Wednesday, July 1, 2009

Myriad Genetics (MYGN) Implodes After Hours on Revenue Miss

How far Myriad Genetics (MYGN) has fallen - this had been one of the star stocks of the last 12 months as it seemed to do no wrong. In fact during 2 of the worst swoons in market history (Sep-Oct 08, and Jan-Feb 09) the stock held its ground and/or advanced! But the past few months have not treated it kindly. Last night after the bell Myriad came out with a "slight" revenue warning - $86M for fiscal fourth quarter (analysts had estimated $91.6M as consensus); so a 6% shortfall. This miss takes them to a $326M year versus prior guidance of $330M, and analysts $336M.

For that the stock was down 17%+ in after hours yesterday. It seems overdone but a few issues here (1) this is the second "miss" by management in a short period of time (2) the stock has been expensive even with the dramatic drop since late winter and (3) we really have to start questioning if someone on the inside is leaking information out.

To that last point in late April (when I owned MYGN) I cut back the position sharply when I saw a sharp spike in volume 10 days ahead of earnings. 10 years ago it would of meant nothing to me, but the chicanery on Wall Street is now a lot more easier to pick out. I now always get suspicious of this sort of activity even if the idealist in me still wants to believe there is some even playing field... I wrote then:

The cynic in me says with the company reporting earnings the first week of May, with 3 days in a row of huge volume and terrible price action someone with inside information is getting out. (not that this ever happens on Wall Street).

... with such high volume out of the blue... and knowing how Wall Street works with the asleep at the wheel SEC - this level of drop on this much volume has me going the 'better safe than sorry' route especially with such an expensive stock.

And of course you know how the story ends [May 4, 2009: Myriad Genetics Slight Miss on Revenue; Beats on Earnings] So as the "people with the right connections" were getting out in the mid $40s during those high volume days in latter April, the inside information-less enjoyed a $31 print in after hours.

Why do I bring this up? Last Friday there was a MASSIVE surge in volume in Myriad Genetics (MYGN)... 2 days ahead of a warning. Now let's be fair - Friday was a wacky day as it was the annual Russell rebalancing act, as some 400+ stocks got moved in and out of indexes. I don't know if Myriad was one of those but I will assume some portion of that volume spike could of been due to index rebalancing. But let's just say, if we had any faith in the SEC these are the type of VERY easy to see anomolies they should be investigating day in and day out. Not that they ever do - heck when someone built an entire case on Bernie Madoff for them, they could not even process that sort of gift. But I digress... let's just say this is 2x we've seen this sort of "pattern" ahead of bad news and it doesn't look good on the surface. We'll never know the truth because our "truth seeking" securities regulatory agency is too busy chasing after average Joe 6 Pack instead of investigating the real Barnums of the market.

If Myriad opens anywhere near its after hours print of below $30 it actually would begin going from "very rich" in valuation to simply "expensive". Despite this miss, the company still has an excellent growth rate and that is frankly, a rare thing in this very stagnant US economy - but unfortunately as I try to say almost every week: Main Street still matters even if Wall Street chooses to laugh it off. As more Americans lose jobs and cut back on healthcare - no one is immune.
  • Myriad Genetics, Inc. (NASDAQ:MYGN - News) today announced that, based on preliminary estimates, it anticipates reporting total molecular diagnostic revenue, which represents the bulk of the Company's revenue, of approximately $86 million for the fiscal 2009 fourth quarter ending June 30, 2009.
  • The Company continues to believe that revenue for the fiscal 2009 fourth quarter is being impacted by the current economic recession, which is driving increasing unemployment levels resulting in the loss of insurance coverage and patients delaying or cancelling doctor visits.
  • Previously, the Company stated it expected total molecular diagnostic revenue for the full 2009 fiscal year to grow more than 48% over fiscal 2008 to approximately $330 million. The Company now is projecting that molecular diagnostic revenue for the fiscal year ending June 30, 2009 will be approximately $326 million, or a 46% increase over the prior fiscal year.
Myriad Genetics, Inc. is a leading healthcare company focused on the development and marketing of novel molecular diagnostic and therapeutic products.

[Mar 2, 2009: Starter Stake in Myriad Genetics]
[Feb 3, 2009: Myriad Genetics - Monster Results]
[Jan 20, 2009: Myriad Genetics - Another Diagnostic Heavy Hitter]

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