On Mar 19, we issued an updated research report on molecular diagnostics company Myriad Genetics Inc. MYGN.
Lately, this renowned developer of molecular diagnostic and companion diagnostic tests delivered second-quarter fiscal 2015 financial results, which beat the Zacks Consensus Estimate on both lines. However, results declined on both fronts on a year-over-year basis.
The company reported adjusted earnings per share (EPS) of 40 cents in the quarter, steering past the Zacks Consensus Estimate by a nickel. However, earnings deteriorated substantially from the year-ago quarter by 39.4%.
The year-on-year downside primarily reflected the absence of the positive impact of celebrity publicity on profitability that was observed in the second quarter of fiscal 2014; dilution from the recent Crescendo acquisition and lower margin associated with the process of converting Myriad's hereditary cancer franchise to myRisk.
On the other hand, revenues declined 9.6% year over year to $184.4 million, but closely beat the Zacks Consensus Estimate of $183 million.
The revenue decline was primarily attributable to the one-time revenue benefit that the company had gained from celebrity publicity in the second quarter of the prior year and the timing of certain pharmaceutical and clinical services contracts.
Meanwhile, during the reported quarter, Myriad achieved a major milestone with its BRACAnalysis CDx test becoming the first FDA-approved test to identify ovarian cancer patients who may benefit from the PARP inhibitor Lynparza. We believe, going forward, the company will be able to fetch higher profits banking on higher demand for this test.
Myriad is making excellent progress with respect to the conversion of its Hereditary Cancer business from single syndrome testing to the myRisk hereditary cancer test. The company ended the reported quarter with 53% of hereditary cancer revenues attributable to myRisk.
During the second quarter, Myriad also presented a health economic study on its Prolaris test, which demonstrated that Prolaris could save the healthcare system an amount of $6 billion over 10 years.
However, we are concerned about the guidance cut initiated by the company for fiscal 2015.
Despite compelling growth drivers, Myriad’s long-term success depends on the market conversion to its hereditary cancer panel test and sustainability of the robust top-line growth with entry of other players.
The stock currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Med-biomed/generic stocks such as Affymetrix Inc. AFFX, ANI Pharmaceuticals, Inc. ANIP and Cambrex Corp.. CBM are worth reckoning. All these three stocks hold a Zacks Rank #1 (Strong Buy).
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