UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~December 31, 2017~~

September 30, 2020

☐
☐			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)~~

(State or other jurisdiction

of incorporation or organization)

320 Wakara Way, Salt Lake City, UT

(Address of principal executive offices)

87-0494517

(I.R.S. Employer Identification No.)

84108

(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

MYGN

Nasdaq Global Select Market

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 has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” ~~“large accelerated filer”~~“smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act. ~~Check one:~~

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

~~(Do not check if smaller reporting company)~~

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~February 1, 2018~~November 2, 2020, the registrant had ~~69,850,295~~75,210,480 shares of $0.01 par value common stock outstanding.

~~MYRIAD GENETICS, INC.~~

~~INDEX TO FORM 10-Q~~

Table of Conten t s

MYRIAD GENETICS, INC.

INDEX TO FORM 10-Q

	~~Page~~
			Page
		PART I - Financial Information

Item 1.		Financial Statements

		Condensed Consolidated Balance Sheets ~~(Unaudited)~~ as of ~~December 31, 2017~~ September 30 , 2020 (Unaudited)and June 30, ~~2017~~ 20 20	3

		Condensed Consolidated Statements of Operations ~~(Unaudited)~~ for the three ~~and six~~ months ended ~~December 31, 2017~~September 30 , 2020 and ~~2016~~2019 (Unaudited)	4

		Condensed Consolidated Statements of Comprehensive ~~Income (Unaudited)~~Loss for the three ~~and six~~ months ended ~~December 31, 2017~~September 30 , 2020 and ~~2016~~2019 (Unaudited)	5

		Condensed Consolidated Statements of Stockholders’ Equity for the three months ended September 3 0 , 2020 and 2019(Unaudited)	6

		Condensed Consolidated Statements of Cash Flows ~~(Unaudited)~~ for the ~~six~~three months ended ~~December 31, 2017~~September 3 0 , 2020 and ~~2016~~2019 (Unaudited)	6 7

		Notes to Condensed Consolidated Financial Statements (Unaudited)	7 8

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	28 27

Item 4.		Controls and Procedures	28 27

		PART II - Other Information

Item 1.		Legal Proceedings	29 28

Item 1A.		Risk Factors	29 28

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.		Defaults Upon Senior Securities	29

Item 4.		Mine Safety Disclosures	29 30

Item 5.		Other Information	29 30

Item 6.		Exhibits	29 30

Signatures			31

Table of Content s

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets ~~(Unaudited)~~

(In millions)

	December 31,			June 30,
ASSETS	2017			2017			ASSETS	September 30, 2020		June 30, 2020
								(Unaudited)
Current assets:							Current assets:
Cash and cash equivalents	$	88.7		$	102.4		Cash and cash equivalents	$	118.3	$	163.7
Marketable investment securities		54.8			48.3		Marketable investment securities	42.1		54.1
Prepaid expenses		9.8			12.7		Prepaid expenses	12.5		13.8
Inventory		38.2			42.2		Inventory	26.6		29.1
Trade accounts receivable, less allowance for doubtful accounts of $9.5 December 31, 2017 and $8.2 June 30, 2017		121.1			105.6
Trade accounts receivable							Trade accounts receivable	85.1		68.1
Prepaid taxes		8.4			0.2		Prepaid taxes	107.9		0
Other receivables		6.0			5.7		Other receivables	2.0		2.9
Total current assets		327.0			317.1		Total current assets	394.5		331.7
Property, plant and equipment, net		48.4			51.1		Property, plant and equipment, net	36.7		37.0
Operating lease right-of-use assets							Operating lease right-of-use assets	62.7		66.0
Long-term marketable investment securities		58.5			48.5		Long-term marketable investment securities	30.2		37.0
Intangibles, net		475.2			491.6		Intangibles, net	590.9		605.3
Goodwill		319.4			316.1		Goodwill	328.3		327.6
Other assets							Other assets	1.2		0
Total assets	$	1,228.5		$	1,224.4		Total assets	$	1,444.5	$	1,404.6
LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	25.1		$	22.0		Accounts payable	$	19.1	$	21.7
Accrued liabilities		60.8			65.6		Accrued liabilities	65.4		75.9
Current maturities of operating lease liabilities							Current maturities of operating lease liabilities	13.6		13.5
Short-term contingent consideration		70.0			127.3		Short-term contingent consideration	3.3		3.1
Deferred revenue		3.4			2.6		Deferred revenue	32.3		32.8
Total current liabilities		159.3			217.5		Total current liabilities	133.7		147.0
Unrecognized tax benefits		33.4			25.2		Unrecognized tax benefits	37.4		23.5
Long-term deferred taxes							Long-term deferred taxes	75.3		26.6
Long-term debt							Long-term debt	224.6		224.4
Noncurrent operating lease liabilities							Noncurrent operating lease liabilities	53.5		56.9
Other long-term liabilities		6.6			7.2		Other long-term liabilities	10.7		8.0
Contingent consideration		11.0			13.2
Long-term debt		43.2			99.1
Long-term deferred taxes		60.8			84.4
Total liabilities		314.3			446.6		Total liabilities	535.2		486.4
Commitments and contingencies							Commitments and contingencies
Stockholders’ equity:							Stockholders’ equity:
Common stock, 69.4 and 68.4 shares outstanding at December 31, 2017 and June 30, 2017 respectively		0.7			0.7
Common stock, 75.2 and 74.7 shares outstanding at September 30, 2020 and June 30, 2020 respectively							Common stock, 75.2 and 74.7 shares outstanding at September 30, 2020 and June 30, 2020 respectively	0.8		0.7
Additional paid-in capital		871.1			851.4		Additional paid-in capital	1,101.2		1,096.6
Accumulated other comprehensive loss		(2.4	)		(5.5	)	Accumulated other comprehensive loss	(3.6)		(5.2)
Retained earnings (deficit)		44.8			(68.4	)
Accumulated deficit							Accumulated deficit	(189.1)		(173.9)
Total Myriad Genetics, Inc. stockholders’ equity		914.2			778.2		Total Myriad Genetics, Inc. stockholders’ equity	909.3		918.2
Non-Controlling Interest		—			(0.4	)
Non-controlling interest							Non-controlling interest	0		0
Total stockholders' equity		914.2			777.8		Total stockholders' equity	909.3		918.2
Total liabilities and stockholders’ equity	$	1,228.5		$	1,224.4		Total liabilities and stockholders’ equity	$	1,444.5	$	1,404.6

See accompanying notes to condensed consolidated financial statements.

Table of Content s

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share amounts)

	Three months ended						Six months ended
	December 31,						December 31,							Three months ended September 30,
	2017			2016			2017			2016				2020		2019
Molecular diagnostic testing	$	179.2		$	183.9		$	358.0		$	348.9		Molecular diagnostic testing	$	135.7	$	172.0
Pharmaceutical and clinical services		14.8			12.6			26.2			25.0		Pharmaceutical and clinical services	9.5		14.3
Total revenue		194.0			196.5			384.2			373.9		Total revenue	145.2		186.3
Costs and expenses:													Costs and expenses:
Cost of molecular diagnostic testing		37.7			37.4			73.9			71.6		Cost of molecular diagnostic testing	39.9		41.2
Cost of pharmaceutical and clinical services		6.7			7.0			13.5			12.7		Cost of pharmaceutical and clinical services	4.3		8.5
Research and development expense		16.8			18.6			34.6			38.0		Research and development expense	17.6		21.3
Change in the fair value of contingent consideration		13.0			(3.8	)		(60.2	)		(3.2	)	Change in the fair value of contingent consideration	(1.1)		0.7
Selling, general, and administrative expense		115.4			120.3			230.5			232.2		Selling, general, and administrative expense	124.1		135.5
Total costs and expenses		189.6			179.5			292.3			351.3		Total costs and expenses	184.8		207.2
Operating income		4.4			17.0			91.9			22.6
Operating loss													Operating loss	(39.6)		(20.9)
Other income (expense):													Other income (expense):
Interest income		0.4			0.3			0.8			0.6		Interest income	0.4		0.9
Interest expense		(0.7	)		(2.6	)		(1.7	)		(3.3	)	Interest expense	(2.9)		(2.9)
Other		(0.4	)		(2.6	)		(0.7	)		(3.8	)	Other	(1.6)		0.6
Total other income (expense):		(0.7	)		(4.9	)		(1.6	)		(6.5	)
Income before income tax		3.7			12.1			90.3			16.1
Income tax provision		(28.4	)		6.2			(22.8	)		11.4
Net income	$	32.1		$	5.9		$	113.1		$	4.7
Total other expense, net													Total other expense, net	(4.1)		(1.4)
Loss before income tax													Loss before income tax	(43.7)		(22.3)
Income tax benefit													Income tax benefit	(28.5)		(1.7)
Net loss													Net loss	(15.2)		(20.6)
Net loss attributable to non-controlling interest		—			—			(0.1	)		—		Net loss attributable to non-controlling interest	0		0
Net income attributable to Myriad Genetics, Inc. stockholders	$	32.1		$	5.9		$	113.2		$	4.7
Earnings per share:
Basic	$	0.46		$	0.09		$	1.64		$	0.07
Diluted	$	0.45		$	0.09		$	1.59		$	0.07
Net loss attributable to Myriad Genetics, Inc. stockholders													Net loss attributable to Myriad Genetics, Inc. stockholders	$	(15.2)	$	(20.6)
Net loss per share:													Net loss per share:
Basic and diluted													Basic and diluted	$	(0.20)	$	(0.28)
Weighted average shares outstanding:													Weighted average shares outstanding:
Basic		69.3			68.2			68.9			68.5
Diluted		71.9			68.3			71.2			68.9
Basic and diluted													Basic and diluted	74.7		73.7

See accompanying notes to condensed consolidated financial statements.

Table of Content s

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive ~~Income~~Loss (Unaudited)

(In millions)

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Net income attributable to Myriad Genetics, Inc. stockholders

$
32.1

$
5.9

$
113.2

$
4.7

Unrealized loss on available-for-sale securities, net of tax

(0.3
)

(0.4
)

(0.3
)

(0.8
)
Change in foreign currency translation adjustment, net of tax

0.1

(8.0
)

3.4

(3.6
)
Comprehensive income (loss)

31.9

(2.5
)

116.3

0.3

Comprehensive income attributable to non-controlling interest

—

—

—

—

Comprehensive income (loss) attributable to Myriad Genetics, Inc.
shareholders

$
31.9

$
(2.5
)

$
116.3

$
0.3


	Three months ended September 30,
	2020		2019
Net loss attributable to Myriad Genetics, Inc. stockholders	$	(15.2)	$	(20.6)
Unrealized loss on available-for-sale debt securities, net of tax	(0.2)		0
Change in foreign currency translation adjustment, net of tax	1.8		(2.2)
Comprehensive loss	(13.6)		(22.8)
Comprehensive loss attributable to non-controlling interest	0		0
Comprehensive loss attributable to Myriad Genetics, Inc. shareholders	$	(13.6)	$	(22.8)

See accompanying notes to condensed consolidated financial statements.

Table of Content s

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(In millions)


	Common stock		Additional paid-in capital		Accumulated other comprehensive loss		Retained earnings (accumulated deficit)		Myriad Genetics, Inc. Stockholders’ equity
BALANCES AT JUNE 30, 2019	$	0.7	$	1,068.0	$	(5.4)	$	25.6	$	1,088.9
Issuance of common stock under share-based compensation plans, net of shares exchanged for withholding tax	—		(0.5)		—		—		(0.5)
Share-based payment expense	—		8.8		—		—		8.8
Net loss	—		—		—		(20.6)		(20.6)
Other comprehensive loss, net of tax	—		—		(2.1)		—		(2.1)
BALANCES AT SEPTEMBER 30, 2019	$	0.7	$	1,076.3	$	(7.5)	$	5.0	$	1,074.5

BALANCES AT JUNE 30, 2020	$	0.7	$	1,096.6	$	(5.2)	$	(173.9)	$	918.2
Issuance of common stock under share-based compensation plans, net of shares exchanged for withholding tax	0.1		(3.8)		—		—		(3.7)
Share-based payment expense	—		8.4		—		—		8.4
Net loss	—		—		—		(15.2)		(15.2)
Other comprehensive income, net of tax	—		—		1.6		—		1.6
BALANCES AT SEPTEMBER 30, 2020	$	0.8	$	1,101.2	$	(3.6)	$	(189.1)	$	909.3

See accompanying notes to consolidated financial statements.

Table of Conten t s

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

	Six months ended
	December 31,							Three months ended September 30,
	2017			2016				2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:							CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income attributable to Myriad Genetics, Inc. stockholders	$	113.2			4.7
Adjustments to reconcile net income to net cash provided by operating activities:
Net loss attributable to Myriad Genetics, Inc. stockholders							Net loss attributable to Myriad Genetics, Inc. stockholders	$	(15.2)	$	(20.6)
Adjustments to reconcile net loss to net cash provided by operating activities:							Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		26.3			22.1		Depreciation and amortization	17.7		18.2
Non-cash interest expense		0.1			0.3		Non-cash interest expense	0.2		0.1
Gain (loss) on disposition of assets		0.1			(0.2	)
Non-cash lease expense							Non-cash lease expense	3.3		3.2
Loss (gain) on disposition of assets							Loss (gain) on disposition of assets	0.1		(0.1)
Share-based compensation expense		13.3			15.2		Share-based compensation expense	8.4		8.8
Impairment of cost basis investment		—			2.5
Bad debt expense		16.0			18.1
Loss on extinguishment of debt		—			1.3
Deferred income taxes		(25.9	)		2.9		Deferred income taxes	48.4		(5.1)
Unrecognized tax benefits		8.2			0.6		Unrecognized tax benefits	13.9		0.4
Change in fair value of contingent consideration		(60.2	)		(3.2	)	Change in fair value of contingent consideration	(1.1)		0.7
Changes in assets and liabilities:							Changes in assets and liabilities:
Prepaid expenses		2.9			8.3		Prepaid expenses	1.2		2.6
Trade accounts receivable		(32.5	)		(24.4	)	Trade accounts receivable	(17.0)		16.7
Other receivables		1.4			(2.4	)	Other receivables	0.9		(0.1)
Inventory		4.1			(10.4	)	Inventory	2.6		3.1
Prepaid taxes		(8.4	)		(0.4	)	Prepaid taxes	(107.9)		2.1
Other assets							Other assets	(1.2)		0
Accounts payable		3.0			(2.0	)	Accounts payable	(3.2)		(9.3)
Accrued liabilities		(5.8	)		(5.0	)	Accrued liabilities	(9.8)		(4.9)
Deferred revenue		0.7			0.5		Deferred revenue	(0.6)		0
Net cash provided by operating activities		56.5			28.5
Net cash (used in) provided by operating activities							Net cash (used in) provided by operating activities	(59.3)		15.8
CASH FLOWS FROM INVESTING ACTIVITIES							CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(3.7	)		(3.9	)	Capital expenditures	(1.5)		(1.4)
Acquisitions, net of cash acquired		—			(216.1	)
Purchases of marketable investment securities		(61.3	)		(49.0	)	Purchases of marketable investment securities	0		(23.1)
Proceeds from maturities and sales of marketable investment securities		45.2			108.9		Proceeds from maturities and sales of marketable investment securities	18.6		17.4
Net cash used in investing activities		(19.8	)		(160.1	)
Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities	17.1		(7.1)
CASH FLOWS FROM FINANCING ACTIVITIES:							CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from common stock issued under share-based compensation plans		6.3			1.0
Net proceeds from revolving credit facility		—			204.0
Payment for tax withholding for common stock issued under share-based compensation plans							Payment for tax withholding for common stock issued under share-based compensation plans	(3.8)		(0.4)
Payment of contingent consideration recognized at acquisition							Payment of contingent consideration recognized at acquisition	(0.1)		(3.3)
Repayment of revolving credit facility		(56.0	)		—		Repayment of revolving credit facility	0		(8.6)
Net proceeds from term loan		—			199.0
Repayment of term loan		—			(200.0	)
Fees paid for extinguishment of debt		—			(0.6	)
Repurchase and retirement of common stock		—			(31.6	)
Proceeds from non-controlling interest		0.3			—
Net cash provided by (used in) financing activities		(49.4	)		171.8
Net cash used in financing activities							Net cash used in financing activities	(3.9)		(12.3)
Effect of foreign exchange rates on cash and cash equivalents		(1.0	)		(0.7	)	Effect of foreign exchange rates on cash and cash equivalents	0.7		0.3
Net increase (decrease) in cash and cash equivalents		(13.7	)		39.5
Net decrease in cash and cash equivalents							Net decrease in cash and cash equivalents	(45.4)		(3.3)
Cash and cash equivalents at beginning of the period		102.4			68.5		Cash and cash equivalents at beginning of the period	163.7		93.2
Cash and cash equivalents at end of the period	$	88.7		$	108.0		Cash and cash equivalents at end of the period	$	118.3	$	89.9

See accompanying notes to condensed consolidated financial statements.

Table of Conten ts

NOTES TO CONDENSED CONSOLIDATED F~~INANCIAL~~FINANCIAL STATEMENTS (UNAUDITED)

(Dollars and shares in millions, except per share data)

~~(1)~~

~~BASIS OF PRESENTATION~~

(1)BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements ~~have been prepared by~~for Myriad Genetics, Inc. and subsidiaries (the “Company” or “Myriad”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). ~~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 in accordance with GAAP. The condensed consolidated 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, 2017,~~ included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017. Operating results for the three and six months ended December 31, 2017 may not necessarily be indicative of results to be expected for any other interim period or for the full year.~~

The consolidated financial statements include the accounts of the Company’s majority-owned subsidiary, Assurex Canada, Ltd. which is 85% owned by Assurex Health, Inc. (“Assurex”), a wholly owned subsidiary of the Company, and 15% owned by the Centre for Addiction and Mental Health. Assurex Canada, Ltd. is a consolidated subsidiary of Assurex Health, Inc. The value of the non-controlling interest represents the portion of Assurex Canada, Ltd.’s profit or loss and net assets that is not held by Assurex Health, Inc. The Company attributes comprehensive income or loss of the subsidiary between the Company and the non-controlling interest based on the respective ownership interest.

2020.

The preparation of financial statements in conformity with U.S. GAAP 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 revenue and expenses during the reporting period. ~~Actual~~Operating results ~~could differ from those estimates.~~

~~Reclassification in the Consolidated Statements of Operations~~

~~In connection with the preparation of the financial statements~~ for the three ~~and six~~ months ended ~~December 31, 2017,~~September 30, 2020 may not necessarily be indicative of results to be expected for any other interim period or for the full year.

The full impact of the COVID-19 outbreak continues to evolve and its future impact remains highly uncertain and unpredictable. As such, it is uncertain as to the full magnitude of the effect that the pandemic will have on the Company's financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on the Company's financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evaluation of the COVID-19 outbreak and the global responses to curb its spread, the Company ~~determined that~~is not able to estimate the ~~amounts for~~effects of the ~~change in the fair value of contingent consideration were improperly reported as a component of other income (expense) and should have been reported as a component of operating income~~COVID-19 outbreak on ~~the consolidated statements~~its results of operations, ~~at December 31, 2016. As a result,~~financial condition, or liquidity for future periods.

We have historically experienced seasonality in our testing business. The volume of testing is negatively impacted by the three and six months ended December 31, 2016 total costs and expenses were overstated, causing operating income and total other income (expense) to be understated by $3.8 and $3.2 respectively. There was no impact to net income or earnings per share. The Company concluded that the error was not material to the consolidated statements of operations, but has elected to correct the errorsummer season, which is generally reflected in the accompanying financial statements for consistent presentation. The classification error had no effect on the on the previously reported consolidated balance sheets, statements of comprehensive income or cash flows for the quarter ended June 30. The quarter ending December 31 ~~2016.~~

~~New~~is generally strong as we see an increase in volumes from patients who have met their annual insurance deductible. Conversely, the quarter ending March 31 is typically negatively impacted by the annual reset of patient deductibles. Due to the global pandemic, we cannot predict if seasonality will follow the same pattern as in prior years.

Reclassifications

Certain prior period amounts have been reclassified to conform with the current period presentation. The reclassifications have no impact on the total assets, total liabilities, stockholders’ equity, cash flows from operations, or net loss for the period.

Recent Accounting Pronouncements

Recently Adopted Standards

In ~~February~~June 2016, the Financial Accounting Standards Board ~~(FASB)~~(the "FASB") issued ~~Accounting Standards Update 2016-02, Leases~~ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU ~~2016-02”~~2016-13”) which introduces new guidance for the accounting for credit losses on certain instruments within its scope. ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. For trade receivables, the Company is required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which reflects losses that are probable. Credit losses relating to available-for-sale debt securities are also recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. On July 1, 2020, the Company adopted ASU 2016-13 under the modified retrospective approach by initially applying ASU 2016-13 at the adoption date, rather than at the beginning of the earliest comparative period presented. This guidance was adopted with no material impact to the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU ~~2016-02 amends~~2018-15 aligns the ~~existing accounting standards~~requirements for ~~lease accounting,~~capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, including ~~requiring lessees~~hosting arrangements that include an internal-use

Table of Conten t s

software license. On July 1, 2020, the Company adopted ASU 2018-15 on a prospective basis with no material impact to ~~recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will~~the Company's consolidated financial statements as of September 30, 2020. The amounts capitalized may be ~~effective beginning~~material in future periods; implementation costs incurred in cloud computing arrangements are capitalized as part of the other assets financial statement line item in the ~~first quarter~~consolidated balance sheets.

Standards Effective in Future Years and Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASC 2019-12 is a new accounting standard to simplify accounting for income taxes and remove, modify, and add to the disclosure requirements of income taxes. The standard is effective for fiscal ~~2020. Early~~years beginning after December 15, 2020, with early adoption ~~of ASU 2016-02 is~~ permitted. ~~ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief.~~ The ~~Company’s management~~Company is currently evaluating the impact ~~of adopting ASU 2016-02~~this new standard will have on the ~~Company’s~~ consolidated financial statements.

~~In May 2014,~~

(2)REVENUE

Myriad generates revenue by performing molecular diagnostic testing and pharmaceutical services. The Company previously provided clinical services until selling Privatklinik Dr. Robert Schindlbeck GmbH & Co. KG (the "Clinic") in February 2020. Revenue from the ~~FASB issued~~sale of molecular diagnostic tests and pharmaceutical and clinical services is recorded at the ~~converged standard on~~estimated amount of consideration to be received. The Company has determined that the communication of test results or the completion of clinical and pharmaceutical services indicates transfer of control for revenue recognition purposes.

The following table presents detail regarding the composition of our total revenue by product and by U.S. versus rest of world, “RoW”:


	Three months ended September 30,
	2020						2019
(In millions)	U.S.		RoW		Total		U.S.		RoW		Total
Molecular diagnostic revenues:
Hereditary Cancer Testing	$	72.1	$	8.5	$	80.6	$	100.6	$	3.9	$	104.5
Prenatal	16.4		0.1		16.5		23.5		0		23.5
GeneSight	11.9		0		11.9		22.7		0		22.7
Vectra	9.1		0		9.1		11.0		0		11.0
myChoice CDx	7.6		0.2		7.8		1.3		0		1.3
Prolaris	6.4		0		6.4		6.5		0		6.5
EndoPredict	0.4		2.4		2.8		0.5		1.8		2.3
Other	0.6		0		0.6		0.1		0.1		0.2
Total molecular diagnostic revenue	124.5		11.2		135.7		166.2		5.8		172.0
Pharmaceutical and clinical service revenue	9.5		0		9.5		8.5		5.9		14.3
Total revenue	$	134.0	$	11.2	$	145.2	$	174.7	$	11.7	$	186.3

The Company performs its obligation under a contract with a customer by processing diagnostic tests and communicating the objective of providing a single, comprehensive model for all contracts with customers to improve comparability in the financial statements of companies reporting using International Financial Reporting Standards and U.S. GAAP. The standard contains principles that an entity must apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity must recognize revenue to depict the transfer of goods or servicestest results to customers, ~~at an amount that the entity expects to be entitled to~~ in exchange for ~~those goods or services. An entity can apply~~consideration from the ~~revenue standard retrospectively~~customer. The Company has the right to ~~each~~bill its customers upon the completion of performance obligations and thus does not record contract assets. Occasionally, customers make payments prior ~~reporting period presented (full retrospective method) or retrospectively with~~to the ~~cumulative effect~~Company's performance of ~~initially applying the standard recognized at the date of initial application in retained earnings (modified retrospective method). The standard will be effective for~~its contractual obligations. When this occurs, the Company ~~first quarter of~~records a contract liability as deferred revenue. During fiscal 2019, with early adoption permitted for annual periods beginning after December 16, 2016. The Company plans to adopt the standard July 1, 2018 using the full retrospective method. The Company continues to assess the impact of this standard on its results of operations, financial position and cash flows. Based on its preliminary assessment,year 2020, the Company ~~expects~~received approximately $29.7 in advance Medicare payments to provide relief from the ~~majority~~economic impacts of COVID-19 on the Company. The advance Medicare payments are included in the beginning and ending balance of deferred revenue. A reconciliation of the ~~amounts that have historically been classified as bad debt~~

beginning and ending balances of deferred revenue is shown in the table below:

~~expense, primarily related~~

Table of Conten t s


	Three months ended September 30,
	2020		2019
Deferred revenue - beginning balance	$	32.8	$	2.2
Revenue recognized	(2.3)		(0.4)
Prepayments	1.8		0.3
Deferred revenue - ending balance	$	32.3	$	2.1

In accordance with ASU 2014-09, the Company has elected not to ~~patient responsibility, will be reflected as a reduction~~disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts that are one year or less, as the revenue is expected to be recognized within the next year. Furthermore, the Company has elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its agreements wherein the Company’s right to payment is in an amount that directly corresponds with the value of Company’s performance to date. However, the Company periodically enters into arrangements with customers to provide diagnostic testing and/or pharmaceutical and ~~therefore~~clinical services that may have terms longer than one year and include multiple performance obligations. As of September 30, 2020, the aggregate amount of the transaction price of such contracts that is allocated to the remaining performance obligations is $2.8.

The Company may provide discounts to its customers. In determining the transaction price, Myriad includes an estimate of the expected amount of consideration as ~~a reduction in~~ revenue. The Company ~~anticipates~~applies this method consistently for similar contracts when estimating the effect of any uncertainty on an ~~increase~~amount of variable consideration to which it will be entitled. The Company applies the expected value method for sales where the Company has a large number of contracts with similar characteristics.

In addition, the Company considers all the information (historical, current, and forecast) that is reasonably available to identify possible consideration amounts. The Company considers the probability of the variable consideration for each possible scenario. The Company also has significant experience with historical discount patterns and uses this experience to estimate transaction prices. The Company excludes from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer. for example, sales tax, value added tax, etc. When assessing the total consideration for insurance carriers and patients, revenues are further constrained for estimated refunds. The Company reserves certain amounts in accrued liabilities on the balance sheet in anticipation of requests for refunds of payments made previously by insurance carriers, which are accounted for as reductions in revenues in the ~~level~~consolidated statements of ~~required financial statement disclosures~~operations and comprehensive loss. As of September 30, 2020, the Company recorded a $2.2 accrued liability and corresponding reduction in revenues for future refund of payments.

Cash collections for certain diagnostic tests delivered may differ from rates originally estimated, primarily driven by changes in the estimated transaction price due to contractual adjustments, obtaining updated information from payors and patients that was unknown at the ~~standard.~~

~~(2)~~

~~ACQUISITIONS~~

~~Assurex~~

~~On August 31, 2016,~~time the performance obligation was met and settlements with third party payors. As a result of this new information, the Company ~~completed the acquisition of Assurex, pursuant to the Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated August 3, 2016. Pursuant to the terms~~updates our estimate of the ~~Merger Agreement, Myriad Merger Sub, Inc., a wholly owned subsidiary~~amounts to be recognized for previously delivered tests, the impact of ~~the Company,~~which was ~~merged with and into Assurex, with Assurex continuing as the surviving corporation, and wholly owned subsidiary~~not material to our consolidated statements of ~~Myriad. The Company acquired Assurex~~operations for total consideration of $351.6, net of cash acquired of $5.5, including a cash payment of $216.1, and two potential performance-based milestones totaling $185.0 with a fair value of $130.0. The fair value of the performance-based milestones was determined by using the Monte Carlo Method.

Of the cash consideration, $19.1 was deposited into an escrow account to fund (i) any post-closing adjustments payable to Myriad based upon differences between the estimated working capital and the actual working capital of Assurex at closing, and (ii) any indemnification claims made by Myriad against Assurex within 18 months following closing.

Total consideration transferred was allocated to tangible assets acquired and liabilities assumed based on their fair values as of the acquisition date including current adjustments as set forth below. The Company believes the acquisition establishes the foundation for our neuroscience business and leverages our existing preventative care business unit with the addition of a product, GeneSight, which has growth potential. These factors contributed to consideration transferred in excess of the fair value of Assurex’s net tangible and intangible assets acquired, resulting in the Company recording goodwill in connection with the transaction. ~~During~~ the three months ended September 30, ~~2017 there was a fair value increase as of the date of the acquisition to equipment totaling~~ ~~$0.1 and $0.2 change in the non-controlling interest at the date of acquisition, which resulted in a net increase to goodwill of $0.1~~ ~~due to updated 3~~^rd ~~party valuations.~~ Also during that period there was a $1.8 increase in the deferred tax liability due to differences in GAAP and tax purchase accounting as of the date of acquisition which increased goodwill by the same amount.

Management estimated the fair value of tangible and intangible assets and liabilities in accordance with the applicable accounting guidance for business combinations and utilized the services of third-party valuation consultants. The allocation of consideration transferred is considered final as of September 30, 2017. The final purchase price allocation is as follows:

2020.

Estimated Fair
Value

Current assets

$
18.2

Intangible assets

295.6

Equipment

1.9

Goodwill

121.1

Current liabilities

(18.9
)
Deferred tax liability

(66.3
)
Total fair value purchase price

$
351.6

Less: Contingent consideration

(130.0
)
Less: Cash acquired

(5.5
)
Total cash consideration transferred

$
216.1

~~Identifiable Intangible Assets~~

The Company ~~acquired intangible assets that consisted of developed technology which had an estimated fair value of $256.5 and a database with an estimated fair value of $39.1. The fair value of~~applies the developed technology was determined using a probability-weighted income approach that discounts expected future cash flows to present value. The fair value of the database was determined using a combination of the lost profits and replacement cost methods. The estimated net cash flows were discounted using a discount rate of 16% which is based on the estimated internal rate of return for the acquisition and represents the rate that market participants might use to value the intangible assets. The projected cash flows were based on key assumptions such as estimates of revenues and operating profits; the time and resources needed to recreate databases and product and commercial development and approval; the life of the commercialized product; and associated riskspractical expedient related to ~~viability and product alternatives.~~costs to obtain or fulfill a contract since the amortization period for such costs will be one year or less. Accordingly, 0 costs incurred to obtain or fulfill a contract have been capitalized. The Company ~~will amortize~~also applies the ~~intangible assets on a straight-line basis over their estimated useful lives of 17 years~~practical expedient for ~~the developed technology and 5 years~~not adjusting revenue recognized for ~~the database. This amortization is not deductible for income tax purposes.~~

~~Goodwill~~

The goodwill represents the excess of consideration transferred over the fair value of assets acquired and liabilities assumed and is attributable to the benefits expected from combining the Company’s research and commercial operations with Assurex’s. This goodwill is not deductible for income tax purposes. Change in goodwill for the period ended December 31, 2017 is shown below:

Carrying

amount

Balance June 30, 2017

$
119.2

Fair value adjustment to equipment

(0.1
)
Non-controlling interest adjustment

0.2

Change in deferred tax liability

1.8

Ending balance December 31, 2017

$
121.1

~~Pro Forma Information~~

~~The unaudited pro-forma results presented below include~~ the effects of the ~~Assurex acquisition~~time value of money. This practical expedient has been elected because the Company collects very little cash from customers under payment terms and the vast majority of payment terms have a payback period of less than one year.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Substantially all of the Company’s accounts receivable are with companies in the healthcare industry, U.S. and state governmental agencies that make payments on the customer's behalf, and with individuals. The Company does not believe that receivables due from U.S. and state governmental agencies, such as ~~if it had been consummated as~~Medicare, represent a credit risk since the related healthcare programs are funded by the U.S. and state governments. The Company only has one payor, Medicare, that represents greater than 10% of ~~July 1, 2016, with adjustments to give effect to pro forma events that~~its revenues. Revenues received from Medicare represented approximately 16% and 14% of total revenue for the three months ended September 30, 2020 and 2019, respectively. Concentrations of credit risk are ~~directly attributable~~mitigated due to the acquisition which includes adjustments related to the amortization of acquired intangible assets, interest income and expense, and depreciation. The unaudited pro forma results do not reflect any operating efficiency or potential cost savings which may result from the consolidation of Assurex. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operationnumber of the ~~combined company would have been if the acquisition had occurred~~Company’s customers as well as their dispersion across many geographic regions. No payor accounted for more than 10% of accounts receivable at ~~the beginning~~September 30, 2020 or 2019. The Company does not require collateral from its customers.

Table of the period presented nor are they indicative of future results of operations and are not necessarily indicative of results that might have been achieved had the acquisition been consummated as of July 1, 2016.

Conten t s

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Revenue

$
194.0

$
196.5

$
384.2

$
385.4

Income from operations

4.4

13.2

91.9

12.4

Net income (loss)

32.1

5.9

113.2

(13.3
)
Net income (loss) per share, basic

$
0.46

$
0.09

$
1.64

$
(0.19
)
Net income (loss) per share, diluted

$
0.45

$
0.09

$
1.59

$
(0.19
)

To complete the purchase transaction, the Company incurred approximately $5.0 of acquisition costs, which were recorded as selling, general and administrative expenses for the year ended June 30, 2017. For the three and six months ended December 31, 2017, Assurex contributed revenue of approximately $31.7 and $60.5. For the three and six months ended December 31, 2017, operating expenses related to Assurex were approximately $29.2 and $58.9.

~~(3)~~

~~MARKETABLE INVESTMENT SECURITIES~~

(3)MARKETABLE INVESTMENT SECURITIES

The Company has classified its ~~marketable~~debt investment securities as available-for-sale securities. These securities are carried at estimated fair value with unrealized holding gains and losses, net of the related tax effect, included in accumulated other comprehensive loss in stockholders’ equity until realized. Gains and losses on investment security transactions are reported on the specific-identification method. Dividend and interest income are recognized when earned. The Company’s cash equivalents consist of short-term, highly liquid investments that are readily convertible to known amounts of cash. The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of security at ~~December 31, 2017~~September 30, 2020 and June 30, ~~2017~~2020 were as follows:

			Gross		Gross
			unrealized		unrealized						Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Estimated fair value
	Amortized		holding		holding			Estimated
	cost		gains		losses			fair value
At December 31, 2017:
At September 30, 2020:										At September 30, 2020:
Cash and cash equivalents:										Cash and cash equivalents:
Cash	$	85.9	$	—	$	—		$	85.9	Cash	$	68.3	$	—	$	—	$	68.3
Cash equivalents		2.8		—		—		$	2.8	Cash equivalents	50.0		—		—		$	50.0
Total cash and cash equivalents		88.7		—		—			88.7	Total cash and cash equivalents	118.3		—		—		118.3
Available-for-sale:										Available-for-sale:
Corporate bonds and notes		57.9		—		(0.2	)		57.7	Corporate bonds and notes	40.5		0.6		0		41.1
Municipal bonds		34.9		—		(0.1	)		34.8	Municipal bonds	12.6		0.2		0		12.8
Federal agency issues		12.6		—		(0.1	)		12.5	Federal agency issues	4.0		0.1		0		4.1
US government securities		8.3		—		—			8.3	US government securities	14.2		0.1		0		14.3
Total	$	202.4	$	—	$	(0.4	)	$	202.0	Total	$	189.6	$	1.0	$	0	$	190.6

			Gross		Gross
			unrealized		unrealized						Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses		Estimated fair value
	Amortized		holding		holding			Estimated
	cost		gains		losses			fair value
At June 30, 2017:
At June 30, 2020:										At June 30, 2020:
Cash and cash equivalents:										Cash and cash equivalents:
Cash	$	83.5	$	—	$	—		$	83.5	Cash	$	132.8	$	—	$	—	$	132.8
Cash equivalents		18.9		—		—			18.9	Cash equivalents	30.9		—		—		30.9
Total cash and cash equivalents		102.4		—		—			102.4	Total cash and cash equivalents	163.7		—		—		163.7
Available-for-sale:										Available-for-sale:
Corporate bonds and notes		45.4		0.1		(0.1	)		45.4	Corporate bonds and notes	50.1		0.8		0		50.9
Municipal bonds		32.7		—		—			32.7	Municipal bonds	17.8		0.2		0		18.0
Federal agency issues		11.6		—		(0.1	)		11.5	Federal agency issues	5.5		0.1		0		5.6
US government securities		7.2		—		—			7.2	US government securities	16.4		0.2		0		16.6
Total	$	199.3	$	0.1	$	(0.2	)	$	199.2	Total	$	253.5	$	1.3	$	0	$	254.8

In accordance with the adoption of ASC 2016-13, the Company assesses any unrealized loss positions for available-for-sale debt securities for which an allowance for credit losses has not been recorded. The aggregate amount of unrealized losses of these securities was not significant, and the impact of the securities in a continuous loss position to the condensed consolidated statements of operations and comprehensive loss were not material as of September 30, 2020.

Table of Conten t s

Cash, cash equivalents, and maturities of debt securities classified as available-for-sale securities are as follows at ~~December 31, 2017:~~

Amortized

Estimated

cost

fair value

Cash

$
85.9

$
85.9

Cash equivalents

2.8

2.8

Available-for-sale:

Due within one year

54.9

54.8

Due after one year through five years

58.8

58.5

Due after five years

—

—

Total

$
202.4

$
202.0

~~(4)~~

~~PROPERTY, PLANT AND EQUIPMENT, NET~~

December 31,

June 30,

2017

2017

Land

$
2.5

$
2.3

Buildings and improvements

19.8

17.1

Leasehold improvements

22.6

22.1

Equipment

109.9

106.9

154.8

148.4

Less accumulated depreciation

(106.4
)

(97.3
)
Property, plant and equipment, net

$
48.4

$
51.1

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Depreciation expense

$
3.8

$
3.6

$
7.7

$
7.3

~~(5)~~

~~GOODWILL AND INTANGIBLE ASSETS~~

~~Goodwill~~

The Company has recorded goodwill of $319.4 from the acquisitions of Assurex that was completed on August 31, 2016, Sividon Diagnostics GmbH (“Sividon”) that was completed on May 31, 2016, Privatklinik Dr. Robert Schindlbeck GmbH & Co. KG (the “Clinic”) that was completed on February 27, 2015, Crescendo Bioscience, Inc. that was completed on February 28, 2014 and Rules-Based Medicine, Inc. that was completed on May 31, 2011. Of this goodwill, $253.3 relates to the Company’s diagnostic segment and $66.1 relates to the other segment. The following summarizes changes to the goodwill balance for the six months ended December 31, 2017:

Carrying
amount

Beginning balance July 1, 2017

$
316.1

Adjustments to acquisitions (see note 2)

1.9

Translation adjustments

1.4

Ending balance December 31, 2017

$
319.4

~~Intangible Assets~~

Intangible assets primarily consist of amortizable assets of purchased licenses and technologies, customer relationships, and trade names as well as non-amortizable intangible assets of in-process technologies and research and development. The following summarizes the amounts reported as intangible assets:

Gross

Carrying

Accumulated

Amount

Amortization

Net

At December 31, 2017:

Purchased licenses and technologies

$
527.2

$
(79.6
)

$
447.6

Customer relationships

4.6

(3.1
)

1.5

Trademarks

3.0

(0.9
)

2.1

Total amortized intangible assets

534.8

(83.6
)

451.2

In-process research and development

24.0

—

24.0

Total unamortized intangible assets

24.0

—

24.0

Total intangible assets

$
558.8

$
(83.6
)

$
475.2

Gross

Carrying

Accumulated

Amount

Amortization

Net

At June 30, 2017:

Purchased licenses and technologies

$
525.7

$
(61.2
)

$
464.5

Customer relationships

4.6

(2.8
)

1.8

Trademarks

3.0

(0.8
)

2.2

Total amortized intangible assets

533.3

(64.8
)

468.5

In-process research and development

23.1

—

23.1

Total unamortized intangible assets

23.1

—

23.1

Total intangible assets

$
556.4

$
(64.8
)

$
491.6

~~The Company recorded amortization expense during the respective periods for these intangible assets as follows:~~

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Amortization of intangible assets

$
9.3

$
9.3

$
18.6

$
14.8

~~(6)~~

~~ACCRUED LIABILITIES~~

December 31,

June 30,

2017

2017

Employee compensation and benefits

$
42.0

$
44.4

Accrued taxes payable

3.2

7.1

Other

15.6

14.1

Total accrued liabilities

$
60.8

$
65.6

~~(7)~~

~~LONG-TERM DEBT~~

On December 23, 2016, the Company entered into a senior secured revolving credit facility (the “Facility”) by and among Myriad, as borrower, the lenders from time to time party thereto, providing for the Facility in an aggregate principal amount of up to $300.0, which amount shall include $10.0 sublimits, in each case, for swingline loans and letters of credit. Pursuant to the Facility, Myriad borrowed revolving loans in an aggregate principal amount of $205.0 with $0.7 upfront fees and $0.3 debt issuance costs recorded as a debt discount to be amortized over the term of the Facility resulting in current net long-term debt of $204.0. The Facility matures on December 23, 2021. There are no scheduled principal payments of the Facility prior to its maturity date.

The proceeds of the Facility were used (i) to refinance in full the obligations under the Term Loan, (ii) to pay any fees and expenses related thereto, and (iii) for working capital and general corporate purposes.

The Facility contains customary loan terms, interest rates, representations and warranties, affirmative and negative covenants, in each case, subject to customary limitations, exceptions and exclusions. The Credit Agreement also contains certain customary events of default.

Covenants in the Facility impose operating and financial restrictions on the Company. These restrictions may prohibit or place limitations on, among other things, the Company’s ability to incur additional indebtedness, create certain types of liens, mergers or consolidations, and/or change in control transactions. The Facility may also prohibit or place limitations on the Company’s ability to sell assets, pay dividends or provide other distributions to shareholders. The Company must maintain a specified leverage and interest ratios measured as of the end of each quarter as a financial covenant in the Facility. We were in compliance with all financial covenants at December 31, 2017.

~~During the three and six months ended December 31, 2017, the Company made $31.0 and $56.0 in principal repayments respectively.~~

The Facility is secured by a first-lien security interest in substantially all of the assets of Myriad and certain of its domestic subsidiaries and each such domestic subsidiary of Myriad has guaranteed the repayment of the Facility. Amounts outstanding under the Facility were as follows:

December 31,

June 30,

2017

2017

Long-term debt

$
44.0

$
100.0

Long-term debt discount

(0.8
)

(0.9
)
Net long-term debt

$
43.2

$
99.1

~~(8)~~

~~OTHER LONG TERM LIABILITIES~~

December 31,

June 30,

2017

2017

Pension obligation

6.3

5.9

Other

0.3

1.3

Total other long term liabilities

$
6.6

$
7.2

The Company has two non-contributory defined benefit pension plans for certain Clinic employees. Participation in the plans excludes those employees hired after 2002. As of December 31, 2017 the fair value of the plan assets were approximately $0.1 resulting in a net pension liability of $6.3.

~~(9)~~

~~PREFERRED AND COMMON STOCKHOLDER’S EQUITY~~

~~The Company is authorized to issue up to 5.0 shares of preferred stock, par value $0.01 per share. There were no preferred shares outstanding at December 31, 2017.~~

~~The Company is authorized to issue up to 150.0 shares of common stock, par value $0.01 per share. There were 69.4 shares issued and outstanding at December 31, 2017.~~

~~Common shares issued and outstanding~~

Six months ended

December 31,

2017

2016

Common stock issued and outstanding at July 1

68.4

69.1

Common stock issued upon exercise of options and employee
stock plans

1.0

0.6

Repurchase and retirement of common stock

—

(1.6
)
Common stock issued and outstanding at December 31

69.4

68.1

~~The following is a reconciliation of the denominators of the basic and diluted earnings per share (“EPS”) computations:~~

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Denominator:

Weighted-average shares outstanding used to compute
basic EPS

69.3

68.2

68.9

68.5

Effect of dilutive shares

2.6

0.1

2.3

0.4

Weighted-average shares outstanding and dilutive
securities used to compute diluted EPS

71.9

68.3

71.2

68.9

Certain outstanding options and restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share because the effect would have been anti-dilutive. These potential dilutive common shares, which may be dilutive to future diluted earnings per share, are as follows:

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Anti-dilutive options and RSU's excluded from EPS
computation

0.2

8.7

0.5

6.4

~~Stock Repurchase Program~~

In June 2016, the Company’s Board of Directors authorized an eighth share repurchase program of $200.0 of the Company’s outstanding common stock. The Company plans to repurchase its common stock from time to time or on an accelerated basis through open market transactions or privately negotiated transactions as determined by the Company’s management. The amount and timing of stock repurchases under the program will depend on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. As of December 31, 2017, the Company has $160.7 remaining on its current share repurchase authorization.

The Company uses the par value method of accounting for its stock repurchases. As a result of the stock repurchases, the Company reduced common stock and additional paid-in capital and recorded charges to accumulated deficit. The shares retired, aggregate common stock and additional paid-in capital reductions, and related charges to accumulated deficit for the repurchases for periods ended December 31, 2017 and 2016 were as follows:

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Shares purchased and retired

—

0.6

—

1.6

Common stock and additional paid-in-capital reductions

$
—

$
5.4

$
—

$
14.5

Charges to retained earnings

$
—

$
4.8

$
—

$
17.1

~~(10)~~

~~INCOME TAXES~~

~~On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted. The Tax Act makes broad and complex changes to the U.S. tax code that will affect our fiscal year ending June~~September 30, 2018, including, but not limited to (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; 2020:


	Amortized cost		Estimated fair value
Cash	$	68.3	$	68.3
Cash equivalents	50.0		50.0
Available-for-sale:
Due within one year	41.8		42.1
Due after one year through five years	29.5		30.2
Due after five years	0		0
Total	$	189.6	$	190.6

(4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) creating the base erosion anti-abuse tax (BEAT), a new minimum tax; (6) creating a new limitation on deductible interest expense; (7) revising the rules that limit the deductibility of compensation to certain highly compensated executives, and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

In connection with our initial analysis of the impact of the Tax Act and consistent with the requirement to record a provisional estimate when applicable, the Company recorded a discrete net income tax benefit during the quarter ended December 31, 2017 of approximately $32.6. This provisional estimate primarily consists of a net benefit for the corporate rate reduction due to the revaluing of its net deferred tax liabilities as a result of the reduction in the federal corporate tax rates. The Company’s net deferred tax liabilities represent temporary differences between the book bases of assets which are greater than their tax bases. Upon the reversal of those temporary differences, the future tax impact will be based on the lower federal corporate tax rate enacted by the Tax Act. The Company is continuing to gather information and to analyze aspects of the Tax Act, which could potentially affect the estimated impact on the deferred tax balances. For various reasons that are discussed more fully below, we have not completed our accounting for the income tax effects of certain elements of the Tax Act. To the extent we were not yet

able to make reasonable estimates of the impact of certain elements, we have not recorded any adjustments related to those elements and have continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act.

In addition to the discrete benefit recorded during the quarter ended December 31, 2017 for the provisional estimated impact on the Company’s net deferred tax liabilities, the lower federal corporate tax rate reduced the Company’s estimated annual effective tax rate which was applied to year to date operating results in accordance with the interim accounting guidelines. The Company estimates that the reduction in the federal corporate rate will have an ongoing effect to reduce the Company’s income tax expense from continuing operations.

As a result of changes made by the Tax Act, Section 162(m) will limit the deduction of compensation, including performance-based compensation, in excess of $1 million paid to anyone who, for tax years beginning after January 1, 2018, serves as the Chief Executive Officer or Chief Financial Officer, or who is among the three most highly compensated executive officers for any fiscal year. The only exception to this rule is for compensation that is paid pursuant to a binding written contract in effect on November 2, 2017 that would have otherwise been deductible under the prior Section 162(m) rules. Accordingly, any compensation paid in the future pursuant to new compensation arrangements entered into after November 2, 2017, even if performance-based, will count towards the $1 million fiscal year deduction limit if paid to a covered executive. The Company estimates that there will not be a material impact during the current quarter or fiscal year, as the law is effective for tax years beginning after January 1, 2018. The Company has evaluated its binding contracts entered into prior to November 2, 2017, and believes there will be no material impact for adjustments related to deferred equity compensation currently carried as a deferred tax asset on the Company’s balance sheet. The Company is still analyzing certain aspects of the Act and refining calculations, which could potentially affect the impact of this provision.

The Tax Act also implements certain changes on the taxation of the Company’s foreign operations. Our accounting for the following elements of the Tax Act is incomplete, and we were not yet able to make reasonable estimates of the effects. Therefore, no provisional adjustments were recorded.

The Deemed Repatriation Transition Tax (Transition Tax) is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. While the Company estimates that there will not be a material impact during the current quarter or current fiscal year due to the Transition Tax, we are not able to make a reasonable estimate of the Transition Tax and have not recorded a provisional amount. We are continuing to gather additional information needed to finalize the amount of post-1986 E&P to more precisely compute the amount of the Transition Tax.

The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs’ U.S. shareholder. Global intangible low-taxed income (GILTI) is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The Company is not making a policy election at this time. Our calculation of the deferred balance with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Because whether we expect to have future U.S. inclusions in taxable income related to GILTI depends on not only our current structure and estimated future results of global operations but also our intent and ability to modify our structure and/or our business, we are not yet able to reasonably estimate the effect of this provision of the Tax Act. Therefore, we have not made any adjustments related to potential GILTI tax in our financial statements.

Other revisions to the taxation of foreign earnings will not be effective until the Company’s fiscal year ending on June 30, 2019. The Company is in the process of evaluating the additional provisions of the Tax Act that will become effective in their fiscal year ending June 30, 2019.

The impact of the Tax Act may differ from these estimates, possibly materially, due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued and actions the Company may take as a result of the Tax Act. The Company will continue to update the provisional estimates as information is obtained, such as state impacts regarding decoupling from the Tax Act provisions, realization of deferred amounts in the fiscal year, and accounting method elections that may be made by the Company.

The Tax Act reduces the federal corporate tax rate to 21% in the fiscal year ending June 30, 2018. Section 15 of the Internal Revenue Code Stipulates that our fiscal year ending June 30, 2018, will have a blended corporate tax rate of 28 percent, which is based on the applicable tax rates before and after the Tax Act and the number of days in the year. Certain significant or unusual items are separately recognized in the quarter during which they occur and can be a source of variability in the effective tax rate from quarter to quarter.

Income tax expense (benefit) for the three months ended December 31, 2017 was $(28.4), which included a provisional one-time benefit of $32.6 related to the Tax Act. After excluding the one-time benefit related to the Tax Act, the income tax expense for the three months ended December 31, 2017 was $4.2, or approximately 113.5% of pre-tax income compared to $6.2, or approximately 51.2%% of pre-tax income, for the three months ended December 31, 2016. Income tax expense for the six months ended December 31, 2017 (after excluding the one-time Tax Act benefit of $32.6) was $9.8, or approximately 10.7% of pre-tax income compared to $11.4, or approximately 70.8% of pre-tax income, for the six months ended December 31, 2016. Income tax expense for the three and six months ended December 31, 2017 is based on the Company’s estimated annual effective tax rate for the full fiscal year ending June 30, 2018, adjusted by discrete items recognized during the period. For the three and six months ended December 31, 2017, the Company’s recognized effective tax rate differs from the U.S. federal statutory rate primarily due to the effect of fair value adjustments related to acquisition contingent consideration, state income taxes, the prior year adoption of ASU 2016-09 (“ASU 2016-09”), Improvements to Employee Share-Based Payment Accounting and other benefits realized from the differences related to the earlier recognition of the tax effect of equity compensation expense from incentive stock options and the deduction realized when those options are disqualified upon exercise and sale.

The Company files U.S., foreign and state income tax returns in jurisdictions with various statutes of limitations. The Company is currently under audit by the IRS for the fiscal years ended June 30, 2014 and June 30, 2015; the State of New Jersey for the fiscal years June 30, 2007 through 2013; and Canada for the fiscal years June 30, 2014 through 2015. Annual and interim tax provisions include amounts considered necessary to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues may differ materially from the amount accrued.

FAIR VALUE MEASUREMENTS

~~(11)~~

~~SHARE-BASED COMPENSATION~~

On November 30, 2017, the shareholders approved the adoption of the 2017 Employee, Director and Consultant Equity Incentive Plan (the “2017 Plan”). The 2017 Plan allows the Company, under the direction of the Compensation Committee of the Board of Directors, to make grants of restricted and unrestricted stock awards to employees, consultants and directors. The plan allows for issuance of up to 1.4 shares of common stock. In addition, as of December 31, 2017, the Company may grant additional shares of common stock under the 2017 plan up to 1.7 options outstanding under our 2003 Plan and 6.8 options and restricted stock units outstanding under our 2010 Plan, that expire or are cancelled without delivery of shares of common stock.

The number of shares, terms, and vesting periods are determined by the Company’s Board of Directors or a committee thereof on an option-by-option basis. Options generally vest ratably over service periods of four years. Options granted after December 5, 2012 expire eight years from the date of grant, and options granted prior to that date generally expire ten years from the date of grant. In September 2014, the Company began issuing restricted stock units (“RSUs”) in lieu of stock options. RSUs granted to employees generally vest ratably over four years on the anniversary date of the last day of the month in which the RSUs are granted. The number of RSUs awarded to certain executive officers may be reduced if certain additional performance metrics are not met. Options and RSUs granted to our non-employee directors vest in full upon completion of one year of service on the Board following the date of the grant.

~~Stock Options~~

~~A summary of the stock option activity under the Company’s plans for the six months ended December 31, 2017 is as follows:~~

Number
of
shares

Weighted
average
exercise
price

Options outstanding at June 30, 2017

8.0

$
24.67

Options granted

—

$
—

Less:

Options exercised

(0.5
)

$
23.39

Options canceled or expired

(0.1
)

$
26.60

Options outstanding at December 31, 2017

7.4

$
24.75

Options exercisable at December 31, 2017

7.4

$
24.75

~~As of December 31, 2017, there was no unrecognized share-based compensation expense related to stock options.~~

~~Restricted Stock Units~~

~~A summary of the RSU activity under the Company’s plans for the six months ended December 31, 2017 is as follows:~~

Number
of
shares

Weighted
average
grant date
fair value

RSUs outstanding at June 30, 2017

2.0

$
33.02

RSUs granted

1.1

$
32.64

Less:

RSUs vested

(0.7
)

$
34.97

RSUs canceled

(0.1
)

$
27.40

RSUs outstanding at December 31, 2017

2.3

$
32.77

As of December 31, 2017, there was $46.7 of total unrecognized share-based compensation expense related to RSUs that will be recognized over a weighted-average period of 2.4 years. This unrecognized compensation expense is equal to the fair value of RSUs expected to vest.

~~Employee Stock Purchase Plan~~

The Company also has an Employee Stock Purchase Plan that was approved by shareholders in 2012 (the “2012 Purchase Plan”), under which 2.0 shares of common stock have been authorized. Shares are issued under the 2012 Purchase Plan twice yearly at the end of each offering period. As of December 31, 2017, approximately 0.7 shares of common stock have been issued under the 2012 Purchase Plan.

~~Share-Based Compensation Expense~~

~~Share-based compensation expense recognized and included in the condensed consolidated statements of income and comprehensive income was allocated as follows:~~

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Cost of molecular diagnostic testing

$
0.2

$
0.3

$
0.3

$
0.4

Cost of pharmaceutical and clinical services

0.0

0.0

0.1

0.1

Research and development expense

1.2

1.4

2.1

3.0

Selling, general, and administrative expense

5.5

5.7

10.8

11.7

Total share-based compensation expense

$
6.9

$
7.4

$
13.3

$
15.2

~~(12)~~

~~FAIR VALUE MEASUREMENTS~~

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates it will receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value of contingent consideration related to the Sividon and Assurex acquisitions as well as the long-term debt were categorized as a level 3 liability, as the measurement amount is based primarily on significant inputs not observable in the market. For more information about the Assurex acquisition, see Note 2 "Acquisitions". The fair value hierarchy prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1—	quoted prices in active markets for identical assets and liabilities.
~~Level 2—~~	observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Some of the Company’s marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities.
~~Level 3—~~	~~unobservable inputs.~~

Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Some of the Company’s marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities.

Level 3—unobservable inputs.

All of the Company’s financial instruments are valued using quoted prices in active markets or based on other observable inputs. For Level 2 securities, the Company uses a third party pricing service which provides documentation on an ongoing basis that includes, among other things, pricing information with respect to reference data, methodology, inputs summarized by asset class, pricing application and corroborative information. The fair value of contingent consideration related to the Sividon Diagnostics GmbH ("Sividon") acquisition in fiscal year 2016 as well as long-term debt are categorized as Level 3 liabilities, as the measurement amount is based primarily on significant inputs not observable in the market. For Level 3 contingent consideration, ~~we reassess~~the Company reassesses the fair value of expected contingent consideration and the corresponding liability each reporting period using the Monte Carlo Method, which is consistent with the initial measurement of the expected earn out liability. This fair value measurement is considered a Level 3

measurement because ~~we estimate~~the Company estimates projections during the ~~earn out~~expected measurement period of approximately 9.25 years, utilizing various potential pay-out scenarios. Probabilities were applied to each potential scenario and the resulting values were discounted using a rate that considers weighted average cost of capital as well as a specific risk premium associated with the riskiness of the ~~earn out~~earn-out itself, the related projections, and the overall business. The contingent ~~earn out~~earn-out liabilities are classified as a component of long-term and short-term contingent consideration in ~~our~~the Company’s consolidated balance sheets. Changes to ~~these estimated~~the earn-out liabilities are reflected in change in the fair value of contingent consideration in our consolidated ~~income statement.~~

statements of operations. Changes to the unobservable inputs could have a material impact on the Company’s financial statements.

The fair value of our long-term debt, which we consider a Level 3 measurement, is estimated using discounted cash flow analyses, based on the Company’s current estimated incremental borrowing rates for similar borrowing arrangements. The fair value of long-term debt is estimated to be ~~$38.7~~$226.5 at ~~December 31, 2017.~~

September 30, 2020.

Table of Conten t s

The following table sets forth the fair value of the financial assets and liabilities that the Company re-measures on a regular basis:

	Level 1		Level 2		Level 3			Total
December 31, 2017
												Level 1		Level 2		Level 3		Total
September 30, 2020											September 30, 2020
Money market funds (a)	$	2.8	$	—	$	—		$	2.8		Money market funds (a)	$	50.0	$	0	$	0	$	50.0
Corporate bonds and notes		—		57.7		—			57.7		Corporate bonds and notes	0		41.1		0		41.1
Municipal bonds		—		34.8		—			34.8		Municipal bonds	0		12.8		0		12.8
Federal agency issues		—		12.5		—			12.5		Federal agency issues	0		4.1		0		4.1
US government securities		—		8.3		—			8.3		US government securities	0		14.3		0		14.3
Contingent consideration		—		—		(81.0	)		(81.0	)	Contingent consideration	0		0		(5.9)		(5.9)
Total	$	2.8	$	113.3	$	(81.0	)	$	35.1		Total	$	50.0	$	72.3	$	(5.9)	$	116.4

~~(a)~~

~~Money market funds are primarily comprised of exchange traded funds and accrued interest~~

(a)Money market funds are primarily comprised of exchange traded funds and accrued interest.

	Level 1		Level 2		Level 3			Total
June 30, 2017
												Level 1		Level 2		Level 3		Total
June 30, 2020											June 30, 2020
Money market funds (a)	$	7.4	$	—	$	—		$	7.4		Money market funds (a)	$	30.9	$	0	$	0	$	30.9
Corporate bonds and notes		—		50.4		—			50.4		Corporate bonds and notes	0		50.9		0		50.9
Municipal bonds		—		36.9		—			36.9		Municipal bonds	0		18.0		0		18.0
Federal agency issues		—		13.8		—			13.8		Federal agency issues	0		5.6		0		5.6
US government securities		—		7.2		—			7.2		US government securities	0		16.6		0		16.6
Contingent consideration		—		—		(140.5	)		(140.5	)	Contingent consideration	0		0		(6.8)		(6.8)
Total	$	7.4	$	108.3	$	(140.5	)	$	(24.8	)	Total	$	30.9	$	91.1	$	(6.8)	$	115.2

~~(a)~~

~~Money market funds are primarily comprised of exchange traded funds and accrued interest~~

(a)Money market funds are primarily comprised of exchange traded funds and accrued interest.

The following table reconciles the change in the fair value of the contingent consideration during the periods presented:

Carrying
amount

Balance June 30, 2017

$
140.5

Change in fair value recognized in the income statement

(60.2
)
Translation adjustments recognized in other comprehensive income

0.7

Ending balance December 31, 2017

$
81.0

~~(13)~~	~~COMMITMENTS AND CONTINGENCIES~~
		Carrying amount
Balance June 30, 2020		$	6.8
Payment of contingent consideration		(0.1)
Change in fair value recognized in the income statement		(1.1)
Translation adjustments recognized in other comprehensive loss		0.3
Ending balance September 30, 2020		$	5.9

The fair value of contingent consideration for the three months ended September 30, 2020 decreased compared to the same period in the prior year due to changes in timing of expected cash payments associated with the contingent consideration related to the Sividon acquisition.

(5)PROPERTY, PLANT AND EQUIPMENT, NET


	September 30, 2020		June 30, 2020
Leasehold improvements	$	32.6	$	31.8
Equipment	114.1		112.1
	146.7		143.9
Less accumulated depreciation	(110.0)		(106.9)
Property, plant and equipment, net	$	36.7	$	37.0

Table of Conten t s


	Three months ended September 30,
	2020		2019
Depreciation expense	$	2.4	$	2.9

(6)GOODWILL AND INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the three months ended September 30, 2020, are as follows:


	Diagnostic		Other		Total
Beginning balance	$	270.7	$	56.9	$	327.6
Translation adjustments	0.7		0		0.7
Ending balance	$	271.4	$	56.9	$	328.3

The Company will perform its annual goodwill impairment testing during the quarter ended December 31, 2020 as a result of its change in fiscal year end (see Note 16). The upcoming annual assessment may result in impairment charges if there is deterioration in business conditions, negative changes in market factors, or changes in the strategic priorities of the Company and its reporting units.

Intangible Assets


	Gross Carrying Amount		Accumulated Amortization		Net
At September 30, 2020:
Purchased licenses and technologies	$	816.6	$	(232.4)	$	584.2
Customer relationships	4.7		(4.4)		0.3
Trademarks	3.0		(1.4)		1.6
Total amortized intangible assets	824.3		(238.2)		586.1
In-process research and development	4.8		—		4.8
Total unamortized intangible assets	4.8		—		4.8
Total intangible assets	$	829.1	$	(238.2)	$	590.9


	Gross Carrying Amount		Accumulated Amortization		Net
At June 30, 2020:
Purchased licenses and technologies	$	815.6	$	(217.1)	$	598.5
Customer relationships	4.6		(4.2)		0.4
Trademarks	3.0		(1.4)		1.6
Total amortized intangible assets	823.2		(222.7)		600.5
In-process research and development	4.8		—		4.8
Total unamortized intangible assets	4.8		—		4.8
Total intangible assets	$	828.0	$	(222.7)	$	605.3

Table of Conten t s

The Company recorded amortization expense during the respective periods for these intangible assets as follows:


	Three months ended September 30,
	2020		2019
Amortization of intangible assets	$	15.3	$	15.3

(7)ACCRUED LIABILITIES


	September 30, 2020		June 30, 2020
Employee compensation and benefits	$	47.2	$	47.4
Accrued taxes payable	3.5		6.1
Other	14.7		22.4
Total accrued liabilities	$	65.4	$	75.9

(8)LONG-TERM DEBT

On December 23, 2016, the Company entered into a senior secured revolving credit facility (the “Facility”) by and among Myriad, as borrower, and the lenders from time to time party thereto. On July 31, 2018, the Company entered into Amendment No. 1 which effected an “amend and extend” transaction with respect to the Facility by which the maturity date thereof was extended to July 31, 2023 and the maximum aggregate principal commitment was increased from $300.0 to $350.0. On May 1, 2020, the Company entered into Amendment No. 2 (the “Amended Facility”), which waived the Company's compliance with certain covenants and modified the interest rate and other terms during the Amendment Period from March 31, 2020 through June 30, 2021 (the "Amendment Period"). Both amendments were accounted for as modifications pursuant to guidance in ASC 470-50.

Pursuant to the Amended Facility, the Company borrowed revolving loans in an aggregate principal amount of $300.0 with $1.8 in upfront fees and $0.3 debt issuance costs recorded as a debt discount to be amortized over the term of the Amended Facility. The Company incurred an additional $1.0 in upfront fees as a result of Amendment No. 2, which was also recorded as a debt discount that will be amortized over the term of the Amended Facility. The current balance of the net long-term debt is $224.6. There are 0 scheduled principal payments of the Amended Facility prior to its maturity date.

The Amended Facility contains customary loan terms, interest rates, representations and warranties, affirmative and negative covenants, in each case, subject to customary limitations, exceptions and exclusions. The Amended Facility also contains certain customary events of default. Amendment No. 2 modified the Facility to increase the interest rate to be fixed at a spread of LIBOR plus 350 basis points on drawn balance and the undrawn fee was increased to 50 basis points during the Amendment Period. At the end of the Amendment Period, interest rates return to the previous pricing of 200 basis points on drawn balances and an undrawn fee ranging from 25 to 45 basis points based on the Company's leverage ratio. The LIBOR floor was also increased to 1.0% during the Amendment Period. The interest rate as of September 30, 2020 was 4.5%.

Covenants in the Amended Facility impose operating and financial restrictions on the Company. These restrictions may prohibit or place limitations on, among other things, the Company’s ability to incur additional indebtedness, create certain types of liens, and complete mergers, consolidations, or complete change in control transactions. The Amended Facility may also prohibit or place limitations on the Company’s ability to sell assets, pay dividends or provide other distributions to shareholders. The Company must maintain specified leverage and interest ratios measured as of the end of each quarter as a financial covenant in the Amended Facility. Amendment No. 2 modified the Amended Facility's compliance with the leverage covenant and the interest coverage ratio covenant, which were waived through March 31, 2021. A minimum liquidity covenant was added for the period beginning May 2020 until March 2021, and a minimum EBITDA covenant was added for the quarters ending December 31, 2020 and March 31, 2021. Amendment No. 2 also revised certain negative covenants of the Amended Facility during the Amendment Period. The Company was in compliance with all financial covenants at September 30, 2020. Based on the continued uncertainty regarding the impact of COVID-19 on the Company’s future operations, it is possible that the Company could be in violation of certain financial covenants contained in the Amended Facility within the Amendment Period, which runs through June 30, 2021. The Company may seek waivers or amendments from the lenders in order to avoid a future potential covenant violation, in addition to taking other potential actions. If the Company were unable to comply with the covenants in the future, it could result in an increase in the rate of interest and limits on the Company's ability to incur certain additional indebtedness and it could potentially cause the loan repayment to be

Table of Conten t s

accelerated, any of which could have a material adverse impact on the Company’s operations and liquidity. The Company has and continues to take actions to mitigate the risk of an event of default under the Amended Facility, however there is no assurance it will be successful in doing so.

The Amended Facility is secured by a first-lien security interest in substantially all of the assets of Myriad and certain of its domestic subsidiaries and each such domestic subsidiary of Myriad has guaranteed the repayment of the Amended Facility. Amounts outstanding under the Amended Facility and Facility were as follows:


	September 30, 2020		June 30, 2020
Long-term debt	$	226.7	$	226.7
Long-term debt discount	(2.1)		(2.3)
Net long-term debt	$	224.6	$	224.4

(9)OTHER LONG-TERM LIABILITIES


	September 30, 2020		June 30, 2020
Contingent consideration	$	2.6	$	3.7
Other	8.1		4.3
Total other long-term liabilities	$	10.7	$	8.0

The Company's balance of other long-term liabilities as of September 30, 2020 and June 30, 2020 consists of the Company's portion of social security taxes that have been deferred under the CARES Act that do not have to be deposited until December 2021 and December 2022.

(10)PREFERRED AND COMMON STOCKHOLDERS' EQUITY

The Company is authorized to issue up to 5.0 shares of preferred stock, par value $0.01 per share. There were 0 preferred shares outstanding at September 30, 2020.

The Company is authorized to issue up to 150.0 shares of common stock, par value $0.01 per share. There were 75.2 shares issued and outstanding at September 30, 2020.

Common shares issued and outstanding


	Three months ended September 30,	Year ended June 30,
	2020	2020
Beginning common stock issued and outstanding	74.7	73.5
Common stock issued upon exercise of options, vesting of restricted stock units and employee stock plans	0.5	1.2

Common stock issued and outstanding at end of period	75.2	74.7

Basic earnings per share is computed based on the weighted-average number of shares of common stock outstanding. Diluted earnings per share is computed based on the weighted-average number of shares of common stock, including the dilutive effect of common stock equivalents, outstanding. In periods when the Company has a net loss, stock awards are excluded from the calculation of diluted net loss per share as their inclusion would have an antidilutive effect.

Table of Conten t s

The following is a reconciliation of the denominators of the basic and diluted earnings per share (“EPS”) computations:


	Three months ended September 30,
	2020	2019
Denominator:
Weighted-average shares outstanding used to compute basic EPS	74.7	73.7
Effect of dilutive shares	0	0
Weighted-average shares outstanding and dilutive securities used to compute diluted EPS	74.7	73.7


	Three months ended September 30,
	2020	2019
Anti-dilutive options and RSUs excluded from EPS computation	7.3	1.7

Stock Repurchase Program

In June 2016, the Company’s Board of Directors authorized a share repurchase program of $200.0 of the Company’s outstanding common stock from time to time or on an accelerated basis through open market transactions or privately negotiated transactions as determined by the Company's management. The amount and timing of stock repurchases under the program will depend on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. As of September 30, 2020, the Company is authorized to repurchase up to $110.7 of shares under this authorization. NaN shares were repurchased during the three months ended September 30, 2020 or 2019.

(11)SHARE-BASED COMPENSATION

On November 30, 2017, the Company’s shareholders approved the adoption of the 2017 Employee, Director and Consultant Equity Incentive Plan (as amended, the “2017 Plan”). On November 29, 2018 and December 5, 2019, the shareholders approved amendments to the 2017 Plan increasing the shares available to grant. The 2017 Plan allows the Company, under the direction of the Compensation Committee of the Board of Directors, to make grants of restricted and unrestricted stock awards to employees, consultants and directors. As of September 30, 2020, the Company may grant additional shares of common stock under the 2017 Plan with respect to the 0.1 options outstanding under our 2003 Plan and 4.8 options and restricted stock units outstanding under our 2010 Plan, to the extent that those options and restricted stock units expire or are cancelled without delivery of shares of common stock. If an RSU awarded under the 2017 Plan is cancelled or forfeited without the issuance of shares of common stock, the unissued or reacquired shares, which were subject to the RSU, shall again be available for issuance pursuant to the 2017 Plan.

The number of shares, terms, and vesting periods are determined by the Company’s Board of Directors or a committee thereof on an award-by-award basis. RSUs granted to employees generally vest ratably over four years on the anniversary date of the designated day of the last week of the month in which the RSUs are granted. The number of RSUs awarded to certain executive officers may be increased or reduced based on certain additional performance metrics. Options and RSUs granted to our non-employee directors vest in full upon completion of one year of service on the anniversary following the date of the grant. Options generally vest ratably over service periods of four years. Options granted after December 5, 2012 expire eight years from the date of grant, and options granted prior to that date generally expire ten years from the date of grant. In September 2014, the Company began generally issuing RSUs in lieu of stock options.

During the three months ended September 30, 2020, the Company granted stock-based awards to the Company's new President and Chief Executive Officer as an inducement material to his commencement of employment and entry into an employment agreement with the Company. The inducement awards were made in accordance with Nasdaq Stock Market rules and were not made under the Company's existing equity plans; the inducement awards are included in the tables below.

Table of Conten t s

Stock Options

A summary of the stock option activity under the Company’s equity plans, including the Company's inducement awards, for the three months ended September 30, 2020 is as follows:


	Number of shares	Weighted average exercise price
Options outstanding at June 30, 2020	4.8	$	24.47
Options granted	0.7	$	13.38
Less:
Options exercised	0	$	0
Options canceled or expired	(0.1)	$	16.40
Options outstanding at September 30, 2020	5.4	$	23.19
Options exercisable at September 30, 2020	4.7	$	24.62

As of September 30, 2020, there was $5.2 of unrecognized share-based compensation expense related to the inducement stock options that will be recognized over a weighted-average period of 2.8 years.

Restricted Stock Units

A summary of the RSU activity under the Company’s plans, including the Company's inducement awards and RSU awards with performance metrics, for the three months ended September 30, 2020 is as follows:


	Number of shares	Weighted average grant date fair value
RSUs outstanding at June 30, 2020	2.3	$	32.50
RSUs granted	0.4	$	13.24
Less:
RSUs vested	(0.8)	$	33.07
RSUs canceled	0	$	0
RSUs outstanding at September 30, 2020	1.9	$	27.70

As of September 30, 2020, there was $44.1 of total unrecognized share-based compensation expense related to RSUs that will be recognized over a weighted-average period of 2.5 years.

Employee Stock Purchase Plan

The Company also has an Employee Stock Purchase Plan that was approved by shareholders in 2012 (the “2012 Purchase Plan”), under which 2.0 shares of common stock have been authorized. Shares are issued under the 2012 Purchase Plan twice yearly at the end of each offering period. As of September 30, 2020, approximately 0.3 shares of common stock are available for issuance under the 2012 Purchase Plan.

Share-Based Compensation Expense

Share-based compensation expense recognized and included in the condensed consolidated statements of operations and comprehensive loss was allocated as follows:


	Three months ended September 30,
	2020		2019
Cost of molecular diagnostic testing	$	0.3	$	0.2
Cost of pharmaceutical and clinical services	0.1		0.1
Research and development expense	1.3		1.5
Selling, general, and administrative expense	6.7		7.0
Total share-based compensation expense	$	8.4	$	8.8

Table of Conten t s

(12)INCOME TAXES

In order to determine the Company’s quarterly provision for income taxes, the Company used an estimated annual effective tax rate that is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. Under the Tax Cuts and Jobs Act, the federal corporate tax rate is 21% for calendar year 2020. Certain significant or unusual items are separately recognized in the quarter during which they occur and can be a source of variability in the effective tax rate from quarter to quarter.

Income tax benefit for the three months ended September 30, 2020 was $28.5, or approximately 65.2% of pre-tax loss compared to an income tax benefit of $1.7, or approximately 7.6% of pre-tax loss, for the three months ended September 30, 2019. Income tax benefit for the three months ended September 30, 2020 is based on the Company’s estimated annualized effective tax rate for the six-month transition period ending December 31, 2020, adjusted by discrete items recognized during the period. For the three months ended September 30, 2020, the Company’s recognized effective tax rate differs from the U.S. federal statutory rate primarily due to carrying back net operating losses due to the CARES Act.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) was enacted. CARES impacted several provisions to the U.S. tax code that have affected our six-month transition period ending December 31, 2020, including, but not limited to, (1) NOL carry-back and carry-forward provisions, (2) deductibility of interest, (3) acceleration of corporate AMT credits, and (4) classification of qualified improvement property. As of the quarter ended September 30, 2020, the Company recognized an income tax net benefit of $20.0 related to the CARES Act, which included an increase in the uncertain tax benefit accrual of $14.3, related to carrying back net operating losses to tax years with higher corporate tax rates than the year the net operating loss originated. The Company will continue to evaluate the application of any and all provisions through the remainder of the six-month transition period ending December 31, 2020.

The Company files U.S., foreign and state income tax returns in jurisdictions with various statutes of limitations. The Company is currently under audit by the state of New Jersey for the fiscal years June 30, 2013 through 2017; the state of New York and Massachusetts for the fiscal years June 30, 2014 through 2016; Germany for the fiscal years June 30, 2013 through 2015; and Switzerland for the fiscal years June 30, 2015 through 2016. Annual and interim tax provisions include amounts considered necessary to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues may differ materially from the amount accrued.

(13)COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and legal proceedings covering matters that arise in the ordinary course of its business activities. As of ~~December 31, 2017,~~September 30, 2020, the management of the Company believes any reasonably possible liability that may ~~ultimately~~ result from the resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, operating results, or cash flows.

~~(14)~~

~~EMPLOYEE DEFERRED SAVINGS PLAN~~

From time to time, the Company receives recoupment requests from third-party payors for alleged overpayments. The Company ~~has a deferred savings plan which qualifies under Section 401(k)~~disagrees with the contentions of the ~~Internal Revenue Code. Substantially all of~~pending requests or has recorded an estimated reserve for the ~~Company’s U.S. employees are covered by the plan. The Company makes matching contributions of 50% of each~~

~~employee’s contribution with the employer’s contribution not to exceed 4% of the employee’s compensation. The Company recorded contributions to the plan as follows:~~

alleged overpayments.

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Deferred savings plan contributions

$
1.6

$
1.4

$
3.5

$
3.0

~~(15)~~

(14) SEGMENT AND RELATED INFORMATION

The Company’s business is aligned with how the ~~Chief Operating Decision Maker~~chief operating decision maker reviews performance and makes decisions in managing the Company. The business units have been aggregated into ~~two~~2 reportable segments: (i) diagnostics and (ii) other. The diagnostics segment provides testing and collaborative development of testing that is designed to assess an individual’s risk for developing disease later in life, identify a patient’s likelihood of responding to drug therapy and guide a patient’s dosing to ensure optimal treatment, or assess a patient’s risk of disease progression and disease recurrence. The other segment provides testing products and services to the pharmaceutical, biotechnology and medical research industries, research and development, and clinical services for patients, and includes corporate services such as finance, human resources, legal and information technology.

Table of Conten t s

Segment revenue and operating income (loss) were as follows during the periods presented:

	Diagnostics		Other			Total
Three months ended December 31, 2017
									Diagnostics		Other		Total
Three months ended September 30, 2020								Three months ended September 30, 2020
Revenues								Revenues	$	130.5	$	14.7	$	145.2
Depreciation and amortization								Depreciation and amortization	16.7		1.0		17.7
Segment operating loss								Segment operating loss	(0.3)		(39.3)		(39.6)
Three months ended September 30, 2019								Three months ended September 30, 2019
Revenues	$	179.2	$	14.8		$	194.0	Revenues	$	170.4	$	15.9	$	186.3
Depreciation and amortization		11.7		1.4			13.1	Depreciation and amortization	16.9		1.3		18.2
Segment operating income (loss)		34.6		(30.2	)		4.4	Segment operating income (loss)	17.3		(38.2)		(20.9)
Three months ended December 31, 2016
Revenues	$	183.9	$	12.6		$	196.5
Depreciation and amortization		11.5		1.4			12.9
Segment operating income (loss)		32.1		(15.1	)		17.0
Six months ended December 31, 2017
Revenues	$	358.0	$	26.2		$	384.2
Depreciation and amortization		23.5		2.8			26.3
Segment operating income (loss)		68.6		23.3			91.9
Six months ended December 31, 2016
Revenues	$	348.9	$	25.0		$	373.9
Depreciation and amortization		19.3		2.8			22.1
Segment operating income (loss)		62.0		(39.4	)		22.6

Three months ended

Six months ended

December 31,

December 31,

2017

2016

2017

2016

Total operating income for reportable segments

$
4.4

$
17.0

$
91.9

$
22.6

Unallocated amounts:

Interest income

0.4

0.3

0.8

0.6

Interest expense

(0.7
)

(2.6
)

(1.7
)

(3.3
)
Other

(0.4
)

(2.6
)

(0.7
)

(3.8
)
Income from operations before income taxes

3.7

12.1

90.3

16.1

Income tax provision

(28.4
)

6.2

(22.8
)

11.4

Net income

32.1

5.9

113.1

4.7

Net loss attributable to non-controlling interest

—

—

(0.1
)

—

Net income attributable to Myriad Genetics, Inc.
stockholders

$
32.1

$
5.9

$
113.2

$
4.7


	Three months ended September 30,
	2020		2019
Total operating loss for reportable segments	$	(39.6)	$	(20.9)
Unallocated amounts:
Interest income	0.4		0.9
Interest expense	(2.9)		(2.9)
Other	(1.6)		0.6
Loss from operations before income taxes	(43.7)		(22.3)
Income tax benefit	(28.5)		(1.7)
Net loss	(15.2)		(20.6)
Net loss attributable to non-controlling interest	0		0
Net loss attributable to Myriad Genetics, Inc. stockholders	$	(15.2)	$	(20.6)

(15) SUPPLEMENTAL CASH FLOW INFORMATION


	Three months ended September 30,
	2020		2019
Cash paid during the period for income taxes	$	1.3	$	0.2
Cash paid for interest	2.6		2.8
Establishment of operating lease right-of-use assets and lease liabilities
Operating lease right-of-use assets	$	—	$	74.5
Operating lease liabilities	—		(78.8)
Accrued liabilities and other long-term liabilities	—		4.3

(16) SUBSEQUENT EVENTS

Change in Fiscal Year

On October 9, 2020, the Company’s Board of Directors approved a change in the Company’s fiscal year from a fiscal year ending on the last day of June of each year to a calendar fiscal year ending on the last day of December of each year, effective January 1, 2021. Accordingly, the Company will be issuing financial statements for a six-month transition period ending December 31, 2020 and calendar year financial statements thereafter.

~~(16)~~

~~SUPPLEMENTAL CASH FLOW INFORMATION~~

Six months ended

December 31,

2017

2016

Cash paid during the period for income taxes

$
5.5

$
8.0

Non-cash investing and financing activities:

Fair value adjustment on marketable investment
securities recorded to other stockholder's equity

(0.3
)

(0.8
)

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

~~General~~

We are a leading personalized medicine company dedicated to being a trusted advisor transforming patient lives through pioneering molecular diagnostics. Through our proprietary technologies, we believe we are positioned to identify important disease genes, the proteins they produce,

(Dollars and ~~the biological pathways~~shares in which they are involved to better understand the genetic basis of human disease and the role that genes and their related proteins may play in the disease process. We believe that identifying biomarkers (DNA, RNA and proteins) will enable us to develop novel molecular diagnostic tests that can provide important information to solve unmet medical needs that will provide better patient outcomes and reduce waste in the healthcare system. During the three months ended December 31, 2017, we reported total revenues of $194.0 million, net income of $32.1 million that included income tax benefit of $28.4 million resulting in $0.45 diluted earningsmillions, except per share. During the six months ended December 31, 2017, we reported total revenues of $384.2 million, net income of $113.2 million that included income tax benefit of $22.8 million resulting in $1.59 diluted earnings per share.

Our business units have been aligned with how the Chief Operating Decision Maker reviews performance and makes decisions in managing the Company. The business units have been aggregated into two reportable segments: (i) diagnostics and (ii) other. The diagnostics segment provides testing and collaborative development of testing that is designed to assess an individual’s risk for developing disease later in life, identify a patient’s likelihood of responding to drug therapy and guide a patient’s dosing to ensure optimal treatment, or assess a patient’s risk of disease progression and disease recurrence. The other segment provides testing products and services to the pharmaceutical, biotechnology and medical research industries, research and development, and clinical services for patients, and includes corporate services such as finance, human resources, legal and information technology.

~~Business Highlights~~

During the quarter ended September 30, 2017 GeneSight achieved statistically significant improvement in the gold-standard outcomes of response and remission in a 1,200 patient prospective randomized controlled trial. We also presented data from the IMPACT study at the World Congress of Psychiatric Genetics demonstrating that GeneSight statistically significantly improved anxiety symptom severity in 210 patients with generalized anxiety disorder. Anxiety symptoms based on the GAD-7 scale, improved 45 percent in patients receiving congruent therapy versus 26 percent for patients receiving non-congruent therapy. The result was statistically significant with a p-value of 0.03.

During the quarter ended December 31, 2017 we presented pivotal validation data for riskScore showing it is a highly statistically significant predictor of the 5-year lifetime risk of breast cancer. We presented data demonstrating that VectraDA was three to five times better at predicting radiographic progression compared to conventional measures of disease activity. The Medicare Local Coverage Decision (LCD) for favorable intermediate prostate cancer patients was finalized. Last we received FDA approval for BracAnalysis CDx as a companion diagnostic in conjunction with Lynparza for HER2-metastatic breast cancer.

~~Results of Operations for the Three Months Ended December 31, 2017 and 2016~~

~~Revenue~~

Three months ended

December 31,

(In millions)

2017

2016

Change

Revenue

$
194.0

$
196.5

$
(2.5
)

The decrease in revenue was primarily due to a decrease of $17.0 million in Hereditary Cancer Testing primarily due to reduced reimbursement. This decrease was partially offset by increases of $10.0 million in GeneSight, $1.9 million in Prolaris and $2.2 million in pharmaceutical and clinical services due to increased reimbursement and sample volumes.

~~The following table presents additional detail regarding the composition of our total revenue for the three months ended December 31, 2017 and 2016:~~

Three months ended

December 31,

$

% of Total Revenue

(In millions)

2017

2016

Change

2017

2016

Molecular diagnostic revenues:

Hereditary Cancer Testing

$
126.9

$
143.9

$
(17.0
)

65
%

73
%
GeneSight

31.7

21.7

10.0

16
%

11
%
VectraDA

11.1

10.7

0.4

6
%

6
%
Prolaris

5.0

3.1

1.9

3
%

2
%
EndoPredict

2.0

1.6

0.4

1
%

1
%
Other

2.5

2.9

(0.4
)

1
%

1
%
Total molecular diagnostic revenue

179.2

183.9

(4.7
)

Pharmaceutical and clinical service revenue

14.8

12.6

2.2

8
%

6
%
Total revenue

$
194.0

$
196.5

$
(2.5
)

100
%

100
%

~~Cost of Sales~~

Three months ended

December 31,

(In millions)

2017

2016

Change

Cost of sales

$
44.4

$
44.4

$
—

Cost of sales as a % of sales

22.9
%

22.6
%

Cost of sales as a percentage of revenue increased slightly from 22.6% to 22.9% during the three months ended December 31, 2017 compared to the same period in the prior year. The increase was primarily driven by a change in existing product mix and lower hereditary cancer reimbursement.

~~Research and Development Expenses~~

Three months ended

December 31,

(In millions)

2017

2016

Change

R&D expense

$
16.8

$
18.6

$
(1.8
)
R&D expense as a % of sales

8.7
%

9.5
%

Research and development expense for the three months ended December 31, 2017 decreased compared to the same period in the prior year primarily driven by a $1.2 million decrease in costs related to product and clinical development and a $0.5 million reduction in share-based compensation. In general, costs associated with research and development can fluctuate dramatically due to the timing of clinical studies, the staging of products in the pipeline and other factors.

~~Change in the Fair Value of Contingent Consideration~~

Three months ended

December 31,

(In millions)

2017

2016

Change

Change in the fair value of contingent consideration

$
13.0

$
(3.8
)

$
16.8

Change in the fair value of contingent consideration as a % of sales

6.7
%

(1.9
)%

The fair value of contingent consideration for the three months ended December 31, 2017 increased compared to the prior year due to increases to the fair value of contingent consideration related to the Assurex and Sividon acquisitions. We expect that the final Assurex contingent consideration will be paid out during the quarter ended March 31, 2018.

~~Selling, General and Administrative Expenses~~

Three months ended

December 31,

(In millions)

2017

2016

Change

SG&A expense

$
115.4

$
120.3

$
(4.9
)
SG&A expense as a % of sales

59.5
%

61.2
%

Selling, general and administrative expense increased for the three months ended December 31, 2017 compared to the same period in the prior year primarily due to a $1.1 million increase in sales and marketing compensation related to higher sample volumes and a $0.5 million increase in amortization. These increases were partially offset by decreases of $3.6 million related to integration and net savings related to our Elevate 2020 initiative, which is our Company wide efficiency program, and a $2.8 million reduction in bad debt.

~~Other Income (Expense)~~

Three months ended

December 31,

(In millions)

2017

2016

Change

Other income (expense)

$
(0.7
)

$
(4.9
)

$
4.2

For the three months ended December 31, 2017 compared to the same period in the prior year, the decrease in other expense was primarily driven by $2.5 million impairment on our investment in Raindance Technologies (“Raindance”) and $1.3 million loss on extinguishment of debt recognized in the prior year.

~~Income Tax Expense~~

Three months ended

December 31,

(In millions)

2017

2016

Change

Income tax expense (benefit)

$
(28.4
)

$
6.2

$
(34.6
)
Effective tax rate

(767.6
)%

51.2
%

Our tax rate is the product of a blended U.S. federal effective rate of 28% and a blended state income tax rate of approximately 3%. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from period to period.

Income tax expense after excluding the $32.6 million one-time Tax Act benefit for the three months ended December 31, 2017 is $4.2 million for an effective tax rate of 113.5%. The increase in the effective rate (after excluding the one-time Tax Act benefit) for the three months ended December 31, 2017 as compared to the same period in prior year is due to fair value adjustments related to acquisition contingent consideration, state taxes, and the early adoption of ASU 2016-09 which impacts expense based on fluctuations in stock price. Differences related to the recognition of the tax effect of equity compensation expense from the disqualification of incentive stock options also impacted the current and prior year effective tax rate.

~~Results of Operations for the Six Months Ended December 31, 2017 and 2016~~

~~Revenue~~

Six months ended

December 31,

(In millions)

2017

2016

Change

Revenue

$
384.2

$
373.9

$
10.3

The increase in revenue was primarily due to an increase of $31.5 million in GeneSight revenue resulting from including two full quarters of revenues from Assurex as well as the impact of increased volumes. In addition, VectraDA revenue increased by $4.9

million primarily due to timing of Medicare billing and cash collections as well as a switch to an accrual basis revenue recognition for some payers. Also, there was a $2.1 million increase in Prolaris revenue due to increased volumes. These increases were partially offset by a decrease of $29.6 million in Hereditary Cancer Testing primarily due to reduced reimbursement.

~~The following table presents additional detail regarding the composition of our total revenue for the six months ended December 31, 2017 and 2016:~~

Six months ended

December 31,

$

% of Total Revenue

(In millions)

2017

2016

Change

2017

2016

Molecular diagnostic revenues:

Hereditary Cancer Testing

$
253.6

$
283.2

$
(29.6
)

66
%

75
%
GeneSight

60.5

29.0

31.5

16
%

8
%
VectraDA

27.1

22.2

4.9

7
%

6
%
Prolaris

8.0

5.9

2.1

2
%

2
%
EndoPredict

3.8

3.3

0.5

1
%

1
%
Other

5.0

5.3

(0.3
)

1
%

1
%
Total molecular diagnostic revenue

358.0

348.9

9.1

Pharmaceutical and clinical service revenue

26.2

25.0

1.2

7
%

7
%
Total revenue

$
384.2

$
373.9

$
10.3

100
%

100
%

~~Cost of Sales~~

Six months ended

December 31,

(In millions)

2017

2016

Change

Cost of sales

$
87.4

$
84.3

$
3.1

Cost of sales as a % of sales

22.7
%

22.5
%

Cost of sales as a percentage of revenue increased slightly from 22.5% to 22.7% during the six months ended December 31, 2017 compared to the same period in the prior year. The increase was primarily driven by a change in existing product mix and lower hereditary cancer reimbursement.

~~Research and Development Expenses~~

Six months ended

December 31,

(In millions)

2017

2016

Change

R&D expense

$
34.6

$
38.0

$
(3.4
)
R&D expense as a % of sales

9.0
%

10.2
%

Research and development expense for the six months ended December 31, 2017 decreased compared to the same period in the prior year primarily driven by a $1.8 million decrease in costs related to product and clinical development, $1.3 million reduction in share-based compensation and a $0.4 million reduction in R&D costs related to VectraDA. In general, costs associated with research and development can fluctuate dramatically due to the timing of clinical studies, the staging of products in the pipeline and other factors.

~~Change in the Fair Value of Contingent Consideration~~

Six months ended

December 31,

(In millions)

2017

2016

Change

Change in the fair value of contingent consideration

$
(60.2
)

$
(3.2
)

$
(57.0
)
Change in the fair value of contingent consideration as a % of sales

(15.7
)%

(0.9
)%

The fair value of contingent consideration for the six months ended December 31, 2017 decreased compared to the same period in the prior year is primarily due to a $73.3 million decrease due to the Assurex RCT not meeting its primary endpoint which resulted in the Company not being required to pay the related milestone as defined in the acquisition agreement. This decrease was partially offset by increases in the fair value of the remaining Assurex and Sividon contingent consideration.

~~Selling, General and Administrative Expenses~~

Six months ended

December 31,

(In millions)

2017

2016

Change

SG&A expense

$
230.5

$
232.2

$
(1.7
)
SG&A expense as a % of sales

60.0
%

62.1
%

Selling, general and administrative expense decreased for the six months ended December 31, 2017 compared to the same period in the prior year primarily as a result of $13.3 million related to integration activities and net savings related to our Elevate 2020 initiative, which is our Company wide efficiency program, as well as a $2.7 million reduction in bad debt. These decreases were offset by $7.1 million from the inclusion of Assurex for a full two quarters and $4.7 million increase in amortization expense mainly related to the Assurex acquisition.

~~Other Income (Expense)~~

Six months ended

December 31,

(In millions)

2017

2016

Change

Other income (expense)

$
(1.6
)

$
(6.5
)

$
4.9

For the six months ended December 31, 2017 compared to the same period in the prior year, the decrease in other expense was primarily driven by the $2.5 million impairment of our investment in Raindance, a one-time $2.0 million indirect tax expense and $1.3 million loss on extinguishment of debt recognized in the prior year.

~~Income Tax Expense~~

Six months ended

December 31,

(In millions)

2017

2016

Change

Income tax expense (benefit)

$
(22.8
)

$
11.4

$
(34.2
)
Effective tax rate

(25.2
)%

70.8
%

Our tax rate is the product of a blended U.S. federal effective rate of 35% and a blended state income tax rate of approximately 3%. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from period to period.

Income tax expense after excluding the $32.6 million one-time Tax Act benefit for the six months ended December 31, 2017 is $9.8 million for an effective tax rate of 10.9%. The decrease in the effective rate (after excluding the one-time Tax Act benefit) for the six months ended December 31, 2017 as compared to the same period in prior year is due to fair value adjustments related to acquisition contingent consideration, state taxes, and the early adoption of ASU 2016-09 which impacts expense based on fluctuations in stock price. Differences related to the recognition of the tax effect of equity compensation expense from the disqualification of incentive stock options also impacted the current and prior year effective tax rate.

~~Liquidity and Capital Resources~~

We believe that our existing capital resources and the cash to be generated from future sales will be sufficient to meet our projected operating requirements, including contingent consideration and repayment of the outstanding Facility which matures on December 23, 2021, for the foreseeable future. There are no scheduled principal payments of the Facility prior to its maturity date; however, our available capital resources may be consumed more rapidly than currently expected and we may need or want to raise additional financing. We may not be able to secure such financing in a timely manner or on favorable terms, if at all. Without additional funds, we may be forced to delay, scale back or eliminate some of our sales and marketing efforts, research and development activities, or other operations and potentially delay development of our diagnostic tests in an effort to provide sufficient funds to continue our

~~operations. If any of these events occurs, our ability to achieve our development and commercialization goals would be adversely affected.~~

Our capital deployment strategy focuses on use of resources in three key areas: research and development, acquisitions and the repurchase of our common stock. We believe that research and development provides the best return on invested capital. We also allocate capital for acquisitions that support our business strategy and share ~~repurchases based on business and market conditions.~~

~~The following table represents the balances of cash, cash equivalents and marketable investment securities:~~

data)

December 31,

June 30,

(In millions)

2017

2017

Change

Cash and cash equivalents

$
88.7

$
102.4

$
(13.7
)
Marketable investment securities

54.8

48.3

6.5

Long-term marketable investment securities

58.5

48.5

10.0

Cash, cash equivalents and marketable investment
securities

$
202.0

$
199.2

$
2.8

The decrease in cash and cash equivalents was primarily driven by $49.4 million in cash used in finance activities which included $56.0 million in payments to decrease the balance of our revolving credit facility and $19.8 million used in investing activities. This was partially offset by $56.5 million in cash provided by operating activities.

~~The following table represents the condensed consolidated cash flow statement:~~

Six months ended

December 31,

(In millions)

2017

2016

Change

Cash flows from operating activities

$
56.5

28.5

$
28.0

Cash flows from investing activities

(19.8
)

(160.1
)

140.3

Cash flows from financing activities

(49.4
)

171.8

(221.2
)
Effect of foreign exchange rates on cash and cash equivalents

(1.0
)

(0.7
)

(0.3
)
Net increase (decrease) in cash and cash equivalents

(13.7
)

39.5

(53.2
)
Cash and cash equivalents at the beginning of the year

102.4

68.5

33.9

Cash and cash equivalents at the end of the period

$
88.7

$
108.0

$
(19.3
)
Forward-Looking Statements

~~Cash Flows from Operating Activities~~

The increase in cash flows from operating activities for the six months ended December 31, 2017, compared to the same period in the prior year, was primarily due to the $51.5 million increase in net income excluding the effect of the change in contingent consideration. The increase was also due to $1.2 million of changes in assets and liabilities associated with operating activities. These were partially offset by a $24.7 million increase in non-cash charges excluding the effect of the change in contingent consideration.

~~Cash Flows from Investing Activities~~

For the six months ended December 31, 2017, compared to the same period in the prior year, the decrease in cash used in investing activities was driven primarily by the $216.1 million of cash used for the purchase of Assurex in the prior year. This was partially offset by a $76.0 million decrease in net proceeds from marketable investment securities.

~~Cash Flows from Financing Activities~~

For the six months ended December 31, 2017, compared to the same period in the prior year, the decrease in cash flows from financing activities was driven primarily by the $204.0 million reduction in net proceeds from the revolving credit facility in the prior year and the $56.0 million in cash paid for repayment of the revolving credit facility in the current year. These reductions in cash flows were partially offset by $31.6 million reduction in cash used to repurchase common stock and an increase in proceeds from issuance of common stock under share-based compensation plans of $5.3 million.

~~Effects of Inflation~~

~~We do not believe that inflation has had a material impact on our business, sales, or operating results during the periods presented.~~

~~Share Repurchase Program~~

In June 2016, our Board of Directors authorized an eighth share repurchase program of $200.0 million of our outstanding common stock. We plan to repurchase our common stock from time to time or on an accelerated basis through open market transactions or privately negotiated transactions as determined by our management. The amount and timing of stock repurchases under the program will depend on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. As of December 31, 2017, we have $160.7 million remaining on our current share repurchase authorization. See also “Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds – Issuer Purchases of Equity Securities.”

~~Critical Accounting Policies~~

Critical accounting policies are those policies which are both important to the presentation of a company’s financial condition and results and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. No significant changes to our accounting policies took place during the period. For a further discussion of our critical accounting policies, see our Annual Report on Form 10-K for the fiscal year ended June 30, 2017.

~~Certain Factors That May Affect Future Results of Operations~~

The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes,” ~~“potential,~~“seek,” “could,~~” “would,~~” “continue,” “likely,” “will,” ~~“strategy,~~“strategy”, “goal” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to: uncertainties associated with COVID-19, including its possible effects on our operations and the demand for our products and services; our ability to efficiently and flexibly manage our business amid uncertainties related to COVID-19; the risk that sales and profit margins of our existing molecular diagnostic tests and pharmaceutical and clinical services may decline or will not continue to increase at historical rates; risks related to our ability to successfully transition from our existing product portfolio to our new tests; risks related to changes in ~~the~~ governmental or private insurers’ coverage and reimbursement levels for our tests or our ability to obtain reimbursement for our new tests at comparable levels to our existing tests; risks related to increased competition and the development of new competing tests and services; the risk that we may be unable to develop or achieve commercial success for additional molecular diagnostic tests and pharmaceutical and clinical services in a timely manner, or at all; the risk that we may not successfully develop new markets for our molecular diagnostic tests and pharmaceutical and clinical services, including our ability to successfully generate revenue outside the United States; the risk that licenses to the technology underlying our molecular diagnostic tests and pharmaceutical and clinical services tests and any future tests are terminated or cannot be maintained on satisfactory terms; risks related to delays or other problems with operating our laboratory testing facilities; risks related to public concern over ~~our~~ genetic testing in general or our tests in particular; risks related to regulatory requirements or enforcement in the United States and foreign countries and changes in the structure of the healthcare system or healthcare payment systems; risks related to our ability to obtain new corporate collaborations or licenses and acquire new technologies or businesses on satisfactory terms, if at all; risks related to our ability to successfully integrate and derive benefits from any technologies or businesses that we license or ~~acquire, including but not limited to our acquisition of Assurex, Sividon and the Clinic;~~acquire; risks related to our projections about the potential market opportunity for our products; the risk that we or our licensors may be unable to protect or that third parties will infringe the proprietary technologies underlying our tests; the risk of patent-infringement claims or challenges to the validity of our patents; risks related to changes in intellectual property laws covering our molecular diagnostic tests and pharmaceutical and clinical services and patents or enforcement in the United States and foreign countries, such as the Supreme Court ~~decision~~decisions in ~~the lawsuit brought against us by the Association~~Mayo Collab. Servs. v. Prometheus Labs., Inc., 566 U.S. 66 (2012), Ass’n for Molecular Pathology ~~et al;~~v. Myriad Genetics, Inc., 569 U.S. 576 (2013), and Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014); risks of new, changing and competitive technologies and regulations in the United States and internationally; the risk that we may be unable to comply with financial operating covenants under our credit or lending ~~agreements:~~agreements; the risk that we will be unable to pay, when due, amounts due under our ~~creditor~~credit or lending agreements; and other factors discussed under the heading “Risk Factors” contained in Item 1A of our Annual report on Form 10-K for the fiscal year ended June 30, ~~2017,~~2020, which has been filed with the Securities and Exchange Commission, as well as any updates to those risk factors filed from time to time in our Quarterly Reports on Form 10-Q (including Item 1A below in this report) or Current Reports on Form 8-K.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

~~Item 3. Quantitative~~

General

We are a leading precision medicine company acting as a trusted advisor to transform patient lives through pioneering molecular diagnostics. Through our proprietary technologies, we believe we are positioned to identify important disease genes, the proteins they produce, and ~~Qualitative Disclosures About Market Risk~~

~~There~~the biological pathways in which such genes and proteins are involved to better understand the molecular basis of certain human diseases. We believe that identifying these biomarkers (i.e., DNA, RNA and proteins) will enable us to develop novel molecular diagnostic tests that can provide important information to solve unmet medical needs. During the three months ended September 30, 2020, we reported total revenues of $145.2 and net loss of $(15.2) resulting in $(0.20) net loss per share.

Our business units have been ~~no material changes~~aligned with how the chief operating decision maker reviews performance and makes decisions in managing the Company. The business units have been aggregated into two reportable segments: (i) diagnostics and (ii) other. The diagnostics segment provides testing and collaborative development of testing that is designed to assess an individual’s risk for developing disease later in life, identify a patient’s likelihood of responding to drug therapy and guide a patient’s dosing to ensure optimal treatment, or assess a patient’s risk of disease progression and disease recurrence. The other segment provides testing products and services to the pharmaceutical, biotechnology and medical research industries, research and development, and clinical services for patients, and includes corporate services such as finance, human resources, legal and information technology.

Business Updates

During the quarter ended September 30, 2020, we continued to see improvement in business fundamentals, including test volumes, for our diagnostic products which have been affected by the COVID-19 pandemic. Total test volumes reached 90 percent of pre-pandemic levels by the end of the quarter compared to 75 percent of pre-pandemic levels at the end of the prior quarter ended June 30, 2020. We have also made the following recent announcements:

•Appointed Paul J. Diaz as President and Chief Executive Officer, effective August 13, 2020.

•The American College of Obstetricians and Gynecologists recently issued guidelines recommending prenatal testing for average risk patients. These guidelines have led to new medical policy guidelines for payors covering average risk testing incorporating 24 million covered lives to date.

•Received a local coverage determination ("LCD") for Prolaris for unfavorable intermediate and high-risk patients from Palmetto GBA and CGS Administrators, LLC, two of the administrative contractors for the Centers for Medicare & Medicaid Services. The final LCD becomes effective December 6, 2020.

•The final LCD for pharmacogenomic (PGx) testing became effective during the quarter, which expanded coverage for patients to all healthcare providers licensed and qualified to diagnose the condition and prescribe relevant medications (either independently or in an arrangement).

•Received coverage from the German Federal Joint Committee (G-BA) for the EndoPredict® breast cancer prognostic test. The positive decision means that EndoPredict® is now available to all patients with statutory health insurance in Germany without restrictions as a benefit of the statutory health insurance scheme (GKV).

Change in Fiscal Year

On October 9, 2020, our Board of Directors approved a change in our ~~market risk during~~fiscal year from a fiscal year ending on the ~~six~~last day of June of each year to a calendar fiscal year ending on the last day of December of each year, effective January 1, 2021. Accordingly, we will be issuing financial statements for a six-month transition period ending as of December 31, 2020, and calendar year financial statements thereafter.

Results of Operations for the Three Months Ended September 30, 2020 and 2019

Revenue


	Three months ended September 30,
(In millions)	2020		2019		Change
Revenue	$	145.2	$	186.3	$	(41.1)

The Company's revenues for the three months ended ~~December 31, 2017~~September 30, 2020 continued to be impacted by factors related to the COVID-19 pandemic, including patients incurring obstacles to access healthcare professionals, which resulted in testing volumes declining compared to the ~~disclosures~~prior year across the majority of the products. In addition, the average expected reimbursement per test decreased due to a variety of factors such as negotiating new contracts with payors and the impact of a $2.2 million reduction in ~~Part~~revenues for estimated future refunds across the Company's products. Hereditary Cancer Testing revenues decreased $23.9 compared to the same period in the prior year due primarily to an approximate 18% decrease in volumes and an approximate 6% decrease in average reimbursement per test. GeneSight revenues declined $10.8 compared to the same period in the prior year due primarily to an approximate 28% decrease in volumes and an approximate 27% decrease in average reimbursement per test. Prenatal revenues declined $7.0 compared to the same period in the prior year due primarily to a decrease in average reimbursement per test of approximately 34%. Pharmaceutical and clinical service revenue declined $4.8 compared to the same period in the prior year, primarily as a result of selling the Clinic in February 2020.

The following table presents additional detail regarding the composition of our total revenue for the three months ended September 30, 2020 and 2019:


	Three months ended September 30,				$ Change		% of Total Revenue
(In millions)	2020		2019				2020		2019
Molecular diagnostic revenues:
Hereditary Cancer Testing	$	80.6	$	104.5	$	(23.9)	56	%	56	%
Prenatal	16.5		23.5		(7.0)		11	%	13	%
GeneSight	11.9		22.7		(10.8)		8	%	12	%
Vectra	9.1		11.0		(1.9)		6	%	6	%
myChoice CDx	7.8		1.3		6.5		5	%	1	%
Prolaris	6.4		6.5		(0.1)		4	%	3	%
EndoPredict	2.8		2.3		0.5		2	%	1	%
Other	0.6		0.2		0.4		—	%	—	%
Total molecular diagnostic revenue	135.7		172.0		(36.3)
Pharmaceutical and clinical service revenue	9.5		14.3		(4.8)		7	%	8	%
Total revenue	$	145.2	$	186.3	$	(41.1)	100	%	100	%

Cost of Sales


	Three months ended September 30,
(In millions)	2020			2019			Change
Cost of molecular diagnostic testing	$	39.9		$	41.2		$	(1.3)
Cost of molecular diagnostic testing as a % of revenue	29.4		%	24.0		%
Cost of pharmaceutical and clinical services	$	4.3		$	8.5		$	(4.2)
Cost of pharmaceutical and clinical services as a % of revenue	45.3		%	59.4		%

The cost of molecular diagnostic testing as a percentage of revenue increased from 24.0% to 29.4% during the three months ended September 30, 2020 compared to the same period in the prior year. The increase was primarily driven by the decline in revenue from lower test volumes during the period, attributable to the impact of COVID-19 as lower revenues were generated to cover fixed costs of performing the tests. The cost of pharmaceutical and clinical services as a percentage of revenue decreased from 59.4% to 45.3% during the three months ended September 30, 2020 compared to the same period in the prior year due to the sale of the Clinic in February 2020.

Research and Development Expenses


	Three months ended September 30,
(In millions)	2020			2019			Change
R&D expense	$	17.6		$	21.3		$	(3.7)
R&D expense as a % of sales	12.1		%	11.4		%

Research and development expense for the three months ended September 30, 2020 decreased compared to the same period in the prior year primarily due to decreased personnel expenses from a decrease in headcount and decreased technology related expenses from synergies between our labs located in Salt Lake City and in San Francisco.

Change in the Fair Value of Contingent Consideration


	Three months ended September 30,
(In millions)	2020			2019		Change
Change in the fair value of contingent consideration	$	(1.1)		$	0.7	$	(1.8)
Change in the fair value of contingent consideration as a % of sales	(0.8)		%	0.4

Selling, General and Administrative Expenses


	Three months ended September 30,
(In millions)	2020			2019			Change
SG&A expense	$	124.1		$	135.5		$	(11.4)
SG&A expense as a % of sales	85.5		%	72.7		%

Selling, general and administrative expense decreased for the three months ended September 30, 2020 compared to the same period in the prior year primarily due to the Company implementing cost saving measures due to the decline in testing volumes as a result of the impacts of COVID-19 and due to a decline in expense from the sale of the Clinic in February 2020. The cost savings measures implemented by the Company have been partially offset by increased legal expenses and expenses related to our leadership transition in the current six-month transition period ending December 31, 2020.

Other Expense, net


	Three months ended September 30,
(In millions)	2020		2019		Change
Other expense, net	$	(4.1)	$	(1.4)	$	(2.7)

Other expense, net increased for the three months ended September 30, 2020 compared to the same period in the prior year, due to increased foreign exchange losses and to decreased interest income.

Income Tax Benefit


	Three months ended September 30,
(In millions)	2020			2019			Change
Income tax benefit	$	(28.5)		$	(1.7)		$	(26.8)
Effective tax rate	65.2		%	7.6		%

Our tax rate is the product of a blended U.S. federal effective rate of 21% and a blended state income tax rate of approximately 3%. Certain significant or unusual items are separately recognized during the period in which they occur and can be a source of variability in the effective tax rates from period to period.

Income tax benefit for the three months ended September 30, 2020 was $28.5, and our effective tax rate was 65.2%. The increase in the effective rate for the three months ended September 30, 2020 as compared to the same period in the prior year is primarily due to carrying back net operating losses due to the CARES Act.

Liquidity and Capital Resources

We believe that our existing capital resources and the cash to be generated from future sales, taking into consideration the expected continuing impacts of COVID-19 on our operations, will be sufficient to meet our projected operating requirements and repay the outstanding Amended Facility, which matures on July 31, 2023 and which has no scheduled principal payments prior to that date. Our available capital resources, however, may be consumed more rapidly than currently expected, and we may need or want to raise additional financing. We may not be able to secure such financing in a timely manner or on favorable terms, if at all. We are subject to financial covenants as part of our outstanding Amended Facility. Based on the continued uncertainty regarding the impact of COVID-19 on our future operations, it is possible that we could be in violation of certain financial covenants contained in the Amended Facility within the Amendment Period, which runs through June 30, 2021. We may seek waivers or amendments from our lenders in order to avoid a future potential covenant violation, in addition to taking other potential actions. If we were unable to comply with the covenants in the future, that could result in an increase in the rate of interest and limits on our ability to incur certain additional indebtedness and could potentially cause the loan repayment to be accelerated. Without additional funds, we may be forced to delay, scale back or eliminate some of our sales and marketing efforts, research and development activities, or other operations and potentially delay development of our diagnostic tests in an effort to provide sufficient funds to continue our operations. If any of these events occurs, our ability to achieve our development and commercialization goals could be adversely affected.

Additionally, the COVID-19 pandemic and resulting global disruptions have caused significant volatility in financial markets. This disruption can contribute to potential defaults in our accounts receivable, affect asset valuations resulting in impairment charges, and affect the availability of lease and financing credit as well as other segments of the credit markets. We utilize a range of financing methods to fund our operations and capital expenditures and expect to continue to maintain financing flexibility in the current market conditions. However, due to the continuing rapidly evolving global situation, it is not possible to predict whether unanticipated consequences of the pandemic are reasonably likely to materially affect our liquidity and capital resources in the future.

Our capital deployment strategy focuses on use of resources in the key areas of research and development, acquisitions, debt repayment, and the repurchase of our common stock. We believe that investing organically through research and development or acquisitively to support business strategy provides the best return on invested capital.

The following table represents the balances of cash, cash equivalents and marketable investment securities:



(In millions)	September 30, 2020		June 30, 2020		Change
Cash and cash equivalents	$	118.3	$	163.7	$	(45.4)
Marketable investment securities	42.1		54.1		(12.0)
Long-term marketable investment securities	30.2		37.0		(6.8)
Cash, cash equivalents and marketable investment securities	$	190.6	$	254.8	$	(64.2)

The decrease in cash, cash equivalents, and marketable investment securities was primarily driven by $59.3 in cash used by operations and the use of $3.8 for the proceeds from the issuance of common stock, net of shares exchanged for withholding tax, offset by $18.6 in proceeds from maturities of marketable investments.

The following table represents the condensed consolidated cash flow statement:


	Three months ended September 30,
(In millions)	2020		2019		Change
Cash flows from operating activities	$	(59.3)	$	15.8	$	(75.1)
Cash flows from investing activities	17.1		(7.1)		24.2
Cash flows from financing activities	(3.9)		(12.3)		8.4
Effect of foreign exchange rates on cash and cash equivalents	0.7		0.3		0.4
Net decrease in cash and cash equivalents	(45.4)		(3.3)		(42.1)
Cash and cash equivalents at the beginning of the period	163.7		93.2		70.5
Cash and cash equivalents at the end of the period	$	118.3	$	89.9	$	28.4

Cash Flows from Operating Activities

The decrease in cash flows from operating activities for the three months ended September 30, 2020, compared to the same period in the prior year, was primarily due to the $107.9 change in the balance of prepaid taxes and the $17.0 change in the balance of trade accounts receivable, offset by an increase in the unrecognized tax benefit adjustment of $13.2 and an increase in the deferred income tax adjustment of $48.4.

Cash Flows from Investing Activities

For the three months ended September 30, 2020, compared to the same period in the prior year, the change in cash flows from investing activities was driven primarily by the purchase of approximately $23.1 of marketable securities during the same period in the prior year that did not occur during the three months ended September 30, 2020.

Cash Flows from Financing Activities

For the three months ended September 30, 2020, compared to the same period in the prior year, the decrease in cash flows from financing activities was driven primarily by the use of $8.6 in cash for repayment of the credit facility during the same period in the prior year that did not occur during the three months ended September 30, 2020.

Effects of Inflation

We do not believe that inflation has had a material impact on our business, sales, or operating results during the periods presented.

Share Repurchase Program

Our Board of Directors has previously authorized us to repurchase up to $200.0 of our outstanding common stock. We may repurchase our common stock from time to time or on an accelerated basis through open market transactions or privately negotiated transactions as determined by our management. The amount and timing of stock repurchases under the program will depend on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. As of September 30, 2020, we are authorized to repurchase up to $110.7 under our current share repurchase authorization. See also “Part II, Item 7A2. Unregistered Sales of Equity Securities and Use of Proceeds – Issuer Purchases of Equity Securities”.

Critical Accounting Policies

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our market risk during the three months ended September 30, 2020 compared to the disclosures in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, which is incorporated by reference herein.

Item 4. Controls and Procedures

~~(a)~~

Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures.

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

~~(b)~~

Changes in Internal Controls. There were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Changes in Internal Controls

The Company is in the midst of a multi-year transformation project to achieve better analytics and process efficiencies through the use of Oracle Fusion Cloud Services System. During the quarter ended September 30, 2020, the Company completed the implementation of certain modules used in the financial statement close process and management reporting. Additional phases will continue to be implemented over the coming year. Emphasis has been on the maintenance of effective internal controls and assessment of the design and operating effectiveness of key control activities throughout development and deployment of each phase.

Other than as described above, there were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - ~~Othe~~rOther Information

Item 1. Legal Proceedings

Purported Securities Class Action Claims

On September 27, 2019, a purported class action complaint was filed in the United States District Court for the District of Utah, against the Company, its former President and Chief Executive Officer, Mark C. Capone, and its Executive Vice President and Chief Financial Officer, R. Bryan Riggsbee (“Defendants”). On February 21, 2020, the plaintiff filed an amended class action complaint, which added the Company’s Executive Vice President of Clinical Development, Bryan M. Dechairo, as an additional Defendant. This action, captioned In re Myriad Genetics, Inc. Securities Litigation (No. 2:19-cv-00707-DBB), is premised upon allegations that the Defendants made false and misleading statements regarding our business, operations, and acquisitions. The lead plaintiff seeks the payment of damages allegedly sustained by it and the purported class by reason of the allegations set forth in the amended complaint, plus interest, and legal and other costs and fees. The Company intends to vigorously defend against this action. Due to the nature of this matter and inherent uncertainties, it is not possible to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss, if any.

Other Legal Proceedings

On August 24, 2018, our wholly-owned subsidiary, Assurex Health, Inc. ("Assurex") was served with an Amended Complaint which had been filed in the Circuit Court of Cook County, Illinois, County Department, Law Division, Civil Action No. 2018 L 004972, by Pipe Trades Services MN Welfare Plan ("Pipe Trades"), as a qui tam relator, on behalf of the State of Illinois, Pipe Trades, and all others similarly situated, purportedly arising from Assurex's alleged violations of the Illinois Insurance Claims Fraud Prevention Act and other causes of action. Pipe Trades seeks certification of a putative class, certification as the purported class representative, and the payment of treble damages allegedly sustained by Pipe Trades and the purported class by reason of the allegations set forth in the amended complaint, plus statutory damages and penalties, plus interest, and legal and other costs and fees. The State of Illinois and Cook County, Illinois, have declined to intervene in the matter. On September 11, 2019, plaintiffs filed a second amended complaint, and on October 10, 2019, Assurex filed a Motion to Dismiss Plaintiff’s Second Amended Complaint for Lack of Personal Jurisdiction and Standing, requesting that the second amended complaint be dismissed in its entirety, with prejudice, for lack of personal jurisdiction and standing. On July 20, 2020, this motion was denied. The Company’s motion filed on August 12, 2020, for interlocutory appeal of the denial of the motion to dismiss, was denied in a hearing on October 30, 2020. The Company intends to continue to vigorously defend against this action. Due to the nature of this matter and inherent uncertainties, it is not possible to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss, if any.

Qui Tam Lawsuit

In June 2016, our wholly-owned subsidiary, Crescendo Bioscience, Inc. (“CBI”), received a subpoena from the Office of Inspector General of the Department of Health and Human Services requesting that CBI produce documents relating to entities that received payment from CBI for the collection and processing of blood specimens for testing, including a named unrelated company, healthcare providers and other third party entities. The Office of Inspector General subsequently requested additional documentation in December 2017. CBI provided to the Office of Inspector General the documents requested. On January 30, 2020, the United States District Court for the Northern District of California unsealed a qui tam complaint, filed on April 16, 2016 against CBI and the Company, alleging violations of the Federal and California False Claims Acts and the California Insurance Fraud Prevention Act. On January 22, 2020, after a multi-year investigation into CBI’s and the Company’s alleged conduct, the United States declined to intervene. On January 27, 2020, the State of California likewise filed its notice of declination. The Company was not aware of the complaint until after it was unsealed. On May 23, 2020, the court denied CBI and the Company’s motion to dismiss. The Company intends to continue to vigorously defend against this action. Due to the nature of this matter and inherent uncertainties, it is not possible to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss, if any.

Other than as set forth above, we are ~~presently~~ not a party to any legal proceedings that we believe will have a material impact on our business, financial position or results of operations.

Item 1A. Risk Factors

~~There have been no material changes to~~

The following risk factor disclosure should be read in conjunction with the risk factors ~~included~~described in ~~our~~the Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~

2020.

We may be adversely impacted if we are unable to successfully implement new systems or unable to adapt systems to our change in fiscal year-end.

Information technology systems are an important part of our business operations. We are in the midst of a multi-year transformation project to achieve better analytics and process efficiencies through the use of Oracle Fusion Cloud Services System ("Oracle Fusion"). This project is expected to improve the efficiency and effectiveness of certain financial and business transaction processes and the underlying systems environment. During the quarter ended September 30, 2020, we completed the implementation of certain modules used in the financial statement close process and management reporting. Additional integrations are expected to take place over the next year. An implementation of this nature is a major undertaking from a financial, management and personnel perspective. The implementation of Oracle Fusion may prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that this system will be beneficial to the extent anticipated.

In addition, we have announced a change in our fiscal year end from a fiscal year ending on the last day of June of each year to a calendar fiscal year ending on the last day of December each year, effective January 1, 2021, which will require certain modifications to our systems used for accounting and management reporting. If the systems are not appropriately configured for the change in fiscal year-end it could have a material adverse effect on our results of operations and financial condition.

We are subject to debt covenants that impose operating and financial restrictions on us and if we are not able to comply with them, it could have a material adverse impact on our operations and liquidity.

Covenants in the Amended Facility impose operating and financial restrictions on us. These restrictions may prohibit or place limitations on, among other things, our ability to incur additional indebtedness, create certain types of liens, and complete mergers, consolidations, or change in control transactions. Under the Amended Facility, a change in control of the Company, which means that a shareholder or a group of shareholders is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power of the voting stock of the Company, would require mandatory prepayment of the outstanding debt. The Amended Facility may also prohibit or place limitations on our ability to sell assets, pay dividends or provide other distributions to shareholders. These restrictions could also limit our ability to take advantage of business opportunities.

We must maintain specified leverage and interest ratios measured as of the end of each applicable quarter as financial covenants in the Amended Facility. The Amended Facility, through Amendment No. 2 entered into on May 1, 2020, modified compliance with the leverage covenant and the interest coverage ratio covenant, which were waived through March 31, 2021, and added a minimum EBITDA covenant for the quarters ending December 31, 2020 and March 31, 2021. Based on the continued uncertainty regarding the impact of COVID-19 on our future operations, it is possible that we could be in violation of certain financial covenants contained in the Amended Facility within the modification period, which runs through June 30, 2021.

If we are unable to comply with the covenants and ratio in the Amended Facility, we may be in default under the agreement. A default would result in an increase in the rate of interest and limits on our ability to incur certain additional indebtedness and it could potentially cause the loan repayment to be accelerated, any of which could have a material adverse impact on our operations and liquidity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

~~In June 2016, we announced that our~~

Our Board of Directors ~~had~~has previously authorized us to repurchase ~~an additional~~up to $200.0 million of our outstanding common stock, ~~increasing the cumulative share~~of which $110.7 million is still available to repurchase ~~authorization since we first authorized the program in May 2010 to $1.4 billion. In connection with our most recent stock repurchase authorization, we have been~~as of September 30, 2020. We are authorized to complete the repurchase through open market transactions or through an accelerated share repurchase program, in each case to be executed at management’s discretion based on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. ~~As of the date of this report, we have not entered into an accelerated share repurchase agreement under our most recent stock repurchase program.~~ The repurchase program may be suspended or discontinued at any time without prior notice. The transactions ~~effectuated to date~~ occurred in open market ~~purchases.~~

~~During~~purchases and pursuant to a trading plan under Rule 10b5-1.

No stock repurchases were made under our stock repurchase program during the three months ended ~~December 31, 2017 we acquired the following shares of common stock under our stock repurchase program:~~

September 30, 2020.

~~(a)~~

~~(b)~~

~~(c)~~

~~(d)~~

~~Total Number of~~

~~Approximate Dollar~~

~~Shares Purchased as~~

~~Value of Shares that~~

~~Part of Publicly~~

~~May Yet Be~~

~~Total Number of~~

~~Average Price Paid~~

~~Announced Plans or~~

~~Purchased Under the~~

~~Period~~

~~Shares Purchased~~

~~per Share~~

~~Programs~~

~~Plans or Programs~~

~~October 1, 2017 to October 31, 2017~~

—

~~160.7~~

~~November 1, 2017 to November 30, 2017~~

—

~~160.7~~

~~December 1, 2017 to December 31, 2017~~

—

~~160.7~~

~~Total~~

—

~~160.7~~

On October 31, 2017, Myriad entered into a Study Support Agreement and Subscription Agreement with a third party service provider pursuant to which Myriad will issue up to 18,000 shares of its common stock in consideration for clinical trial support services to be rendered under the Study Support Agreement.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

~~31.1~~
10.1			Executive Employment Agreement between the Registrant and Paul J. Diaz dated July 24, 2020.

10.2*			Performance -Based Restricted Stock Unit Agreement between the Registrant and Paul J. Dia z dated O c tober 8, 2020.

10.3			Restricted Stock Unit Agreement between the Registrant and Paul J. Dia z dated August 13, 2020.

10.4			Performance-Based Non-Qualified Stock Option Agreement between the Registrant and Paul J. Diaz dated August 13, 2020.

10.5			Non-Qualified Stock Option Agreement between the Registrant and Paul J. Diaz dated August 13, 2020.

10.6			Form of Separation and Release Agreement between the Registrant and Paul J. Diaz.

31.1			Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
~~31.2~~
31.2			Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

~~32.1~~
32.1			~~Certifications~~Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Furnished).
~~101~~
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			The ~~following materials~~cover page from ~~Myriad Genetics, Inc.’s~~the Company's Quarterly Report on Form 10-Q for the quarter ended ~~December 31, 2017,~~September 30, 2020, has been formatted in ~~XBRL (Extensible Business Reporting Language): (i)~~Inline XBRL.

			* The appendix to this exhibit has been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of the ~~unaudited Condensed Consolidated Balance Sheets, (ii)~~omitted appendix will be furnished to the unaudited Condensed Consolidated Statements of Operations (iii) the unaudited Consolidated Statement of Comprehensive Income, (iv) the unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. SEC upon request.

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	MYRIAD GENETICS, INC.

Date: ~~February 7, 2018~~ November 9, 2020	By:	~~By:~~	/s/ ~~Mark C. Capone~~ Paul J. Diaz
			~~Mark C. Capone~~ Paul J. Diaz
			President and Chief Executive Officer
			(Principal executive officer)



Date: ~~February 7, 2018~~ November 9, 2020	By:	~~By:~~	/s/ R. Bryan Riggsbee
			R. Bryan Riggsbee
			Executive Vice President, Chief Financial Officer
			(Principal financial and ~~chief~~ accounting officer)

	Estimated Fair Value
Current assets	$	18.2
Intangible assets		295.6
Equipment		1.9
Goodwill		121.1
Current liabilities		(18.9	)
Deferred tax liability		(66.3	)
Total fair value purchase price	$	351.6
Less: Contingent consideration		(130.0	)
Less: Cash acquired		(5.5	)
Total cash consideration transferred	$	216.1

	Carrying
	amount
Balance June 30, 2017	$	119.2
Fair value adjustment to equipment		(0.1	)
Non-controlling interest adjustment		0.2
Change in deferred tax liability		1.8
Ending balance December 31, 2017	$	121.1

	Carrying amount
Beginning balance July 1, 2017	$	316.1
Adjustments to acquisitions (see note 2)		1.9
Translation adjustments		1.4
Ending balance December 31, 2017	$	319.4

	Gross
	Carrying		Accumulated
	Amount		Amortization			Net
At December 31, 2017:
Purchased licenses and technologies	$	527.2	$	(79.6	)	$	447.6
Customer relationships		4.6		(3.1	)		1.5
Trademarks		3.0		(0.9	)		2.1
Total amortized intangible assets		534.8		(83.6	)		451.2
In-process research and development		24.0		—			24.0
Total unamortized intangible assets		24.0		—			24.0
Total intangible assets	$	558.8	$	(83.6	)	$	475.2

	Number of shares			Weighted average exercise price
Options outstanding at June 30, 2017		8.0		$	24.67
Options granted		—		$	—
Less:
Options exercised		(0.5	)	$	23.39
Options canceled or expired		(0.1	)	$	26.60
Options outstanding at December 31, 2017		7.4		$	24.75
Options exercisable at December 31, 2017		7.4		$	24.75

	Number of shares			Weighted average grant date fair value
RSUs outstanding at June 30, 2017		2.0		$	33.02
RSUs granted		1.1		$	32.64
Less:
RSUs vested		(0.7	)	$	34.97
RSUs canceled		(0.1	)	$	27.40
RSUs outstanding at December 31, 2017		2.3		$	32.77

	Carrying amount
Balance June 30, 2017	$	140.5
Change in fair value recognized in the income statement		(60.2	)
Translation adjustments recognized in other comprehensive income		0.7
Ending balance December 31, 2017	$	81.0