Chris Lau
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Chris Lau in Value Stocks,

Mylan’s Epipen Fiasco: Nightmare or Opportunity

Last year, a revelation that Valeant Pharmaceuticals (VRX) used specialty pharmacy Philidor Rx Services to sell drugs at high costs changed the drug market forever. Valeant’s management paid a steep price, but as the company attempts to turnaround its business,the public focus moved on. Mylan is now the poster child for charging exorbitant prices for EpiPen. 

EpiPen is $600 a pop:

Sadly, the main ingredient, epinephrine, has been off patent for years. With pressure escalating for Mylan (MYL) to cut prices, the controversy is either a nightmare or opportunity for the drug company.

Ahead of searches and mentions for EpiPen + generic online, Mylan’s stock fell on news the U.S. senator Chuck Grassley asked why EpiPen prices kept going up.


Since the drop, Mylan’s stock has yet to bottom. The stock is a falling knife. At just 6 percent above yearly lows, chances are good the extreme negative sentiment for Mylan’s EpiPen will drive the stock lower. Value investors will like the company’s healthy $11.94 per share of cash. The stock also trades at just 2x book value. The deep discount does not come free. Mylan is looking at a severe drop in profit margins for the EpiPen product. In the second quarter, EpiPen helped the specialty division grow 33 percent:

“Our Specialty division delivered revenue of $403 million in the quarter, a year-over-year increase of 33%, as a result of higher sales of EpiPen, Perforomist, and ULTIVA.”


Mylan has hundreds of product launches ahead, but it will not add meaningfully to revenue in the near-term.

At $39.97, Mylan’s stock is very cheap, at 6.84x forward earnings. The company will likely cut earnings guidance, boosting the price multiples.

Biotech investors clearly have better opportunities.

More biotech ideas: