3 Headwinds Hindering Mylan

Even with positive near-term catalysts, Mylan NV MYL suffers from “uncertain prospects” that warrant a neutral stance, according to Morgan Stanley. 

The Rating

Analyst David Risinger downgraded Mylan from Overweight to Equal-weight and cut the price target from $46 to $36.

The Thesis

By Morgan Stanley’s forecast, the Food and Drug Administration will soon approve generic Advair and set Mylan up for launch “in coming weeks.” But three challenges hinder the biotech’s potential, Risinger said in the Tuesday downgrade note. (See his track record here.) 

They are: 

• Generic sales trends demonstrate accelerating year-over-year decline, Risinger said. He speculated that Mylan’s weak August sales were related to a regulatory warning on the firm’s largest facility, where shipments may have subsequently suffered.
• Teva Pharmaceutical Industries Ltd ADR TEVA expects to launch an Epipen competitor in the fourth quarter that would poach Mylan’s market share. Morgan Stanley attributes 11 percent of the firm’s bottom line to Epipen.
• Mylan’s “disappointing” biosimilars and complex products focus faces fresh commercial challenges.
• “Pipeline prospects are questionable due to modest uptake of U.S. biosimilars and branded manufacturers' success in blunting uptake of certain complex generics (e.g., Teva's retention of branded Copaxone market share),” Risinger said. 

Given the acknowledged risks, the analyst halved forecasts for Mylan’s 2018-2019 compound annual growth rate in earnings before interest, tax, depreciation and amortization from 8 percent to 4 percent.

Price Action

Mylan's stock was down 5.8 percent at $33.26 at the time of publication Tuesday morning. 

Related Links:

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Morgan Stanley: As Generic Competitors Falter, Mylan Is Worth A Shot