The wait is finally over for Myriad Genetics, Inc MYGN. The company recently received favorable Medicare local coverage determination (LCD) for its Prolaris diagnostic test, which is used to evaluate the aggressiveness of prostate cancer in patients. Noridian – the local Medicare Administrative Contractor (MAC) that processes all Medicare claims from Myriad – issued the final LCD.

Medicare, as a major player in the urology market, insures approximately 65% of all prostate cancer patients in the U.S. We believe the receipt of this final Medicare reimbursement will act as a positive growth catalyst for Myriad, ramping up revenues from the Prolaris test.

This final reimbursement coverage mirrors the final LCD issued by Palmetto GBA on Jan 15, 2015 for the Prolaris test.

The Medicare reimbursement will provide coverage to all low and very low risk prostate cancer patients with life-expectancy of 10 years or more, as per the standards of the National Comprehensive Cancer Network (NCCN). This patient category comprises roughly half of the newly diagnosed prostate cancer patients in the U.S. Post this final LCD receipt, roughly 60,000 patients, who have been diagnosed with localized prostate cancer, will be able to undergo Myriad’s life-saving Prolaris test.

The final Medicare LCD has been posted on the Medicare Coverage Database of the Centers for Medicare & Medicaid Services (CMS) website. Prostate cancer patients will be able to avail this reimbursement with effect from Oct 15, 2015.

It is worth noting that prostate cancer is the most common cancer affecting men in the country and is currently the second leading cause of cancer death among American men.  Every year, over 220,000 new patients are diagnosed with prostate cancer, while 30,000 cases prove to be fatal.

So far, Myriad’s Prolaris test has duly established its efficacy in assessing the aggressiveness of prostate cancer in patients, by accurately measuring mortality risks in them. Evidently, as per a validation study presented in May 2014, Prolaris has the capacity to differentiate newly diagnosed patients with lower risk from those who are likely to die due to prostate cancer within a span of 10 years.

Additionally, this study also demonstrated the superiority of Prolaris over standard clinical tools like Gleason Score or PSA, when it comes to predicting cancer-specific death and metastases in prostate cancer patients. It is also a cost-effective test with the potential to save $6 billion for the healthcare system across a period of 10 years.

We believe receipt of the final Medicare reimbursement for Prolaris will also bring in significant gross margin improvement at Myriad as the test will no longer weigh heavily on cost of revenues. We expect to start witnessing this margin improvement in the company’s first quarter fiscal 2016 results and further thereafter. Further, on an encouraging note, management expects to witness revenues of $10–$12 million from its Prolaris test in fiscal 2016.

At present, Myriad is pursuing broader indications for Prolaris for all risk category patients and expanded private payer coverage. Once the company gets reimbursement for all types of prostate cancer patients, it will rake in more profits by virtue of this test.

Currently, Myriad retains a Zacks Rank #3 (Hold). Some better-ranked stocks in the med-biomed/generic space are AMAG Pharmaceuticals, Inc. AMAG, Gilead Sciences Inc. GILD and Neogenomics Inc. NEO. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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