Activist Target: Myriad Genetics

Myraid Activists
The molecular diagnostics firm, whose shareholders as of June included D.E. Shaw and Glenview Capital Management, announced a series of changes to corporate governance and executive compensation policies that could signal shareholder unrest.

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Though no shareholders have made public overtures at Myriad Genetics Inc. (MYGN), the molecular diagnostics company has made a series of moves over the past 12 months that suggest it may have been worried about shareholder unrest amid lackluster financial results.

Salt Lake City-based Myriad, which in August installed a new CEO and in March named a new chairperson, on Oct. 15 announced changes to corporate governance policies, including a shift from plurality voting to majority voting for directors.

Myriad also unveiled changes to its executive compensation policies and noted that since the fall of 2019, it has added six new board members and announced the retirement of three directors.

Myriad, whose shareholders as of June 30 included D.E. Shaw & Co. LP and Glenview Capital Management LLC, offers molecular diagnostic tests for hereditary cancer, urological cancer and autoimmune disorders, among others. D.E. Shaw held a 4.4% stake and Glenview had a 2.4% stake as of June 30, according to FactSet Research Systems Inc.

Myriad saw significant declines in test volumes in March and April because of social distancing policies brought about the Covid-19 pandemic. The company, whose fourth quarter of fiscal year 2020 ran from April through June 30, said volumes by the close of the quarter improved to about 75% of their pre-pandemic level.

The company in August reported fiscal fourth-quarter revenue of $93.2 million, down 57% year over year, and a net loss of $55.5 million, compared with a net loss of $4.3 million in the same period last year.

Shares of Myriad, meanwhile are down about 50% since early January, ending Oct. 21 at $14.02 apiece. The company’s market cap sits at just above $1 billion.

Among the corporate governance changes announced Oct. 15, Myriad said it would implement a retirement process for board members at age 75, as well as broaden the scope of the audit and finance committee.

As for its executive compensation policies, Myriad said it will eliminate future cash long-term incentive programs, lower management payouts under a change-of-control and transition to a double trigger system for equity vesting.

The company will also change its fiscal year end to Dec. 31 from June 30.

On Aug. 13, the same day it unveiled fiscal fourth-quarter results, Myriad named Paul J. Diaz, most recently a partner at healthcare private equity firm Cressey & Co. LP and a former president and CEO of Kindred Healthcare Inc., as its new president and CEO. Mark C. Capone stepped down from those roles in February and Myriad CFO R. Bryan Riggsbee served as interim president and CEO as the firm searched for a permanent replacement. Riggsbee continues to serve as CFO.

“Based on initial feedback, Diaz is a well-respected growth and operations-focused manager with credibility,” Jefferies LLC analysts wrote in a note on Aug. 14, later adding, “While our initial view is positive, it will take some time to formulate a major strategy rethink that is already overdue, in our view.”

Myriad’s board composition has also changed, adding health- and tech-focused personnel in the process, while replacing aging directors. In September, for instance, it added Rashmi Kumar, senior vice president and global chief information officer at Hewlett Packard Enterprise Co. (HPE), to the board.

In September 2019, the company expanded its board to nine directors while subsequent additions, including Kumar, bring the total to 12 directors.

Following the annual meeting on Dec. 4, John T. Henderson, Lawrence C. Best and co-founder Walter Gilbert will retire from the board. Henderson is 76 years old, Best is 71, and Gilbert, who won a Nobel Prize in chemistry in 1980 for his development of a rapid DNA sequencing technology, is 88, according to BoardEx.

While the shareholder base of Myriad has been quiet publicly, it is likely the drastic governance moves, as well as the company’s board changes, were done at least in part to appease shareholders that were put off amid the stock sell-off and revenue decline. Decreasing the average age of its board while increasing its focus on technology also make the company less susceptible to activists.

“The changes we have made in corporate governance are designed to better serve the needs of all our stakeholders,” said a Myriad representative in emailed comments, noting the company is adopting best practices in the industry.

The company “continues to actively engage with shareholders and other key stakeholders, responding to valued feedback in a dynamic market and incorporating diverse perspectives to inform our growth strategy and governance policies,” the Myriad representative said in the email.

A D.E. Shaw representative declined to comment for this story, and a representative for Glenview did not immediately comment.

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Armie Margaret Lee

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