On Monday, Myriad Genetics (NASDAQ:MYGN) experienced a downgrade in its stock rating by Leerink Partners, moving from Outperform to Market Perform. This adjustment was accompanied by a significant reduction in the price target, which now stands at $21.00, down from the previous target of $30.00. The stock, currently trading at $15.13, has declined over 31% in the past six months, with InvestingPro data showing it's trading near its 52-week low of $14.34.
The decision to downgrade Myriad Genetics was based on several factors that Leerink Partners believes could impact the company's growth prospects. While the company has achieved revenue growth of 12.15% over the last twelve months, InvestingPro analysis indicates the company is not currently profitable, though analysts forecast a return to profitability in 2024.
The firm noted the commendable turnaround that Myriad Genetics has achieved under the leadership of CEO Paul Diaz over the past four years, but pointed to a deteriorating market environment, including challenges related to reimbursement and increasing competition.
Specific concerns were raised about the upcoming competitive pressures in 2025 for Myriad's Prolaris prostate cancer assay. Delays in securing coverage for the GeneSight test by UnitedHealth (UNH, Overweight, Mayo Clinic) are also causing headwinds.
Additionally, the potential for Medicaid cuts, the limited upside from Invitae (OTC:NVTAQ)'s (NYSE:NVTA, Not Rated) disruption in the hereditary cancer testing market, and the competitive nature of Comprehensive Genomic Profiling (CGP) are factors that contribute to Leerink's outlook.
Moreover, Leerink Partners has adjusted its growth estimate for Myriad Genetics for the year 2025 to 2.5%, a decrease from the previous estimates of 6% and even earlier, 12%. The firm cited these revised growth expectations as a key reason for the decrease in the price target to $21 from the earlier $30.
Leerink Partners' analysis suggests that with the current market conditions and the challenges Myriad Genetics faces, there are limited opportunities for the company to grow in the near to medium term. The firm's revised rating and price target reflect a cautious stance on the stock's future performance.
In other recent news, Myriad Genetics has reported an 11% year-over-year revenue growth and a positive adjusted earnings per share in its third-quarter 2024 earnings call. The company has adjusted its revenue target for 2024 to approximately $840 million and increased its earnings per share target to $0.12-$0.14. However, a recent policy change by UnitedHealth Group (NYSE:UNH) may cease coverage of Myriad Genetics' GeneSight testing from 2025, potentially leading to an approximately $40 million annualized revenue impact.
In response to this, Scotiabank (TSX:BNS) revised the price target for Myriad Genetics. Despite the potential challenges, Myriad Genetics remains focused on achieving approximately 12% revenue compound annual growth rate through 2026. The company plans to launch the Precise MRD test for breast cancer in the first half of 2026 and has made significant investments in lab technologies, including EMR system integrations.
In legal developments, Myriad Genetics has reached a settlement in a series of shareholder derivative lawsuits. Under the terms of the settlement, the company will implement specified corporate governance reforms and pay up to $950,000 in attorneys' fees and expenses, without admitting any liability or wrongdoing.
These recent developments highlight the company's commitment to growth and profitability amidst policy and legal challenges. CEO Paul Diaz and Senior VP Matt Scalo are actively engaging with UnitedHealthcare and other stakeholders to navigate these challenges.
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