Myriad Genetics Earnings: Maintaining Our $18.50 FVE on Solid Volume Growth but Higher Expenses

We’re maintaining our fair value estimate for Myriad Genetics at $18.50 per share following solid first-quarter results that position the firm to meet our forecast for the year as well as to meet our forecast for continued high-single-digit top-line growth over the next several years and a return to full-year adjusted profitability by 2025. Myriad’s top line grew by 10% compared with the first quarter of 2022, with solid double-digit volume growth partly countered by product mix changes (growing revenue from prenatal test SneakPeek) and tough comparisons, given a positive $12 million adjustment in the first quarter of last year that was not repeated. Growth was spread across women’s health (9%), oncology (11%), and mental health (9%). While we’re encouraged by the 31% increase in GeneSight testing volumes, and we expect continued strong demand in the coming years as a result of expanded access, new reimbursement codes have translated to lower prices, and we’ve slightly lowered our forecast for 2023 GeneSight sales. On the other hand, oncology tests are performing strongly, with particularly strong sales of prostate cancer test Prolaris, and we’ve slightly increased our oncology sales estimates for the year. Myriad’s bottom line remained solidly in the red due to high selling, general, and administrative costs, although we expect that Myriad will begin to see improved leverage from its tenured salesforce and digital selling efforts in coming quarters. Overall, we think shares look slightly overvalued and that the firm’s portfolio of hereditary cancer, women’s health, and mental health tests do not support an economic moat. We’re looking for evidence of Myriad’s success with stabilizing pricing and implementing cost controls before increasing our fair value estimate.