Myriad Genetics (MYGN) reported an EPS of 29 cents for the first quarter of fiscal 2012, beating both the Zacks Consensus Estimate of 27 cents and the year-ago quarter’s EPS of 24 cents. Revenues were $110.5 million, up 20% year over year and higher than the Zacks Consensus Estimate of $107 million.
Myriad’s two businesses – Molecular diagnostic testing and Companion diagnostic services – recorded revenues of $104 million (up 13% year over year) and $6.5 million, respectively. The company acquired the Companion diagnostic business following the acquisition of Rules-Based Medicine in May 2011. Molecular diagnostic testing revenue is derived from both Oncology (up 12% to $74.2 million) and Women’s Health (up 15% to $29.8 million).
While Myriad markets several molecular diagnostic products, the company's flagship product is Bracanalysis (representing 81% of total revenues during the quarter), which studies BRCA1 and BRCA2 genes for assessing woman's risk of developing hereditary breast and ovarian cancers. This test recorded a 10.9% jump in revenues to $89.5 million. Moreover, revenues derived from Colaris and Colaris AP, which assess a patient's risk of developing hereditary colorectal and uterine cancers, increased 35% to $9.6 million.
Gross profit increased 18.9% year over year to $96.1 million. Gross margin, however, declined 100 basis points (bps) to 87%. Operating expenses increased by 20.7% during the quarter to $54.6 million due to a 16.8% rise in selling, general and administrative expenses ($46.1 million) while research and development (R&D) expenses increased 47.6% ($8.5 million). Consequently, operating margin declined 120 basis points to 37.5%.
Myriad exited the quarter with cash, cash equivalents and marketable securities of $401.7 million, down from $417.3 million at the end of fiscal 2011. The company repurchased 1.7 million shares during the quarter. The consistent share buyback program had a favorable impact on the company’s bottom line as shares outstanding declined 8% year over year.
Guidance
Myriad reiterated its guidance for fiscal 2012. The company expects to report revenues of $445–$465 million resulting in an EPS of $1.20–$1.25. While the current Zacks Consensus Estimate of $457 million in revenues is within the company’s guidance, the Zacks Consensus Estimate of $1.23 for earnings lies near the higher end of the company’s expectation. Molecular diagnostic testing and Companion diagnostic services are expected to record revenues of $421–$439 million and $24–$26 million, respectively.
Recommendation
We consider Myriad’s Bracanalysis as a valuable asset for top-line growth as it has the potential to tap a widely unexplored market. We are encouraged by the company’s various initiatives to achieve this objective. The acquisition of RMB will further enable the company to diversify its product pipeline and strengthen its foothold in the Companion diagnostics market. Moreover, with a strong cash balance, the company is well placed to expand its product portfolio and target new territories. However, operating expenses are on rise due to the company’s focus on international expansion and product development. As a result, the company’s margin remains under pressure, although the bottom line should benefit from the repurchase program. The company also faces stiff competition from players such as Genomic Health (GHDX), Qiagen (QGEN), among others.
We are currently Neutral on Myriad, which also corresponds to a Zacks #3 Rank (Hold) in the short term.
GENOMIC HEALTH (GHDX): Free Stock Analysis Report
MYRIAD GENETICS (MYGN): Free Stock Analysis Report
QIAGEN NV (QGEN): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment