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Myriad Genetics (NASDAQ:MYGN) is a $2.64 billion mid-cap molecular diagnostics company that specializes in analyzing genes. The company analyzes genes to assess a person's risk for developing disease later in life. This analysis also determines a patient's likelihood of responding to specific drugs and to determine optimal dosing. It also assesses a patient's risk of disease progression and reoccurrence. Myriad owns the patents for these innovative and life-saving diagnostics, giving the company a moat around its business.

Actress Angelina Jolie recently brought attention to Myriad when she wrote about having her double-mastectomy in the New York Times. Myriad's gene diagnostics determined that Jolie carries a faulty gene, BRCA1, which increases her risk of developing breast and ovarian cancer. She decided to have a preventive double-mastectomy to reduce her risk of developing breast cancer. Jolie wrote that her chances of developing breast cancer were reduced from 87% to less than 5% as a result of the surgery. Myriad's BRACAnalysis was used to diagnose Jolie.

Myriad also has an innovative diagnostic test for men. The company's Prolaris test is the first test that predicts a man's probability of surviving his prostate cancer. Currently, 85% of men diagnosed with prostate cancer will have aggressive therapy in the form of removal or radiation. However, only 20% - 30% of those men actually need aggressive therapy. Polaris makes it possible for many men to avoid unnecessary aggressive therapy. A clinical study found that 90% of men with a low Prolaris score survived their cancer for ten years without any treatment. On the other hand, those with a high Prolaris score need the aggressive therapy as only 22% of those men survive.

The company also offers the following products: Melaris to diagnose melanoma (skin cancer), Colaris to diagnose colon cancer, Panexia for pancreatic cancer testing, OnDose for dose optimization, TheraGuide for managing chemo toxicity, and Prezeon for PTEN testing.

Future Products

Myriad also has a few promising products in its pipeline. One product, known as myRisk Hereditary Cancer, is expected to revolutionize hereditary cancer testing. myRisk is designed to solve the following two problems facing physicians: what gene should be ordered for testing and how should patients be managed when they have gene mutations. This product is also good for answering the following four patient's questions: What is my risk of having a disease? Do I have a disease? How aggressive is my disease? How do I treat my disease? This product is expected to phase out Myriad's single gene products upon transitioning to myRisk by the summer of 2015.

Melapath is a product that is expected to be launched later in 2013. Since 14% of all skin biopsies are classified as indeterminate, Melapath is designed to assist physicians in determining whether the result is benign nevi or malignant melanoma. This will help save many lives as over 275,000 patients are affected annually.

Next fiscal year, Myriad is planning to launch a lung cancer prognostic test. This will help to determine what therapy is best and how to treat the disease. Currently, trial and error is used to prescribe medicine and only about 30% of cancer patients benefit from the chemotherapy that is given to them. This is a groundbreaking test to make diagnosing and treatment of lung cancer much more effective.

Myriad is expected to launch an HRD breast cancer test in 2015. Rather than only looking at two genes that may cause breast cancer, HRD testing looks at a more complete pathway that strongly predicts which primary tumors will respond to platinum-based combination therapy in patients with triple-negative breast cancer. Triple negative breast cancer is an aggressive disease and describes tumors that lack an estrogen receptor, progesterone receptor, and HER2. This is another life-saving test that Myriad will offer in the future to benefit patients, physicians, and investors.

Myriad is also in the process of seeking strategic partnering and licensing agreements. The company is focused on the following medical fields: Oncology, Preventive Care, Urology, Dermatology, Autoimmune disorders, and Neuroscience diseases. Currently the company has collaborations with 20 pharmaceutical companies. Myriad has eight collaborations in Phase II clinical trials, three drugs in Phase III, and three drugs that are nearing post-marketing studies.

The Risks

Myriad is involved in a Supreme Court decision (Association for Molecular Biology vs. Myriad Genetics) to decide whether human genes are patentable. Currently, Myriad has patents directed to the human genes BRCA1 and BRCA2, which are correlated to the risk of developing breast or ovarian cancer. Myriad argues that human invention was involved to determine where the gene begins and ends. The company says that a gene is like a baseball bat isolated from a tree. The wood is found in nature, but humans determine where it begins and ends to make a bat. If Myriad loses this case, it could have a negative impact on the stock. Personally, I like Myriad's comparison and think that the company has a good chance of winning the case.

Fundamentals

Myriad is currently fairly valued with a forward P/E of 17.91, a PEG of 1.4, and a price to book ratio of 3.98. For the past twelve months, the company brought in $152.6 million in operating cash flow and $143 million in free cash flow. It has $336 million in total cash and zero debt. The company has 8.4 times more current assets than current liabilities. Myriad is expected to grow earnings annually at 14.25% for the next five years. This is higher than the market's expected earnings growth of about 9.5% and the industry's expected growth of 13%.

Conclusion

My thoughts are that the company will perform well over the long-term as an investment. Myriad is a serious disruptor in the field of medicine, giving patients and physicians valuable information that will save many lives. As medicine for cancer advances, Myriad's advances in diagnostics will help individually match patients with the proper treatment. With its above average expected growth, the stock should outperform the market over the next five years. Investors can feel good knowing that their investment money is going to a company that helps save lives.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Myriad Genetics: Disruptive Products For Cancer Diagnostics