Mylan: Generic Drugmaker with a Strong Portfolio

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 |  Includes: AGN, CPD, HITK, MYL, PRX, RDY, TEVA
by: BioPharma Investor

Mylan Pharmaceuticals (NASDAQ:MYL) keeps coming up on my radar so I would like to take the time to analyze the stock and give some recommendations on it. Mylan is approaching its 52 week high so is it a buy or not? In October 2008, they reached a 52 week low of 5.75 and today is trading at 14.88. So that old adage of Buy Low-Sell High is coming into play. In these economic times many rules of trading are finding exceptions to that rule. Mylan's Financial picture can be found on Google Finance here. I see a good exception to Mylan's future, and see the company's stock rising based on FDA approvals that have come in over the past few months.

I really like the generic market right now. With patents expiring you can literally gauge how much a generic will make based on the patents expiring in the next few months. These generics are the hyenas in a pack of lions that have a good way of scavenging for their food in the Serengeti. The hyena has a distinct relationship with the Lions. The lions kill much of the food the hyena scavenges. But then there are vultures too so we will end this charade and get to the point. They may not come up with the drugs but they are definitely going to make a nice profit from them. But the competition is fierce these days. Some competitors in the generic market include Watson (WPI), Teva (NASDAQ:TEVA) , Dr Reddy's Labs (NYSE:RDY), Hi-Tech Pharmacal (NASDAQ:HITK), Par Pharmaceuticals (NYSE:PRX), and Caraco (NYSEMKT:CPD).

Recent news has cleared Mylan's name from their Morgantown, WV 483 letter fiasco. Mylan's stock went from 13.85 to 12.10 based on the news on July 27th. The Post Gazette article can be found here, entitled Adverse reaction: The FDA probes quality control at Mylan. It is funny how quick we come to judgment over initial accusations. With that said, the Pittsburgh Post Gazette published allegations of profound quality control issues that got the attention of the FDA to investigate their plant. No 483 letter was issued and Mylan has since sued the Newspaper over the SOP deviation document stories. FDA cleared Mylan and Mylan Pharmaceuticals Receives Final FDA Report and Reaffirms Its 48-Year Exemplary Record of Quality on August 13th.

But to run a business in a lower economic area like West Virginia can be profitable, if they can handle their quality control issues. They can pay employees less based on the economic value of the area and can make more money. I have seen this first-hand by working outside of Raleigh in a rural area and finding out how much less we were making than those in the RTP area. Anyways, they choose these sites for a reason. People in West Virginia definitely need the jobs.

Is this company going to make money or not? I say yes. Going through PR Newswire recently, Mylan continues gaining FDA approval for marketing for key generics. Here is a list compiled from the last few months for FDA approvals.

  1. August 27, 2009 Mylan Begins Marketing First Generic Version of BenzaClin(R) Acne Treatment
  2. August 18, 2009 Mylan's Matrix Receives First and Only Tentative FDA Approval Under PEPFAR for Generic Version of Atripla(R) HIV Treatment
  3. August 10, 2009 Mylan Receives FDA Approval for Generic Version of Migraine Treatment Imitrex(R)
  4. July 20, 2009 Mylan Receives FDA Approval for Additional Strengths of the Antipsychotic Haloperidol--- Key News from the article. Currently, Mylan has 119 ANDAs pending FDA approval representing $84.7 billion in annual brand sales, according to IMS Health. Thirty-five of these pending ANDAs are potential first-to-file opportunities, representing $16.6 billion in annual brand sales, according to IMS Health.
  5. July 16, 2009 Mylan Receives FDA Approval for Generic Version of Thyroid Deficiency Treatment Cytomel
  6. July 7, 2009 Mylan Receives FDA Approval for Generic Version of Prostate Cancer Treatment Casodex
  7. June 17, 2009 Mylan Receives FDA Approval for Additional Strength of Generic Restoril(R)
  8. May 29, 2009 Mylan Receives Tentative FDA Approval for Generic Version of Singulair(R)
  9. May 7, 2009 Mylan Receives Final FDA Approvals for Generic Versions of Anti-Rejection Medication CellCept(R)
  10. April 14, 2009 Mylan Confirms First-to-File Patent Challenge Relating to Xeloda(R) Cancer Treatment

But with the good I would like to investigate their financials a little closer. They have a Market Cap of 4.54 Billion. For the six months ended June 30, 2009, Mylan reported total revenues of $2.48 billion compared to $2.28 billion in the same prior year period. This represents an increase of $199.3 million or 8.8%. Net revenues increased $174.5 million, while other revenues increased $24.8 million. The increase in net revenues is due to higher third-party sales in all three of the Company's segments. The Generics Segment accounted for the majority of the increase ($131.3 million) followed by the Matrix Segment ($25.2 million) and the Specialty Segment ($18.0 million). On a constant currency basis, total revenues increased by approximately 17%. Their August 3rd quarterly report can be found here.

Revenue is up and gross profit is up too. However, so were their operating expenses. Earnings per share were 0.19, slightly down from Q1, but not a loss. That is good news. I see their generic market for HIV medications as their key growth. President Clinton and Mylan Chairman and CEO Robert J. Coury Announce New Agreement to Lower Price of Treatment for Patients with Drug-Resistant HIV in Developing Countries.

Disclosure: Long MYL