In addition to playing up Dr. Ostrer’s change of employment, Myriad is also playing down the impact of its court case to its business. “While this is a very important, potentially landmark court case, it only involves 15 of our 500 patent claims,” Myriad CEO Peter D. Meldrum pointed out. “The outcome of this particular litigation will not have material impact on the operations of the company, and I’m not sure that’s fully appreciated by shareholders.” Myriad has noted that its Melanoma Dx and lung cancer prognosis tests are set to enter the market next year. The company has nine tests on the market, with another 13 molecular diagnostic tests in its pipeline.
However, BRCAnalysis® is Myriad’s lead product, accounting for 81% of the company’s total revenue during the third quarter of its fiscal year ending March 31 of $105.9 million, a 17% gain from a year earlier. All 23 of the patents involved in BRCAnalysis will expire between now and 2018. However, product revenues would start flattening sooner if the court case ends up going against Myriad.
Overall, Myriad generated $129.8 million in revenue, a 27% year-over-year leap, and $29.6 million in net income, up about 6% from a year earlier. Based on that performance, Myriad raised its guidance range to investors for FY 2012 to $1.29 to $1.31, up from $1.20 to $1.25 EPS. Myriad also raised its revenue guidance to between $492 million and $496 million, up from between $445 million and $465 million.
Leerink Swann raised its rating on the company’s stock to “outperform” on May 21, agreeing with Myriad that concerns over its IP were overblown. Leerink also raised its target price range to $30–$31 a share from $27–$30 a share.
Myriad’s best long-range prospects for growth lie with addressing two key legal questions. The first question remains open: What intellectual material is patentable? The second was partly answered by Justice Breyer in Mayo: What has to be added to a law of nature to make it a patentable process?
Mayo doesn’t make Myriad’s task easier, as a unanimous Supreme Court retreated from three decades of life-science-friendly patent rulings going back to Diamond v. Chakrabarty (1980). Myriad’s best argument is to show that its patents can coexist with the legal landscape as rewritten by Mayo by demonstrating a key quality of valid patents articulated by Justice Breyer in that ruling: “a particular, inventive application of the law.” Since he left the terms undefined, it will be up to Myriad to define “particular” and “inventive” and hope the Federal Circuit appeals court agrees.