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Why Myriad Genetics Shares Are Tanking Today

By Keith Speights - Feb 7, 2020 at 11:59AM

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The molecular diagnostics company's latest quarterly results weren't anywhere close to what Wall Street expected.

What happened

Shares of Myriad Genetics (MYGN 0.22%) were tanking by 32.5% as of 11:27 a.m. EST on Friday. The plunge came after the molecular diagnostics company announced disappointing fiscal 2020 second-quarter results following the market close on Thursday.

Myriad reported total revenue in Q4 of $195.1 million, down 10% year over year. The company posted adjusted earnings per share of $0.23. This was a 40% drop compared to the prior-year period and came in well below the consensus Wall Street estimate of $0.31.

DNA with a segment broken off

Image source: Getty Images.

So what

Sometimes companies that give bad news in their quarterly results try to spin the news in a way that makes it seem more positive. But Myriad Genetics didn't attempt to sugarcoat its Q2 numbers.

CEO R. Bryan Riggsbee stated:

Revenue in the fiscal second quarter fell short of expectations largely due to the prenatal business. Prenatal cash collections were negatively impacted by issues in billing operations that occurred during the transition of the homegrown Counsyl billing system to an industry-standard system used by Myriad.  We are in the process of implementing a number of initiatives focused on improving cash collections, have made several organizational changes to bolster growth and are evaluating additional initiatives.

How badly did Myriad's prenatal business perform in the second quarter? Sales plummeted 47% year over year to $16.4 million. The company also experienced less worrisome declines for its hereditary cancer, GeneSight, and Vectra molecular diagnostics businesses.

Investors shouldn't dwell too much on one disappointing quarter. However, Myriad Genetics is now on a roll in the wrong direction, missing earnings estimates for three consecutive quarters.

Now what

Riggsbee said, "Despite recent payer related headwinds, we continue to see significant near-term prospects to drive increased revenue and I am highly focused on returning Myriad to a position of sustained long-term profitable growth."

Like it or not, though, healthcare stocks like Myriad perform poorly when they don't meet Wall Street's expectations. The company projects adjusted earnings per share of $0.02 for the third quarter, well below the average analysts' estimate of $0.30. Myriad could be in store for more turbulence.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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