Angelina Jolie went unmentioned during Myriad Genetics’ August 13 conference call to discuss results for its fourth quarter and full fiscal year ending June 30. But it wasn’t hard to guess who president and CEO Peter D. Meldrum had in mind when he discussed his company’s strong Q4 results, especially its 51% year-over-year revenue growth in its strongest segment, women’s health. He attributed the growth, in part, to “recent celebrity publicity around breast cancer,” namely the movie star’s widely reported double mastectomy.
Meldrum acknowledged that Myriad probably won’t enjoy a similar boost from Hollywood in its new fiscal year (“the duration of this publicity benefit is likely to be short-term”), and that his company will see increased competition from gene test providers going forward. Yet Myriad says intellectual property concerns rather than economic figures explain its recent patent-infringement lawsuits against rivals Ambry and Gene By Gene, filed less than a month after the U.S. Supreme Court’s mixed decision on patentability of Myriad’s breast cancer susceptibility genes BRCA1 and BRCA2.
In papers filed at U.S. District Court for the District of Utah, Central Division, Myriad contended Ambry and Gene By Gene are infringing on 10 of 24 patents covering synthetic primers, probes, and arrays, plus testing methods related to BRCA1 and BRCA2. Myriad owns 5 of the 10 patents and licenses the rest from co-plaintiffs University of Utah, University of Pennsylvania, Toronto’s Hospital for Sick Children, and Canadian company Endorecherche.
Myriad noted it spent more than $500 million to develop its BRACAnalysis® diagnostic test for hereditary breast and ovarian cancer, and argued that its rivals’ tests would reduce royalties for the patent holders, now totaling about $57 million: “Myriad has suffered and will continue to suffer substantial damage to its business, including, without limitation, lost profits, loss of business reputation, loss of business opportunities, and loss of market share.”
That’s one reason why it’s hard to divorce economics from Myriad’s patent litigation. Other reasons can be found in the Q4 results and the company’s plans to introduce future tests discussed on the conference call. BRACAnalysis represented 74% of total company revenue in Q4, generating $129.6 million, a 19% increase compared to fiscal year 2012.
The revenue percentage will likely decline over the next fiscal year, as Myriad launches three new gene tests. On Sept. 5, Myriad announced the launch of myRisk Hereditary Cancer™, a 25-gene panel covering eight major cancers (breast, colorectal, endometrial, gastric, ovarian, pancreatic, uterine, and melanoma), at an average selling prioce of $3,700. The other new tests are myPath Melanoma™ and myPlan Lung Cancer™. By summer 2015, Myriad expects to discontinue several current tests including BRACAnalysis.
Myriad says the launches, plus higher taxes and cost of patent litigation (an expected $10 million this fiscal year), will shrink its FY 2014 projected earnings-per-share (EPS) growth 6–10%, well below its 36% EPS leap this past fiscal year. Given the prospect of reduced growth, Myriad’s assertion of patent rights against competitors is understandable: “We believe that our patents are valid and enforceable, and they’re being infringed,” Ron Rogers, head of communications at Myriad, told GEN.