Myriad Genetics Down on Court Ruling - Analyst Blog

Shares of Myriad Genetics Inc. MYGN slashed 8.34% at yesterday's close, soon after an unfavorable court bid, according to a Bloomberg report. The news narrated that the U.S. District Court for the District of Utah has denied Myriad's motion to block competitor Ambry Genetics from selling the competing tests, given that the patent infringement case between Myriad and Ambry Genetics is still pending at the court.

This court action also indicates Myriad's low chance of winning the lawsuits which alleged that the similar gene cancer tests related to the BRCA1 and BRCA2 genes being sold by Ambry Genetics Corp., violate its patents.

This comes as a major setback for Myriad Genetics which had recorded 43% growth in BracAnalysis – its flagship product in the last reported quarter. This is not the only standalone legal challenge facing Myriad. The company is currently entangled in several lawsuits with companies like Invitae Corporation and Laboratory Corporation of America Holdings LH.

Notably, in Jun 2013, Supreme Court ruling declared that isolated human genes are not patentable. Following the decision, several companies have commenced offering clinical diagnostic and genomic laboratory services, including the testing and analysis of the BRCA1 and BRCA2 genes that compete with the BRACAnalysis testing and services of Myriad. Although Myriad has filed several patent infringement lawsuits against these companies, any defeat in these legal issues may create significant trouble for the company going forward.  

We believe that emerging competitors and pricing pressure might plague the stock in the future. To add to the challenges faced by Myriad, macroeconomic uncertainty is another headwind. Also, with an extensive pipeline of some tests still under early-stage development, the company continues to face higher expenses. Although the company expects to increase its addressable market with myRisk in the near future, we remain cautious owing to the market conversion phase with the discontinuation of the successful legacy products.

Currently, the stock carries a Zacks Rank #2 (Buy). Some other well-placed stocks that are worth a look include Biogen Idec Inc. BIIB and Actelion Ltd. (ALIOF). Both the stocks carry a Zacks Rank #2.