NEW YORK (AP) -- Shares of Myriad Genetics rebounded Tuesday after the company said a Medicare contractor will correct a pricing error on its genetic tests.
THE SPARK: On Monday the Centers for Medicare & Medicaid Service disclosed reimbursement data for Myriad's BRACAnalysis test, which detects genes linked to an increased risk of breast and ovarian cancer. The data showed that the maximum payment from Noridian Healthcare Solutions of Utah was much lower than expected.
Noridian, a Medicare Administrative Contractor, determines reimbursement rates for several states. It is particularly important for Myriad because Myriad is based in Utah and its tests are performed there.
Late Monday Myriad said Noridian had made a clerical error and will correct the price to $2,795.09 from $1,449.01. That matches a limit from other regions. The company said it may take a week or two for Medicare to reflect the correction.
THE BIG PICTURE: Myriad Genetics Inc.'s BRACAnalysis test confirms the presence of two gene mutations that are responsible for some hereditary breast and ovarian cancers. The Salt Lake City company plans to launch three new tests this year.
Myriad has sued two competitors to stop them from selling a genetic test that competes with BRACAnalysis. Those companies launched their tests in June following a Supreme Court ruling that companies cannot patent genes that are naturally found in the body, a ruling that analysts say will open the door for competing tests and additional scientific research. The court said synthetically created genetic material, called complementary or cDNA, can be patented.
THE ANALYSIS: Cowen and Co. analyst Doug Schenkel said Myriad only does about 10 percent of its business with Medicare, but if Noridian were cutting its rates, private health care companies might have followed suit and further diminished the company's revenue.
"Chances are this was just a weird 12-hour period where you had some bad information out there that came out in a fairly unique way," he said. "This process ended exactly where we thought we were going to end."
Schenkel rates the stock "Market Perform" with a $31 price target.
SHARE ACTION: Myriad stock rose $2.06, or 8.8 percent, to $25.56 in afternoon trading. The shares dropped 9.3 percent on Monday.