NEW YORK (GenomeWeb) – Taking stock of Myriad Genetics pipeline and recent stock performance, Cowen and Co. analyst Doug Schenkel today upgraded the company’s stock to an Outperform rating from a previous Market Perform rating.
"In our base case, we see a path to low-single digit to mid-single digit growth supporting multiple expansion and 15 percent to 20 percent upside from current levels without broader GeneSight reimbursement," Schenkel wrote in a note to investors. "The risk/reward is attractive."
Schenkel put a price target on Myriad’s stock of $37 per share, or 26 percent above its closing price of $29.29 on Thursday. In lowering it from a previous target of $40 per share, he made a number of conservative assumptions including that Myriad’s revenues from hereditary cancer testing will likely not grow much more, GeneSight pharmacogenetic testing revenue will grow at a moderate rate absent meaningful reimbursement expansion, revenue from Counsyl will only grow at mid-single digit levels, and other products will similarly have mid-single digit growth.
Also today, Myriad announced the publication of the GUIDED study, a prospective, large-scale, blinded, randomized controlled trial to evaluate the utility of GeneSight involving 1,167 treatment-resistant major depressive disorder patients who had failed at least one psychotropic medication. The study showed that at week eight, individuals who received GeneSight-guided treatment had a 50 percent higher rate of remission (p=0.007), a 30 percent increased rate of response (p=0.01), and 11 percent greater improvement in symptoms (p=0.11) compared to those in the standard of care group.
"There is a lot of debate about the utility and value of GeneSight in the academic/medical community," Schenkel wrote. "The reality is that Myriad missed its primary endpoint in the GUIDED study (other endpoints were good and Myriad makes seemingly good arguments that those matter too, but missing the primary is never great)."
Myriad executives are hoping that the publication of this study will sway commercial payors. Researchers involved in GUIDED also conducted a subset analysis of patients who entered the study on drugs GeneSight deemed to be “red medications,” meaning they were unlikely to respond well to them. This subset analysis showed that those who switched to drugs the test predicted to be better suited for them (in the green or yellow category) by the eighth week had 153 percent higher rates of remission (p=0.0067), 71 percent higher rates of response (p=0.0364), and 59 percent greater symptom improvement (p=0.0018) compared to those that stuck with the red category meds.
Despite Myriad executives’ confidence in the GUIDED data, Schenkel noted it is challenging to confidently evaluate whether GeneSight can achieve broader commercial coverage. "Our forecast does not assume there is any material expansion in GeneSight coverage ," he wrote, adding that if half the commercial payor-reimbursed tests are paid at $2,000, Myriad will generate between $350 million and $400 million in incremental revenue and more than double its EPS expectations in fiscal year 2020.
Counsyl, which Myriad acquired last year, is another factor in these projections. Myriad hopes to capture e around 75 percent of the NIPT and carrier testing market this year by integrating 80 Counsyl sales reps with 160 of Myriad's primary care sales reps. Myriad has also noted that broader practice guidelines could help expand coverage of NIPT in average risk patients, and has indicated efforts to resolve reimbursement difficulties with UnitedHealthcare.
Schenkel wrote that Counsyl is a good fit with Myriad’s commercial infrastructure and "could be a nice source of upside over time."