Myriad Genetics Jumps on Medicare Decision - Analyst Blog

Shares of Myriad Genetics Inc. MYGN gained 11.47% on yesterday's close, following the announcement of increase in the CMS (Centers for Medicare & Medicaid Services) reimbursement rate for the company's popular breast cancer test – BRACAnalysis. After the Dec 2013 release of the final plan of CMS that cut the reimbursement rate to a large extent, the recent revised rate comes as a major boost for the company.

According to Myriad Genetics, on Apr 1, 2014, CMS provided an updated pricing for each BRACAnalysis test conducted by the company. The new rate offered by the CMS is $2,184, a huge 52% jump from the earlier proposed amount of $1,438. The raised reimbursement rate is now effective starting Apr 1, 2014.

Notably, in December, CMS' consideration for paying $1,438 for each of the tests represented a slash of 49% from the previously proposed rate of $2,795. Although the latest rate still lags the initial proposal, we expect this recent move to successfully boost investor sentiments and reinstate faith in the stock.

BRACAnalysis is a popular breast cancer test that helps identify individuals who are highly susceptible to developing breast and ovarian cancer. The BRACAnalysis test – as offered by Myriad Genetics in the U.S. – is quite expensive, varying in the range of $3,000 to $4,000.

This upgraded reimbursement rate should thus significantly increase the adoption of this pioneer product from Myriad Genetics thereby potentially improving the company's revenues to a certain extent in the upcoming quarters.

We acknowledge that Myriad Genetics enjoys several competitive advantages based on its solid experience, highly efficient laboratory network and brand recognition. Nonetheless, the company is poised to face market erosion in the forthcoming quarters due to increased competition from companies such as Bio-Reference Laboratories BRLI and Quest Diagnostics DGX, as well as privately-held entities like Ambry and Invitae.

Currently, Myriad Genetics carries a Zacks Rank #2 (Buy). Investors interested in the Med-Biomed/Gene industry may also consider Actelion Ltd. (ALIOF) which carries a Zacks Rank #1 (Strong Buy).