We have reaffirmed our Neutral recommendation on
) with a target price of $29.00.
The company reported earnings of 34 cents per share in the first
quarter of fiscal 2013, which met the Zacks Consensus Estimate
while revenues of $133 million exceeded nominally.
While Myriad markets several molecular diagnostic products, the
company's flagship product is Bracanalysis (representing 81.7% of
total revenues during the last reported quarter), which studies
BRCA1 and BRCA2 genes to assess a woman's risk of developing
hereditary breast and ovarian cancers. This test recorded a 17%
jump in revenues to $108.7 million during the quarter. Moreover,
revenues derived from Colaris and Colaris AP, which assess a
patient's risk of developing hereditary colorectal and uterine
cancers, increased 51% to $11.5 million.
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 has increased the
addressable oncology market for Bracanalysis by $200 million to an
annual market potential of $650 million. Revenues from these three
indications grew 45% during the reported quarter. To further expand
in the Women's Health market, Myriad is looking to add new
territories and implement better interactive media campaigns.
Besides, significant growth opportunity lies in the Women's Health
market for Bracanalysis due to the low penetration level (7%).
The company's expansion plan in Europe is on track with its goal
to record $15 million of revenues from international operations by
fiscal 2016. The company's laboratory in Munich, Germany has been
operational since January and is capable of generating $50 million
in revenues each year within the next five years. Attempts are
being made to build infrastructure in the five major markets of
Germany, France, Italy, Spain and Switzerland. While reimbursement
for Bracanalysis, Colaris and Colaris AP has already been received
in these markets, Myriad is working to receive reimbursement for
Prolaris. The company is confident about the potential of Prolaris
in Europe and has undertaken several key clinical studies in
prostate cancer to drive adoption and obtain reimbursement for the
We are also impressed by Myriad's focus on establishing itself
as a strong player in the companion diagnostic market. The company
has agreements with several pharmaceutical companies including
Johnson & Johnson
), among others.
Meanwhile, due to the company's focus on international expansion
and pipeline development, expenses are on the rise. This is
reflected in the decline in operating margin during the reported
quarter. Moreover, several ongoing tests are in the early-to-middle
stages of development and, hence, some years away from
Our recommendation is backed by a Zacks #3 Rank (Hold) in the
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