Myriad Genetics' Healthy Outlook
Myriad Genetics, Inc. (MYGN), is a biopharmaceutical company that focuses on the development of diagnostic and therapeutic products. The company employs a variety of proprietary proteomic technologies to identify genes, their relative proteins, and their pathways.
Research in these areas has helped the company in developing drugs that prevent various diseases. From a research and development standpoint, we are optimistic about the future potential of Myriad. The growth of predictive medicine, several candidates in Alzheimer 's disease and Cancer lead us to be bullish on the stock.
The predictive medicine business has been performing very well. Sales continued to grow in the fiscal second quarter of 2008 by 55.4 per cent year-over-year and 15.3 per cent sequentially. Further, gross margin increased to a record 85% in 2Q08. The company should be able to become profitable in fiscal 2009.
Long-term growth should come from the successful commercialization of Flurizan for the treatment of Alzheimer's disease. The company completed enrollment of both its U.S. phase III trial and global phase III trial with Flurizan. Previous phase II data, admittedly mixed, still gives us confidence in these phase III trials.
We arrived at our target price of $50 by applying a P/E ratio of 29x to our fiscal 2010 EPS of $2.71, discounted at 25% for two years. We expect Myriad Genetics will become profitable in fiscal 2009 based on the successful launch and partnering of Flurizan. We continue to rate Myriad shares Buy with a price target of $50.
Limited Downside for KT Corp.
KT Corporation's (KTC)fixed-line revenue is likely to decline over the near-term, as wireless substitution continues and VoIP competition enters the market. Intensifying broadband competition and continued regulatory pressures are also expected to compress future revenue growth levels.
We see limited downside in the shares due to KT's higher dividend and modest valuation. KT paid a dividend of $1.07 (KRW 2,000) which equates to a payout yield of 4.2%.
However, the company's business catalysts are not yet overly convincing that would drive up share demand, in our opinion and, therefore, we maintain our Hold recommendation. KT is trading at a forward multiple of 10.1x our 2008 EPADS estimate, which is in the mid-range for its global peers. We expect KT to generate modest top-line growth and the company's cost structure is relatively inflexible (due to government regulations and the power of its trade unions).
Admittedly, the company's leadership position in the Korean telecom market and its focus on next-generation broadband and wireless services should partially offset the effects of intensifying competition and a difficult regulatory environment.
