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Myriad Genetics' Elevate 2020 Plan Holds Promise Amid Issues

Zacks Equity Research

On Jul 1, we issued an updated research report on Myriad Genetics, Inc. MYGN. The stock carries a Zacks Rank #4 (Sell).

Lately, Myriad Genetics is observing growth in EndoPredict, Vectra, Hereditary Cancer and Prolaris testing revenues. The FDA approvals and encouraging test results buoy optimism on the stock. We are upbeat about the company's expectation to witness stable pricing in Hereditary Cancer testing through fiscal 2020. Moreover, the company seems well-positioned to deliver strong fiscal 2019 results on the back of solid Counsyl buyout synergies..

Fortifying its foothold internationally, the company has been receiving a satisfactory response to its BRACAnalysis CDx in Japan for addressing metastatic breast cancer. In this regard, it has secured a Japanese approval for BRACAnalysis CDx as the companion diagnostic in first line ovarian cancer with olaparib. The company is optimistic about the scope of this test in Japan considering that every year, roughly 22,000 cancer patients across the Land of the Rising Sun are eligible for companion diagnostic testing.

Myriad Genetics, Inc. Price

Myriad Genetics, Inc. Price

Myriad Genetics, Inc. price | Myriad Genetics, Inc. Quote

Myriad Genetics has so far made a significant progress with its five strategic imperatives that include transition and expansion of the hereditary cancer market, diversifying revenues by commercializing its new products, ramping up the company’s international contribution by investing in large countries, gaining reimbursement for the launched products, increasing international RNA kit revenues and enhancing profitability with Elevate 2020.

It is important to note here that this ‘Elevate 2020’ program — introduced by Myriad Genetics — targets $50 million in incremental operating income by fiscal 2020.

However, in the last reported quarter, the company suffered a decline in GeneSight and Vectra testing revenues, which were affected by an adverse third-quarter seasonality. This apart, escalating Research and development (R&D) expenses and selling, general and administrative (SG&A) expenses are inducing a massive operating margin contraction.

Shares of this Salt Lake City, UT-based molecular diagnostics provider have underperformed the broader industry over the past three months. The stock has declined 15.3% compared with the industry’s 3.1% dip.

Meanwhile, Myriad Genetics faces acute competition in the key BRACAnalysis market. The company expects the same to intensify due to the advancement of this technology. We believe, tough headwinds might reduce the prices of expensive tests provided by the company. This might in turn, impede the stock’s margin improvement.

Moreover, as the company receives a considerable portion of its revenues as well as pays part of its expenses in foreign currencies, it is exposed to unfavorable exchange rate fluctuations between foreign notes and the U.S. dollar.

Key Picks

A few better-ranked stocks in the broader medical space are DENTSPLY SIRONA XRAY, Penumbra PEN and CONMED Corp. CNMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY’s long-term earnings growth rate is expected to be 11.5%.

Penumbra’s long-term earnings growth rate is projected at 21.5%.

CONMED’s long-term earnings growth rate is estimated at 13.3%.

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