Is Mylan Stock A Buy?

Mylan NV (NASDAQ:MYL) is a global pharmaceuticals company and one of the largest. It creates a wide range of medicines covering a wide range of ailments, with its most recent pre-coronavirus headlines revolving around its alleged price gouging of EpiPens, a necessary treatment for severe allergic reactions.

When the world was struck by the global pandemic, the company waived its exclusive rights for Kaletra, a generic HIV treatment, to help fight the viral outbreak. So, is Mylan stock a Buy?

The company announced at the end of October that it is merging with Pfizer’s Upjohn unit to create a new company called Viatris. Effective November 13, Pfizer(NYSE:PFE) and Mylan shareholders are being issued shares of Viatris at a ratio of 57 percent (Pfizer) to 42 percent (Mylan). 

This has investors pondering whether this new company will thrive. Here’s what you need to know.

Mylan Treats A Wide Variety Of Diseases 

Mylan was founded in 1961, and it has subsidiaries around the world, including in the U.S., Canada, Brazil, New Zealand, Japan, India, Australia, and Europe. It started in West Virginia, and its headquarters is now located in Canonsburg, Pennsylvania.

The company grew through the end of the 20th Century through a series of mergers and acquisitions that gave it a widespread funnel of treatments. This includes technologies like transdermal patches and dry-powder inhalers, along with treatments for diuresis, allergies, COPD, ulcers, blood pressure, Parkinson’s, and more.

While it remained open about using its malaria and HIV treatments against the SARS-CoV2 virus, they didn’t prove very effective in early tests. This caused it to remain flat and underperform the general market. However, being a component of the S&P 500 wonder if it’s undervalued in the lens of this new merger.

Is Mylan Stock A Buy?

During the stock market crash, Mylan dropped from a 52-week high in February of $23.11 to a 52-week low of $12.75. It never again reached $20 per share for the remainder of 2020 and struggled to stay above $15 per share. This gives is a market capitalization of between $8 billion and $9 billion for the back half of the year.

The company’s P/E ratio is 30.23, compared to 24.80 of Pfizer. Pfizer shareholders during the merge are the ones who will clearly benefit most by the merger, as they’ll receive free shares of Viatris on top of existing Pfizer shares.

In fact, the announcement of the successful deal gave both companies a price boost in the week leading up to the merger.

Upjohn has a lot of popular drugs that are no longer company exclusive, meaning generics are allowed. This includes Lipitor, Viagra, and Celebrex.

Buying Mylan at the end of 2020 could hold a lot of risk because of the share dilution caused by the merger.

Of course, it’s not just a share dilution – the company will have a much larger pharmaceutical footprint, as Pfizer’s generic drug unit is no small mom-and-pop operation. But with more money comes more problems, and Mylan has a lot.

Risks Of Buying Mylan Stock

Mylan was an early leader in the coronavirus vaccine race. Researchers assumed its malaria and HIV medications could also be used for treatment of this virus.

However, that proved to be a fallacy within months, and other vaccine candidates took over the media buzz. Pfizer, for example, announced positive results the week after the election, carrying the entire market up with it.

Pfizer also quickly rebounded from the pandemic and started reporting profits throughout the year. Competitors like Moderna Inc (NASDAQ:MRNA) skyrocketed in the wake of the virus, as its treatment was included in the U.S. government’s Operation Warp Speed. This program gave a lot of Mylan’s competitors huge grants and fast-tracked clinical trials.

This puts Mylan in position where it could fall to the competition. Let’s explore that possibility.

Mylan Vs Competitors

Mylan already lost the COVID-19 vaccine race to its competitors. It’s not out of the question that it faces stiffer competition from these better-funded companies which received government assistance.

And that’s just the U.S. grants – every government around the world is giving out money to secure enough cure doses to treat their citizens.

Missing out on this major opportunity is what kept Mylan stock down in the aftermath of the crisis. It not only underperformed the general market, but it failed to keep up with the rest of its niche. The Pfizer deal (negotiated prior to the viral outbreak) is a lifeline that couldn’t have come at a better time.

The new company will need to focus its efforts on marketing, because the demand for a lot of medical treatments went down during the pandemic.

Ironically, the healthcare sector was one of the heaviest hit during this medical emergency. This was caused by large volumes of patients cancelling and delaying optional treatments.

Is Mylan Stock a Buy? The Bottom Line

Mylan is a massive global pharmaceutical giant that was at the frontlines of the coronavirus pandemic. Unfortunately, its proposed treatments failed to show efficacy, and it lose luster while its competitors outshined it in both headlines and the market. This pushed the company to a low market cap during its merger with Pfizer’s Upjohn unit.

Investing in Mylan prior to the merger would’ve been great, but it’s already done. Now you’re facing a quarter of uncertainty as the market adjusts to this new company. It also faces challenges and needs to pivot its massive operations to meet market demand.

Should the economy return to a level of normality that involves buying more medications, Mylan is a win. However, that hasn’t proven true yet.

Bearish investors fear it could continue losing value or remain stagnant through 2021, while bullish investors believe it’ll be a banner year following the merger. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.