As if last summer’s Supreme Court denial of protection for breast cancer gene patents previously issued to Myriad Genetics weren’t enough, now the Centers for Medicare and Medicaid Services (CMS) wants to reduce the reimbursement rate for BRCA testing by roughly 50%.
On December 28, CMS announced that it was cutting reimbursement for BRCA1 and BRCA2 testing from $2,700 to $1,438. Analysts were quick to foresee reduced performance for Myriad Genetics, which until June’s Supreme Court decision had exercised an international stranglehold on BRCA testing. Since then, the company has filed suit against several labs that have sought to move into the BRCA testing space, in turn spawning a number of countersuits.
Mizuho Securities analysts Peter Lawson and Eric Criscuolo issued a research note downgrading Myriad stock from buy to hold—with a reduced price target from $36 to $24—and offered extensive commentary on their expectations for the company—and the field—in the year ahead.
“While Medicare amounts to only about 10% of MYGN’s BRCA revenue, we believe the cut will bleed through to private pay, or at least reinforce the idea/threat they will cut,” wrote Lawson and Criscuolo.
Although they voiced confidence in the superiority of Myriad’s test—in part because of the company’s extensive database of clinical outcomes—the analysts admitted that the CMS decision adds uncertainty to Wall Street estimates. “While sentiment is low, starting with the Supreme Court decision, the speed of competitive entrants and now escalation of pricing fears, we believe sentiment and management visibility will be reduced, clouding Street estimates,” they noted.
With more or less sympathy, other market analysts have also reduced their price targets for Myriad, with new expectations ranging from $15 to $32.
Myriad could no doubt use an opportunity to put something in its win column in the near future. But with pricing and competitive pressures mounting, and Street sentiment decidedly against them, that might take a while to pull off.
