Can Molecular Diagnostics Drive Myriad's (MYGN) Q2 Earnings?

Myriad Genetics, Inc. (NASDAQ:MYGN) is scheduled to report second-quarter fiscal 2018 results on Feb 6, after the closing bell.

Last quarter, the company posted a positive earnings surprise of 23.8%. Moreover, Myriad Genetics beat the Zacks Consensus Estimate in all of the trailing four quarters, the average being 15%.

Let’s take a look at how things are shaping up prior to this announcement.

Factors Influencing Q2 Results

Similar to last quarter, MyriadGenetics is expected to gain from strong Molecular Diagnostics performance, led by solid contributions from the GeneSight and EndoPredict tests. Per the company, the GeneSight test represents significant opportunities. As GeneSight is placed in a highly under-penetrated preventive care market, the product has huge growth potential. Also, during the last reported quarter, the company announced favorable data from a multi-center, double-blind and randomized controlled trial evaluating the impact of the GeneSight Psychotropic test on psychiatric treatment response in 1,200 patients with major depressive disorder. This is expected to stimulate expanded GeneSight adoption and payer coverage. Management expects consistent growth in GeneSight test revenues in the quarters ahead.

We also encouragingly note that, over the last few months, Myriad Genetics has been making encouraging progress with the EndoPredict test. During fiscal 2017, the company received reimbursement approval for EndoPredict in France, Quebec and an increased number of German sites. The company also received positive coverage decision for the test from Palmetto GBA, a Medicare Administrative Contractor (MAC) and Anthem (NYSE:ANTM) in August, within six months of the test launch in the United States. Notably, full implementation of this decision will lend Myriad Genetics coverage for approximately 90% of breast cancer patients. Moreover, according to Myriad Genetics, EndoPredict presents a global market opportunity of more than $600 million annually, with major demand in countries like Canada and the United States.

Myriad Genetics, Inc. Price and EPS Surprise

Myriad Genetics, Inc. Price and EPS Surprise | Myriad Genetics, Inc. Quote

We are also upbeat about management’s expectations of double-digit volume growth in fiscal 2018 for GeneSight, Vectra DA and Prolaris revenues, all of which make up the chunk of the Molecular Diagnostics portfolio.

The Prolaris testing’s volumes grew in double digits in the last reported quarter as well. We are also encouraged by the company’s receipt of a positive final Local Coverage Determination to expand Medicare coverage of the Prolaris test from Palmetto GBA, a MAC, in the first half of 2017. Moreover, management seems upbeat about the prospects of the Prolaris test as it represents a global market opportunity of approximately $1.5 billion annually.

Myriad Genetics witnessed continued year-over-year growth in Hereditary Cancer volumes, with pricing matching expectations in the last reported quarter. Per management, the company continued to witness a solid sample trend in this space. Last September, the company launched riskScore under its myRisk Hereditary Cancer testing portfolio. Notably, riskScore helps determine a woman's risk of developing breast cancer by combining genetic markers throughout the genome with the patient’s family and clinical history.

Management believes that the company is well-positioned in breast cancer testing market for fiscal 2018, courtesy of encouraging Hereditary cancer volumes on steady growth and predictable long-term pricing. Thus, we believe the company is positioned to cash in on the huge potential in the breast cancer screening market.

The Zacks Consensus Estimate for fiscal second-quarter revenues of $189 million reflects a decline of 4.1% from the year-ago quarter reported number.

On the flip side,unfavorable foreign currency translation continues to pose a threat. With a considerable portion of its revenues coming from outside the United States, the company faces the risk of exchange rate fluctuations. Additionally, macroeconomic uncertainty and higher expenses owing to extensive pipeline of some testsmay impact margins.

Earnings Whispers

Our proven model does not conclusively show that Myriad Genetics is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Myriad Genetics has an Earnings ESP of -3.72%. This is because the Most Accurate estimate is pegged at 23 cents, while the Zacks Consensus Estimate is at 24 cents.

Zacks Rank: Myriad Genetics carries a Zacks Rank #3, which increases the predictive power of ESP. However, an ESP of -3.72% makes surprise prediction difficult.

The Zacks Consensus Estimate for second-quarter 2018 adjusted earnings of 24 cents reflects a 7.7% decline from the year-ago quarter.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Bio-Rad Laboratories (NYSE:BIO) has an Earnings ESP of +4.45% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein (NASDAQ:HSIC) has an Earnings ESP of +0.09% and a Zacks Rank #3.

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