Mylan Price Target Slashed Even As TLD Drug Receives Tentative Approval

Morgan Stanley reduced its price target on the shares of Mylan N.V. MYL following downward revision to its estimates due to the IMS trends, generic price pressure and uncertain new launch timing.

Meanwhile, in a separate note, Mylan announced its NDA for TLD, a combo of Lamivudhine and Tenofovir Disoproxil Fumarate tablets, has received tentative approval from the FDA under the U.S. President's Emergency Plan for AIDS Relief, or PEPFAR.

Tentative FDA Approval For HIV Treatment

TLD is an antiretroviral fixed-dose combination, with the drug to be made available in developing countries as a first-line regimen for people being treated for HIV/AIDS.

Mylan clarified that TLD combines molecules from three originator medicines, namely ViiV Healthcare's Tivicay, which is licensed through the Medicines Patent Pool, Eprivir and GLD's Viread.

Pricing Pressure

Meanwhile, analyst David Risinger said the price pressure is worse than expected, as evidenced by Teva Pharmaceutical Industries Ltd (ADR) TEVA guidance reduction on Aug. 3. The analyst indicated that the two key consortiums causing the current pressure were ClarusONE and WBAD.

Giving details, the firm noted that ClarusOne, the buying consortium of McKesson Corporation MCK and Wal-Mart Stores Inc WMT, had begun implementing lower priced contracts in the second quarter. With Express Scripts Holding Company ESRX/Econdisc joining the Walgreens Boots Alliance Inc WBA Development generic buying consortium on May 18, the firm believes lower pricing could start to hit Mylan in the second half of 2017.

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Reducing Estimates, Price Target

The firm lowered its 2017 earnings per share estimate by 5 percent from $5.17 to $4.93 and its 2018 estimate by 10 percent from $5.78 to $5.21. The 2017 revenue estimate was lowered by 2 percent from $12.29 billion to $12.06 billion and the 2018 estimate was slashed by 4 percent from $13 billion to $12.4 billion.

The firm also trimmed its second quarter earnings per share and revenue estimates to $1.15 and $2.92 billion, respectively, both of which are below the consensus estimates.

Morgan Stanley maintains its Equal-Weight rating on the shares of Mylan, citing the low valuation, but lowered its price target for the shares from $52 to $36.

At time of writing, Mylan shares were down 2.64 percent at $32.05.