Myriad Genetics, Inc. (MYGN) has so far made significant progress with its five strategic imperatives that include transition and expansion of the hereditary cancer market, diversify revenues by commercializing its new products, increase the company’s international contribution by investing in large countries, gaining reimbursement for new products, increasing international RNA kit revenue and enhancing profitability with Elevate 2020.
Myriad Genetics has a market cap of $1.84 billion. The company has an expected earnings growth rate of 11.6% for the next five years.
Over the past three months, this Salt Lake City, UT-based company’s share price has underperformed its industry The stock has lost 22.2% in comparison with the industry’s 8.5% decrease and the S&P 500’s 1.9% rise.
Riding on solid prospects, this Zacks Rank #3 (Hold) stock is worth holding on to, for now.
What’s Working in Favor of the Stock?
Robust Performance by New Products: Myriad Genetics recorded strong testing volumes from new products, growing to 76% of the total test volumes in third-quarter fiscal 2019. The company witnessed a 19% year-over-year growth in GeneSight testing volumes in the last reported quarter. It also saw a double-digit year-over-year rise in EndoPredict testing volumes.
Increased Focus on International Revenues: Consolidating its foothold internationally, the company has received Japanese approval for BRACAnalysis CDx as the companion diagnostic in first-line ovarian cancer with olaparib. Further, Myriad Genetics announced the inclusion of EndoPredict by the United Kingdom’s National Institute for Health and Care Excellence (NICE) in its recommendations.
Impressive Reimbursement Update: During the fiscal third quarter, Myriad Genetics witnessed continued progress from commercial payers’ ongoing GeneSight technical assessments. According to the company, its GeneSight and Vectra coverage saw positive momentum with the announcement of GeneSight coverage by Kroger.
Elevate 2020 Program Buoys Optimism: Myriad Genetics introduced an ‘Elevate 2020’ program, targeting $50 million in incremental operating income by fiscal 2020. On solid execution of the program, during the third quarter of fiscal 2019, the company’s total organic expenses reduced by $4.4 million, despite double-digit organic test volume growth.
On the flip side, there are a few factors deterring the growth of the stock.
Foreign Exchange Headwinds: Myriad receives a considerable portion of its revenues and pays a part of its expenses in foreign currencies. As a result, the company remains at risk of exchange rate fluctuations between foreign currencies and the U.S. dollar.
Escalating Operating Expenses:In the last reported quarter, R&D expenses rose 16.2% year over year along with a 30.3% increase in SG&A expenses. According to the Myriad genetics, mounting expenses were the results of the integration of Counsyl (a genetic screening company) acquisition.
Tough Market Competition:With the entry of new players, price competition is another cause of concern. Per management, Myriad is currently facing competition in its BRACAnalysis market.
Adverse Impact of New Regulations: CMS has lately adopted a new coding set for diagnosis, commonly known as ICD-10-CM, which significantly expands the current coding set. Myriad fears that it may have to incur considerable expense in implementing ICD-10-CM, and, in failure of its adequate implementation, the company’s business might suffer a setback.
Stocks to Consider
A few better-ranked stocks in the broader medical space are Masimo Corporation MASI, CONMED CNMD, DENTSPLY SIRONA XRAY, each currently carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Masimo’s long-term earnings growth rate is projected at 16.1%
CONMED’s long-term earnings growth rate is expected at 13.3%.
DENTSPLY SIRONA’s long-term earnings growth rate is predicted at 11.5%.
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