Mylan Pharma Finding Synergies

Mylan (MYL - Analyst Report) exited 2008 on a positive note. The company beat top- and bottom-line guidance for the year by a huge margin. First quarter results were also strong with earnings coming in well above expectations.

Following the release of first quarter results, Mylan increased the lower end of its EPS guidance for 2009 by 10 cents and is now expecting earnings in the range of $1.00 - $1.10 in 2009. The company maintained its guidance for 2010 and announced that it expects to achieve cost synergies of $160 million in 2009
(up from the previous guidance of $120 million).

We believe that the guidance should be achievable. New generic product launches, especially generic versions of Keppra and Depakote ER, should help maintain momentum in 2009.

Meanwhile, Mylan continues to work on the successful integration of the Merck Generics business that was acquired in October 2007. The acquisition has catapulted Mylan to the position of the third largest generic company in the world, and will allow Mylan to expand its footprints in non-U.S. markets like Europe, Japan and other Asia-Pacific regions.

With Matrix and Merck Generics, Mylan should be able to position itself as a leader in the worldwide generics market. The company remains on track to achieve synergies of $160 million and $272 million in 2009 and 2010, respectively.

Management announced certain strategic initiatives last year which should aid long-term growth. The company entered into an agreement with Forest Labs (FRX - Analyst Report) and sold its rights to Bystolic for $370 million.

The company has also been working on improving its capital structure which should help ease concerns regarding its liquidity position. Mylan currently has almost $453 million in cash and equivalents and access to $750 million committed revolving credit facility.

These funds should be sufficient to meet the company’s medium term requirements. We maintain our Hold rating on the stock with a price target of $14. Our target price is based on 13x our 2009 EPS estimate of $1.06.

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