Court Allows Myriad To Patent Cancer Genes

A federal appeals court has upheld the right of Myriad Genetics (MYGN) to patent two human genes that form the basis of a widely used genetic test for breast and ovarian cancers. The 2-to-1 decision, which comes five months after the US Supreme Court set aside the issue, gives Myriad the right to patent two so-called isolated human genes – BRCA1 and BRCA2 – that account for most inherited forms of breast and ovarian cancers (here is the decision).

Myriad shares rose.

MYGN Chart

MYGN data by YCharts

As we wrote previously, many women with a familial history undergo genetic tests to determine if they have mutations on their BRCA genes. The info helps decide on treatment or prevention, such as increased surveillance, preventive mastectomies or ovary removal. Women who test positive using Myriad’s test, which is called BRACAnalysis, have an 82 percent higher risk of breast cancer and a 44 percent higher risk of ovarian cancer in their lifetimes. However, each test may cost about $4,000 and the patents prevent Myriad competitors from offering such a test without paying a fee.

Here's a five-year look at Myriad revenues and profit.

MYGN Revenue TTM Chart

MYGN Revenue TTM data by YCharts

At the same time, the appeals panel reversed a 2010 ruling by a Manhattan federal judge that Myriad cannot patent methods to compare those gene sequences, or isolated DNA (back story). Last year, the same federal appeals court reasoned that the Myriad testing looks for distinctive chemical forms of the genes, and not as they appear naturally in the body, which would not be subject to patent.

The stock's valuation has declined over time, as seen in the PE ratio chart.

MYGN PE Ratio Chart

MYGN PE Ratio data by YCharts

The latest decision was likely informed by a recent US Supreme Court ruling that a Nestle unit called Prometheus Laboratories cannot patent a diagnostic method for tracking patient changes. In that case, the justices decided the Prometheus patents effectively claimed “the underlying laws of nature themselves” (back story).

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Ed Silverman is the editor of Pharmalot and a contributor toYCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.



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