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Supreme Court Denies Human Gene Patents

Written By Jason Stutman

Posted June 17, 2013

A recent Supreme Court ruling just put a fair amount of money into the pockets of a few savvy short sellers today. The court has unanimously decided that human genes cannot be patented – a severe blow to Myriad Genetics (NASDAQ: MYGN).


As a result of the ruling, Myriad Genetics has effectively lost its monopoly on genetic testing for ovarian and breast cancer.

Shares are currently down 17 percent as I write this, and while I feel for Myriad shareholders, that’s what you get for not following your stocks tightly enough.

The fact is, anyone should have been able to see this coming from a mile away.

When the Supreme Court makes a unanimous ruling, there really should be no room for surprises. Nature simply cannot be patented, and that fact is just as obvious today as it was prior to the recent ruling.

But hindsight is twenty-twenty, and the past has passed. The best thing to do now is learn from those mistakes and take advantage of rising opportunities.

Opening the Market

For almost two decades now, any doctor testing for genes BRCA1 and BRCA2 was forced to use Myriad’s tests, which cost over $3,000 a piece. But thanks to this ruling, the market is finally about to see some competition.

Women with BRCA1 and BRCA2 mutations are far more likely to be diagnosed with breast cancer, according to the National Cancer Institute. 60 percent of women with a BRCA mutation will get breast cancer during their lifetimes as compared to 12 percent of the general population.

Yet only one in a hundred women have a BRCA mutation. This low rate of mutation, coupled with Myriad’s $3,000 price tag, has created a generally low demand for BRCA testing.

But with the market now open to competition, prices are likely to decrease, and tests are going to become more common. Cancer testing companies once hindered by Myriad’s intellectual property rights now have a green light to expand their services.

One of these companies is Rosetta Genomics (NASDAQ: ROSG). Rosetta offers a variety of medical tests including cancer detection. Rosetta has so far focused on tumor content rather than gene predisposal, but with Myriad’s patents now void, Rosetta is free to offer more options.

Another benefactor of the ruling is Genetic Technologies Limited (NASDAQ: GENE). Unlike Myriad, Genetic Technologies held no property over naturally occurring human genes. However, the company specializes in cancer predisposition and will now be able to enter Myriad’s once impenetrable BRCA market.

Carbon Copy

Although the Supreme Court’s ruling was focused on human genes and made no specific ruling regarding the genetics of other naturally occurring organisms, any intellectual property in these realms is now at great risk.

The reasoning behind the court’s decision is clear: The BRCA gene is naturally occurring and thus cannot be treated as intellectual property.

In other words, patents on DNA sequencing of animals, bacteria, viruses, fungi, etc. will not be upheld in future decisions. That being said, be wary of any players in this field.

Qiagen (NASDAQ: QGEN) is one player to watch out for. The company owns intellectual property in virus and bacterial DNA sequencing and is likely to lose a share of the market as a result.

Competitors will begin challenging these patents and will undoubtedly take advantage of many no-longer-protected discoveries.

Turning progress to profits,

  JS Sig

Jason Stutman

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