Shares of Myriad Genetics, Inc. MYGN rose 3.7% to $35.16 following the closure of the company’s acquisition of Sividon Diagnostics on May 31. Notably, the buyout will lend Myriad Genetics access to Sividon Diagnostics’ proprietary multi-gene diagnostic test – EndoPredict – which can identify the aggressiveness of breast cancer on a molecular level.
In particular, Germany-based breast cancer prognostic startup – Sividion Diagnostics – is originally a spin-off from Siemens Healthcare Diagnostics and has been in a distribution partnership with Myriad for the past two years. Evidently, in Jan 2014, Sividion and Myriad entered into an exclusive co-marketing agreement that allowed the later to distribute and sell EndoPredict in markets outside the U.S.
The Sividon acquisition provided Myriad with global distribution rights of EndoPredict, with the later currently targeting the launch of this CE-marked test in the U.S. and broader reimbursement coverage globally.
EndoPredict is a second-generation prognostic test that helps physicians offer personalized treatment for breast cancer patients. Compared to the older multi-gene tests, EndoPredict detects the likelihood of late metastases (i.e. metastasis formation after more than five years) and can thus guide treatment decisions for chemotherapy as well as extended anti-hormonal therapy.
So far, EndoPredict has been studied in approximately 4,000 patients and utilized in over 13,000 patients, and has consistently demonstrated the best ability to predict which patients are at low risk for distant metastases. In a head-to-head study, the test has been shown to outperform the prognostic ability of the leading first generation test while providing definitive answers with no intermediate results.
Deal Details
This deal, entailing an upfront cash payment of €35 million ($39.1 million), allows for an additional amount of €15 million ($16.8 million) payable to Sividon in performance-based milestones. Interestingly, Myriad has planned to fund the entire transaction through cash in hand, which has been $286 million at the end of the third quarter of fiscal 2016.
Moreover, this test is currently CE Marked on the Siemens Versant instrument, which Myriad aims at transitioning to the Thermo Fisher QuantStudio platform as a key step in its newly initiated strategy of investing in major markets with kit-based tests.
Financial Outlook
Myriad expects the acquisition to be neutral to both revenue and earnings in fiscal 2017. The company believes that the global EndoPredict market – worth over $600 million – is currently less than 25% penetrated. Myriad expects greater reimbursement coverage for this test to garner higher sales for it.
With the growing number of breast cancer cases and the global cancer diagnostic market currently expected to grow at a CAGR of 7.6% to $168.6 billion by 2020; we expect the Sividon acquisition to open up more opportunities for Myriad in this market, driving its profits in the days ahead.
Zacks Rank & Key Picks
The company currently carries a Zacks Rank #3 (Hold). Better-ranked medical stocks are Baxter International Inc. BAX, Boston Scientific Corporation BSX and SurModics, Inc. SRDX. While Baxter sports a Zacks Rank #1 (Strong Buy), Boston Scientific and SurModics carry a Zacks Rank #2 (Buy).
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