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Myriad Genetics Earnings: Robust Testing Volumes Propel Revenue Growth, Provide Near-Term Momentum

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We make no change to our $18.50 fair value estimate for no-moat Myriad Genetics MYGN, as third-quarter results landed largely as expected. Overall revenue growth of 14% year over year was driven by continued momentum in testing volume growth across the product portfolio, including strong volume growth year over year in hereditary cancer at 18%, pharmacogenomics at 19%, and prenatal (excluding contributions from Sneak Peak) at 20%. Solid revenue growth demonstrates healthy demand for the firm’s core offering and led management to raise its full-year 2023 topline growth estimate to 10%-11%, up about 100 basis points at the midpoint. We made similar adjustments to our full-year revenue expectations, but with no material impact on our valuation. At current prices, Myriad’s shares look about fairly valued.

While challenging payer and pricing dynamics haven’t fully gone away, the strain on profitability is easing slowly. Third-quarter margins reflect this improvement, where year over year and sequential margin expansion was driven by better pricing and increasing payor coverage. However, as we continue to see volatility with these factors in the near term, we believe the firm will need to continue its prudent cost cutting in order to remain on track to achieve its profitability goals over the longer term. Enhanced visibility into contract payouts in the near term should also help contribute to incremental margin expansion through revenue growth expectations.

Our longer-term forecasts for the firm remain largely intact. We made only minimal updates to our assumptions based on management’s full-year 2024 guidance announcement, given that this outlook was in line with the firm’s unchanged, longer-term goals of 10% annual revenue growth and gross margins over 70%. This compares with our 2027 forecasts of 9.2% revenue growth compounded annually and 72.5% gross margin, supported by continued market share gains, increased market penetration, and overall industry trends.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Karen Andersen, CFA

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Karen Andersen, CFA, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She is responsible for biotechnology research.

Before joining Morningstar in 2005, Andersen received a master’s degree in business administration from Rice University, where she served as senior healthcare analyst for the M.A. Wright Fund and earned the distinction of Jones Scholar. She has scientific research experience in both academia (at Rice University and the University of Queensland in Australia) and industry (at Lexicon Genetics and a subsidiary of Genzyme).

Andersen also holds a bachelor’s degree in biochemistry from Rice University, where she graduated magna cum laude. She is a member of Phi Beta Kappa and holds the Chartered Financial Analyst® designation. She ranked first in the biotechnology industry, and had the highest score overall, in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

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