Mylan, Inc. (MYL) engages in the global development,marketing and producing of generic and brand pharmaceutical products. It operates two segments, Generics and Specialty, with branded drugs such as EpiPen Auto-Injector, Performist Inhalation Solution, and antiretroviral (ARV) drugs.
Our early March downgrade to HOLD was in part related to growing concern around the EPIPEN franchise. While broader concerns over an AB-rated generic EPIPEN in September 2015 remain a meaningful risk, current TRx trends are tracking below our forecast and as such we’ve revisited our forecast. We’re lowering EPIPEN sales for 2013E through 2016E with the result a 2-4% reduction in EPS now pegging us below consensus.
We’re lowering our price target consistent with the EPS cut from $33 to $32 – no change to HOLD rating.
EPIPEN TRx growth trending negative. We now model flattish TRx growth through 2015 (from ~low to mid single digits) with 15% annual price increases (unchanged). Recently launched brand competitor Auvi-Q continues to pick-up incremental share with no signs thus far of overall market growth. Push-back will point to tough comps over last year due to seasonality, which at least in part likely explains the magnitude of the negative trend, but for now we believe trends suggest a more conservative outlook.
With contribution expected to accelerate to close to 30% of EPS this year (~22% in 2012), debate around potential competition is likely to pick up. As EPIPEN becomes a bigger part of the P&L, focus will shift to (1) how much EPS is at risk and (2) how MYL plans to backfill it. Per prior settlement TEVA can enter in September 2015 with FDA holding the key to whether or not an AB-rated product will be approved. We think uncertainty here could weigh on the stock.
Valuation reasonable, but we still prefer ACT for more near-term catalysts. Our $32 target is based on ~10x P/E and 8.5x EV/EBITDA
multiple on our 2014 pro forma forecasts. MYL currently trades at 9.4x 2014E EPS, which is a slight discount to ACT and should keep support in the stock assuming forecasts hold.
- How to Ride Mylan’s Steady Rise (investorplace.com)
- Mylan : 4Q BRINGS UPSIDE AND THE MUCH ANTICIPATED DEAL (amp2012.com)
- Mylan to buy Agila of India for $1.6 billion (miamiherald.com)