Myriad Genetics, Inc. MYGN recently announced a definitive agreement to buy Counsyl — a leader in expanded carrier and non-invasive prenatal screening. Notably, this buyout will cost Myriad Genetics around $375 million. After meeting certain customary closing conditions and receiving regulatory approvals, the transaction is expected to close in first-quarter fiscal 2019.
Financial Details of the Deal
Myriad Genetics intends to use a combination of cash on hand, an existing revolving credit facility and the issuance of common stock to pay $375 million for the buyout.
Buyout Integration and Expected Synergy Benefits
Myriad Genetics plans to retain Counsyl as a wholly-owned subsidiary, post the successful completion of the acquisition. Further, integrating Counsyl’s reproductive testing products with its hereditary cancer tests, Myriad Genetics plans to solidify its position as a leading women's health genetic testing company. Per management, the acquisition deal will help the existing customer base for Counsyl's reproductive tests to expand by almost three-fold.
Further, we encouragingly note that Counsyl’s reproductive genetic tests are currently being covered by commercial insurance in the United States, with more room for expanded coverage for the Foresight (expanded carrier screening) and Prelude (non-invasive prenatal screening) tests in the near term.
Market Opportunities Post Buyout
Per data provided by the company, we believe that Myriad Genetics’ decision to foray into the high-potential reproductive testing market is strategically aligned. Per the company, roughly 900,000 carrier screening tests and around 1.3 million non-invasive prenatal screening tests are estimated to be carried out in the United States during fiscal 2018.
Per Myriad Genetics, these markets are expected to reach a worth of more than $1.5 billion in fiscal 2023 with around 3.5 million reproductive genetic tests performed in the United States.
Our Take on the Deal
Myriad Genetics exited the last reported quarter on a promising note. The company observed strong revenue growth in GeneSight, Vectra DA and Prolaris tests. Also, Hereditary Cancer volume expansion was impressive. We are upbeat about the company witnessing growth in new product volume along with the success of its Elevate 2020 program. Further, the raised FY18 guidance instills confidence in the stock.
Considering Myriad Genetics’ strong fundamentals and business prospects, this buyout is expected to help the company cash in on bountiful opportunities in the high-potential reproductive testing market.
Share Price Performance
Over the past three months, shares of Myriad Genetics have outperformed its industry. Per the latest price movement, the stock has gained 10.6% against the industry’s decline of 7.1%.
Zacks Rank & Stocks to Consider
Myriad Genetics currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical sector are Intuitive Surgical ISRG, Illumina, Inc ILMN and Amedisys, Inc. AMED. While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Amedisys carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical has an expected long-term earnings growth rate of 12.1%.
Illumina expects long-term earnings growth of 20%.
Amedisys has an expected long-term earnings growth rate of 17.5%.
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