MYRIAD GENETICS INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2003

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-26642

MYRIAD GENETICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

87-0494517

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)


320 Wakara Way, Salt Lake City, UT		84108
*(Address of principal executive offices)*		*(Zip Code)*

Registrant’s telephone number, including area code: (801) 584-3600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

As of February 1, 2004 the registrant had 27,140,629 shares of $0.01 par value common stock outstanding.

MYRIAD GENETICS, INC.

INDEX TO FORM 10-Q


		Page
PART I - Financial Information

Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets (Unaudited) as of December 31, 2003 and June 30, 2003	3

	Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended December 31, 2003 and 2002	4

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended December 31, 2003 and 2002	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14

Item 4.	Controls and Procedures	14

PART II - Other Information

Item 1.	Legal Proceedings	16

Item 2.	Changes in Securities and Use of Proceeds	16

Item 3.	Defaults Upon Senior Securities	16

Item 4.	Submission of Matters to a Vote of Security Holders	16

Item 5.	Other Information	17

Item 6.	Exhibits and Reports on Form 8-K	17

Signatures		18

MYRIAD GENETICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


*(in thousands, except per share amounts)*	Dec. 31, 2003			June 30, 2003
Assets
Current assets:
Cash and cash equivalents	$	42,464		$	61,603
Marketable investment securities		21,257			11,172
Prepaid expenses		8,532			7,740
Trade accounts receivable, less allowance for doubtful accounts of $880 at Dec. 31, 2003 and $895 at June 30, 2003		13,194			12,917
Other receivables		5,099			9,241
Related party receivables		576			150

Total current assets		91,122			102,823

Equipment and leasehold improvements:
Equipment		33,260			31,826
Leasehold improvements		7,626			7,531

		40,886			39,357
Less accumulated depreciation and amortization		22,264			20,675

Net equipment and leasehold improvements		18,622			18,682
Long-term marketable investment securities		39,625			53,517
Other assets		7,626			7,801

	$	156,995		$	182,823

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,890		$	11,454
Accrued liabilities		6,779			4,925
Deferred revenue		2,221			2,958

Total current liabilities		12,890			19,337
Stockholders’ equity:
Preferred stock, $0.01 par value. 5,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $0.01 par value, 60,000 shares authorized; issued and outstanding 27,141 at Dec. 31, 2003 and 27,079 at June 30, 2003		271			271
Additional paid-in capital		261,637			261,155
Accumulated other comprehensive income		311			711
Accumulated deficit		(118,114	)		(98,651	)

Total stockholders’ equity		144,105			163,486

	$	156,995		$	182,823

See accompanying notes to condensed consolidated financial statements.

MYRIAD GENETICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended						Six Months Ended
*(in thousands, except per share amounts)*	Dec. 31, 2003			Dec. 31, 2002			Dec. 31, 2003			Dec. 31, 2002
Revenues:
Predictive medicine revenue	$	10,446		$	8,151		$	18,510		$	16,015
Research revenue		2,773			8,406			7,852			15,420
Related party research revenue		929			462			1,458			1,094

Total research revenue		3,702			8,868			9,310			16,514

Total revenues		14,148			17,019			27,820			32,529
Costs and expenses:
Predictive medicine cost of revenue		3,448			2,995			6,207			5,916
Research and development expense		11,558			12,218			24,531			23,164
Selling, general and administrative expense		9,523			9,295			17,631			17,011

Total costs and expenses		24,529			24,508			48,369			46,091

Operating loss		(10,381	)		(7,489	)		(20,549	)		(13,562	)
Other income (expense):
Interest income		527			725			1,096			1,567
Other		—			(5	)		(10	)		34

Loss before taxes		(9,854	)		(6,769	)		(19,463	)		(11,961	)
Income taxes		—			125			—			250

Net loss	$	(9,854	)	$	(6,894	)	$	(19,463	)	$	(12,211	)

Basic and diluted loss per share	$	(0.36	)	$	(0.27	)	$	(0.72	)	$	(0.50	)

Basic and diluted weighted average shares outstanding		27,109			25,081			27,098			24,454

See accompanying notes to condensed consolidated financial statements.

MYRIAD GENETICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended
*(In thousands)*	Dec. 31, 2003			Dec. 31, 2002
Cash flows from operating activities:
Net loss	$	(19,463	)	$	(12,211	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,854			2,675
(Gain) loss on disposition of assets		10			(34	)
Bad debt expense		358			170
Changes in operating assets:
Trade receivables		(635	)		(2,276	)
Other receivables		4,142			(6,398	)
Related party receivables		(426	)		(98	)
Prepaid expenses		(792	)		(2,347	)
Accounts payable		(7,564	)		2,147
Accrued liabilities		1,854			546
Related party payable		—			(1,038	)
Deferred revenue		(737	)		(8,507	)

Net cash used in operating activities		(20,399	)		(27,371	)

Cash flows from investing activities:
Capital expenditures		(2,529	)		(5,477	)
Increase in other assets		(100	)		(1,100	)
Purchases of marketable investment securities		(28,988	)		(17,753	)
Proceeds from sales and maturities of marketable investment securities		32,395			29,201

Net cash provided by investing activities		778			4,871

Cash flows from financing activities:
Net proceeds from issuance of common stock		482			58,460

Net cash provided by financing activities		482			58,460

Net decrease in cash and cash equivalents		(19,139	)		35,960
Cash and cash equivalents at beginning of period		61,603			61,067

Cash and cash equivalents at end of period	$	42,464		$	97,027

See accompanying notes to condensed consolidated financial statements.

MYRIAD GENETICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1)	Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by Myriad Genetics, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly all financial statements. The financial statements herein should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2003, included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2003. Operating results for the three and six month periods ended December 31, 2003 may not necessarily be indicative of the results to be expected for any other interim period or for the full year.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(2)	Stock-Based Compensation

In 1992, the Company adopted the “1992 Employee, Director, and Consultant Stock Option Plan” (subsequently renamed the 2002 Amended and Restated Employee, Director and Consultant Stock Option Plan (the 2002 Plan)). In 2003 the Company adopted the 2003 Employee, Director and Consultant Stock Option Plan, to replace the existing plan and terminated the 2002 Plan. The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net loss, as all options granted under these plans have an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.


	Three Months Ended Dec. 31,						Six Months Ended Dec. 31,
*(in thousands, except per share amounts)*	2003			2002			2003			2002
Net loss, as reported	$	(9,854	)	$	(6,894	)	$	(19,463	)	$	(12,211	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax related effects		(6,277	)		(6,291	)		(12,806	)