Recently, Angelina Jolie announced that she underwent a prophylactic bi-lateral mastectomy in an effort to reduce her chances of being afflicted with breast cancer. Jolie’s mother, Marcheline Bertrand, died of ovarian cancer in 2007 at age 56, and Jolie’s maternal grandmother, who died in 1973 at age 45, was also diagnosed with ovarian cancer.
Jolie’s decision to undergo a double mastectomy before ever contracting breast cancer was not only a brave decision, it was one made by an individual who was well-informed. Her choice to have a double mastectomy was based on information that, only seventeen years ago, was not available to patients. She had learned that she was a carrier of the BRCA1 gene mutation, which is a major contributor to breast and ovarian cancer. Ultimately, Jolie decided it would be best to have the surgery performed to reduce the odds of her getting breast cancer.
BRCA1 and BRCA2 are part of the human genetic system that belong to a class of genes known for their ability to suppress tumors. Mutations of these genes, however, has been linked to increased risks of contracting breast and/or ovarian cancer, which are considered to be “hereditary.” In 1988, a search for the genetic basis of breast and ovarian cancer began in earnest, and in 1990 a team of scientist announced that they had discovered the linkage between a certain gene and the increased risk of breast cancer. That gene was identified as BRCA1, which stands for Breast Cancer Gene 1. In 1991, following the discovery of BRCA1, a team of research scientist formed Myriad Genetics (MYGN) for the purpose of “elucidating” the roles genes play in the development and progression of human diseases.
Company:
Myriad Genetics is headquartered in Salt Lake City, Utah, but the company has offices worldwide, and its international headquarters is located in Zurich, Switzerland.
The company’s founders are:
- Mark Skolnick (Adjunct Professor in the Department of Medical Informatics at the University of Utah)
- Walter Gilbert (1980 Nobel Laureate in chemistry and Professor in the Department of Molecular and Cellular Biology at Harvard University)
- Peter Meldrum (past President and CEO of Agridyne and current CEO and President of Myriad Genetics, Inc.) and
- Kevin Kimberlin of Spencer Trask & Company
In 1996, Myriad introduced the first molecular diagnostic test for common diseases: hereditary breast and ovarian cancer. The test is known as BRACAnalysis® and it has become the standard of care for diagnosing hereditary gene mutations known for increasing the risk of breast and ovarian cancer. Since the introduction of BRACAnalysis, Myriad has gone on to develop eight additional innovative molecular diagnostic tests for breast, prostate, colon, pancreatic, ovarian, and uterine cancers and melanoma. To date, Myriad’s tests have benefited approximately one million cancer patients.
For over two decades, Myriad has pioneered nucleic acid (DNA and RNA) technologies to identify novel genetic biomarkers that can act as early indicators of an individual’s risks for contracting certain types of cancers, and the tests have been proven to save lives and improve the quality of life of patients with cancer, or who have a family history of cancer.
In 2011, Myriad acquired Rules-Based Medicine, Inc. of Austin, Texas, a leader in the utilization of multiplex immunoassay technologies used to discover protein biomarkers. The acquisition of the company and its ability to work with DNA, RNA and proteins gives Myriad a complete complement of biomarker technologies; a move which positioned Myriad as a leader in the emerging field of companion diagnostics.
In 2012, Myriad expanded its international operation by opening a laboratory in Munich, Germany. It also expanded its sales operations to include markets in Paris, Madrid, Milan, Munich and Zurich. The company believes that its predictive medicine, personalized medicine, prognostic medicine and companion diagnostic products will benefit patients world-wide by helping physicians to better guide their patients in their healthcare decisions.
A summary of the critical events and milestones, which have occurred over the past twenty-two years, can be seen in the bulleted points below:
- 1991 – BRCA1 was linked to chromosome 17 by UC Berkeley scientists
- 1991 – Myriad Genetics was founded by Dr. Walter Gilbert, Mark Skolnick, Kevin Kimberlin and Peter Meldrum
- 1994 – BRCA1 was cloned at the University of Utah in Mark Skolnick’s lab and published by 40 collaborators
- 1994 – First BRCA1 U.S. patent was filed by the University of Utah, National Institute of Environmental Health Sciences (NIEHS) and Myriad Genetics
- 1994/1995 – Development of process and laboratory to perform high throughput sequencing by Myriad
- 1995 – BRCA2 was resequenced based on unpublished information at the Myriad facility and the University of Utah by Mark Skolnick and collaborators
- 1995 – First BRCA2 patent filed in the U.S. by the University of Utah and other institutions
- 1996 – Myriad launched BRACAnalysis, a predictive medicine product for hereditary breast and ovarian cancer
- 1997 – First BRCA1 patent was granted in the U.S. to the University of Utah, NIEHS and Myriad Genetics
- 1998 – First BRCA2 patent was granted in the U.S. to the University of Utah, NIEHS and Myriad Genetics
- 2000 – Myriad launched COLARIS, a predictive medicine product for hereditary colorectal and uterine cancer
- 2002 – Myriad launched COLARIS AP, a predictive medicine product for adenomatous polyposis colon cancer syndromes
- 2002 – Myriad launched MELARIS, a predictive medicine product for hereditary melanoma
- 2007 – Myriad launched TheraGuide 5-FU, a personalized medicine product to predict toxicity to 5-FU-based chemotherapy
- 2008 – Myriad launched PREZEON, a personalized medicine product to assess the status of the PTEN gene
- 2009 – Myriad launched OnDose, a personalized medicine product to measure a patient’s exposure to 5-FU chemotherapy
- 2010 – Myriad launched PANEXIA, a predictive medicine product for hereditary pancreatic and related cancers
Material Events:
Myriad is currently a defendant in a lawsuit brought by the Association for Molecular Pathology, et al., in which the Plaintiffs are seeking a declaratory ruling that 15 claims in patents relating to the BRCA1 andBRCA2 genes are invalid and unenforceable under 35 U.S.C Section 101. The suit was originally filed on May 12, 2009 in the United States District Court for the Southern District of New York.
On May 12, 2009, the ACLU and the Public Patent Foundation (PUBPAT) filed a lawsuit charging that patents on two human genes associated with breast and ovarian cancer, BRCA1 and BRCA2, are unconstitutional and invalid.
Source: ACLU
On March 29, 2010, Myriad’s patents on the BRCA1 and BRCA2 genes were ruled invalid by the U.S. District Court for the Southern District of New York. On appeal, the U.S. Court of Appeals for the Federal Circuit reversed the trial court’s opinion and held that the genes were eligible for patents. On December 7, 2011, the ACLU filed a petition for a writ of certiorari with the U.S. Supreme Court, and on March 26, 2012, the Supreme Court, in light of Mayo Collaborative Services v. Prometheus Laboratories, Inc., in which the Supreme Court had ruled, just six days earlier, that more restrictive rules were required to patent observations about natural phenomena, vacated the Federal Circuit’s judgment and remanded the case to the lower court for further consideration.
On August 16, 2012, the Federal Circuit reaffirmed Myriad’s right to patent the genes, although it denied the company’s rights to patent comparisons of DNA sequences. On November 30, 2012, the Supreme Court agreed to hear a second challenge to the two gene patents held by Myriad. Oral arguments took place on April 15, 2013, with a decision expected by the end of the Supreme Court’s term in June, 2013.
At issue with Myriad’s patents is whether or not the company can patent something that occurs naturally in nature. Under patent law, a patent can not be issued on something unless it is “markedly different” from a product of nature. In his oral arguments to the Supreme Court, Myriad’s attorney, Gregory Castanias, argued that once a gene was removed from the human body it became a “new molecule” that Myriad “invented.” Justice Sotomayor challenged Castanias on this claim using a chocolate chip cookie analogy:
I can bake a chocolate chip cookie using natural ingredients — salt, flour, eggs, butter — and I create my chocolate chip cookie. And if I combust those in some new way, I can get a patent on that. But I can’t imagine getting a patent simply on the basic items of salt, flour and eggs, simply because I’ve created a new use or a new product from those ingredients.
In response, Castanias argued that the chemical composition of the isolated DNA is different from that of the DNA in the human body because the gene is connected to other chemicals when it is in the body. Accordingly, Castanias argued that Myriad created an invention by determining where the gene began and ended. He offered Justice Sotomayor his own analogy by saying: “A baseball bat doesn’t exist until it’s isolated from a tree. But that’s still the product of human invention to decide where to begin the bat and where to end the bat.”
The case is something I covered in a previous article on Myriad, and borrowing from that article:
Myriad’s Long-Term Implications: Watching the Watchers. Looking ahead, it appears increasingly unlikely that Myriad’s denouement, when it finally arrives in 2013 or 2014, will produce a significant effect one way or the other on either Myriad or the personalized medicine industry. We think this is likely to be true regardless of the litigation’s substantive outcome.
For Myriad, win or lose in court, its challenged patents will expire by the end of 2015. But the company’s additional patents (the litigation involves only a small minority of Myriad’s overall BRCA portfolio), its decades of experience as the sole provider of clinical BRCA diagnostic testing and its proprietary database of BRCA mutation information should allow Myriad to comfortably maintain its advantage in the marketplace against would-be direct competitors of clinical BRCA diagnostic testing.
Source: Myriad Gene Patent Litigation
Company officials, also, do not believe the case will have a material adverse impact on the company’s business. According to information provided in the most recent 10-Q document, which was filed on May 8, 2013:
Apart from the nine claims being challenged in this lawsuit, there are over 500 separate claims under 24 patents, and various propriety technologies and information, which cover the intellectual property utilized in, or relating to, our BRCAnalysispredictive medicine test for breast and ovarian cancer which are not subject to this lawsuit. Accordingly, we do not believe that this lawsuit will have a material adverse impact on our business, financial position or results of operations.
We are not a party to any other legal proceedings that we believe will have a material impact on our business, financial position or results of operations.
Source: 10-Q
Though the Supreme Court’s final ruling may not inure to Myriad’s benefit, I, too, for the reasons mentioned above, do not believe that it will have a material effect on Myriad’s business. Though the mainstay of Myriad’s business is BRACAnallysis, which is at the heart of investors’ concerns over the lawsuit, Myriad has an ever increasing portfolio of products and services which serve to futher solidify Myriad’s dominant position in predictive medical testing and analysis. For more information on the products and services offered by Myriad, simply click on the icons within the following table.
Current Products
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Fundamentals:
As can be seen in the above graphics, Myriad’s revenue increased 23.38 percent on a YOY basis; raw earnings (i.e. EBITDA) rose 14.55 percent on a YOY basis; and Diluted EPS increased 18.18 percent on a YOY basis. In its most recent quarterly report, Myriad showed an increase in stockholders’ equity of ~5.6 percent over a nine month period. ROE for FY 2012 was ~18 percent.
Technicals:
Over a long-term time horizon, Myriad’s stock has formed what appears to be a very large cup & handle pattern. If the pattern holds-up to its predictive powers, it could foretell great things to come for Myriad’s stock price. In further support of the pattern, Myriad’s stock price leapt 22.6 percent from its closing price of $28.30 on 5/7/13 to a high of $34.70 on 5/14/13 when the company’s earnings report handily beat guidance.
Myriad Genetics Inc. (MYGN) reported earnings per share (EPS) of 46 cents in the third quarter of fiscal 2013, representing a beat of 17.9% over the Zacks Consensus Estimate and EPS growth of 34% for the company. This denotes the third consecutive quarterly earnings beat for the company. Apart from strong top-line growth, the EPS upside was led by lower share count and margin expansion.
Source: Yahoo! Finance
Personal Note & Conclusion:
In late August of last year, my wife and partner of twenty-eight years was, sadly, diagnosed with breast cancer. She is in her late forties and her mother has had to undergo two breast cancer surgeries within the past fifteen years. As a result of her age and her family’s history with cancer, my wife decided it would be best to have herself tested for the BRCA gene mutations. The results showed that she is a carrier of the BRCA2 gene mutation which, like BRCA1, puts her at higher risk of breast and ovarian cancer.
Ultimately, she decided to undergo a bi-lateral mastectomy in an effort to reduce her risks of recurrence. She also decided to have a hysterectomy performed at the same time as the double mastectomy in an effort to reduce her risks of ovarian cancer. At present, there are no easy and/or completely accurate tests that can be performed to detect early stage ovarian cancer. Studies are presently underway to learn more about ways in which early detection can be accomplished, but present-day detection methods require much more than a simple blood test (i.e. a tissue sample is often required). Noteworthy here, too, is the fact that if a tumor is not present at the time a tissue sample is taken (or if the sample is taken from an area other than where cancerous cells are located) healthy tissue will have no prognostic value in determining a woman’s overall risks for contracting ovarian cancer — or in determining if she already has cancer.
For those who may be interested in a breast cancer patient’s personal perspective, you can visit my wife’s Web site which I have been working to create over the past several weeks. There, you will learn about her personal experiences and the information she gleaned from those experiences. Both, she and I felt it important to share her story so that others could benefit.
With regard to Myriad Genetics, the prospects for the company look good. Myriad is a company that has revolutionized the way we look at, and treat, cancer. The company’s services, in my humble opinion, are invaluable, and they may have very well saved the lives of my wife and my young daughter — as well as many other people who may be afflicted with these awful diseases. (Note: Given that my wife has the BRCA2 gene mutation, there is now a 50% chance that our young daughter will have the same gene mutation. If that proves to be true, then, at least (like Angelina Jolie), she will have an opportunity to take prophylactic measures to reduce her risks from cancer.)
My family’s personal experience with breast cancer and the BRCA2 gene mutation is, however, no reason for individual investors to consider taking a stake in Myriad Genetics. The real reasons investors should consider investing in the company are for the valuable services the company provides, and for the company’s future prospects. Sadly, cancer diagnoses are predicted to rise over the coming years; partly due to the aging Baby Boomer Generation, and partly due to the fact that human beings are living longer. Myriad stands to benefit from these phenomena.
Some have argued that Myriad’s patents have precluded other companies from entering the field of predictive medicine and genetic analysis, which, as a result, has driven-up the costs for testing. Remember, however, that Myriad is the company that pioneered the research and development of these novel technologies which reveal the markers that can predict an individual’s probability of contracting cancer; thus, a premium is warranted. Also, at costs ranging from several hundred to several thousands of dollars (the high range is somewhere between $3,000 to $4,000) Myriad’s tests may, in the long-run, prove to be much more cost effective than the treatments which must be administered once a person has been diagnosed with cancer. By having the information made available, and by making the tough decision to have a prophylactic bi-lateral mastectomy performed, Angelina Jolie effectively reduced her risk profile for breast cancer from ~85 percent to ~5 percent, and that is a great risk to reward ratio in any investment — especially where one’s life is concerned!
Note: Information for this article was collected from Wikipedia.com, Morningstar.com, the ACLU.org, Yahoo! Finance, the Genomics Law Report, Myriad’s 10-Q document and from Myriad’s Web site. Charting data provided courtesy of optionsXpress.com.
