Myriad Genetics ($MYGN) had warned that CMS reimbursement for its BRCA predictive cancer tests could drop by close to 50% this year. Payments are indeed declining, but the Utah diagnostics company disclosed in a recent regulatory filing that they won't drop nearly as much as previously expected.
The Centers for Medicare and Medicaid Services announced late last year that they'd slash reimbursement levels from $2,795 to $1,438 for a full sequencing of BRCA1 and BRCA2 genes. But CMS revised its pricing plans as of April 1, according to the company's regulatory filing, and will now pay $2,184 for the full sequencing of BRCA1 and BRCA2 genes--still a decline, but 52% higher than originally anticipated.
That's great news for Myriad, whose market-leading BRACAnalysis test screens for mutations in both genes and produces the bulk of the company's revenue. BRCA1 and BRCA2 mutations can point to a much higher risk of breast or ovarian cancer.
Investors are more than happy about the news. They've driven Myriad's stock up more than 11% since April 1. Myriad traded at $39.29 late morning on April 3, up slightly from the previous day's close.
The U.S. Supreme Court invalidated some of Myriad's BRCA patents last summer but upheld others, which the CMS used as a reason for its initial reimbursement reduction, noting that rival labs were now offering much cheaper BRCA testing as a result of the court's decision. But Myriad participated in a public comment period earlier this year in which it addressed the original, larger CMS reimbursement cut.
Leerink analyst Dan Leonard, in a research note quoted by Investor's Business Daily, noted that the upward revision stems from new pricing data submitted to the CMS that showed other labs were actually charging between $2,000 and $2,500 for their BRCA tests.
Myriad has sued a number of its rivals since they launched their own BRCA tests, including Quest Diagnostics ($DGX), LabCorp ($LH) and others, alleging patent infringement. Last month, a U.S. district judge in Utah denied Myriad's motion to stop Ambry Genetics from selling its own version of the BRCA test. The company also recently settled a similar lawsuit against Gene by Gene.
Myriad's stock is up more than 80% since the beginning of the year. Stellar financial performance has helped, as well as the company's ongoing effort to diversify with new tests and products in the wake of the U.S. Supreme Court decision last year. Investors also responded favorably to Myriad's plans announced in February to buy Crescendo bioscience for $270 million, in order to grab that company's rheumatoid arthritis molecular diagnostic.
- read Myriad's regulatory filing
- here's Investor's Business Daily's take