by Travis Johnson, Stock Gumshoe | August 18, 2017 4:15 pm
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I met with MYGN a few years ago while the stock was still on the southbound express. Their super success story test (product) for genetic susceptibility to breast cancer had become a very high percentage of total revenues. It had gotten a big boost when Angelina Jolie’s heath made headlines, then the Supreme Court ruled their test patent protection invalid, meaning others could enter the market and chip away the market and also drive lower prices, “double whammy”. At the time of my meeting, I was told that is was their library of past test data that was the “secret sauce”, which would keep customers coming back and paying towards full price (and getting reimbursed!) Its a little like the vision center that claims a 100% success rate versus the other down the street costs 50% less – which is the better value? People feared MYGN’s franchise would quickly whither. Meanwhile, the company was not exactly asleep at the wheel and had been funding new products, developed or acquired at early stage. One such product, Polaris, could help diagnose whether a prostate cancer case was likely to benefit from aggessive treatment, or, rather conclude the patient would be just as well off avoiding unneccesary procedures. (very simplified). Who would want to go through that if you could know ahead “for sure” that it was a waste of time and money? A completely different product arena of theirs is “companion diagnostics” —a test category which greases the rails for a new drug category, the PARP inhibitors such as TSRO’s, for breast/ovarian cancers. A payor will have to pay a lot for PARP therapy. By testing a patient first with a “companion diagnostic” specifically designed for the treatment in question, a conclusion can be made whether the treatment will be successful. Similar concept to the prostate test, but with potentially higher stakes. MYGN seemingly has the PARP market locked up, but, one key unknown is how these companion diagnostics are going to be priced.
One thing that is very nice about the companion diagnostics testing model is that payors will likely require the tests prior to approving payment for the PARP treatment itself….meaning: the drug company (like TSRO) needs the companion diagnostic test completed before they can sell their drug. So it is the PARP guy who will pay for all the marketing, and perhaps some of the distribution costs…the MYGN salesman just answers the phone.s.
So the battle ahead, IMO, is whether the new tests volumes will grow fast enough to offset the shrinkage of the BIG product…we’ve seen this movie with companies. Here, while the stock was dropping, it was becoming apparent to some that maybe the company’s “secret sauce” story has some validity and the big product remains stable or maybe even grows. If you could really understand that claim, you would know whether to buy this stock. so far anyway, the new up-and-comers are showing promise, but they are small relative contributors at this point.
The bull theme for this company is in the future of neccessary medical cost containment. The history of medicine was doctor centric, which placed few limits of chosen treatment. Now the monster that is 20% of the US economy is squeezing out other spending of a constrained national budget. Efficiency from increasingly having medical care run like a business is part of it (mostly available through IT and big data analysis). But another big part is avoiding unneccesary treatment because it doesn’t help. In our litigious society, everyone needs to cover their a.. Better to have a legal backstop in denying coverage…I am sure many laywers are watching this one with moist chops. So tests that have been approved as statistically validated proofs for going ahead or not with a treatment or procedure, means “better outcomes”…both patient and payment system. That is the train MYGN claims to be on, and those who are not short (see below) are believers.
Note, is there has been a Massive short position here (with capital “M”). ergo… you can draw your own conclusions…cue the move line, “Hey punk, do you feel lucky?”
Well put, thanks.
Thanks. The situation with patents is a concern
Well, Travis, I took some of the stock @ $30.00 and its been on an upward trend since (now 20% up as of 2/10/17) I have a 10% stop on it so I will see how it goes.
When this wonderful Mampilly recommendation for MYGN was made MYGN was trading at, or around $49 – $50, it is now trading and bouncing around $27 -$29. Another big hit for the wonderful Mampilly.