How Does Mylan’s Valuation Compare to Its Peers’?




On March 22, 2016, Mylan (MYL) was trading at a forward PE (price-to-earnings multiple) of about 7.6x. Since January 1, 2016, the company has traded in the range of 7.4x–10.2x.

How Does Mylan's Valuation Compare Its to Peers'?

After July 2015, Mylan mostly traded at discounted valuations compared to its peers Teva Pharmaceuticals (TEVA), Pfizer (PFE), and Bristol-Myers Squibb (BMY).

On July 27, 2015, Teva Pharmaceuticals announced that it would undergo a friendly acquisition of the generics business of Allergan instead of pursuing Mylan in a hostile takeover. After this announcement, Mylan’s share price fell by about 14.5%, and its PE fell as well. To know more about the Teva–Allergan deal, please refer to Teva Announces Its Acquisition of Allergan Generics.

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Mylan’s share price and valuations fell further as the company continued its attempt at a hostile takeover of Perrigo. On November 13, 2015, shareholders of Perrigo rejected Mylan’s offer by a strong majority. After this announcement, Mylan’s share price witnessed a rise, indicating that the deal had been considered unfavorable by investors. To know why Mylan’s share price rose, you can read Why Did Mylan’s Share Price Rise after Its Offer Was Rejected?

After its 4Q15 earnings results on February 10, 2016, Mylan again witnessed a steep fall in its share price and valuation multiples. Mylan’s earnings per share (or EPS) were about $1.22 in 4Q15, below Wall Street analysts’ consensus estimate of about $1.28.

Additionally, in its 4Q15 earnings conference, Mylan announced the acquisition of specialty pharmaceutical company Meda at a consideration of $9.9 billion. Investors believe that the offer, which prices Meda’s shares at a 92% premium to the company’s closing price on February 10, 2016, is a significant overvaluation of the target. Hence, despite the deal synergies, Mylan’s share price suffered on the announcement of the deal.

Analysts’ recommendations

In a Bloomberg survey of 24 brokerages recorded on March 22, 2016, about 57.1% of brokers rated Mylan as a “buy,” while 42.9% rated it as a “hold.” No brokers rated Mylan as a “sell.”

The consensus 12-month target price for Mylan is $60.38 compared to its price of $45.46 as of March 21, 2016. This implies a 32.8% return. If Mylan’s share price manages to realize this projection, it could have a positive impact on the iShares Nasdaq Biotechnology ETF (IBB). Mylan accounts for about 4.2% of IBB’s total holdings.

In the next part of this series, we’ll explore Mylan’s strategy for the EpiPen Auto-Injector and its overall efforts to increase its market share in the anaphylaxis market.


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