SEC Company Response from MYRIAD GENETICS INC (MYGN) (CIK 0000899923) (MYGN) — Jul 23, 2008
MYRIAD GENETICS INC (MYGN) (CIK 0000899923)
Date: July 23, 2008 · CIK: 0000899923 · Accession: 0001193125-08-155930
AI Filing Summary & Sentiment
Reasoning
Referenced dates: February 27, 2008, February 27, 2008
Letter
Correspondence
Myriad Genetics, Inc.
July 22, 2008
VIA EDGAR AND OVERNIGHT MAIL
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Attn: Jim B. Rosenberg
Senior Assistant Chief Accountant
Mail Stop 6010
Re: Myriad Genetics, Inc.
Form 10-K for Fiscal Year Ended June 30, 2007
File No. 0-26642
Ladies and Gentlemen:
This letter is being submitted in connection with comments received from the Staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (the “Commission”) on our Annual Report on Form 10-K for the fiscal year ended June 30, 2007 (the “2007 Annual Report”).
Background
The initial comments from the Staff were contained in a letter dated February 27, 2008 (the “Initial Comment Letter”) from Mr. Jim B. Rosenberg, Senior Assistant Chief Accountant of the Staff, to Mr. Peter D. Meldrum, President and Chief Executive Officer of Myriad Genetics, Inc. (the “Company”). Comment No. 6 of the Initial Comment Letter requested that the Company provide its significance testing analysis under Rule 3-09 of Regulation S-X promulgated under the Securities Act of 1933, as amended, for its equity investment in Prolexys Pharmaceuticals, Inc. (“Prolexys”) and an explanation why the Company had not provided the audited or unaudited financial statements required by the rule in its 2007 Annual Report. On March 12, 2008, the Company submitted a response to the Initial Comment Letter, including a response to Comment No. 6 (the “Initial Response Letter”).
On April 10, 2008, the Company received additional comments, orally, from Mr. Mark Brunhofer of the Staff (the “Second Comments”). In the Second Comments, among other comments, the Staff advised the Company that the Staff had reviewed the Company’s response to Comment No. 6 in the Initial Response Letter and was requesting that the Company either amend its 2007 Annual Report to provide the financial statements of Prolexys, which should be audited, or request a waiver of the financial statement requirement of Rule 3-09 of Regulation S-X from the Office of the Chief Accountant of the Division of Corporation Finance.
320 Wakara Way
Salt Lake City, UT 84108
Myriad Genetics, Inc.
July 22, 2008
Page
On July 3, 2008, after experiencing delays with its prior auditors, the Company submitted a request for a waiver of Rule 3-09 of Regulation S-X, a copy of which is attached hereto as Attachment A (the “Waiver Request”).
Supplemental Response
Since submission of the Waiver Request, the Company has worked with its current auditors to reconsider its analysis under Rule 3-09 and has discussed its views in a telephone conference on July 17, 2008 with Mr. Brunhofer and Mr. Todd Hardiman, Associate Chief Accountant of the Office of the Chief Accountant of the Division of Corporation Finance. As discussed with Messrs. Brunhofer and Hardiman, and as detailed below, the Company has now concluded that Rule 3-09 of Regulation S-X does not require the Company to include the financial statements of Prolexys in the Company’s 2007 Annual Report.
Pursuant to APB No. 18, paragraph 19(i), “the investor should ordinarily discontinue applying the equity method when the investment (and net advances) is reduced to zero and should not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee.” Given that the Company’s investment in Prolexys has been reduced to zero (considering both the Company’s percentage interest in the net losses of Prolexys as well as the accretion of the Company’s basis difference in the underlying net assets of Prolexys), the Company is no longer applying the equity method of accounting for its interest in Prolexys. Furthermore, as stated in the SEC Training Manual, Topic 2, III.B.2., “For purposes of computing the income significance test under Rule 3-09, use GAAP changes in the equity investment as presented in the income statement . . . .”
As discussed with the Staff, the Company had previously reduced its investment in Prolexys to zero and has recorded no income or loss related to Prolexys in its statements of operations for each of the fiscal years ended June 30, 2005, 2006 and 2007. In addition, the Company accretes the unamortized basis in its investment in Prolexys in each period, and in the fiscal years ended June 30, 2005, 2006 and 2007 and each of the interim periods contained therein the Company’s proportionate interest in the losses of Prolexys has exceeded that accretion. Because the Company has no obligation, commitment or plan to provide additional funding to Prolexys, and the investment account is zero at the beginning of each of the historical periods, the Company’s proportionate interest in Prolexys’s losses is limited to the accretion of the gain, thereby resulting in a net impact to the Company’s income statement of zero. Accordingly, in applying the significance test under Rule 3-09, the numerator in the computation is zero, thereby rendering Rule 3-09 not applicable for each of the fiscal years ended June 30, 2005, 2006 and 2007.
* * *
Myriad Genetics, Inc.
July 22, 2008
Page
In addition, as requested by the Staff in the Initial Comment Letter, the Company acknowledges that:
•
the Company is responsible for the adequacy and accuracy of the disclosure in the filing;
•
Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and
•
the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
* * *
This response letter has been filed on EDGAR under the form type CORRESP. The Company understands that the Commission may have additional comments after reviewing this letter.
We hope that the above responses will be acceptable to the Staff. If you have any questions or comments regarding the information in this letter, kindly contact the undersigned at (801) 584-3672, or our outside counsel, Scott A. Samuels, Esq. of Mintz Levin, at (617) 348-1798. Thank you for your time and attention.
Very truly yours,
/s/ James S. Evans
Show Raw Text
CORRESP 1 filename1.htm Correspondence Myriad Genetics, Inc. July 22, 2008 VIA EDGAR AND OVERNIGHT MAIL Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Attn: Jim B. Rosenberg Senior Assistant Chief Accountant Mail Stop 6010 Re: Myriad Genetics, Inc. Form 10-K for Fiscal Year Ended June 30, 2007 File No. 0-26642 Ladies and Gentlemen: This letter is being submitted in connection with comments received from the Staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (the “Commission”) on our Annual Report on Form 10-K for the fiscal year ended June 30, 2007 (the “2007 Annual Report”). Background The initial comments from the Staff were contained in a letter dated February 27, 2008 (the “Initial Comment Letter”) from Mr. Jim B. Rosenberg, Senior Assistant Chief Accountant of the Staff, to Mr. Peter D. Meldrum, President and Chief Executive Officer of Myriad Genetics, Inc. (the “Company”). Comment No. 6 of the Initial Comment Letter requested that the Company provide its significance testing analysis under Rule 3-09 of Regulation S-X promulgated under the Securities Act of 1933, as amended, for its equity investment in Prolexys Pharmaceuticals, Inc. (“Prolexys”) and an explanation why the Company had not provided the audited or unaudited financial statements required by the rule in its 2007 Annual Report. On March 12, 2008, the Company submitted a response to the Initial Comment Letter, including a response to Comment No. 6 (the “Initial Response Letter”). On April 10, 2008, the Company received additional comments, orally, from Mr. Mark Brunhofer of the Staff (the “Second Comments”). In the Second Comments, among other comments, the Staff advised the Company that the Staff had reviewed the Company’s response to Comment No. 6 in the Initial Response Letter and was requesting that the Company either amend its 2007 Annual Report to provide the financial statements of Prolexys, which should be audited, or request a waiver of the financial statement requirement of Rule 3-09 of Regulation S-X from the Office of the Chief Accountant of the Division of Corporation Finance. 320 Wakara Way Salt Lake City, UT 84108 Myriad Genetics, Inc. July 22, 2008 Page 2 On July 3, 2008, after experiencing delays with its prior auditors, the Company submitted a request for a waiver of Rule 3-09 of Regulation S-X, a copy of which is attached hereto as Attachment A (the “Waiver Request”). Supplemental Response Since submission of the Waiver Request, the Company has worked with its current auditors to reconsider its analysis under Rule 3-09 and has discussed its views in a telephone conference on July 17, 2008 with Mr. Brunhofer and Mr. Todd Hardiman, Associate Chief Accountant of the Office of the Chief Accountant of the Division of Corporation Finance. As discussed with Messrs. Brunhofer and Hardiman, and as detailed below, the Company has now concluded that Rule 3-09 of Regulation S-X does not require the Company to include the financial statements of Prolexys in the Company’s 2007 Annual Report. Pursuant to APB No. 18, paragraph 19(i), “the investor should ordinarily discontinue applying the equity method when the investment (and net advances) is reduced to zero and should not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee.” Given that the Company’s investment in Prolexys has been reduced to zero (considering both the Company’s percentage interest in the net losses of Prolexys as well as the accretion of the Company’s basis difference in the underlying net assets of Prolexys), the Company is no longer applying the equity method of accounting for its interest in Prolexys. Furthermore, as stated in the SEC Training Manual, Topic 2, III.B.2., “For purposes of computing the income significance test under Rule 3-09, use GAAP changes in the equity investment as presented in the income statement . . . .” As discussed with the Staff, the Company had previously reduced its investment in Prolexys to zero and has recorded no income or loss related to Prolexys in its statements of operations for each of the fiscal years ended June 30, 2005, 2006 and 2007. In addition, the Company accretes the unamortized basis in its investment in Prolexys in each period, and in the fiscal years ended June 30, 2005, 2006 and 2007 and each of the interim periods contained therein the Company’s proportionate interest in the losses of Prolexys has exceeded that accretion. Because the Company has no obligation, commitment or plan to provide additional funding to Prolexys, and the investment account is zero at the beginning of each of the historical periods, the Company’s proportionate interest in Prolexys’s losses is limited to the accretion of the gain, thereby resulting in a net impact to the Company’s income statement of zero. Accordingly, in applying the significance test under Rule 3-09, the numerator in the computation is zero, thereby rendering Rule 3-09 not applicable for each of the fiscal years ended June 30, 2005, 2006 and 2007. * * * Myriad Genetics, Inc. July 22, 2008 Page 3 In addition, as requested by the Staff in the Initial Comment Letter, the Company acknowledges that: • the Company is responsible for the adequacy and accuracy of the disclosure in the filing; • Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and • the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. * * * This response letter has been filed on EDGAR under the form type CORRESP. The Company understands that the Commission may have additional comments after reviewing this letter. We hope that the above responses will be acceptable to the Staff. If you have any questions or comments regarding the information in this letter, kindly contact the undersigned at (801) 584-3672, or our outside counsel, Scott A. Samuels, Esq. of Mintz Levin, at (617) 348-1798. Thank you for your time and attention. Very truly yours, /s/ James S. Evans James S. Evans Chief Financial Officer cc: Todd Hardiman Mark Brunhofer Division of Corporation Finance Securities and Exchange Commission Peter D. Meldrum James L. Benson Myriad Genetics, Inc. Ken Marceron David Jolley Ernst & Young LLP Myriad Genetics, Inc. July 22, 2008 Page 4 Jonathan L. Kravetz, Esq. Brian P. Keane, Esq. Scott A. Samuels, Esq. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. ATTACHMENT A Scott A. Samuels | 617 348 1798 | ssamuels@mintz.com One Financial Center Boston, MA 02111 617-542-6000 617-542-2241 fax www.mintz.com July 3, 2008 VIA FACSIMILE [202-772-9213] Office of the Chief Accountant Division of Corporation Finance Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Attn: Craig Olinger Deputy Chief Accountant Re: Myriad Genetics, Inc. Waiver Request under Rule 3-09 of Regulation S-X Form 10-K for Fiscal Year Ended June 30, 2007 File No. 0-26642 Ladies and Gentlemen: On behalf of our client Myriad Genetics, Inc. (the “Company”), we are requesting a waiver of the requirement that the Company provide separate financial statements of a 50% or less owned entity pursuant to Item 3-09 of Regulation S-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or if such request is denied, a waiver from the requirement that such separate financial statements be audited in order to be incorporated into the Company’s Securities Act registration statements. Background The waivers requested herein are being submitted in connection with the comments contained in a letter dated February 27, 2008 (the “Initial Comment Letter”) from Mr. Jim B. Rosenberg, Senior Assistant Chief Accountant, of the Staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (the “Commission”) to Mr. Peter D. Meldrum, President and Chief Executive Officer of the Company, concerning the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007 (the “2007 Annual Report”). Comment No. 6 of the Initial Comment Letter requested that the Company provide Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. BOSTON | WASHINGTON | NEW YORK | STAMFORD | LOS ANGELES | PALO ALTO | SAN DIEGO | LONDON Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. July 3, 2008 Page 2 its significance testing analysis under Item 3-09 of Regulation S-X for its equity investment in Prolexys Pharmaceuticals, Inc. (“Prolexys”) and an explanation why the Company had not provided the audited or unaudited financial statements required by the rule in its 2007 Annual Report. On March 12, 2008, the Company submitted a response (the “Initial Response Letter”) to the Initial Comment Letter, including a response to Comment No. 6. A copy of that comment and the Company’s response to it is included herewith on Schedule A for your convenience. The Company believes it has resolved all but one comment contained in the Initial Comment Letter, and the Company has amended its subsequent filings to include revised disclosures in response to the comments. The Company received additional comments, orally, from Mr. Mark Brunhofer of the Staff on April 10, 2008 (the “Second Comments”). In the Second Comments, the Staff advised the Company that, having reviewed the Company’s response to Comment No. 6 of the Initial Comment Letter, the Staff was requesting that the Company either amend its 2007 Annual Report to provide the financial statements of Prolexys, which should be audited, or request a waiver of the financial statement requirement of Rule 3-09 of Regulation S-X from the Office of the Chief Accountant of the Division of Corporation Finance.1 In the period since the Second Comments were issued on April 10, 2008, the Company has repeatedly requested that its former auditor, KPMG LLP, who is also the former auditor of Prolexys, perform the additional review procedures it states are required in order to include the audited Prolexys financial statements in an amendment to the Company’s 2007 Annual Report and to obtain KPMG’s consent to incorporate the financial statements into the Company’s Securities Act registration statements. However, despite repeated efforts, the Company has not been able to obtain KPMG’s review or consent. Accordingly, after further discussion with the Staff, the Company has determined that the quickest and most cost-effective way to resolve the Staff’s outstanding comment is if the Company is able to obtain either of the waivers requested herein. Request for Waiver of Rule 3-09 Financial Statements The Company requests that the Chief Accountant grant a waiver from the requirement that the Company provide separate financial statements of Prolexys in the Company’s 2007 Annual Report, notwithstanding that the 20% significance threshold set forth in Item 3-09 of Regulation S-X was technically exceeded for fiscal years ending June 30, 2006 and 2005. 1 In the Second Comments, the Staff also requested that the Company (i) re-assess the effectiveness of its disclosure controls and procedures and include the reassessment in its amended filing, and (ii) submit a letter signed by a duly authorized officer of the Company, instead of outside legal counsel, setting forth the “Tandy” representations requested in the Initial Comment Letter. The Company will address these comments once the waivers requested herein are decided by the Office of the Chief Accountant. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. July 3, 2008 Page 3 As noted in the Company’s Initial Response Letter (set forth in Schedule A hereto), the Company’s share of Prolexys’ losses from an ownership standpoint exceeded the 20% threshold for both fiscal 2006 and 2005. However, as stated in Note 10 to the Company’s audited financial statements in the 2007 Annual Report, the carrying value of the Company’s investment in Prolexys has been $0 since inception, and because the Company is under no obligation to provide any additional or on-going financial support to Prolexys, the losses incurred by Prolexys had no impact on the Company’s financial position or results of operations. Furthermore, any losses incurred by Prolexys in future periods will also have no impact on the Company’s financial position or results of operations. From an accounting perspective, despite the fact that the Company has an equity ownership position in Prolexys that exceeds 20%, the Company’s share of Prolexys’ current and future losses is effectively zero. The 20% significance test of Rule 3-09 was not exceeded in fiscal 2007, and the Company does not expect the test to be exceeded again in the future. For these reasons, even though one of the three significance tests exceeded 20% for fiscal 2006 and 2005, the Company respectfully submits that the Prolexys financial statements are not material to investors’ understanding of the Company’s financial results or prospects. Moreover, the Company has historically provided abbreviated summary financial information relating to Prolexys in the footnotes to the Company’s financial statements (see, e.g., Note 10 to the financial statements included in the 2007 Annual Report). The Company proposes to continue to provide summary financial information relating to Prolexys in the footnotes to the Company’s financial statements rather than provide separate financial statements of Prolexys. The Company believes that, given the factors cited above, this information provides adequate disclosure to investors. Based on the foregoing, the Company requests that the Chief Accountant grant a waiver of the financial statement requirement set forth in Rule 3-09 of Regulation S-X and permit the Company to exclude the Prolexys financial statements for fiscal year 2006 and 2005 in the Company’s 2007 Annual Report. Request for Waiver of Audited Financial Statements In the event that the Chief Accountant denies the foregoing request and concludes that the Company must include the Prolexys financial statements in the Company’s 2007 Annual Report, the Company requests, in the alternative, that the Chief Accountant waive the requirement that the financial statements be audited for purposes of inclusion in the 2007 Annual Report and also in any registration statement of the Company filed under the Securities Act which incorporates such financial statements by reference. The financial statements of the Company and Prolexys for the fiscal year ended June 30, 2007 were audited by Ernst & Young LLP. However, both the Company and Prolexys changed auditors during fiscal 2007, and the financial statements for both companies for the fiscal year ended June 30, 2006 and prior years were audited by KPMG. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. July 3, 2008 Page 4 The Company has been advised by KPMG that KPMG must re-perform some of its audit procedures in compliance with PCAOB standards instead of AICPA general auditing standards in order to include the 2006 audited Prolexys financial statements in the Company’s 2007 Annual Report and to obtain KPMG’s consent to incorporate such financial statements into the Company’s Securities Act registration statements. Since the Company received the Second Comments from the Staff on April 10, 2008, the Company has repeatedly requested that KPMG begin the procedures necessary to allow the Company to include KPMG’s audit opinion for the 2006 Prolexys financial statements in an amended filing to the Compan