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Leerink Initiates Coverage of Myriad Genetics With Market Perform Rating

NEW YORK (GenomeWeb) – Leerink on Monday initiated coverage of Myriad Genetics with a Market Perform rating and a $31 12-month price target on the company's stock.

In a research note, analyst Puneet Souda noted that while Myriad is still a dominant leader in hereditary cancer testing, it is still trying to stabilize that business in the wake of the 2013 US Supreme Court decision on gene patenting, while also diversifying its portfolio to drive future growth.

The company's attempts to diversify within and outside of hereditary cancer testing, however, "offers little upside" to Leerink's financial forecast without stable reimbursement in place, Souda wrote.

For instance, the GeneSight pharmacogenomic test is Myriad's second-largest product and continues to deliver solid volume growth of about 45 percent year over year, "but limited commercial reimbursement is holding back major upside longer-term," Souda noted. "However we prefer to remain cautious in awaiting results from GeneSight's 1,200-patient study year-end readout and subsequent potential coverage given our conversations with MedaCorp psychiatrists who view GeneSight as useful but still not medically necessary and costly for the majority of patients." MedaCorp is Leerink's strategic expert network comprising more than 35,0000 healthcare professionals.

In addition, despite Myriad's hereditary cancer business declining for the last six quarters, Leerink sees signs of stabilization as 86 percent of the business is now in long-term contracts, "but we believe reimbursement pressures are unlikely to diminish in the near-medium term in [hereditary cancer] testing."

Souda added that the company is "undergoing a transformation and we do see potential for upside if clinical studies help drive reimbursement for its new products longer term." Until then, he wrote, Leerink is modeling revenues of $762.4 million, or 1 percent less than Wall Street estimates in fiscal year 2018, with EPS of $1.03.

In August, following release of its fourth quarter and fiscal year 2017 earnings, Myriad said that in fiscal year 2018 it estimated that it would record total revenues of $750 million to $770 million and adjusted EPS of $1.00 to $1.05. It also noted that it expects reduced hereditary cancer testing revenues, but hopes to offset those declines with new product sales and cost-reduction initiatives.

In late-morning trading on Nasdaq, Myriad's shares were up about 1 percent at $36.60.