What happened

Shares of genetic-testing leader Myriad Genetics (NASDAQ:MYGN) dropped over 18% today. That may have investors confused, especially considering the company today announced that its GeneSight platform successfully concluded a major study showing it could potentially be used to direct the treatment of depression and provide better outcomes for patients. 

It was the largest study of its kind ever conducted -- with 1,200 patients. It was a double-blind, randomized study -- the most robust design. So why did the stock drop? At the very bottom of the press release, Myriad Genetics buried one tiny piece of information that has Wall Street worried: The test didn't work in all patients.

As of 12:47 p.m. EDT, the stock had settled to an 18.2% loss.

A businessman pulling a block out of a block tower game, similar to Jenga.

Image source: Getty Images.

So what

The potentially troubling news was at the bottom of the press release under the subheader "Assurex Milestone Payments." Myriad Genetics acquired the all-important GeneSight platform when it acquired Assurex Health for up to $351 million. The "up to" part covers milestone payments depending on the performance of certain studies involving the platform, including the successfully concluded major depressive disorder test reported today. 

Myriad Genetics disclosed to investors that the "clinical trial milestone payment will not be due because this endpoint did not achieve statistical significance in the entire study population." To be fair, that's not a very detailed description, but Wall Street isn't taking any chances.

GeneSight is the most important platform for the future of Myriad Genetics. Most of its new tests developed in-house have stumbled to deliver growth and aren't growing quickly enough to replace declining revenue from its hereditary cancer test platform. So, it acquired GeneSight, which provided $78 million in revenue in fiscal 2017. The problem is that the hereditary cancer testing platform's revenue fell by $70 million.  

Now what

Depending on the meaning of "did not achieve statistical significance in the entire study population," today's news of a successful study in directing treatment in depression could be less important than the press release would lead investors to believe. Then again, Mr. Market could be grossly overreacting to that vague disclosure. Right now, there's simply no way to know for sure. Investors will need to wait for management to provide a more detailed explanation.