Pioneering genetic-testing company Myriad's biggest new product is facing pushback from US regulators that could 'significantly limit' the test's appeal. The stock is down 40%.

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Myriad Genetics sells a test that claims to point patients to the best depression drug, based on their DNA. The FDA is now getting involved.

• Pioneering genetic-testing company Myriad Genetics sells a test called GeneSight that claims to analyze a patient's DNA and point them to the best depression drug for them.
• Scientists and doctors have raised concerns about GeneSight and other similar tests. Now, the FDA is asking for changes to GeneSight, Myriad Genetics disclosed on Tuesday.
• Those changes "could significantly limit" broad adoption of GeneSight because it would not be able to make specific drug recommendations, JPMorgan analyst Tycho Peterson and team said.
• This news comes after UnitedHealth Group, the nation's largest health insurer, said it would start covering GeneSight and other such tests for certain patients starting in October.
• Myriad Genetics stock dropped nearly 40% in Wednesday morning trade.
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Genetic-testing company Myriad Genetics's biggest up-and-coming product is a test that claims to match patients with depression to the best medications for them, based on their DNA.

The test, GeneSight, and ones like it have been criticized by scientists and doctors, who've raised questions about how useful they are to patients.

Now, the US Food and Drug Administration is asking for changes to the GeneSight test, Myriad disclosed late Tuesday in a regulatory filing. The company didn't provide much detail on what changes may be required.

"The FDA requested changes to the GeneSight test offering, and we have been in ongoing discussions with the FDA regarding its request," Myriad said in an annual report filed with the US Securities and Exchange Commission. "Although we continue to disagree that changes to the test are required, on August 10, 2019 we submitted a proposal regarding the reporting of GeneSight test results to healthcare providers that we believe addresses the FDA's principal concerns."

CFO and EVP R. Bryan Riggsbee added on Tuesday that the approach Myriad is taking here "should not affect the benefits that we believe are provided by the GeneSight test." Riggsbee made the remarks as part of a conference call discussing the company's fourth-quarter financial results.

Read more: Pioneering genetic-testing company Myriad's biggest up-and-coming product could be at risk after scientists raised major questions

When pressed by Wall Street analysts for more details on the call, company executives declined to comment any further.

'A meaningful risk to the long-term potential of GeneSight'

The regulator's request could prevent Myriad from making specific drug recommendations in its reports, JPMorgan analyst Tycho Peterson and team said.

This "could significantly limit the broader adoption of GeneSight" JPMorgan's Peterson and team said, adding that "we view this development as a meaningful risk to the long-term potential of GeneSight."

Myriad shares dropped nearly 40% in Wednesday morning trade, to $27.42 a share. JPMorgan rates Myriad "underweight" and has a price target of $27 per share for the company. Myriad shares closed at $44.55 on Tuesday.

A $2,000 test for depression drugs like Zoloft and Paxil

GeneSight, which costs about $2,000, works like this: First, a patient gets a cheek swab taken. Later, a report comes back, breaking down various depression drugs like Zoloft and Paxil into different, color-coded buckets.

The color green points to the medications that should be used. Orange signals potential for "moderate" issues like dose changes or drugs working less well, and red for "significant" problems like side effects.

Myriad says that GeneSight is able to make those predictions by testing genes looking at how the body may break down medications and the potential responses to a given medication.

GeneSight is covered for seniors on the government program Medicare as well as by some private health plans.

But concerns about GeneSight and tests like it have been raised in recent years. The FDA issued a warning last fall about tests that, like GeneSight, haven't been approved or cleared by the regulator. The American College of Neuropsychopharmacology, a professional organization of brain scientists, put out a statement last year that such tests are "scientifically unsupportable for general clinical use."

Psychiatrist Dr. Charles Nemeroff, who has written that tests like GeneSight are "not ready for prime time," told Business Insider earlier this year that he's seen these types of results hurt patients. Nemeroff is the acting chair of the Department of Psychiatry at the University of Texas's Dell Medical School.

"I have had depressed patients who responded well to an antidepressant show up in my office with the test results ordered by their primary care physician informing me that they has stopped taking their prescribed medication because it was classified at 'red,'" he wrote in an email to Business Insider. "They subsequently and rapidly relapsed into another episode."

A recent win for Myriad: coverage from the nation's largest health insurer

Earlier this month, Myriad and GeneSight scored a major victory when UnitedHealth Group - the nation's largest private health insurer - said it would start covering it and other tests in October. UnitedHealth had previously said that these types of tests were unproven and not medically necessary "due to insufficient evidence of efficacy."

Even so, Myriad put out financial guidance for the 2020 fiscal year that came in much below Wall Street's expectations, the JPMorgan analysts said.

"Stepping back, the quarter and guidance were clearly disappointing, especially considering MYGN's history of beating against a low bar and the addition of UNH reimbursement for GeneSight in FY20, and key questions around GeneSight remain unaddressed, in light of recent FDA interactions," they said.