Tightening Privacy Laws And Fierce Competition Will Undermine Genetic Testing

Key Takeaways

• Tightening regulations, shifting payer dynamics, and rapid technological change threaten Myriad's revenue, margins, and competitiveness.
  
• Increased competition and product commoditization risk eroding market share while forcing higher R&D investment, challenging future profitability.
  
• Growth in payer coverage, test portfolio expansion, and strategic focus on innovation and partnerships position the company for revenue, margin, and long-term profitability improvement.

Catalysts

A molecular diagnostic testing and precision medicine company, develops and provides molecular tests in the United States and internationally.

• Further tightening of regulations around genetic privacy and data security could increase compliance costs and deter both providers and patients from using Myriad's genetic testing solutions, ultimately constraining revenue growth and compressing net margins.
  
• Downward pressure on healthcare spending and intensified payer scrutiny may result in more restrictive reimbursement policies for key test offerings, threatening revenue predictability and driving volatility in earnings over the long term.
  
• The accelerating commoditization of genetic information and proliferation of direct-to-consumer digital health tools risk undermining Myriad's pricing power and eroding average revenue per test, directly impacting gross margins and stalling top-line expansion.
  
• Fierce competition from larger diagnostics providers and low-cost, high-throughput entrants is likely to cause sustained market share loss, especially as established products lose patent protection, notably shrinking gross margins and leading to persistent revenue stagnation.
  
• Rapid technological innovation in genomics, including next-generation sequencing, could render current products obsolete and force Myriad to make disproportionately high R&D investments to keep pace, reducing profitability and increasing the risk of failed product launches that fail to replace legacy revenue streams.

Myriad Genetics Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Myriad Genetics compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Myriad Genetics's revenue will grow by 2.6% annually over the next 3 years.
• The bearish analysts are not forecasting that Myriad Genetics will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Myriad Genetics's profit margin will increase from -47.4% to the average US Biotechs industry of 14.1% in 3 years.
• If Myriad Genetics's profit margin were to converge on the industry average, you could expect earnings to reach $126.9 million (and earnings per share of $1.27) by about August 2028, up from $-395.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 3.4x on those 2028 earnings, up from -1.5x today. This future PE is lower than the current PE for the US Biotechs industry at 13.2x.
• Analysts expect the number of shares outstanding to grow by 2.45% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.06%, as per the Simply Wall St company report.

Myriad Genetics Future Earnings Per Share Growth

Risks

• Continued expansion in payer coverage, especially the accumulation of new product coverage and policy expansions for key tests such as GeneSight and in prenatal screening, is driving improvement in reimbursement rates and average revenue per test, which could bolster long-term revenue and earnings growth.
  
• Improving test portfolio diversification and successful launches-such as the upcoming commercially differentiated Prequel NIPS at 8 weeks, expanded Foresight carrier screening, FirstGene, and new oncology panels-could meaningfully expand the company's total addressable market and support sustained topline growth and gross margin expansion.
  
• Strategic focus on high-growth areas like the Cancer Care Continuum, enhanced by selective R&D investments and new partnerships (for example, with PATHOMIQ and through upcoming MRD and AI-enabled tests), positions Myriad to benefit from long-term secular trends in precision medicine, aiding both revenues and profitability.
  
• Execution improvements seen in operational areas (like revenue cycle management, EMR integrations, and commercial execution) and commitments to grow revenue faster than operating expenses indicate the potential for operating leverage and consistent EBITDA growth over the medium to long term.
  
• Demonstrated ability to secure flexible, long-term financing and maintain liquidity facilitates further investment in innovation and growth initiatives, potentially mitigating risks to net income from rising costs and enabling continued expansion into new high-margin diagnostics markets.

Valuation

• The assumed bearish price target for Myriad Genetics is $3.5, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Myriad Genetics's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $18.0, and the most bearish reporting a price target of just $3.5.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $898.8 million, earnings will come to $126.9 million, and it would be trading on a PE ratio of 3.4x, assuming you use a discount rate of 7.1%.
• Given the current share price of $6.32, the bearish analyst price target of $3.5 is 80.6% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.