Mylan rises on purchase of injectable drug maker

Mylan rises on $1.6B deal for Agila, expanding sales of injection drugs in emerging markets

Associated Press

NEW YORK (AP) -- Shares of Mylan Inc. rose Thursday after the company said it agreed to buy Agila Specialties, a company that makes generic versions of injectable drugs.

THE SPARK: Mylan said Wednesday that it would buy Agila from Strides Arcolab for $1.6 billion in cash. It could make $250 million in additional payments if Strides Arcolab satisfies other conditions. Mylan is one of the largest generic drug companies in the world and it said the deal will make it one of the biggest marketers of injectable products, and sales of those drugs are growing faster than sales of other types of generic medications.

Mylan said the deal should close in the fourth quarter and will add to its adjusted income immediately.

THE BIG PICTURE: Mylan is based in Pittsburgh, and it is the fourth-largest generic drug maker. It has spent billions of dollars to expand its international business in recent years, buying Indian drugmaker Matrix Laboratories and the generic drug division of Merck KGaA. Agila, which is based in India, gets about 40 percent of its revenue from the U.S. and 25 percent from Brazil, a large emerging market for medications.

Mylan also reported its fourth-quarter results Wednesday afternoon. The company said its net income grew 25 percent in the fourth quarter. Mylan's adjusted net income totaled 65 cents per share, a penny more than analysts expected. Its revenue increased 13 percent to $1.72 billion. According to FactSet, that's about $100 million less than analysts expected.

Sales in North America, the Europe-Middle East-Africa region, and Asia-Pacific all grew more than 10 percent. The company said revenue from specialty drugs jumped 39 percent on greater sales of EpiPen. While Mylan gets most of its revenue from generic drugs, it also handles the U.S. marketing of EpiPen, an epinephrine auto-injector developed by Pfizer Inc. for the treatment of severe allergic reactions.

Mylan forecast adjusted income of $2.75 to $2.95 per share and revenue of $7 billion to $7.4 billion in 2013. Analysts expect net income of $2.81 per share and $7.14 billion in revenue on average.

THE ANALYSIS: Susquehanna Financial Group analyst Gary Nachman said Mylan "will now be a major player in the global generic injectables market, which has very good growth potential." Nachman said he has a positive view of the purchase, but few details on the deal are available right now. Mylan plans to share more details about the deal and how it will affect the company at its investor meeting in August, he said.

Nachman maintained a "Positive" rating on Mylan shares and raised his price target to $33 per share from $31.

Cowen & Co. analyst Ken Cacciatore said the acquisition is "interesting." He suggested the sale price is high, although it may appear more reasonable based on Agila's contribution to the company's annual sales. Cacciatore said he thinks Mylan will get $375 million to $400 million in revenue from Agila in 2014. However he said Mylan has little or no growth and a lot of debt, and kept a "Neutral" rating on its shares.

SHARE ACTION: Mylan stock rose $1.20, or 4.2 percent, to $29.77 in afternoon trading. The shares have been trading around all-time highs, and they peaked at $30.47 earlier Thursday.

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