Myriad Genetics Plunges to 5-Year Low as Forecast Falls Shortby
Company cites weakness in genetic testing for cancer risk
Shares decline 34% to lowest level since December 2011
Myriad Genetics Inc. plunged the most in 16 years after the company forecast 2017 sales and earnings that fell substantially short of analysts’ estimates, due largely to declining revenue from tests used to detect a genetic risk of developing cancer.
The medical test maker said it expects to earn $1.00 to $1.10 per share excluding certain items in 2017, well below the $1.79 average estimate of analysts surveyed by Bloomberg. Revenue also came in under expectations, with the company forecasting $740 million to $760 million in sales, versus the $790.2 million average estimate.
The shares fell 34 percent to $19.39 at 12:37 p.m. in New York, the biggest decline since March 2000 and lowest level since December 2011. The stock had dropped 4.8 percent in the past 12 months before today.
Revenue from hereditary cancer testing fell 7 percent in the fourth quarter, the Salt Lake City-based company said in a statement. Myriad has long-term contracts in place for 65 percent of the business, with the remainder vulnerable to pricing pressure and competition that crimped sales during the quarter.
The company is facing increasing competition after it lost a lawsuit 18 months ago that prohibited it from blocking competitors’ DNA tests to determine the risk for breast and ovarian cancers. The U.S. Supreme Court previously limited companies’ ability to obtain patents on human genetic sequences, and the U.S. Court of Appeals for the Federal Circuit said that decision invalidated several Myriad patents.
The increasing competition and resulting price declines are crimping Myriad’s performance faster than the company’s efforts to roll out new products are boosting sales, said Jack Meehan, an analyst at Barclays Plc in New York. The pace of the competitive pressure is eroding the business faster than analysts or the company expected even a quarter ago, he said.
“We’re concerned that incremental competitive weakness in the Hereditary Cancer Testing business will pressure overall results for the company,” Meehan wrote in a note to clients on Wednesday. “While we continue to be positive on the new product strategy, the contribution does not appear to be big and fast enough to offset HCT pressure in the next year.”