Do you find yourself avoiding biotech investments, especially small and micro caps, because of the risk? Consider Myriad Genetics (NASDAQ:MYGN). Along with plenty of risk, the company has a cash-generating biotech-based business that greatly reduces its cash burn rate.

Myriad reported fourth-quarter and full-year results today, and they looked good. Q4 revenue, compared with the year-ago comparable quarter, rose by 42.4%.

Producing an eye-popping 60% increase in sales was the company's predictive medicine (genetic testing) segment, now representing 80.4% of total sales. Used to determine future cancer risks, the testing business benefited from a marketing and sales effort that focused on expanding insurance coverage, eliminating insurance preauthorization requirements, and educating oncology nurses and physicians with regard to the utility of genetic testing.

Ramping up the highly profitable predictive testing business is doubly smart, given the 73% gross profit margins in the fourth quarter and the $17 million in positive cash flow it gushed in fiscal 2005. It also makes Myriad more than just a development-stage biotech pharmaceutical company.

Unfortunately, testing does not pay all the bills. In the fourth quarter, research and development expenses rose by 33.5%, and although the net loss was less than it was last year, there was still $10 million in red ink.

The company has a rapidly expanding drug development pipeline. Its lead drug candidate, Flurizan, is in phase 3 trials for the treatment of Alzheimer's disease. The company also has a phase 2 trial for a drug focusing on prostate cancer, and three phase 1 trials for the treatment of solid tumors, brain cancer, and metastatic tumors/blood cancers. The lead candidate for the treatment of HIV (MPI-49839) is waiting in the wings for a phase 1 trial.

The pipeline is using up a good chunk of cash, but Myriad still ended the year with $113.8 million in cash and no debt. The company believes there is enough cash to get through at least the next two years, and in fact it has a $300 million shelf registration already filed.

There are many exciting developmental drug companies out there, among them Human Genome Sciences (NASDAQ:HGSI) and Incyte (NASDAQ:INCY). But these also have substantial debt and no growth engine (as the testing business is for Myriad) to cut down on the cash burn rate. Established biotechnology companies such as Genentech (NYSE:DNA) and Amgen (NASDAQ:AMGN) have massive market capitalizations; Genentech sells for 52 times estimated 2006 earnings.

On the other hand, Myriad is a small-cap company with 30.8 million shares outstanding. The stock has been a lackluster performer over the past three years despite the success of the testing business and the full drug pipeline. It's still a high-risk company, but it offers to investors an interesting option compared with other biotechnology companies.

Myriad Genetics is a Motley Fool Rule Breakers selection . To see more of our biotech picks, start a free trial today.

Fool contributor W.D. Crotty owns shares in Myriad Genetics. Click here to see The Motley Fool's disclosure policy.