Mylan : 4Q BRINGS UPSIDE AND THE MUCH ANTICIPATED DEAL

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MYL : NASDAQ : US$28.57
BUY 
Target: US$33.00

COMPANY DESCRIPTION:
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. It is headquartered in Canonsburg, Pennsylvania.

MYL’s 4Q results and 2013 guidance brought upside and raised guidance as expected. However, focus will be on the $1.6 billion announced Agila
deal.

Agila brings an attractive injectables platform and moderate accretion though, like many, we were surprised at the limited financial disclosure which will leave lingering questions and a wider range on pro forma Street EPS. Overall, we’re raising standalone EPS and increasing our target to $33.
 4Q and 2013 outlook largely as expected. 4Q brought a penny of costdriven upside while 2013 guidance largely straddled consensus with
revenue lowered and EPS raised (EMEA a positive surprise).
 Agila is 5-7% accretive in 2014-16 on our analysis. 2014 pro forma EPS will be the primary focus and our $3.32 is driven by 3% core upside and 5% deal accretion.
 Where do we go from here? Raised guidance and major deal announcement were the two primary catalysts we were looking for. Focus will now shift to 2014 with catalysts and EPS upside the primary drivers for both MYL and ACT. Assuming a modest upward stock move in MYL, valuation would be ~ in line with ACT (on our 2014 pro forma EPS) – we see upside in both but all else equal more near-term stock moving catalysts in ACT.
 We are raising our target to $33. Our raise reflects both higher 2014 standalone EPS (+3%) and accretion (+5%) though we for now leave
Agila out of published EPS. Our PT is based equally on 2014E P/E and EV/EBITDA and implies a 10x multiple on pro forma 2014E EPS.

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