Mylan's (MYL) EpiPen Saga Could Add More Supply Chain Volatility Moving Forward - Evercore

August 25, 2016 11:46 AM EDT
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Price: $36.04 -2.78%

Rating Summary:
    12 Buy, 12 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 24 | Down: 17 | New: 14
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Evercore ISI affirms Mylan (Nasdaq: MYL) with a Hold rating and $49 price target amid today's EpiPen cost-adjustment news.

The firm commented, Thanks to our top rated Specialty Pharma guru Umer Raffat (and CNBC) we are highlighting a slide Mylan is featuring (see below) in its ongoing saga surrounding EpiPen pricing. What the slide tries to imply is that the economic profits (and cause for elevated pricing) are shared nearly equally with the supply chain and insurers (welcome back debate over gross to net pricing and rebates). While we have not yet done our own calculations, it would not be unusual for gross to net spreads to approach 40% for a product such as EpiPen. The easy conclusion for us is that this may mark a more hostile period between service providers and manufacturers as the debate over whom is responsible for elevated drug pricing (and whose profits are thus truly at risk) is unlikely to subside (and may actually increase thanks to an increasingly likely Clinton presidency). These sorts of risks are always tough to quantify but clearly this is likely to result in continued volatility for the supply chain through the election and thus constrained multiples (some of which has already occurred – albeit there had been heightened hope of normalization).

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