Zacks_Analysts' Blog : Myriad to Buyback Shares Again - Analyst Blog

Myriad Genetics (MYGN) has authorized a $100 million stock repurchase program, of which $50 million will be executed with the help of an accelerated share repurchase (ASR) agreement with JPMorgan Chase & Co. (JPM). The company expects to complete the remaining $50 billion of share buybacks by the end of December 2011.

During the past twelve months, the company has returned $200 million to its shareholders through share buybacks, including 2.9 million shares during the second quarter of fiscal 2011. Myriad exited the last reported quarter with cash and marketable securities of $494.4 million, up 1.2% from $488.4 million at the end of June 2010. 

Although Myriad derives a majority of its revenues from Bracanalysis, which studies BRCA1 and BRCA2 genes for assessing woman's risk of developing hereditary breast and ovarian cancers, it is working on diversifying its portfolio.

Moreover, in order to improve its bottom line, the company has adopted sales expansion activities through the execution of DTC (direct-to-consumer) campaign and has beefed up its sales team to increase market penetration into the US OB/Gyn and oncology market. While the company derives 95% of its revenues from the US, it is planning to establish its presence in Europe by December 2012, a market almost 75% of the size of the US.

With a strong balance sheet, Myriad is well placed to expand its product portfolio, targeting new territories and launching new products. Moreover, the company’s plan to expand in Europe is also backed by the existing cash balance.

Recommendation

We consider Myriad’s Bracanalysis to be a valuable asset for top line growth as it has the potential to tap a widely unexplored market. Although the company’s molecular diagnostics business is performing well, we remain concerned about the overall weakness in the economy and the tough competitive scenario in the biotechnology and genetics-testing field.

However, with a strong cash balance, the company is well placed to expand its product portfolio and target new territories. Its bottom line is expected to strengthen further with the share buyback program.

We have a ‘Neutral’ recommendation for the stock, which also corresponds to the Zacks # 3 Rank (hold) in the short-term.