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Out on their own
SALT LAKE CITY—The economic climate hasn't soured Myriad Genetics Inc. on plans to spin off its pharmaceutical business from its molecular diagnostics one, but it has prompted the company to fund it without counting on going to the market to raise capital. In that vein, at the Piper Jaffray Health Care Conference held in New York in early December, Myriad officials noted that they will likely use between $150 million and $200 million of the firm's cash on hand to fund the pharma spinoff.
"We're still in the process of putting together the official budget," says Peter Meldrum, president and CEO. "But one thing we recognize is that this is a hard environment in which to raise cash. So, we want to make sure the pharma group has sufficient cash reserves to see through completion of clinical studies for its two lead compounds, and we estimate right now that will be between $150 million and $200 million to do that and submit NDAs to FDA without having to go back to the market and raise additional funds."
As of the end of the firm's first quarter on Sept. 30, Myriad had $442.6 million in cash, cash equivalents, and marketable investment securities. Gregory Critchfield, president of Myriad Genetic Laboratories, had noted at the Piper Jaffray conference that strong insurance coverage for Myriad's products has insulated it somewhat from the recent economic downturn.
Meldrum notes that in the early days of the company, the two business units enjoyed a synergy but he says that has waned as the molecular diagnostics business moved into commercialization and the pharma side moved into trials, and each began to do more independent work.
"If there is any 'con' to this decision to spin off the pharma side, it will be the fact that each company will be doing its early-stage research on its own, an area where we might have enjoyed cost savings before as a single company," Meldrum notes. "But other than that, I think both companies will do better as independent organizations. As they have matured, they have become very different businesses. The pharma side is a product model with inventory and product channels, and the molecular diagnostics side is a service model. They have different shareholder bases and investors and splitting them off will allow us to better pursue their unique business opportunities and maximize shareholder value by having two well-capitalized and highly focused independent companies."
Mid-December also saw the company announce that the New York Stock Exchange's Listing and Compliance Committee cleared Myriad to file an application to transfer trading of its shares to the New York Stock Exchange from NASDAQ, where it has traded under the MYGN symbol. Upon transfer the stock will trade under the new ticker symbol MGX. Myriad Genetics anticipates trading on the NYSE Big Board in the second calendar quarter of 2009. The spinoff, Myriad Pharmaceuticals Inc., will trade on NASDAQ.
"They are both great exchanges," Meldrum says, "and we feel that NASDAQ is an excellent forum for technology, particularly earlier stage companies in the biotech sector, so Myriad Pharmaceuticals will trade there. On the diagnostic side, we're profitable and revenues last year were almost a quarter of a billion dollars, with revenue growth up 53 percent over the previous fiscal year. We will be a profitable company for the foreseeable future and we felt that moving to the New York Stock Exchange represented the transition the company had made from a more research-oriented organization to a profitable revenue-generating growing organization." DDN