EUR 850.00 For Business Accounts Only

Morningstar | New Products Help Keep Mylan’s Third-Quarter Results on Track

We don’t anticipate any changes to our fair value estimate or no-moat rating for Mylan as the company’s third-quarter results keep it on track with our year-end expectations. Management reaffirmed its year-end outlook.

Mylan’s business continues to face a number of challenges in its U.S. generics business, EpiPen franchise, and regulatory issues at its Morgantown facility, but its international operations and focus on complex products—such as generic Copaxone and biosimilar versions of Neulasta and Humira--showed evidence of helping to stabilize the business during the quarter. While North American segment sales fell 13% on a constant currency basis from last year, Europe and other international revenue increased 2% and 11%, respectively. New product launches had a more pronounced effect upholding profitability, with adjusted gross margin up nearly 200 basis points from a year ago.

We continue to think Mylan’s focus on complex products is a net positive for the company, but the company continues to face a high degree of uncertainty, in our opinion. The discontinuation of the biosimilar partnership with Momenta modestly sets back Mylan’s pipeline, and the company will continue to face a number of larger biosimilar competitors. Mylan also continues to attempt to build out its respiratory franchise, including the recent acquisition of TOBI from Novartis, likely in anticipation of a generic Advair launch. The timing of this product approval remains uncertain, in our view, due to the product’s complexity, but it should become a beneficial launch for Mylan if it can get regulatory approval. We also still have some doubts about the ultimate success of Mylan’s biosimilar insulin products despite recent success in Europe.