Can Myriad Genetics, Inc. (MYGN) Survive the Supreme Court?

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Does patent protection really matter?
Despite owning half of all human gene patents (2,000 of 4,000) in the United States, Incyte Corporation (NASDAQ:INCY) will remain insulated from such a decision. The company uses its intellectual property to develop drugs rather than diagnostic tests and has an industry-leading portfolio of JAK inhibitors in development with Eli Lilly & Co. (NYSE:LLY) and Novartis AG (ADR) (NYSE:NVS).

Quest Diagnostics Inc (NYSE:DGX) purchased a swath of gene patents relating to neurological disorders for $740 million in 2011. The acquisition was based upon hundreds of diagnostic tests with patents to boot. Another company that could be in for turbulence is Agilent Technologies Inc. (NYSE:A) , which partnered with Pfizer Inc. (NYSE:PFE) just a few weeks ago to develop companion diagnostics.

But if we take a step back, does the industry really care if a test is patented or not?

Good for the industry?
Depending on your views about the case, you may think that patent protection is necessary for innovation — a line Myriad frequently touts. While one can find reasons to support or debunk that logic, some heavy hitters in the industry believe that growth could accelerate if gene patents were no longer allowed. How? Companies would be free to offer tests for any gene they can find, which would lead to more tests with lower and more competitive pricing for patients.

Quest and Agilent are much larger than Myriad and have diverse revenue streams. The two companies even offer tests not protected by patents that are integral to their businesses. To me, it appears that Myriad is in a much different lifeboat from its peers because of its small size and overdependence on BRACAnalysis. And although Australia recently chose to uphold the BRCA gene patents, it will have no bearing on that of the Supreme Court of the United States.

A worst case scenario would jeopardize close to 80% of the company’s revenue. Of course, the company is trading at a lower price now than it was in 2008 despite doubling revenue and net income. So there could be quite a big pop on any decision in the company’s favor. While it is quite possible that Myriad could survive the Supreme Court, the binary event is much too risky for me. Will you be staking out a position? Let me know in the comments section below.

The article Can Myriad Genetics Survive the Supreme Court? originally appeared on Fool.com and is written by Maxxwell A.R. Chatsko.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter, @BlacknGoldFool, to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool recommends Quest Diagnostics.

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