The Supreme Court unanimously agreed that companies can't own natural DNA, but Thursday's ambiguous yet far-reaching ruling also said manipulated genes could be patented.

The case, Association for Molecular Pathology v. Myriad Genetics (MYGN), challenged Myriad's patenting of genes it isolated and turned into its BRACAnalysis test, which estimates susceptibility to breast and ovarian cancer.

The case was closely watched by companies eager to protect products based on genetic research. Some doctors and scientists have argued gene patents would restrict competition and drive up costs for patients.

The court ruled that the original genes BRCA1 and BRCA2, are "products of nature" and can't be owned. But to turn the genes into usable products, Myriad synthesized them in a form called complementary DNA. The court ruled cDNA patents are valid due to the degree of manipulation involved.

Analyst Jose Haresco of JMP Securities told IBD that cDNA patent protection was likely why investors initially sent Myriad shares to a four-year high.

"That's the stuff that actually matters," he said. "It's the bridge between the naturally occurring gene and the actual product.

Rival Tests Loom

Haresco said the decision removed uncertainty over the stock since the suit was filed in 2009. Many JMP clients liked Myriad's business model and growth its EPS Rank is a strong 90 but couldn't "pull the trigger" due to the patent issue.

But competition immediately surfaced. Bio-Reference Laboratories (BRLI) said Thursday that in August it will offer "a suite of comprehensive genetic tests for inherited cancers including BRCA1 and BRCA2 genes.

The tests involve next-generation gene sequencing, which Morningstar analyst Charlie Miller has flagged as a threat to Myriad's more old-school tests.

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Gene Patent Ruling Leaves Key Questions For Industry

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