Mylan Outperforms as Generics Rule

We recently upgraded our recommendation on Mylan, Inc. (MYL - Analyst Report) from Neutral to Outperform with a target price of $26.00.

Mylan is one of the leading players in the US generics market. We are encouraged by Mylan’s geographic reach and product depth along with a robust generic product pipeline. A large number of high-value branded pharmaceuticals have begun to go off-patent and many more will lose patent exclusivity in the next few years.

Mylan has a robust pipeline and it hopes to exploit the patent cliff overhanging the pharma industry. We believe the generic segment will post strong sales in the US in 2012 with more than 500 new product launches expected to generate $800 million in revenue. In 2012, Mylan hopes to make 13 date-certain launches, 4 being first-to-file opportunities of generic versions of Teva Pharmaceutical’s (TEVA - Analyst Report) Provigil (April 2012), Takeda’s Actos (August 2012) and Actoplus Met (December 2012) and Novartis’ (NVS - Snapshot Report) Diovan HCT (September 2012). Other key launches include the generic versions of Zyprexa (April 2012), Plavix (May 2012), Viramune (May 2012) Clarinex (July 2012) Singulair and Singulair Chew (August 2012), Avapro and Avalide (September 2012) and Atacand (December 2012).

In Europe, Mylan expects to launch about 350 products in 2012. These new product launches in combination with easing pricing comparisons could lead to improved growth trends in Europe. In the Asia-Pacific region, Mylan’s growth is driven by its Indian subsidiary Mylan Laboratories, which is one of the fastest growing active pharmaceuticals ingredient (API) manufacturers in India.

Mylan conducts its specialty business through Dey Pharma, which markets branded specialty injectable, nebulized and transdermal products for life-threatening conditions. The segment’s main products are the EpiPen Auto-Injector (severe allergies) and Perforomist Inhalation Solution (a formoterol fumarate inhalation solution for the treatment of chronic obstructive pulmonary disorder). These products not only offer Mylan the necessary diversification from generics but contribute to revenue growth. Management expects Dey to deliver substantially going forward, as the EpiPen and Perforomist franchises surpass expectations.

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Read the full analyst report on TEVA

Read the full analyst report on MYL