Myriad's Revenue Growth Has Stabilized

| About: Myriad Genetics, (MYGN)

Recently, we reaffirmed our Neutral recommendation on Myriad Genetics (NASDAQ:MYGN) with a target price of $25.00

Myriad reported another strong quarter with a 13% growth in revenues to $102.4 million. While pricing contributed 5% to the growth, the remaining 8% came from an increase in sample volumes. Revenues derived from Oncology and Woman's Health increased 13.5% (to $73 million) and 11% (to $29.3 million), respectively. It is also encouraging to note that the company has experienced stability in patient visits to Ob/Gyn offices.

Myriad is confident of maintaining the momentum going ahead through product portfolio expansion, targeting the companion diagnostic market and expansion into Europe. To establish Bracanalysis as a companion diagnostic for PARP inhibitors, Myriad has also got into agreements with BioMarin Pharmaceuticals (NASDAQ:BMRN), Abbott Laboratories (NYSE:ABT) and AstraZeneca (NYSE:AZN).

The European molecular diagnostics market size is about 75% of the U.S. market. Moreover, many U.S. based diagnostic companies derive 30%−50% of overall revenue and profit from international operations. Based on these facts, Myriad is looking at establishing a European presence by early 2012. The company expects to initially target opportunities in Germany, France, Italy, Spain and Switzerland. Once the company has succeded with regard to European business, it plans to target the rapidly growing markets of Asia Pacific, Latin America, Eastern Europe and the Middle East in the 2014-2016 timeframe.

In April 2011, Myriad decided to acquire Texas based, privately-held Rules-Based Medicine (RBM) for $80 million in cash. This deal would expand Myriad's portfolio to take into its ambit psychiatric disorders, infectious diseases and inflammatory diseases. According to Myriad, apart from strengthening its strong oncology pipeline it would also have access to RBM's pipeline that includes tests for anti-psychotic drug safety, hepatitis C drug response and detection of kidney damage in diabetes patients. Based on a strong third-quarter and the proposed acquisition of RBM, Myriad raised its guidance for fiscal 2011.

In the past, Myriad's revenue growth had been adversely affected due to the difficult economic conditions. Although the situation has stabilized and patient visits to physicians have improved, any hiccup in the economic recovery process will negatively impact its top line.