Myriad Is Still On Top

Though some are viewing the recent U.S. Supreme Court’s ruling against the patenting of human genes as a loss for Myriad Genetics (MYGN), they fail to see the true results of the decision. In the end the court did, in fact, uphold Myriad’s patents given that it deemed cDNA (Complimentary DNA) to be patent eligible. For those brave enough to delve into the court’s decision in its entirety, I have included a complete PDF copy of the ruling here. Essentially, however, the court concluded that:

A naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring.

Though the earlier appellate court’s decision was much broader, finding that isolated strands of, otherwise natural, DNA were patent eligible because they are not naturally unwound, de-histoned or cleaved at both ends in the human body, the Supreme Court essentially found the same to be true; however, the Supreme Court made the distinction between “naturally occurring” DNA and DNA sequences that are manipulated by humans. This is precisely the argument that Myriad’s attorney, Gregory Castanias, made before the court when he stated that:

… once a gene was removed from the human body it became a “new molecule” that Myriad “invented.”

and 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.”

Given that I have covered Myriad and its story in much more detail in two previous articles (here and here), I won’t belabor points previously made. One point to be made here, however, is that unless companies like Quest Diagnostics have found ways to accurately isolate the BRCA genes, as Myriad has done, then I do not believe other testing facilities will pose a threat to Myriad’s business — at least not in the near future. Personally, I have taken this opportunity to add to my stake in Myriad, but I would not suggest that you do the same — at least not until the dust settles. Though I still believe in Myriad’s story, and in the company as valuable addition to an investment portfolio, in the end, for the trade/investment to truly work in favor of the individual investor, the opinions that really matter are those of the institutional investors and hedge fund managers; and right now they are either on vacation or disenchanted with Myriad.

The summer doldrums can pose wonderful buying opportunities for investors, but it is a time that also creates tremendous volatility for the market. If, eventually, you decide to purchase shares of Myriad, or add to position that you already have, then I would suggest that you wait and watch the stock’s price action (and, especially, the volume activity) over the next several weeks, and then ease into the investment with a dollar cost averaging strategy (i.e. don’t purchase all of the shares you wish to purchase all at once). Though this strategy will add to servicing costs (i.e. fees and commissions) it will help to keep the investment’s total cost basis in check.

Personally, I believe in Myriad and the services the company offers — but I have been personally affected by the services the company has provided me and my family. Thus, my opinions about the company may be more slanted than others and one should take that fact into consideration when reading this piece. That said, however, whenever I hear someone talk about “best of breed” my thoughts immediately jump to those people who are behind the company and its story, rather than the way the company’s stock price may be performing at any given moment in time. In that vein, there are some very brilliant people working at Myriad Genetics — people who, through all of their hard work and innovations, may have very well saved my most precious investments — those of my my life partner and soul-mate, and my one and only daughter.

Disclosure: I own share of MYGN.

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