PATHOMIQ AI Partnership Will Expand Oncology And Women's Health

Key Takeaways

• Strategic partnerships and investments in AI and women's health aim to enhance oncology offerings and capture larger market shares, driving revenue growth.
  
• Expansion and innovation in testing and R&D, despite challenges, support future market opportunities and improved financial performance.
  
• Myriad Genetics may face challenges from reimbursement issues and integration delays, affecting revenue and market share, with pricing stability dependent on legislative and partnership dynamics.

Catalysts

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

• The partnership with PATHOMIQ to apply AI technology to oncology products is anticipated to enhance Myriad's offerings, potentially leading to increased adoption and revenue growth in the oncology sector.
  
• The focus on executing corporate programs like the breast cancer risk assessment program and EMR integration is expected to drive significant volume growth, positively impacting future revenues.
  
• The strategic investment in women's health, particularly with products like the Prequel offering earlier gestational insights, aims to capture a larger market share of the sizable unmet demand, thereby bolstering revenue.
  
• The continued expansion of the GeneSight test despite reimbursement challenges, supported by new publications and legislation, is positioned to enhance demand and increase revenues in the pharmacogenomics space.
  
• Investment in R&D towards innovative products like Precise MRD and FirstGene is expected to result in significant future market opportunities and revenue growth, while also aiming to stabilize and improve gross margins.

Myriad Genetics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Myriad Genetics's revenue will grow by 5.9% annually over the next 3 years.
• 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 -15.2% to the average US Biotechs industry of 15.9% in 3 years.
• If Myriad Genetics's profit margin were to converge on the industry average, you could expect earnings to reach $157.9 million (and earnings per share of $1.68) by about May 2028, up from $-127.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.5x on those 2028 earnings, up from -5.2x today. This future PE is lower than the current PE for the US Biotechs industry at 20.4x.
• Analysts expect the number of shares outstanding to grow by 0.89% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.75%, as per the Simply Wall St company report.

Myriad Genetics Future Earnings Per Share Growth

Risks

• Myriad Genetics may face challenges due to UnitedHealthcare's decision to cease reimbursement for GeneSight, impacting future revenues from a key product line.
  
• Integration of EMR systems is taking longer than expected, potentially delaying the volume growth necessary for revenue increases.
  
• Despite recent advances, the underpenetrated hereditary cancer testing market faces integration complexities and a necessity for focused education, which might slow revenue realization.
  
• The transition of strategic partnerships, such as the acquisition impacts with LabCorp and Tempus, could affect market share and revenue growth unexpectedly.
  
• The reliance on continued reimbursement improvements and the uncertainty around biomarker legislation adoption may affect pricing stability, impacting net margins.

Valuation

• The analysts have a consensus price target of $15.819 for Myriad Genetics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $29.0, and the most bearish reporting a price target of just $9.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $994.9 million, earnings will come to $157.9 million, and it would be trading on a PE ratio of 11.5x, assuming you use a discount rate of 6.8%.
• Given the current share price of $7.2, the analyst price target of $15.82 is 54.5% higher.
• 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.