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Mizuho Upgrades Myriad, Citing Medicare Reimbursement and 'Overstated' Competitive Pressures

NEW YORK (GenomeWeb News) – Mizuho Securities today upgraded shares of Myriad Genetics to a Buy rating, citing an increase in Medicare reimbursements for the BRACAnalysis test, as well as stabilized competition, and several potential positive catalysts over the next year to 24 months.

Analyst Peter Lawson upgraded the company's stock from a prior Neutral rating and raised his 12-month price target on Myriad's shares to $50 from $40.

The changes follow a decision by the Centers for Medicare and Medicaid Services this week to bump up the reimbursement level for BRCA1 and BRCA2 gene testing to $2,184 from $1,438. Immediately following CMS' revisions, Lawson increased his price target for Myriad's shares to $40 from $28 but maintained his Neutral rating.

"While we see payor cuts as a major risk, we think that payors are more likely to contract with additional BRCA competitors than completely switch to rival tests," Lawson said in a research note today. "We believe that payors, and importantly doctors and patients, will remain on board with Myriad, driven by better data and clinical outcomes."

He added that despite forecasts of sharper competition in BRCA gene testing, "the competitive threats are overstated and stabilized to a large degree."

In June the US Supreme Court ruled that human genes are not patentable but synthetic DNA is, seemingly opening the door for other firms to offer BRCA1/2 testing. Lawson noted, though, that so far any share loss experienced by Myriad has been in the medical geneticists channel, "and in part countered with a dedicated sales force." He also pointed out that one competitor has been removed — Gene by Gene, which stopped selling standalone diagnostic tests that measure BRCA1/2 genes in North America as part of a settlement reached with Myriad in February.

Other companies do not offer panel testing "where guidelines are moving, in our view," Lawson added, while Myriad continues to transition all single gene tests, such as BRACAnalysis, to panel tests such as its myRisk. Management remains confident that full conversion of BRACAnalysis to myRisk will occur by next summer, "reducing our worry around BRCA competition."

Lastly, he said that during the next 12 to 24 months, potential tailwinds to Myriad's stock include reimbursement for Prolaris; increased private payor reimbursement for myRisk; more testing opportunities around PARP inhibitors; an uptick in Colaris following changes in National Comprehensive Cancer Network guidelines; and upside from Vectra DA, purchased as part of Myriad's recent acquisition of Crescendo Bioscience.

In morning trading on the Nasdaq, shares of Myriad were up about 4 percent at $41.89.