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Myriad Genetics, Inc. Posted By : admin
Posted On : Sunday, February 01, 2015
Company Name : Myriad Genetics, Inc. Investment Range : Long
Ticker : NASDAQ:MYGN M.Cap.Range : Mid-cap
Country : US Stock Price : 37.42
Description :        

Business Description

Myriad Genetics, Inc. (Myriad) is a molecular diagnostic company. The Company is focused on developing and marketing predictive medicine, personalized medicine and prognostic medicine tests. It performs all of its molecular diagnostic testing and analysis in its own reference laboratories. These technologies include the cornerstone technologies of biomarker discovery, high-throughput deoxyribo nucleic acid (DNA) sequencing, ribo nucleic acid (RNA) expression and multiplex protein analysis. The Company uses this information to guide the development of new molecular diagnostic tests that are designed to assess an individual's risk for developing disease later in life (predictive medicine), identify a patient's likelihood of responding to drug therapy and guide a patient's dosing to ensure optimal treatment (personalized medicine), or assess a patient's risk of disease progression and disease recurrence (prognostic medicine).

Company offers 13 commercial molecular diagnostic tests of which 7 are predictive, 3 are personalized medicine and 2 are prognostic medicine tests and 1 diagnostic medicine test. They currently market product through distributors in LatAm, Middle East, Asia & Africa. Company has direct presence globally through 16 direct subsidiaries and 44 distributors globally.

Company targets three groups (1) Patients with breast, ovarian, uterine & colorectal cancer (2) survivors of these cancer (3) patients at high risk for these cancers. Earlier company used to sell different cancer packages but now they have clubbed everything under one name i.e. myRisk. myRisk has about 87% gross margins.

Positives

•Largest Molecular diagnostics laboratory

•Company's BRAC Analysis tests are reimbursed by Medicare & private payers

• Company was early introducer of such test in 1996 and had monopoly in these predictive tests

• Global leader in hereditary cancer risk assessment

• Company switching to next generation technology under myRisk brand

• Company has a higher accuracy than any other player in the market

• Fastest turnaround time for the company of about 7days for BRAC and 2-3 weeks for myRisk

• Company is planning for product diversification and international expansion that could diversify their revenues

• Historical growth rate and cash flow has been strong

Negatives

• Technology could change rapidly and thus may make company's products obsolete

•Over reliance on single technology since last 18 years

• Reimbursements coming down will affect their revenues

• Company's patents were invalidated by Supreme Court in June - 2013

• Company may be at risk of losing market share

• There could be pricing pressure on the company as others are able to do the test at much lower cost

• Hereditary breast & ovarian cancer comprises only about 5%-10% of total cancer patients

• Breat & Ovarian market is good but other cancer markets are highly competitive

• Company to get into other tests which are low margin in nature

• No clarity on future growth of the company

Industry Overview

The company’s total addressable market is now around $18bn.

Competitors

LabCorp (public), Quest (public), Ambry, Pathway Genomics, Fulgent, Gene Dx, Ethigen, Univ. of Washington, Illumina (public), life technologies, Qiagen

Earnings Growth Driver

• Negative growth driver

       • Falling test prices as competition is picking up after court order

       • Market share loss

       • Fall in reimbursement rates could affect revenues

• Positive Growth driver

       • Increasing international presence

       • Increase in number of test performed

       • Increased awareness about tests

       • Increasing penetration

       • Addressing new diseases

M&A

• Acquired Rules-Based Medicine Inc. (RBM) in May 2011 for $80mm in Cash

• Acquired Crescendo in Feb 2014 for $270mm in Cash

Valuations

Looks reasonable assuming company will turn around

Elevator Pitch

The company has strong technology leadership with immense future potential. But at the same time it also faces intense competition.

Company is market leader in Predictive & Personalized Medicine care. Currently earning depressed because of transitioning cost and under-utilized potential of acquired business. Expecting the company will turn around, the valuation looks cheap as compared to many of its competitors.

 
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