On Apr 17, we downgraded our recommendation on
Myriad Genetics Inc.
) to Neutral from Outperform. Despite the recent healthy growth,
the stock is presently out of favor on account of imminent
Presently, there is a lot of uncertainty surrounding Myriad.
While the company started fiscal 2013 on a solid note, several
downsides such as reimbursement issues and ongoing patent
litigation weigh on the stock.
The Noridian reimbursement price cut for the integrated
Bracanalysis test is a major cause of concern. We are wary that
if private insurance payors follow suit, the reimbursement cut
might adversely impact Myriad.
Further, Myriad continues to face legal claims that challenge its
patent landscape. The ongoing patent litigation (to decide
whether isolated human genes can be patented) might drag the
stock. We are concerned that an adverse outcome might affect the
patent landscape for the company's flagship product, which in
turn might impact the Myriad's growth over the long haul.
We also keep an eye on the product development timelines. With
several tests under early-stage development, Myriad continues to
face higher costs. Consequently, gross margin pressure is another
cause of concern. Also, uncertainties in Europe remain an
Although Myriad still expects fiscal revenues and EPS to come in
at the high end of the guidance, the issue surrounding the stock
leads to a somewhat pessimistic view that the company might not
be able to keep the recent momentum going over the long haul.
We await Myriad's recovery from the ongoing challenges. Myriad
presently carries a Zacks Rank #4 (Sell). However, other medical
sector stocks such as
), carrying a Zacks Rank #1 (Strong Buy) are expected to do well.
), carrying a Zacks Rank #2 (Buy) is also worth considering.
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