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Stock Analyst Update

Improved Outlook for Myriad Genetics

We're raising our fair value estimate on the narrow-moat firm after the unveiling of a new cancer product.


We are raising our fair value estimate for narrow-moat  Myriad Genetics (MYGN) to $30 per share following the unveiling of myRisk riskScore and Myriad’s recent detail on cost-cutting measures and synergies expected over the next few years. While Myriad’s hereditary cancer business has been beleaguered by pricing pressure, despite volume growth, we now recognize that 86% of the business is under long-term contracts. We believe riskScore will provide an added degree of durability, and we have boosted our long-term sales growth assumptions for myRisk. In addition, we are now more bullish on margin expansion opportunities for the business. Overall, we forecast rapid expansion for some of Myriad’s nascent products, and we believe GeneSight will grow at a solid clip. Additional reimbursement for fledgling products could be an additional boon to the business. However, we think these prospects and margin expansion story are already reflected in the shares and we would recommend a pullback for a margin of safety before investing.

We view riskScore as the fourth generation of Myriad’s hereditary cancer products and believe it is a tactful use of Myriad’s proprietary database of cancer variations. Hereditary cancer testing can often lead to vague answers for a wide swath of patients, as fewer than 10% of women at risk of breast cancer carry a clinically actionable mutation. The new product evaluates a woman's risk of developing breast cancer by combining genetic markers throughout the genome with the patient’s family and clinical history. The score is a simple percentage risk of developing breast cancer for a given patient, which is compared with the risk of the overall population. We believe it will take time to gain momentum and could attract patients who are not necessarily utilizing myRisk now but want to understand if they need MRIs each year.

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Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.