Myriad Genetics Inc

NASDAQ:MYGN

Earnings Call Transcript 2024-Q1

[Operator]

Thank you for standing by, and welcome to Myriad Genetics First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Matt Scalo. Please go ahead.

[Matthew Scalo, executive]

Thanks, Latif, and good afternoon, and welcome to the Myriad Genetics First Quarter 2024 Earnings Call. During the call, we will review the financial results we released today, and afterwards, we will host a question-and-answer session. Our quarterly earnings release was issued this afternoon on Form 8-K and can be found on our website at investor.myriad.com.

I'm Matt Scalo, Senior Vice President of Investor Relations. And on the call with me today are Paul Diaz, President and Chief Executive Officer; Scott Leffler, our Chief Financial Officer; Sam Raha, our Chief Operating Officer; and Mark Verratti, our Chief Commercial Officer. This call can be heard live via webcast at investor.myriad.com, and a recording will be archived in the Investors section of our website, along with this slide presentation.

Please note that some of the information presented today contains 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 in the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K to document identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

I will now turn the call over to Paul.

[Paul Diaz, executive]

Thanks, Matt. Good afternoon, everyone, and thank you for joining us. On today's call, we will discuss highlights of our strong first quarter performance, provide an update on the progress to continue to make accelerating profitable revenue growth.

First, I want to thanks my Myriad teammates, to our provider partners their continued support and commitment to advancing our mission and vision to make precision testing and precision medicine more accessible and helping people take more control of their health.

Now turn to Slide 4 to talk about our highlights of the quarter. We continue to deliver on our commitment to shareholders as we achieved double-digit revenue growth in the first quarter compared to last year, reflecting both volume growth and ASP improvements across the portfolio. Our focus on profitable growth continues into 2024 as we reported positive adjusted EBITDA, and we're close to breakeven on an adjusted EPS basis in the first quarter. We're excited about the ongoing execution of our near-term strategic priorities that are driving growth and efficiency across the enterprise. We are seeing early wins in both oncology and women's health, related to recent market dislocation as we continue to reinforce our oncology offering with Precise Tumor and Precise Liquid, currently being integrated to This morning, we have a reorganization of our international operations that I will provide more detail on as well as progress standing [indiscernible] We continue to accelerate investments in clinical validation studies and EMR integrations. Large part of our transformation journey has been addressing our clinical validation data deficit. In 2024, we will go to ASCO and a talk with more publications, abstracts and posters than we've seen in a long time. Mark and Sam will speak for these and other strategic priorities on the call as well as important updates on upcoming product launches and data review.

Next slide, please. Our strategic areas of focus are directly aligned with our customer and the pillars we believe will drive long-term growth, innovation and profitability for shareholders. Every provider survey as we do and every customer interaction I have only point back to 5 things to provide us spectrum. Our customers want tests that have strong clinical utility and validity as well as the last partner with the most comprehensive testing menu that meets their needs. Our customers care about fast turnaround time and tested not place unnecessary burdens on their staff. They also want tests that are affordable for their patients. Our 4 strategic pillars address customer needs, which I will discuss on the next slide.

Top tier science and innovation or [indiscernible] genetics we deliver products that are clinically validated and use real-world clinical settings. We've invested heavily in technology through lab operations, automated, scalable and cost effective labs that are compliant with FDA quality management consistent requirements. Our team continues to make it easier to do business with Myriad of testing new platforms and results delivery, supported by our ongoing investment in the MRD integrations, our new universal order management activities and our patient provider portal. Finding these pillars with expertise cross-regulatory compliance and revenue cycle management, we find ourselves in a position to serve our customers at scale and product.

Next slide, please. Myriad announced the reorganization of our European operations, better align company resources to our domestic opportunity while continuing to serve key biopharma partners to patients outside the United States. As part of the reorganization Myriad signed an definitive agreement to sell our EndoPredict business, Scientific. We will license the right to continue to produce and sell EndoPredict as an LDT in the United States as part of Precise of College solutions. We will also license [indiscernible] right to sell Polaris future diagnostic kits outside the U.S. The strategic rationale for includes part of our continued effort to accelerate profitable growth while supporting our biopharma partners more efficient. This also allows us to better position Myriad towards other global businesses more effectively through strategic partnerships including licensing and distribution agreement. I would also call out is this does not affect Japan, which has been and remains an important market for Myriad. Transaction is expected to close in the second or third quarter of this year.

Last quarter, we announced the acquisition of Precise Tumor and Liquid from [indiscernible]. Sam will provide an update on the integration and the associated labs or new Salt Lake facility, which is making steady progress. Together, these transactions represent very capital-efficient ways to optimize in the Oncology portfolio. These transactions are expected to be accretive to earnings and cash flow in 2025.

I will close with comments on the FDA's final rule regarding regulation of tests. While we share many of the concerns raised by the industry regarding the use of the device framework of this industry oversight, we do view the final rule is generally positive for Myriad. as all of our clinical tests in and New York state requirements. We have a strong quality assurance of Myriad team as well as a long history of compliant with FDA quality tenants. We plan to be proactive in working with FDA to ensure that our products continue a new look regulatory requirements. Sam will cover this in more detail later on the call. Now I'll turn it over to Scott.

[Mark Verratti, executive]

Thanks, Paul. I will begin on Slide 9 to talk about our commercial teams. We continue to invest in tools and analytics that enable our commercial teams to better segment their territories and identify clinicians that could benefit from Myriad testing portfolio. We have seen positive results from the use of these analytic tools as the commercial teams continue to drive new and sustainable revenue growth. In the second half of 2023, we realigned our commercial sales force incentives from volume-based targets to revenue-based targets. Overall, the shift better aligns our commercial team's goals with the company's focus on reducing We believe that the 12% revenue growth and positive ASP trend in the first quarter, in part reflect our investment in these analytical tools and the realignment of our commercial team incentives, and our ongoing focus on revenue cycle management, which Scott will talk about in more detail.

Most importantly, these efforts position us well for continued positive momentum throughout 2024.

Next slide. Myriad continues to lead with differentiated insights offered by our hereditary cancer test. In the first quarter, hereditary cancer testing revenue grew 16% compared to last year, with volumes up 9% year-over-year. We believe this consistent growth reflects the combination of our reputation as a leader in this area, the commercial team doing a better job driving home our differentiated messaging, improving relationships with genetic counselors along with early competitive dislocation. Looking forward, we are excited about the omnichannel opportunity to drive Myriad's growth across all of our businesses, and we continue to accelerate our investment in clinical validation studies and EMR integration to address recent market dislocation with the most recent, with the most clinically differentiated hereditary cancer test in the market.

Next slide. As mentioned, no part of our portfolio has more upside potential than our hereditary cancer customer. Just for the unaffected population, there are an estimated 50 million women in the United States that meet guidelines for hereditary cancer testing. We are making good use of the analytical tools as mentioned previously to better identify and serve those patients. Additionally, through partnerships with LifePoint Hospitals we are expanding our reach even further. In the first quarter of this year, our Women's Health team grew our hereditary cancer testing revenue by 12% compared to last year where -- while our oncology team grew our hereditary cancer testing revenue by 20% over the same period. Our ability to serve more patients in both the unaffected and affected markets reflect these consistent results, and there is so much more upside for us to realize.

Next slide. Here at Myriad, we focus on ways to expand access to genetic testing. myRisk with risk score is 1 of the best examples of how we are going to act. RiskScore is the component of myRisk that expands its benefits for people of all ancestries the only polygenic risk score in breast cancer validated for women of any demographic. Not only is this a major differentiator for myRisk, risk score is an example of our commitment to expanding access to genetic testing and increasing equity for care for all people.

Next slide. myRisk has been in the news a lot recently as more people become aware of the importance of genetic testing in the preventative care market. In today's patient-centric health care ecosystem, many patients want to do their own health care journey, which is why we have invested in resources like history for patients to determine their breast cancer risk online or free and why we continue to provide free genetic counseling to anyone to take from cancer test. Myriad is not just a lab partner, we are also to advocate whose objective is to drive insights that help people take control of their health and increase access to genetic testing.

I will now turn to Slide 14 and talk about our prenatal business. In the first quarter, our prenatal revenue increased 22% and volumes increased 9% compared to last year, reflecting market share gains and ongoing initiatives to improve ASPs. Our commitment to support providers negatively affected by the market dislocation continues to drive volume for this business. While our disciplined approach in adding quality accounts to the franchise has resulted in strong ASPs for both Prequel and Foresight. We see even more upside for this business as we await ACOG guideline expansion this year. We believe the expanded guidelines will improve patient health and expand the market opportunity for carrier screening and our clinicians are already ordering larger panels from us. Once ACOG moves, we believe the rest of the market and payers will adapt as well, which will likely result in ASP improvement, considering a large number of expanded panels that we currently run that are often not reimbursed. We look forward to ACOG guideline update and the launch of Foresight Universal Plus later this year.

Next slide. In the first quarte GeneSight revenue increased 21% year-over-year as we reported approximately 124,000 tests in Q1. ASPs improved both year-over-year and quarter-over-quarter in the first quarter, reflecting improved revenue cycle management activities.

I want to end on Slide 16 and share with the pipeline for our products. I would remind investors of our upcoming launch, Foresight Universal Plus expanded carrier screening test in the context of anticipated ACOG expanded guidelines. This new test will feature an expanded panel as well as more efficient and cost-effective workflows. These guideline expansions would also support our multiple prescreening test, FirstGene, which we hope to launch later this year. We continue to adapt to our oncology offering with the addition of Precise Tumor and Precise Liquid from our recent acquisition. Sam will speak towards the progress we are making integrating both these tests into new labs. We are making tremendous strides in the of PRECISE MRD. Last quarter, we announced the research collaboration with the National Cancer Center Hospital East in Japan to use our highly sensitive precise MRD test.

We look forward to speaking more on MRD at ASCO this year as well as Myriad's other areas of research included in 7 abstracts accepted by ACO across HRD, polygenic risk orders, germline registry studies and our tumor-informed approach to whole genome sequencing.

Now I will turn the call over to our Chief Operating Officer, Sam Raha.

[Samraat Raha, executive]

Thanks, Mark. Let me start on Slide 18 and provide an update of our Lab of the Future program. A quick reminder that the overall objective of this program is to drive innovation and operational excellence to continue delivering high-quality testing results at scale that meet regulatory requirements while shortening turnaround time in support of our ongoing focus to improve patient provider experience, all of which continue to differentiate us from other labs. As you may recall, we completed construction of our new lab in South San Francisco and Salt Lake City in 2023.

Highlights from Q1 of this year includes completing and passing clinical inspections, a New York State in Salt Lake City by the state of California and Clea in South San Francisco. We also completed the validation of Prequel, our NITS assay in South San Francisco and completed the first year of bringing up Precise MRD assay workflow and Salt Lake City. Our plan for South San Francisco remains to complete the move in, workflow validation and full-scale lab operations by the end of 2024. For our new Salt Lake City lab, we remain focused on completing the move-in process as well as the validation of sample processing for most of our oncology assays by the end of 2024 and running those assays at scale by the end of Q3 and 2025. We are also in the process of integrating recently acquired Precise Tumor, Precise Liquid test into our new Salt Lake City facility. Let me talk more about that now on the next slide.

You may recall that we completed the acquisition of select assets in our Mountain Precision Genomics last quarter, including lab instrumentation, workflows and Precise Tumor and Precise Liquid assays, which, together, these 2 are genomic profiling tests for therapy selection that are part of our overall Precise Oncology Solutions portfolio. Our immediate focus has been on retaining employees associated with the acquisition as well as testing contributing for providers as we move these operations to our new Salt Lake City facility.

I'm happy to share that we have seen great engagement from our new team members and that turnaround time has already been reduced under our direct oversight. We've advanced our lab transition planning and started moving some instrumentation to Salt Lake City within the quarter. We expect to start processing Precise Tumor samples in Salt Lake City in Q3 of this year as we also advanced our work on Precise Liquid. And by the end of 2024, we expect to have completed the lab move entirely and to fully be operational for sample processing reporting in Salt Lake it.

Next slide, please. Building on what Paul shared last week, the FDA released its final rule regarding the oversight of lab-developed tests or LDTs. Adding to Paul's comments earlier, our current view that this finalized version of the rule is more favorable than the preliminary guidance. We believe that Myriad is in a good position to work within the new framework. First of all, the rule provides a continued path for LDTs approved by New York State Department of Health to serve the market without requiring a additional analytical or clinical validation through the FDA. And again, all of our on-market tests meet CAP, CLIA New York State requirements. Second, we have a strong quality assurance, regulatory affairs organization for over a decade of meaningful experience collaborating with the FDA on regulatory submissions, including 2 FDA-approved tests, CDx and the BRACAnalysis CDx. We've also built and maintained a robust quality management system, which is the foundational element of all the patient samples that we process we report on. While we are optimistic about the FDA's new rule, we are also aware that the FDA intends to review associates with LDTs and could review the sufficiency of analytical and clinical validation data for LDTs that are approved by New York State.

Finally, I have personal experience running a business that is regulated by the FDA. And since joining Myriad, I've been working closely with our teams to prepare and plan for increased FDA oversight and how we can use the LDT rule as a competitive differentiator for Myriad.

Turning to the next slide. I'd like to end with an update on select operational highlights from the first quarter. We are proud to have a high level of organizational engagement across the company, reflected in a single-digit employee turnover level. In terms of market penetration, health care providers among our most important constituents. Their satisfaction with Myriad Genetics led to NPS or Net Promoter Score of 74 in the first quarter, up from 70% for the full year 2023, a figure that has continued to improve over the past few years. This is a testament to the focus and investments we continue to make in the patient provider experience.

In terms of efficiency and productivity, this quarter, we increased commercial productivity by 11.5% compared to the last quarter as a result of the continued execution of our commercial transformation that Mark and his team are leading, including improved sales planning and process optimization.

With that, let me turn it over to Scott Leffler, our CFO. Scott?

[Scott Leffler, executive]

Thanks, I'll start on Slide 23. We delivered a strong overall performance in Q1, led by a 12% revenue growth year-over-year. This growth was mainly driven by hereditary cancer testing, prenatal testing and pharmacogenomics and speaks to internal initiatives such as an improving customer experience and continued execution by our commercial. Mark provided commentary as to how the commercial team with enhanced analytical tools are addressing health care provider needs and more effectively generating revenue growth.

We believe these activity, in addition to ongoing progress in revenue cycle management were important drivers of our Q1 ASP improvement, up 2% over the year ago period. Historically, ASPs in the first quarter tend to be soft due to resetting of deductibles and other adjustments beginning of each year. So the fact that we are starting off 2024 with such as strong ASP performance bodes well for the rest of the year.

Next slide. On Slide 24, we revisit some of the revenue cycle initiatives discussed at our September 2023 investor event. We have made progress on multiple fronts, including ramping up EMR integration, improving prior automating our billing process and expanding payer coverage. Myriad has seen a number of payers recently expand coverage of average risk population to benefit First quarter revenue reflects approximately $3 million from a single payer of expanded coverage of these average as well as other immaterial favorability from period adjustments. We are pleased with this continued progress against our long-term goal to reduce our new pay rate, complementing the volume generating potential of the business.

Moving to Slide 25. I want to highlight our financial performance by the quarter. First quarter adjusted gross margin of 58.5% improved 80 basis points compared to last year, overcoming associated with the IPG Lab and Precise Tumor and Liquid assets. which were acquired in February of this year and are still being integrated. First quarter 2024 adjusted OpEx of $139 million increased sequentially from the fourth quarter of 2023 but decreased by 4% year-over-year. As reflected in our full year 2024 guidance, we expect our full year OpEx run rate to be higher than the Q1 amount as we ramp up spending to accommodate growth and strategic Our strong revenue growth and margins in Q1 drove a significant improvement in overall profitability, including an adjusted EPS loss of only $0.01 versus a loss of $0.21 in the first quarter of 2023 as well as $4 million of positive adjusted EBITDA compared to a loss of $19 million in the prior year period.

Regarding financial flexibility on Slide 26. We finished Q1 in a solid position with approximately $104 million in cash, cash equivalents and marketable investments and have $41 million of availability under our credit facility. The first quarter is typically a high cash burn due to seasonal effect. However, we saw a meaningful year-over-year improvement in adjusted operating cash flow with an outflow of only approximately $9 million in the first quarter of 2024 versus an outflow of $25 million for the first quarter of 2023. Importantly, adjusted operating cash flow is expected to be positive for the remainder of 2024.

On Slide 27, we reiterate our full year 2024 financial guidance for revenue between $820 million and $840 million, representing annual growth between 9% and 11%. Our strong performance positions us well to meet or exceed our revenue guidance range, but I would also note that there are areas where we will increase spend to accelerate actionable commercial opportunities and a changing competitive landscape to further drive the top line that Mark touched upon. An example of that accelerated spend would be our EMR integration numbers, where new customer wins are often dependent on our ability to meet the IT requirements of us. Overall, we are optimistic regarding the business trends and the company's ability to grow at or above industry We remain comfortable with full year gross margin rate of 59.5% to 70.5%, with adjusted operating expense growth between 5% and 7% and and adjusted EPS between breakeven and $0.05. Now let me turn the call back to Paul.

[Paul Diaz, executive]

Thanks, Scott. We continue to build on the pillars of long-term growth and profitability that delivered our strong results in 2023 and the first quarter of this year. Our clinically differentiated products supported by technology, deliver value in real-world clinical settings, and enable early detection and better treatment decisions for providers and their patients. Our modernized labs, commercial engine are examples where investments in automation and advanced technology are yielding improved workflows, faster turnaround times and reduced operating costs. All of this reinforcing our position as a trusted differentiated lab, specialized expertise, quality, the strong, scalable commercial underpinned by data, research and technology with industry-leading margins and business health. We continue to energize the enterprise around our shared vision, genetic testing and precision medicine more accessible, helping people take more control of their health and who they will provide us to better treat and prevent disease.

I'd like to now turn it back over to Matt for your questions.

[Matthew Scalo, executive]

Thanks Paul. As a reminder in today's call, we use certain non-GAAP financial measures. The reconciliation of the GAAP to non-GAAP financial results and GAAP to non-GAAP financial guidance can be found in our earnings release under the Investor Relations section of our website. Now we're ready to begin our Q&A session to ensure broad participation. [Operator Instructions] we are now ready for the Q&A portion of the call.

[Operator]

[Operator Instructions] And our first question comes from the line of Matt Sykes of Goldman Sachs.

[Matthew Sykes, analyst]

Congrats on the quarter. Maybe Paul or maybe Mark, just talk a little bit about the runway that you see for future market share gains in both hereditary cancer and prenatal. You made some comments that it sort of just at the beginning, so would love to know kind of where you see that runway and how long? And then how sticky the new relationships that you're building? I'd assume if you get those relationships, it's probably easier to keep them over time post winning them. I just want to get some color around that.

[Paul Diaz, executive]

Yes, Matt. Well, first, it's an early phase of this, particularly for large accounts, these institutions take a while to make changes. I would say what's happened and Mark will elaborate here is that we're in the room now, certainly with 2 or 3 other competitors and people are revisiting their choices. And as I said earlier, we're really focused on the things that they tell us they care about, ease of use, clinically differentiated products. And that's where EMR and the other point of care things really matter. But you're absolutely right that these relationships, I think, will be stickier. I mean you know I come from a large hospital system world that once these institutions make changes without the disruptions that we're seeing now, it's very hard to kind of get in. Now that being said, the genomic testing is not #1, 2, 3 or on the list of a hospital system priorities. But we're pretty excited. I think that expectation should be, though, that the business we hope to sign in the back half of the year certainly could give us a lot of momentum going into '25. But you really won't see -- what I think is a big opportunity to fully come through until '25. But Mark, why don't you take

[Unknown Executive]

Yes, I would agree with that, and thanks for the question, Matt. I think not to speak over Paul here. I think the benefit is, we are at the table. Myriad is perceived as best-in-class. And so I think we are at the table. These providers, even though there is dislocation, they've got lots of other priorities. And so we think of it as it's going to take a couple of quarters for us to really accelerate. But as Paul mentioned and as I mentioned during my comments, for the myRisk business with EMR integration and all the investments we are making, that really suits us well for the back half of the year and going into 2025.

[Matthew Sykes, analyst]

Great. And then maybe just as my follow-up, a related question. Perhaps, again for you, Mark, just given the change in incentives for the commercial team to revenue from volume, does that help salespeople target the right customers? I'm sure in this market dislocation, there's a number of customers that might not be economically viable? And this change in incentive does it focus your salespeople on attracting the right customers? And what has the reception been from your commercial team to this change in incentive?

[Mark Verratti, executive]

Yes, Matt, you are spot on, right? I think when we make those changes, it it just allows our team to focus their attention. It isn't that we're excluding any particular patient or any particular provider. But from a point of focus and even to Scott's comments, just all of our efforts around revenue cycle management, making sure that the order, making sure that the provider knows what the guidelines, making sure the provider has an understanding that what the specific payer coverage is in making sure that at time of ordering, we're collecting as much information as we can, absolutely allows us to be able to pull through increased ASP. And that's something that I think in this space, Matt, just really was not teams -- just really didn't have that type of focus. So I would definitely agree with you there. And I would say the acceptance from the sales force has been 100% aligned. That's -- obviously, that's how they get paid. That's how they get compensated, but it's also about the way that they spend their time in the field, right, where they're not wasting time focusing in areas that aren't going to best for the company and they're certainly not going to benefit them.

[Paul Diaz, executive]

And what we're perfectly I mean I've talked to sales teams about this. They understand now that maybe a point of volume is worth giving up to get 3 or 4 points of revenue. We are just much better online now. And I think you started seeing that inflection and that change in the quarter because they are very much now aligned with the revenue cycle management initiative. And again, as Mark said, and at our different national sales meetings and stuff. We have not got pushed back because we really help them embrace us as far changes. So I think you'll see that net benefit play out over the course of the year and accelerate it

[Operator]

Our next question comes from the line of Doug Schenkel with Wolfe Research

[Douglas Schenkel, analyst]

I want to start with a high-level one. Scott and Sam, it's now been a few months since you joined the company. I'm curious where you are in the process of essentially evaluating the firm, evaluating your teams. Essentially, what's better, what's worth? It just would be interesting to get an update on kind of your early learnings and kind of what -- where you think you are in essentially starting to play offense in your leadership roles at the new firm?

[Scott Leffler, executive]

Sure. I'll start off and then hand it over to First of all, thanks very much for the question. We could not be more thrilled to be at Myriad, but also with everything that I've seen and learned both about the company itself and the momentum that it has, but also in terms of the overall broader market opportunity that we see in front of us. I just feel privileged to have joined the company here, but it's a very special inflection point where so much great work and so much great investment as already done. And I think you can see a lot of the fruits of that effort in our results from Q1 but also to now and is in front of us in terms of the ability to accelerate for us at going forward. And so if there is any learning that I've had in the last 3 months of the company, it is how extraordinary product business has been a bit the momentum also that [indiscernible] forward.

[Paul Diaz, executive]

Yes. Thanks, Scott. Thanks for the question, Doug. I concur with what you said, Scott. I'll tell you that I have a vantage point of coming from some other larger companies that you're aware of. And I would put our team on par with any of them.

[Mark Verratti, executive]

It is a focus on, as Paul was mentioning, understanding location first, the science, but the operational execution to deliver timely results, body results. I think all of those things are exactly what is needed for this next phase of our journey. And I also -- it's taken time, not as obvious one coming from the outside, just the level of transformation on so many different fronts that this company has really executed on the last 2 years. And it's -- I think there's a lot of return yet to be seen from that. And of course, now Scott and I joining this great organization. We have an opportunity, a healthy part of taking us to the next level. So not only do I have no regrets. This is exactly what I want

[Paul Diaz, executive]

And Doug, I'd only add that Dr. George just been an incredible addition an oncologist physician, health systems, oncology business. I mean, he has had such an impact just over the last couple of months and Dr. Dallas Reed on our Equipment Health side. So the company bills, the team build is happening at many different levels. And these 2 guys have just been great. They're freeing us to do lots and lots of other things, and we saw a little bit of that this quarter with some of the strategic stuff. So I couldn't be more pleased with our new partnership. .

[Unknown Analyst]

That's fantastic. And maybe I'll just try to sneak in one more on an unrelated front. Regarding the LDT final rule, I appreciate what you shared in your prepared remarks. For whatever it's worth, my take was this kind of turned out to potentially be a pretty big advantage for Myriad. I'm just wondering if you guys by and large agree. And as we look forward, recognizing this is going to take a few years to phase in. Does this change anything as you think about how you develop assays, how you go to market, how you think about things competitively. Again, I think this increases barriers to entry for others. And this may even boost your position as a consolidator. So I'd love to get any comments on where you agree or disagree with my initial thoughts on this?

[Paul Diaz, executive]

Yes, I'll start and can add. I agree, Doug. I mean, I think that this is going to be very difficult for subscale operators. We have been preparing for this stuff for years, quite frankly. We began to develop our plans to last in the future. It was not just a real estate play. It was an automation strategy. It was to have a quality management system with full knowledge that this was coming. We feel lucky and that the investments we've made over the last decade in those quality management systems now can be leveraged both in our existing products, modifications to our existing products and future products. So clearly, we think this is going to be a competitive advantage. And the capital markets taken together with this, I think it's going to put a lot of pressure on folks whether they're health system, up and coming lab operators or others. Sam's doing a great job of holding the team together and you can talk a little bit about every single one of our products is going through the product management with respect to these rules that we've been working at. That's the one.

[Unknown Analyst]

Yes. I mean I concur with everything Paul said. I mean it really answers your question, Doug. But just to build on what Paul is saying we have been preparing for very diligently going through every single product we have on market and that we're preparing to launch some the things that Mark talked about with an eye to all those critical elements, right, not only quality management systems, but what are the studies that need to be done? What is the labeling approach and all doing that while we meet the most important thing, heard all myself talk about over and over again, right? We have to make sure the quality stands there, but the tests are relevant, audience there that the turnaround time is there, and we need the test accessible. So I think this is going to be I don't know how folks that are outsourcing their lab operations to get to 70% gross margins and do it consistently, meet these new requirements all the same time. So I think it will be quite a challenge for yourself.

[Operator]

Our next question which comes from the line of Dan Brennan of TD Cowen.

[Daniel Brennan, analyst]

Congrats on a strong quarter. Maybe first one, obviously, you had a really solid start to the year. You maintained the full year guide. You talked about, I think, just prudence. But could you speak to -- it didn't sound like there were -- I think you called out $3 million maybe in prior period benefits, so most of the beat was all organic. So is there anything that would prevent you from seeing this strength to continue? Just wondering why not kind of raise the right now?

[Paul Diaz, executive]

We agree, We're just putting one front or the other here. It's a really strong start to the year, particularly on the ASP side that we run through the year. And we certainly can build on that, hopefully exceed guidance as we go through the rest of the year, but just didn't see to get ahead of our note at this point.

[Matthew Sykes, analyst]

Got it. And then maybe on the hereditary cancer side, the oncology side, really beat our forecast women's health was strong, but more in line. Just could you elaborate a bit more on kind of how much the benefit was from the share gains that you're seeing from the dislocation versus some of the ongoing initiatives that you have? And presumably, there's still a lot more share gains ahead given the size of that business, that one bankrupt. So just a little more color on kind of what you saw this quarter teasing it out and kind of what's assumed in the guidance going forward?

[Mark Verratti, executive]

Yes, Dan, this is Mark. And I think we called it out that in Q1, most of it was just our ongoing blocking and tackling. I think you're always winning share back and forth. So we would expect, as we mentioned earlier, that any incremental gains would happen in the back half of the year.

[Operator]

Our next question comes from the line of Puneet Souda of Leerink Partners. .

[Puneet Souda, analyst]

I just want to clarify the European EndoPredict business, if there was anything for that in the guide? And just wondering, I know you have reiterated the guide, but just wanted to clarify that point. And then I have a follow-up.

[Paul Diaz, executive]

Yes. No, I would say that both of the strategic transactions, we sort of are incorporating within the guide. And so and being able to reposition the portfolio with the additions of Precise Tumor and Precise Liquid, reorganized our European operations become much more efficient in the way we were serving that market pretty extensively. And to put a little more cash back on the balance sheet. These are both very capital-efficient transactions and whether it's on the revenue and the profitability side within our guidance for '24 and accretive to earnings and cash flow in '25. So -- we are really excited at this market that we are picking and choosing our opportunities, and we think there'll be more in terms of bolt-ons and strategic acquisitions going forward. But these are the kind of stuff that we want to keep doing saying or different philosophy

[Puneet Souda, analyst]

Got it. Okay. And then just following up on that, I mean, when you look at portfolio optimization sort of that you have done the focus on Precise Liquid and expansion into therapy management and also MRD sort of, Paul, just walk us through how you think about further either trimming of the portfolio or as you said, potential expansion, other strategic options that you might pursue, given sort of where the state of the market is right now in diagnostics?

[Paul Diaz, executive]

Yes. When I push and physicians, and we're certainly going to ask over these questions for like what are the key precision benefit tools you need to treat a cancer patient, breast cancer patients, et cetera, hereditary cancer always comes up first, somatic second, Liquid third, and MRG, interesting new novel technology floor. So we're just very excited over the next couple of years, we're going to have a place where you can get those primary key tools to treat and monitor the progression of patients in one place in an EMR with consolidated reports. And I think that is going to be a big differentiator from others who are trying to string together this, and all of a sudden, cancer seems be interesting. What I got here, everybody thought it was a dead bounce kind of thing. So we kind of like the portfolio position. That being definitely -- we are investing in innovation. We're investing in building more studies as we referred to on the call. That's a place where we have a playing catch-up, going to have to an ACOG with more studies and more readouts that we've had in years. And we'll certainly be watching the marketplace for great client innovation that fits within our portfolio. But we're going to stay pretty disciplined on the indications that we're focusing on and the channels where we think we have

[Operator]

Our next question comes from the line of Andrew Cooper of Raymond James.

[Andrew Cooper, analyst]

Thanks for the question. Maybe just first kind of sticking with the OUS transaction. Can you maybe just give us a little bit more of the thinking on sort of circling the wagons fear on the U.S. opportunity and what our takeaways from that should be? Is it, hey, we're just really excited about the opportunity here and don't need to worry about the European efforts in the same way we have before. Like what should our takeaway really be on that decision? .

[Paul Diaz, executive]

Yes. I would say that the thesis is generally the complexity is a killer of growth, accountability and operating in Europe is both complicated and expense Every single country has a certain requirement. We were going to be [indiscernible] of satellite labs everywhere to go through their regulatory process, [indiscernible] wasn't worth the for the your that's where they live, that's when they do business. They're great at kits. And so for us to continue to serve through distribution arrangements in our LDT operations, Salt Lake to continue to expand in Japan, where we have a growing and very profitable business. And yes, resources, we have to be very efficient. So investing in studies, investing in EMR has higher returns on bringing in this new business opportunity we see through the consolidated market where Europe is a much longer term and a more complicated process. So that was really what went into the

[Unknown Analyst]

Okay. That's helpful. And then maybe just shifting to the P&L a little bit. Would love a little bit of flavor? I know you shared a little bit, but on some of the ASP dynamics maybe across some of the different areas of the portfolio. And then also just if we think about the ramp in OpEx through the year, can you give us a breakout of how much of that we should think about is true kind of new product growth that you're trying to drive and new efforts versus sort of maintaining the growing base that you have?

[Paul Diaz, executive]

I'll take the second one and let Scott take the first one. We're continuing to try to get productivity gains across all OpEx, whether it's commercial, in the support center and trying to repatriate dollars to R&D, the clinical studies than to IT, where we know we have very quick returns on investment. So we expect to stay within that 5% to 7% growth. I'll just remind everybody, over the last couple of years, we've gone exactly because we were and we've done that again this quarter, and you're really starting to see the leverage of this operating model is for. And so we -- we maintain that we can manage within that 5% to 7%. But within that, we may push the 7% growth in OpEx, but a higher percentage of that, call it, 10% to 15% growth in the R&D and tech spend, while the other areas is really wages and cost that are in the 4% to 5% range all. So that's how I would think about that. No big investments beyond that 5% to 7% range in our OpEx, you'll see some ramp up over the course of the year and just a great job by the team starting this year in terms of actually beating budget in the first quarter. So you will see a little bit ramp each quarter as we invest getting ahead of the launches and the studies that we're rendering.

[Unknown Analyst]

Yes. So I'll take that with your first question on ASP. And I'll just remind you that on the last earning call, you can talk a little bit about the fact that -- looking back on 2023, our overall ASP performance for 2023 actually it was a little bit worse than we would typically expect. And so coming into the year, we already saw that there was an opportunity to really perform even better than we would typically hope for us given the ability to recover some of what was lost last year along with incremental organic improvement from the various initiatives that we've talked about. But really, I would say that it's just been an extraordinary success so far this year. And here is the more or less across the Board in the individual product level, if you see outsized ASP games. And when you look at the performance where I think we felt that a 2% contribution from ASP. In some ways, a high certificate is improvement in an individual product level -- because you have a little bit of product mix that it is impacting that blended number, but really what we're seeing almost across the board is much greater than that improvement in ASP. And that's something that we believe certainly is sustainable and based on the number of initiatives we continue to have that play so they build on going forward. .

[Operator]

Our next question comes from the line of Rachel Vanda of JPMorgan.

[Rachel Vatnsdal Olson, analyst]

So first, I just wanted to dig into seasonality in 2Q expectations. Last quarter, you provided guidance for 12 month top and bottom. So I was wondering if you could do something along with lines for 2Q as well. So first up, how comfortable are you with the Street at around $200 million of revenues and roughly $0.01 of loss per share? And then given some of the moving pieces that you highlighted today, reaching from LDT to some of the product launches and competitive dynamics, how are you thinking about the various segments performing in 2Q?

[Unknown Executive]

So that was a lot and fast. So first, we did not give Q1 guidance, and we're not giving Q2 guidance. I think directionally, the Street is a pretty good place in terms of where our estimates are for Q2, building on our Q1 success. There's nothing that we're seeing in the assets for Q2 that trouble us. I would encourage folks not to get ahead of us here. Again, since there's a lot of moving parts with last the future and everything else going on. But on individual products, it continues to be a story of continuing to grow Q2 is typically a stronger quarter for us in terms of volume. And Scott just said, the ASP tailwinds that we have to continue in the year. So that does bode well very strong year, even without big market share gains, as Mark said, it will probably happen later next year, later this year, quite frankly, strong momentum going into '25.

[Rachel Vatnsdal Olson, analyst]

Great. And then just on my follow-up around ACOG, you mentioned that ACOG guideline expansion would be upside later this year if we were to see it. So I guess, what's your latest assumption on when we could see an update from ACOG? I appreciate it's not embedded into guidance at this point. And then I just wanted to talk for a minute about market share regarding 2Q. One of your peers out there has more of an opt-out strategy when it comes to 22Q testing. I know you guys have focused more on the profitability side and have more of that in type of strategy. So when ACOG eventually expand or guidelines, should we see that positive guideline inclusion? How do you see that playing out from a market share perspective given that shift between opt-in and opt-out?

[Paul Diaz, executive]

Yes. We just released the study on 22Q, which was showed the power prebook,quite frankly, and differentiated from everything else in the market, quite frankly. And so if 22Q is included in a costive line, we think that will give us just another reason to continue to win share and win share that's profitable. The thing that I just want to keep underscoring for everybody is profitable growth here. That's what we're focused on, and that's what we delivered this quarter, and that we're going to continue to deliver. But you're absolutely right. The expansion of ACOG guidelines should they happen, we think both will broaden adoption as well as improve ASP. And the lack of Foresight Universal Plus will include those genes that we expect. So we're holding off until we see that, and that kind of just goes to the product management discipline overall. We want to make sure that we are not launching products that are not in guidelines and that we don't -- that we have a tax payment, which is the thing that I think the industry is finally grappling on with launch is not just having your your studies and going out and selling on your product, it is also having an eye for getting paid and running it through your lab efficiently. And so that's the balance we're trying to bring to product management. But the expansion of guidelines to be a great tailwind for us going into next year. If they are adopted as we spoke later this summer, and we're all kind of up to if there in 22Q would be also just great to have in that context.

[Operator]

Our next question comes from the line of Subu Nambi of Guggenheim Securities.

[Subhalaxmi Nambi, analyst]

Got it. On reproductive health, a couple of larger players have exited the market. And you clearly have made progress in capturing share, but how are you gaining share without compromising on going forward in the business model of [indiscernible] the market?

[Paul Diaz, executive]

I'm not really sure if I followed, you didn't come through particularly clearly. I think the question was how are we gaining share profitably. I'm sorry, could you just restate the question, please?

[Subhalaxmi Nambi, analyst]

Can you guys hear me now?

[Paul Diaz, executive]

It's a little better. But yes, maybe just a little louder.

[Subhalaxmi Nambi, analyst]

Okay. So on reproductive health, a couple of larger players have exited the market, and you are clearly making progress in capturing share. But how are you gaining share without compromising margin given the business model of those that exited given the business model of those exited margin market tend to really focus on the margins?

[Paul Diaz, executive]

Yes. So good question. We absolutely are trying to be there for customers. As Mark said, we see patient. We don't see payer. But that doesn't mean that we are not focused on making sure that we are bringing on business with good margins that we can do it effectively. So I think what you've seen over the last 2 years is our ability to grow and grow more profitability, and you saw in the last 2 quarters. So it is about profitable growth, maintaining those gross margins near 70%. That will fluctuate sometimes from quarter-to-quarter, depending on mix and other factors, but we've stayed in that 68% to 70%. And think we could probably do a little bit better as the year progresses here, but absolutely committed to not just bringing on business to win business, but to bring on business that is profitable and that generates cash flow. If you look at our cash flow conversion and you look at our 50 days and DSOs, we've got to convert billings into cash. And ultimately, I think that's what disciplined businesses need to do, and we're trying to do here.

[Subhalaxmi Nambi, analyst]

Super helpful. And one last one for me. On MRT, any updates on clinical data, how is the enrollment progressing? And are you still planning commercial launch in the back half of next year?

[Paul Diaz, executive]

Yes. So there'll be some additional studies at ASCO. And then we are expecting to get a readout on an R&D Anderson study this fall, late summer. And in addition, we will be running samples for pharma in July, I have told. So I think Q3, Q4, we will have a lot more to talk about the progress we're making with the study, but everything is progressing there. We have another patent we're expecting to get issued here shortly. So while we -- we wish we were making more progress, we are going to be investing in some additional studies. But so far, my understanding for sale is that they're running through the labs really well. Sensitivity is high. Our partners are really pleased with what they are seeing in terms of the results, and we'll be talking as said more about this at ASCO, including with our partners at MD Anderson.

[Operator]

Our next question comes from the line of Mason of Stephen Inc.

[Jacob Krahenbuhl, analyst]

This is Jacob on for Mason. Congrats on a strong start to the year. It's sort have been covered, so I'll maybe just keep it to one here. But could you talk a bit about the early traction you're seeing within your oncology portfolio after acquiring Intermountain? I realized launching Precise Liquid and your MRD offering will be big drivers of this opportunity. But have you maybe seen an increase in the number of docs or in multiple tests within this segment yet?

[Paul Diaz, executive]

Yes. I mean I think that it's still early this day here. The first thing was to make sure that we integrated it. Sam and the team are doing a great job there. And we've seen a slight increase, but the real push will happen later this year once it's fully integrated and going into '25. It's not really envisioned to be a driver of our for this year. But we do see Precise Tumor numbers overall growing and not just in terms of the Intermountain deal. And now we control 100% of the P&L. So it's not just sort of the allocated part of the P&L. So that is starting to contribute. But I think what you'll see coming out of ASCO, is a big push in terms of our oncology team about preparing a hereditary cancer with precise tumor. And that really sets the stage for liquid next year and MRD. So stay tuned. I think we'll have a lot to say at ASCO about how this portfolio comes together in terms of Precision Medicine tools for oncologists particularly for breast cancer patients, but for other indications as well. And that's what we'll be highlighting at ASCO. We're pretty excited about the feedback we've gotten from oncologists in terms of that as reviewed preparation.

[Operator]

Our next question coming from the line of Michael

[Unknown Analyst]

This is John on for Mike. I wanted to ask on GeneSight, great volume, ASP and did better than our models, so exceptionally well. Could you provide any update you've had in terms of improving the coverage, like what states and blue plans are next for you? And what's in your guide versus what can be an upside?

[Paul Diaz, executive]

It's -- as Scott said, it's just blocking and tackling right now. It's -- we haven't even really fully leveraged the biomarker piece just yet. We're probably don't want to call an individual states, but we are amping up a couple of states in the office and other places. But it's been a number of different wins, $1 billion a year, $1 billion there. Also you're talking about a nice lift in ASP and just gaining more traction on coverage with large in terms of GeneSight and also improving requirements and working with CMS, Medicare Advantage plan with respect to along with other industry participants. And again, as Scott said, it's been across-the-board effort across all our products in terms of seeking out places where we didn't have coverage even for myRisk hereditary cancer, where we had certain Blues plan that we're not covering. And as Scott said, last year was a really tough year from ASP's perspective, and we're seeing the results of that turnaround now working through some of those coding changes and other things. And we think, again, that momentum will continue. We'll build on that throughout the year and going into '25.

[Unknown Analyst]

Got you. Understood. And then on the flip side, if I could ask for the tumor profiling, any thoughts on -- any thoughts on how the volume and the ASP is going to go there?

[Paul Diaz, executive]

Yes. The tumor profiling was impacted because we had a really big win in Q1 of last year with a couple of biopharma partners. So it was really the biopharma revenue that skews that performance. myChoice has been a little down because it changed the average risk. But overall, that negative 17% was driven by the fact that we had a big win in Q1 of last year with 2 or 3 being partners. The biopharma business is very lumpy. So we're not really -- not really clear. We always get paid. It's always really good business, but sometimes it falls in Q1 and sometimes it falls in Q3, so we still are excited about the prospects of building that business, and that's something Sam impacted we're really partnering up on.

[Operator]

I would now like to turn the conference back to Paul Diaz for closing remarks. Sir?

[Paul Diaz, executive]

Thank you, everybody. Thanks, everyone turning up for me today. So I appreciate you guys spending time on the call today. I just want to thank my teammates for all their hard work. It was actually a difficult operating quarter. We had a few issues at the lab. We had to work through the team rally. And again, we're just really pleased at the start of the year. Appreciate you all of you participating in the call today and your support. And again, I hope that you are starting to see, as Scott said, just at the beginning of the process here of us really starting to grow Myriad Genetics. And I think you can expect and should expect more from us as the year progresses. So thank you all.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect. Goodbye.