Myriad Genetics 2026 Q2 Earnings Call

Please go ahead. Good afternoon, welcome to Myriad Genetics' second quarter 2026 earnings call.

During the call, we will review financial results we released today, and afterwards, we will host a Q&A session. Our 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. On the call with me today are Sam Raha, our President and Chief Executive Officer, Ben Wheeler, our Chief Financial Officer, and Brian Donnelly, our Chief Commercial Officer. Joining for Q&A will be Mark Verratti, our Chief Operating Officer. This call can be heard live via webcast at investor.myriad.com, a recording will be archived in the investor 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. 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 SEC, specifically the company's annual report on Form 10-K, its quarterly report on Form 10-Q, and its current report on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. I'll now turn the call over to Sam.

Thanks, Matt. Good afternoon, everyone, thank you for joining us. Let me dive right into our second quarter performance and key actions we're taking to create a more focused business and can drive accelerated growth and profitability as we go forward. Second quarter total revenue of $190.7 million was down 11% year-over-year, as volume decreased 1% and revenue per test decreased 9%. Demand for our Cancer Care Continuum and mental health test portfolios remained solid, with test volume growing 6% and 4% year-over-year respectively. This growth was offset by continued softness in our prenatal testing volume, which declined 9% over last year's period.

Regarding the 9% year-over-year decline in average revenue per test, it is important to call out that this figure included a headwind of approximately $11 million from lower than expected prior period collections, which includes a $4 million write-off of aged receivables. Excluding this headwind, average revenue per test was down 3% year-over-year and reflects elevated payer friction for our prenatal and hereditary cancer tests in 2026. Mitigating the HCT average revenue per test pressure is one of our top priorities. We are executing a focused and comprehensive action plan to address it, which both Ben and I will speak more about. We're also doing a rigorous evaluation of our product portfolio to determine the optimal allocation of capital and enhancement of shareholder value, and we'll keep you updated on our progress and decisions.

With regards to our Cancer Care Continuum business, we continue to make meaningful progress on a number of fronts. Q2 MyRisk volume remained strong, with 10% growth year-on-year, and we achieved a number of pipeline milestones, including the launch of our first AI-enhanced prostate cancer test, Prolaris+ AI. We also took important steps forward with our Precise MRD test by expanding clinical testing availability to colorectal and renal cancers and submitting Precise MRD for breast cancer to MolDX for coverage determination. These achievements are on track with our stated plans and bolster our confidence in our longer-term growth aspirations. As hereditary cancer and other molecular diagnostic testing continues to grow, pressures on reimbursement rates is expected to persist. As a result, we have activated an initiative called Ascend to increase organizational efficiency, productivity, and scalability and are being supported by a leading professional services firm.

We anticipate this initiative will produce meaningful, measurable benefits to profitability, including adjusted EBITDA in 2027 and beyond. Lastly, we are lowering our 2026 revenue and gross margin guidance. Total revenue guidance moves to $770 million-$790 million. Gross margin moves to 66%-67%. This updated guidance reflects the Q2 performance and lower volume assumptions for prenatal health and lower HCT average revenue per test. However, due to uncertainty regarding the timing and impact from the Ascend initiative, we're suspending our adjusted EBITDA guidance. As I mentioned, we're experiencing elevated reimbursement pressure, which is impacting the average revenue per test for our MyRisk Hereditary Cancer test. This pressure is coming from changing prior authorization requirements, more medical record requests, and higher overall payer denial rates.

This type of payer-generated revenue cycle friction, while not new, became more aggressive in the quarter and resulted in a step-down in realized average revenue per test. Importantly, this reimbursement pressure is not the result of changes in medical policy. It is payer-initiated revenue cycle friction, and we're seeing similar dynamics across the broader healthcare system as payers cite automated denials as a mechanism to manage plan utilization and lower their reimbursement costs. The impact is from a limited number of payers. As we deeply analyze the situation, we have determined that we should have engaged earlier and more directly with payers as conditions evolved. Earlier intervention could have reduced the downstream impact. Mitigating HCP reimbursement pressure from these limited payers and anticipating other potential pressures is one of our top priorities. To that end, we're taking a number of immediate actions.

We're optimizing the end-to-end revenue cycle process. This includes enhancing front-end coverage verification and prior authorization workflows, increasing alignment of services with payer expectations, and integrating third-party medical record repositories into our workflows to automate responses to documentation requests and the associated claim appeals. We're increasing utilization of AI by deploying AI-enabled workflows for reducing manual touches and accelerating claim resolution. We are engaging in a policy-based approach to better align medical policy with clinical practices and utilization of our services. The facts are we have received orders for clinicians for medically necessary tests. We have processed patient samples and returned test results, which have been used to inform the care of those patients. The content of these tests are supported by NCCN and ASCO guidelines, yet we are not receiving payment in a timely manner.

We believe that many of these payer practices create unnecessary administrative burden, are inconsistent with the timely reimbursement of medically necessary testing, and ultimately could negatively impact member or patient care. Individually, as Myriad, we're going to do a better job of initiating engagement with our key payer constituencies on a regular basis. We will continue to pursue other pathways to resolve these issues, including working with industry organizations, policymakers, and payers to reduce unnecessary barriers and improve transparency in laboratory benefit management processes. In addition to all of these noted activities, we will continue to advance our work to reduce COGS for MyRisk. The ASCEND initiative will reduce the OPEX related to revenue cycle management over time.

Importantly for our stakeholders, even under scenarios where average revenue per test experiences additional pressure, HCP remains a highly profitable business with attractive margins, strong cash generation, and significant long-term growth opportunities. I would call out that our updated 2026 financial guidance assumes no improvement in average revenue per test from the second quarter level. Let me transition now to providing an update on key 2026 milestones. We presented this slide last quarter, and you'll notice a number of new check marks representing further progress and achievements made since our Q1 call, including key clinical publications, the MolDX submission, and Precise MRD for breast cancer, and recent launches. These actions strengthen Myriad's ability to serve cancer care testing and support our long-term growth profile.

We continue to drive solid volume growth in hereditary cancer testing, which is enabled by a combination of our strong market position, commercial execution, and ongoing commitment to clinically relevant innovation. We're encouraged with the feedback on Precise MRD as we transition to early access from alpha launch. We continue to expand the number of sites and invest in the commercial team and its capabilities ahead of full launch in 2027. Brian will share more on this. In June, we launched our AI-enhanced Prolaris prostate cancer test that combines the power of molecular and AI analysis and early urologist interest and input has been positive. Last week, we successfully executed the commercial launch of FirstGene. These milestones and new products, along with the expanding customer reach, will enable us to accelerate growth in the quarters ahead.

The initiatives and actions we are working on will ensure that we are able to increase focus on our most important near and long-term strategic opportunity: serving the Cancer Care Continuum. The expected impact from the combination of implementing the Ascend organizational initiative to increase efficiency and scalability, mitigating the impact on MyRisk average revenue per test, and any actions that may stem from the rigorous evaluation of our product portfolio is a stronger company with changes to our structure performance going forward. A company with strengthened growth rate, profitability, and predictability. Let me turn it over to Brian Donnelly, our Chief Commercial Officer.