Myriad Genetics (MYGN) Plunges After a Partial Supreme Court Victory
Shares of diagnostic test maker Myriad Genetics (MYGN) plunged nearly 14% last Friday, after the company received a partial victory in its patent battle over its test for genes associated with breast and ovarian cancer, which ended four years of litigation. Salt Lake City, Utah-based Myriad currently sells a popular test for the BRCA 1 and BRCA 2 genes linked to hereditary breast and ovarian cancer. The test is the only one available on the market due to Myriad's patents.
This has led a group of scientists to challenge Myriad's patents, despite the U.S. Patent and Trademark Office's common practice of awarding patents on human genes for nearly three decades. Daily Chart
In response to the challenge, the Supreme Court ruled that genes naturally found in the body can't be patented, but those synthetically created, known as complementary or cDNA, can be. This invalidates only five of Myriad's patents, which include naturally occurring genes, but did not affect the other 19. Myriad's general counsel, Rick Marsh, stated, "The balance of our patent estate is still valid and enforceable," Marsh said. "We are very pleased with the outcome." That distinction reportedly allows Myriad to preserve its revenue from its best-selling BRACAnalysis test, which was launched in 1996 and has been used by over a million women. However, other scientists claimed that it would open the door for competing tests and allow scientists to perform other gene-related disease research on non-synthetic DNA without restraints. They also claim that researchers will now be able to perform gene-sequencing experiments to better understand diseases without the fear of being sued by companies like Myriad. In the end, new diagnostic tests developed through non-synthetic sequencing could become a viable alternative to Myriad's BRCA test. Some scientists also believe that the ruling will allow better gene-based treatments for cancer and other serious diseases, which could create "custom" tests and medicine based on individual needs. However, Erik Gordon, a professor at University of Michigan's Ross School of Business noted that it will take competing companies a very long time to duplicate Myriad's BRCA tests, which are considered the industry standard, without infringing on their patents. Therefore, Myriad shareholders should realize that a big change is not in the foreseeable future, despite the Supreme Court's confusing and dramatic ruling. Many investors were puzzled by the ruling's implications, and the stock initially surged 10% to a four-year high of $38.27 on Friday before plunging. The company's trading volume on Friday was 15 times the daily average, indicating high interest in the stock. Shares of Myriad currently trade at 14.8 times forward earnings with a 5-year PEG ratio of 1.2. The stock does not currently pay a dividend. Other News About MYGN Myriad Genetics Shares Retreat on Court Decision
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Published on Jun 21, 2013
By Leo Sun