User 193167

Myriad Options on Alzheimers Disease

knows_ad:

There are a couple of challenges to your market analysis of ~$5B in sales:

First, there are ~430,000 new diagnoses of AD per year in the US. BUT only ~20% are mild. Yes, it's true that the prevalence is massive (~5 million). Unfortunately, is the prevalence too comprised of only ~20% milds but also the vast majority are not actual diagnoses, just estimated numbers.

Aside from the numbers, remember that AD is a subjective diagnosis that is only 90% accurate. But even if lots of Dr's attempt to mis-classify the patients to mild, this isn't an easy market.

My model (yes, there are indeed medical scientists who are also Street capable) leads me to believe that if it hits the metrics in both the US and EU Phase III trials, the drug is a shoe-in for FDA approval. Given MYGN's ability to deploy a neuro/geron sales force directly and rent one via partnership for GPs/interns, US sales won't break $500M for at least 10 quarters and the EU won't contribute more than 10% to the top line in year 3 of US approval.

It's a ~$75-92 stock depending on when you ask the question relative to the US and EU trials and whether all of the end-points (yes, there are more than one!) are met with high significance. Betting your dollar to the neutral at worst or owning two names after a split-up to possibly double your money in 12-24 months is a very good bet.

Disclaimers: 1 1) own the stock, 2) know and have interviewed the management team, 3) understand the science, and 4) have ZERO conflict of interest in my opinion either as an employee, an analyst, a banker, a child of the CEO, or anything else that I could gain other than the stock going as I believe it will.

Myriad Options on Alzheimers Disease

*ahem...

Gents, it's not a $41, $25 or $55 stock. For whatever reason, this discussion has failed to even recognize that they will sell ~$220M of diagnostic tests at ~85% margins this year!

The price is suppressed BECAUSE of the likely failure of Flurizan. The Street says 10% chance. If it fails, the burn goes down and the stock heads right up to $50+ (not a 12-month forecast). If it succeeds, the "run up over the last 2 years" (I still can't understand that statement given the PROFITABLE DIAGNOSTICS BUSINESS) will pale to the $70+ 12-mo price that would follow.

Think about this: when the stock pops after the top-line announcement, it will probably go up as the disaster scenario has clearly been priced in already. Then the shorts will be stuck covering thereby supporting the a new plateau.

And to those who haven't read the rest of the story...

Management has said that if 1) Flurizan fails and 2) the stock doesn't head north once the burn is gone, the Board has said there will be strong consideration (metrics and timing unannounced) for splitting the two businesses. They already did the tax analysis and it should be free to the shareholders. No doubt that scenario would result in a $50+ Myriad Diagnostics and a $6 Myriad Pharma companies.

Als, check out how many of the management team exercised when the stock hovered around $36. Then check out that when it bumped up ~$5, it was because T. Rowe and Fidelity INCREASED their positions.

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**A Scientific point...
The drug is the only profen that can be tolerated anywhere near the dose that shows an effect. Don't get me wrong, I'm not bullish on Flurizan. But that wasn't mentioned above.