Myriad Genetics, a biotech provider of molecular diagnostics for personalized medicine, has recently unveiled blockbuster trial results for its Genesight Pharmacogenomic test for Depression. The profit potential could cure depression in any biotech investor…
Depression is notoriously difficult to treat. Although the current gold standard for treatment involves a combination of talk therapy and medication, as many as ⅔ of patients must try multiple different medications before seeing results. In fact, as many as 33% of patients NEVER achieve remission although they have tried several different medications.* When we take into account that most medicines take at least six to eight weeks to become effective, this means that some already severely distraught people must endure a year or more of “trial and error” prescribing before achieving relief. Today’s best psychiatrists might admit behind closed doors that the process amounts to little more than a structured guessing game.
Now Myriad Genetics Inc is charging forward with a new test that could dramatically alter the paradigm. The Genesight test aims to match a patient’s personal genetic makeup to the right medication. After a sample of DNA is taken by a simple cheek swab, a provider winds up with a list of “greenlight, redlight, and yellowlight” medications to try. While these results are still much less precise than what would be ideal, many physicians may feel that anything is better than the current guessing game.
Until now, Myriad has mostly been known as a cancer genomic company. The company pioneered the BRCA2 predictive breast cancer test that famously lead Angelina Jolie to opt for a preemptive mastectomy once she realized that she was at high risk of inheriting the same cancer that killed her mother. This has been a tremendously lucrative business for investors, but competition has caught up with Myriad as patents around the BRCA test have run out. $MYGN has responded by diversifying into a variety of different innovative tests, typically by purchasing smaller, underfunded companies with novel technology.
When Myriad acquired Assurex Inc. in 2016, it was a risky bet on a new technology with great potential but little proven data. It turns out, producing credible clinical data is an expensive process. So not only did Myriad management have to pay up to $410 million to acquire Assurex, but they also invested many millions more to bulk up the research program around the Genesight Test. $MYGN knew that the Genesight test, if proven effective, could change the way millions of suffering Americans are treated. Physicians don’t just run expensive new tests based on a fast talking sales reps promise; forming new clinical habits requires solid proof. The prize? Nothing less than 246,000 Primary Care Physicians in the United States, and potentially many more around the world.
You might think that psychiatrists would be the main target for Genesight. Afterall, these are the specialists that are trained specifically to care for mentally ill patients. Yes, Genesight would be appealing to some psychiatrists. But many are “stuck in their ways,” and have a wealth of clinical experience to fall back on. The real opportunity for $MYGN investors is primary care. 65% of all antidepressants are currently prescribed by primary care doctors.* There are a few reasons for this.
First, most antidepressants of the most common category (SSRIs) have mild side effect profiles. Despite the scary warnings on the bottle, in reality few people try Prozac and then light themselves on fire. So even though depression may not be a physician’s specialty, he bares little risk by taking the initiative and treating a patient in agony. But mostly, primary care physicians may feel forced to treat depression due to the severely broken nature of our healthcare system.
For starters, many psychiatrists don’t take insurance. Most primary care physicians do. This means that a severely anxious or depressed patient sitting in a PCP’s office would have to go through the additional trauma of calling ten psychiatrists and being rejected before finally finding a specialist that accepts insurance. Secondly, we are suffering a serious shortage of psychiatrists in the United States today; a deeply depressed patient in a PCP’s office might not be able to find an available psychiatrist, even if he can pay in cash. This is especially true in rural or remote areas. Lastly, depressed, anxious patients are notorious for lethargically ignoring doctors’ advice and neglecting follow up; a PCP may feel that he is the last line of defense for a patient that will never bother to see a doctor again. So the dutiful primary care doctor, steward of hearts, lungs, and kidneys, may reluctantly take on that most tricky of human organs; the agonized brain.
But what if there were an easy, affordable test that could help a non specialist feel comfortable right from day one? Armed with better science, maybe a primary care doctor could do just as well as any psychiatrist, allowing the PCP to keep more paying patients rather than referring them out. With science on his side, couldn’t a PCP do just as well as the “guessing game” that he knows will occur at the psychiatrist’s office?
So, Myriad had it’s reasons for gambling $410 million dollars by purchasing a small diagnostics company with barely proven technology. In fact, $MYGN had about $10,000,000,000 reasons. That is the estimated total addressable market listed in the company’s corporate presentation dated June, 2018. Myriad’s total revenue as a company for fiscal 2018 was only $773 million. If Myriad can transform Gensight into the Gold Standard first step in treating depression in primary care offices across the world, the company could easily grow it’s revenue by a factor of ten. Profit would grow even more!
But Myriad has needed solid clinical proof. Changing common medical practice requires solid clinical data that providers can believe in. This month, they got it. A quote from the company’s CEO:
The publication of the GUIDED study represents a major milestone for Myriad and a significant advance for pharmacogenomic testing,” said Mark C. Capone, president and CEO, Myriad Genetics. “The United States has a mental health care crisis and GeneSight is a clinically proven solution to improve outcomes for patients with depression.”
The study showed that at week 8, individuals in the GeneSight cohort had a 50 percent higher rate of remission (p=0.007), a 30 percent higher rate of response (p=0.01), and 11 percent greater improvement in symptoms (p=0.11) compared to those in the treatment-as-usual (TAU) group…
The GUIDED study was not published in some cheesy flyer you would find at your health food store. Rather the study made its debut in the Journal of Psychiatric Research, a respected, peer reviewed publication widely read in established psychiatric circles in the United States. This is a big deal.
Did the stock shoot through the roof on the good news? No. Analysts were too busy obsessing over Myriad’s legacy cancer business and the competitive challenges it faces. Or maybe they were just too busy obsessing over Trump’s Trade War with China. Or maybe Wall Street is just plain crazy. Just like depression medication, sometimes good news takes a while to kick in; a savvy investor has a chance to scoop up shares cheap before the share price perks up. With these kind of clinical results to support its growing psychiatric franchise, don’t expect Myriad’s share price to stay depressed for long…
For more extensive analysis regarding MYGN, check out Myriad Things Went Right
DISCLOSURE: The Sick Economist Owns Shares in $MYGYN.