The Zacks Analyst Blog Highlights: Myriad Genetics, Anika Therapeutics, Biogen Idec , Alexion Pharmaceuticals and Cabot Oil & Gas

Zacks


For Immediate Release

Chicago, IL – June 18, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Myriad Genetics Inc. (MYGN-Free Report), Anika Therapeutics Inc. (ANIK-Free Report), Biogen Idec Inc. (BIIB-Free Report), Alexion Pharmaceuticals, Inc. (ALXN-Free Report) and Cabot Oil & Gas Corporation (COG-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday’s Analyst Blog:

Myriad: End to Legal Battle Over Patents

The much hyped Supreme Court ruling regarding legal claims that challenge its patent landscape is out for Myriad Genetics Inc. (MYGN-Free Report) and it seems like a halfway triumph for this molecular diagnostic company.

The Issue

In Nov 2012, Myriad revealed that the U.S. Supreme Court would review the decision of U.S. Court of Appeals for the Federal Circuit. It applies to the company’s composition of matter claims that isolated DNA of the BRCA1 and BRCA2 genes are patentable. Earlier, in Apr 2012, U.S. Court of Appeals for the Federal Circuit declared that Myriad’s composition of matter claims covering isolated DNA of the BRCA 1 and BRCA 2 genes were patentable.

Following the Supreme Court review, earlier ruling by the Federal Circuit Court of Appeals to declare the patentability of Myriad’s composition of matter claims covering isolated DNA of the BRCA 1 and BRCA 2 genes were subject to legal scrutiny once again. The legal claims pertain to the company’s flagship Bracanalysis test. The decision was anticipated in Jun 2013.

The Verdict

While the apex court upheld Myriad’s patent claims on complementary DNA or cDNA, the other five claims from the company to cover isolated DNA were declared not eligible for patents by the U.S. Supreme Court. According to the Court, most of Myriad’s unchallenged claims pertain to ‘method claims’ applying knowledge about BRCA 1 and BRCA 2 gene. This implies patent eligibility for the company’s ‘method claims’.

Subsequent to the ruling, Myriad currently has over 500 valid and enforceable claims in 24 various patents for its Bracanalysis test. This still reflects a solid patent landscape for the company’s primary revenue driver.

The Implications

The landmark Supreme Court ruling declared that isolated human genes are not patentable. This represents a downside for Myriad. As a result, the stock tanked 13.81% (or $4.42) on Jun 14 following the much awaited decision.

This is likely to spur competition for the company as its leadership in the market stands challenged. The decision also provides headway for other companies in the market which Myriad served with its exclusive Bracanalysis test. With the entry of new players, imminent price competition is another cause of concern.

Nonetheless, cDNA or synthesized DNA was declared patentable. The Supreme Court also upheld the patent eligibility of the company’s method claims. As most of Myriad’s patent claims were upheld, the company still has a strong patent protection for its Bracanalysis test.

We wait to see the impact of the Supreme Court ruling on Myriad’s growth profile going forward. Until then, the stock carries a Zacks Rank #1 (Strong Buy) on the back of positive estimate revisions for the ongoing and next fiscal and stellar earnings performance over the past few quarters.

Other Zacks Rank #1 stocks that warrant a look are Anika Therapeutics Inc. (ANIK
-Free Report) and Biogen Idec Inc. (BIIB-Free Report). Alexion Pharmaceuticals, Inc. (ALXN-Free Report), carrying a Zacks Rank #2 (Buy) is also likely to do well.

Cabot Downgraded to Strong Sell

On Jun 15, Zacks Investment Research downgraded independent oil and gas exploration and production (E&P) company, Cabot Oil & Gas Corporation (COG-Free Report) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Cabot witnessed sharp downward estimate revisions after reporting weak first-quarter 2013 results. In fact, the company has delivered negative earnings surprises in 2 of the last 4 quarters with an average miss of 15.95%.

On Apr 24, 2013, Cabot reported earnings per share, excluding special items, of 20 cents, missing the Zacks Consensus Estimate of 25 cents. The underperformance resulted from lower realized natural gas prices.

Cabot’s 2013 capital expenditure guidance – at $950–$1,025 million – add to the negative sentiment, as we do not expect this rate of spending to be matched by increased cash flows at the current gas price level. Accordingly, we apprehend a free cash flow deficit in 2013.   

Moreover, we remain worried about volatile natural gas fundamentals and Cabot’s high exposure to the commodity. Unless the outlook for natural gas prices improves, we do not see any significant price upside in Cabot shares.

A combination of all these factors weighed on the earnings estimates for Cabot in the last 60 days. The Zacks Consensus Estimate for the second quarter of 2013 has gone down by 19.35% to 25 cents per share while it dropped 10.87% to $1.23 per share for 2013.

 

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