My apologies to cut the lunch time speaker but let me introduce or next company here, it’s Myriad. For those interested in the breakout, it’s going to be across the hallway in the Georgian Room, and let me introduce Pete Meldrum to tell you a little bit more about the story. Pete?
Thank you, and welcome to the Myriad Genetics presentation. Before I begin I would like to point out that I may be making some forward-looking statements, please refer to our SEC filings for risk factors that may cause those statements to differ materially from actual events. Myriad Genetics is the leader in the development and marketing of transforming molecular diagnostic products. Products that assess an individual’s risk for developing cancer later in life, products that help manage specifically to the individual based on their individual genetic makeup, their disease more efficiently. Products that save lives and improve the quality of life.
Myriad has launched nine commercial products to date and we have a strong pipeline of 13 additional products that the company is diligently working on. These products are marketed through our own sales force which consists of 350 individuals throughout the United States, and just recently we have opened our labs in the Europe as we begin to expand internationally. And our products are covered by a strong intellectual property state of 182 issued patents.
We are a June 30 fiscal year company, and we finished June 30, 2011 with revenues of $402 million. That represented an operating profit of $158 million. The company generates significant cash, $189 million of positive cash flow. And we apply that cash not only to reinvest in the company, but we completed a $200 million stock repurchase program as well. If you look at healthcare today, it’s very effective in the United States but it’s not very efficient. There is fragmented decision making, waste that goes on in the healthcare system, we don’t always know if an individual should be treated so there are unnecessary treatments. And I will talk a little bit about one of our products, PROLARIS, in prostate cancer, where there are many unnecessary surgeries that men take as the don’t know how aggressive their cancer is.
And Myriad’s solution to this is to develop products that prevent disease, an ounce of prevention is worth a pound of cure, so we lower cost by preventing the disease in the first place rather than waiting for an individual to contract the disease and then treat the disease. By diagnosing earlier when the treatment is more effective and the survival rate is more effective, and by guiding therapies for the individual’s genetic makeup so that they receive an optimal treatment regime.
Myriad has three strategic directives that we have focused on to grow revenues and expand our opportunities in the near term. We are certainly going to grow existing products in markets and I will talk about that in just a minute. But we have also developed now an international presence with the opening of our European facilities. And we are developing new tests and have a strong product pipeline, both in the molecular diagnostic field but also with companion diagnostics. All of these we think will fuel long-term growth for the company.
The first strategic directive then is to grow our existing products in markets. And I would like to talk briefly about the three of our products. BRACAnalysis is our flagship product. It is a test that identifies an individual’s risk for developing breast or ovarian cancer later in life. And the company is expanding that market by moving from traditional invasive breast cancer to developing information and support for triple negative breast cancer, carcinoma in situ, and expanding in the ovarian cancer market. And these three initiatives have allowed us to grow this market so that BRACAnalysis right now has a market potential of greater than $1 billion annually.
COLARIS is a similar product but focused on colon cancer and endometrial cancer. And we have recently improved the colorectal cancer test by adding a fourth gene to the panel, making it much more informative, called PMS2. We have hired a specialty physician sales force calling on GI docs to expand our outreach. And have experienced very strong growth, in fact, last quarter the COLARIS product grew 35% year-over-year. This represents about a $400 million annual market potential.
The newest product the company has launched is PROLARIS, which assesses a man’s prostate cancer and how aggressive that cancer will be. And I am going to talk a little bit more about each of these tests. PROLARIS has a $700 million market potential. When we think of BRACAnalysis, an individual who has a mutation in one of the two genes we test for, has an 86% chance of developing breast cancer later in life, and a 44% chance of developing ovarian cancer.
Obviously, those are fairly scary numbers. But armed with that information there are things that the patients and the physician can do to reduce substantially by over 50%, the probability that they are going to actually get the cancer. An increased surveillance so that they can catch the disease at an earlier stage when it’s more treatable. Not only is this information critical in terms of managing the patient’s healthcare, but it is very cost effective. If you look at cost effective medicine, which is about $50,000 for quality of adjusted life here saved, BRACAnalysis comes in at about 60% of that, or $30,600. So it is very cost effective, it saves the overall healthcare system money. And at the same time is critical in the managing of patient’s hereditary cancer risk.
Our fastest growing product and our second largest product is COLARIS. This is a product that we are only about 10% penetrated in, in the market. If an individual has a mutation in one of the genes [audio gap] that individual has greater than 93% chance of getting colon cancer at some point of time in his or her life. [audio gap] market opportunity, and we have expanded the market with the addition of the PMS 2 gene and are more aggressively promoting it with the specialty physician sales force.
The third product I would like to talk about is PROLARIS. If a man is diagnosed with prostate cancer, about 90% of us will actually have a radical prostatectomy or radiation therapy. And yet, most of us have a slow growing indolent form of the disease. An active surveillance where you don’t do anything but monitor cautiously that patient, would be a much better therapeutic response. There have been recent articles showing that there are too many unnecessary surgeries performed on prostate cancer patients in the United States, creating a burden on the healthcare system and lowering the quality of life for these men with prostate cancer. Because when you look at a radical prostatectomy or radiation therapy, you run the risk of side effects of incontinence and impotence.
It turns out that about 20% of those men have an aggressive form of cancer where this type of surgical intervention would be appropriate. And yet something like 90% are actually having the surgeries. PROLARIS is the first test on the market that actually can identify which of the men have an aggressive form of the disease and which have the slow growing form where active surveillance and watchful waiting would be appropriate. We are very excited about this product. We produced a paper at ASCO, where the data supporting PROLARIS was very strong and pre-prostatectomy patients and we are very excited about the opportunity for this product in the near future.
Our second major initiative then was to move internationally and we have chosen to move into Europe initially. We have three products that have received reimbursement in Europe. BRACAnalysis, COLARIS, and COLARIS AP. And we will be seeking in the future reimbursement for two other Myriad products, PREZEON and PROLARIS. Our headquarters are in Zurich and our main sequencing facility is in Munich, Germany. Initially we are going to focus on the five major market countries in Europe which is Germany, France, Spain, Italy and Switzerland. And then later on we will expand to the other smaller countries on the continent.
While the main sequencing is done at our facilities in Munich, the actual data interpretation is done at our headquarters in Salt Lake City, where we can leverage the infrastructure here in the United States. And then the information is sent to our headquarters in Zurich where the reports are actually issued out to the physicians and patients in the language appropriate for the various countries.
Myriad is very much focused on not only growing our portfolio and expanding within oncology and women’s healthcare, and internationally, but expanding to different disease states. Currently about 70% of our revenues come from the oncology sector, 30% from women’s healthcare. Yet, we are developing products like PROLARIS that would address the urology market. We have a product under development that the company in-licensed from a group called Melanoma Diagnostics. That product coupled with our Molaris which identifies your risk for developing melanoma later in life, will allow us to move into the dermatology section, we recently obtained an option to acquire a company called crescendo, which is very strong in the autoimmune disease area. And in particular rheumatoid arthritis. Again, which allows us to expand that as a new disease indication for Myriad.
And we announced the acquisition of RBM this past year. RBM is very strong in the CNS area, particularly the neuroscience area, and we are currently working on a product with them that we think is very exciting to differentiate between patients that have major depression and bipolar disease. So Myriad is expanding its disease focus and developing products across all of the major disease indications. If you look at the investment that we have done this past year, as I mentioned, we started off with the acquisition of rules based medicine. That allows us not only to expand into the neuroscience market, but they have collaborations with over 20 major pharmaceutical companies, and this helps us fill out our companion diagnostic franchise.
Also when you think of looking for markers that indicate which genes are involved in human disease and the role those genes play in human disease, we use three different technologies. Myriad is very strong in DNA analysis and RNA, but we lacked the third leg to our technology stool that begin protein analysis. And RBM was very strong in protein multiplexing and analysis and that completes our tool chest. Next we obtained an in-licensing of technology from a group called Chronix Biomedical. This is involved in the early detection of cancers, particularly colorectal cancer. Very excited about this market opportunity and I think this will represent a potential product if the science pans out, of significant value.
As I mentioned also we in-licensed technology from Melanoma Diagnostics allowing us to combine that product with Molaris and to expand our presence in the dermatology market. And finally we obtained an option on Crescendo Biosciences to acquire that company. This was a very low risk opportunity for the company. We obtained an option by loaning them $35 million at a 6% interest rate. If the company does not do well and meet our investment hurdles and criteria, the money is repaid to Myriad. If they meet the revenue target that we have set before them, then we have pre-negotiated a multiple of revenues for the acquisition price, and we will apply that $35 million to the acquisition price.
So Myriad has been very aggressive at reinvesting in the business for growing the business in the future. As I mentioned also, we have a very strong product pipeline. The company has not only a product pipeline internally but through the acquisition of Myriad RBM we have strengthened that pipeline outside of the oncology and women’s healthcare space. The next product the company will launch is the melanoma diagnostic product. This product allows a pathologist to take a skin biopsy and determine whether that biopsy is malignant or benign. And at 400,000 biopsies each year, it’s too difficult just by looking at the biopsy to determine if a malignancy is present. And so this I think would be a very valuable product to assist the pathologist in making that determination.
I would like to talk about two other products very briefly, both of those came through the RBM acquisition. There is a kidney damage product that can identify at a very early stage kidney damage in patients with type 2 diabetes. We are very excited about that market. That certainly is a significant market in terms of size. And in the area of the neuroscience field, it’s very difficult for psychiatrist initially to differentiate in many patients between whether or not they have major depression or bipolar disease. This is important because the drugs, the treatment for those two are very different. And if a mis-diagnosis occurs, it can actually harm the patient. And this test allows the psychiatrist to make a much more accurate determination in the early stage of the disease onset as to whether or not the patient has major depression or bipolar disease.
As you can see we have a very strong product pipeline and all of these products have multi-hundred million dollar a year market potential. The company has enjoyed strong revenue growth. Revenue is growing over the past five years from a $145 million to $402 million last year. About a 29% compound annual growth rate. And we have followed that with very strong earnings growth. Earnings growth growing from $32 million to $158 million last year. About a 49% CAGR. And we are very excited about the initiatives and the strategic directives we put in place to continue this exciting growth.
We reported our first fiscal quarter for September 30 with revenues of $110.5 million, that was up 20% over the prior year. We saw a good growth in gross profit and operating income of 17% over the prior year. And fully diluted earnings per share of $0.29, a 22% increase over the prior year. In addition to the revenue and income that the company has generated, we have a very strong balance sheet. The company has over $400 million cash in the bank. And this includes not only the acquisition and investment in research that the company has made, but as I mentioned we had a $200 million stock buyback as well. So we are generating a lot of cash and have certainly a strong balance sheet.
The company issued guidance which was confirmed back in November. That guidance includes a revenue range of $445 million to $465 million in revenues. That’s again double digit revenue growth. And fully diluted earnings per share of $1.20 to a $1.25.
I think Myriad Genetics has a very exciting and a bright future. We certainly are a very strong company financially with a strong balance sheet. We generate significant cash flow. Our products are well received in the marketplace and they have attractive gross profit margins. We have significant untapped potential with the existing tests as we growth the oncology market for BRAC and COLARIS. With the addition of new genes and the improvement of those products, and the addition of new indications in the market like triple negative breast cancer as we expand that market opportunity.
We certainly have a strong global commitment. And the company has again just announced its operations in Europe and we will be generating revenues for the second half of this fiscal year from the European operations. But we are also looking beyond Europe and focusing on Latin America and Asia as market opportunities down the road for Myriad Genetics. We have a very strong and deep pipeline of products. 13 products in our corporate pipeline and across multiple disease indications, not just oncology but the neuroscience, primary care, dermatology and urology market opportunities.
And the acquisition of Rules Based Medicine we have strengthened our companion diagnostic franchise. In addition to PARP inhibitors and PI 3-kinase inhibitors, where Myriad has a dominant position, given our IP protection, we now have collaborations with over 20 major pharmaceutical companies, where in concert Myriad and the pharma company are developing companion diagnostics with drugs that could represent exciting market opportunity for the company in the not too distant future.
And lastly, we have very, I think responsible deployment of capital. As I mentioned, our first goal is to invest in Myriad itself, and we spent about $120 million in acquisition of companies and in-licenses of technology. We invest very strongly and have increased our R&D efforts. And at the same time we have plenty of cash to return cash to shareholders and as I mentioned completed a $200 million stock repurchase just last year. And in August of this year the board authorized a second $200 million stock repurchase that we are in the process of doing as well.
So I think indeed the future for Myriad Genetics is very bright. With that I would like to thank you for your attendance today and this concludes the formal presentation. If you have any questions we will have a breakout session in the Georgian Room. Thank you.
(No question and answer session for this call)
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