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Myriad Genetics Reports
Myriad Genetics' annual numbers lead to an examination of the larger story of this biopharmaceutical company. Myriad clearly and truthfully calls itself "emerging" -- rare among its biotech peers -- and declares its reliance on the new frontier technologies of genomics and proteomics. Armed with this knowledge, the Foolish investor can apply tools to evaluate Myriad's drug discovery and development prospects. At this stage, tooth-combing the quarterly report numbers takes a back seat.
By
Tom Jacobs (TMF Tom9)
August 22, 2000
Emerging biopharmaceutical company Myriad Genetics (Nasdaq: MYGN) reported increased revenues and reduced losses for the year ending June 30, 2000. Year-over-year revenues jumped 34% from $25.3 million to $34.0 million, due to growth in Myriad's medical diagnostics and research revenues. The company's losses narrowed from $1.06 per share in fiscal 1999 to $0.86 per share in 2000.
Myriad conducts drug discovery and development using genomics and proteomics tools. Investors jumped on these buzzwords in 2000 and tripled Myriad's market cap to $1.4 billion since December. But is a self-described "emerging" biotech drug company worth those big bucks, when biotech IPOs have given us a bevy of research-stage product-less hopefuls sporting market caps of $50 million?
To answer, let's squirrel behind Myriad's press release. Armed with the Fool's Biotechnology Crash Course, I'm taking a critical look at the company's list of accomplishments, sorting them from "so what?" to "hmm... very interesting":
"Discovery of an exciting diabetes gene that may lead to therapeutic and predictive medicine products for diabetes."
Wow, a gene! It "may" lead to something! Too bad it only faces a few years of looking for a drug candidate, then 15 years and $500 million before it hits the market. Who's bellying up with the cash?
"Discovery of promising drug targets in the AIDS and rheumatoid arthritis fields. The HIV targets represent a new class of therapeutics and a novel approach to halting viral replication that may also be applicable to additional viral diseases."
How "promising"? What stage are the targets in? How many years from human tests?
"Discovery of a colon cancer drug compound, designated MPI-42511, which selectively kills colon cancer cells, the program is being advanced toward human clinical trials."
OK, "being advanced toward" beats "may" and "promising." Where is the drug in the 6.5-year preclinical testing phase? Remember that even when a drug candidate enters human clinical trials, it will endure an average of 8.5 years of FDA review and approval -- if it's successful -- before hitting the market.
"Discovery of an important prostate cancer gene. The discovery triggered a $1 million milestone payment from strategic partner Schering-Plough (NYSE: SGP)."
Though this is only discovery of the gene, it's a big enough deal to generate cash. Investors in emerging biotech drug companies like to see cash-rich pharmas paying for discoveries and floating the company while it fills its drug pipeline. One million bucks is a start. What are the other milestones? Remember, it takes 15 years and $500 million to run the drug-approval gauntlet.
"Delivery of five new validated drug targets to corporate partners."
Good. It sounds like the partners pay for those targets, just as Schering-Plough kicked in some real money for the gene discovery. But how much did the partners pay for the five new targets, and what rights did Myriad sign away? Savvy companies like Millennium Pharmaceuticals (Nasdaq: MLNM) have struck some great deals that allow it to retain key development rights to targets.
"Development of four strategic alliances totaling $86 million in potential value to Myriad, with partners Hitachi, Novartis, Pharmacia and Roche."
"Potential" value. I like that. Kind of like your employer saying, "Your salary represents potential payments." But this is intriguing enough to merit further research.
When you've found a biotech worth further investigation, check out the company's website; does it tell you more about the company's deals? Review the latest 10-K and 10-Q, then ask yourself the following questions:
- How much money does the company have?
- Will the company go out of business before it sells a drug
- How much will the company dilute my shares when it issues more in exchange for future cash?
- When the company needs more money, will anyone provide it?
Too many research-stage companies with no products in the pipeline and tenuous alliances with the big pharmas call themselves "biopharmaceutical companies," leaving out key words such as "emerging" or even "dreaming." Myriad tells you where it stands. Foolish investors can begin there and check what's under the microscope.
Your Turn:
Sound off on the Myriad discussion board!
Related Links:
Biotechnology discussion board
A Foolish Checklist for Biotech Investing, Fool's Den, 6/13/00
Proteomics: The Coming Revolution, Soapbox Report by IClimbRox
What the Heck Is Genomics?, Soapbox Report by Bart Janssen
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