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Acquisition and Earnings Beat Lift Myriad Shares

Zacks Equity Research

Shares of Myriad Genetics Inc. (MYGN) climbed 15.12% to $31.29 ever since the company announced its decision to enter the huge potential autoimmune diagnostic market through the acquisition of Crescendo Bioscience. A healthy second quarter fiscal 2014 result, declared on the same day, also contributed to the gain.

Myriad announced the acquisition of Crescendo Bioscience – an autoimmune diagnostics company. Myriad has agreed to pay $270 million for the transaction, $25 million of which will repay Crescendo's outstanding loans.

This agreement seems to be beneficial for Myriad from multiple aspects. The acquisition will allow the company to expand its portfolio of diagnostic tests beyond breast cancer and enter the autoimmune diagnostic market. According to Myriad, this acquisition will enable the company to access Crescendo’s core product Vectra DA, which has a $3 billion global market opportunity.

This acquisition will also strengthen the foothold of Myriad as a leader in the protein diagnostic market because the technology and products of Crescendo will help to improvise the existing product pipeline at Myriad and complement the protein expertise at Myriad RBM.

Myriad is optimistic about the acquisition and expects this to create fresh demand for Crescendo’s products globally. It is expecting the deal to generate significant operating profits in the future. Fiscal 2016 onwards, the acquisition is also expected to be accretive to earnings.

Solid Quarterly Numbers

Myriad also exited the second quarter of fiscal 2014 on an encouraging note.  It reported earnings per share of 66 cents, up a stupendous 57.1% year over year. It also surpassed the Zacks Consensus Estimate by a remarkable 40.4%. The top line also beat the Zacks Consensus Estimate of $178 million and increased 37% to $204.1 million.

Following the recent developments, an enviable portfolio of products and an attractive pipeline, Myriad raised its revenue and earnings outlook for fiscal 2014. It expects revenues in the range of $740–$750 million, higher than the prior forecast of $700–$715 million implying annualized growth of 21% to 22%. The current Zacks Consensus Estimate of $708 million remains far below the company’s guidance.

Myriad currently predicts its earnings to vary between $2.09 and $2.12 per share, higher than the previously guided range of $1.92 and $1.97. The revised outlook reflects growth of 18% to 20%. However, the Zacks Consensus Estimate for the same is pegged at $1.97 per share, which falls below the guided range.

 The higher-than-expected guidance and the acquisition of Crescendo are deemed to be encouraging for Myriad.

Currently, the stock carries a Zacks Rank #3 (Hold). Better-placed stocks that are worth a look include Actelion Ltd. (ALIOF), Affymetrix Inc. (AFFX) and Biogen Idec Inc. (BIIB), each sporting a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on ALIOF
Read the Full Research Report on AFFX
Read the Full Research Report on MYGN
Read the Full Research Report on BIIB

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