We have reaffirmed our Neutral recommendation on
) following its third quarter fiscal 2012 results. Based on a
strong quarter, the company raised its guidance for the current
fiscal for the second time in the year.
Myriad reported a strong third quarter with both revenues and
EPS going past the Zacks Consensus Estimates. The company's
flagship product, Bracanalysis, has been recording robust growth
over the past few quarters on the back of increasing penetration in
both Oncology and Women's Health markets.
The company's continuous focus on penetrating the segments of
ovarian cancer, carcinoma in situ and triple negative breast cancer
indications have increased the addressable oncology market for
Bracanalysis by $200 million to an annual market potential of $650
million. Revenues from these three indications grew 57% during the
reported quarter. To further expand in the Women's Health market,
Myriad is looking at growing same-store sales (24% year-over-year
growth), addition of new territories (up 31%) and implementation of
interactive media campaigns. Besides, significant growth
opportunity lies in the Women's Health market for Bracanalysis due
to the low penetration level (7%).
We are encouraged with Myriad's expansion plan in Europe that
continues to remain ahead of schedule with a goal to record $15
million of revenues from international operations by fiscal 2016.
The company's laboratory in Munich, Germany is operational since
January and is capable of generating $50 million in revenues each
year within the next five years. With its headquarters in
Switzerland, hiring of country managers for the five major markets
of Germany, France, Italy, Spain and Switzerland have been done.
While reimbursement for Bracanalysis, Colaris and Colaris AP have
already been received in these markets, Myriad is working to
receive reimbursement for Prolaris. The Prolaris clinical program
is running ahead of schedule and the company is in talks with large
institutions in France and Australia to initiate additional
validation studies later this year.
Meanwhile, due to the company's focus on international expansion
and pipeline development, expenses are on the rise. With R&D
expenses touching 9% of the total revenue level in 2012 (from 7% in
2011), margins will come under pressure. This is reflected in the
decline in operating margin during the reported quarter. Moreover,
the competitive landscape is quite tough with the presence of
players such as
Our recommendation is backed by a Zacks #3 Rank (Hold) in the
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