that turnaround time to increase the 35 days, only 44% of oncologists are interested in converting. And if you go out to 90 days which other laboratory is offering panels or offering 90 day turnaround time, the interest in myRisk virtually disappears at that type of turnaround time.

And then lastly, variance database, we have over 16,000 variants classified with breast and ovarian, over 6,000 with colon genes and we expect because of the volume that we do a Myriad that for all the other genes on the panel we will rapidly build ovarian database over the next few years prior to that 2018 timeframe.

Now, just a little more on variant classification, for those who haven’t followed this. This is really a critically important part of a panel such as myRisk particularly with 25 genes. When BRCA was initially launched, we had about 40% uncertain variant rate and only after tens and tens of million dollars of research, have we been able to drive that uncertain variant rate down to less than 3%.

If you were to look at Europe today, uncertain variant rates are about 30%, which is really where we were in the United States back in the early 2000s. And that’s because there was no single laboratory in Europe that has done the volume of testing required to do this expensive reclassification of variance.

Just to give you some idea, there were search and development involved in reclassifying just a single variant, for one variant we will typically have to see that in about 20 cancer patients. And we will have to go out and find and test for free 10 family members. And only after analyzing all of that information can we then eventually reclassify just a single variant. And you can imagine the work that’s involved when you have tens of thousands of variance that needs to be reclassified.

Now, in this 2018 timeframe, we see a market that is dramatically different than what we face today. There will be tectonic shifts in this marketplace. Today, this is a clear base test, BRACAnalysis test. We don’t believe that will exist in 2018.

In 2018, in the oncology market, what we see is hereditary cancer testing beginning in the tumor and Jerry is going to talk about an example of that with the HOD assay in the next section then eventually transitioning over into germline tests like myRisk. And so, oncology will have some fundamental shifts by 2018.

On the women’s health side of the market, physicians well have been using myRisk for over three years by the time 2018 comes. Technology is pretty much a one-way streak. We don’t see a physician giving up a high-definition of myRisk and going backwards to something that is a capital grade technology, that we just don’t see happening. Physicians, healthcare, technology is really a one-way streak.

Now, we do believe it will be BRACAnalysis available but that will be available as an FDA approved test in Myriad’s laboratories as a companion diagnostic for PARP-inhibitors and potentially other drugs. And so that post 2018 market is fundamentally different market than what we face today.

Now, lastly in that differentiation phase for a competitor that may want to launch a BRCA 1&2 test, there is going to be, I think there were significant concerns about that – that competitor will miss 60% of the positive patients. They are going to miss patients because they will not have the myRisk panel and genes. They will miss patients because of BART and they will miss patients because they don’t have the database to interpret the test results that they will be generating. And we think this number is at least 60%, this is based on real data that we’ve already generated on the myRisk panel.

Now, for physicians and patients we can’t imagine a setting where a physician would sit across from a patient and say, I ordered a test you were negative, but I ordered the test that misses 60% of the positives. So we can’t really – we can’t be sure what your hereditary cancer status is.

The payors are all actually very responsive to that discussion as well, COLARIS is a good example, that’s competitive market today. We have the most sensitive test on the market that’s why we enjoy such a high share in COLARIS. And we enjoy a premium on reimbursement. Payors recognize that the only time they can withhold treatments that are expensive like prophylactic surgeries or expensive imaging is if they can be certain a patient is being really truly diagnosed as negative. Is there is some questions to that end a payor cannot withhold some of those treatments. And so they are very responsive to a test that is going to be the most sensitive test.

And last, I’d like to just talk a little bit about the technology that Myriad will employ to execute the myRisk panel. First of all, just a snapshot in our experience from sequencing standpoint. We’re one of the largest clinical DNA sequencing laboratories in the world. We have sequenced over 1 million patients, we do over 100 million bases each and every week and knows they’re all done at a clinical level of accuracy which is fundamentally different than the level of accuracy that you might see in a research setting.

We also have extensive experience with next generation sequencing. And we’ve been using next-gen sequencers for six years, we’ve done over 7,000 samples on next-gen sequencers. We’ve been sequencing DNA from FFP for over three years now Jerry will talk a little bit about that in the next section. We’ve also got experience doing whole exome, whole genome, whole scriptome, methylation, really anyway you can employ next generation sequencing technologies. Jerry’s team is being working on that for now multiple years.

Now, one of the questions we’ve had with the announcement of the RainDance partnership is whether or not we will be pursuing whole exome or targeted GE selection. We have chosen targeted gene selection and this slide provides a little bit of the data that provided the rationale for that decision.

On your left hand side, there are some experiments we have run looking at whole exome sequencing with various level of coverage. What you can see and these were real patient samples, what you can see 20X coverage, we were actually missing about 12% of patient mutations. When we extended that coverage for the entire exome to the extent that a hide-seek 2,500 can go, which is 100X we were still missing about 3% of mutations and because you just, although the average coverage is 100 you get spotty coverage throughout various basis.

As a result of that, we’ve chosen to go to targeted gene panel like we got represented on myRisk with 25 genes, the reason is for clinical testing the only answer that’s acceptable is 100% accuracy. You must be able to read every single base accurately. Now that’s very different in the research setting but that’s the level that of quality that’s required in expected by Myriad.

And in addition to that we need to be able to read large rearrangements effectively as well, all of that means we need on average about 1,000X coverage which means, given technology as it currently exists, our best approach is to do a targeted gene product such as myRisk.

And last, just a little bit of the insight on the process that we used to generate that myRisk results. As I mentioned upfront, our customers have clear expectations of us, 100% accuracy, very low uncertain variant rates and very rapid turnaround times. And the only way that we can achieve those three things simultaneously is if we look at our process as a DNA sequencing factory and not as a DNA sequencing laboratory. We truly run our operations just like Toyota with lean systems and approach to manufacturing processes because that’s what’s required for that level of performance.

And I just want to talk about a few elements of the process in the proprietary nature of some of the things that we do. First, if you start out at the beginning of the process with DNA extraction, a couple of things. And there is a little picture on there of a buckle sample, it takes a substantial amount of development to be able to use a buckle or oral sample in such a complicated process as the Myriad’s process. And so we have some proprietary technologies and processes that we would develop that will allow us to do that.

The second thing is, that’s the beginning of the utilization of a laboratory information management system that’s proprietary systems to Myriad for managing this entire factory. There is no commercially available software that will allow us to manage this factory in the appropriate way. By way of example, we do about 16 million transactions into our laboratory information system each and every day. And those need to be done with a high level of accuracy to ensure change of custody for the product as it moves through the process.

The second part of that factory is to target gene selection, where we will be employing the RainDance Technology. RainDance Technology, are nano droplets that each of those nano droplets being a tiny PCR reactor that has a multiplex of primers inside it. That allows us to do 1,200 amplicons at the same level of efficiency that we have with every one amplicon that we currently run for the BRACAnalysis test.

We have worked with RainDance on some proprietary processes, we have a proprietary multiplex primer, library that’s provided to us under our specifications. And in addition, we’ve had to develop the ability to attach nano barcodes on to each of these DNA samples after they’ve gone through PCR reactions. That’s because for efficiency and turnaround time, we will be running multiple patient samples on the same hide-seek 2,500 run.

We need to be able to bring all of those samples together in the appropriate way after we’ve done sequencing run and that requires us to attach nano barcodes and then reassemble that DNA after those runs have been done.

So, moving on to the third party sequencing, I think there is a perception that you just flow this on a hide-seek and generated sequence. Unfortunately it’s actually a lot more complicated with that when you need 100% accuracy. We do use hide-seek 2,500 for this product, but in addition to that we’ve had to validate all of these 1,200 amplicons in Sanger sequencing so that we can do gap filling where there are holes in the sequence.

In addition to that, there are certain genes that have pseudo genes associated with those. Those require entirely different PCR process and those need to be done separately and it will be done on my-seek.

We have to bring all of this sequencing information together into again a proprietary software written by Myriad to assess whether or not there were variance in those sequencing traces. That we have not been able to find a commercially viable software package to do this effectively and so we’ve developed our own proprietary systems for analyzing sequencing.

Now, once the sequencing is been done, it moves to that next part of the factory which is variant classification. This is very complicated and it needs to be done very quickly. We’ve actually set up six different factory operations, we call gene teams, in which these teams look for either internal data, external data and so that they can adequately sort out whether or not this variant is in fact imperious or not.

Once those gene teams have done their classification, it then moves to a confirmation process. You must have an orthogonal technology that you use to confirm any variation that you’ve identified in patient’s DNA and therefore we have to validate Sanger sequencing to be used to assess each of these variance. And in addition, we have to validate micro-array technology to assess larger arrangements that I’ve identified through this process.

The last part of the factory then goes into test report generation. Again, all proprietary software that had to be written by Myriad, we generate two different reports, one of those reports is a genetic result and the other is called a clinical management tool. This clinical management tool is actually very important and has been very well received particularly as you saw by OBGYN.

What this report does is it brings together the genetic test result and the family history and provides the comprehensive assessment that the risk – for the risk, the cancer risk for a patient over their lifetime. So this is a very personalized report with very specific cancer risk based on family history and genetic test results. And all of that software had to be generated by Myriad, but that particular report has been incredibly well received by customers as it really simplifies a lot of what they ultimately have to do as a physician.

So, I will end with this. Just a couple of specific quotes that we had from physicians that has had exposure to this Myriad’s profile. From an OBGYN, as said, I already know BRACAnalysis, I already know COLARIS. This is a trusted advisor and a revolutionary product they really are stepping up their game.

From a surgeon that says this is exactly what we do in our charts now but all of this information would be pulled together in a single site that makes it much easier for me to manage my patients.

From a primary care physician, that said, I trust the company, I trust the process, this would be paid for, useful and reliable. And lastly, from an oncologist that said this is clinically actionable information. It’s a product that not only helps me make a diagnosis, but will help me make a tailored plan for each of my patients.

So, just in closing, we are very excited to bring this product myRisk to launch. And by the end of this calendar year, in the fall of this year, we truly believe it will revolutionize the way that hereditary cancer testing is done not only in this country but around the world. And once again we are delighted to be the leaders in this hereditary cancer revolution about to happen.

Thank you for your time. And I’ll introduce our next speaker, Dr. Jerry Lanchbury, our Chief Scientific Officer, who is going to provide some additional detail on exciting new HRD assay.

Jerry Lanchbury

Thanks very much Mark. It gives me great pleasure this morning to be able to talk about one of Myriad’s new future product. Myriad genetics has developed a novel companion diagnostic, which reads out the DNA repair capacity over a given tumor cell. We call this product the hereditary – I’m sorry, we call this product the Homologous Recombination Deficiency test or HRD test for short.

And it’s important because for the first time we can really get to the inside of the DNA repair mechanism of a tumor cell and determine the precise therapy that would be appropriate for a patient based on that genotype. Where this is particularly relevant is to the use of platinum and potentially to use the PARP inhibitors in the future.

So, this slide just outlines a relatively simple scheme describing what happens of the DNA repair status within the cell. At the top you can see the normal pathway, where there is no mutation the cell has relative genomic stability and a drug like platinum, Cava carboplatin or Swissplatin only has a limited opportunity to inhibit the growth of the cell.

In the patients who has for example of BRCA1 or BRCA2 mutation or mutation in some other gene affecting double stranded DNA repair. For function and stability is induced, there are un-repaired double strand breaks in the genome. And when you apply a platinum drug, one can drive a cell over a threshold lethality situation and that leads to selected tumor death.

Now, off to Homologous Recombination Deficiency assay, offers this tailored treatment strategy based on covering this property of an inability to repair double stranded DNA. And therefore one can apply a drug in a really targeted selected way to the right patient at the right time.

A similar situation occurs with some modification in the PARP-inhibitor response opportunity. In this case, in a cell that has lost double stranded DNA repair capacity, the cell switches over to using its single stranded base pair machinery and so becomes completely reliant on that for repairing its DNA.

This single stranded pathway involves Poly ADP ribose polymerases which can be inhibited by a PARP-inhibitor and on this slide you can see the structure for Olaparib. So inhibiting the single-stranded pathway, in the cell which has lost its double stranded repair pathway leads to this so called synthetic lethality and tumor death.

And the HRD assay is obviously useful in both of these scenarios for indicating platinum and also PARP response.

So, DNA repair, double stranded DNA in particular is very complex. There are many genes involved and as you know we’ve built a business on a number of these genes. But there are still a large number of these genes which will probably not yet characterized. These genes can be broken in many ways through mutation, rearrangement, deletion, they can be silent by methylation.

And there were probably other mechanisms also at play that we don’t understand as well as other genes those are yet to be characterized.

And so, when we came to try to device a test for this complex situation, rather than thinking about all the positive mechanisms, we thought about the downstream effect of a lack of a double-stranded repair. And so, we went off looking in the genome for a signature that would report this genomic scar of double-stranded DNA repair instability.

And that led to the Homologous Recombination or HRD test which is our solution to this difficult problem.

So, what is the HRD measure? Well, essentially we take DNA from the tumor and on the next slide you’ll see, and the precise process that we use. And we generate a report that includes loss of heterozygosity and telomeric allelic imbalance.

And you can see at the bottom, a graphic that indicates, this is a genome interrogated with 50,000 snips. And everywhere you see a black star, there is one of these genome events that we count. And it’s the summation of this count that gives us the HRD score.

Now, in addition to have a comprehensive test, we also sequenced the BRCA1, BRCA2 at the tumor level. And the combination of this HRD score and the BRCA tumor data is what leads us to be able to give the appropriate therapy potentially to a patient.

This slide outlines the HRD tests we saw it with formal infix paraffin embedded tumor material, stranded material that comes from a quality so there is no special preparation involved. We extract the DNA and then we take that DNA and we captured 60,000 snips that are distributed across the genome as well as the Exxon’s and the boundary regions of BRCA 1&2.

This will get dropped into a hide-seek 2,500 sequencer running in fast mode capacity. And we go through and use a proprietary set of algorithms to construct the genome, and also to determine the deleterious DNA mutation status of BRCA 1&2 using Myriad’s proprietary database.

The real power of this HRD test is it builds on the complex series of nested phenomena in a genome. You’re all very familiar with germline mutations and BRCA 1&2, underpinning hereditary cancer risk. These are builds upon in the tumor by incremental schematic mutations, methylation can occur, particular genes, I showed you a couple of slides ago, indicating there were multiple processes that work.

And the real power of HRD is it integrates all of these preoperative effects of the tumor and gives us the simple measure that we can work with to indicate care. And this simple measure can support a variety of therapies that you see on the right hand slide of the slide, protoderm, PARP-inhibitors, novel DNA damage agents for the coming into inter-play and development.

So, what this essentially does is it really dramatically increases the treatment opportunity in these important cancers. Now, one of the issues with these cancers is that those with double-stranded DNA defects are actually really difficult to treat like ovarian cancer, triple negative breast cancer.

It also brings into play diseases like Adeno or squamous lung cancer where there is really no hereditary defect. But where as you can see on the bottom right hand side of the slide, there is a profound deficiency in HRD in 30% of the patients. So this is an attractive testing opportunity which leads to an extremely attractive therapeutic opportunity.

This slide just outlines the development of the HRD test, we actually discovered the HRD phenomenon in DNA from ovarian cancer tumors, collaboration with ND Anderson, Gold Mills and Bryan Hennessey, we carried out three studies and this was published in the British Journal of Cancer, a total of over 700 patients in the end, with really spectacular P values.

What we were really interested then was applying that technology to breast cancer and so we went to breast cancer, we showed that high HRD was the phenomenon first of triple negative cancer and then of other breast cancers.

We then moved to showing that this HRD phenomenon was relevant to platinum response and I’ll show you that in the next slide. We intend to develop with a couple more studies for a calendar year 2015 commercial launch for the platinum test.

We’re also working very hard on our PARP-inhibitors studies with a number of pharma companies. And we intend to all being well, launch HRD test for the use of PARP-inhibitors by 2017 calendar year.

So, the first clinical study in breast cancer showing the relevance of the HRD test that Pete alluded to this morning and showed you a graph. It was a collaboration with the Stanford Group with Melinda Telli and Jim Ford, and we studied the niche of a scenario in triple negative breast cancer, 93 patients treated with carboplatin, gemcitabine and iniparib, we carried out the assay both on frozen tumors an also SSP which is the important clinical material that’s commonly available. And we performed the HRD assay on pretreatment biopsies.

We calculated response using RCB or Residual Cancer Burden and obviously this statistical analysis. And the dates are shown on this slide, if one takes an HRD threshold of 10, which was medium special derived from ovarian cancer, patients with a score of 10 or above 10 or who have BRCA 1&2 it does a mutation, 70% of those patients responded to the platinum based therapy as I showed you on the previous slide.

And in contrast the 12% of the patients who had a score of less than 10 or who would be asked they well responded, we really got a profound difference. And as you can see it has a highly significant P value. This gave us some very great confidence in the Assay and we set it forward.

Now, this slide shows you that high HRD is a phenomenon of all common subtypes of breast cancer, not just a triple negative breast cancer. And that’s why we’re excited by opening up the treatment opportunity across a range, the whole range of breast cancer sufferers.

I’ve shown you already this HRD is relevant to ovarian cancer, to breast cancer and also to lung cancer and we’ve been going through a number of rather cancer opportunities and the dates are outlined on this slide.

You can see that high HRD score is a property of prostate tumors, lung tumors but this is actually pretty and frequent in brain tumors, prostate tumors and colon tumors.

So, while it’s infrequence in that last three groups, we think that there is a testing opportunity in metastatic setting when there are a few options available for those patients.

So, we think that the testing opportunity overall probably approaches about 0.5 million patients in the U.S. annually and depending on the test price, we could see $1 billion to $2 billion market opportunity for this companion diagnostic.

So, in summary, HRD test is the most accurate way of determining double-stranded DNA deficiency at the tumor level. We’ve completed extensive renovation in triple negative breast cancer and ovarian cancer. High HRD snips as I showed you is highly prevalent across all subtypes of breast cancer and really opens up a major testing opportunity. And high HRD snips faces as I showed you is very prevalent in many other major cancers.

We intend to launch the platinum indication for HRD in calendar year 2015 and the PARP-inhibitor indication all being well in calendar year 2017. And as I outline, this is a very major market opportunity for Myriad between $1 billion and $2 billion a year.

Thank you very much for your attention. And I’d like now to pass on to Lloyd Sanders.

Lloyd Sanders

So, thank you very much Jerry. And I also want to say thank you for all for being here today.

So, as Jerry said, my name is Lloyd Sanders and I head up the oncology business unit. I have been in the business let’s say for about 25 years at here at Myriad as well as on the pharma side. And almost 20 years of that 25 years has been in the oncology space.

Today I have the pleasure of talking with you about the oncology business unit and the growth opportunities within this business unit. So we in the oncology business focus on the incident marketplace or those patients affected with cancer and/or diagnosed with cancer. And we have 137 account executives, we’ve got 19 area managers, and we have 19 regional medical specialists, those are genetic counselors in most cases focused on the target audience that you see here, net target audience is medical oncologist, it’s surgeons, it’s genetic counselors and geneticists as well as perhaps to a lesser extent gastroenterologist.

This business unit has a track record of success and we’re proud of what we’ve accomplished and internally outlines what we have done since FY08, so grow in revenue from R177 million back in FY08 up to $316 million in FY12. The 316 represents some of the impressive penetration rates that you have heard of speak to in the past, a 45% in the effective space.

So, we’re impressed and proud of that accomplishment. And, but I don’t want to undermine the potential that we still see going forward, because we started with the first side and talking about the growth opportunities.

And so, what I want to do now is talk about the opportunity, the patient populations, and the penetration rates within. I mean, if I could I’d like to separate the newly diagnosed patient population from the survivor patient population, okay.

And so, for today’s purposes or for all purposes, the definition of a survivor would be a patient in the way we’re looking at it is a patient who is diagnosed with cancer, met criteria for testing but for whatever reason was not tested at the time that they were diagnosed. And so they are continuing to come back into the offices for a routine exams going forward. So, we’ll get to that in a minute.

What this slides looks at is the newly diagnosed patient population. You can see for breast cancer, there was almost a 120,000 patients per year that will meet criteria for testing and you can see the numbers for the rest of the indications.

And then, secondly on the second line, that is – those patients that were tested and I mean, newly diagnosed patients that were tested and you have the resulting penetration rates. So we see that 45% for breast cancer in the newly diagnosed patient population. So I think the message here, particularly when you look on the far right hand side at the 34%, we’re testing about one third of the patients who meet the criteria for testing today in the newly diagnosed patient population.

So that means, we’re not testing two thirds of the patients who meet that criteria. That’s what makes up this survivor patient population that I was talking about, so let’s see if we can quantify that just a little bit.

So, as you can imagine, if you say every year you’re missing a number of patients that builds up over time. So, we did a five-year look back at the survivor patient population and here is what you have after five years. And breast cancer almost 213,000 patients are in this pool of patients who have been diagnosed with cancer, meet criteria for testing are at risk but have not yet been tested.

You see the numbers for ovarian 44,000, colorectal cancer and endometrial are there as well. This is a key focus for this business unit. We need to identify those patients and make sure that they get the testing that they need and I’ll talk through some of our strategies behind that here in a few minutes.

The other thing I want to just point out is that we’re bullish on delivering double-digit growth and how we’re going to do that. Well, if we take those two unique patient populations, the newly diagnosed patient population on the left, the survivor patient population on the right, if we have a 2% increase in penetration in each of those two, that delivers 12,000 new patients and this is practices of breast cancer example. And that will deliver a 13% year-on-year growth. And I’ll talk through again some of the strategies as about how we’re going execute on that.

As you can imagine, as penetration does increase, you need to be better at targeting and identifying those patients, where they happen to lie within your customer base. So, about the end of last year, last calendar year, we took on a project to really segment our accounts and you can see we segmented them by growth driver and maintenance accounts. And on the wide axis, you have patient volume in the accounts, the x-axis you have penetration.

So, let’s take the growth accounts in the green for a moment. In those growth accounts, these are by definition accounts that have a very low penetration, penetration would be defined as the number of tests that are conducted relative to the number of patients based fees. These growth accounts also have a high patient volume. So low penetration, high patient volume and there is about 3,000 accounts that fall within this category.

We are going to, in fact, we initiated a couple of months back, a re-focus and a shift in effort from a commercial standpoint to double our efforts within these growth accounts.

Conversely, if you take the maintenance accounts, so that’s on the far right hand side, these accounts by definition have high penetration so above 50%. It doesn’t really matter with the patient population here is because they are highly penetrated, meaning there is not many additional patients to go after to generate growth. The growth opportunity lies in the green where there is minimal penetration.

So, the strategy is fairly simple. We are going to shift effort from the maintenance accounts over to the growth accounts, we need to see what the effort was previously. In fact we’ve already done this, this is a couple of months back.

And within those growth accounts, we’re going to do protocol integrations and we’re going to do them slightly differently than we have in the past. But we believe this slight difference is going to make a significant difference, one difference will be that we’re going to focus on hereditary cancer as opposed to doing BRACAnalysis integrations of POLARIS. If we focus on hereditary cancer, then you get everything. We think this is going to drive POLARIS out.

And then secondly, those protocol integrations need to focus and we’ve already done this as well. They’re going to focus on the newly diagnosed patient which is a typical standard way we’ve done in the past but also that survivor patient population right, because these are patients that have been diagnosed that are at risk a day, there is still an opportunity to do something about it. And as they come back in for routine screening, we’re going to make sure our family history is collected then through the protocols that we set out in our clinics.

So, I hope that makes sense to you. But I want to take a moment and drill down on a protocol integration and maybe take a patient example if I could.

So, most physicians have, every physician has a process for taking care of their patients. And there is a workout page which would be, one, so screen and evaluate, diagnose number two, the treatment is determined and then you manage that patient going forward.

So, this is an example of a new patient of protocol integration, right. So newly diagnosed patient comes in, and for this example, let’s use breast cancer. So this is a newly diagnosed breast cancer patient and this particular clinic or this particular account that we’re going to use today does not have an effective process for capturing those patients at risk for hereditary cancer. They need a protocol integration but they haven’t had one yet.

So, let’s go through the process. So pathology and imaging, physicians going to look at the size of the tumor, look at the location of the tumor, they are going to determine the step – the ERPR status, HER2/neu status, a lot of work is going to go into preparing this patient so they can make the diagnosis.

Once all that work is done and they’re ready to make a diagnosis, and let’s take for this example, that its stage 2 ERPR positive HER2 negative breast cancer. And if you really go to adjuvant online and look this up, put all this in, you’d probably get a recurrence rate of around 15% depending upon the grade of the tumor.

So, now we have a diagnosis, now it’s time to determine treatment, okay. So the treatment for this particular patient, a reasonable treatment would be breast conserving surgery, Steri Lumpectomy, followed by whole breast radiation, if there is nodal involvement, you’re going to get adjuvant chemotherapy. So all of this is done to then say, how can we reduce – how can we reduce that risk of 15% down to something else. And in this case, adjuvant online, we tell you it’s about 30% risk reduction by employing this treatment strategy.

So, willing to move heaven in earth to reduce that risk it’s only 15% in the first place down to what now would be around let’s say 11%, that’s what’s done for a typical patient.

Now, let’s move over here to the right side, and say that patient had been seen in an office in which protocol integration had been completed and now there is a systematic consistent process, consistent process for identifying those patients at risk for hereditary cancer.

The big change here is really in adding family history. You’ve got to know what the family history is, compare that to the NTCN guidelines criteria to determine if the patient needs criteria. And for this example let’s take the same patient and let’s say the patient’s sister currently has ovarian cancer and her mom – her mother died of breast cancer. Well, now that patient meets criteria for testing. So you run a BRACAnalysis and while that comes back, the patient has BRCA1 mutation.

What’s the significance of that relative to what the physician in the other practice had communicated to the patient, it’s dramatic. The risk of recurrence is not 15%, it is for the original tumor but for a second primary, now that risk is up to 64%. The risk for ovarian up to 44%, a dramatic difference from what it was before.

And if you think about it, they got the wrong treatment too. The patient more than likely if they were aware of the implications of a BRCA1 or 2 mutations, they get a different surgery. They would have gotten instead of breast conserving surgery there would be a mastectomy or perhaps a double mastectomy with reconstructive surgery. You want to get the ovaries out, so they have a prophylactic oophorectomy, you want to reduce any risk of perhaps getting ovarian cancer.

So it changes everything if you don’t get the diagnosis right. And that’s why our protocol integrations are going to focus on making sure you understand. If you don’t know the BRCA status, then you might not get the diagnosis accurate and that’s what we’re talking about in the field right now.

So, you remember that survivor patient population I talked about a few minutes ago, that’s the patient who diagnosed a while back did not get BRCA testing even though they met criteria, right. So what about that patient in this scenario? Well, that patient is going to be coming back in, twice a year for the first two years, once a year after that expecting to hear everything looks great, we’ll see you next year. And why is that? Because she thinks she has an 11% chance of recurrence because that’s what she was told. When in reality, her risk of recurrence can be up to 64%. That’s why we’re implementing protocols that focus not only on newly diagnosed patients but those patients that fall within that survivor patient population.

So, as these patients come back in, they can’t be treated like a routine follow-up. You got to get past family history, identify if they’ve got a risk of a mutation and then get them tested you got to ensure that accurate diagnosis. So, again a major part of our strategy focused on both protocol integration and the type of protocol integration that we’re going to employ.

So, Mark spent a good bit of time talking about myRisk hereditary cancer. We’re excited about that as he said. The reason we’re excited is because our customer is excited. We’re expecting rapid conversion. You can see the numbers from medical oncology for surgery, for genetics, they love the fact that it’s a higher detection rate, more mutations, get their identify, you can do something about it, the report is fantastic is what they tell us because you get the detailed medical management.

The strategy here is pretty basic and pretty simple too. We have high users of BRACAnalysis and COLARIS today. We’re going to go to those users and we’re going to provide them the product in advance of everybody else gives them the opportunity to learn about it, you get comfortable with it. We’ll leverage their experience for a broader launch down the road, because we’re going to have this positive experience.

And then, the other thing I will say is, the importance of the genetic counselors in this, they will also be involved in this early axis roll-out.

So, the net-net of the oncology business unit is that we do have a large market. We test one third of the appropriate patients just in the newly diagnosed patient population, it’s a large market. We’re going to shift our focus from maintenance accounts to the grow accounts because that’s where the patients are that are not being routinely identified and tested. We’re going to shift the message from just talking about fact POLARIS to talking about hereditary cancer.

Protocol integrations, we’re going to focus not only on newly diagnosed patients but the survivor patient population where that’s a significant change what we have done in the past. Launch myRisk hereditary cancer driver up and uptake. And then finally, from a growth perspective, as I said earlier, we are – we have got a strong team. I’ve been in business for a long time as I said this is one of the strongest teams I’ve ever worked within oncology. We have a great message, a great story and we’ve got a good plan. And we are intending on driving double digit growth.

So, thanks for your time today. I’d like to now introduce my colleague, Mr. Alec Ford, he heads up the preventive care business unit.

Alec Ford

Good morning, thank you Lloyd. Again, my name is Alec Ford, I’ve been in pharma, biotech and diagnostics industries now for about 24 years. A lot of that time in preventive care, lot of that time into women’s health channel.

I’m excited in talking about the preventive care business unit today. And I’m going to focus on a couple of key parts. I’m going to first focus on the opportunity that we have ahead of us. We have an untapped market in preventive care. I’m going to focus more specifically on next year what we’re going to do to drive growth in our business unit next year and ensure that growth continues. And then finally, based on Mark and Lloyd’s comments I’m going to provide some detail on how we’re going to convert our market to new Myriad myRisk Hereditary Cancer.

First, and looking at our overall market potential, this is clearly a prevalence market and looking at the market size that you see in front of you, less than 10% significantly less than 10 of our market is penetrated at this point in terms of the customers that we have tried to get to begin to do a hereditary cancer risk assessment and testing.

The interesting thing, one of the interesting things about our market is historically this has been a reach market. We’ve had a lot of customers over the years that we spent time with helping them begin to build the knowledge and skills to do this effectively and well.

The only reason we’re third of our OBGYNs or a third of all OBGYNs have used systems we haven’t had a chance to spend time with them yet and help them develop an effective process and protocol to do this in their practice.

At the end of the day, the preventive care business unit to ensure that we effectively prevent people from getting cancer in this country, the preventive care business unit has to go where people now receive care. And at the end of the day that’s the 50 million OBGYN business, it’s the two thirds of women who go to radiology, breast imaging and mammography. And finally, it’s those people in the United States who are currently getting colonoscopy.

If we can find these patients when they are getting their routine preventive care now, we can make a significant difference in the course and likelihood that they’ll have a disease later.

You can see the year-on-year growth and sales volume annually for the preventive care business unit both in OBGYN as well as radiology. I’m going to talk a little bit about what’s driven that growth and why that growth even outside our field edition, why that growth has accelerated from a productivity standpoint in the last several years.

On the chart on the screen right now, you can see our headcount year-on-year in terms of how many people we have in the field. This current year we have about 170.

The single most important thing I can share with you about the preventive care business units impact in the last couple of years is the dramatic change in productivity we’ve seen. I’ll talk about how this was historically a reach market. And at the end of the day, prior to the last two years, 70% of our growth was about our ability to go out and find new customers, whether those were primary care OBGYN inter-radiology, we would go to as many of those customers who had an interest in providing risk assessment and testing in their practice. And we would try to begin the process of getting them to use our test effectively.

The thing and the single most important dynamic that has changed in our business, as we’ve used those early users as a base and now we begin to help them as we launch, have launched protocol integrations in the last two years, and you’ve heard Lloyd speak of this. We’ve helped them not only develop processes for doing this well in terms of assessing hereditary cancer risk and testing, but we’ve helped them do a consistently. So at the end of the day, the difference between our business two years ago and our business today is, and I’ll show you this in detail in a moment.

This is 70% of our growth today is coming from users who’ve used before who you’ve helped and begin in process install a process and place a process in their practice where they can do this year-on-year effectively and well and prevent cancer across all their patients at risk, let me drill down on that a little more detail.

You can see our growth from new testers in the first orange row on the graph above, year-on-year, our growth has been fairly consistent, a lot of physicians, OBGYNs, primary care physicians and radiologists have begun to see that assessing family history is providing risk assessment and testing is a critical part of providing routine care for their patients, societal standards, to some degree mandate, this is a part of people’s care and mandate that the user family history is an important part of moving the needle and how these patients are taking care of.

What’s changed now for us is the existing tester online. In the last few years, you can see from an incremental revenue standpoint, the significant difference that those existing testers have made to our business. This is a new dynamic in our business in the last few years and it’s a direct result of us using lean and six sigma processes to develop very simple effective protocols that aren’t intrusive to the average OBGYN primary care or radiology practice. Protocols and processes that don’t upset a practice that allow them to begin to do this, do it well and do it consistently.

Couple of the pieces of the roadmap for us in primary care and preventive care. The first of course is protocol integration. We have a great many customers who think that hereditary cancer risk assessment is important. If you were to go out and survey a 100 OBGYNs today and ask them how important is this, 95% of them would tell you it’s wildly important. It doesn’t mean that all of them do it and it doesn’t mean that all of them do it consistently and well. Protocol integration is a way for us to help them and partner with them and help them accomplish that.

I talked about our limitations in terms of reach. We have continued opportunities and we’ll do this in fiscal year ‘14 to expand our sales organization so that we can go get more and more targets in preventive care, radiology and OBGYN. And then as I had mentioned before, specific to radiology, we’ve only penetrated about 5% of the 3,000 mammography radiology and breast imaging centers across the country.

To put this in perspective in terms of what the market opportunity is for preventive care, if you look at the top cortile of captures in OBGYN, and compare the top cortile of testers in radiology even today the top testers in radiology will test anywhere between five to seven times as many patients annually.

The people who go in for routine breast imaging radiology mammography are classically patients with family histories that are highly appropriate and should be considered for testing. And these are customers that absolutely have a need to elevate their value proposition with a referral base and expand their services in their communities such that the physicians that referred them for mammography get a different product at the end of the day. And so, a lot of things really line up well for radiologists.

And then, finally interactive marketing. At the end of the day we all know that breast cancer risk, breast cancer advocacy is one of the things that ensures a large number of women do get risk assessment and testing in this country. But at the end of the day, we’ve thought it was very important to begin to innovate in the interactive marketing space in a way that we could reach a large number of patients I’ll talk to you about some of the specifics on that.

Drilling down a little bit on protocol integration, very simple graphic here on the left hand side of the graphic in order – is the average OBGYN number of patients tested per year. On the right hand side is an OBGYN, the average OBGYN patients tested, if we have worked with them to develop an effective protocol at a practice level, installed it, gone in and evaluated it, measured it overtime, how many patients need family history, how many patients were given a family history questionnaire. How many patients went on to testing? How many times did the physician review our family history?

We’ve taken a fairly scientific approach to bring back information to customers who have adopted this process to help them make it better, to show that that in fact or given week that even though 29 patients may have met criteria for testing, only 9 were tested.

Physicians are counting on us with this kind of partnership and this kind of precision in terms of helping them do this and it’s adding a significant value to their practice.

Little bit on interactive marketing. In the second quarter of this year, we’ve launched the hereditary cancer quiz, and if you haven’t taken it, I highly suggest you do and get the people in your family to do so. Anyone who takes this quiz can answer questions about their family history and in under 60 seconds based on existing societal guidelines for testing, know if they need to talk to their doctor.

Average patient takes under 30 seconds to complete it. Now, the astounding thing about this with a relatively limited launch for us in Q2, in the first quarter this was available and it was only available for about two months in the quarter, 100,000 patients took this quiz online. And you can see the numbers that were relatively high risk ended up being about a little – somewhere between 30% to 40% of those patients had family histories in that existing criteria for testing.

So, we’re doing a lot of things from an interactive marketing space, partnering with organizations, we have a high degree of connection with these patients already to ensure that women have a chance to answer questions about their family history and have their care changed as a result.

The last piece I’ll say about the interactive marketing tools that we have as well as the quiz, is we actually work one-on-one with customers now. We can work with any customer in the country who want it, we can put this on their website, we can have the results of every single quiz e-mailed to that provider. So they can make a requirement for patients who are new patients enrolled in their practice. And they get all of the results immediately sent to them based on the results of the quiz for that patient. It’s a fantastic free screen for any office that brings real value to them in terms of identifying patients.

You’ve heard Mark and Lloyd both talk about Myriad myRisk Hereditary Cancer. We’re very fortunate in the preventive care space that our customers had a very high degree of intention to switch to this as soon as it’s available. And then, they want to switch for a couple of important reasons. They know they’re going to identify more mutation carriers and they see significant value there that is obvious. And they know how important that is.

But specifically for the preventive care audience, there is a couple of other dynamics in play. If you would have go and talk to an OBGYN physician today and contrast two patients, perhaps with ambiguous family histories, they may have not known which test to order. They might not know do I order BRACAnalysis or do I order COLARIS. This pretty much solves that problem for them and that’s one of the biggest reasons they’re excited about, this is all I have to do is get a sense that a patient has this significant family history, I don’t have to figure out which test to give. And that’s a real need or mover for them in the research that we’ve done to date.

The second piece and you’ve heard this mention before. The second piece of this is so important to preventive care business unit, so important to OBGYNs and primary care physicians that so critical is, right now, when we send the test result back it’s very specific to other out patient has a mutation. From Myriad myRisk hereditary cancer, if you are an OBGYN and you order a test and that patient does not have a mutation but has a significant family history, we will tell you what societal guidelines tell you to do with that patient based on their family history, no one does that now.

At the end of the day, our OBGYNs, our primary care physicians and our radiologists ask us over and over again, I appreciate the technology you have. I appreciate how well you do it. I appreciate all the support at the practice level. I need to know what to do. I need to know what to do when I have a patient who has a family history of cancer, tell me what to do.

So, at the end of the day, you’ll get this report back and it will walk you through the medical management for that patient based on their family history and that is one of the biggest reasons they’re excited about this new product.

To wrap up, I’ll talk about the year ahead. We know the Affordable Care Act and the focus on increased reimbursement for preventive care services is an opportunity. We’ve already started to capture that opportunity. We’ve had a lot of success in the last two years in terms of our same store customers and deepening our success with them. We plan to continue to do that.

We’re going to continue our effort on reaching more and more OBGYNs primary care physicians and radiologists. We understand that if we don’t partner with the customer to help them develop a consistent and practical way to do this, it doesn’t happen and it doesn’t stick. And so we continue to focus to identify customers that we can do protocol integrations with.

And then finally, as I had mentioned a moment ago, Myriad myRisk Hereditary Cancer is a dramatic opportunity in preventive care. It solves a lot of problems for clinicians who don’t have deep hereditary cancer experience or genetics knowledge and it helps them use a process from very simply assessing family history and taking one test that’s going to help them take care of patients in a way that they want to. They want to change their care based on the medical management that their society or other societies recommend.

So, I thank you for your time this morning. I believe we are going to take an overdue break for about 10 minutes and we’re going to start back in about 10 minutes if you’d take a peek at your watch. Thank you again.


Scott Gleason

Next, representing from Myriad will be Bill Rusconi, who is the Head of our Urology Division.

Bill Rusconi

Good morning, I’m Bill Rusconi. I’ve been with Myriad for 13 years now, and prior to that another 15 years in healthcare industry, and devices therapeutics and consumer. I had privilege of talking to you about our urology business and growth opportunity for Myriad in the area of prostate cancer.

So, first of all, I want to talk a little bit about the prostate cancer statistics, about a quarter of million men each year are diagnosed with prostate cancer, and about 30,000 of them die of that disease every year. 200,000 of those 238,000 are localized disease, and there are several options for their treatment. However, 85% of those are aggressively treated when, in fact probably more than half of them – half of them don’t need any kind of treatment.

With that treatment comes several side effects including incompetence, evidence etcetera. This creates a significant market opportunity for determining, which patients need care, which patients need treatment and which ones don’t. And so, in that incident population, we see there’s about a $700 million opportunity and testing those 200,000 patients to determine, whether their cancer is aggressive or not. There is also an additional opportunity and those patients, who have been previously diagnosed and have yet to determine, whether their cancer is aggressive or not.

In fact, there is about a 150,000 to 200,000 men that are currently on active surveillance that have not been tested to determine, whether they have an aggressive form of cancer. It’s very exciting time to be in the prostate cancer space right now, as Pete had refer to earlier the United States Preventative Services Task Force put out a statement last year recommending against PSA screening in the general population, primarily related to the fact that it was leading to over diagnosis and what they considered over-treatment.

The AUA recently added to their guidelines or restriction in the PSA screening population as well. The interesting thing about this is, and the statements related to this controversy both the USPSTF as well the American Cancer Society and commenting on the PSA guidelines, basically stated that if only there were a test, they’re only they are away if we could determine, whether this cancer is aggressive and should be treated or non aggressive and doesn’t need treatment that would be a resolution to this challenge.

So, I’m pleased to talk about a solution to this challenge in the test that we have. Another interesting thing to understand and another driver of this over treatment controversy is the fact, the treatment is very expensive. And the cost of surgery and the cost of radiation is significantly higher than the cost of active surveillance. This is the one your total cost and as you can see, you have anywhere from 15 to a 24 increased first year cost of managing a patient, when they’re undergoing radiation or surgery versus active surveillance.

On the other hand, while there is a much higher level of cost of care for the physician him or herself, the reimbursement is actually better in not treatment overtime and not treating overtime. Many of the cost related to radiation and/or surgery are going to hospital cost, anesthesia, etcetera, and not directly to the physician him or herself. So, that their reimbursement is actually better over a four year period, this is published by the University of Miami over four years, they actually get better reimbursement from active surveillance then they went through radiation or through surgery.

Looking down, no, it’s there only about 4,000 of the 11,000 urologists actually perform surgery on prostate cancer, a relatively concentrated market. Incremental services that they can gain with active surveillance include the opposites, biopsies that they will do for ongoing monitoring as well as ongoing PSA testing.

I’ll talk a little bit about PROLARIS test. We have unparallel clinical validation in PROLARIS, and we are the only test available on the market that actually is, has an indication for both pre-treatment as well post-treatment and we have data in both. We have nine studies right now, and several other under way, so others underway, four of which have been published, one more has been accepted for publication, covering a range of sample types and clinical scenarios both pre-treatment in the diagnosis biopsy as well as post-treatment. We also have data on the goal standard end points demonstrating the PROLARIS prognostic for significant clinical end points that include biochemical recurrence, post-treatment, metastasis and prostate cancer-specific mortality.

Also I want to point out that there been over 3,000 patients study to-date in these studies and publications. One of the phase I want to go into little more detail, was biopsy study done at London, its 349 patient study on biopsy tissue, where we looked at survival and patients who were conservatively managed meaning that they were in watch for waiting, and this was published last year in British Journal of Cancer. And you see the 10 year survival and patients who had a low risk PROLARIS score, which is the product of our test; the PROLARIS score had 80% survival in 10 years versus those with high risk PROLARIS score, which only had 25% survival. So, you see a significant differentiation in risk and outcome based on the PROLARIS test.

More recent study done with the VA, our Duke in Durham, North Carolina with the study of radiation treated patients, where we looked at the biopsy specimens to predict their outcomes post radiation. This is the 340 patients study, again on diagnostic biopsy and the outcome we are looking for was recurrence for progression of disease. This study has been accepted in peer-reviewed publication should be published very soon.

The other interesting point is that 57% of these patients were African-American. Again, the result of this study demonstrated that with the low PROLARIS score, when we have high level of confidence, there would be no need for further treatment and that there would be very low risk of recurrence. Whereas, with the high PROLARIS score on biopsy again that patient had a much higher risk of recurrence, and therefore possibly would have benefited from more treatment, which on radiation could be increased dosed, increased duration, increased area of treatment.

So, again the PROLARIS score would demonstrate as the most predicted factor of outcome of all the different clinical factors that we are taking into account. The interesting thing is the PROLARIS score measures how fast the tumor is growing; we look at the cell proliferation to look at a component of cancer that is not looked at by current clinical pathologic features. So, pathology like PSA Stage and recent score only look at how far the tumor is progressed, you know, how advance that tumor is, so that’s only half of the picture because an advanced tumor could have been smoldering for 20 years, and may not go much further in the short term. Whereas a lower, less advanced tumor could have just the reason over the last year or two and could be going very quickly. And current pathologic features and adverse pathology not actually look at that behavior or that personality of the tumor that actually tells you how fast is it growing? Is this tumor on fire or is this tumor indolent? Okay.

So, when you look at adverse pathology alone that only gives you half of the picture even with better pathology, there is only half of the picture, what’s needed and what PROLARIS provides is the view of the other half of the picture. So, you can have a more advanced tumor relative to one that is less advanced, but that less advanced tumor, if it’s PROLARIS score is higher is going to go much further faster than the more advanced tumor that maybe into one. So, this is been demonstrated repeatedly in clinical studies, where the PROLARIS score is giving new and independent, and very predictive information about the outcomes related to prostate cancer.

So, when we look at the other test that may be coming on the market, one of the important things to understand is where PROLARIS is different. And first is indications, this is the test that can be used both pre and post-treatment to determine, one, what kind of treatment should be done or whether treatment is necessary, and for those patients who have already been treated, if further treatment is necessary or further monitoring is wanted.

Secondly, the outcome predicted or these are clinical goal standard meaningful outcomes, the physician used on a regular basis that are typically used in most clinical trial, prostate cancer-specific mortality, which is as you know, the ultimate outcome, biochemical recurrence, and metastasis.

Again, we study over 3,000 patients in our clinical studies. We have four peer-reviewed publications, four studies and peer-reviewed publications, and one more in press. We’d also presented four additional studies most recently at the American Neurologic Association Meeting in San Diego this past week.

Another important header, advantage is that, we have data demonstrating that our gene show little regional variability across the cancer or across the prostate, which is important. And finally, after having been testing for about a year now, we have been able to reduce the sample requirements because these are biopsy samples, we’ve been able to reduce the sample requirements to loss in the industry. So, we are about a third less than any of our competitors are right now.

So, in summary, with the PROLARIS test we’ve received over 3,000 orders to-date in the last four months. We have experienced successes significantly better than any other diagnostic prognostic launch in the cancer space. About 90% of our current samples are biopsy samples, so physicians are really seeing the advantage of getting this information before choosing to treat, we have over 350 urologists that have used the test and continue to use the test. We are in the process of just completing our hiring of the last of our 24% sales force. We are having active dialogue with Medicare, in terms of determining coverage and criteria, and/or enthusiastic about providing data to Medicare about how physicians are using the test, and that is our proceed trial that is currently underway. So, we expect Medicare reimbursement in calendar year of 2014. Thank you very much for your time. And I’d like to turn it over to Gary King, who is going to talk about our international business.

Gary King

Thanks Bill, I’m Gary King, Executive Vice President of International Operations, one of the newer members of the Myriad Management Team. I joined just a couple of years ago, prior to that I lived, worked and build businesses in Saudi Arabia, the Middle East, Asia, Europe, South America, and Australia.

And I’m pleased to be doing the same now building the business outside the U.S. for Myriad. I’d like to give just a brief overview of our progress and building our international businesses, and some of the excitement around that business. We’ve made substantial progress in the last 18 months, we’ve established a central laboratory and unique that’s been certified ISO 15189 complaint. This laboratory uses exactly the same robust, analyzer, chemistries, and laboratory information system that Mark described for the Central Laboratory in Salt Lake City, we have a smaller capacity at around 15,000 BRCA samples per year, but that is expandable.

From our headquarters in Zurich, we provide marketing clinical, admin support, as well as certain tax advantages. We have regional offices established in seven countries to provide more local, clinical, and sales support. We focused our early recruiting on clinical expertise. And you’ll see that about a third of our 35% team in Europe, are either physicians or genetic councilors. And we are fortunate to be able to leverage the 21 year experience over the U.S. particular around our laboratory processes and functions, and interpretation of our analysis in the laboratory. We’ve built and trained a network of 40 distribution partners that now represent Myriad products in over 80 countries around the world. These distributor partners will be supported by area managers in North and South America, Europe, and soon Asia.

Despite having a population in these seven direct countries in Europe, only about 10% larger than the U.S. due to the higher cancer incidents, we see a significantly higher potential market in Europe for some of our key products in Ovarian Breast and prostate cancer, we see the potential addressable patient market between 25% and 40% higher than in the United States.

However, what we see in terms of penetration is much lower. In these Europe seven countries, only about 40,000 test for BRCA have been performed, about a quarter that of the United States, despite having 20% to 30% more breast and ovarian cancer. Now, the prices are higher in Europe for BRCA testing, especially in Germany and Switzerland. So, the overall market is probably about 30% to 33% out of the U.S., but there is a substantial upside opportunity in BRCA testing in Europe.

And we think this is because of the much lower awareness of the advantages of Hereditary Breast and Ovarian Cancer testing for both affected and unaffected patients. Myriad has spent about 15 years in the United States creating this awareness. There’s been no company or no entity in Europe to provide the same level of education and awareness creation as Myriad has done. So, we are focusing our early efforts in two fronts, first in taking share of the exiting market, but also in working with physicians and with patient groups to create awareness of the benefits of Hereditary testing for patients unaffected and affected.

One area that we think will really jump start the BRCA testing market in Europe will be the introduction of PARPs. The first PARP that will likely be on the market is AstraZeneca as the lapper due to launch in about 2015.

As Jerry Lanchbury explained PARP inhibitors poisoned one of the two DNA repair pathways and a tumor cell. The tumor cell requires of functioning BRCA protein to repair its DNA in the presence of PARP inhibitor, by measuring the BRCA status of a patient or a tumor, you can determine, which patients will respond to PARP inhibitors. And in fact, some studies have shown that tumors are a thousand times more sensitive if they have a mutation in their BRCA genes.

The opportunity for the first indication of Ovarian Cancer for a companion diagnostic BRCA test will be about 30,000 tests or a $120 million. Now to serve as a companion diagnostic for these PARP inhibitors will require a test that it’s a first accurate, where a mutation can be determine to cause a lots of function in the BRCA protein or not. And second, it must be performed quickly; the physician must have the results quickly in order to know whether or not to prescribe that drug.

And as you’ll see Myriad is uniquely positioned to provide such fast accurate testing in Europe. The initial indication for Ovarian Cancer will soon be followed with indications and triple negative, Advanced Breast Cancers and other cancers as well.

Besides the lapper, there are six other PARPs in phase two or three clinical trials in Europe today. There are over a hundred active PARP trials underway today, so a lot of clinical interests currently underway for PARPs. There are other compounds such as the recently announced collaboration with PharmaMar for their drug that will use an HRD test as Jerry described this not a PARP inhibitor, but will require a companion diagnostic that is similarly fast and accurate.

If you compare the Myriad BRCA test in Europe with the test provided by competing laboratories, you see that the Myriad test is significantly faster and significantly more accurate than competing BRCA test in Europe. And these are the results of a 200 laboratory survey that we performed about 16 months ago as well as publically provided data on turnaround times and the U.S. So, again to serve as a companion diagnostic for a PARP, you need a result that’s fast and you need a result that’s accurate. And Myriad alone is able to ride such a fast accurate result in Europe.

We’re very excited about the potential for PROLARIS outside the U.S. we launched PROLARIS at the European Urological Association Meeting in Mellon in March. However, the PROLARIS had already been used expensively in Europe, four studies involving over 13,000 patients had already been performed in the UK, Germany, and France. We have right now five trials evaluating PROLARIS and rolling about 500 patients throughout Europe. And we see commercial orders coming in from Europe and outside Europe already for PROLARIS.

So, in summary then, we are building a commercialization platform outside the U.S. for the launch of new product and significant growth in a few years for our current products BRCA and COLARIS our newest product PROLARIS and our large future opportunity companion diagnostics for PARP. Myriad is uniquely positioned to provide fast accurate BRCA testing as a companion diagnostics for the PARPs that will be launched within the next two years, and we remain on track to achieve our goal of $50 million in revenue outside the U.S. in 2016.

And with that, I’ll hand it over to our CFO, James Evans.

Jim Evans

Thanks, Gary. And thanks to everyone for your participation today, we do appreciate those, who are able to make it here to New York, and all those who are participating via the webcast. I’m taking your time to understand various strategies a little bit better.

And I’d hope you’ve been able to get a feel of the excitement that we have as a management team around the strategies, the opportunities that we have to grow our markets to dive deeper into the opportunities that are there with further adoption to expand internationally and to launch new test. But of course, at the end of the day what’s most important is providing better healthcare to doctors and patients as they go through making the key decisions that Pete discussed at the start of the meeting. I’m going to take a few minutes today and talk about the financial strategy that will lie over top of the opportunities and strategies that we’ve laid out through our presentations today.

But to start let’s take a quick look at where we are today in the financial realm. These are the numbers that we released on Tuesday, representing the performance for our third fiscal quarter and let’s be honest, you can stare at those all day and just be happy, really nice top line growth to 21% that is driven growth down on the operating line of 26% and that’s fallen all the way through to the earnings per share line that’s grown 34% over the same quarter of the prior year.

We’ve been fortunate in that, when we started the year, you recall that we guided toward growth on both the revenue and the earnings line between 11% and 14%, and through the first nine months of the year, we’ve been able to update that guidance number of times to where currently at our call on Tuesday, we were able to increase that guidance to expectations of revenue growth of 20% to 21% and earnings per share growth of 27% to 28%.

So, we’ve been very pleasantly surprised that how the business has been growing throughout the year, and we would expect to see that type of growth for the final three months of the year to bring in the annual numbers in that range. But what’s nice is, it’s not a one-time blip on the radar for us, but it’s something that we’ve seen consistently over the last number of years. Here are few other historical, our financial performance numbers that we’ve been able to enjoy.

On the top line, our revenue growth with the compound annual growth rate of 22% over the last five years. And as Pete mentioned, we’ve been able to see a number of quarters back-to-back with an excessive of 20% top line growth, actually it’s been since June of 2011, every quarter since then, has had that type of impressive in top line growth.

On operating income with the 31% compound annual growth rate over the last five years, and that’s even with the significant investment in our sales and marketing infrastructure as we’ve grown the woman’s health sales force as we’ve launched new exploratory sales forces to prepare for new product launches.

And with the significant investments in R&D, if you were to look back to our fiscal 2010 year, we were spending about 6% of revenues on our research and development efforts. Now as a result of having a further pipeline of products, we’re spending closer to 9% of our revenues on research and development. And that’s a 147% increase over what we’ve spent in R&D in 2010. So, we are making a significant investment, but at the same time, we are able to see strong operating income results.

Our earnings per share have also grown significantly over the last number of years, for those who have been following the company for a while now you remember in some of those earlier years we were dealing with net operating loss care reports and we were able to offset, but we try to do a pro forma of our EPS and take that into account and show what that growth was independent of the tax impact of the operating losses.

And we are able to see significant improvement there, that’s also been driven by our stock repurchase program that we initiated in May of 2010, under which we’ve repurchased $525 million worth of stock representing about 24.3 million shares and just over 25% of the shares that were outstanding at the time that we initiated the program. So, an aggressive program of getting cash back to our shareholders has helped translate into strong earnings per share growth.

And, then finally looking quickly at our return on invested capital over the last number of quarters, I think it helps demonstrate that, Myriad has been very successful and driving operating income growth without having to spend tremendous amounts in capital investments. We’ll find in fiscal 2013 that where we will have spent just around $10 million in CapEx, acquisitions, and capital at least hold improvements.

And we are looking to spend about the same amount next year, and that’s even with moving to, you know, a new platforms to be able to process the myRisk cancer or Hereditary Cancer Test bringing on the new front in equipment with RainDance, we are still able to have a fairly modest investment and capital while pushing significant results through the operating line.

So, that’s historical, let’s go to what’s going to happen going forward. What’s impressive is the market size that we address today, and where we see that going over the next five years. Today as you look at BRAC, COLARIS, BART, and PROLARIS. We are grossing about $4.2 billion market. By 2018, we see that market growing to over $12 billion with the conversion of BRAC and COLARIS to myRisk Cancer to on the international expansion of PROLARIS and the launch of HRD and Melapath providing for significant market opportunity as we roll out these products.

Our goals over that time from a financial standpoint are to continue to drive low mid, low to mid double digit revenue growth. On our call Tuesday, we talked about our expectations for – our fiscal year 2014. And keeping in mind that it is going to be a transition year, and a year in which we will have some tough comps with the success we’ve seen in BARC this year, we still are very comfortable that we will be able to see low double digit growth next year and that accelerating in few future years as these new products become fully integrated into the system.

We expect to continue to see double digit EPS growth in the mid double digits, as we continue to take advantage of opportunistic stock buybacks and pushing through on operating income to the bottom line. Our mid double digit return on invested capital, again we are able to do a lot without having to spend much in that capital investment, and we would anticipate, our goal is to keep those operating margins in the mid to high 30% range, where we’ve been able to see them over the last number of quarters.

If you were to, if we are successful in that goal and we are able to see that type of revenue growth on the top line just a graphical representation of what might be able to happen with our revenues over the next five years, you can see that we could very rapidly be approaching a billion dollar in revenue company with success in those goals that we’ve outlined.

But there are number of upsides to those goals as well, right now as we looked at that new market, it didn’t take into consideration companion diagnostic that might be successfully spun out like RBMs program that they currently have going on with Sanofi and diabetes program with the potential that could come through there. Our new product launch, that is still in the pipeline that might show potential like the depression differential or kidney damage.

The impact from acquisitions as Pete mentioned earlier, we are about half way through the period that we have the option to buy Crescendo Biosciences within the next year and half we’ll be making a determination, whether that something that we will be bringing into the fold. And then we have the growth in the international arena outside of the five market countries that we’ve identified as a distributor network comes on board and starts really showing results, those are all potential upsides to the market numbers that we talked about.

You can see them over a period of time, we have a nice layering affect of different strategies, different projects and products that will be launched that we think, leave us in very good stead for both near term, immediate growth, mid-term and longer term growth as these are rolled out over the next few years.

Now, I’d also like to just talk briefly about our capital allocation strategy, we’ve been as always our number one priority is to reinvest our cash into the business, we are expecting a two new product launches in calendar ‘13 with myRisk and Hereditary Cancer and the Melanoma, the

melapath product and more test launch next year as we have talked about 1CCT and others that may come along.

We’ve been investing in research and development as I discussed in heavily building out our product pipeline as well as building additional clinical data for those products that have already been launched and continue to grow the opportunities around them. We’ve looked at M&A opportunities, we continue to do that, we’ve been active in the acquisition of RMB, which is an $80 million acquisition, and the option that we currently have in Crescendo Biosciences as well as looking at more early stage opportunities where we bring in license gene or something that we see that we can build into our product offering that will enhance that.

And, as I talked about, we’ve been very aggressive in our stock repurchase program and we are committed to returning cash to shareholders that is an excess of what we can intelligently reinvest into the business. At the end of the day that leaves us with a very strong balance sheet with maximum flexibility, no debt currently on the balance sheet, so we are able to take advantage of any opportunities that may come along for the company.

And, then finally I want to take a couple of seconds and talk about the Supreme Court case that is currently awaiting results as Pete mentioned in some detail on the earnings call on Tuesday. We are expecting to have decision by the end of the current session for the court, which ends on June 30th. I was fortune enough to be able to sit in during the whole arguments, was fascinating to see the interaction between the justices and attorneys and really did between the justices and each other through the attorney. But I think it became very clear watching that deliberation that the case that first started off as RC genes patentable really was bifurcated more into or – is isolated DNA patentable and CDNA patentable.

I think very early on in the discussions it was determined or they would be questioning, and this is my opinion that went around CDNA quickly came to a conclusion that it was, it’s a man-made and that it’s done in a laboratory that seemed to be fairly anonymously accepted and most of the discussion after that really went around the isolated DNA. So, I’m talking to our attorneys, they’ve highlighted three most probable outcomes to the case, one being the both isolated and CDNA or pattern delegable, the next that isolated DNA would not be pattern delegable, but CDNA would be, and that is actually the government recommendation through the solicitor general or the none of the patents would be eligible on the DNA.

What I also took away from the arguments is that the justices seem very, very comfortable with method patents, there were number of times during the discussions where they said, well, isn’t that something that you could get a pattern around the method that you do there.

And, I think it’s important to note that of our 500, over 500 claims that only nine are being adjudicated in this process, the rest are those method and correlating whether there is a mutation in a genetic sequence that we think we’ll still be very, very strong in providing us protection even if the nine claims that are currently being discussed were to be thrown out. So, we feel very comfortable with the intellectual property that we have surrounding BRACAnalysis independent of three most probable outcomes that are listed here.

With that, I will turn the time back over to Pete and we’ll wrap up.

Pete Meldrum

Thank you, Jim. And I want to thank all of you for attending the Investor Day today. I have just a few closing remarks and then we’ll open it up for the question-and-answer portion of the period.

Myriad as a content driven company, we are one of the largest DNA sequencing laboratories in the world and we are a leader in these profiling. Myriad is a pioneer in the field of predictive medicine, assessing an individual risks or developing cancers later in life. And I’m very pleased that we are able to announce today the first comprehensive pan-cancer panel, myRisk, Hereditary Cancer, which will be launched in the fall of this year about five to six months from today.

But Myriad is also an innovator in the field of companion diagnostics, we will revolutionize the field to companion diagnostics by moving away from focusing on single biomarkers to looking at pathways like our HRD test. And the HRD test, we intend to launch in about two years in calendar 2015 for the platinum drugs. And then we have very exciting opportunities as more PARP inhibitors make their way to the market.

We’re also trailblazer in guiding therapy and assessing how aggressive a cancer is likely to be, we are excited about our PROLARIS product, we’ve already had over 3,000 orders from positions and patient on PROLARIS, and we are very excited about the proceed study, which we will convince Medicare to grant to reimbursement to PROLARIS, and we anticipate that within about the next twelve months. We have the complete toolbox of technologies to discover all the genes and biomarkers or experts and DNA sequencing in R&A expression, and DN protein analysis. And there are few other companies that have that complete set of capabilities.

We are global diagnostic company and very excited about the global opportunity, we have presence in over 80 different countries, and I’m really excited right now about the possibility of the first PARP inhibitor drug being approved in Europe in 2015 and Myriad’s role in identifying those patients, who would likely respond to this exciting new therapeutic opportunity.

We have unparallel resources with a very strong balance sheet of $450 million cash in the bank, as Jim mentioned, no debt and we generate a significant amount of annually, which gives us tremendous flexibility in terms of looking at opportunities to grow and diversify our business for the future. And we have a very strong core of business or we’re in the process of growing and planning for the future. Our existing core business is growing a greater than 20% per year and represents an exciting opportunities for near term growth going forward in the future.

So, with that I’d like to thank you again for attending the Investor Day. And I’d like to leave you with some comments before we get into the Q&A period from some of the patients and physicians who have used Myriad’s test and if we could show the video please.

(Video Presentation)

This concludes the formal part of our presentation. We do have three microphones or any of you who have questions that you would like to raise about the company as you are already doing, raise your hand, we’ll have someone come to you with microphone and we’d be delighted to answer those questions. Thank you.

Question-and-Answer Session

Isaac Ro – Goldman

Thanks, Isaac Ro from Goldman. The myRisk test obviously interesting in new transition via business along with transition nothing comes it’s a little bit of execution risk, what `do you think is the most important piece of execution risk that you face and how you’re managing that if you move to myRisk in the fall?

Mark Capone

Sure. Thanks, Isaac. You know I think for us it’s, I think as you saw on the demand side, there’s incredible interest, so I think the clinical dilemmas are well known, this actually synthesize both of the front and back end for a physician. So, from that side, which typically for new product is where you’re concerned the most is just creating that demand.

I think in this case, it will be more on the execution inside the laboratory, these are some very complicated processes that needed to be executed with the type of turnaround time and quality, expectations, or customers have. So, I think for me it’s just making sure we can do the laboratory executions in a manner that we can meet demand; I think that will – that’s probably the thing that I’d spend the most time thinking about.

Isaac Ro – Goldman

Great. Now just follow up on the technology comment, you mentioned, you know, survey in the landscape on informatics then ultimately choosing to develop your own, can you talk a little bit about what you did on the informatics side to make your test unique and differentiated, there’s obviously a lot of other companies working on, you know, cancer type panel, pan-cancer test if you will, so over the next few years, if we think about other entrance coming to the marketplace trying to replicate what you’ve done, how would you identify sort of, some of key technology advantage that you’ve developed specifically Informatics? Thanks.

Mark Capone

Sure. I would probably divide that up in two categories, first is just the process pieces in and out of itself as I mentioned everything from the laboratory information system to the sequencing analysis software that proprietary portions of the RainDance technology that we have, all of that the report generation, all of those things are from a informatics process standpoint relatively significant investments, and I think it’s difficult for somebody to come in and try to replicate every aspect to that.

And report piece is a brand new piece where you try to feed in information from genetics from family history, from medical professional society guidelines, all of that has to come together in an automated fashion. And that’s clearly something that you can’t find without the shelf technology, variant classification is an incredibly important part of that process, there’s a lot of informatics built around that. First of all, there’s the database itself that you need to be able to query that we will rapidly expand as we continue to do more testing on all of these genes.

But in addition to that, the processes by which you have to classify variance in a very quick manner, queries for either outside data or the ability to go out and actually do additional studies in order to classify variance, you know, one of the things I mentioned that we have to do is, find those variance, now there’s cancer patients, but go out find family members, test family members for free, there’s an incredible amount of investment that’s required, all of that just to reclassify you had a single variant.

And the last thing I’d point to is from an informatics standpoint, we’re the only laboratory that will continue to stay in touch with patients and physicians after they tested. So, in fact, they have an uncertain variant that ultimately than gets reclassified, we will contact physicians, we will contact patients; we will let them know that their test results have been updated and that they need to connect in order to get the updated version of that test report.

And nobody else does those types of things for their patients, I think that’s why when you do research, you hear things like, I truly believe Myriad is the Trusted Advisor that will be there, not only to help me do the testing, but be there afterwards to update my results as more as learned about each of these variants.

Pete Meldrum

Let me just add a few thoughts to Mark’s comment, as we think of that competition in the Hereditary Cancer field. Myriad is a Trusted Advisor, and we have an excellent reputation, and an outstanding sales force in the oncology and preventative care arenas. And Myriad already competes, I think very effectively against major reference laboratories and other hospitals and lab institutions. And I think COLARIS is a real good example of how Myriad does compete, absence of intellectual property competitive advantage.

We dominate colorectal cancer market and we have no pattern protection or competitive advantage in that arena, it really is Myriad’s customers service, our rapid turnaround time, the quality of our test, the ability to characterize and understand, variance of uncertain significance that gives us that competitive advantage. And, we’ll have that advantage in stage around the Hereditary Cancer panel as challenging as understanding the U.S. and getting at a quick turnaround times for BRCA1 or BRCA2 multiply that twelve times for the 25 genes or we will need all of that depths of knowledge and information.

And Myriad for over a year has been doing prevalent studies and begun to understand and already the sample in our current database around the genes that will make the Hereditary Cancer panel such a valuable asset to the company in the future.

Isaac Ro – Goldman

To follow up on the execution part of this, you talked about kind of a factory not a laboratory. And I was wondering if you just give us a little more color in terms of, what’s your capacity right now as currently constructed maybe something about where the bottle mix are in the process and any implications for what we’d expect in terms of future spend based on that?

Pete Meldrum

Yeah, I think the laboratory right now, I think you saw some other slides we talked about 150,000 samples a year and you know, those types of numbers. So, that’s the current laboratory capacity, obviously we will need to transition to the myRisk product and be able to do more than that when we make the full transition. And so, that’s what from the execution side that’s being our most concerned of doubt is being able to do that as rapidly as we can to expand the size of the laboratory.

The good thing about the laboratory from a capital equipment standpoint as Jim mentioned, it’s relatively light on from a capital standpoint, and because each of the steps in the process are made up of a number of discreet pieces of capital equipment, it’s pretty easy to expand from a capacity standpoint, it’s a matter of buying a couple of additional pieces of equipment and then integrating that into the informatics.

So, I’m not worried from a capacity standpoint, we’ve got a plenty of space, we’ve got all our suppliers that are more than capable of expanding their capacity, it’s just to be able to put in place such a complicated process make sure it runs with type of turnaround time, accuracy, uncertain variant rates that our customers expect, that’s the thing that we will have to transition in and why it will take until summer of 2015 to fully transition this entire laboratory.

Peter Lawson – Mizuho Securities

Peter Lawson, Mizuho Securities, Jim just on the capital deployment, what’s the right mix over the next five years with buybacks, capital investments, acquisitions?

Jim Evans

Yeah. As I mentioned on the capital deployment, we are going to continue to be opportunistic on share buyback, we have a $175 million still authorized that has not been deployed at this point. But we will continue to monitor the stock price and make determinations around when is a good time to buy that stock back, so we don’t have any type of set program that we need to have the x amount done by a certain date, but we’ll continue to do that opportunistically. We haven’t really moved beyond next year as far as the capital equipment budget goes, but as I mentioned that’s going to be in $10 million range. And so, I think we continue to be very manageable versus the kind of cash that we’re throwing off.

We do have two groups within Myriad that looks to do business development, one that looks at very early stage opportunities and the other ones that are out there talking to university, tech transfer groups talking to companies that have new exciting discoveries that really haven’t been commercialized yet, we can license in and bring our commercial infrastructure to there, and then we have the group that’s looking at more mature opportunities that we think might be synergistic with the current business.

I will continue to look at those opportunities and see if any makes sense to default into the business, you know, we’ve shown that we do have an appetite for that in the past and we’ll continue to look at those types of opportunities. It’s difficult Myriad is kind of out on the forefront of this industry and there haven’t been very many other companies that has been able to grow to a size that would make a full acquisition attractive to Myriad, if we did that, we want to make sure that they have revenues that would be meaningful in addition to the company to make it worth doing a full acquisition and bring on all the liabilities and other issues that come with trying to pull the company in. So, we will continue to look at those opportunities, but again it will be more opportunistic as you find things that make sense for the company.

Peter Lawson – Mizuho Securities

And then over the same period, the tax rate, where do you think that can get to?

Jim Evans

Well, we are undergoing a major program right now in order to establish, you know, better establish our international opportunities and driving that tax rate down wherever possible. So, in the near future, we will be transitioning some of our IP over to the international corporations, so that the testing that’s done over there will be taxed at the much lower rates.

And so, we would see that potentially driving the tax rate for the full company down and that’s going to have to, that’s driven off of the amount of revenues that we actually do recognize in Europe, so as that grows that will help drive the combined tax rate down. It’s hard to say at this point exactly what that will be, for now we’re still with that 39%, 40% tax rate. But we do anticipate as sales grow internationally that we will be able to see the total mix of tax for the company pushed to a lower level.

Doug Schenkel – Cowen & Company

Good morning, this is Doug Schenkel from Cowen and Company. I have, I guess, two questions for now. First question for Mark and then I actually was going to target the second to Bill, but Mark you can probably address this one as well.

So, the first question is, BRACAnalysis it’s a very good test for patients, who are within guidelines, do you have data or are you prepared at some point to present data that demonstrate how much more useful my gene will be in the population of patient that are currently within guideline for BRACAnalysis both within breast and ovarian. And how important do you think that data is in the context of reimbursement discussions given that you are going to try price this at a level that is higher than integrated BRAC?

Mark Capone

So, yeah. Thanks, Doug. A couple of comments on, the BRACAnalysis is an outstanding product obviously it serve families well, you saw a good example on the video of a woman whose life has changed as the result.

Obviously technology is now an advanced to a point where we can measure more genes as efficiently as we could, the single genes, we are and have conducted tests, clinical studies to look at the prevalent of these other genes in patients that currently meet criteria for Hereditary Breast and Ovarian Cancer, those studies have already been done, the slide that talks about the percent of patients that will be missed if competitor were just have B1/B2 that wasn’t meant to be a cartoon, there’s actually some data behind those slides.

So, it will have some significant as it relates to the sensitivity of the test. We will also conduct studies on patients that do not currently meet criteria, which is the opportunities I mentioned on that slide to double the market because we are convinced the increase sensitivity of this test, we will now allow other patients to be eligible, whereas otherwise they would not, all of that’s driven by a very powerful health economic story to our payors and because each of these studies that’s shown that if you can prevent that cancer from happening in the first place, there’s a pretty positive return on that from an health economic standpoint, just on the pricing I will know that the pricing that was listed on that slide was a list price.

So, the list price for integrated BRACAnalysis is $4,040, the list price for COLARIS the entire suite COLARIS gene is now around $4,500. So, what you saw on the slide was a list price that is actually consistent with what today’s list prices are. So, our physicians with payors is that you will be getting a lot more information preventing a lot more cancers at a list price that’s equivalent to what we have today.

Doug Schenkel – Cowen & Company

Well, then that’s helpful. And the second question is really on PROLARIS and the $700 million market opportunity that you had on the slide up there. This is, I think based on the assumption that this could be used in all 200,000 patients that are diagnosed with localized disease annually, is that the right way to think about this opportunity I guess, to put it differently, so you expect this test to potentially be used in all patients independent of age, Gleason score or PSA and there’s not, what part of the market do you think is truly the lowest hanging fruit? Thank you.

Mark Capone

Sure. I think when you take a stab and then Bill, see if you want to jump in. I think that the way they look at this market probably similar to how we did Hereditary Cancer when the market first began is that, what we found is that actually probably nobody was getting the precisely correct treatment, everybody was being treated according to family history, which meant, those with mutations were being under-treated, those with out-mutations were being over treated.

I think we’ve got that same opportunity in this market place as well that for those patients that actually have the low PROLARIS score from a risk standpoint are being over treated. But I think as Bill mentioned, for those patients that actually have a high PROLARIS score, they’re probably being under-treated relative to an aggressive combination therapy, which is the patient that was on the video was contemplating is, do I use follow up radiation based on the result of my prostatectomy. So, when you look at it through that land, you would argue all patients are appropriate for testing, so that we can either increase or decrease relative to what they may have received historically, Bill.

Bill Rusconi. I think Mark covered it most patients with localized disease, the pathology alone is not getting them enough information to determine, whether it’s aggressive or not truly, this could be more advanced. And depending on the age of the patient or other factors comorbidities with that patient, you might want to know how aggressive this disease is, even if it’s more advanced cancer, if it’s not that aggressive just more advanced you may not treat, again if you got somebody, who is young and have the very early stage cancer, but it’s aggressive, you may want to treat anyway because they’ve got pretty long life expectancy otherwise.

Mark Capone

I think maybe just the last point is, Bill did a very good job with talking about PROLARIS as an independent assessment of the tumor, how fast versus how far, I think that’s the reason that every patient could be appropriate because of that independent assessment or this just correlated pathology.

I think that would be a different conversation because it’s really just given more of the same type of information. But given the independent nature of PROLARIS the fact that it’s correlated to outcomes, gold standard outcomes of recurrence in survival, I think that’s what really opens this up to a much broader audience of men.

Vamil Divan – Credit Suisse

I’m Vamil Divan from Crédit Suisse. I just one follow on the PROLARIS side topic I guess, first was just from the new competition coming out now, highlighting multiple pathways that their targeting was there assays as opposed to proliferation. Pathway that you guys booked on. Maybe you could talk about sort of the development and why the focus is just on the one pathway? That maybe does open up an opportunity for others and is there any thought that maybe evolving the test in any way to include other markers going forward?

Pete Meldrum

Thank you. Yeah, and just a really compliments to Jerry Lanchbury’s team, this was outstanding research done by Jerry. If you actually turn back to him with time to when this project started, Jerry was faced with an interesting choice. One choice would have been to actually try to find markers that correlated to pathology and those samples are actually relatively easy to find and those studies are relatively easy to do.

I think the choice that was made back then was not to pursue that, perhaps for a couple of reasons. First is that the healthcare system already paid for and utilized this pathology. The second reason is that we know pathology is not a perfect correlated to the gold standard outcomes of recurrence and survival.

If pathology did predict us then we wouldn’t have the need for a $4,000 genomic test. And so, as a result of that Jerry and his team decided that we would look for independent assessments of the aggressiveness of prostate, how fast the cancer was moving and how far it had progressed. And that required actually a much more difficult development project because we had to find samples that had 20 years of history so that we could correlate these markers with outcomes as opposed to pathology.

And that’s the work that was done and if there is simple sets and incredibly difficult to find, Jerry was about to find those. But because of that we’ve got what we think is now the independent predictor, and when you combine how far and how fast, it actually gives you the types of P values you’re seeing at 10 to the minus 9.

We do know some other products have chosen to correlate to pathology and that’s – it’s just we’ve chosen a different path and we’ve chosen different end points. And what we see are that the markers that correlate to pathology are different than the markers that correlate to those gold standard endpoints.

And so, we will not look to add other markers that correlate to pathology. If we add other markers, it will be because they correlate to gold standard endpoints like survival or recurrence. And so that’s – that’s I think is the distinction between the different development choices.

Vamil Divan – Credit Suisse

Okay, thanks. And then just one other one on that, on the myRisk, just to clarify, you mentioned that points of differentiation you have beyond just the proprietary content like your turnaround time and the customer service and all that. In terms of proprietary content, can you just clarify what the Supreme Court decisions coming up soon? How would that impact things if that case did not go your way, we lost, either isolated DNA or CDNA or both, how would the impact of proprietary part of myRisk? Thanks.

Pete Meldrum

Yes, thank you for the question. One of the things that I tried to emphasize was that Myriad is really a content driven company. Our goal is to understand the role genes play in human disease and use that information to benefit patients.

So, because we’ve been a content driven company, as you’ve seen on the slides today, we have a number of genes that are involved in myRisk hereditary cancers, well beyond BRCA1, BRCA2, RAD51C, PALB2, P16, P10. All of those genes patents have commonality and strong isolated DNA claims which may or may not survive the Supreme Court decision.

Strong CDNA claims, again which is the subject of this current court case. But very strong method and correlation patent claims as well. In fact, by far and away we have more claims across all of the genes that we have proprietary content on, in the myRisk Hereditary cancer panel. Our method of the used patent claims not composition the amount of patent on the genes themselves.

So, I think it’s important for investors not to think that should the Supreme Court rule against either CDNA or isolated DNA, the gene patents are no longer any good. Quite the contrary, the method of used claims are very strong and that will continue to give Myriad a very strong intellectual property competitive advantage going forward with myRisk.

Tycho Peterson – JP Morgan

Okay, over here, it’s Tycho Peterson with JP Morgan. First one, just on – I’m wondering if you can comment on the new database efforts, I’m talking about UCSF in particular. Where is this on a scale from a relevant to concerning, and I think you alluded to the fact that maybe some of these databases could end up with core content. Is the risk they do more bad than good and how do you manage that dynamic in the market?

Pete Meldrum

Sure, thanks Tycho. There have been efforts over the years to put together public databases for variance. In fact the efforts go back quite a ways, over 15 years. I think all those efforts have always faced similar challenges which is why those efforts, all those databases, always come with a disclaimer that the information should only be used for research purposes and not for clinical purposes.

And some of the limitations that those databases have is that the information isn’t necessarily up to date so you run the risk of using old information to interpret patient’s variance. Generally, it’s incomplete because in some cases like in the example Myriad, things that are classified as variance that are polymorphism not necessarily reported out as specific mutations that can’t be included in the database. So generally databases are incomplete.

And they really are unregulated as opposed to a database like Myriad’s which is regulated by clear. And for those reasons, always the disclaimer has been, these are not to be used for clinical interpretations. And so I don’t think what we’re seeing is anything really new from the standpoint of a desire for a research database. I think those efforts probably will continue.

I think what gives us confidence is the quality systems we have built around our databases, on how they are controlled, how they are updated, how the information is curetted, all of that is incredibly regulated and incredible poly systems surround that. And so that gives us a lot of confidence in the calls that we’re making and the use of that database.

And I think our customers, particularly because they know we update variant information when you reach out and contact anyone knows variance are updated. We’re very confident in the interpretations and reinterpretations that Myriad provides out of our regulated database.

Tycho Peterson – JP Morgan

And then, just a follow-up on myRisk, I think the timelines might have moved up there. Can you talk a little bit about what brought that and also just the willingness to payors to pay for cancer panels more broadly? And then, can you talk about a VUS from myRisk at launch?

Pete Meldrum

Sure. Our plan is to launch myRisk in the fall of 2013. So, within the next six months we will launch. And we expect full conversion of the hereditary cancer market by the summer of 2015. So those are our goals. As I mentioned that the delay in the conversion is as much just making sure we can get all of our laboratories processes in place with the type of customer expectations that people have.

And from an uncertain variance standpoint, as it’s true BRACAnalysis, anytime you start with the new gene, you will inherently have a higher on certain variant rate. Now given our expensive efforts that reclassification and variance and given the high volumes that Myriad runs, we will be in a very good position to very rapidly be able to characterize those uncertain variance and reduce any starting on certain variant rate which will then just continue to expand the size of the variant database that we’ve already assembled that’s reasonably sizable.

We’ve – we have a very good sense of what the uncertain variance will look like on launch. And because we’ve done so many thousands of samples at this point, we’ve researched that and I think our customers are very comfortable with that level. And what will be presented with that as clinically actionable. So I think we feel pretty good about that.

And then the last question Tycho, on reimbursement, risk price will be the same as what we are currently offering but we’ll be providing a lot more information and identifying more patients that are risk for hereditary cancers. So, the pair research that we’ve done given their profile, similar pricing, better information, they’ve been very receptive that from a payors standpoint to help economics just get better under that scenario than what they’ve currently approved.

Tycho Peterson – JP Morgan

And then just one last clarification of PROLARIS. I think, I didn’t think that addressed had originated. So can you just kind of clarify the comment there, and then also how aggressively are you using the pharmaco-economic data such as the Miami data to go after EDRT and urology service?

Pete Meldrum

Bill, you want to talk to that?

Bill Rusconi

Sure. And Jerry might be able to comment also on the heterogeneity, there was a study at AUA that demonstrated with PROLARIS that you saw a strong correlation across the prostate of the PROLARIS for which doesn’t depart to addressing heterogeneity.

In addition, our studies evolve in the context of heterogeneity or the potential for heterogeneity, evolved and been able to demonstrate the abilities predicted outcomes and the stronger stability to predict the outcomes of any other factor. Second question was?

Tycho Peterson – JP Morgan


Bill Rusconi

Sure. Again, physicians are looking at what their revenue models are going to be and looking at all the different options they have in terms of how they run their practice. Obviously, they are making clinical decisions based on what’s going to be in the best wishes of patients but they also have to run a business.

And so, we’re using that data to inform them that of what their choices are from an economic standpoint, the active surveillance is a viable option for them such that they won’t lose money as a result. While a prostatectomy may cost $18,000 for the physician they only make about $1,500 between $1,500 and $2,000. And so the lost revenue from not treating their forward going to active surveillance is not a significant as one might say. Did that answer your question?

Pete Meldrum

And let me just add a thought. As was shown on Bill’s slide, remember that only 4,000 of the 11,000 urologists actually perform surgery. And so, that other 7,000 would not lose money in terms of reducing the more aggressive types of therapy.

For the 4,000 that do, the Miami study has shown that in the long-run, those urology officers will actually make more money by doing active surveillance and by doing the radiation. It’s really the hospital cost, the NSTs, those expenses that are the economic driver in terms of serving the healthcare system money and at the same time improving the quality of life with man with prostate cancer.

Chip Skinner – Royce Funds

Chip Skinner from Royce Funds. I guess two questions related to PROLARIS. If my math is correct, $3,400 of tests, 3,000 tests in the last 12 months, that’s about $10 million revenue run rate. Is that – are you recognizing revenues today or is that something you will retroactively recognize once the Medicare reimbursement is in place?

Pete Meldrum

Thank you, Chip, very good question. Right now because PROLARIS is not reimbursed by Medicare and Medicare is about two thirds of all of the man diagnosed with prostate cancer. And there is some uncertainty as to the timing of the Medicare reimbursement. We recognize revenue on a cash basis when we actually receive the money not on an accrual basis as we do most of our other tests.

We’re very optimistic about Medicare approval, we, as I mentioned today, I think that the proceed study is the final component that Medicare is looking for to make a decision and we do expect a decision within the next fiscal year.

Historically Medicare has reimbursed some legacy clients and so they can go back to a certain period of time and reimburse previously tested patients. At the same time, we’re working very closely with private insurers to get reimbursement there and those discussions have gone extremely well.

Chip Skinner – Royce Funds

I was also intrigued by your comment that PROLARIS I think is the fastest growing product that you’ve introduced so far out of the gate. Can you put some more flesh around how that compares to BRCA or other tests in terms of the rapidness of its growing?

Mark Capone

Yeah, I think and I think the comments Bill made, it actually was – it was actually the fastest growing for any cancer prognostic assay in its first year. So it wasn’t just an internal benchmark, it actually was an external one as well. If you went back to the BRAC days towards now, we’re back a couple of decades. But typically in these new launches and in even some of what we’ve seen in cancer prognostics have been in the hundreds the first year not number like 3,000.

So, I think that gives you a magnitude of the difference, it’s really Bill’s team has done a great job. And remember, we only had for the first half of that probably about eight sales people. In addition to that, we didn’t get the biopsy indication until just in the summer. So about half way through that first year is when we actually got the biopsy indication, which as Bill mentioned is currently 90% of what physicians are using PROLARIS for.

So, we’re encouraged by that as a first year. Again reimbursement is critical as Pete mentioned and we’re pursuing that aggressively. But creating demand in anticipation of reimbursement is actually very important as well.

Pete Meldrum

And let me just add, I think Bill and his team have done a fabulous job, and a lot of credit for those 3,000 orders goes to them. But I think it’s also reflective that clinical parameters like Gleeson Score just reading on getting neurologists the information they need to make decisions that dramatically affect all of us as demand with regards to prostate cancer.

And I think this dramatic increase in demand that we’ve seen is a reflection of the need in the marketplace for an independent better assessment of how aggressive a man’s prostate cancer is going to be. And we’re very excited about the recent activity we’ve seen among urologists here, our early introduction of PROLARIS.

Derik De Bruin – Bank of America

Hi, Derik De Bruin from Bank of America. There are two questions, first one dean. So, you’re expecting a smooth transition in terms of reimbursement coverage when you go the hereditary side, I mean, do you have to go back and get a re-approval, get it approved by the payors and go back and examine it or is that – I was just curious, does it require any special work to get coverage reimbursement for hereditary cancer?

Mark Capone

No, we should be able to use the existing molecular pathology code, the existing reimbursement that we’ve already negotiated with payors. So we would anticipate very smooth transition on the cases that we would have to go seek additional reimbursement or code as if we were going to chance somehow on the pricing on the product. But as we mentioned our list prices will be consistent with our current products. So, we believe this will be very smooth from a reimbursement standpoint.

Derik De Bruin – Bank of America

Great. And the, I know recently there has been some introductions in Europe in particular of why technologies are offering a community BRCA1 two panel, I know that they are being developed for potential use in European diagnostic laboratories. Have you looked at that product, have you examined, how does that compare you from them, I’m just curious in terms of just what your impressions are?

Mark Capone

Yes, yeah, we have – we’ve talked a lot about that particular product, I mean, Jerry can, probably talk more specifically about anything in Europe. But I think the important part of that and I’ve had direct conversations with life, they view that as a community panel which is really not a product that they plan on marketing. It’s really been put out there developed by some of the users in kind of an open architecture way.

It only looks at specific previously identified mutations. So, what I will not do is do entire look at every base in the gene to see if in fact there are mutations. So, it’s really very limited. We have a similar test here where we do that for Ashkenazi Jewish mutations, there are three mutations that are commonly known. Those three are actually on this light panel. But it’s very limited, there is a very small percent of patients that would ever end up positive for that panel.

So, if you truly want to do a full assessment about what your risks are, you’ve got to sequence the entire because BRCA 1&2 we’ve learned over the years, there are thousands and thousands and thousands of variance. And we find literally dozens every week that we’ve never seen before. So it doesn’t lend itself for some sort of variant panel. So we see it more as a research type tool and that’s what life has explained to us as well.

Pete Meldrum

And let me just add a few thoughts as well. We really need to start thinking about myRisk hereditary caner as the test and not necessarily BRACAnalysis.

As Mark indicated, the life research is only panel misses a great number of mutations. But as Mark also indicated on myRisk BRACAnalysis captures maybe 60% of the Myriad of genes involved in hereditary cancer. And so, we need to really compare that, looking at BRCA1 BRCA2 mutations with myRisk which is much more comprehensive, much more inclusive test.

And from a commercial standpoint, where you’re dealing with a patient and actually going to make a decision on giving that patient surgery or chemotherapy or some aspect of managing their disease process, you need the most complete, most accurate information. And you don’t want an expensive short-cut renovation slides at this day.

Michael Yee – RBC Capital Markets

Michael Yee from RBC Capital Markets. A couple of things. First was when you talk about next year’s double digit growth, what are your assumptions for PROLARIS, in that how much is contributing to that?

Second question is you used the word erosion possibly post 2018, can you put a little bit more color around what that means, do you expect revenues to continues double digit beyond 2018 or what are some scenarios that would cause you to think about erosion?

And then, third question is, you didn’t mention PARP in the United States, specifically talk about for Europe, but these drugs are also being brought for United States over, does that change anything?

Bill Rusconi

Can I take the first one?

Mark Capone


Bill Rusconi

So, on our guidance for next year, we do anticipate some modest contribution from PROLARIS as we talked about expecting to see the decision from Medicare sometime in calendar 2014. We have an assumption of modest PROLARIS revenues coming in. But not ready at this time to give a specific number.

Pete Meldrum

As Jim mentioned in his presentation, we are forecasting load in the double digit revenue growth over the next five years, that’s certainly our goal and what we’re going to try to accomplish.

The use of the word erosion was maybe not appropriate in 2018, I think the thought was in 2018 the name BRCA patents will go away and we will no longer have strong intellectual property protection on the BRACAnalysis test. Plus really eroded to is however BRCA sales, it won’t be a test except for possibly PARP-inhibitors. It will be completely replaced by myRisk Hereditary Cancer.

And even after the 2018 period, on Mark’s slide, he showed half a dozen or so genes that we have intellectual property around, that are key players in a variety of broad spectrum of cancers. And those will still give us competitive advantage.

But also as I mentioned with COLARIS where we have no intellectual property advantage, because of customer service turnaround time, accuracy of testing, we dominate those markets. So I wouldn’t – well, we haven’t given guidance beyond five years in terms of what our goal is for revenue growth. I wouldn’t want to leave an impression that we think that that’s going to be reduced in 2018, just because we’ve lost some of the BRCA patents.

Mark Capone

And then PARPs, if I can talk about that. We’re very excited about PARPs, I think Jerry mentioned it because it probably looks closer to launch in Europe than it does here in the U.S. But as we mentioned AstraZeneca with Olaparib, beating up the forefront, we have global relationships with AstraZeneca and so those would include not only collaborations in Europe but collaborations in the United States as well.

So, we’re in very active discussions with them as well as many of the others or all of the other companies that are actively engaged in PARP program. So, and those conversations are around not only BRACAnalysis as in companion diagnostic.

But as Jerry mentioned around the HRD assay, in those PARP-inhibitor programs, I did just as a last point on my one slide say that in that post 2018 timeframe, we do envision an FDA approved BRACAnalysis laboratory BRACAnalysis being on label for PARP-inhibitors. That is how we see the market of all being and so it will continue existing as a companion diagnostic. But as Pete mentioned, it’s used for hereditary cancer, we won’t be surpassed by the myRisk product.

Pete Meldrum

I’m mindful that we have overrun our time. And so, Scott I think we have time for maybe one final question.

Scott Gleason


Sung Ji Nam – Cantor Fitzgerald

Thanks for taking my question, Sung Ji Nam, Cantor Fitzgerald. Going back to PROLARIS and your competitor product and I’m specifically referring to Genomic Health. I’m trying to get a sense of obviously you’ve outlined your advantages and Genomic Health has kind of claimed their advantages as well. I’m trying to get a sense of in your view, I know it’s early, but do you think there could be a market for both tests to co-exist and for physicians to use both in complimentary fashion, if you could comment on that? Thanks.

Mark Capone

Sure. I think it’s difficult to, at this point we haven’t really seen any published data from any other competitor product. And so, I think in the absence of that until data is made it through the peer review process and been in publication, it’s always difficult to understand exactly what type of information is available. So I don’t know that we can fully comment on anything other than some of the anecdotes we’ve heard to this point.

What we do know is that PROLARIS as currently defined has an opportunity for 230,000 men because it can provide insights not only to those patients that are at lower risk and don’t require as much intervention but also for patients that are at higher risk and don’t realize the level of risk they have.

And so, in addition to that as Bill mentioned, it’s indicated in both biopsy and post prostatectomy. And so, we haven’t seen any data that would suggest there is another test out there with those kind of comprehensive indications that are both in biopsy, post prostatectomy, low risk man, low risk man, we just haven’t seen any data on any other test.

And we think it’s because PROLARIS measures an independent marker which is how fast the cancer is progressing as opposed to just how far it’s gone or a correlation to how far it’s progressed, which is pathology. So I think it’s that independent nature that allows us to get those sorts of comprehensive claims. And I think until we see some published data on something similar to that it’s probably hard to make any additional comments.

Scott Gleason

All right. Well, thank you very much. We do have lunch in the room just next door to this room. And we’d be delighted to have you join us. Thank you again.

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