We have upgraded Myriad Genetics (MYGN) to Outperform with a target price of $24.00.
Myriad reported another strong quarter with a 20% jump in total revenues to $110.5 million based on a 13% growth in Molecular diagnostics revenue to $104 million. While pricing contributed 1.5% to the growth, the remaining 11.5% came from an increase in sample volumes. Revenues derived from Oncology and Woman’s Health increased 12% (to $74.2 million) and 15% (to $29.8 million), respectively.
Moreover, Myriad has progressed well with its international expansion and expects to generate revenues from Europe as early as January 2012. Development of a laboratory in Munich, Germany is complete with progress going on for equipping and staffing it. Besides, the company is on track with its laboratory accredition goals and expects the lab to be operational by December end. The company has located its headquarters, management and administrative team in Switzerland and plans to spread its sales, marketing and clinical organizations across other regions to begin aggressive market development. While reimbursement for Bracanalysis, Colaris and Colaris AP have already been received, Myriad is working to receive reimbursemnet for Prolaris.
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. Recently, Myriad entered into a deal with Crescendo Biosciences which in due course can complement its portfolio by adding autoimmune and inflammatory disease products.
During the quarter, the company repurchased shares for $37 million and also provided a $25 million loan to Crescendo Bioscience. As a result of the consistent share buyback program, the outstanding share count declined 8.1% year over year to 87 million during the quarter, thereby having a positive bottom-line impact.
With a strong balance sheet, Myriad is well placed to expand its product portfolio, targeting new territories and launching new products. However, the company witnesses competition from players such as Genomic Health (GHDX), Qiagen (QGEN), among others. Moreover, the current economic uncertainty might curtail patient visits to physicians, thus affecting the company. Again, a bleak Europe might offer blockages to Myriad’s expansion plans.
Nonetheless, based on the strong growth potential of the company, we have upgraded the stock. The stock retains a Zacks #2 Rank (Buy) in the short term.
