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

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Summary:
Myriad reported a disappointing first quarter fiscal 2015 with earnings per share of $0.25 that missed the Zacks Consensus Estimate by 24.2%. Earnings also deteriorated from the year-over-year adjusted number. Further, revenues fell 16.6% to $168.8 million, missing the Zacks Consensus Estimate of $174 million. According to management, the company will soon be able to improve its profitability by expanding its capacity and lab efficiencies. Moreover, positive results from the different studies conducted on a wide range of Myriad's products, were another upside. We are also impressed with the 95% rise in revenues from myRisk test and expect this number to expand even further. However, the market entry of other players following a Supreme Court ruling and subsequent price-war is a cause of concern. Uncertainty owing to the conversion to myRisk is another headwind. We are thus Neutral on the stock.

Overview:

Myriad Genetics (MYGN), headquartered in Salt Lake City, UT, 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 assessment of 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 acquired 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 third 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 had 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%.

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.

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.

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 seeks 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


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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

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