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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-02-25 · 143 added, 149 removed, 144 unchanged (67% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes thereto included elsewhere in this Report.

Unless otherwise noted, all of the financial information in this Report is consolidated financial information for the Company.

We discover and commercialize genetic tests that determine the risk of developing disease, assess the risk of disease progression, or guide treatment decisions across medical specialties where critical genetic insights can significantly improve patient care and lower health care costs.

Our mission is to advance health and well-being for all, empower individuals with vital genetic insights and enable healthcare providers to better detect, treat and prevent disease.

We are currently executing upon a strategic transformation plan that is focused on the following strategic priorities:

(1) innovation that improves clinical outcomes, ease of use, and access;

(2) enterprise capabilities to accelerate growth and scale to market opportunity;

and (3) focus on execution and delivery of consistent results.

In connection with these strategic priorities, we are focusing our efforts on our Oncology, Women's Health, and Mental Health products.

We intend to develop and enhance best-in-class products to support growth, improve patient and provider experience, and reach more patients of all backgrounds.

By investing in tech-enabled commercial tools, we believe we will be able to drive increased engagement, improve revenue cycle management, and reduce complexity and cost.

We are committed to disciplined management of our initiatives to fulfill our mission and drive long-term growth and profitability.

With a foundation of financial, commercial, operational and technological strength, we expect to accelerate growth as we launch a new enterprise commercial model, launch a unified ordering portal, invest in new sequencing technologies, further develop direct-to-consumer channels, and build commercial capabilities to support new products and offerings.

Our consolidated revenues consist primarily of sales of molecular diagnostic tests through our wholly-owned subsidiaries.

This section of Management's Discussion and Analysis discusses year-to-year comparisons between the year ended December 31, 2022 and the year ended December 31, 2021.

Discussions of comparisons between the year ended December 31, 2021 and the year ended December 31, 2020 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 25, 2022.

The following discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes thereto included elsewhere in this Annual Report on Form 10-K.

Unless otherwise noted, all of the financial information in this Annual Report on Form 10-K is consolidated financial information for the Company.

We develop and offer genetic tests that help assess the risk of developing disease or disease progression and guide treatment decisions across medical specialties where genetic insights can significantly improve patient care and lower health care costs.

Our mission is to advance health and well-being for all, empower individuals with vital insights and enable healthcare providers to better detect, treat and prevent disease.

Personalized genetic data, digital, and virtual consumer trends are converging to change traditional models of care.

We believe significant growth opportunities exist to help patient populations with pressing health care needs through innovative solutions and services.

Our focus is on organic growth, deployment of capital, including through opportunistic acquisitions, and the launch of new products.

We are focusing our efforts in three key areas where we have specialized products, capabilities, and expertise:

Oncology, Women's Health, and Mental Health.

We believe our path to organic growth is driven by articulating our clinical differentiation, advancing a new commercial model in our Oncology and Women's Health businesses to reach a broader set of physicians and patients, raising awareness with patients who we believe would benefit from testing, and innovation that improves clinical outcomes, ease of use, and access.

By investing in tech-enabled commercial tools, new lab facilities, and advanced automation, we believe we will be able to reduce complexity and cost.

With a foundation of financial, commercial, operational and technological strength, we plan to launch new products and capabilities in 2023, such as our unified ordering portal, FirstGene, and, on a research use only basis, Precise MRD, which we expect will help accelerate our growth.

We intend to develop and enhance our products to support growth, improve patient and provider experience, and reach more patients of all backgrounds.

We are committed to disciplined management of a key set of initiatives to fulfill our mission and drive long-term growth and profitability.

Our consolidated revenues consist primarily of sales of tests through our wholly-owned subsidiaries.

During the year ended December 31, 2022, we reported total revenues of $678.4 million, net loss attributable to Myriad Genetics, Inc.

stockholders of $112.0 million and basic and diluted loss per share of $1.39.

Industry and Competition

Patients, healthcare providers, payors and health systems are looking to apply the power of genetic insights, molecular diagnostics and precision medicine to achieve improved clinical outcomes and lower cost.

Key industry trends include:

• accelerating shifts in consumer engagement, early detection, home-based care models, the rise of low-cost sequencing, telemedicine and virtual care;

• disruption in the way outpatient care is delivered in the midst of the COVID-19 pandemic, coupled with broadened awareness of the vital role of diagnostic testing;

• expanding access to genetic insights, particularly among underserved populations with increased focus on health equity, reducing disparities in health care outcomes and ensuring increased access for challenged communities;

• broader, more innovative use of large data sets and analytics;

• growth in personalized medicine and the interest in new partnership models to advance companion diagnostics and serve patients with specific treatments based on their own genetic makeup and biology.

These market trends create new opportunities to position us, and our products, for growth and commercial success through enhanced customer service levels and a stronger alignment of our value proposition with physicians and payors.

Our focus is on innovative science that improves health outcomes, access for all, and ease of experience in the genetic testing process.

We expect to use our ability to innovate not only in research, development and technology, but also in go-to-market approaches, commercial capabilities, and tech-enabled applications so that we can adapt quickly to customer preferences and market dynamics.

Business Updates

During the year ended December 31, 2022, we took meaningful steps to fulfill our mission and execute our strategic transformation and growth plan.

These steps included the following:

• the acquisition of Gateway Genomics, LLC (Gateway), a personal genomics company and developer of consumer genetic tests that gives families insight into their future children;

• the launch of Precise Oncology Solutions, a comprehensive offering designed to help oncologists determine effective and personalized treatment plans for individual patients;

• the appointment of several new leaders to our management team, including a new Chief Commercial Officer, Chief Operating Officer, Chief Scientific Officer, and Chief Marketing Officer, as part of our ongoing enhancement of our executive leadership team;

• total revenue grew 6% year-over-year, excluding contributions from divested businesses.

Pharmacogenomics volume growth continued to lead our portfolio, reporting 35% volume growth year-over-year, and hereditary cancer test volumes rebounded in the second half of the year, generating 10% volume growth in the second half of the year ended December 31, 2022 as compared to the second half of the year ended December 31, 2021.

We have historically experienced seasonality in our testing business.

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Additionally, the volume of testing is negatively impacted by the summer season, which is generally reflected in the quarter ended September 30th.

These seasonality patterns have generally continued during the COVID-19 pandemic, but due to the continued uncertainty surrounding the COVID-19 pandemic, we cannot predict if seasonality will follow the same pattern as in prior years.

Components of Consolidated Operations

Molecular Diagnostic Testing .

Our molecular diagnostic tests are designed to analyze genes and their expression levels to assess an individual’s risk for developing disease later in life, determine a patient’s likelihood of responding to a particular drug, or assess a patient’s risk of disease progression.

Provided with this valuable information, physicians may more effectively manage their patients’ health care.

Our tests are designed to analyze genes and their expression levels to assess an individual’s risk for developing disease, determine a patient’s likelihood of responding to a particular drug, assess a patient’s risk of disease progression, or identify factors which could lead to serious conditions in pregnancy.

Revenue is recognized when the communication of test results has occurred.

Pharmaceutical and Clinical Service .

On July 1, 2021, we divested Myriad RBM, Inc., which provided pharmaceutical and clinical services.

As a result, we ceased providing pharmaceutical and clinical services as of that date.

We also divested of other clinical operations in February 2020.

As a result, we ceased providing pharmaceutical and clinical services as of that date and no longer generate revenue from these services.

Through Myriad RBM, Inc., we provided biomarker discovery, pharmaceutical and clinical services to the pharmaceutical, biotechnology, and medical research industries utilizing our multiplexed immunoassay technology.

We also divested other clinical operations in February 2020.

Revenue for these services was recognized at the completion of the pharmaceutical and clinical services.

Costs and Expenses

Personnel-related costs for each category of Costs and Expenses includes salaries, bonuses, employee benefit costs, employer payroll taxes, and stock-based compensation.

Cost of Molecular Diagnostic Testing.

Cost of molecular diagnostic testing consists primarily of costs related to lab supplies, personnel-related costs, and overhead costs.

Cost of Pharmaceutical and Clinical Service.

Cost of pharmaceutical and clinical service consists primarily of costs related to lab supplies and personnel-related costs.

Personnel-related costs for each category of Costs and Expenses include salaries, bonuses, employee benefit costs, employer payroll taxes, and stock-based compensation.

Cost of Testing Revenue.

Cost of testing revenue consists primarily of costs related to laboratory supplies, personnel-related costs, and overhead costs.

Cost of Other Revenue.

Cost of other revenue consists primarily of costs related to laboratory supplies and personnel-related costs.

Research and Development Expense.

Research and development expenses consists primarily of personnel-related costs and lab supplies, which includes costs incurred in formulating, improving, validating and creating alternative or modified processes related to and expanding the use of our current molecular diagnostic test offerings and costs incurred for the discovery, development and validation of our pipeline of molecular diagnostic and companion diagnostic candidates.

Research and development expenses consist primarily of personnel-related costs and laboratory supplies, which includes costs incurred in formulating, improving, validating and creating alternative or modified processes related to and expanding the use of our current test offerings and costs incurred in the discovery, development and validation of our pipeline of test candidates.

Selling, General, and Administrative Expense.

Selling, general, and administrative expenses include costs associated with managing and growing our businesses.

Selling, general and administrative expenses consist primarily of salaries, commissions, related personnel costs, and third-party costs for sales, marketing, customer service, billing and collection, legal, finance and accounting, information technology, and human resources.

Selling, general, and administrative expenses consist primarily of personnel-related costs and third-party costs for sales, marketing, customer service, billing and collection, legal, finance and accounting, information technology, and human resources.

Legal Charges Pending Settlement.

Legal charges pending settlement includes accruals related to potential legal settlements.

Goodwill and Long-Lived Asset Impairment Charges.

Goodwill and long-lived asset impairment charges includes the impairment loss recognized on the Company's goodwill or long-lived assets, including impairments recognized on intangible assets and right-of-use lease assets.

Goodwill and long-lived asset impairment charges include the impairment loss recognized on our goodwill or long-lived assets, including impairments recognized on intangible assets and right-of-use (ROU) lease assets.

Other Income (Expense).

Other income (expense) includes interest income earned on our cash and cash equivalents holdings in short-term interest-bearing accounts;

Other income (expense) includes interest income earned on our cash, cash equivalents, and restricted cash held in short-term interest-bearing accounts;

interest expense associated with our debt and amortization of deferred financing costs and original issue discount costs;

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Results of Operations

This section of Management’s Discussion and Analysis generally discusses year-to-year comparisons between the year ended December 31, 2021 and the comparative year ended December 31, 2020.

Due to our change in fiscal year from June 30th to December 31st, effective January 1, 2021, the comparative year ended December 31, 2020 was unaudited.

Discussions of comparisons between (1) the transition period for the six months ended December 31, 2020 and the comparative period of the six months ended December 31, 2019 and (2) the years ended June 30, 2020 and June 30, 2019 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Transition Report on Form 10-K for the transition period ended December 31, 2020, filed with the SEC on March 16, 2021.

Years Ended December 31, 2021 and 2020

Years Ended December 31, Change % of Total Revenue

(In millions) 2022 2021 2022 2021

Molecular diagnostic revenue:

Testing revenue:

Hereditary Cancer $ 305.5 $ 316.3 $ (10.8) 45 % 46 %

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Other — 0.5 (0.5) — % — %

Total molecular diagnostic revenue

666.4 513.5 152.9

Pharmaceutical and clinical service revenue

24.2 43.6 (19.4) 4 % 8 %

Total testing revenue 678.4 666.4 12.0

Other revenue — 24.2 (24.2) — % 4 %

Total revenue $ 678.4 $ 690.6 $ (12.2) 100 % 100 %

Molecular diagnostic revenues for the year ended December 31, 2021 increased $152.9 million compared to the same period in the prior year.

Revenue for the year ended December 31, 2020 was negatively impacted by the pandemic as patients faced significant obstacles accessing healthcare professionals.

Tumor Profiling revenues increased $62.5 million compared to the same period in the prior year due to a $31.9 million increase in revenue for Prolaris due to expanded coverage and the submission of claims for previously performed tests that were pending clarification of the coverage policy, as well as a $25.3 million increase in revenues from MyChoice CDx due to expansion in Japan and other areas.

Revenue from Pharmacogenomics increased $35.0 million compared to the same period in the prior year due primarily to a 58% increase in volume.

Prenatal revenues increased $32.3 million compared to the same period in the prior year due primarily to an increase of 19% in the average reimbursement per test and an increase of 12% in volume, as well as a change in estimate related to revenues from prior periods.

Hereditary Cancer revenues increased $31.9 million compared to the same period in the prior year due primarily to a 13% increase in volume as well as a change in estimate related to revenues from prior periods.

These increases were partially offset by a $7.5 million decrease in Autoimmune compared to the same period in the prior year due primarily to the completion of the sale of select operating assets and intellectual property, including the Vectra test, from the Myriad Autoimmune business unit, on September 13, 2021.

Pharmaceutical and clinical service revenue for the year ended December 31, 2021 declined $19.4 million compared to the year ended December 31, 2020, primarily due to the sale of Myriad RBM, Inc.

on July 1, 2021 and the inclusion of revenue from Privatklinik Dr.

Robert Schindlbeck GmbH & Co.

KG (the "Clinic") for two months in the previous period prior to the sale of the Clinic in February 2020.

Test revenues for the year ended December 31, 2022 increased $12.0 million compared to the prior year.

Revenue from Pharmacogenomics increased $33.9 million compared to the prior year due primarily to a 35% increase in volume.

Prenatal revenues increased $9.6 million due primarily to the acquisition of Gateway and an increase of 7% in average reimbursement per test excluding Gateway.

Tumor Profiling revenues increased due to volume increases in our Prolaris and MyChoice CDx products, partially offset by a decrease in international revenue due to changes in foreign exchange rates and a one-time milestone revenue earned in the prior year.

Autoimmune revenues decreased $27.9 million compared to the prior year due to the sale of the Myriad Autoimmune business on September 13, 2021.

Hereditary Cancer revenues decreased $10.8 million due primarily to changes in foreign exchange rates.

Other revenue for the year ended December 31, 2022 declined $24.2 million compared to the year ended December 31, 2021, due to the sale of Myriad RBM, Inc.

on July 1, 2021.

Cost of Sales

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(in millions) 2022 2021

Cost of molecular diagnostic testing $ 185.7 $ 157.9 $ 27.8

Cost of molecular diagnostic testing as a % of revenue 26.9 % 28.3 %

Cost of pharmaceutical and clinical services $ 11.9 $ 20.3 $ (8.4)

Cost of pharmaceutical and clinical services as a % of revenue 1.7 % 3.6 %

The cost of molecular diagnostic testing as a percentage of revenue decreased from 28.3% to 26.9% during the year ended December 31, 2021 compared to the year ended December 31, 2020.

The decrease was primarily driven by the increase in revenue from higher test volumes during the current period, as higher 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 3.6% to 1.7% during the year ended December 31, 2021 compared to the year ended December 31, 2020 due to the sale of Myriad RBM, Inc.

on July 1, 2021 and the inclusion of the costs related to the Clinic for two months in the previous period prior to the sale of the Clinic in February 2020.

Cost of testing revenue $ 202.0 $ 185.7 $ 16.3

Cost of testing revenue as a % of revenue 29.8 % 27.9 %

Cost of other revenue $ — $ 11.9 $ (11.9)

Cost of other revenue as a % of revenue — % 49.2 %

The cost of testing revenue as a percentage of revenue increased from 27.9% to 29.8% during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase was primarily driven by the shift in the product mix for the current period and an increase in compensation costs due to an increase in the number of employees and an increase in the average cost per employee during the 2022 period.

The cost of other revenue as a percentage of revenue was 49.2% for the year ended December 31, 2021.

The sale of Myriad RBM, Inc.

was completed on July 1, 2021, and as a result, there were no corresponding costs during the current period.

Research and Development Expense

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Research and development expense as a % of total revenue 12.6 % 11.9 %

Research and development expense for the year ended December 31, 2021 increased by $8.6 million compared to the prior year due primarily to costs incurred in the current year as part of the Company's strategic transformation initiatives, increases in lab expenses, and increases in compensation costs as a result of employee bonus reductions in the prior period stemming from the significant impact of COVID-19 on our financial results.

Research and development expense for the year ended December 31, 2022 increased by $3.5 million compared to the prior year primarily due to an increase in compensation expense and information technology related costs, partially offset by a decrease in clinical trial costs and costs incurred in the 2022 period related to our strategic transformation initiatives as compared to the prior year.

Selling, General, and Administrative Expense

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Selling, general, and administrative expense $ 514.7 $ 537.8 $ (23.1)

$ 537.8 $ 496.9 $ 40.9

Selling, general, and administrative expense as a % of total revenue 75.9 % 77.9 %

Selling, general and administrative expense increased by $40.9 million for the year ended December 31, 2021 compared to the prior year due primarily to a $12.6 million increase in stock-based compensation due to lower stock-based compensation in the prior period as a result of adjustments to stock-based compensation related to the departure of our former Chief Executive Officer, and a $16.2 million increase in costs incurred in the current period as part of the Company's strategic transformation initiatives, as well as an $8.2 million increase in bonus expense as a result of employee bonus reductions in the prior year stemming from the significant impact of the COVID-19 pandemic on our financial results, a $6.3 million increase in legal expenses, a $5.0 million increase in consulting fees, and a $3.3 million increase in IT hardware costs.

Increases were partially offset by a $10.5 million decrease in amortization expense and a decrease in sales and marketing expenses of $3.4 million due primarily to fewer in-person sales and marketing events and travel-related expenses.

Selling, general, and administrative expense decreased by $23.1 million for the year ended December 31, 2022 compared to the prior year due primarily to a $23.9 million decrease in legal expenses, which was driven in part by the receipt of insurance proceeds for certain legal matters of $12.0 million in 2022 and a decrease in litigation expenses during 2022.

Additionally, costs from our strategic transformation initiative decreased by $11.6 million in 2022 due to a decrease in retention and severance costs as well as related consulting costs.

The remaining decrease in selling, general, and administrative expenses in 2022 is due to a $9.7 million decrease in amortization expense due to intangible assets sold in the divestitures in the prior year and a $8.8 million decrease in bonus and commission expenses.

The decreases were partially offset by a $17.4 million increase in sales and marketing expenses due to more in-person sales and marketing events and travel-related expenses in 2022, a $7.6 million increase in wages and other compensation expenses, a $5.5 million increase in consulting expenses, and a $3.3 million increase in information and technology expenses.

Legal Charges Pending Settlement

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Legal charges pending settlement as a % of total revenue — % 9.0 %

Legal charges pending settlement increased for the year ended December 31, 2021 compared to the prior year due to $62.0 million of accruals related to potential legal settlements, including $48.0 million in connection with the qui tam lawsuit against Crescendo Bioscience, LLC and the Company and $14.0 million in connection with the Abelli lawsuit.

There was no corresponding legal charges pending settlement in the prior year.

The Abelli lawsuit was subsequently settled on January 24, 2022, pursuant to which the Company agreed to pay $14.0 million to the plaintiffs.

Legal charges pending settlement decreased for the year ended December 31, 2022 compared to the prior year due to $62.0 million of accruals related to potential legal settlements recorded in the prior year, including $48.0 million in connection with the qui tam lawsuit against Crescendo Bioscience, LLC and the Company and $14.0 million in connection with the Abelli lawsuit.

These amounts were subsequently paid in connection with the settlement of these cases in April 2022 and January 2022, respectively.

There were no corresponding legal charges pending settlement in the year ended December 31, 2022.

Goodwill and Long-lived Asset Impairment Charges

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Goodwill and long-lived asset impairment charges as a % of total revenue 2.5 % 0.3 %

Goodwill and long-lived asset impairment charges decreased for the year ended December 31, 2021 compared to the prior year due primarily to the Company recognizing goodwill impairment charges in the prior year related to the Autoimmune reporting unit, as well as additional charges related to the abandonment of in-process research and development intangible assets.

In the current year, we recognized a $1.8 million impairment to right-of-use assets as a result of the voluntary early termination of certain lease agreements to consolidate space.

Goodwill and long-lived asset impairment charges increased for the year ended December 31, 2022 compared to the prior year primarily due to the Company recognizing a $13.0 million impairment to ROU assets and a $3.9 million impairment to the related leasehold improvements in the current year as a result our decision to no longer use certain leased facilities in order to consolidate space.

During the prior period, the Company recognized a $1.8 million impairment to ROU assets as a result of the voluntary early termination of certain lease agreements.

Other Income (Expense)

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Other income (expense) $ — $ 133.4 $ (133.4)

Other income (expense) increased for the year ended December 31, 2021 due primarily to the combined $152.2 million net gain recognized on the sales of Myriad RBM, Inc.

and the Myriad myPath, LLC laboratory in the current period, partially offset by expenses or losses in the current period, including the $0.6 million net loss recognized on the sale of the Myriad Autoimmune business unit and losses of $5.2 million and $6.5 million for a non-cancelable purchase commitment and inventory, respectively, recognized in connection with the divestiture transactions.

The increase in Other income (expenses) was partially offset by the receipt of $14.6 million in stimulus funds from the CARES Act in the prior period.

Interest expense decreased due primarily to the repayment of the Company's Amended Facility in full on July 30, 2021.

Other income (expense) decreased for the year ended December 31, 2022 compared to the prior year due primarily to the $121.0 million net gain recognized on the sale of Myriad RBM, Inc.

and the $31.2 million net gain recognized on the sale of the Myriad myPath, LLC laboratory in the prior period, partially offset by charges in the prior period, including losses of $5.2 million and $6.5 million for a non-cancelable purchase commitment and inventory, respectively, recognized in connection with certain divestiture transactions, as well as a $3.4 million decrease in interest expense in the current period.

The interest expense in the prior period is related to the debt outstanding at that time, which was repaid in full on July 30, 2021.

There was no debt outstanding during the year ended December 31, 2022.

Income Tax Benefit

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Income tax benefit for the year ended December 31, 2022 was $(28.6) million, and our effective tax rate was (20.3)%.

The change in the effective tax rate for the year ended December 31, 2021 as compared to the prior year is due primarily to the tax benefit recorded in the prior year related to the CARES Act, tax expense recorded in the prior year related to asset impairments, tax benefit recorded in the current year related to the differences between the book and tax basis of assets divested, disallowed executive compensation expenses, the release of a valuation allowance, and stock compensation expense.

For the year ended December 31, 2022, our effective tax rate differs from the U.S.

federal statutory rate primarily due to disallowed executive compensation expenses, stock compensation, change in valuation allowance, and research and development credits.

For the year ended December 31, 2021, our effective tax rate differs from the U.S.

federal statutory rate primarily due to disallowed executive compensation expenses, differences between the book and tax basis of assets divested, the tax impact of the CARES Act, stock compensation, and release of a valuation allowance.

Liquidity and Capital Resources

Our primary sources of liquidity are our cash, cash equivalents and marketable investment securities, our cash flows from operations, our cash flows from investing activities, and, in certain circumstances as discussed below, amounts available for borrowing under our Amended Facility.

Our primary sources of liquidity are our cash, cash equivalents and marketable investment securities, our cash flows from operations, and, in certain circumstances as discussed below, amounts available for borrowing under our Amended Facility.

Our capital deployment strategy focuses on use of resources in the key areas of research and development, technology and acquisitions.

We believe that investing organically through research and development or acquisitively to support business strategy provides the best return on invested capita l.

During the year ended December 31, 2021, our liquidity increased by $379.1 million from the combined proceeds from the sales of Myriad RBM, Inc., the Myriad Autoimmune business, and the Myriad myPath, LLC laboratory.

The cash generated from these divestitures provides us with additional liquidity as we seek out strategic opportunities for capital deployment.

We believe that investing organically through research and development and new product development or acquisitively to support our business strategy provides the best return on invested capita l.

We believe that our existing capital resources will be sufficient to meet our projected operating requirements for the foreseeable future.

In addition, our capital resources and cash on hand may be used for acquisitions or other strategic investments.

All remaining borrowings under our Amended Facility, which matures on July 31, 2023, were repaid on July 30, 2021 using cash generated from our recent divestitures.

Our available capital resources, however, may be consumed more rapidly than currently expected, and we may need or want to raise additional financing.

All previously outstanding borrowings under our Amended Facility, which matures on July 31, 2023, were repaid on July 30, 2021 using cash generated from divestitures and as such, we have no outstanding borrowings as of December 31, 2022.

Our available capital resources, however, may be consumed more rapidly than currently expected, or may be insufficient for our business needs for many reasons, including as a result of our operational cash needs, capital expenditures, and litigation related costs not covered by, or above the limits set forth in, our insurance.

As a result, 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.

In addition, we are subject to financial covenants as part of our outstanding Amended Facility that could limit our ability to incur additional indebtedness.

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.

The current rising interest rate environment, together with recessionary headwinds, could make any potential financing more difficult or expensive to obtain.

In addition, as of December 31, 2022, our borrowing limit under the Amended Facility has decreased to $150.0 million, and we remain subject to financial covenants under our Amended Facility, which could limit our ability to incur additional indebtedness under the Amended Facility or otherwise or impact our decision to pursue other financing.

Without additional funds, we may be forced to delay the build-out of our new laboratories, scale back or eliminate some of our sales and marketing efforts, research and development activities, or other operations, or delay development of our 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.

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Unrestricted cash, cash equivalents, and marketable securities totaled $169.7 million as of December 31, 2022.

Our revolving commitment amount is $250.0 million as of December 31, 2021.

As the Company's total unrestricted cash, cash equivalents, and marketable securities exceeded $150.0 million as of December 31, 2021, we will be unable to make future borrowings unless related to a permitted acquisition.

In addition, following the expiration of the waiver of the leverage ratio and interest coverage ratio covenants, which waiver is effective until March 31, 2022, our ability to borrow under the Amended Facility will be limited if we are unable to comply with those financial covenants.

Our revolving commitment amount under the Amended Facility is $150.0 million as of December 31, 2022.

As our total unrestricted cash, cash equivalents, and marketable securities exceeded $150.0 million as of December 31, 2022, we are currently unable to make borrowings under the Amended Facility unless related to a permitted acquisition.

In addition, we are subject to a minimum liquidity covenant, which requires us to maintain liquidity of $150.0 million.

Liquidity is defined under the Amended Facility as the sum of our unrestricted cash, cash equivalents and marketable investment securities plus the aggregate undrawn and available amount of the revolving commitments under the Amended Facility.

From time to time, we enter into purchase commitments or other agreements that may materially impact our liquidity position in future periods.

In April 2021, a non-cancelable operating lease for our new corporate headquarters in Salt Lake City, Utah, commenced with a lease term of 15 years and total future lease payments of approximately $66.0 million as of December 31, 2021.

In addition, in late 2021, we entered into two non-cancelable operating leases, one for approximately 7,500 square feet in Durham, North Carolina, which expires in 2029, and one for approximately 63,000 square feet in South San Francisco, California, which expires in 2033.

The total future lease payments of the new North Carolina and California leases are approximately $2.3 million and $58.8 million, respectively, as of December 31, 2021.

As of December 31, 2021, the Company had approximately $4.0 million of non-cancelable contractual purchase obligations with varying terms over the next two years.

In the first quarter of 2022, we entered into a non-cancelable operating lease for approximately 230,000 square feet in Salt Lake City, Utah, which will commence in 2022, with a lease term of 15 years and total future lease payments of approximately $77.8 million.

Due to the continually evolving global situation from the COVID-19 pandemic, including the emergence of the more highly transmissible Delta and Omicron coronavirus variants and their impact on the ongoing recovery from the earlier effects of the COVID-19 pandemic, it is not possible to predict whether ongoing consequences of the pandemic are reasonably likely to materially affect our liquidity and capital resources in the future.

In February 2022, we entered into a non-cancelable operating lease for approximately 230,000 square feet in west Salt Lake City, Utah.

The lease has a term of 15 years, which, along with rent payments, is expected to commence in the third quarter of 2023.

Total future rent payments under the lease are approximately $78.0 million.

We also entered into a non-cancelable operating lease for approximately 63,000 square feet of leased space in South San Francisco, California.

The lease has a term of 10 years and, along with rent payments, is expected to commence in the third quarter of 2023.

Total future rent payments under the lease are approximately $58.8 million.

Because of the technical nature of our business and our focus on science, research, and development, we are highly dependent upon our ability to attract and retain highly qualified and experienced management, scientific, and technical personnel.

Competition and compensation for such personnel and other qualified personnel increased as employment vacancies surged during the year ended December 31, 2021, which has increased the difficulty and cost of hiring and retaining qualified personnel.

In addition, potential federal or state regulations that require us to mandate COVID-19 vaccinations for our employees, or any future decision on our part to voluntarily require our employees to receive a COVID-19 vaccine, could impact our ability to hire and retain employees.

Loss of the services of or failure to recruit additional key management, scientific and technical personnel and other qualified personnel who are necessary to operate our business would adversely affect our molecular diagnostic business, and it may have a material adverse effect on our business as a whole.

Additionally, disruptions to our supply chain as a result of the COVID-19 pandemic could cause shortages of critical materials required to conduct our business, which may have a material adverse effect on our business as a whole.

Competition and increased compensation for such personnel and other qualified personnel have increased the difficulty and cost of hiring and retaining qualified personnel.

Loss of the services of or failure to recruit additional key management, scientific, and technical personnel and other qualified personnel who are necessary to operate our business would adversely affect our business, and it may have a material adverse effect on our business as a whole.

Additionally, disruptions to our supply chain could cause shortages of critical materials required to conduct our business, which may have a material adverse effect on our business as a whole.

In addition, inflation has had, and we expect it will continue to have, an impact on the costs we incur to attract and retain qualified personnel, costs to generate sales and produce diagnostic testing results, and costs of lab supplies.

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

The following table represents the balances of cash, cash equivalents, and marketable investment securities as of December 31, 2022 and 2021:

(in millions) 2022 2021

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Cash, cash equivalents and marketable investment securities $ 169.7 $ 397.8

$ 398.8 $ 171.7

The increase in cash, cash equivalents, and marketable investments securities for the year ended December 31, 2021 was primarily driven by $379.1 million in total cash consideration from the sale of Myriad RBM, Inc., the Myriad Autoimmune business, and the Myriad myPath, LLC laboratory, the receipt of a U.S.

federal tax refund of $89.6 million, and proceeds of $91.8 million from the exercise of stock options, partially offset by $226.4 million in repayments of our Amended Facility and $10.5 million in transaction expenses related to the foregoing divestitures, as well as by cash used in operating activities as part of our normal course of business.

During the transition period ended December 31, 2020, the decrease in cash, cash equivalents and marketable investment securities was primarily driven by the Company using $73.7 million in cash for operating activities.

The decrease in cash, cash equivalents, and marketable investment securities as of December 31, 2022 compared to December 31, 2021 was primarily driven by $106.3 million in cash used by operations, which included legal settlement payments of $62.0 million, as well as $57.2 million in cash used for our acquisition of Gateway, $45.3 million in cash used for capital expenditures, and $4.3 million in cash used for the payment of withholding tax in connection with the issuance of common stock, net of proceeds from the issuance of common stock.

The Company also had restricted cash of $9.5 million and $1.4 million as of December 31, 2022 and 2021, respectively.

The following table represents the condensed cash flow statement:

Year Ended December 31,

Years Ended December 31,

(in millions) 2022 2021

Cash flows from operating activities $ 18.2 $ (26.9)

Cash flows from investing activities 274.4 61.6

Cash flows from financing activities (150.6) (1.0)

Effect of foreign exchange rates on cash and cash equivalents

Change in cash and cash equivalents classified as held for sale — 1.5

Net increase (decrease) in cash and cash equivalents 141.4 35.8

Cash and cash equivalents at the beginning of the

period 117.0 81.2

Cash and cash equivalents at the end of the period $ 258.4 $ 117.0

Cash flows provided by (used in) operating activities $ (106.3) $ 18.6

Cash flows provided by (used in) investing activities (77.5) 274.4

Cash flows used in financing activities (8.0) (150.6)

Effect of foreign exchange rates on cash, cash equivalents, and restricted cash (0.6) (0.6)

Net increase (decrease) in cash, cash equivalents, and restricted cash (192.4) 141.8

Cash, cash equivalents, and restricted cash at the beginning of the period 258.8 117.0

Cash, cash equivalents, and restricted cash at the end of the period $ 66.4 $ 258.8

Cash Flows from Operating Activities

In the year ended December 31, 2021, the increase in cash flows was primarily due to the change in the balance of prepaid taxes due to the receipt of a $89.6 million U.S.

federal tax refund, partially offset by a decrease in cash flows from operating activities primarily driven by a $37.7 million change in trade accounts receivable in the current period compared to the prior period due to the change in sales volumes and cash collections as a result of the significant impact of the COVID-19 pandemic on our financial results during the prior period.

In the year ended December 31, 2022, the decrease in cash flows from operating activities was primarily due to the change in the balance of prepaid taxes due to the receipt of an $89.0 million U.S.

federal tax refund in the prior year and an $81.2 million decrease in accrued liabilities during the current year, which was primarily driven by legal settlement payments of $62.0 million in 2022.

Cash Flows from Investing Activities

In the year ended December 31, 2021, the increase in cash flows from investing activities as compared to the same period in the prior year was primarily due to incremental cash proceeds of $357.8 million from divestitures in the current period as compared to the prior period.

This increase is partially offset by an increase of $132.0 million of purchases of marketable investment securities in the current period as compared to the prior period, a decrease of $8.2 million in proceeds from marketable investment securities during the current period, and an increase of $4.8 million in capital expenditures in the current period.

In the year ended December 31, 2022, the decrease in cash flows provided by investing activities as compared to the prior year was primarily due to the receipt of $379.1 million in cash proceeds from divestitures in the prior year, with no corresponding proceeds in the current period and the acquisition of Gateway, net of cash acquired, for $57.2 million, partially offset by a $67.1 million increase in proceeds from marketable investment securities in the current period.

Cash Flows from Financing Activities

In the year ended December 31, 2021, the decrease in cash flows from financing activities as compared to the same period in the prior year was primarily due to the use of $226.4 million in cash for repayments of the Amended Facility during the current year.

The decrease was partially offset by an increase of $80.2 million in proceeds from the exercise of stock options, net of shares exchanged for payroll withholding tax in the current year as compared to the prior year.

In the year ended December 31, 2022, the decrease in cash flows used in financing activities as compared to the prior year was primarily due to the use of $226.4 million in cash for repayments of the outstanding debt balances under the Amended Facility during the prior year, partially offset by a decrease of $84.6 million in proceeds from the exercise of stock options, net of shares exchanged for payroll withholding tax in the current year as compared to 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.

However, inflation has had, and we expect that it will continue to have, an impact on the labor costs we incur to attract and retain qualified personnel, costs to generate sales and produce diagnostic testing results, and costs of lab supplies.

Inflationary costs may impact our profitability and could adversely affect our business, financial condition and results of operations.

Inflation has had, and may continue to have, an impact on the labor costs we incur to attract and retain qualified personnel, costs to generate sales and produce testing results, and costs of laboratory supplies.

Inflationary costs have impacted our profitability and continue to adversely affect our business, financial condition and results of operations.

In addition, increased inflation has had, and may continue to have, an effect on interest rates.

Increased interest rates may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, additional funding.

Share Repurchase Program

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See “Part II, Item 5.

Unregistered Sales of Equity Securities and Use of Proceeds – Issuer Purchases of Equity Securities” below.

Critical Accounting Policies

Critical accounting policies are those policies which are both important to the portrayal 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.

Our critical accounting policies are as follows:

Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Issuer Purchases of Equity Securities” above.

Critical Accounting Estimates

Critical accounting estimates are those policies which are both important to the portrayal 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.

Our critical accounting estimates are as follows:

• revenue recognition;

• purchase accounting;

• income taxes.

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Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer.

We generate revenue primarily by performing molecular diagnostic testing.

We perform our obligation under a contract with a customer by processing those diagnostic tests and communicating the test results to customers, in exchange for consideration from the customer.

Revenue from the sale of molecular diagnostic tests is recorded at the estimated transaction price.

We generate revenue primarily by performing genetic testing.

We perform our obligation under a contract with a customer by processing those tests and communicating the test results to customers, in exchange for consideration from the customer.

Revenue from the sale of tests is recorded at the estimated transaction price.

We have determined that the communication of test results indicates transfer of control for revenue recognition purposes.

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When this occurs, we record a contract liability as deferred revenue.

Significant judgments are required in determining the transaction price and satisfying performance obligations under the revenue standard.

Significant judgments are required in determining the transaction price in connection with satisfying performance obligations under the revenue standard.

In determining the transaction price, we estimate the expected amount of consideration as revenue.

We apply 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.

We apply this method consistently for similar contracts when estimating the effect of any uncertainty on an amount of variable consideration to which we will be entitled.

An estimate of transaction price does not include any estimated amount of variable consideration that is constrained.

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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 in the Consolidated Balance Sheets in anticipation of request 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 Income (Loss).

We reserve certain amounts in accrued liabilities in the Consolidated Balance Sheets in anticipation of request 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.

We test goodwill for impairment on an annual basis and in the interim by reporting unit if events and circumstances indicate that goodwill may be impaired.

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The valuation of a reporting unit requires judgment in estimating future cash flows, discount rates, residual growth rates and other factors.

In making these judgments, we evaluate the financial health of our business, including such factors as industry performance, market saturation and opportunity, changes in technology and operating cash flows.

Changes in our forecasts or decreases in the value of our common stock could cause book value of reporting units to exceed their fair values.

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If an event occurs that would cause a revision to the estimates and assumptions used in analyzing the value of the goodwill, the revision could result in a non-cash impairment charge that could have a material impact on the financial results.

As of December 31, 2021, we have recorded goodwill of $239.2 million on our Consolidated Balance Sheet.

This goodwill is attributable to the Myriad Mental Health, Myriad International, and Myriad Women's Health reporting units.

We qualitatively evaluated the Myriad Mental Health and Myriad International reporting units for impairment.

As of December 31, 2022, we have recorded goodwill of $286.8 million on our Consolidated Balance Sheets.

This goodwill is attributable to the Myriad Mental Health, Myriad International, Myriad Women's Health, and Gateway reporting units.

We qualitatively evaluated our reporting units for impairmen t.

The factors that are considered in the qualitative analysis include macroeconomic conditions, industry and market considerations, revenue growth rates, current and financial performance, other factors that would have a negative effect on earnings and cash flows, and other relevant entity-specific events and information.

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We noted no indicators of impairment during the year ended December 31, 2022.

For our Myriad Women's Health reporting unit, we elected to perform a quantitative assessment of goodwill.

We measured the fair value of the Myriad Women's Health reporting unit utilizing the market approach and the discounted cash flow method under the income approach.

As a result of the assessment, no goodwill impairment charges were recorded as the estimated fair value of the reporting unit exceeded the carrying value of the goodwill as of December 31, 2021.

We performed a sensitivity analysis of the discount rate and the revenue growth rate, which are significant assumptions in the calculation of fair value.

We determined that a 1% increase in the discount rate or a 1% decline in forecasted revenue growth would not have changed our determination that the fair value of the reporting unit was in excess of its carrying value.

Goodwill impairment testing requires us to make a number of assumptions and estimates concerning future levels of revenue growth, operating margins, and other financial assumptions, which are based upon our long-term plan.

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While there are always changes in assumptions to reflect changing business and market conditions, our overall methodology used has remained unchanged.

Purchase Accounting.

We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations.

The tangible and identifiable intangible assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values as of the business combination date, including identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill.

Significant judgment is often required in estimating the fair value of assets acquired, particularly intangible assets.

We base the estimated fair value of identifiable intangible assets acquired in a business combination on third-party valuations that use information and assumptions provided by our management, which consider our estimates of inputs and assumptions that a market participant would use.

Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed is recorded to goodwill.

The use of alternative valuation assumptions, including estimated revenue projections, growth rates, estimated cost savings, cash flows, discount rates, estimated useful lives and probabilities surrounding the achievement of contingent milestones could result in different purchase price allocations and amortization expense in current and future periods.

In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under Accounting Standards Codification (ASC) 480 - Distinguishing Liabilities from Equity , a liability is recognized equal to the fair value of the contingent payments we expect to make as of the acquisition date.

This liability is remeasured each reporting period and changes in the fair value are recorded in change in fair value of contingent consideration in our Consolidated Statements of Operations.

Income Taxes .

Our income tax provision is based on income before taxes and is computed using the liability method in accordance with Accounting Standards Codification (“ASC”) 740 – Income Taxes .

Our income tax provision is based on income before taxes and is computed using the liability method in accordance with ASC 740 – Income Taxes .

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates projected to be in effect for the year in which the differences are expected to reverse.

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Recent Accounting Pronouncements

See Note 1 to the Consolidated Financial Statements included in Item 8 of this Report for a description of recent accounting pronouncements.

See Note 1 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis