NEW YORK – Investment bank UBS this week initiated coverage of Myriad Genetics with a neutral rating and a 12-month price target of $18 on the company's stock.
In a note to investors, UBS analyst Lu Li noted that Myriad's growth profile has improved over historical trends, though it remains lower than peers and sustained double-digit growth is "unlikely" in the medium term.
Pressures against such growth come predominantly from pricing and reimbursement challenges. UBS noted that pricing pressures stemming from the 2013 US Supreme Court ruling against Myriad continue to stymie revenue growth. In the landmark ruling, the court decided that the discovery of naturally occurring gene sequences and their cleavage and isolation from other genetic material in the body aren't patent-worthy inventive activities.
In addition, the recent decision by UnitedHealthcare to pull its coverage of multigene pharmacogenetic panel tests directly impacted sales of Myriad's GeneSight assay and caused shares in the company to tumble.
Pharmacogenomics testing was central to Myriad's positive Q3 revenue growth, and in a conference call to discuss earnings with investors, CEO Paul Diaz said that the company is working with UHC to resolve the issue before the policy is set to go into effect this coming January.
In a statement earlier this week, the company said that it had presented UHC with additional clinical data supporting GeneSight and requested that UHC enrollees maintain access to the test throughout 2025, particularly in the primary care setting, where antidepressants are more frequently prescribed.
UBS expects the UHC decision to create headwinds impacting approximately $40 million, or roughly 5 percent of Myriad's revenue for 2025, but do not expect other payors to follow suit.
Further constraining risk related to the UHC decision, Myriad has expanded GeneSight's commercial and managed Medicaid coverage with 18 new contracts and 29 new coverage wins so far this year, Li noted. Additionally, Li sees stable reimbursement trends for hereditary cancer and prenatal testing businesses, aided by guideline inclusion and state biomarker laws.
Over a dozen US states have recently passed laws requiring broad insurance coverage for biomarker tests, although payors continue to evaluate how best to adjust their policies to comply with those laws.
Although Myriad's strong growth in FY2023/2024 was partially driven by one-time events that are not expected to repeat, such as competitors leaving the market, Li noted positive trends in the company's ability to diversify its portfolio over the past three years.
In mid-afternoon trading on the Nasdaq, shares of Myriad were up slightly over 1 percent at $24.37.