(MYGN) Myriad Genetics Analyst Uprades Shares to Outperform

Recently, we upgraded Myriad Genetics (MYGN) to Outperform with a target price of $27.00.

Myriad is confident of retaining the momentum recorded over the past few quarters going ahead through product portfolio expansion, targeting the companion diagnostic market and expansion into Europe. With respect to new products, Myriad aims to launch at least one new molecular diagnostic product each year.

The company’s tenth product, slated for launch in the second half of 2011, will assist dermatopathologists in determining whether a patient’s mole is benign or a malignant melanoma.

We are also encouraged by Myriad’s recent acquisition of Texas based, privately-held Rules-Based Medicine (RBM) for $80 million in cash. This deal would expand the company’s portfolio to take into its ambit psychiatric disorders, infectious diseases and inflammatory diseases.

According to Myriad, apart from strengthening its strong oncology pipeline it would also have access to RBM’s pipeline that includes tests for anti-psychotic drug safety, hepatitis C drug response and detection of kidney damage in diabetes patients. RBM’s most advanced product under development is in the neuroscience area – VeriPsych that assists physicians in identifying schizophrenics from normal individuals.

Myriad is aiming at establishing itself as a strong player in the companion diagnostic market. In April 2011, the company entered into an agreement with BioMarin Pharmaceuticals to conduct BRCA1 and BRCA2 mutation testing on patients to be enrolled in the latter’s phase I/II clinical study of BMN 673. To establish Bracanalysis as a companion diagnostic for PARP inhibitors, Myriad has also got into agreements with Abbott Laboratories (ABT) and AstraZeneca (AZN).

The European molecular diagnostics market size is about 75% of the US market. Moreover, many US based diagnostic companies derive 30%?50% of overall revenue and profit from international operations. Based on these facts, Myriad is looking at establishing a European presence by early 2012. The company expects to initially target opportunities in Germany, France, Italy, Spain and Switzerland.

The company conducted a market survey of 207 key persons and oncologists across the five targeted countries and found their response for the clinical value of the Bracanylysis, Colaris, Prezeon, OnDose and Prolaris products to be positive.

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