Myriad Genetics
(
MYGN
) reported an EPS of 33 cents for the second quarter of fiscal
2012, beating both the Zacks Consensus Estimate of 31 cents and the
year-ago quarter's EPS of 26 cents. Revenues were $122.8 million,
up 22% year over year and higher than the Zacks Consensus Estimate
of $115 million.
Myriad's two businesses - Molecular diagnostic testing and
Companion diagnostic services - recorded revenues of $117.6 million
(up 17% year over year) and $5.2 million, respectively. The company
acquired the Companion diagnostic business following the
acquisition of Rules-Based Medicine in May 2011. Molecular
diagnostic testing revenue is derived from both Oncology (up 15% to
$79.8 million) and Women's Health (up 22% to $37.9 million).
While Myriad markets several molecular diagnostic products, the
company's flagship product is Bracanalysis (representing 82.6% of
total revenues during the quarter), which studies BRCA1 and BRCA2
genes for assessing a woman's risk of developing hereditary breast
and ovarian cancers. This test recorded a 14% jump in revenues to
$101.4 million. Moreover, revenues derived from Colaris and Colaris
AP, which assess a patient's risk of developing hereditary
colorectal and uterine cancers, increased 56% to $10.9 million.
Gross profit increased 20.7% year over year to $106.7 million.
Gross margin, however, declined 113 basis points (bps) to 86.9%.
Operating expenses increased by 22.9% during the quarter to $61.2
million due to a 16.6% rise in selling, general and administrative
expenses ($50.9 million) while research and development (R&D)
expenses increased 68.1% ($10.2 million). Consequently, operating
margin declined 140 bps to 37%.
Myriad exited the quarter with cash, cash equivalents and
marketable securities of $428.3 million, down from $417.3 million
at the end of fiscal 2011. The company repurchased 927,709 million
shares during the quarter. The consistent share buyback
program had a favorable impact on the company's bottom line as
shares outstanding declined 8% year over year.
Guidance Raised
Myriad upgraded its guidance for fiscal 2012. The company now
expects to report revenues of $465-$475 million (previous guidance
of $445-$465 million) resulting in an EPS of $1.24-$1.28
($1.20-$1.25). The revised guidance is more optimistic than the
current Zacks Consensus Estimate of $460 million in revenues and
EPS of $1.24. Molecular diagnostic testing and Companion
diagnostic services are expected to record revenues of $440-$450
million ($421-$439 million) and $24-$26 million, respectively.
Recommendation
We consider Myriad's Bracanalysis as a valuable asset for
top-line growth as it has the potential to tap a widely unexplored
market. We are encouraged by the company's various initiatives to
achieve this objective. Moreover, with a strong cash balance, the
company is well placed to expand its product portfolio and target
new territories. However, operating expenses are on rise due to the
company's focus on international expansion and product development.
As a result, the company's margin remains under pressure, although
the bottom line should benefit from the repurchase program. The
company also faces stiff competition from players such as
Genomic Health
(
GHDX
),
Qiagen
(
QGEN
), among others.
We currently have a Neutral recommendation on Myriad. The stock
retains a Zacks #4 Rank ("Sell") in the short term.
GENOMIC HEALTH (
GHDX
): Free Stock Analysis Report
MYRIAD GENETICS (
MYGN
): Free Stock Analysis Report
QIAGEN NV (
QGEN
): Free Stock Analysis Report
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