Myriad Reverts to Neutral

Bracanalysis, Myriad’s (MYGN - Analyst Report) flagship product, has been recording robust growth over the past few quarters on the back of increasing penetration in both Oncology and Women’s Health. We are also impressed to note that the company is on track to generate revenues from Europe as early as January 2012.

Development of the laboratory in Munich, Germany is complete with work on equipping and staffing currently in progress. Myriad has set a target of generating $50 million in annual revenues within the next five years.

Myriad is focused on its research and development initiatives to deliver new molecular diagnostic products. The company has decided to pursue internal developments, in-licensing of technologies and acquisitions to expand its business. Myriad entered into a deal with Crescendo Biosciences which in due course can complement its portfolio by adding autoimmune and inflammatory disease products. Over the recent past, the company has acquired Rules-Based Medicine (“RBM”) and in-licensed technologies from Chronix Biomedical and Melanoma Diagnostics. At present, the company has 13 products under various stages of development. The RMB deal would expand Myriad’s pipeline including tests for anti-psychotic drug safety, hepatitis C drug response and detection of kidney damage in diabetes patients.

In breast cancer, Myriad is undertaking several strategies to expand the targeted patient population. Apart from increasing penetration with triple negative breast cancer patients, the company is focusing on carcinoma in situ (CIS), a non-invasive form of breast cancer that occurs in almost 62,000 patients each year.

Viewing the huge untapped potential in the CIS market, Genomic Health (GHDX - Analyst Report), another player in the diagnostics space, plans to launch Oncotype DX DCIS Score to physicians on December 28^th. This will enable physicians to better assess the risk of a particular patient, facilitating the selection of the appropriate treatment option.

However, European expansion and pipeline development have pushed up operating expenses. This will put margins under pressure. Moreover, the current uncertainties in Europe might come in the way of Myriad’s expansion plans. Although we are optimistic about the company over the long term, given the current uncertainties, we are reverting to a Neutral recommendation.

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