Myriad Genetics Earnings: Test Volume Still a Reliable Growth Driver; Adoption Uptick Looks Steady

Myriad Genetics MYGN delivered solid second-quarter results driven by strong volume performance that increased the top line 10% year over year (excluding a one-time adjustment from the prior-year period). We are maintaining our $18.50 fair value estimate for the no-moat firm as the results landed roughly as we expected. At current prices, the shares look fairly valued.

The company marked its third consecutive quarter of double-digit revenue growth, with healthy volume growth edging out a negative top-line impact from challenging payer dynamics and tough pricing in the second quarter. Oncology testing continued to perform strongly; volume growth accelerated sequentially by 200 basis points to 18%. In women’s health, increased adoption of MyRisk by providers and strong selling success yielded solid growth, and the firm hit a milestone for Prequel with 1 million tests provided to date, reflecting the consistently robust performance of the neonatal screening business. Steady growth for GeneSight was driven by the continued incremental increase in provider adoption over the quarter. We believe provider adoption remains a key growth driver in the pharmacogenomics business by providing opportunities for increased market penetration and contributions to organic revenue growth.

We make no material changes to our near-term or long-term assumptions for Myriad. For the full year, our forecasts of 9.4% revenue growth and 69% gross margin are unchanged and within management’s maintained guidance. We think sequential margin improvement seen during the second quarter signals the successful implementation of cost-saving initiatives so far, which could help the firm hit its positive adjusted profitability goal for the fourth quarter. Over the longer term, growth will depend on Myriad’s ability to further capitalize on industry tailwinds, increase market penetration, and defend its existing market share.