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Why Myriad Genetics Shares Spiked Then Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Myriad Genetics (NASDAQ: MYGN  ) , a molecular diagnostic company, spiked higher by as much as 13% following a ruling by the Supreme Court over the patentability of human genes. The gains were short-lived, though, as shares closed the day down nearly 6%.

So what: Today's Supreme Court ruling was nothing short of confusing if you're a Myriad Genetics shareholder. On one hand, the Supreme Court ruled that genes found naturally in the body cannot be patented. This means that the patents held by Myriad on the BRCA1 and BRCA2 genes, which are often linked to a higher risk for developing breast and ovarian cancer, would not be valid. It could also mean that competition to Myriad's BRACAnalysis molecular test could be on the horizon. Conversely, the Supreme Court did uphold Myriad patents on synthetic genetic material known as complementary DNA. Most of Myriad's patents are based on cDNA.

Now what: There are a lot of huge implications here. First, it means that Myriad may soon face competition for its lead revenue-generating BRCA1 and BRCA2 gene test. It also means that the focus on cDNA is going to increase even more dramatically than it had in the past since the majority of its patents were upheld. Today's ruling likely isn't going to affect Myriad's bottom line in any meaningful way over the next couple of years, but it could change the face of molecular diagnostics and perhaps introduce more competition in the latter half of the decade.

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  • Report this Comment On June 13, 2013, at 5:03 PM, aecooter33 wrote:

    Competition later half of the decade? 3 companies launched BRCA testing today and Quest said they will launch in a few months.

  • Report this Comment On June 13, 2013, at 6:23 PM, cal8 wrote:

    I think you massively misunderstood what the ruling means. The cDNA has nothing to do with anything that MYGN makes money on (no one reverse transcribes mRNA to sequence for BRCA1 or 2, you do this if you are making an injectable, this was done for the biotech industry). The first price I have seen is $2200 for a test that MYGN was charging $4200 yesterday.

    With multiple testing companies (that do this type of testing but much more efficiently and at higher volume) coming out with tests, the tests will drop in price and become better. This is a great day for women's health and an terrible day to be long MYGN. I fully expect MYGN to disappear.

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9/28/2016 4:00 PM
MYGN $21.58 Down -0.52 -2.35%
Myriad Genetics CAPS Rating: ****