Mylan NV (NASDAQ:MYL) isn’t done addressing the damage done by its EpiPen price hikes, and that suggests the bottom is in for Mylan stock.
In its latest move, the pharmaceutical giant said it will launch a cheaper, generic version of the emergency response medication. Coupled with last week’s announcement of a what amounts to discounts on the branded version of the pen, MYL has gone a long way toward chopping the price of EpiPen.
From a press release:
“(Mylan) will launch the first generic to EpiPenAuto-Injector (epinephrine injection, USP) at a list price of $300 per generic EpiPen two-pack carton, which represents a discount of more than 50% to the Mylan list price, or wholesale acquisition cost (“WAC”), of the branded medicine. The authorized generic will be identical to the branded product, including device functionality and drug formulation.”
The move follows MYL’s introduction of a $300 My EpiPen Savings Card, which acts as cash at the pharmacy. This initial bit of damage control appeared to be effective, arresting the free fall in Mylan stock late last week.
It remains to be seen how the public reacts to Mylan’s EpiPen alternative strategy, but investors should rest easy. The drubbing in MYL stock was driven more by headline risk than economics anyway.
Mylan stock fell as much as 13% last week on the EpiPen backlash, wiping out around $3 billion in market value. However, EpiPen is a billion-dollar brand. With a price-to-sales multiple of 2.31, the entirety of Mylan’s EpiPen business is worth roughly $2.31 billion in market cap.
MYL Stock Priced for Upside
Sure, price cuts hurt, but it’s not like Mylan was ever going to lose the entire EpiPen revenue stream. The selloff is overdone. And given the recent action in MYL stock, it looks like the market is figuring that out.
Monday’s announcement of an EpiPen alternative appears to be a smart move from both a public and investor relations standpoint. Even Mylan’s widely excoriated CEO struck the right note in the press release.
From Heather Bresch:
“We understand the deep frustration and concerns associated with the cost of EpiPen to the patient, and have always shared the public’s desire to ensure that this important product be accessible to anyone who needs it. Our decision to launch a generic alternative to EpiPen is an extraordinary commercial response …”
The EpiPen alternative and $300 patient assistance program are going to hurt the top line and margins — but MYL is hardly looking at a hit worth $3 billion in market cap. Headline risk might keep a lid on Mylan stock until the news cycle on this episode runs its course, but it looks like the downside is in.
There may be other good reasons to be bearish on Mylan, but the EpiPen brouhaha is no longer one of them.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
