Mylan (MYL) has joined forces with Pfizer (PFE) to develop, manufacture, distribute and commercialize generic drugs in Japan.
The companies entered into an agreement to form an exclusive long-term strategic collaboration. The financial terms of the agreement were not disclosed.
Approximately 350 products and 125 pipeline candidates will be included in the partnership. All products will be marketed under the Pfizer brand. However, the names of both companies will be displayed on the labels of the drugs.
As per the terms of the agreement, Pfizer will undertake the commercialization duties, while Mylan will head the research and development and manufacturing responsibilities. Although Mylan and Pfizer will continue to function separately in Japan, they will collaborate on generic products. Both companies will share the costs and profits from the collaboration.
Through this deal, Mylan intends to strengthen its presence in the lucrative Japanese generic market. As per the data provided by IMS Healthcare, Japan’s generic retail prescription market is the sixth largest in the world. The Japanese government plans to increase the generic utilization volumes to 30% from 24% by the end of 2012.
Our Recommendation
We are encouraged by Mylan’s geographic reach and product depth, along with a robust generic product pipeline. However, we remain concerned about the company’s lackluster performance in the Europe, Middle East and Africa (:EMEA) region. Additionally, with most large branded drugs due to lose patent exclusivity within the 2017-2018 period, we have little visibility on the growth prospects of generic companies like Mylan beyond that timeframe.
Thus, we prefer to remain on the sidelines and have a Neutral recommendation on Mylan. The stock carries a Zacks #2 Rank (Buy rating) in the short term. We currently have a Neutral recommendation on Pfizer, which carries a Zacks #3 Rank (short-term ‘Hold’ rating).
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