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Key Risks Facing Mylan in January 2018

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Key risks

Mylan (MYL) has diversified its operations across multiple product categories and geographies. However, there are certain company-specific risks that may affect its profitability in 2018.

In 2011, Mylan entered into an agreement with Pfizer (PFE), allowing the former exclusive worldwide rights to develop, manufacture, and commercialize Pfizer’s generic versions of GlaxoSmithKline’s (GSK) Advair and Seretide. These generic drugs were to incorporate Pfizer’s proprietary dry powder inhaler delivery platform.

In March 2017, Mylan received a CRL (Complete Response Letter) from the FDA regarding the company’s abbreviated new drug application for the respiratory delivery platform. Mylan has a related contingent liability of $361 million for the product.

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In October 2017, the FDA rejected Mylan’s marketing application for its biosimilar of Amgen’s (AMGN) Neulasta. Livemint, citing Mylan’s development partner, Biocon, stated that the FDA’s CRL “sought certain data on chemistry, manufacturing and controls from facility requalification activities post recent plant modifications.” The letter noted that there were no issues related to the product’s bioequivalence.

Intense competition

While the healthcare space is highly competitive around the globe, this competition is particularly evident in Mylan’s North American segment, where key brand EpiPen has been experiencing continuous market share erosion and is expected to contribute less than 3% of the company’s total revenue in fiscal 2018.

Pricing issues

During marketing exclusivity, a company generates more revenue with fewer competitors. Once this period nears expiration, cheaper competing products enter the market, resulting in rapid erosion of the original drug’s market share.

Mylan was criticized for substantially raising EpiPen prices when competing products from Teva Pharmaceutical and Sanofi were expected to hit the market. While a pack of EpiPens cost $100 in 2007, it cost $609 in 2016. Notably, Mylan makes up ~0.30% of the Power Shares QQQ ETF (QQQ).

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