On Dec 23, we reaffirmed our long-term Neutral recommendation
Myriad Genetics Inc.
). Although solid quarterly results and efforts to revamp product
portfolio have been encouraging, the company is plagued by
uncertainties such as discontinuation of legacy products and the
impact of the landmark Supreme Court ruling. The molecular
diagnostic stock presently carries a Zacks Rank #3 (Hold).
Why the Reiteration?
In the first quarter of fiscal 2013, Myriad reported earnings
per share (EPS) of 68 cents in the first quarter of fiscal 2014,
registering a 47.8% beat over the Zacks Consensus Estimate and
excellent year-over-year growth of 88%. Revenues increased 51.7%
year over year to $202.2 million, sailing past the Zacks
Consensus Estimate of $168 million.
The higher-than-expected guidance for the current fiscal also
boosts confidence. The commercialization of the unique myRisk
test is another material upside as management expectations from
the pan-cancer test are sky high.
Moving forward, we consider Myriad's HRD test as a valuable
asset for top-line growth as it has the potential to tap a widely
unexplored market. The company's increasing focus on the
companion diagnostic market should work reasonably well to fuel
growth. We look forward to the expansion of indications and
derive comfort from the company's plan to foray into the
dermatology, autoimmune and neuroscience market in future, on the
back of portfolio development.
However, the much-hyped Supreme Court ruling regarding legal
claims that challenge Myriad's patent landscape is out and it
seems like a letdown for the company. Notably, in Jun 2013, a
Supreme Court ruling had declared that isolated human genes are
Following the decision, several companies have commenced
offering clinical diagnostic and genomic laboratory services,
including the testing and analysis of the BRCA1 and BRCA2 genes
that compete with the BRACAnalysis testing and services of
Myriad. Although Myriad has filed several patent infringement
lawsuits against these companies, defeating these legal issues
may create considerable trouble for the company going
Moreover, the Centers for Medicare & Medicaid Services
(CMS) recently proposed to pay $1,438 to Myriad for each
BRACAnalysis test conducted by the company. The considerable
reduction from the previously paid amount of $2,795 is expected
to put a heavy burden on the company. Furthermore, European
macroeconomic conditions might deter Myriad's expansion plans in
the near term.
Stocks to Consider
While we remain on the sidelines regarding Myriad at present,
we are positive about
InSite Vision Inc.
) carrying a Zacks Rank #1 (Strong Buy) and
) with a Zacks Rank #2 (Buy).
AFFYMETRIX INC (AFFX): Free Stock Analysis
HESKA CORP (HSKA): Free Stock Analysis Report
INSITE VISION (INSV): Get Free Report
MYRIAD GENETICS (MYGN): Free Stock Analysis
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