CEPH Cephalon (MM)

Mylan Inc. (MYL) recently announced that Endo Pharmaceuticals (ENDP) filed a patent infringement lawsuit in connection with an abbreviated new drug application (ANDA) filed by Mylan with the US Food and Drug Administration (FDA) for the generic version of Endo’s acute migraine drug Frova.

Mylan believes it is the first company to file an ANDA for generic Frova and is expecting to be granted 180 days of marketing exclusivity once approved. Frova generated revenues of approximately $68.2 million in the trailing twelve months ending on June 30, 2011.

This month, Mylan launched the generic version of Uroxatral tablets. Some important products launched by Mylan in the recent past include generic versions of AstraZeneca's (AZN) Entocort, Novartis' (NVS) Femara and Cephalon's (CEPH) Amrix.

Mylan has a robust generic pipeline. As of August 17, 2011, the company had 162 abbreviated new drug applications (ANDAs) pending FDA approval, targeting $94.4 billion in branded sales. Mylan believes that about 43 of these ANDAs are first-to-file opportunities representing more than $25.5 billion in branded sales.

Our Recommendation

We currently have a Neutral long-term recommendation on Mylan. The shares carry a Zacks #2 Rank (short-term Buy rating). Mylan is one of the leading players in the US generics market.

The company holds immense potential as many blockbuster drugs are slated to lose patent exclusivity in the forthcoming period. We are encouraged by Mylan’s robust generic pipeline. However, competition in the generic segment is strong with players like Teva Pharmaceuticals (TEVA), Watson Pharma (WPI), Par Pharmaceuticals (PRX) and Sandoz - the generics arm of Novartis - in the field.

Moreover, we are concerned about lackluster growth in the European generics business. We intend to remain watchful until better visibility is obtained on top-line growth prospects in Europe.

 
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