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business newsMyriad Genetics Rises, Patent Case Looms
By
Brett Chase
May 04, 2011 2:00 pm
An analyst thinks Myriad's stock has upside and predicts a win in an important patent case in federal court.
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Shares of Myriad rose more than 6% in midday trading Wednesday after the company raised its full-year profit forecast., Myriad’s shares are still down 6% in the past year.
A pioneer in the field of personalized medicine, Myriad sells diagnostic products to help identify genetic causes of diseases. The biggest overhang on the stock in the past year or so is a legal challenge to Myriad’s patents on isolated DNA that the company says holds genetic information about treating diseases like breast cancer.
At least one analyst thinks the stock can win its legal challenge and predicts the shares will rise to $26 in the next year. This once high-flying stock (it traded above $45 a share in 2009) has a lot of upside, according to RBC Capital Markets analyst Michael Yee.
A recently announced acquisition, a push into Europe and expected better demand for Myriad’s products makes the stock a buy, Yee says. A win in an important patent case definitely pushes the shares up, he adds.
“We believe the stock can trend higher with improving macro-environment, improving execution and a potential positive patent appeals decision this summer,” Yee says.
Myriad said Tuesday that it expects fiscal year 2011 profit to be as much as $1.09 a share on $402 million in sales, compared with a previous estimate of up to $1 a share in profit and $400 million in revenue.
The company says it will benefit from the just-closed takeover of closely held Rules-Based Medicine for $80 million as the deal will add to earnings over the next couple of years. While Myriad is known for its cancer tests, the acquisition broadens the company’s portfolio to include diagnostics for infectious and inflammatory diseases and psychiatric disorders.As for the elephant in the room: Myriad faces a decision on an appeal of a federal judge’s ruling voiding Myriad’s patents on human genes. (Regardless of the outcome, some legal observers predict this case will end at the US Supreme Court.) A federal judge ruled against Myriad in March of last year, saying that something that occurs in nature can’t be patented. Myriad’s patent on human genes (used to diagnose cancer) are legitimate because the DNA is isolated using high-tech research tools, the company argues.
Lawyers for Myriad argued before the US Court of Appeals for the District of Columbia Circuit last month. The case, brought by patient advocates, scientists and others, was appealed by Myriad after a federal judge in New York ruled that human genes can’t be patented, invalidating some patents Myriad holds for breast and ovarian cancer.
A ruling from the appellate court may be as soon as next month, Yee predicts.
The analyst has spent some time analyzing the case. He believes the lower court decision may be overturned based on a number of factors. First, there’s a question of whether the group bringing the suit, the Association for Molecular Pathology has legal standing because it’s not clear the plaintiff was harmed by Myriad. Yee also believes a Supreme Court decision on intellectual property decided last summer, Bilski v. Kappos, may help Myriad. And federal Judge Robert Sweet, who ruled against Myriad last year, has had four patent decisions appealed and overturned, Yee notes.
And then, it’s on to the Supreme Court.
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No positions in stocks mentioned.
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