Mylan’s Q2 earnings report sent the stock as low as around $35 on Aug 9. The generic drug giant reported earnings and revenue that both missed consensus estimates. Unlike Bausche Health (NYSE: BHC) and Endo International (NASDAQ: ENDP), which both rose after reporting results, Mylan’s outlooked spooked shareholders.
Mylan reported Q2 earnings of $1.07 and revenue falling 5.1 percent to $2.81 billion. Management cut guidance, citing challenges in the U.S. market. Conversely, Endo and BHC both raised guidance, signaling Mylan’s problem is specific to the company alone.
Valuation
At a 42x P/E, 1.8x PEG, and 1.5x P/B, Mylan looks relatively expensive. The stock could face further downside pressure as investors switch out to ENDP, BHC, or to Teva Pharmaceuticals (NYSE: TEVA). Management may need to re-evaluate the CEO’s performance. The company compensates the CEO excessively despite the poor quarterly performance.
Mylan offered hope about growth in generics. It believes the unsustainability of WACC pricing for brands as they compete against generics will drive the need for more access to generics and higher utilization.
Takeaway
The disruption for EpiPen supply is a clear headwind for Mylan. Pfizer (NYSE: PFE) is partly to blame but Mylan should have been on top of the problem. If the supply issue is resolved, the stock may bounce back.
