(MYL) Still Neutral on Mylan

We are maintaining our Neutral recommendation on Mylan Inc. (MYL) with a target price of $30.00.

Why the Reiteration?

Mylan performed well in the fourth quarter of 2012. Mylan’s fourth quarter 2012 adjusted earnings of 65 cents per share beat the Zacks Consensus Estimate by a penny. The earnings beat was primarily attributable to higher revenues. Earnings also increased 23% from the year-ago quarter. Revenues climbed 13% to $1.72 billion.

Mylan is one of the leading players in the global generics market. Its generics business has been consistently performing well. Mylan’s generic unit has seen quite a few launches over the past few months. Important recent launches include Mylan’s generic version of Valeant Pharmaceuticals International’s (VRX) Zovirax ointment Apart from Mylan, Dr. Reddy’s Laboratories Ltd. (RDY) too has been making multiple generic launches over the past few months.

As of Apr 3, 2013 Mylan’s generic unit had 178 abbreviated new drug applications (ANDAs) pending approval by from the US Food and Drug Administration (FDA). The ANDAs represent annual sales worth $78.4 billion, according to data released by IMS Health. Mylan believes that 35 of these pending ANDAs are potential first-to-file opportunities. Data released by IMS Health further revealed that the 35 ANDAs represent annual branded sales worth $20.3 billion, for the 12 months ending Jun 30, 2012.

We are also pleased by Mylan’s focus on the emerging markets. Over the long term, the biggest opportunities for growth in the generics industry would be expansion in emerging these markets.

We note that Mylan is witnessing pricing pressure and currency fluctuations in several European markets, which have been affecting the performance of the Europe, Middle East & Africa segment since the last few quarters. The performance of the segment remains a concern, despite its encouraging showing in the final quarter of 2012.

We see limited upside potential until more visibility is obtained on Mylan’s pipeline development and hence retain our Neutral stance on the stock.

Other Stocks to Consider

The stock carries a Zacks Rank #2 (Buy). Akorn, Inc. (AKRX) too carries a Zacks Rank #2 in the generic space.
AKORN INC (AKRX): Free Stock Analysis Report

MYLAN INC (MYL): Free Stock Analysis Report

DOCTOR REDDYS (RDY): Free Stock Analysis Report

VALEANT PHARMA (VRX): Free Stock Analysis Report

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