Mylan Jumps As DOJ Settlement Removes 'Lingering Concerns'

Mylan (MYL) stock jumped at the open Monday, as investors digested the company's announcement late Friday that it had reached a $465 million settlement with the Department of Justice about the classification of EpiPen in the Medicaid Drug Rebate Program.

"The DOJ settlement removes a significant overhang that had been weighing on the stock," RBC Capital Markets analyst Randall Stanicky wrote in a mostly upbeat research note Monday, in which he maintained his sector perform rating and 48 price target on Mylan stock.

Mylan stock was up more than 8%, near 39, in early trading in the stock market today, earlier rising above 40 for the first time since Sept. 29. In Friday's regular session, Mylan stock hit a three-year low of 35.58.

The $465 million is less than Mylan's 2015 EBIT, earnings before interest and taxes, Stanicky pointed out. The agreement "will remove any lingering concerns of a larger cash call and ongoing negative headline here and represents an important step in moving forward," he wrote.

The government has said EpiPen, a potentially lifesaving injector that treats dangerous allergic reactions, should have been classified as an innovator drug, according to rules set up by the Centers for Medicare and Medicaid Services and thus, said Stanicky, subject to a higher rebate formula of 24%, vs. 13%.

The agreement, though, won't end the heat Mylan continues to face from lawmakers, patients and patients families from the six-fold increase in EpiPen prices since 2007, to $600 for a two-pack. Reacting to the heat, Mylan recently announced a generic version at roughly half the price and in Augustexpanded the eligibility of its patient-assistance program, but the issue of high drug prices isn't going away.

Mylan late Friday also lowered its guidance for the year, and Stanicky lowered his own estimates as result, also noting expected competition from a Teva Pharmaceuticals (TEVA) generic rival product that he said would further impact in 2018.

"We see sustainable growth for MYL, albeit lower than peers anticipated due to erosion of EpiPen, which has been an important driver ...," Stanicky said.

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