On Mar 5, 2013, we reaffirmed our long-term Outperform
Myriad Genetics Inc.
) following its strong second-quarter fiscal 2013 results and
upward revision in the fiscal outlook.
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Why the Reiteration?
On Feb 5, Myriad reported another positive earnings surprise when
its second-quarter earnings per share rose 27% on a
year-over-year basis to 42 cents, reflecting a beat of 10.5% over
the Zacks Consensus Estimate. Revenues climbed 21% to $149.1
million, surpassing the Zacks Consensus Estimate. The quarter
showed sign of balanced growth as Myriad's mainstay franchise of
molecular diagnostic test was supported by the relatively minor
companion diagnostic segment.
While Bracanalysis test remains Myriad's flagship product, the
BART (Bracanalysis Rearrangement Technology) test continues to
gain traction. The positive momentum of the BART test is
reflected in the massive five time increase of its revenues to
Apart from these, Myriad has a gamut of other tests to drive
growth. The company's strong pipeline, with certain tests that
will serve a billion-dollar market, is another upside.
On the other hand, Myriad's focus on the companion diagnostic
market is encouraging. The company's agreements with several
pharmaceutical companies like
) is likely to boost revenues for the companion diagnostic
franchise going forward.
Myriad's new share buyback program should provide earnings upside
in the coming quarters. Meanwhile, the company has made
commendable progress with respect to its expansion in Europe.
Although there is no dearth of growth catalysts for Myriad,
margin pressure and reimbursement price cuts for its tests might
sour its momentum. We also remain watchful of the patent
litigation (to decide whether isolated human genes can be
patented), which might affect Myriad's patent landscape for its
flagship product. The decision is anticipated in Jun 2013.
Accordingly, the stock carries a Zacks Rank #3 (Hold). Other
medical stocks that warrant a look are
), both carrying Zacks Rank #1 (Strong Buy).