G.research, Inc. One Corporate Center Rye, NY 10580-1422 Tel (914) 921-5075 www.gabelli.com July 21, 2015 Gabelli & Company Myriad Genetics (MYGN - $34.67 NASDAQ) Source: Myriad Genetics Slowly But Surely Sara Wojda (914) 921-5075 -Please Refer To Important Disclosures On The Last Page Of This Report-
G.research, Inc. One Corporate Center Rye, NY 10580-1422 Tel (914) 921-5075 www.gabelli.com July 21, 2015 Gabelli & Company Myriad Genetics (MYGN - $34.67 - NASDAQ) -1- Slowly but Surely - Buy FYE 6/30 Cash EPS P/E PMV 2017P $2.00 17.3x $45 Dividend: None Current Return: Nil 2016P 1.90 18.2 42 Shares O/S: 69.5 million 2015E 1.50 27.7 33 52-Week Range: $39.95 - $31.34 2014A 2.43 15.4 -- COMPANY OVERVIEW Headquartered in Salt Lake City, UT, Myriad Genetics is the largest service provider of high-value diagnostic information focused on risk, prognosis, diagnosis and treatment of various diseases. In 2014, the company generated $778 million of revenues, a 27% increase over the prior year, and adjusted EBITDA of $306 million. Myriad currently produces fourteen different commercial molecular diagnostic tests with an emphasis on breast, ovarian, skin, prostate cancers and rheumatoid arthritis. It also has collaborated with various drug manufacturers to offer companion diagnostics. By gathering genetic information of a human disease, doctors can use Myriad s products to assess a patient s risk for developing a disease, response to drug therapy, and risk of disease progression and recurrence. About 96% of Myriad s revenue comes from molecular diagnostics, specifically in the areas of breast/ovarian cancer, prostate cancer, colorectal/endometrial cancer and rheumatoid arthritis, while the remaining 4% comes from pharmaceutical/clinical diagnostics. We estimate that Myriad will generate revenues of $718 million, adjusted EBITDA of $194 million, and adjusted cash earnings of $1.50 per share in 2015, down significantly from the previous year as a result of delayed reimbursement, capacity issues and an unsecured contract. Cash EPS includes adjustments associated with amortization of intangibles assets, executive transition cost, and discontinued operations. We are initiating coverage on Myriad with a Buy recommendation. With a 90% market share in hereditary cancer testing, Myriad has the potential to create significant value for its shareholders: Myriad has focused its research and development on improving its core technologies, setting it apart from competition. Its 25-gene myrisk TM panel has a competitive advantage over less comprehensive, singlegene tests. With full conversion to myrisk TM, physicians will recognize the value of Myriad s panel test. Myriad has struggled to find public and/or private reimbursement for various tests, including Vectra DA and Prolaris, causing management to reduce fiscal 2015 guidance. We anticipate these coverage decisions to be secured during the summer of 2015, and we expect Myriad to start recognizing revenue for these previously unprofitable tests. Myriad has entered the companion diagnostics field, by collaborating with various drug companies such as AstraZeneca, AbbVie, BioMarin, and Tesaro. The company has successfully launched BRACAnalysis CDx TM, the first and only FDA-approved laboratory developed test (LDT) that can help make treatment decisions for Lynparza TM, AstraZeneca s ovarian cancer drug. By pairing its diagnostics with drugs, we expect Myriad to find quicker reimbursement and new sources of revenue. Table 1 Myriad Genetics Income Statement, 2014-2019P (in m illio ns, e xc e pt per s hare data) 2014 2015E 2016P 2017P 2018P 2019P '14-'19P CAGR Total Revenue $ 778 $ 718 $ 778 $ 796 $ 833 $ 872 2.3% Expenses (486) (549) (555) (563) (577) (594) Operating income $ 292 $ 169 $ 223 $ 233 $ 256 $ 278 Pre-tax income 295 171 223 233 256 279 Inco me taxes 105 60 85 89 97 106 Net income - cont. ops. $ 190 $ 110 $ 139 $ 145 $ 159 $ 173 Shares outstanding 73 74 73 72 71 71 Cash EPS $ 2.43 $ 1.50 $ 1.90 $ 2.00 $ 2.25 $ 2.45 Source: Company data and Gabelli & Company estimates
US Genetic Testing Market Myriad competes in the $3 billion genetic cancer testing market, a segment of the $75 billion United States laboratory services market. Globally, Myriad sees a market opportunity of $18 billion, after considering a 30-year penetration rate associated with the fact that most patients are only tested once in their lifetimes. Myriad previously held 100% share of the $700 million US breast/ovarian cancer testing market, but lost 10% to competition over the past two years after its key patent was overturned in a 2013 Supreme Court ruling. Since new companies have entered, Myriad has been able to hold its leadership position by testing a broader and more accurate panel of genes, supported by an unmatched database. The company has sold 1.5 million hereditary tests in aggregate, roughly 200,000-250,000 on an annual basis. Because cancer genetic testing is relatively new to the market, competition will help increase awareness and potential demand for Myriad s offerings. Hereditary Cancer Tests (94.3% of 2014 revenues) myrisk TM (6.9% of 2014 revenues) myrisk TM is Myriad s hereditary cancer panel test which encompasses twenty-five genes that identify risks for eight cancers: breast, ovarian, gastric, colorectal, pancreatic, melanoma, prostate, and endometrial. This panel test is expected to cannibalize Myriad s legacy single gene tests (below), as conversion is expected to be completed by the end of summer 2015. Within the genetic cancers that this panel tests, there are over 600,000 new diagnoses annually in the US, and the estimated global market opportunity is approximately $5 billion. Studies show that mutation detection has increased 40-50% through myrisk TM by blending genetic testing status and personal/family cancer history into one assessment. It takes roughly ten days to generate a report that includes genetic results, recommended actions for positive and/or negative results, family history analysis, and information for family members. The panel testing enables multiple genes to be assessed, reducing medical costs, time, and false negative results. Because myrisk TM does not hold a price premium over its legacy BRACAnalysis TM test, physicians would likely choose one test for eight cancers rather than purchase multiple tests for individual cancers. Currently, myrisk TM is being reimbursed by different payors at different rates, and we expect the announcement of an average selling price in the near future. BRACAnalysis TM (66.5% of 2014 revenues) BRACAnalysis TM is Myriad s legacy cancer test for hereditary breast cancer and hereditary ovarian cancer. From a blood test or saliva sample, it detects BRCA1 or BRCA2 gene mutations, which increase the risk of up to 87% for breast cancer, up to 44% for ovarian cancer by age 70, and up to 64% for a second breast cancer. The addressable incident market has roughly 137,000 breast/ovarian cancer patients, while the addressable survivor market is composed of roughly one million breast cancer survivors and 176,000 ovarian cancer survivors. About 4% of women in the US without symptoms qualify for the test, yielding over six million additional patients. From early risk detection, physicians can help a patient through increased surveillance, riskreducing medication, and/or prophylactic surgery. BRACAnlaysis TM is currently reimbursed and contributed to 66.5% of 2014 revenues. COLARIS /COLARIS AP (7.6% of 2014 revenues) COLARIS is Myriad s genetic test for hereditary colorectal cancer and hereditary endometrial cancer. From a blood test or saliva sample, it detects six different gene mutations. With positive results, a patient can be diagnosed with Lynch syndrome (causing colorectal, endometrial, and ovarian cancers) and/or MAP (causing colon cancer). COLARIS AP specifically detects mutations in APC and MYH genes, which cause adenomatous polyposis colon cancer syndromes. There are roughly 43,000 colorectal cancer patients and 50,000 endometrial cancer patients in the incident market. There are 346,000 colon cancer survivors and 600,000 endometrial survivors that further qualify for the COLARIS test. Roughly 3% of people in the US without symptoms also qualify, yielding over nine million additional patients. COLARIS is currently reimbursed and contributed to 7.6% of 2014 revenues. -2-
EndoPredict (Other 2014 revenues, 1.8% total) EndoPredict is Myriad s genetic test for recurrent breast cancer. It detects the likelihood of late metastases after more than five years and determines which women with breast cancer would benefit from chemotherapy or antihormonal therapy. In a study with more than 2,200 patients, it was shown to accurately predict progression and metastasis. EndoPredict targets 165,000 patients in Europe, 122,000 patients in the US, and 228,000 patients in other parts of the world. MELARIS (Other 2014 revenues, 1.8% total) MELARIS is Myriad s genetic test for hereditary melanoma (skin cancer). From a blood test or saliva sample, it detects p16 gene mutations associated with 50 times the risk of developing melanoma, and an increased risk of pancreatic cancer. PANEXIA TM (Other 2014 revenues, 1.8% total) PANEXIA TM is Myriad s genetic test for pancreatic cancer. From a blood test or saliva sample, it detects PALB2 and BRCA2 gene mutations, associated with hereditary pancreatic, breast, and ovarian cancers. Positive results yield an 8.6 times higher risk of developing pancreatic cancer. In 2014, over 46,000 men and women in the US were estimated to be affected by pancreatic cancer. Prolaris (Other 2014 revenues, 1.8% total) Prolaris measures the expression levels of genes to detect tumor aggressiveness in prostate cancer. It can detect the risk of progression within ten years, and can be used at the time of diagnosis or in post-surgical settings to determine the most suitable actions for each patient. Current comparable tests only measure the severity of the cancer, not the aggressiveness or risk of recurrence. Myriad s Prolaris test is offered to roughly 200,000 men in the US, for a $600-700 million domestic opportunity and a $2 billion global opportunity. Myriad expected to receive Medicare coverage for Prolaris by the end of June 2015, but public data shows that the status is currently pending. Once established, approximately 60,000 patients would be covered by Medicare, and with an average selling price of $3,000 per test, this is an estimated $180 million opportunity in the US. MyPath MyPath Lung Cancer TM measures the expression levels of genes to detect tumor aggressiveness in early-stage lung cancer. It targets 30,000 patients with either Stage 1 or Stage 2 lung cancer. MyPath Melanoma TM helps to distinguish malignant melanoma from non-cancerous moles and skin lesions. It targets 15% of skin biopsies that yield cancerous traits, or 300,000 patients in the US, representing a $400 million domestic market and a $1 billion global market. Physicians may further recommend mypath Melanoma TM if results are inconclusive, mainly for precautionary reasons. Myriad currently holds 10% share of the melanoma market, and submission to payors for reimbursement is currently pending. Other Molecular Diagnostics (1.8% of 2014 revenues) Vectra DA (1.8% of 2014 revenues) Vectra DA is a blood test that measures twelve key biomarkers associated with rheumatoid arthritis. These measurements are combined into a single score that can be used to assess and track disease activity. The product has a three million test potential, as 1.5 million patients are tested twice per year. Myriad completed 33,000 tests in 2014, with 40% of tests covered under Medicare at $575 per test. With current Medicare coverage, there is a $600 million revenue opportunity, and private payor coverage would expand the domestic market to $1.5 billion and the global market to $3 billion. Myriad expected the private payor coverage to be established by the end of fiscal year 2015, but public data implies that this status remains pending. -3-
Table 2 Myriad Genetics Molecular Diagnostics Test Revenue 2014 Test BRACAnalysis 66.5% BART 11.5 COLARIS (AP) 7.6 myrisk 6.9 Vectra DA 1.8 Other MDx 1.8 Total 96.1% Source: Company data and Gabelli & Company estimates Pharmaceutical/Clinical Diagnostics (3.9% of 2014 revenues) On June 1, 2011, Myriad completed the acquisition of Rules-Based Medicine (RBM) for $80 million in cash. This deal expanded Myriad s research portfolio into new diseases, extended Myriad into 20 new pharma/biotech relationships, and added eight new product candidates into the company s existing pipeline. Through Myriad RBM, the subsidiary generated $30 million from its pharma and clinical services in 2014 and used sample information to develop companion diagnostic test panels. On December 10, 2012, Myriad announced collaboration with Sanofi (SNY - $53.25 - NYSE) on a diabetes study that added a one-time $10 million to 2013 revenues. This segment of Myriad s business drives genetic discoveries that further feed into the molecular development pipeline. Long-term, we estimate pharma/clinical diagnostics to generate approximately $5 million per quarter. Multi-Analyte Profile (MAP) is Myriad s library composed of over 550 immunoassays, which is further segmented into DiscoveryMAP (human clinical trials), RodentMAP (pre-clinical animal studies), and OncologyMAP (cancer-related proteins). This information allows Myriad to develop companion diagnostic tests. TruCulture is Myriad s blood culture that can be administered without specialized facilities, in which companies can detect drug toxicity before human trials. The multiplexed immunoassay kits allow customers to leverage Myriad s technology services through complimentary in-house testing. Research In 2014, Myriad invested $67 million or approximately 9% of sales on research and development, mainly focused on test development. Research also concentrated on genes, biomarkers, and proteins related to diseases, as well as corporate services. Historically, the expense has been fluctuated around the number of clinical studies and timing of samples related to those studies. Long-term, we estimate Myriad to spend approximately 9% of revenues on research and development, which may fluctuate due to the volatility in revenue and potential acquisitions. Myriad includes this as a separate operating segment, which supports both the molecular and pharma/clinical businesses. Table 3 Myriad Genetics Product Segments 2012-2019P FYE 6/30 2012 2013 2014 2015E 2016P 2017P 2018P 2019P REVENUE Molecular $ 472 $ 582 $ 748 $ 695 $ 758 $ 776 $ 813 $ 852 Pharma/Clinical 24 31 30 22 20 20 20 20 Total $ 496 $ 613 $ 778 $ 718 $ 778 $ 796 $ 833 $ 872 EB ITDA Molecular $ 249 $ 296 $ 344 $ 229 $ 292 $ 306 $ 336 $ 365 Pharma/Clinical (7) (5) 3 (4) (5) (5) (5) (5) Research (66) (54) (41) (32) (37) (40) (46) (52) Total $ 177 $ 237 $ 306 $ 194 $ 250 $ 261 $ 285 $ 308 Source: Company filings and Gabelli & Company estimates -4-
Companion Diagnostics In recent years, companion diagnostics have moved to the forefront of healthcare advancements. A companion diagnostic is a test based on genetic information that predicts whether a drug will benefit the patient or what dosage the patient should be prescribed. Since the test is co-developed with the drug in clinical trials, diagnostics companies oftentimes see shorter reimbursement timelines as the drug companies are awarded regulatory approval. BRACAnalysis CDx TM (BRCA1 and BRCA2) is the first and only FDA-approved laboratory developed test (LDT) that can help make treatment decisions for Lynparza TM, a PARP inhibitor designed by AstraZeneca (AZN - $67.85 - NYSE) for ovarian cancer patients. Patients who are confirmed to have BRCA1/BRCA2 respond well to Lynparza TM, while negative results would lead to different courses of treatment. Myriad extended its collaboration with AstraZeneca in April 2015 to expand the companion diagnostic into the pancreatic cancer market. MyChoice HRD TM is a tumor tissue test that can identify patients who are most likely to benefit from certain DNA-damaging chemotherapy agents. Positive scores are more likely to respond to chemotherapy, while negative scores are unlikely to respond and indicate it may further put the patient at risk of toxic treatment. In May 2015, Myriad announced a collaboration with BioMarin Pharmaceutical (BMRN - $149.13 - NASDAQ), in which BioMarin will use mychoice HRD TM with the development of talazoparib, a PARP inhibitor for breast, ovarian, and other cancer patients. Myriad is also in collaboration with Tesaro (TSRO - $65.75- NASDAQ) for niraparib, an ovarian cancer drug. Tesaro has also used the BRCA test to characterize drug response in clinical trials. Tumor BRACAnalysis CDx TM is a CE-marked genomic test that detects BRCA1 or BRCA2 mutations in ovarian cancer tumor tissue. By using tissue, the test detects de novo somatic mutations, as opposed to blood or saliva samples that detect germline mutations. The discovery of these mutations could identify up to 50% more patients with BRCA-mutated ovarian cancer than traditional germline tests. In November 2014, Myriad signed an expanded collaboration agreement with AbbVie (ABBV - $70.80 - NYSE) to use BRACAnalysis CDx TM alongside veliparib, a breast cancer drug. Combining these tests, the companion diagnostics target market has roughly 887,000 patients, comprised of ovarian, breast, gastric, pancreatic, lung, and brain/head/neck cancers. MyChoice HRD TM has the potential to be a gold standard test for physicians, with an opportunity to generate $3-4 billion in the US and $6 billion globally. Myriad predicts that its companion diagnostics segment will be the largest revenue growth driver in the future. Reimbursement Challenges Consistent throughout the industry, Myriad has also struggled with securing public and private reimbursement for its tests. The tests that have not received coverage are booked on a cash basis, in contrast to the accrued revenues associated with covered tests. Therefore, the unpaid tests directly impact margins since there is no contribution to the revenue line. Myriad initially expected to receive reimbursement for Prolaris earlier in 2015, but this has yet to be established, reducing expected 2015 revenue by $30 million. This test should win reimbursement shortly, as Myriad now expects to receive it during the summer of 2015. About 40% of Vectra DA is covered by Medicare, and the 60% private payor coverage that was not fulfilled in 2015 reduced expected revenue by an additional $20 million. Myriad has initiated additional clinical studies to satisfy private payors requirements, so these supplements should expedite their decisions. Myriad therefore expects to see private payor reimbursement for Vectra DA during 2016. Internationally, Myriad s hereditary cancer tests are reimbursed for $3,000 in France, Italy, and Spain, while Germany and Switzerland have even higher payments, some close to $5,000. In contrast to the domestic market, the European market is highly fragmented requiring Myriad to focus on each country separately. -5-
-6- Gabelli & Company Competition Myriad s business is split between oncology (50%) and preventative care (50%) markets. Its genetic sector of oncology has experienced competitive pressure in recent years. Myriad has been the innovator of hereditary cancer testing since the late 1990 s, but because genes cannot be patented, the company has seen its 100% share fall to 90% over the past two years to companies such as Bio-Reference Laboratories (BRLI - $44.31 - NASDAQ), Quest Diagnostics (DGX - $73.09 - NYSE), LabCorp (LH - $122.43 - NYSE), and small academic labs. Some of these companies have much greater financial, technical, and marketing resources, but Myriad continues to hold share with only modest price pressure. Quest offers single BRAC1 and BRAC2 tests, while LabCorp s five gene panel tests only a fraction of Myriad s panel. Bio-Reference Labs has begun to back out of the preventative care market because of hesitation to invest with regulation barriers. Myriad expects the overall number of competitors to decrease over time, since success of diagnostic tests are predicated on both FDA approval and securing reimbursement from private payors. Myriad s panel test, focused R&D investment, continuous product introductions, M&A activity, and collaborations with drug companies formulates the company s competitive advantage. Acquisitions In February 2014, Myriad acquired Crescendo Bioscience for $270 million, which added Vectra DA (rheumatoid arthritis) to its product portfolio. Crescendo had been dedicated to developing and commercializing quantitative blood tests for rheumatoid arthritis and other autoimmune diseases, expanding Myriad into a new market to diversify its product revenues. With current reimbursement status and the additional commercial infrastructure, we expect Myriad to benefit from the integration of this acquisition. In the third quarter of 2015, Myriad bought MVZ, a clinical lab in Germany, for $20 million. This purchase was aimed to improve reimbursement and penetration in Europe by increasing patient access to tests and expanding physician education. Germany is Europe s largest molecular diagnostics market, generating approximately 30% of the continent s revenues. Myriad believes that it can rapidly penetrate the fragmented and decentralized market with this European facility by collaborating directly with physicians and thought leaders. Guidance Shortfall At the beginning of the year, Myriad guided to a FY2015 revenue range of $800-810 million, which has since been lowered to $720-722 million. The shortfall was caused by several factors, including reimbursement delays, a contract delay, and capacity issues. Delay in private reimbursement coverage for Vectra DA reduced guidance by $20 million, which is now expected for 2016. Delay in Medicare reimbursement for Prolaris that was originally expected during fiscal 2015 has been pushed out to early fiscal 2016. A delay on a major pharmaceutical contract reduced expectations by an additional $15 million. A $25 million increase in work-in-progress was due to backlog from capacity issues which stem from Myriad s conversion from single cancer testing to the myrisk TM cancer panel. This conversion caused production inefficiencies, which since have been corrected, and full conversion of targeted physician tests to myrisk TM is estimated to be completed by September 2015. All physicians who currently order hereditary cancer tests from Myriad will have transitioned to ordering myrisk TM, leaving the nontargeted physicians the choice to convert to the stronger panel test. This $80 revenue shortfall is not completely convertible to revenue in 2016, since the unpaid tests in 2015 will mostly remain unpaid. Once reimbursement status is secured for Vectra DA and Prolaris, Myriad will generate additional revenue through new payments that were not previously collectible. Additionally, there is potential for reversible revenue to be obtained from Medicare from Prolaris. After this test becomes reimbursable, Myriad can submit claims to Medicare up to the prior year (fiscal 2015) of unrecorded revenue, and the insurance company decides if these claims are reimbursed. Because Myriad cannot assume Medicare s decision, this potential revenue is not calculated into future years revenues. The 2015 fiscal year also had a tough comparison, particularly in Q2 2015 when revenue declined 8% due to a one-time publicity benefit. In May 2013, Angelina Jolie exposed to the public that she used BRACAnlaysis TM to discover and treat her mutated BRCA1 gene. This event increased Q4 2013, Q1 2014, and Q2 2014 revenues by approximately $9 million, $35 million, and $17 million, respectively. Combining Q1 and Q2, the $52 million one-time revenue in 2014 was not repeated in 2015, resulting in 1H sales declining by 13%.
In February 2015, Peter Meldrum announced his retirement after 24 years as CEO at the end of the fiscal year (June), and replacing him is Mark Capone, president of Myriad Genetic Labs. As with any retirement, there is a transition stage in the business that can potentially affect performance, but Capone s thirteen-year history with the company suggests a more seamless transition. Capone has worked with Meldrum and the board in building the company s strategy and managing the $700 million subsidiary while interfacing with shareholders. As Meldrum architected Myriad to its current structure, Meldrum will now lead the company to capitalize on current success while expanding and strengthening the product portfolio. Financials Myriad plans to drive mid-single digit growth over the next few years and benefit from efficiencies as it converts to myrisk TM and gains reimbursement coverage for Prolaris and Vectra DA. In terms of capital deployment, the company s first priority is to invest in research and development. Second, Myriad will return cash to shareholders through share repurchases absent additional accretive acquisitions. It has completed over $1 billion in buybacks since 2010 and remains very active in repurchasing shares, recently authorizing an additional $200 million. Myriad has had difficulty meeting overaggressive guidance because of unfulfilled reimbursement, but this is mainly a timing impact, that should be resolved in future quarters. This company has long-term value, especially with expansion into new disease pipelines such as prostate cancer and the companion diagnostics field. We estimate 2015 revenues will decrease 8% and 2016 revenues will increase 8%, as myrisk TM conversion is completed and new reimbursement is secured for Vectra DA and Prolaris. Looking to 2018 and beyond, we expect Myriad to grow in-line with the market at 4-5%. We believe Myriad will earn $1.90 per share in 2016, growing at a compounded rate of 8.9% to $2.45 per share in 2019. We value Myriad at 12x EBITDA, calculating a 2016 PMV of $42 per share, and recommend investors Buy shares of Myriad. Table 4 Source: Company data and Gabelli & Company estimates Myriad Genetics Private Market Value Analysis 2014-2019P (in millions, except per share data) 2014 2015E 2016P 2017P 2018P 2019P '14-'19P CAGR Revenue: $ 778 $ 718 $ 778 $ 796 $ 833 $ 872 2.3% Adjusted EBITDA 306 194 250 261 285 308 Valuatio n Multiple 12.0x 12.0x 12.0x 12.0x 12.0x 12.0x Total Private Market Value $ 3,669 $ 2,325 $ 2,998 $ 3,131 $ 3,418 $ 3,694 P lus: Net Cash (Debt) 271 181 236 299 378 471 Less: Net Options Payments (a) (232) (73) (150) (174) (215) (256) Equity P MV $ 3,707 $ 2,433 $ 3,084 $ 3,256 $ 3,580 $ 3,910 Shares (basic) 73 74 73 72 71 71 PMV Per Share $ 50 $ 33 $ 42 $ 45 $ 50 $ 55 (a) P ayment to option holders at P MV, net of tax -7-
Other Companies Mentioned: AbbVie (ABBV - NASDAQ) AstraZeneca (AZN - NYSE) BioMarin Pharmaceutical Inc. (BMRN - NASDAQ) Bio-Reference Laboatories (BRLI - " ) LabCorp (LH - NYSE) Quest Diagnostics (DGX - " ) Sanofi (SNY - " ) Tesaro (TSRO - NASDAQ) I, Sara Wojda, the Research Analyst who prepared this report, hereby certify that the views expressed in this report accurately reflect the analyst s personal views about the subject companies and their securities. The Research Analyst has not been, is not and will not be receiving direct or indirect compensation for expressing the specific recommendation or view in this report. Sara Wojda (914) 921-5075 Gabelli & Company 2015 Important Disclosures ONE CORPORATE CENTER RYE, NY 10580 GABELLI & COMAPNY TEL (914) 921-5075 FAX (914) 921-5098 Gabelli & Company is the marketing name for the registered broker dealer G.research, Inc., which was formerly known as Gabelli & Company, Inc. Gabelli & Company ("we or "us") attempts to provide timely, value-added insights into companies or industry dynamics for institutional investors. Our research reports generally contain a recommendation of "buy," "hold," "sell" or "non-rated. We do not undertake to "upgrade" or "downgrade" ratings after publishing a report. We currently have reports on 589 companies, of which 46%, 37%, 3% and 14% have a recommendation of buy, hold, sell or non-rated, respectively. The percentage of companies so rated for which we provided investment banking services within the past 12 months is 0%, 0%, 0% and less than 1%. Ratings Analysts ratings are largely (but not always) determined by our private market value, or PMV methodology. Our basic goal is to understand in absolute terms what a rational, strategic buyer would pay for an asset in an open, arms-length transaction. At the same time, analysts also look for underlying catalysts that could encourage those private market values to surface. A Buy rated stock is one that in our view is trading at a meaningful discount to our estimated PMV. We could expect a more modest private market value to increase at an accelerated pace, the discount of the public stock price to PMV to narrow through the emergence of a catalyst, or some combination of the two to occur. A Hold is a stock that may be trading at or near our estimated private market value. We may not anticipate a large increase in the PMV, or see some other factors at work. A Sell is a stock that may be trading at or above our estimated PMV. There may be little upside to the value, or limited opportunity to realize the value. Economic or sector risk could also be increasing. We prepared this report as a matter of general information. We do not intend for this report to be a complete description of any security or company and it is not an offer or solicitation to buy or sell any security. All facts and statistics are from sources we believe to be reliable, but we do not guarantee their accuracy. We do not undertake to advise you of changes in our opinion or information. Unless otherwise noted, all stock prices reflect the closing price on the business day immediately prior to the date of this report. We do not use "price targets" predicting future stock performance. We do refer to "private market value" or PMV, which is the price that we believe an informed buyer would pay to acquire 100% of a company. There is no assurance that there are any willing buyers of a company at this price and we do not intend to suggest that any acquisition is likely. Additional information is available on request. As of June 30, 2015, our affiliates beneficially own on behalf of their investment advisory clients or otherwise approximately less than 1% of AbbVie, AstraZeneca, BioMarin, Bio-Reference Labs, LabCorp., Myriad Genetics, Quest Diagnostics, Sanofi and Tesaro. Because the portfolio managers at our affiliates make individual investment decisions with respect to the client accounts they manage, these accounts may have transactions inconsistent with the recommendations in this report. One of our affiliates serves as an investment adviser to Honeywell International. or an affiliated entity and has received compensation within the past 12 months for these non-investment banking securitiesrelated services. These portfolio managers may know the substance of our research reports prior to their publication as a result of joint participation in research meetings or otherwise. No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. The analyst, who wrote this report, or members of her household, owns no shares of the above mentioned companies. -8-