Deutsche Bank upgraded Myriad Genetics, Inc. (NASDAQ: MYGN), as it believes the risk/reward is now balanced following the company below-consensus sales and earnings per share guidance for 2018.
The firm upgraded the rating from Sell to Hold, with the price target at $28.
At time of writing, shares of Myriad Genetics were rallying 3.19 percent to $28.75.
Analyst Dan Leonard said he was earlier concerned that the Street numbers were too high and didn't sufficiently reflect downside in the company's Hereditary Cancer Testing, or HTC, business, which accounts for 74 percent of the total sales. The company's sales guidance for 2018 was 4 percent below the Street estimates at the midpoint, the analyst noted.
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Deutsche Bank believes the price erosion in the core hereditary cancer testing business is likely to be metered post 2019, given that cost of HCT isn't a large portion of spend at any given payer.
Additionally, the firm noted that payers have historically used prior authorization as the primary lever to limit genetic testing spend, rather than price. The firm said payers may not prefer discriminating between providers, given the challenge posed by getting acquainted with the evolving medical practice, the firm said.
Meanwhile, Deutsche Bank also indicated Myriad Genetics is able to convince payers that the other HCT options aren't perfect substitutes for its tests due to its variant database and the FDA approved status of its BRCAnalysis test.
The firm also sees opportunity for volume gains to continue.
Deutsche Bank believes the Street estimates through 2020 now appear more appropriate, while opining that its estimates are largely in line save some timing differences.
"We would be more constructive on greater conviction in MYGN's efforts outside of hereditary cancer testing and/or greater volume growth in hereditary cancer testing," the firm concluded.
Latest Ratings for MYGN
| Date | Firm | Action | From | To |
| Aug 2017 | Deutsche Bank | Upgrades | Sell | Hold |
| Aug 2017 | Barclays | Maintains | | Equal-Weight |
| Feb 2017 | Ladenburg Thalmann | Upgrades | Sell | Neutral |
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