With the reaffirmation of an earlier ruling from the U.S. Court of Appeals for the Federal Circuit, a major breakthrough took place for molecular diagnostic company Myriad Genetics, Inc. (MYGN). The earlier ruling given on July 29, 2011 confirmed Myriad’s right to patent two isolated human genes – BRCA 1 and BRCA 2 – directly related to breast and ovarian cancer. However, the Supreme Court asked for a reconsideration of the whole matter.
The lawsuit was initiated on May 12, 2009 by the Association for Molecular Pathology, et al. (Plaintiffs) in the U.S. District Court for the Southern District of New York with the allegation that Myriad’s patents on BRCA 1 and BRCA 2 human genes were invalid and unlawful. Currently, Myriad has exclusive license rights to 525 claims in 24 issued U.S. patents related to Bracanalysis testing.
Bracanalysis is Myriad’s flagship product, contributing 81.7% of total revenue. This test provides a comprehensive analysis of BRCA 1 and BRCA 2 genes for assessing a woman’s risk of hereditary breast and ovarian cancers. A woman testing positive for a deleterious mutation with the Bracanalysis test has an 82% risk of developing breast cancer and a 44% risk of developing ovarian cancer during her lifetime. The test is currently priced at $3,340.
However, the company noted that 95% of the U.S. patients requiring Bracanalysis can obtain coverage through private insurance, Medicare, Medicaid or Myriad’s Financial Assistance Program. For the past 3 years, more than 5,000 patients have benefitted from this assistance program.
In the fourth quarter of 2012, revenues from Bracanalysis increased 17%. Foreseeing significant growth opportunity in the Women’s Health market for Bracanalysis, Myriad is currently focusing on penetrating the segments of ovarian cancer, carcinoma in situ and triple negative breast cancer indications.
We consider Myriad’s Bracanalysis system a valuable asset for top-line growth as it has the potential to tap a widely unexplored market. The company considers the oncology market to be huge, with Bracanalysis having penetrated about 50% of the cancer segment. As a result, the favourable second ruling by the U.S. federal appeals court may be considered a positive development for Myriad. The company is currently undertaking various strategies to increase both the market size and penetration level of Bracanalysis. During fiscal 2012, the company entered into agreements with Cephalon, a subsidiary of Teva Pharmaceutical (TEVA) and Pharma Mar to conduct companion diagnostic testing for their clinical trials.
We currently have a Neutral recommendation on Myriad. The stock retains a Zacks #3 Rank (Hold in the short term).
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