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 September 30, ~~2019~~

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 (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) ~~Delaware~~	~~87-0494517~~
~~(State or other jurisdiction~~ ~~of incorporation or organization)~~	~~(I.R.S. Employer Identification No.)~~

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

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

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

~~Public~~ 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 every Interactive Data File required to be submitted 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 such files). Yes ☒x No ☐¨

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

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 ☒x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of November ~~4, 2019~~2, 2020, the registrant had ~~74,389,024~~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 September 30 ~~2019~~ , 2020 (Unaudited)and June 30, ~~2019~~20 20	3

		Condensed Consolidated Statements of Operations ~~(Unaudited)~~ for the three months ended September 30 , 2020 and 2019 ~~and 2018~~(Unaudited)	4

		Condensed Consolidated Statements of Comprehensive ~~Income (Unaudited)~~Loss for the three months ended September 30 , 2020 and 2019 ~~and 2018~~(Unaudited)	5

		Condensed Consolidated Statements of Stockholders’ Equity ~~(Unaudited)~~ for the three months ended September ~~30, 2019~~ 3 0 , 2020 and ~~2018~~2019(Unaudited)	6

		Condensed Consolidated Statements of Cash Flows ~~(Unaudited)~~ for the three months ended September ~~30, 2019~~ 3 0 , 2020 and ~~2018~~2019(Unaudited)	7

		Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	23 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	30 29

Item 3.		Defaults Upon Senior Securities	30 29

Item 4.		Mine Safety Disclosures	30

Item 5.		Other Information	30

Item 6.		Exhibits	30

Signatures			31

Table of Conten t s

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets ~~(Unaudited)~~

(In millions)

	September 30,			June 30,
ASSETS	2019			2019			ASSETS	September 30, 2020		June 30, 2020
								(Unaudited)
Current assets:							Current assets:
Cash and cash equivalents	$	89.9		$	93.2		Cash and cash equivalents	$	118.3	$	163.7
Marketable investment securities		52.7			43.7		Marketable investment securities	42.1		54.1
Prepaid expenses		14.0			16.6		Prepaid expenses	12.5		13.8
Inventory		28.1			31.4		Inventory	26.6		29.1
Trade accounts receivable		117.0			133.9		Trade accounts receivable	85.1		68.1
Prepaid taxes		23.0			25.1		Prepaid taxes	107.9		0
Other receivables		4.8			4.7		Other receivables	2.0		2.9
Total current assets		329.5			348.6		Total current assets	394.5		331.7
Property, plant and equipment, net		55.0			57.3		Property, plant and equipment, net	36.7		37.0
Operating lease right-of-use assets		71.3			—		Operating lease right-of-use assets	62.7		66.0
Long-term marketable investment securities		51.5			54.9		Long-term marketable investment securities	30.2		37.0
Intangibles, net		667.8			684.7		Intangibles, net	590.9		605.3
Goodwill		416.1			417.2		Goodwill	328.3		327.6
Other assets							Other assets	1.2		0
Total assets	$	1,591.2		$	1,562.7		Total assets	$	1,444.5	$	1,404.6
LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	24.0		$	33.3		Accounts payable	$	19.1	$	21.7
Accrued liabilities		73.0			78.9		Accrued liabilities	65.4		75.9
Current maturities of operating lease liabilities		13.0			—		Current maturities of operating lease liabilities	13.6		13.5
Short-term contingent consideration		3.3			3.4		Short-term contingent consideration	3.3		3.1
Deferred revenue		2.1			2.2		Deferred revenue	32.3		32.8
Total current liabilities		115.4			117.8		Total current liabilities	133.7		147.0
Unrecognized tax benefits		22.1			21.7		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		62.6			—		Noncurrent operating lease liabilities	53.5		56.9
Other long-term liabilities		7.3			7.8		Other long-term liabilities	10.7		8.0
Contingent consideration		7.4			10.4
Long-term debt		225.0			233.5
Long-term deferred taxes		76.9			82.6
Total liabilities		516.7			473.8		Total liabilities	535.2		486.4
Commitments and contingencies							Commitments and contingencies
Stockholders’ equity:							Stockholders’ equity:
Common stock, 74.4 and 73.5 shares outstanding at September 30, 2019 and June 30, 2019 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		1,076.3			1,068.0		Additional paid-in capital	1,101.2		1,096.6
Accumulated other comprehensive loss		(7.5	)		(5.4	)	Accumulated other comprehensive loss	(3.6)		(5.2)
Retained earnings		5.0			25.6
Accumulated deficit							Accumulated deficit	(189.1)		(173.9)
Total Myriad Genetics, Inc. stockholders’ equity		1,074.5			1,088.9		Total Myriad Genetics, Inc. stockholders’ equity	909.3		918.2
Non-Controlling Interest		—			—
Non-controlling interest							Non-controlling interest	0		0
Total stockholders' equity		1,074.5			1,088.9		Total stockholders' equity	909.3		918.2
Total liabilities and stockholders’ equity	$	1,591.2		$	1,562.7		Total liabilities and stockholders’ equity	$	1,444.5	$	1,404.6

See accompanying notes to condensed consolidated financial statements.

Table of Conten t s

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share amounts)

	Three months ended
	September 30,							Three months ended September 30,
	2019			2018				2020		2019
Molecular diagnostic testing	$	172.0		$	189.0		Molecular diagnostic testing	$	135.7	$	172.0
Pharmaceutical and clinical services		14.3			13.3		Pharmaceutical and clinical services	9.5		14.3
Total revenue		186.3			202.3		Total revenue	145.2		186.3
Costs and expenses:							Costs and expenses:
Cost of molecular diagnostic testing		41.2			42.3		Cost of molecular diagnostic testing	39.9		41.2
Cost of pharmaceutical and clinical services		8.5			7.4		Cost of pharmaceutical and clinical services	4.3		8.5
Research and development expense		21.3			21.1		Research and development expense	17.6		21.3
Change in the fair value of contingent consideration		0.7			0.4		Change in the fair value of contingent consideration	(1.1)		0.7
Selling, general, and administrative expense		135.5			129.9		Selling, general, and administrative expense	124.1		135.5
Total costs and expenses		207.2			201.1		Total costs and expenses	184.8		207.2
Operating income (loss)		(20.9	)		1.2
Operating loss							Operating loss	(39.6)		(20.9)
Other income (expense):							Other income (expense):
Interest income		0.9			0.7		Interest income	0.4		0.9
Interest expense		(2.9	)		(2.2	)	Interest expense	(2.9)		(2.9)
Other		0.6			1.1		Other	(1.6)		0.6
Total other expense:		(1.4	)		(0.4	)
Income (loss) before income tax		(22.3	)		0.8
Income tax provision (benefit)		(1.7	)		1.6
Net income (loss)	$	(20.6	)	$	(0.8	)
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 (loss) attributable to Myriad Genetics, Inc. stockholders	$	(20.6	)	$	(0.7	)
Earnings (loss) per share:
Basic	$	(0.28	)	$	(0.01	)
Diluted	$	(0.28	)	$	(0.01	)
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		73.7			73.0
Diluted		73.7			73.0
Basic and diluted							Basic and diluted	74.7		73.7

See accompanying notes to condensed consolidated financial statements.

Table of Conten t s

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

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

(In millions)

Three months ended

September 30,

2019

2018

Net income (loss) attributable to Myriad Genetics, Inc. stockholders

$
(20.6
)

$
(0.7
)
Unrealized gain (loss) on available-for-sale securities, net of tax

—

(0.2
)
Change in foreign currency translation adjustment, net of tax

(2.2
)

0.4

Comprehensive income (loss)

(22.8
)

(0.5
)
Comprehensive income attributable to non-controlling interest

—

—

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

$
(22.8
)

$
(0.5
)


	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 Conten t s

MYRIAD GENETICS, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(In millions)

Accumulated

Retained

Myriad

Additional

other

earnings

Genetics, Inc.

Common

paid-in

comprehensive

(accumulated

Stockholders’

stock

capital

loss

deficit)

equity

BALANCES AT JUNE 30, 2018

$
0.7

$
915.4

$
(4.1
)

$
54.1

$
966.1

Issuance of common stock under share-based compensation plans

—

1.9

—

—

1.9

Share-based payment expense

—

127.4

—

—

127.4

Repurchase and retirement of common stock

—

7.7

—

—

7.7

Net income

—

—

—

(0.7
)

(0.7
)
Other comprehensive income, net of tax

—

—

(0.2
)

—

(0.2
)
BALANCES AT SEPTEMBER 30, 2018

$
0.7

$
1,052.4

$
(4.3
)

$
53.4

$
1,102.2

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

—

(0.5
)

—

—

(0.5
)
Share-based payment expense

—

8.8

—

—

8.8

Net income (loss)

—

—

—

(20.6
)

(20.6
)
Other comprehensive income, net of tax

—

—

(2.1
)

—

(2.1
)
BALANCES AT SEPTEMBER 30, 2019

$
0.7

$
1,076.3

$
(7.5
)

$
5.0

$
1,074.5


	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)

		Three months ended
		September 30,							Three months ended September 30,
		2019			2018				2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:								CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) attributable to Myriad Genetics, Inc. stockholders		$	(20.6	)		(0.7	)
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			18.2			18.3		Depreciation and amortization	17.7		18.2
Non-cash interest expense			0.1			(1.3	)	Non-cash interest expense	0.2		0.1
Non-cash lease expense								Non-cash lease expense	3.3		3.2
Loss (gain) on disposition of assets			(0.1	)		(1.0	)	Loss (gain) on disposition of assets	0.1		(0.1)
Share-based compensation expense			8.8			7.7		Share-based compensation expense	8.4		8.8
Deferred income taxes			(5.1	)		2.7		Deferred income taxes	48.4		(5.1)
Unrecognized tax benefits			0.4			(2.6	)	Unrecognized tax benefits	13.9		0.4
Change in fair value of contingent consideration			0.7			(0.4	)	Change in fair value of contingent consideration	(1.1)		0.7
Changes in assets and liabilities:								Changes in assets and liabilities:
Prepaid expenses			2.6			1.8		Prepaid expenses	1.2		2.6
Trade accounts receivable			16.7			(3.3	)	Trade accounts receivable	(17.0)		16.7
Other receivables			(0.1	)		(0.3	)	Other receivables	0.9		(0.1)
Inventory			3.1			3.5		Inventory	2.6		3.1
Prepaid taxes			2.1			(3.6	)	Prepaid taxes	(107.9)		2.1
Other assets								Other assets	(1.2)		0
Accounts payable			(9.3	)		(8.4	)	Accounts payable	(3.2)		(9.3)
Accrued liabilities			(1.7	)		(4.4	)	Accrued liabilities	(9.8)		(4.9)
Deferred revenue			—			(0.2	)	Deferred revenue	(0.6)		0
Net cash provided by operating activities			15.8			7.8
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			(1.4	)		(1.3	)	Capital expenditures	(1.5)		(1.4)
Acquisitions, net of cash acquired			—			(279.6	)
Purchases of marketable investment securities			(23.1	)		(14.4	)	Purchases of marketable investment securities	0		(23.1)
Proceeds from maturities and sales of marketable investment securities			17.4			16.3		Proceeds from maturities and sales of marketable investment securities	18.6		17.4
Net cash used in investing activities			(7.1	)		(279.0	)
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			(0.4	)		2.1
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			(3.3	)		—		Payment of contingent consideration recognized at acquisition	(0.1)		(3.3)
Net proceeds from revolving credit facility			—			290.0
Repayment of revolving credit facility			(8.6	)		(40.0	)	Repayment of revolving credit facility	0		(8.6)
Net cash provided by (used in) financing activities			(12.3	)		252.1
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			0.3			1.5		Effect of foreign exchange rates on cash and cash equivalents	0.7		0.3
Net decrease in cash and cash equivalents			(3.3	)		(17.6	)	Net decrease in cash and cash equivalents	(45.4)		(3.3)
Cash and cash equivalents at beginning of the period			93.2			110.9		Cash and cash equivalents at beginning of the period	163.7		93.2
Cash and cash equivalents at end of the period		$	89.9		$	93.3		Cash and cash equivalents at end of the period	$	118.3	$	89.9

See accompanying notes to condensed consolidated financial statements.

Table of Conten t s

NOTES TO CONDENSED CONSOLIDATED 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, 2019,~~ included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2019. Operating results for the three months ended September 30, 2019 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.~~

~~Recent Accounting Pronouncements~~

~~Recently Adopted Standards~~

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and changing certain lessor accounting requirements. ASU 2016-02 also requires entities to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. On July 1, 2019, the Company adopted ASU 2016-02 under the modified retrospective approach by initially applying ASU 2016-02 at the adoption date, rather than at the beginning of the earliest comparative period presented. Results for the three months ended September 30, ~~2019 are presented under ASU 2016-02. Prior~~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 is not able to estimate the effects of the COVID-19 outbreak on its results of operations, 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 summer season, which is generally reflected in the quarter ended June 30. The quarter ending December 31 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 ~~were not adjusted and continue~~have been reclassified to ~~be reported under previous lease accounting guidance.~~

~~Under ASU 2016-02,~~conform with the ~~Company determines if an arrangement is~~current period presentation. The reclassifications have no impact on the total assets, total liabilities, stockholders’ equity, cash flows from operations, or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset. Right-of-use (“ROU”) assets represent the Company's right to use an underlying assetnet loss for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable.

As the implicit rate in the Company's leases is generally unknown, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. When calculating the Company’s incremental borrowing rates, the Company gives consideration to its credit risk, term of the lease, total lease payments and adjust for the impacts of collateral, as necessary. The lease term used may reflect any option to extend or terminate the lease when it is reasonably certain the Company will exercise such options. Lease expenses for the Company's operating leases are recognized on a straight-line basis over the lease term.

ASU 2016-02 provides a number of optional practical expedients in transitioning to ASU 2016-02. The Company has elected the package of practical expedients to avoid reassessing under ASU 2016-02 prior conclusions about lease identification, lease classification and initial direct costs. The Company has also elected the practical expedient allowing the use of hindsight in determining the lease term and assessing impairment of right-of-use ROU assets based on all facts and circumstances through the effective date of the new standard. ASU 2016-02 also provides practical expedients for ongoing lease accounting. The Company has elected the recognition exemption for short-term leases for all leases that qualify. Under this exemption, the Company will not recognize ROU assets or lease liabilities for those leases that qualify as a short-term lease (leases with lease terms of 12 months or less), which includes not recognizing ROU assets or lease liabilities for existing short-term leases in transition. The Company also has elected the practical expedient avoid separating lease and non-lease components for any of its leases within its existing classes of assets.

The Company recognized operating lease liabilities of $78.8 and right-of-use assets related to operating leases totaling $74.5 as of the adoption date. These are presented as “Current maturities of operating lease liabilities” for a total of $13.1, “Noncurrent operating lease liabilities” for a total of $65.7, and “Operating lease right-of-use assets” for a total of $74.5 on the Company’s consolidated balance sheet. ~~No adjustments to the beginning retained earnings balance were required.~~

period.

Recent Accounting Pronouncements

Recently Adopted Standards ~~Effective in Future Years and Not Yet Adopted~~

In June 2016, the ~~FASB~~Financial Accounting Standards Board (the "FASB") issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 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 ~~will be~~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 ~~will~~are also be 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 2018-15 aligns the requirements for 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 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 the Company's consolidated financial statements as of September 30, 2020. The amounts capitalized may be 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 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 years beginning after December ~~31, 2019, including interim periods within those years. Early application of the guidance is permitted for all entities for fiscal years beginning after December~~ 15, ~~2018, including the interim periods within those fiscal years. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date.~~2020, with early adoption permitted. The Company is currently evaluating the impact ~~of ASU 2016-13~~this new standard will have on ~~its~~the consolidated financial ~~statements~~statements.

.(2)

REVENUE

~~(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 sale of molecular diagnostic tests and pharmaceutical and clinical services is recorded at the 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 ~~U.S~~by U.S. versus rest of world, “RoW”:


	Three months ended September 30,													Three months ended September 30,
	2019						2018							2020						2019
(In millions)	U.S.		RoW		Total		U.S.		RoW		Total		(In millions)	U.S.		RoW		Total		U.S.		RoW		Total
Molecular diagnostic revenues:													Molecular diagnostic revenues:
Hereditary Cancer Testing	$	100.6	$	3.9	$	104.5	$	113.5	$	2.8	$	116.3	Hereditary Cancer Testing	$	72.1	$	8.5	$	80.6	$	100.6	$	3.9	$	104.5
Prenatal													Prenatal	16.4		0.1		16.5		23.5		0		23.5
GeneSight		22.7		—		22.7		29.3		—		29.3	GeneSight	11.9		0		11.9		22.7		0		22.7
Prenatal		23.5		—		23.5		18.1		—		18.1
VectraDA		11.0		—		11.0		13.0		—		13.0
Vectra													Vectra	9.1		0		9.1		11.0		0		11.0
myChoice CDx													myChoice CDx	7.6		0.2		7.8		1.3		0		1.3
Prolaris		6.5		—		6.5		6.2		—		6.2	Prolaris	6.4		0		6.4		6.5		0		6.5
EndoPredict		0.5		1.8		2.3		0.3		2.1		2.4	EndoPredict	0.4		2.4		2.8		0.5		1.8		2.3
Other		1.4		0.1		1.5		3.6		0.1		3.7	Other	0.6		0		0.6		0.1		0.1		0.2
Total molecular diagnostic revenue		166.2		5.8		172.0		184.0		5.0		189.0	Total molecular diagnostic revenue	124.5		11.2		135.7		166.2		5.8		172.0
Pharmaceutical and clinical service revenue		8.5		5.9		14.3		7.6		5.7		13.3	Pharmaceutical and clinical service revenue	9.5		0		9.5		8.5		5.9		14.3
Total revenue	$	174.7	$	11.7	$	186.3	$	191.6	$	10.7	$	202.3	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 test results to customers, in exchange for consideration from the customer. The Company has the right to bill its customers upon the completion of performance obligations and thus does not record contract assets. Occasionally, customers make payments prior to the Company's performance of its contractual obligations. When this occurs, the Company records a contract liability as deferred revenue. During fiscal year 2020, the Company received approximately $29.7 in advance Medicare payments to provide relief from the 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 beginning and ending balances of deferred revenue is shown in the table below:

Three months ended

September 30,

2019

2018

Deferred revenue - beginning balance

$
2.2

$
2.6

Revenue recognized

(0.4
)

(1.7
)
Prepayments

0.3

1.6

Deferred revenue - Ending Balance

$
2.1

$
2.5

~~Myriad Companies generate revenue by performing molecular diagnostic testing and pharmaceutical & clinical services. Revenue from the sale~~Table of molecular diagnostic tests and pharmaceutical and clinical services is recorded at the invoiced amount net of any discounts or contractual allowances. 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.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 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, ~~periodically~~ the Company periodically enters into arrangements with customers to provide diagnostic testing and/or pharmaceutical and clinical services that may have terms longer than one year and include multiple performance obligations. As of September 30, ~~2019,~~2020, the aggregate amount of the transaction price of such contracts that is allocated to the remaining performance obligations is ~~$1.8.~~

$2.8.

The Company ~~provides discounts such as early payment, self-pay and volume~~may provide discounts to its customers. In determining the transaction price, Myriad includes an estimate of the expected amount of consideration as revenue. The Company applies this method consistently for similar contracts when estimating the effect of any uncertainty on an 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~~customer. for ~~e.g.~~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 consolidated statements of 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 time the performance obligation was met and settlements with third party payors. As a result of this new information, the Company updates our estimate of the amounts to be recognized for previously delivered tests, the impact of which was not material to our consolidated statements of operations for the three months ended September 30, 2020.

The Company applies the practical expedient related to 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 also applies the practical expedient for not adjusting revenue recognized for the effects of the 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 ~~payments~~payment terms have a payback period of less than one year.

~~During~~

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 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 its revenues. Revenues received from Medicare represented approximately 16% and 14% of total revenue for the three months ended September 30, 2020 and 2019, ~~the Company recognized a $10.9 decrease in revenue, which resulted in an ($0.11) impact to EPS, for tests in which the performance obligation~~respectively. Concentrations of ~~delivering the tests results was met in prior periods. The changes were primarily driven by changes in the estimated transaction price~~credit risk are mitigated due to ~~contractual adjustments, obtaining updated information from payors and patients that was unknown at~~ the ~~time the performance obligation was met and settlements with third party payors.~~

~~(3)~~

~~ACQUISITIONS~~

~~Acquisition of Counsyl, Inc.~~

On July 31, 2018, the Company completed the acquisition of Counsyl, Inc. (“Counsyl”), a leading provider of genetic testing and DNA analysis services, pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated May 25, 2018. Pursuant to the termsnumber of the ~~Merger Agreement, Myriad Merger Sub, Inc., a newly-created wholly-owned subsidiary~~Company’s customers as well as their dispersion across many geographic regions. No payor accounted for more than 10% of ~~the Company, was merged with and into Counsyl, with Counsyl continuing as the surviving corporation and a wholly-owned subsidiary of Myriad.~~accounts receivable at September 30, 2020 or 2019. The Company ~~believes the acquisition allows for greater entry into the high-growth reproductive testing market, with the ability to become a leader in women’s health genetic testing.~~

~~The Company acquired Counsyl for total consideration~~does not require collateral from its customers.

Table of $405.9, consisting of $278.5 in cash, financed in part by the Amendment to the Facility (see Note 8) and 2,994,251 shares of common stock issued, valued at $127.4. The shares were issued and valued as of July 31, 2018 at a per share market closing price of $42.53. To complete the purchase transaction, the Company incurred approximately $6.8 of acquisition costs, which were recorded as selling, general and administrative expenses in the period incurred.

Of the cash consideration, $5.0 was deposited into an escrow account to fund any post-closing adjustments payable to Myriad based upon differences between the estimated working capital and the actual working capital of Counsyl at closing.

Conten t s

Consideration transferred was allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values as of the acquisition date. 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 the consideration transferred was finalized within the measurement period (which was up to one year from the acquisition date).

Estimated Fair
Value

Current assets

$
42.5

Intangible assets

290.0

Equipment

18.2

Other assets

0.1

Goodwill

99.3

Current liabilities

(19.6
)
Long term liabilities

(0.1
)
Deferred tax liability

(9.2
)
Total fair value purchase price

$
421.2

Less: Cash acquired

(15.3
)
Total consideration transferred

$
405.9

~~Identifiable Intangible Assets~~

Through its acquisition of Counsyl, the Company acquired intangible assets that consisted of developed screening processes with an estimated fair value of $290.0. The fair values of these developed screening processes were estimated using a probability-weighted income approach that discounts expected future cash flows to present value. Under the probability-weighted income approach, the estimated net cash flows from these developed screening processes were discounted using a discount rate of 12.5%, which is based on the estimated internal rate of return for the acquired developed screening processes and represents the rate that market participants may use to value these intangible assets. The Company will amortize these intangible assets on a straight-line basis over their estimated useful lives of 12 years.

~~Goodwill~~

The goodwill represents the excess of consideration transferred over the fair value of assets acquired and liabilities assumed from Counsyl and is attributable to the benefits expected from combining the Company’s expertise with Counsyl’s technology and customer insights and the opportunity to integrate genetic screening into clinical practice with OBGYNs. Changes in goodwill since the Counsyl acquisition as of September 30, 2019 are shown below:

Carrying

amount

Balance September 30, 2018

$
94.9

Fair value adjustment to equipment

0.7

Intangible adjustment

2.9

Working capital adjustment

(1.1
)
Change in deferred tax liability

1.9

Balance September 30, 2019

$
99.3

(3)MARKETABLE INVESTMENT SECURITIES

~~This goodwill is not deductible for income tax purposes.~~

~~Pro Forma Information (Unaudited)~~

The unaudited pro-forma results presented below include the effects of the Counsyl acquisition as if it had been consummated as of July 1, 2017, with adjustments to give effect to pro forma events that are directly attributable 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 that may result from the consolidation of Counsyl. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operation of the combined company would have been if the acquisition had occurred at the beginning 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, 2017.

Three months ended

September 30,

2019

2018

Revenue

$
186.3

$
212.5

Income (loss) from operations

(20.9
)

11.5

Net income (loss)

(20.6
)

8.6

Earnings (loss) per share, basic

$
(0.28
)

$
0.11

Earnings (loss) per share, diluted

$
(0.28
)

$
0.11

~~(4)~~

~~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 September 30, ~~2019~~2020 and June 30, ~~2019~~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 September 30, 2019:
At September 30, 2020:									At September 30, 2020:
Cash and cash equivalents:									Cash and cash equivalents:
Cash	$	67.2	$	—	$	—	$	67.2	Cash	$	68.3	$	—	$	—	$	68.3
Cash equivalents		22.7		—		—	$	22.7	Cash equivalents	50.0		—		—		$	50.0
Total cash and cash equivalents		89.9		—		—		89.9	Total cash and cash equivalents	118.3		—		—		118.3
Available-for-sale:									Available-for-sale:
Corporate bonds and notes		68.7		0.4				69.1	Corporate bonds and notes	40.5		0.6		0		41.1
Municipal bonds		15.0		0.1				15.1	Municipal bonds	12.6		0.2		0		12.8
Federal agency issues		7.0		—		—		7.0	Federal agency issues	4.0		0.1		0		4.1
US government securities		12.9		0.1		—		13.0	US government securities	14.2		0.1		0		14.3
Total	$	193.5	$	0.6	$	—	$	194.1	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, 2019:
At June 30, 2020:									At June 30, 2020:
Cash and cash equivalents:									Cash and cash equivalents:
Cash	$	68.7	$	—	$	—	$	68.7	Cash	$	132.8	$	—	$	—	$	132.8
Cash equivalents		24.5		—		—		24.5	Cash equivalents	30.9		—		—		30.9
Total cash and cash equivalents		93.2		—		—		93.2	Total cash and cash equivalents	163.7		—		—		163.7
Available-for-sale:									Available-for-sale:
Corporate bonds and notes		64.0		0.6		—		64.6	Corporate bonds and notes	50.1		0.8		0		50.9
Municipal bonds		15.3		—		—		15.3	Municipal bonds	17.8		0.2		0		18.0
Federal agency issues		9.0		—		—		9.0	Federal agency issues	5.5		0.1		0		5.6
US government securities		9.7		—		—		9.7	US government securities	16.4		0.2		0		16.6
Total	$	191.2	$	0.6	$	—	$	191.8	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 September 30, ~~2019:~~

2020:

	Amortized		Estimated
	cost		fair value			Amortized cost		Estimated fair value
Cash	$	67.2	$	67.2	Cash	$	68.3	$	68.3
Cash equivalents		22.7		22.7	Cash equivalents	50.0		50.0
Available-for-sale:					Available-for-sale:
Due within one year		54.9		55.0	Due within one year	41.8		42.1
Due after one year through five years		48.7		49.2	Due after one year through five years	29.5		30.2
Due after five years		—		—	Due after five years	0		0
Total	$	193.5	$	194.1	Total	$	189.6	$	190.6

~~(5)~~

~~PROPERTY, PLANT AND EQUIPMENT, NET~~

September 30,

June 30,

2019

2019

Land

$
2.2

$
2.3

Buildings and improvements

18.2

18.8

Leasehold improvements

31.1

31.0

Equipment

115.5

117.1

167.0

169.2

Less accumulated depreciation

(112.0
)

(111.9
)
Property, plant and equipment, net

$
55.0

$
57.3

Three months ended

September 30,

2019

2018

Depreciation expense

$
2.9

$
4.9

(4)FAIR VALUE MEASUREMENTS

~~(6)~~

~~GOODWILL AND INTANGIBLE ASSETS~~

~~Goodwill~~

The fair value of the Company’s financial instruments reflects the amounts that the Company ~~has recorded goodwill~~estimates it will receive in connection with the sale of ~~$416.1 from~~an asset or pay in connection with the ~~acquisitions~~transfer of ~~Counsyl~~a liability in an orderly transaction between market participants at the measurement date (exit price). 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 ~~was completed~~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 ~~July 31, 2018, Assurex~~other observable inputs. For Level 2 securities, the Company uses a third party pricing service which provides documentation on an ongoing basis that ~~was completed on August 31, 2016,~~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”~~("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, 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 the Company estimates projections during the 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 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, 2014considers weighted average cost of capital as well as a specific risk premium associated with the riskiness of the earn-out itself, the related projections, and ~~Rules-Based Medicine, Inc. that was completed on May 31, 2011. Of this goodwill, $350.8 relates~~the overall business. The contingent earn-out liabilities are classified as a component of long-term and short-term contingent consideration in the Company’s consolidated balance sheets. Changes to the ~~Company’s diagnostic segment and $65.3 relates~~earn-out liabilities are reflected in change in the fair value of contingent consideration in our consolidated statements of operations. Changes to the ~~other segment.~~ 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 $226.5 at September 30, 2020.

Table of Conten t s

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


	Level 1		Level 2		Level 3		Total
September 30, 2020
Money market funds (a)	$	50.0	$	0	$	0	$	50.0
Corporate bonds and notes	0		41.1		0		41.1
Municipal bonds	0		12.8		0		12.8
Federal agency issues	0		4.1		0		4.1
US government securities	0		14.3		0		14.3
Contingent consideration	0		0		(5.9)		(5.9)
Total	$	50.0	$	72.3	$	(5.9)	$	116.4

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


	Level 1		Level 2		Level 3		Total
June 30, 2020
Money market funds (a)	$	30.9	$	0	$	0	$	30.9
Corporate bonds and notes	0		50.9		0		50.9
Municipal bonds	0		18.0		0		18.0
Federal agency issues	0		5.6		0		5.6
US government securities	0		16.6		0		16.6
Contingent consideration	0		0		(6.8)		(6.8)
Total	$	30.9	$	91.1	$	(6.8)	$	115.2

(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, 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, ~~2019:~~

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.

Carrying
amount

Ending balance June 30 2019

$
417.2

Acquisitions

—

Translation adjustments

(1.1
)
Ending balance September 30, 2019

$
416.1

(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

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						Gross Carrying Amount		Accumulated Amortization		Net
	Amount		Amortization			Net
At September 30, 2019:
At September 30, 2020:								At September 30, 2020:
Purchased licenses and technologies	$	814.5	$	(171.5	)	$	643.0	Purchased licenses and technologies	$	816.6	$	(232.4)	$	584.2
Customer relationships		4.7		(3.9	)		0.8	Customer relationships	4.7		(4.4)		0.3
Trademarks		3.0		(1.3	)		1.7	Trademarks	3.0		(1.4)		1.6
Total amortized intangible assets		822.2		(176.7	)		645.5	Total amortized intangible assets	824.3		(238.2)		586.1
In-process research and development		22.3		—			22.3	In-process research and development	4.8		—		4.8
Total unamortized intangible assets		22.3		—			22.3	Total unamortized intangible assets	4.8		—		4.8
Total intangible assets	$	844.5	$	(176.7	)	$	667.8	Total intangible assets	$	829.1	$	(238.2)	$	590.9

	Gross
	Carrying		Accumulated						Gross Carrying Amount		Accumulated Amortization		Net
	Amount		Amortization			Net
At June 30, 2019:
At June 30, 2020:								At June 30, 2020:
Purchased licenses and technologies	$	815.7	$	(156.6	)	$	659.1	Purchased licenses and technologies	$	815.6	$	(217.1)	$	598.5
Customer relationships		4.6		(3.8	)		0.8	Customer relationships	4.6		(4.2)		0.4
Trademarks		3.0		(1.2	)		1.8	Trademarks	3.0		(1.4)		1.6
Total amortized intangible assets		823.3		(161.6	)		661.7	Total amortized intangible assets	823.2		(222.7)		600.5
In-process research and development		23.0		—			23.0	In-process research and development	4.8		—		4.8
Total unamortized intangible assets		23.0		—			23.0	Total unamortized intangible assets	4.8		—		4.8
Total intangible assets	$	846.3	$	(161.6	)	$	684.7	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,

2019

2018

Amortization of intangible assets

$
15.3

$
13.4


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

~~(7)~~

~~ACCRUED LIABILITIES~~

September 30,

June 30,

2019

2019

Employee compensation and benefits

$
45.2

$
48.8

Accrued taxes payable

7.2

3.0

Qui tam settlement

9.1

9.1

Other

11.5

18.0

Total accrued liabilities

$
73.0

$
78.9

(7)ACCRUED LIABILITIES

~~(8)~~

~~LONG-TERM DEBT~~


	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, ~~with~~and the lenders from time to time party thereto. On July 31, 2018, the Company entered into Amendment No. 1 ~~(the “Amended Facility”)~~ which ~~effects~~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. ~~This was~~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 ~~a modification~~modifications pursuant to guidance in ASC 470-50.

Pursuant to the Amended Facility, ~~Myriad~~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 ~~$225.0.~~$224.6. There are 0 scheduled principal payments of the Amended Facility prior to its maturity date.

The proceeds of the Amended Facility were used to: (i) refinance in full the obligations under the Facility, (ii) finance the acquisition of Counsyl (See Note 3), (iii) pay fees, commissions, transactions costs and expenses incurred in connection with the foregoing, and (iv) for working capital and other general corporate purposes.

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 ~~consolidations, and/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. WeAmendment 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, ~~2019.~~

~~During~~2020. Based on the ~~quarter ended September 30, 2019,~~continued uncertainty regarding the impact of COVID-19 on the Company’s future operations, it is possible that the Company ~~made $8.6~~could be in ~~principal repayments.~~

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,			June 30,
	2019			2019				September 30, 2020		June 30, 2020
Long-term debt	$	226.6		$	235.0		Long-term debt	$	226.7	$	226.7
Long-term debt discount		(1.6	)		(1.5	)	Long-term debt discount	(2.1)		(2.3)
Net long-term debt	$	225.0		$	233.5		Net long-term debt	$	224.6	$	224.4

~~(9)~~

~~OTHER LONG TERM LIABILITIES~~

September 30,

June 30,

2019

2019

Pension obligation

6.8

6.8

Other

0.5

1.0

Total other long term liabilities

$
7.3

$
7.8

(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 has 2 non-contributory defined benefit pension plans for certain Clinic employees. Participation in the plans excludes those employees hired after 2002.~~ AsCompany's balance of other long-term liabilities as of September 30, ~~2019 the fair value~~2020 and June 30, 2020 consists of the ~~plan assets were approximately $0.1 resulting in a net pension liability~~Company's portion of ~~$6.8.~~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

~~(10)~~

~~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 0 preferred shares outstanding at September 30, ~~2019.~~

2020.

The Company is authorized to issue up to 150.0 shares of common stock, par value $0.01 per share. There were ~~74.4~~75.2 shares issued and outstanding at September 30, ~~2019.~~

2020.

Common shares issued and outstanding

	Three months ended		Year ended
	September 30,		June 30,				Three months ended September 30,	Year ended June 30,
	2019		2019				2020	2020
Beginning common stock issued and outstanding		73.5		70.6		Beginning common stock issued and outstanding	74.7	73.5
Common stock issued upon exercise of options and employee stock plans		0.9		4.5
Repurchase and retirement of common stock		—		(1.6	)
Common stock issued upon exercise of options, vesting of restricted stock units and employee stock plans						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		74.4		73.5		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,					Three months ended September 30,
	2019		2018			2020	2019
Denominator:					Denominator:
Weighted-average shares outstanding used to compute basic EPS		73.7		73.0	Weighted-average shares outstanding used to compute basic EPS	74.7	73.7
Effect of dilutive shares		—		—	Effect of dilutive shares	0	0
Weighted-average shares outstanding and dilutive securities used to compute diluted EPS		73.7		73.0	Weighted-average shares outstanding and dilutive securities used to compute diluted EPS	74.7	73.7

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

September 30,

2019

2018

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

1.7

4.1


	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 ~~an eighth~~a 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~~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, ~~2019,~~2020, the Company ~~has~~is authorized to repurchase up to $110.7 ~~remaining on its current share repurchase~~of shares under this authorization.

~~The Company uses~~ NaN shares were repurchased during 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 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 ~~2018~~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:

Three months ended

September 30,

2019

2018

Shares purchased and retired

—

—

Common stock and additional paid-in-capital reductions

$
—

$
—

Charges to retained earnings

$
—

$
—


	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

~~(11)~~

~~INCOME TAXES~~

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. ~~The~~Under the Tax ~~Act~~ Cuts and Jobs Act, ~~reduces~~ the federal corporate tax rate tois 21% for ~~the fiscal~~calendar year ~~ending June 30,~~ 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. ~~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, ~~2019~~2020 was ~~$(1.7),~~$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 ~~income compared to income tax expense of $1.6, or approximately 200.0% of pre-tax income,~~loss, for the three months ended September 30,

~~2018.~~ 2019. Income tax ~~expense~~benefit for the three months ended September 30, ~~2019~~2020 is based on the Company’s estimated ~~annual~~annualized effective tax rate for the ~~full fiscal year~~six-month transition period ending ~~June 30,~~December 31, 2020, adjusted by discrete items recognized during the period. For the three months ended September 30, ~~2019,~~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 ~~effect~~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 ~~release~~quarter ended September 30, 2020, the Company recognized an income tax net benefit of ~~uncertain tax liabilities, state income taxes, acquisition transaction costs, and differences~~$20.0 related to the CARES Act, which included an increase in the uncertain tax ~~effect~~benefit accrual of ~~equity compensation expense~~$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 ~~deduction realized when exercised, released or sold.~~

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.

~~(12)~~

~~SHARE-BASED COMPENSATION~~

~~On November 30, 2017, the Company’s shareholders approved the adoption of the 2017 Employee, Director and Consultant Equity Incentive Plan (the “2017 Plan”).~~

(13)COMMITMENTS AND CONTINGENCIES

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, 2019, the Company may grant additional shares of common stock under the 2017 Plan with respect to the 0.4 options outstanding under our 2003 Plan and 5.3 options and restricted stock units outstanding under our 2010 Plan, that 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 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 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 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 three months ended September 30, 2019 is as follows:~~

Number
of
shares

Weighted
average
exercise
price

Options outstanding at June 30, 2019

5.5

$
24.45

Options granted

—

$
—

Less:

Options exercised

(0.4
)

$
22.87

Options canceled or expired

(0.1
)

$
30.00

Options outstanding at September 30, 2019

5.0

$
24.39

Options exercisable at September 30, 2019

5.0

$
24.39

~~As of September 30, 2019, there was 0 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 three months ended September 30, 2019 is as follows:~~

Number
of
shares

Weighted
average
grant date
fair value

RSUs outstanding at June 30, 2019

2.4

$
37.70

RSUs granted

1.2

$
29.89

Less:

RSUs vested

(0.8
)

$
36.00

RSUs canceled

(0.1
)

$
46.00

RSUs outstanding at September 30, 2019

2.7

$
34.71

As of September 30, 2019, there was $39.2 of total unrecognized share-based compensation expense related to RSUs that will be recognized over a weighted-average period of 2.7 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 September 30, 2019, approximately 0.6 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 income and comprehensive income was allocated as follows:~~

Three months ended

September 30,

2019

2018

Cost of molecular diagnostic testing

$
0.2

$
0.2

Cost of pharmaceutical and clinical services

0.1

0.1

Research and development expense

1.5

1.2

Selling, general, and administrative expense

7.0

6.2

Total share-based compensation expense

$
8.8

$
7.7

~~(13)~~

~~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. 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.~~

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. For Level 3 contingent consideration, 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 the Company estimates projections during the earn out period 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 itself, the related projections, and the overall business. The contingent earn-out liabilities are classified as a component of long-term and short-term contingent consideration in the Company’s consolidated balance sheets. Changes to the earn-out liabilities are reflected in change in the fair value of contingent consideration in our consolidated statements of operations. Changes to the unobservable inputs could have a material impact on the Company’s financial statements.

~~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

September 30, 2019

Money market funds (a)

$
13.3

$
—

$
—

$
13.3

Corporate bonds and notes

1.5

69.1

—

70.6

Municipal bonds

—

15.1

—

15.1

Federal agency issues

—

7.0

—

7.0

US government securities

—

13.0

—

13.0

Contingent consideration

—

—

(10.7
)

(10.7
)
Total

$
14.8

$
104.2

$
(10.7
)

$
108.3

~~(a)~~

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

Level 1

Level 2

Level 3

Total

June 30, 2019

Money market funds (a)

$
17.2

$
—

$
—

$
17.2

Corporate bonds and notes

2.5

64.4

—

66.9

Municipal bonds

—

15.4

—

15.4

Federal agency issues

—

9.0

—

9.0

US government securities

—

9.8

—

9.8

Contingent consideration

—

—

(13.8
)

(13.8
)
Total

$
19.7

$
98.6

$
(13.8
)

$
104.5

~~(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, 2019

$
13.8

Payment of contingent consideration

(3.3
)
Change in fair value recognized in the income statement

(0.7
)
Translation adjustments recognized in other comprehensive income

0.9

Ending balance September 30, 2019

$
10.7

~~(14)~~

~~COMMITMENTS AND CONTINGENCIES~~

In July 2019, the Company resolved the complaint filed by a qui tam relator in October 2017 in the United States District Court for the District of South Carolina. The complaint was the basis of the Office of Inspector General (OIG) subpoena dated February 2018 regarding Medicare billing practices relating to the Company’s hereditary cancer testing from 2014 to 2018. After a 17-month investigation, the Department of Justice declined to intervene in the case. The Company believes this demonstrated that the key allegations made in the complaint were false. In order to avoid a lengthy and distracting litigation with the qui tam relator, the Company entered into a settlement agreement on July 18, 2019 under which the Company would pay $9.1 to the qui tam relator in order to settle the matter. The Company paid the settlement amount of $9.1 in October 2019. The Company denies any wrongdoing and does not anticipate any material change in its billing practices.

~~In addition, the~~ Company is subject to various claims and legal proceedings covering matters that arise in the ordinary course of its business activities. As of September 30, ~~2019,~~2020, the management of the Company believes any reasonably possible liability that may 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.

From time to time, the Company receives recoupment requests from third-party payors for alleged overpayments. The Company ~~leases certain office spaces and research and development laboratory facilities, vehicles, and office equipment~~disagrees with ~~remaining lease terms ranging from one to six years. These leases require monthly lease payments that may be subject to annual increases throughout~~ the lease term. Certain of these leases also include renewal options which allows the Company to, at its election, renew or extend the lease for a fixed or indefinite period of time. These optional periods have not been considered in the determinationcontentions of the ~~right-of-use-assets~~pending requests or ~~lease liabilities associated with these leases as~~has recorded an estimated reserve for the ~~Company did not consider it reasonably certain it would exercise the options.~~

The Company performed evaluations of its contracts and determined each of its identified leases are operating leases. For the three months ended September 30, 2019, the Company incurred $4.6 in lease costs which are included in operating expenses in the consolidated statement of operations in relation to these operating leases. Of such lease costs, $0.6 was variable lease expense and $0.1 was short-term lease expense, and neither of them were included in the measurement of the Company's operating ROU assets and lease liabilities. The variable rent expense is comprised primarily of the Company's proportionate share of operating expenses, property taxes, and insurance and is classified as lease expense due to the Company's election to not separate lease and non-lease components.

~~As of September 30, 2019, the maturities of the Company’s operating lease liabilities were as follows:~~

alleged overpayments.

Fiscal year ending:

2020

$
11.9

2021

14.9

2022

13.7

2023

12.6

2024

12.3

Thereafter

19.3

Total lease payments

$
84.7

~~As of September 30, 2019, the weighted average remaining lease term is 6.0 years and the weighted average discount rate used to determine the operating lease liability was 3.87%.~~

~~Disclosures related to periods prior to the adoption of ASU 2016-02~~

~~The~~ ~~following table summarizes the future minimum lease payments as of June 30, 2019:~~

Fiscal year ending:

2020

$
15.1

2021

14.1

2022

13.1

2023

12.2

2024

11.9

Thereafter

19.1

Total lease payments

$
85.5

(14) SEGMENT AND RELATED INFORMATION

~~(15)~~

~~EMPLOYEE DEFERRED SAVINGS PLAN~~

The Company has a deferred savings plan which qualifies under Section 401(k) of the Internal Revenue Code. Substantially all of 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:

Three months ended

September 30,

2019

2018

Deferred savings plan contributions

$
2.5

$
2.0

~~(16)~~

~~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 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
										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	$	170.4	$	15.9		$	186.3		Revenues	$	170.4	$	15.9	$	186.3
Depreciation and amortization		16.9		1.3			18.2		Depreciation and amortization	16.9		1.3		18.2
Segment operating income (loss)		17.3		(38.2	)		(20.9	)	Segment operating income (loss)	17.3		(38.2)		(20.9)
Three months ended September 30, 2018
Revenues	$	189.0	$	13.3		$	202.3
Depreciation and amortization		17.0		1.3			18.3
Segment operating income		27.6		(26.4	)		1.2

Three months ended

September 30,

2019

2018

Total operating income for reportable segments

$
(20.9
)

$
1.2

Unallocated amounts:

Interest income

0.9

0.7

Interest expense

(2.9
)

(2.2
)
Other

0.6

1.1

Income (loss) from operations before income taxes

(22.3
)

0.8

Income tax provision

(1.7
)

1.6

Net income (loss)

(20.6
)

(0.8
)
Net loss attributable to non-controlling interest

—

(0.1
)
Net income (loss) attributable to Myriad Genetics, Inc.
stockholders

$
(20.6
)

$
(0.7
)


	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.

~~(17)~~

~~SUPPLEMENTAL CASH FLOW INFORMATION~~

Three months ended

September 30,

2019

2018

Cash paid during the period for income taxes

$
0.2

$
4.9

Cash paid for interest

2.8

0.9

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

—

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

~~General~~

(Dollars and ~~the biological pathways~~shares in which such genes and proteins are involved to better understand the genetic 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, 2019, we reported total revenues of $186.3 million and net loss of $20.6 million that included income tax benefit of $(1.7) million resulting in $(0.28) diluted earningsmillions, except 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, 2019, Myriad reduced its financial guidance based primarily on a reduction in its outlook for hereditary cancer revenue. The reduction is based upon a coding transition which reduced reimbursement for the Company’s hereditary cancer tests despite double digit volume growth in the fiscal first-quarter. For GeneSight, the Company received reimbursement coverage for the test from UnitedHealthcare, the largest commercial insurer in the country, which took effect on October 1, 2019. Additionally, Myriad signed a master service agreement with a large pharmacy benefit manager in the United States to offer GeneSight to commercial payer and self-funded employer customers. A Fortune 50 company has already opted into the master service agreement.

We also saw the publication of the precision medicine analysis from the GUIDED study which demonstrated the test statistically significantly improved remission, response rates, and symptoms in patients taking medication with predicted gene drug interactions. For the prenatal tests Myriad published a study on its NIPS test Prequel which demonstrated Prequel is the only commercial product that is highly accurate in women with high body mass index. With Prolaris, the company published a clinical utility study demonstrating 82 percent of men with low Prolaris scores choose active surveillance as initial treatment with 64% these men remaining on active surveillance after four years of follow up.

~~From a companion diagnostic perspective, Myriad filed~~ a supplementary Premarket Approval Application with the U.S. Food and Drug Administration (FDA) to authorize BRACAnalysis CDx as a companion diagnostic test for olaparib in metastatic, castrate-resistant, prostate cancer patients with germline BRCA mutations. The company also received the first FDA approval for myChoice CDx^®as a companion diagnostic by healthcare professionals to identify women with ovarian cancer who have homologous recombination deficiency and may be candidates for niraparib monotherapy in the fourth-line setting. The company plans to seek ADLT status for this test and has a list price of $4,040. Myriad also s~~ubmitted the myChoice CDx~~^® ~~companion diagnostic test for approval by Japan’s~~ Pharmaceuticals and Medical Devices Agency (PMDA) in parallel with Takeda’s PMDA review of the novel PARP inhibitor, niraparib. Takeda has an exclusive licensing agreement to develop and commercialize niraparib in Japan.

~~Results of Operations for the Three Months Ended September 30, 2019 and 2018~~

~~Revenue~~

Three months ended

September 30,

(In millions)

2019

2018

Change

Revenue

$
186.3

$
202.3

$
(16.0
)

The decrease in revenue was primarily due to a reduction of $11.8 million in Hereditary Cancer Testing revenue due to reduced reimbursement, including changes in estimates for tests in which the performance obligation of delivering the test results was met in prior periods, and a reduction of $6.6 million in GeneSight revenue due to reduced volumes. These decreases were partially offset by an increase of $5.4 million in Prenatal revenue due to Counsyl contributing revenue for only a portion of the three months ended September 30, 2018 compared to the full three months ended September 30, 2019.

~~The following table presents additional detail regarding the composition of our total revenue for the three months ended September 30, 2019 and 2018:~~

Three months ended

September 30,

$

% of Total Revenue

(In millions)

2019

2018

Change

2019

2018

Molecular diagnostic revenues:

Hereditary Cancer Testing

$
104.5

$
116.3

$
(11.8
)

56
%

57
%
GeneSight

22.7

29.3

(6.6
)

12
%

14
%
Prenatal

23.5

18.1

5.4

13
%

9
%
VectraDA

11.0

13.0

(2.0
)

6
%

6
%
Prolaris

6.5

6.2

0.3

3
%

3
%
EndoPredict

2.3

2.4

(0.1
)

1
%

1
%
Other

1.5

3.7

(2.2
)

1
%

2
%
Total molecular diagnostic revenue

172.0

189.0

(17.0
)

Pharmaceutical and clinical service revenue

14.3

13.3

1.0

8
%

8
%
Total revenue

$
186.3

$
202.3

$
(16.0
)

100
%

100
%

~~Cost of Sales~~

Three months ended

September 30,

(In millions)

2019

2018

Change

Cost of sales

$
49.7

$
49.7

$
—

Cost of sales as a % of sales

26.7
%

24.6
%

Cost of sales as a percentage of revenue increased from 24.6% to 26.7% during the three months ended September 30, 2019 compared to the same period in the prior year. The increase was primarily driven by lower gross margins associated with the Counsyl business and reduction of reimbursement related to Hereditary Cancer and GeneSight, partially offset by the implementation of efficiency programs in our DNA, RNA, and protein based laboratories.

~~Research and Development Expenses~~

Three months ended

September 30,

(In millions)

2019

2018

Change

R&D expense

$
21.3

$
21.1

$
0.2

R&D expense as a % of sales

11.4
%

10.4
%

Research and development expense for the three months ended September 30, 2019 increased compared to the same period in the prior year primarily related to Counsyl being included for a full quarter during the quarter ended September 30, 2019 compared to only a partial quarter for the quarter ended September 30, 2018.

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

Three months ended

September 30,

(In millions)

2019

2018

Change

Change in the fair value of contingent consideration

$
0.7

$
0.4

$
0.3

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

0.4
%

0.2
%

The fair value of contingent consideration for the three months ended September 30, 2019 increased compared to the same period in the prior year due to increase in the fair value of contingent consideration related to the Sividon acquisition.

~~Selling, General and Administrative Expenses~~

Three months ended

September 30,

(In millions)

2019

2018

Change

SG&A expense

$
135.5

$
129.9

$
5.6

SG&A expense as a % of sales

72.7
%

64.2
%

Selling, general and administrative expense increased slightly for the three months ended September 30, 2019 compared to the same period in the prior year primarily related to Counsyl being included for a full quarter during the quarter ended September 30, 2019 compared to only a partial quarter for the quarter ended September 30, 2018.

~~Other Income (Expense)~~

Three months ended

September 30,

(In millions)

2019

2018

Change

Other income (expense)

$
(1.4
)

$
(0.4
)

$
(1.0
)

~~For the three months ended September 30, 2019 compared to the same period in the prior year, the change in other income expense~~ ~~was primarily driven by an increase in interest expense related to the debt incurred to fund the acquisition of Counsyl. This was partially offset by increased interest income.~~

~~Income Tax Expense~~

Three months ended

September 30,

(In millions)

2019

2018

Change

Income tax expense (benefit)

$
(1.7
)

$
1.6

$
(3.3
)
Effective tax rate

7.6
%

200.0
%

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, 2019 is $(1.7) million for an effective tax rate of 7.6%. The decrease in the effective rate for the three months ended September 30, 2019 as compared to the same period in prior year is due to the release of uncertain tax liabilities, state income taxes, acquisition transaction cost, and the differences related to the tax effect of equity compensation expense and the deduction realized when exercised, released or sold.

~~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 July 31, 2023, 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)

September 30,

June 30,

(In millions)

2019

2019

Change

Cash and cash equivalents

$
89.9

$
93.2

$
(3.3
)
Marketable investment securities

52.7

43.7

9.0

Long-term marketable investment securities

51.5

54.9

(3.4
)
Cash, cash equivalents and marketable investment
securities

$
194.1

$
191.8

$
2.3

The decrease in cash and cash equivalents was primarily driven by the repayment of principle on the Amended Facility of $8.6 million, the payment of contingent consideration of $3.3 million related to Sividon, and $18.8 million reduction in net income excluding the change in the fair value of contingent consideration. This was partially offset by $15.8 million in cash provided by operating activities.

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

Three months ended

September 30,

(In millions)

2019

2018

Change

Cash flows from operating activities

$
15.8

7.8

$
8.0

Cash flows from investing activities

(7.1
)

(279.0
)

271.9

Cash flows from financing activities

(12.3
)

252.1

(264.4
)
Effect of foreign exchange rates on cash and cash equivalents

0.3

1.5

(1.2
)
Net increase (decrease) in cash and cash equivalents

(3.3
)

(17.6
)

14.3

Cash and cash equivalents at the beginning of the year

93.2

110.9

(17.7
)
Cash and cash equivalents at the end of the period

$
89.9

$
93.3

$
(3.4
)
Forward-Looking Statements

~~Cash Flows from Operating Activities~~

The increase in cash flows from operating activities for the three months ended September 30, 2019, compared to the same period in the prior year, was primarily due to a $28.3 million change in assets and liabilities associated with operating activities, partially offset by a $18.8 million decrease in net income excluding contingent consideration.

~~Cash Flows from Investing Activities~~

For the three months ended September 30, 2019, compared to the same period in the prior year, the increase in cash used in investing activities was driven primarily by the $279.6 million used for the acquisition of Counsyl that occurred during the same period in the prior year. This was partially offset by a $7.6 million increase in net purchases of marketable investment securities.

~~Cash Flows from Financing Activities~~

For the three months ended September 30, 2019, compared to the same period in the prior year, the decrease in cash flows from financing activities was driven primarily by the $290.0 million in net proceeds from the revolving credit facility that occurred during the same period in the prior year but did not occur during the three months ended September 30, 2019. The decrease in cash flows were partially offset by only $8.6 million in cash paid for repayment of the revolving credit facility during the three months ended September 30, 2019 compared to $40.0 million in cash paid for repayment of the revolving credit facility during the same period in the prior year.

~~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 September 30, 2019, we have $110.7 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. During the first quarter of fiscal 2019, we adopted new accounting guidance related to lease accounting, which is described above at “Recent Accounting Pronouncements.” There have been no other significant changes to our accounting policies 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, 2019.

~~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 Counsyl, Assurex, Crescendo, 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, ~~2019,~~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.

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 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 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 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, 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 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 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 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

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.

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		%

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 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, 2020.

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, ~~2019~~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, ~~2019,~~2020, which is incorporated by reference herein.

Item 4. Controls and Procedures

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.

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 ~~three months~~quarter ended September 30, ~~2019, we~~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 ~~changes to our processes in response to~~over the ~~adoption~~coming year. Emphasis has been on the maintenance of ~~Accounting Standards Update No. 2016-02 “Lease (Topic 842)” that became~~ effective ~~July 1, 2019. The~~internal controls and assessment of the design and operating effectiveness of ~~these changes will be evaluated as part~~key control activities throughout development and deployment of ~~our annual assessment of the effectiveness of internal controls over financial reporting.~~

each phase.

Other than as described above, there were no changes in our internal control over financial reporting that occurred during the ~~quarter~~three months ended September 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - Other Information

Item 1. Legal Proceedings

~~Investigations of the Department of Health and Human Services, Office of Inspector General~~

~~In July~~

Purported Securities Class Action Claims

On September 27, 2019, ~~we resolved the~~a purported class action complaint was filed ~~by a qui tam relator in October 2017~~ in the United States District Court for the District of South Carolina. The complaint was the basis of the Office of Inspector General (OIG) subpoena dated February 2018 regarding Medicare billing practices relating to the Company’s hereditary cancer testing from 2014 to 2018. After a 17-month investigation, the Department of Justice declined to intervene in the case. The Company believes it demonstrated that the key allegations made in the complaint were false. In order to avoid a lengthy and distracting litigation with the qui tam relator, we entered into a settlement agreement on July 18, 2019 under which we would pay $9.1 million to the qui tam relator in order to settle the matter. The settlement was approved on October 23, 2019 andUtah, against the Company, ~~paid the settlement amount of $9.1 on October 29, 2019. The Company denies any wrongdoing and does not anticipate any material change in billing practices.~~

~~Purported Securities Class Action Claims~~

On September 27, 2019, Ethan Silverman, individually and on behalf of all others similarly situated, filed a purported class action complaint in the United States District Court, District of Utah, No. 2:19-cv-00707-PMW (“Silverman Action”), against us, ourits former President and Chief Executive Officer, Mark C. Capone, and ~~our~~its Executive Vice President and Chief Financial Officer, R. Bryan Riggsbee ~~(collectively~~(“Defendants”). On February 21, 2020, the ~~“Defendants”).~~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 ~~certification as the purported class representative and~~ the payment of damages allegedly sustained by ~~plaintiff~~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. ~~We intend~~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 ~~and~~or an estimate of the amount or range of potential loss, if ~~any~~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 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, ~~2019.~~

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,~~ ~~the Company has used $50.0 million to repurchase shares of the Company’s stock as part of an accelerated share repurchase~~ ~~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.~~

~~The details of the activity~~purchases and pursuant to a trading plan under Rule 10b5-1.

No stock repurchases were made under our stock repurchase ~~programs~~program during the three months ended September 30, ~~2019, are as follows:~~

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~~

~~July 1, 2019 to July 31, 2019~~

—

~~110.7~~

~~August 1, 2019 to August 31, 2019~~

—

~~110.7~~

~~September 1, 2019 to September 31, 2019~~

—

~~110.7~~

~~Total~~

—

~~110.7~~

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.INS~~
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~~
101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~101.DEF~~
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
~~101.LAB~~
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
~~101.PRE~~
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
~~104~~
104			The cover page from the ~~Company’s~~Company's Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2019,~~2020, has been formatted in Inline XBRL.

			* The appendix to this exhibit has been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of the omitted appendix will be furnished to the SEC upon request.

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: November ~~5, 2019~~ 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: November ~~5, 2019~~ 9, 2020	By:	~~By:~~	/s/ R. Bryan Riggsbee
			R. Bryan Riggsbee
			Executive Vice President, Chief Financial Officer
			(Principal financial and ~~chief~~ accounting officer)

						Accumulated			Retained			Myriad
			Additional			other			earnings			Genetics, Inc.
	Common		paid-in			comprehensive			(accumulated			Stockholders’
	stock		capital			loss			deficit)			equity
BALANCES AT JUNE 30, 2018	$	0.7	$	915.4		$	(4.1	)	$	54.1		$	966.1
Issuance of common stock under share-based compensation plans		—		1.9			—			—			1.9
Share-based payment expense		—		127.4			—			—			127.4
Repurchase and retirement of common stock		—		7.7			—			—			7.7
Net income		—		—			—			(0.7	)		(0.7	)
Other comprehensive income, net of tax		—		—			(0.2	)		—			(0.2	)
BALANCES AT SEPTEMBER 30, 2018	$	0.7	$	1,052.4		$	(4.3	)	$	53.4		$	1,102.2

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		—		(0.5	)		—			—			(0.5	)
Share-based payment expense		—		8.8			—			—			8.8
Net income (loss)		—		—			—			(20.6	)		(20.6	)
Other comprehensive income, net of tax		—		—			(2.1	)		—			(2.1	)
BALANCES AT SEPTEMBER 30, 2019	$	0.7	$	1,076.3		$	(7.5	)	$	5.0		$	1,074.5

	Estimated Fair Value
Current assets	$	42.5
Intangible assets		290.0
Equipment		18.2
Other assets		0.1
Goodwill		99.3
Current liabilities		(19.6	)
Long term liabilities		(0.1	)
Deferred tax liability		(9.2	)
Total fair value purchase price	$	421.2
Less: Cash acquired		(15.3	)
Total consideration transferred	$	405.9

	Carrying
	amount
Balance September 30, 2018	$	94.9
Fair value adjustment to equipment		0.7
Intangible adjustment		2.9
Working capital adjustment		(1.1	)
Change in deferred tax liability		1.9
Balance September 30, 2019	$	99.3

	Carrying amount
Ending balance June 30 2019	$	417.2
Acquisitions		—
Translation adjustments		(1.1	)
Ending balance September 30, 2019	$	416.1

	Number of shares			Weighted average exercise price
Options outstanding at June 30, 2019		5.5		$	24.45
Options granted		—		$	—
Less:
Options exercised		(0.4	)	$	22.87
Options canceled or expired		(0.1	)	$	30.00
Options outstanding at September 30, 2019		5.0		$	24.39
Options exercisable at September 30, 2019		5.0		$	24.39

	Number of shares			Weighted average grant date fair value
RSUs outstanding at June 30, 2019		2.4		$	37.70
RSUs granted		1.2		$	29.89
Less:
RSUs vested		(0.8	)	$	36.00
RSUs canceled		(0.1	)	$	46.00
RSUs outstanding at September 30, 2019		2.7		$	34.71

	Carrying amount
Balance June 30, 2019	$	13.8
Payment of contingent consideration		(3.3	)
Change in fair value recognized in the income statement		(0.7	)
Translation adjustments recognized in other comprehensive income		0.9
Ending balance September 30, 2019	$	10.7

Fiscal year ending:
2020	$	11.9
2021		14.9
2022		13.7
2023		12.6
2024		12.3
Thereafter		19.3
Total lease payments	$	84.7