Mylan Laboratories (MYL)

Wall Street Journal  Oct 22  Comment 
Abbott tweaked the terms of its agreement to sell a portion of its generic-drugs business to Mylan for $5.3 billion, signaling the deal will be completed despite new Treasury department rules.
StreetInsider.com  Oct 22  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/Mylan+%28MYL%29%2C+Abbott+%28ABT%29+Enter+Amended+Agreement%3B+Will+be+Accretive+to+Mylan/9930435.html for the full story.
Financial Times  Oct 19  Comment 
Generic pharma group’s product set to be used for lethal injection ‘cocktail’ in Alabama
Reuters  Oct 9  Comment 
(Corrects paragraph 5 to say the EpiPen is produced my Mylan Inc, not Pfizer Inc)
FiercePharma  Oct 6  Comment 
Teva and Mylan merge? Rumors are certainly swirling--and not for the first time, either. But while a potential deal might make financial sense, at least one analyst doesn't see it happening.
newratings.com  Oct 6  Comment 
CANONSBURG (dpa-AFX) - Generic drug maker Mylan, Inc. (MYL) Monday announced the launch of its Lamivudine and Zidovudine Tablets USP, 150 mg/300 mg, which is the generic version of Viiv's Combivir, in the U.S. This follows the U.S. Food...
Benzinga  Oct 6  Comment 
In a report published Monday, Bank of America analyst Sumant S. Kulkarni reiterated a Buy rating and $68.00 price target on Mylan Inc (NASDAQ: MYL). In the report, Bank of America noted, “With significant acquisitions, MYL transformed itself...
Forbes  Oct 3  Comment 
Looking at the sectors faring best as of midday Friday, shares of Healthcare companies are outperforming other sectors, up 2.0%. Within the sector, Mylan (NASD: MYL) and Covidien (NYSE: COV) are two large stocks leading the way, showing a gain of...
Reuters  Oct 3  Comment 
Mylan Inc saw unusual options activity on Thursday and the stock rallied sharply after rumors of the company being approached for a possible deal, a day before it issued a...
Financial Times  Oct 3  Comment 
US equity markets rally after upbeat jobs report




 
TOP CONTRIBUTORS

Mylan Laboratories (MYL) is the third largest manufacturer of generic pharmaceuticals in the United States.[1] Until 2007, MYL was a relatively small player in a market dominated by giants Teva and Sandoz, Novartis' generics division. Mylan lacked its competitors' economies of scale and couldn't compete as effectively on price. The company also had limited international exposure, with only $3 million (less than 1% of total sales) in revenue coming from Europe in 2006.

In 2007, however, MYL made two transformational acquisitions. It acquired Merck's generic business, effectively doubling its revenues and giving it a significant presence in fast growing European generics market. Earlier in the year, MYL also acquired, a controlling interest in Matrix, an Indian pharmaceutical ingredients manufacturing firm, significantly expanding its manufacturing capacity while lowering its manufacturing costs. The downside to these acquisitions is that they were mostly funded by debt, and the interest expense associated with them, combined with the cost of integrating the two acquisitions, the Merck business in particular, will depress margins until 2009 [2].

Mylan pursues patent challenges more aggressively than most of its competitors. Rather than waiting for patents to expire, Mylan files challenges which, when successful, allow it to produce the "challenged" drug for 180 days without other generic competition. This strategy, however, comes with the risk of increased exposure to lawsuits and counter-action by the brand manufacturers. MYL has paid $100 million in direct legal and settlement costs from 2003 to 2007. This figure does not include lost revenues from the interruption of sales for drugs that are already in production.

Business Financials

Mylan’s products fall in a wide range of therapeutic categories. It makes 170 drugs in 400 different dosages. 14% of MYL's 2007 revenue came from its sales of calcium channel blockers, primarily its drug nifedipine, and another 19% of revenues came from narcotic agonist analgesics, such as fentanyl. The company currently has 65 applications with 13 “first-to-files” which would mean 180 days of generic marketing exclusivity if successful [3].


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Mylan Annual Report[4]

Key Trends and Forces

  • Unique aggressiveness in patent challenges allows exclusivity: Generic drugs are equivalents of brand name products, and they can be made under two conditions. When a patent on a drug expires, other companies can then produce that drug. Alternatively, a generic company can challenge a brand name drug and claim that parts of it should not be protected under patent. When this occurs and the generic manufacturer wins the challenge, it gets 180 days of exclusivity in which only it can produce the drug. As of March 31, 2007, Mylan had 13 separate applications for generic drugs filed with the FDA, which, if approved, would grant the company 180 days of exclusivity.[5] Pharmaceutical patents are generally short, and the process for gaining FDA Approval for a generic drug is much less rigorous than for a new medication. Often, generic manufacturers only have to prove that their product is equivalent; they do not have to go through the lengthy and expensive process of clinical trials. Thus, many generic manufacturers will wait for the patents to expire.
    However, companies such as Mylan, Barr, Teva, and others use the second option and try to challenge patents early. To pre-empt this, brand selling companies will attempt to reformulate products to maintain the patents. By adding new ingredients or changing the formula slightly, patent life can be extended, or brand domination can be maintained through the new formula. A new trend, however, involves the company selling the drug to a generic manufacturer before the challenge so that the drug goes generic and the 180 period of exclusivity is limited. This strategy means that challenging patents becomes less attractive as the returns are potentially minimized greatly. Mylan is known for its aggressiveness in challenging patents, and it is yet to be seen how Mylan and other generic producers will react to this new trend.
  • Expansion of manufacturing potential and new markets through acquisition of competitors: In May of 2007, Mylan acquired Merck’s generic business, at a cost of $6.7 billion. Mylan also purchased a controlling stake in Matrix, an India-based drug manufacturer. These moves have increased Mylan's manufacturing capabilities; it went from being a small company to a significant player with these acquisitions. Larger economies of scale allow Mylan to better compete with other major manufacturers; it can produce more product at cheaper prices and compete at price levels that were untenable before.
  • In addition to its expanded manufacturing capabilities, Mylan's expansion has opened up vast new markets, in Europe especially but also the rest of the world. Sales jumped from only $2 million in Europe in 2006 to almost $51 million in 2007. Similarly, though not as strikingly, sales rose from $3 million in the rest of the world in 2006 to $14 million in 2007.[6]
  • Aggressiveness has a price; more lawsuits: Part of being a generic manufacturer means dealing with the "edge" of patents. That is, there is likely a gray area between when a product is protected by patent and when it is not. Because of this, companies such as Mylan often face law suits from brand manufacturers. Brand companies can also file a suit claiming patent infringement which would stop generic production temporarily, even if there were not necessarily infringement. This delaying tactic can be very costly, both in legal terms and in terms of lost production time. Mylan is involved in several legal proceedings; two notable ones include challenges regarding possible fraudulent pricing schemes and an antitrust case. Mylan's has paid around $100 million since 2003. This number is not particularly high, but doesn't account for the losses associated with producing the drug that then could not be sold.

Competition

Mylan's 2007 acquisition of Merck's generics business gives it the scale to compete with some Teva and Novartis' Sandoz. Just as Mylan is particularly aggressive in its patent challenges, so is Teva. The giant had 28 challenges filed in 2007, with 15 tentative challenges, compared to Mylan's 13.

Company Annual Reports
Company Annual Reports[7]
Company Annual Reports
Company Annual Reports[8]

Mylan faces competition both from generic and brand name drug producers. Some of its top competitors include:

  • Teva Pharmaceutical Industries (TEVA). Teva Pharmaceuticals USA is one if the largest producers of generic drugs. Its products include therapeutic areas such as anti-infective, cardiovascular, oncology, dermatological and anti-inflammatory.
  • Barr Pharmaceuticals (BRL): BRL manufacturers both generics and brand name drugs, with about 75% of its sales in generics. Its main product line is contraceptives, and it is dominant in this market.
  • Sandoz, a generic division of Novartis AG (NVS). Sandoz's major therapeutic areas include antibiotics, preparations for treating the central nervous system, cardiovascular, hormones and antiallergics.
  • Dr. Reddy's Laboratories (RDY) is one of the largest generic manufactures in the US by revenue. It also manufactures branded products. Dr. Reddy's products include those for hypertension, allergies, urological disorders, cardiovascular, and antibiotics.





References

  1. Mylan 2007 10-K pg. 4
  2. Barron's Online, "Mylan's" Acquisition Gambit," October, 10, 2007
  3. Mylan 2007 10-K pg. 6
  4. Mylan 2007 10-K pg. 31
  5. Mylan 2007 10-K, pg. 6
  6. Mylan 2007 10-K, pg. 73
  7. Watson 2007 10-K pg. 38, Mylan 2007 10-K pg. 31, Teva 2007 20-F pg. 3, Barr 2007 10-K pg. 45, Novartis 2007 20-F pg. 90
  8. Mylan 2007 10-K, Teva 2007 20-F, Novartis 2007 20-F
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