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A Mylan Short Squeeze?

|Includes:GSK, MRK, Mylan Inc (MYL), PFE

Mylan (NASDAQ:MYL), a dominant manufacturer and distributor of generic pharmaceuticals, is set to report its first quarter 2010 financial results on April 29. With close to 25% of its float being shorted, any positive data could force short sellers to liquidate and cover their positions. Mylan, over the past month, has underperformed the S&P 500 – intraday on April 28, Mylan is less than 9% from its 52-week high and has been trading to the upside on stronger-than-average volume.


Weeks ago, I was contemplating how to expose my portfolio to healthcare reform. In short, if medical companies stop cancelling coverage for ill patients and more individuals are granted health coverage from the insurers, a logical question to ask would be how to do such? I, as well as other analysts/journalists, would agree that generic drugs are the solution. Generic drugs, stated by the U.S. Food and Drug Administration (FDA), “…are copies of brand-name drugs and are the same as those brand name drugs in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.” “…generic drugs approved by FDA have the same high quality, strength, purity and stability as brand-name drugs.” Generic drugs are cheaper than versions that have brand names – and that is one reason to why healthcare reform could or will work.


Mylan, over the past several weeks, has come out with interesting news. On April 28, Mylan received FDA approval for Tamsulosin Hydrochloride Capsules, the generic of Flomax, which is used to treat male urinary symptoms. On April 12, Mylan received FDA approval for Bupropion Hydrochloride Extended-Release Tablets, the generic of Wellbutrin SR, which is antidepressant. For the readers of this post who check out Mylan’s Press Releases (, you will find many more interesting stories that occurred in April of 2010. What I am getting at is that all of these recently approved drugs for Mylan will amount to billions of dollars in annual sales. Also, Mylan has 139 Abbreviated New Drug Applications in its pipeline. All of this information could be fuel for a stronger-than-expected outlook.


I should note also that on Wednesday, March 31, 2010, Bloomberg stated how more than 20,000 contracts were traded for the April 2010 $24.00 calls. Those options expired worthless – nonetheless, the action indicated that there was (or still is) some potential catalysts for Mylan in the near-term. Speculators have labeled Mylan to be a potential takeover, but that is a different discussion.


Bottom line, Mylan on April 29, I assume will give a solid outlook due to healthcare reform and its impressive list of drugs pending approval.


Full disclosure: Long MYL calls at time of writing.

Disclosure: Long MYL calls
Stocks: MYL, MRK, GSK, PFE