Myriad Genetics (Salt Lake City), a life sciences company that boasts of a strong cash position despite these tough economic times, says it will spin off its research and development business from its molecular diagnostics business to form two public companies, Myriad Pharmaceuticals and Myriad Genetics.
The spinoff is intended to help the companies "excel in their respective fields," acknowledging the different needs of a high-growth, profitable molecular diagnostics business and a pharmaceutical R&D business, the company said.
"By separating these businesses we believe each company will be better-positioned to deliver on their strategic visions and address their diverse operational and capital needs," Peter Meldrum, president/CEO of Myriad Genetics, said during a company conference call Tuesday. "Furthermore we believe this will be able to unlock the intrinsic value of both companies while giving each company the necessary resources to max their respective commercial opportunities."
Meldrum said the company plans to accomplish the separation of these businesses through a tax-free pro-rata dividend distribution to shareholders of Myriad Genetics during the first half of next year.
"We are excited about the future of both our molecular diagnostics business and our pharmaceutical business and we believe that this new strategic direction will allow each business to achieve its full potential," Meldrum said.
Gregory Critchfield, president Myriad Genetic Laboratories, told call listeners that the company's strategy is "clear and working well." That strategy being to "focus on the molecular cause of disease and launch proprietary products that make a real difference in what patients and doctors do with the information," he said.
With the increased focus on the molecular diagnostics business, Critchfield said, the company has ramped up its business development activities.
"Myriad's cash position is very strong, allowing us to be in the enviable position to carefully evaluate and select product acquisitions that make sense and [we] believe that these activities will lead to the launch of future important molecular diagnostics products," Critchfield said.
When pressed during the question and answer session of the call to talk more about the use of cash proceeds on the diagnostic side, Meldrum further highlighted the company's "enviable" financial position.
"Myriad is fortunate as a company in this challenging economic environment to have a very strong balance sheet and a very strong cash position. The company had more than $400 million cash as of June 30, and analysts project that the company will be profitable this year and generate substantial cash on top of that," Meldrum said. "So this enables us to spin off the pharmaceutical business, provide them with enough cash to move forward and achieve their goals, and yet retain a substantial cash position back at the parent company. We will be generating significant cash in the future and our first priority will be to look at acquisition of products that become available. Because of the challenging economic times there are a number of companies that are running out of cash and it's difficult to access the financial markets, and this creates a very exciting opportunity for Myriad Genetics to acquire products at an attractive price from these companies."
Although Myriad might be open to considering company acquisitions, Meldrum emphasized that, "our preference is to acquire products, not entire companies."
He also assured shareholders on the call that he is "very favorably disposed" at some time in the future, when it is appropriate, to asking the board to consider paying dividends to shareholders. "I am not a big fan of cash stock buybacks," he noted, "I think the dividend is a more appropriate route to distribute cash to the shareholders."
When asked what type of products are most interesting from an M&A perspective, Meldrum said the company is "very interested" in product acquisitions as opposed to technology acquisitions.
"Myriad is fortunate that we have a very strong technology base ... so our preference leans much more to products that are at an earlier stage, having been launched, or products late stage in development that are about to be launched," Meldrum said, before getting a bit more specific. "The company of course is very strong in oncology and we certainly have attempted to build an oncology franchise, however I don't view Myraid Genetics as an oncology company and I would like to broaden our product portfolio beyond oncology into women's healthcare where we certainly have been building sales force and in other specialty physician markets as well."
The company expects Myriad Genetics to trade on the New York Stock Exchange and Myriad Pharmaceuticals, a newly formed company, to be listed on the Nasdaq Global Market.
After the spinoff, Myriad Genetics will have 800 employees and five marketed products — BracAnalysis, Colaris, Colaris AP, Melaris and TheraGuide 5-FU. It will focus on predictive and personalized medicine.
Myriad Pharmaceuticals will have 200 employees and will research and develop cancer and infectious disease drugs. It currently has four drug candidates in human clinical trials.
Shares of Myriad Genetics rose $1.58, or 2.8%, to close at $58.97 Monday.
Myriad has retained J.P. Morgan as its financial advisor, Mintz Levin Cohn Ferris Glovsky and Popeo, P.C. as its legal advisor, and Ernst & Young as its accounting and tax advisor.
In other dealmaking news, MTS Health Investors (New York), a healthcare private equity firm, has bought DNA Diagnostics Center (DDC; Fairfield, Ohio) and related entities from founder Dr. Richard Lee. Financial terms were not disclosed.
According to MTS, DDC is one of the "largest and most reputable" DNA testing laboratories worldwide and the market leader in human DNA identification testing for the private sector. The company provides DNA testing services in the fields of biological family relationships, forensics and veterinary genetics.