Myriad Genetics, Inc. (MYGN): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Myriad reported an encouraging second-quarter fiscal 2014, with EPS of $0.66, a 40.4% beat over the Zacks Consensus Estimate and a stupendous year-over-year growth of 57.1%. Revenue surged 37% to $204.1 million, topping the Zacks Consensus Estimate of $178 million. Apart from strong performance in the core markets (with launch of major pipeline products) and sound international expansion, publicity involving celebrities was a big factor that boosted revenues. Increase in reimbursement rate by CMS was another upside. We look forward to Myriad's efforts to revamp its portfolio with the myRisk test. The company should gain from expansion of indications, and stronger international presence. However, the market entry of other players following a Supreme Court ruling and subsequent price-war is a cause of concern. Uncertainty coming from the conversion to myRisk is another headwind. We are Neutral on the stock.

Overview:

Myriad Genetics (MYGN), headquartered in Salt Lake City, Utah, employs a number of proprietary technologies to target the genetic basis of human diseases and the role these genes might play in the onset, progression and treatment of the respective diseases. This information helps in developing molecular diagnostic products designed to assess an individual's risk for developing a disease later in life (predictive medicine), identification of a patient's probability of responding to drug therapy and guidance regarding proper dosage to ensure optimal treatment (personalized medicine), or assess a patient's risk of disease progression and recurrence (prognostic medicine). To date, Myriad has launched nine commercial molecular diagnostic products, including five predictive medicine, three personalized medicine and one prognostic medicine product.

Myriad has decided on some strategic options for long-term revenue growth. These include growing existing products and markets, developing an international presence, investing in new products and making the most of the companion diagnostic opportunity. In 2011, Myriad acquired molecular diagnostic company Rules-Based Medicine (RBM) to expand its product pipeline to cover other diseases, including neuroscience disorders, infectious diseases and inflammatory diseases. In 2011, the company also acquired in-licensed technologies from Chronix Biomedical and Melanoma Diagnostics.

In Feb 2014, Myriad announced the acquisition of Crescendo Bioscience an autoimmune diagnostics company. The acquisition will allow the company to expand its portfolio of diagnostic tests beyond breast cancer and enter the autoimmune diagnostic market.

Consequently, the company's current focus on Oncology, Preventative Care, Urology, Dermatology, and Neuroscience will also include Rheumatology as the sixth specialty disease. Vectra DA, Crescendo's first product, is the only blood-based molecular diagnostic test to determine the level of disease activity in patients with rheumatoid arthritis. The product is able to assess progression of the disease (post diagnosis) helping physicians to take the correct decision.

Bracanalysis is Myriad's flagship product, contributed 69% of total revenues in the first quarter of fiscal 2014. This test provides a comprehensive analysis of BRCA1 and BRCA2 genes to assess a woman's risk of hereditary breast and ovarian cancers. A woman testing positive for a deleterious mutation with the Bracanalysis test has an 82% risk of developing breast cancer and a 44% risk of developing ovarian cancer during her lifetime. The average selling price (ASP) of Bracanalysis test is $3,100. The company derives revenue from sales of Molecular diagnostic tests (95% of total revenue) and Companion diagnostic services (5% of total revenue).

On Sep 5, 2013, Myriad launched its major pipeline product myRisk Hereditary Cancer. Myriad announced the average selling price of myRisk Hereditary Cancer test in the range of $3,700. The product has an estimated gross margin of about 87%. The company is launching myRisk Hereditary Cancer in a phased approach, starting from an early-access, clinical-experience program to a finite number of medical and scientific superiors. Myriad will then begin an expanded access program later in the year.

In Dec 2013, in order to boost acceptance of the novel test, Myriad demonstrated positive clinical validity data on myRisk Hereditary Cancer diagnostic test at the 2013 San Antonio Breast Cancer Symposium. The clinical data demonstrates the superiority of this diagnostic test over other testing modes. It was found that myRisk has the ability to identify 51% more patients with higher risk of hereditary breast and ovarian cancer than testing of BRCA1 and BRCA2 genes alone.

The study results come close on the heels of the recently presented data (in Oct 2013) on the myRisk test at the Collaborative Group of the Americas on Inherited Colorectal Cancer (CGA) Annual Meeting. Myriad had reported a 61% improvement in detection of hereditary colon cancer and 99.9% accuracy with the myRisk test.

On Oct 29 2013, Myriad launched its myPlan Lung Cancer, a gene expression test designed to assist a physician in predicting the aggressiveness of a patient's lung cancer catering to leading oncologists throughout the U.S. Data presented at the International Association for the Study of Lung Cancer showed that patients with high-risk myPlan Lung Cancer scores resulted in approximately twice the number of lung-cancer deaths over a five-year period, compared to patients with a low-risk score.

On Nov 12, 2013, Myriad launched its molecular diagnostic test myPath Melanoma. This marked Myriad's foray into the area of dermatology through efficient detection of malignancy in skin biopsy. As per the findings which were recently published at the American Society of Dermatopathology, myPath Melanoma provides 90% accuracy in distinguishing malignant melanoma from benign pigmented skin lesions in a variety of subtypes. Furthermore, these positive outcomes have recently been confirmed in an independent clinical validation study to be presented at the American Academy of Dermatology in Mar 2014.

Analyst/Investor Day Developments: On May 9, 2013, Myriad revealed that its myRisk Hereditary Cancer test encompasses 25 gene panel (including sequencing and large rearrangements). At first, the company will target breast cancer, colon cancer, ovarian cancer, endometrial cancer, pancreatic cancer and melanoma.

As a result, Myriad plans to discontinue its flagship Bracanalysis, Colaris, Colaris AP, Melaris and Panexia once it transforms the entire hereditary cancer market by summer 2015. Later, the company plans to extend the test application to lung, prostate and other types of cancer. According to management, the turnaround time for the novel test will be at most 14 days.

The following chart depicts market opportunity of myRisk Hereditary Cancer Test: First Comprehensive Pan-Cancer Panel

Other products in Myriad's current portfolio consists of:

Products

Indication

Colaris

colorectal or uterine cancer

Colaris AP

hereditary colorectal cancer

Melaris

genetic susceptibility to malignant melanoma

Theraguide 5-FU

analyzes mutations in the DPYD gene and variations in the TYMS gene to assess patient risk of 5-FU (flourouracil) toxicity

OnDose

personalized medicine product for colon cancer

Prezeon

personalized and prognostic medicine product analyzing the PTEN gene and assessing loss of PTEN function in many cancer types

Prolaris

assesses the form of prostate cancer to determine its nature

Panexia

hereditary pancreatic and related cancer


Myriad Genetics, Inc. (MYGN): Read the Full Research Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: ASP , CGA , MYGN

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