Graphic: Mylan stock boost follows long share struggles for company, generics industry

Taro Pharmaceutical Industries

29/07/2019 22:34

By Lewis Krauskopf
    NEW YORK, July 29 (Reuters) - Shares of Mylan NV  MYL.O 
surged on Monday after the generic drugmaker agreed to combine
with Pfizer Inc's  PFE.N  off-patent branded drugs business. But
in the bigger picture, the surge is lost in a bleaker landscape
for Mylan's stock price and the broader generic drug industry
since 2015.
    Mylan shares have been in decline for the past four years,
after topping $76 in April 2015, according to Refinitiv data. On
Monday, the shares closed at $20.78, a more-than 70% decline
from that 2015 peak.
    This year alone, Mylan shares had lost one-third of their
value through Friday, before news broke of the Pfizer tie-up.
 urn:newsml:reuters.com:*:nL4N24U2ON
    
    Mylan is far from alone when it comes to share price swoons
for generic drugmakers, which broadly have seen severe declines
over the past several years. 
    "You have seen very challenging valuations for these
companies and I think Pfizer sees that as an opportunity,” said
Kevin Kedra, an analyst with G. Research. "Mylan is essentially
issuing them stock at a depressed level."
    U.S.-traded shares of Israel-based Teva Pharmaceutical
Industries  TEVA.TA  TEVA.N  have tumbled nearly 90% since
peaking four years ago. Teva sought to buy Mylan in the summer
of 2015, but Mylan successfully resisted Teva's unsolicited bid.
    Shares of other makers of generic drugs, such as Perrigo Co
Plc  PRGO.N , Amneal Pharmaceuticals Inc  AMRX.N  and Endo
International Plc  ENDP.O , have also skidded.
    
    
    Their struggles since the start of 2015 contrasts with a
climb of more than 45% for the overall S&P 500  .SPX  as well as
with a more modest 11% gain for the NYSE Arca Pharmaceutical
index of U.S. and European drug stocks  .DRG . 
    
    
    While the companies each have their specific issues, a main
culprit afflicting the industry broadly has been pricing
pressure in the United States, partly due to buyers having
gained more negotiating power, analysts said.
    Generic drug revenue in North America has declined about 50%
in roughly the past four years, predominantly driven by pricing
declines, according to Soo Romanoff, an analyst at Morningstar.
    Earnings for many generic drug companies have stagnated or
struggled as their share prices have fallen over the past four
years.
    
    
    Many companies have also faced regulatory and legal
uncertainty, analysts said, including lawsuits related to the
U.S. opioid abuse epidemic and to alleged price-fixing for
generic drugs.
    At the same time, high leverage also hurt the outlook for
the companies, including from debt related to acquisitions as
the sector consolidated.
    "It kind of created this storm where they couldn’t issue
equity to reduce their leverage," Kedra said. "All of a sudden, 
these companies were in declining businesses with high leverage
and Wall Street is breathing down their neck.”            

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
generic drug stocks vs market    https://tmsnrt.rs/2ylfNkz
Mylan share price    https://tmsnrt.rs/2Mq7Ym6
generic drug stock graphic    https://tmsnrt.rs/2ylilPw
Sickly generic drugmaker profits     https://tmsnrt.rs/2MpQMgy
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 (Reporting by Lewis Krauskopf
Editing by Bill Berkrot)
 ((lewis.krauskopf@thomsonreuters.com; 646-223-6082; Reuters
Messaging: lewis.krauskopf.thomsonreuters.com@reuters.net,
Twitter: @LKrauskopf))