Mylan's Guidance Remains Unchanged

Mylan ( MYL - Analyst Report ) recently responded to the unfavorable ruling by the US District Court for the Southern District of New York regarding the Copaxone patent infringement case. Mylan said that it intends to appeal the court’s decision.

Despite the unfavorable ruling, Mylan maintained its guidance for 2012 and 2013 and said that its earnings guidance was not dependent on the launch of a generic Copaxone.

The company reaffirmed its 2012 earnings guidance range of $2.45 to $2.55 per share. The 2012 Zacks Consensus Estimate for earnings, pegged at $2.50 per share, is in the middle of the guidance range.

Mylan also maintained its 2013 earnings target of $2.75 per share. We expect that the company will be able to achieve this target.

Background

On June 23, 2012, Teva Pharmaceutical Industries Ltd. ( TEVA - Analyst Report ) said that the court has ruled against Momenta Pharmaceuticals, Inc. ( MNTA - Snapshot Report ) /Sandoz Inc. and Mylan/Natco Pharmaceuticals, who were seeking approval for their generic versions of Copaxone.

The court ruled that the claims made by Momenta/Sandoz and Mylan/Natco about the Copaxone patents being invalid and unenforceable were unfounded. Moreover, the court ruled that the generic versions for which the companies were seeking Food and Drug Administration (FDA) approval would infringe the Copaxone patents.

Copaxone is approved for the reduction of the frequency of relapses in relapsing-remitting multiple sclerosis (RRMS), including patients who have experienced a first clinical episode and have MRI features consistent with multiple sclerosis.

As of May 29, 2012, Mylan had 171 abbreviated new drug applications (ANDAs) pending FDA clearance, targeting $84 billion in sales annually. Mylan believes that about 38 of these ANDAs are first-to-file opportunities, representing approximately $25.5 billion in branded sales. The revenue figures are as per IMS Health for the 12 months ending December 31, 2011.

Our Recommendation

We are encouraged by Mylan’s geographic reach and product depth along with a robust generic product pipeline.

However, we are concerned about the company’s lackluster performance in the Europe, Middle East and Africa (EMEA) region. Additionally, with most large branded drugs due to lose patent exclusivity within the 2017-2018, we have little visibility on the growth prospects for generic companies like Mylan beyond that timeframe.

Thus, we prefer to remain on the sidelines and have a Neutral recommendation on Mylan. The stock carries a Zacks #3 Rank (Hold rating) in the short term.