This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Wall Street Realizes Myriad Genetics Monopoly on Breast Cancer Risk Tests Is Done

SALT LAKE CITY, Utah ( TheStreet) -- Myriad Genetics' (MYGN) monopoly on genetic testing for breast cancer risk has been torn down by the U.S. Supreme Court's ruling on human gene patents Thursday. One day later, Wall Street analysts are reacting accordingly.

With Myriad's patents on the BRCA1 and BRCA2 genes now invalidated, other companies like Quest Diagnostics (DGX) and Bio-Reference Labs (BRLI) are moving quickly to launch competitive tests for breast and ovarian cancer risk.

Myriad shares actually surged higher within minutes of yesterday's Supreme Court decision on the belief that the company's core gene-testing business would not be adversely affected, at least immediately. But that Wall Street insta-analysis turned out to be incorrect and by the end of Thursday trading, Myriad shares were in the red, down 6% to $32.01.

On Friday, analysts followed up with Myriad downgrades and cuts to price targets:

Credit Suisse's Vamil Divan:

A mixed ruling by the Supreme Court of the United States (SCOTUS) in the Myriad gene patent case was generally in-line with our expectations. What was surprising to us, however, was the speed with which competitors announced that they would be entering the BRCA testing market, in spite of SCOTUS upholding that cDNA is patent eligible. While the near-term MYGN story is still solid, the longer-term concerns that we have had around the name are now accelerated as these competitors will likely cause MYGN to face pricing pressure and/or market share losses over time.

RBC Capital's Michael Yee:

Our bullish MYGN thesis has played out and risk/reward is less favorable at current levels: the company has met or beat estimates 9 quarters in a row and the Supreme Court case overhang played out in line with our expectations (cDNA upheld but isolated DNA was rejected). Going forward at current levels, 6-12 mo visibility remains more challenging because: 1) 3 competitors including Quest, BRLI, DNATraits, Ambry, announced they plan to launch a new BRCA test which was sooner than consensus expectations and casts uncertainty on real impact to estimates (MYGN is likely to sue them for Sanger sequencing and/or infringing cDNA patents upheld today but this requires resources and time), 2) it is now unclear how much market share these new competitors may garner but there's new risk of possible downside earnings revisions if even 5% market share loss occurs over next year ($20M)...

It's worth noting that Yee, on Thursday, defended Myriad and said the Court's ruling would have no impact on its gene-testing business.

Some analysts are defending Myiad, like Cantor Fitzgerald's Sung Ji Nam:

Despite SCOTUS' only partial reversal of the Federal Circuit decision, two competitors (BRLI and DGX) announced their intentions to provide BRCA1/2 testing by year-end, which is currently exclusively offered by MYGN in the U.S. We believe that MYGN's IP around BRACAnalysis remains strong through 2018, given four of the nine patent claims adjudicated by SCOTUS have been essentially upheld and MYGN's large majority of the patents and claims (~500 claims associated with 24 patents, specifically primers, probes and method-of-use) remain unchallenged, and as such, we think MYGN will aggressively defend its IP going forward. Based on our adjusted estimates (competition still entering in FY:14, higher SG&A from legal expenses, slightly slower share erosion vs. our prior estimates), we reiterate our BUY rating and raise our PT to $41 from $40.

-- Reported by Adam Feuerstein in Boston.

Follow Adam Feuerstein on Twitter.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,238.28 +81.43 0.47%
S&P 500 2,010.66 +9.09 0.45%
NASDAQ 4,587.0260 +24.8370 0.54%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs