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Myriad Genetics, Inc. (MYGN) focuses on developing and marketing products for the healthcare industry. While its Predictive Medicine Products help assess risks for various cancers, its Therapeutic Products focus on treating patients with Alzheimer's disease, cancer, obesity, thrombosis, and HIV. In fiscal year 2007 (ended June 2007), diagnostic products such as BRACAnalysis (for testing breast cancer), COLARIS (for colon and uterine cancer), MELARIS (for skin cancer), and COLARIS AP (for adenomatus polyposis) contributed the bulk of the company's revenue of $157.1 million. The therapeutic products are under various stages of clinical development, and the company is developing these products either on its own, or in association with other corporate partners including Eli Lilly, Bayer Corporation, Schering-Plough, and Novartis. Notable collaborations in the Predictive Medicine division are with Abbott Labs, DuPont, Pfizer, and Roche.

Based in Salt Lake City, UT, the company employs more than 650 people.


Growth in predictive medicine has been strong

Myriad currently has five predictive medicine products on the market. BRACAnalysis is a comprehensive analysis of the BRCA1 and BRCA2 genes for assessing a woman's risk for breast and ovarian cancer. It is a hereditary test designed to find mutations in the BRAC1 and BRAC2 genes. Mutations in these genes can be associated with a 10 to 15-fold increase in ovarian or breast cancer. Similarly, mutations in the MLH1, MSH2, and MSH6 genes are associated with a nearly 40-fold increase in the risk for colon cancer or uterine cancer, and are identified by the company's COLARIS test. A new COLARIS AP test is used to find mutations that may lead to an increase in the risk for adenomatus polyposis (pre-cancerous colon polyps). Finally, the company's MELARIS hereditary test is designed to find mutations in the p16 gene, known to significantly increase the risk of melanoma.

In late July 2007, Myriad Genetics introduced a new product, TheraGuide 5-FU, to help predict which cancer patients are likely to suffer serious toxic reactions to the drug 5-Fluorouracil (5-FU) or the oral form of the drug, capecitabine. More than 500,000 Americans with breast cancer, colon cancer, skin cancer or head and neck cancer are treated with 5-FU each year. Approximately 30% of those patients experience severe toxicity. TheraGuide 5-FU is a comprehensive analysis of the genetic variations in two genes, DPYD and TYMS, which increase a patient's risk for toxicity to 5-FU chemotherapy. With the TheraGuide 5-FU test results, oncologists and their patients can take steps to reduce the risk of avoidable toxicity, including using alternative therapies, reducing the size of the dose and increasing patient monitoring for side effects. TheraGuide 5-FU provides the critical guidance oncologists need to personalize chemotherapy for their cancer patients who are being considered for chemotherapy regimens. The test cost is $1,100 and includes a comprehensive DNA sequence analysis of the DPYD gene and the important variations in the TYMS gene. The result is returned to the requesting physician within seven days of receipt at Myriad.

The company has focused on growing this business through internal development activities and through a distribution agreement with Laboratory Corporation of America Holdings. Laboratory Corporation has a sales team of more than 700 representatives through which Myriad can now access more than 200,000 primary care physicians and specialists. The company has also formed major marketing collaborations with other organizations in foreign countries. These agreements, along with an increased focus on marketing activities, have allowed Myriad to gain sizable market share in predictive medicine. This gain is visible in the strong performance of the business in the fiscal year of 2006, 2007 and in the first quarter of fiscal 2008. Myriad is also developing molecular testing for Diabetes and Pancreatic Cancer.

Myriad Genetics is seeing solid growth in the predictive medicine business. Sales continue to grow rapidly in the first quarter of fiscal 2008. Sales in the fiscal first quarter were $46.1 million, representing a 49.3% growth year over year, and 9.0% growth sequentially. In the fiscal year 2007, sales were $145.3 million, an increase of 44% over the $100.6 million of the same period of last year. Gross margin of preventive medicine continued to increase in the first quarter of 2008. Gross margin reached record 84% in the 1Q08, an increase of 2 percentage point over the 82% gross margin from the fourth quarter of fiscal 2007. Improved gross profit margins primarily resulted from the introduction of new, more efficient operating systems. The increase in predictive medicine revenues reflects strong customer demand for Myriad's molecular diagnostics products due to the demonstrated clinical utility of the tests and the clinical value to patients.

We maintain our optimism about Myriad's predictive medicine. With the introduction of TheraGuide 5-FU in July, we expect continued double digit growth in this business in the coming quarters. We raised our estimate for the rest of fiscal 2008. We estimate total revenue from predictive medicine will reach $209 million in fiscal 2008. We estimate sales in 2009 of $285 million and $350 million in 2010.

Drug development programs are promising with a robust pipeline

The Alzheimer's Disease Program: In drug development, the company is also making steady progress. Flurizan, its lead candidate for Alzheimer's disease, is designed to lower the levels of amyloid beta-42, one of the primary contributors to plaque that accumulates in the brain of Alzheimer's disease patients. Flurizan is currently under two pivotal phase III trials.

The company completed phase II trials with Flurizan in March 2005. The final results, reported in June 2005, demonstrated that Flurizan was well tolerated and beneficial in patients with mild Alzheimer's disease but not so beneficial in patients with moderate AD. Flurizan also demonstrated a 34% improvement with respect to the mild AD patients' daily living activities.

On March 12, 2006, Myriad announced the data from its 21-month phase II follow-on study of Flurizan in patients with mild Alzheimer's disease at the 19th annual meeting of the American Association of Geriatric Psychiatry. The data suggested that study participants on 800 mg BID of Flurizan continued to demonstrate increasing benefit through month 21 in the area of cognition and memory loss and that they maintained more of their global function and activities of daily living than those on 400 mg BID of Flurizan or than the projected placebo. The data suggest that during the follow-on period from months 12 to 21, the benefit of Flurizan on the measures of Alzheimer's disease increased in terms of both effect size and significance, the longer patients remained on Flurizan. As measured by the performance of activities of daily living (ADCS-ADL), by patients taking 800 mg of Flurizan BID, there was a 52% effect size compared with the projected slope of the placebo at 21 months (p=0.029). In terms of the patient's global function at 21 months, the CDR-sb scale showed a 75% effect size (p=0.0007), also significant. These data suggest that there is a substantial benefit from Flurizan on activities of daily living and global function, and that the benefit is increasing over time. The effect of Flurizan in improving cognitive decline, as measured on the ADAS-cog scale, has also increased, as shown by the effect size of 60% at 21 months (p=0.096). All three of the measures suggest sustained benefit from Flurizan in patients with mild Alzheimer's disease. The above results were further supported by the continued 24-month follow-on data of the phase II trial which was presented at the 10th International Conference on Alzheimer's Disease and Related Disorders, in Madrid, Spain on July 19, 2006. The data demonstrated the continued improvement in the area of cognition, global function and daily living activities in patients with mild Alzheimer's disease on 800 mg Flurizan.

On March 5, 2007, the company reported additional data from the above completed phase II trial at the annual meeting of the American Association for Geriatric Psychiatry (AAGP). New data demonstrated that Flurizan may be capable, not only of slowing the decline of Alzheimer's disease, but of halting the disease in its tracks. In this study, many patients with Alzheimer's disease got no worse over two full years, and in some cases, patients treated with Flurizan appear to have improved. Overall, 42% of patients on Flurizan showed improvement or no decline in one or more of the three primary endpoints of cognition, global function and activities of daily living, compared to 10% of patients on placebo. The vast majority of patients in this Phase II study, approximately 94% at the time of enrollment, were receiving stable doses of acetylcholinesterase inhibitors, which are FDA-approved drugs for symptomatic treatment of Alzheimer's disease. Thus, the benefits of Flurizan observed in these patients were over and above the current standard of care. Since Flurizan appears to slow the biological progression of the disease, this is an exciting and novel finding, and if replicated in the ongoing phase III trials will be extraordinarily important.

Based on the phase II results, and after holding discussions with the FDA, the company decided to modify the protocol of the phase III trial in the US, initiated in January 2005, to focus more on the mild AD indication. In this modified trial, the company will evaluate a twice daily dosage of 800 mg Flurizan on mild AD patients. On August 22, 2006, the company announced the completion of about 1600 patient enrollment for this trial. We expect the company to file in late 2007 if results are positive, followed by an approval in 2008. Patient data will be analyzed after 12 months, but patients will remain on treatment for 18 months to allow for additional follow up data. All patients in the U.S. phase III study are permitted to take current standard of care medicines in addition to Flurizan or placebo. Therefore, benefits seen in the trials are over and above any benefit provided by the current standard of care drugs. The US phase III trial is proceeding on schedule and the 18-month term of study will conclude as planned at the end of March 2008. The Company anticipates that it will report the top-line results of this study by the end of June 2008.

Myriad also started to enroll a global phase III trial in July 2006 in patients with mild Alzheimer's disease in Italy, France, Germany, Spain, Sweden, Switzerland, the United Kingdom, Netherlands, Belgium, Canada and Denmark. The trial will enroll approximately 800 participants into two groups, 800 mg twice daily and placebo, and the participants will receive treatment for 18-months. The primary endpoints in the global trial are identical to those of the U.S. phase III trial and are the same as two of the three endpoints in the phase II study. The trial is designed to meet the requirements of the European Agency for the Evaluation of Medicinal Products (EMEA) for marketing approval of Flurizan in Europe. In March 2007, the company announced the completion of enrollment of the global phase III trial. EU filing could come as early as in the 1H08, followed by approval in 2009.

Management stated that they will look for a partner to commercialize Flurizan once phase III data becomes available. We are optimistic on this compound because current Alzheimer's drugs do not slow the progression of the disease, they only treat the symptoms. If successful, Flurizan could be the first drug approved by the FDA for mild Alzheimer's that has a preventative indication.

The Prostate Cancer Program: In addition, Myriad is evaluating R-flurbiprofen (Flurizan), also known as MPC-7869, for prostate cancer in a phase II/III clinical trial. On January 8, 2007, Myriad announced the results of the trial. The clinical trial was designed to evaluate the safety of MPC-7869 and to consider its potential efficacy in slowing the rate of progression of prostate cancer among 246 patients with advanced disease. The two primary clinical endpoints of the trial were the time to systemic disease progression and the change in velocity of Prostate Specific Antigen levels. Statistical significance was not achieved for either of the endpoints, and therefore the Company does not intend to pursue further development of this compound in cancer. However, the study showed that MPC-7869 was well tolerated over long-term administration in an elderly population, confirming the data from previous studies. With the completion of this study, Myriad now has over 1,200 patient-years of safety data on this compound, with a maximum exposure period of 44 months. The safety data collected in this trial will be very useful to its program in Alzheimer's disease. The age of the study population is similar and the 800 mg twice daily dose of MPC-7869 is identical to that of its two ongoing phase III trials in Alzheimer's disease.

The Brain Cancer Program: The company is evaluate Azixa (MPC-6827) for brain cancer. Azixa is a novel small molecule inhibitor of microtubule formation that has demonstrated the ability to inhibit tumor growth in pre-clinical testing. Myriad acquired Azixa with a licensing agreement from Swedish biotech firm EpiCept. The candidate shows activity in animal models of human melanoma and cancers of the ovary, breast, prostate, colon and pancreas. However, the biggest potential lies in brain cancer or glioblastoma. The compound has the ability to cross the blood brain barrier something very few chemotherapy or targeted cancer agents fail to do. Early clinical testing demonstrated a concentration nearly 40-50x that of traditional agents in the brain. This could make Azixa a very potent agent for fighting cancer that has spread to the brain. Myriad believes that Azixa is also quickly cleared from the brain after dosing, allowing for aggressive use of the drug. The candidate also has the potential to become less resistant over time given its novel mechanism.

In September 2006, Myriad announced the results of two phase I trials for Azixa. The agent achieved its maximum tolerated dose. Most importantly, Azixa demonstrated measured reduction in tumor size in some patients. Based on the results of the phase I trials, the company initiated two phase II trials of Azixa in patients with brain cancer or metastatic brain cancer in Mar 2007. The first phase II trial is designed to determine the safety profile of Azixa and the extent of its ability to improve the survival of patients with glioblastoma. The trial will compare the survival of patients treated with Azixa to those treated with oxaliplatin, and to those treated with Azixa plus oxaliplatin. The trial is designed as an adaptive, open label, multiple dose study in patients with recurring or relapsed glioblastoma. Patients will be randomized into one of three treatment arms. Periodically, an analysis of efficacy will be conducted to determine the final size of the second stage of the trial. The trial is expected to enlist the participation of approximately 50-70 centers in total, through both stages of the phase II, in the United States and Europe. The second phase II trial is designed to determine the safety profile of Azixa and the extent of its ability to improve the overall survival of patients with melanoma skin cancer with brain metastases. The trial will compare the survival of patients treated with Azixa to those treated with temozolomide or the combination of Azixa plus temozolomide. The trial is designed as an adaptive, open label, multiple dose study in patients with metastatic melanoma. Patients will be randomized into one of the three treatment arms. The study may enroll up to 150 patients per arm. In August 2007, the company initiated the third phase II clinical trial of Azixa in patients with non-small-cell lung cancer that has spread to the brain. The third phase II trial is designed to determine the safety profile of Azixa and to assess the extent of its ability to improve the overall survival of patients with non-small-cell lung cancer that has spread to the brain. The primary endpoint of the trial is a comparison of the overall survival of patients treated with Azixa alone to those treated with temozolomide or the combination of Azixa plus temozolomide. Secondary endpoints include progression-free survival and a quality of life assessment of patients. The trial is an adaptive, open-label, multiple-dose study in patients with non-small-cell lung cancer that has spread to the brain. Patients will be randomized into one of three treatment arms. The study may enroll up to 150 patients per arm.

Myriad is also developing MPC-2130 for cancer indications. MPC-2130 is a broad-acting inducer of apoptosis in cancer cells. MPC-2130 promotes programmed cell death in tumor cells at a later point in the apoptotic pathway. This leads Myriad management to believe that MPC-2130 may have additive or synergistic activity with other cancer compounds which work at earlier stages of the apoptotic pathway. MPC-2130 is in phase I development. We hope to see the phase I data later this year in advanced metastatic tumors or blood cancers as well as refractory cancers that have progressed despite previous chemotherapy.

In May, 2006, Myriad initiated a phase I human clinical trial of MPC-0920, an orally available, direct thrombin inhibitor. The trial will enroll healthy volunteers in a single, escalating dose format. The phase I is designed to determine the safety, dose range and pharmacokinetics of the drug candidate. There are eight volunteers per cohort, six of whom are given the drug and two are given placebo. The dose escalation will continue until a blood clotting time that is several times higher than normal and sufficient to ensure clinical utility in thrombotic conditions is reached. The primary objective is to examine the safety of MPC-0920 and a secondary objective will be to study the biological activity of MPC-0920. Because MPC-0920 demonstrated an effect on blood clotting time in animal studies, even at very low dose, the company expects the phase I trial to show it to have an effect at low dose in humans as well. This may allow the company to determine a biological effect in the volunteers, which is unlike the situation in most phase I studies. MPC-0920 has been the subject of 27 preclinical studies to date, comprising safety, toxicity, pharmacokinetics and formulation. The company also plans to bring MPI-49839, an orally active HIV maturation inhibitor, into clinic this year.

The HIV Program: On December 04, 2007, Myriad submitted an Investigational New Drug (IND) application to the FDA to begin phase I trials with its drug candidate, Vivecon (MPC-9055), for the treatment of AIDS.

Vivecon is a novel, oral, small-molecule drug candidate to inhibit viral maturation. The drug candidate inhibited viral particles from reaching maturity, so they were incapable of infecting other cells, by targeting the capsid-SP1 cleavage site in the HIV Gag protein. One of the last steps in viral maturation is the enzymatic cleavage of capsid from SP1 by the viral protease. Vivecon is believed to inhibit this cleavage step by binding with the capsid-SP1 junction in Gag, leading to inhibition in development of the viral core. It does not inhibit HIV protease itself.

In preclinical in vitro and in vivo studies, Vivecon has demonstrated good anti-viral activity and safety profile. Vivecon was also shown to be active against viral strains that are resistant to the currently marketed anti-HIV drugs.

The first phase I trial is intended to assess the pharmacokinetics, absorption and tolerability of the compound. This trial is formatted as a single ascending dose in healthy volunteers. Pending successful completion of phase I, Myriad plans to initiate a phase IIa multiple ascending dose trial in HIV-infected individuals to evaluate safety, pharmacokinetics and Vivecon's ability to inhibit viral replication.

Financial position is strong

Myriad Genetics relies on its predictive medicine for its revenue generation. At September 30, 2007, the company had approximately $299 million in cash, cash equivalents and marketable investment securities.

The company has no debt and no convertible securities. The current cash is more than enough to last through fiscal 2009, in which year the company will be profitable and will generate positive cash flow from its operations.


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