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Myriad Genetics: Q4 Hit by Low Test Revenues, Gross Margin

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On Aug 16, we issued an updated research report on Salt Lake City, UT-based molecular diagnostics provider, Myriad Genetics, Inc. (MYGN - Free Report) . The company currently carries a Zacks Rank #4 (Sell).

Myriad ended fiscal 2016 on a disappointing note, with its fourth-quarter numbers missing the Zacks Consensus Estimate on both fronts. The revenue decline in hereditary cancer testing business, which missed management’s expectations, was the major deterrent in the fourth quarter.

Moreover, CMS has lately adopted a new coding set for diagnoses, commonly known as ICD-10-CM, which significantly expands the current coding set. Myriad fears that the company may have to incur considerable expense in implementing ICD-10-CM, and, in failure of its adequate implementation, Myriad’s business might suffer a setback.

The declining gross margin, on the account of more revenue from lower margin segments as well as price reductions associated with the full implementation of long-term contracts, also raised concerns.

On the brighter note, despite witnessing a decline in its hereditary cancer testing revenues, management is currently pursuing a number of initiatives to stabilize and grow this business segment. To do this, the company submitted data to NCCN on expanding indications in breast cancer and pancreatic cancer.

During the fiscal fourth quarter, Myriad successfully completed the conversion to myRisk among its targeted physicians and have made gene panel standard of care within the marketplace. Following this transition, Myriad has more than doubled its Variant Classification database and introduced innovative new algorithmic methodologies for Variant Classification that will ensure Myriad's tests remain the gold standard for accuracy in the years to come.

In terms of reimbursement, Myriad signed a preferred provider agreement with BMI Healthcare in the U.S., U.K.,which will offer coverage to Myriad's complete testing portfolio including EndoPredict, Prolaris, tumor BRACAnalysis and hereditary cancer testing, including myRisk and all legacy tests.

With respect to the EndoPredict test, the company has already achieved ASCO guidelines for it, which has led to coverage with Aetna and indications of coverage for Medicare. Going forward, Myriad is actively reaching out to additional payers and will announce its U.S. commercialization plans for this test consequent to its launch in the second half of fiscal 2017.

Stocks to Consider

Some better-ranked medical stocks worth mentioning are ANI Pharmaceuticals, Inc. (ANIP - Free Report) , Anika Therapeutics Inc. (ANIK - Free Report) and Heska Corporation . All these stocks sport a Zacks Rank #1 (Strong Buy).

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