Mylan (MYL) Miss Overshadowed by Mediocre Deal - Guggenheim

After the 4Q15 miss and announcement of the deal to acquire Meda Guggenheim analyst, Louise Chen, remains on the sidelines and kept her Neutral rating on Mylan (NASDAQ: MYL) shares. This acquisition makes strategic sense, but Meda (3% topline, 5% EBITDA growth) does not enhance MYL's sales and earnings profile. This is important ahead of potential generic competition for Epipen in 2H16. No change to Neutral rating.

The analyst would become more constructive on MYL's stock if the Meda integration progresses better than expected and/or sales from EpiPen, generic Advair, biosimilars and Copaxone are higher than anticipated.

MYL reported 4Q15 adjusted diluted EPS of $1.22, $0.06 lower than consensus driven by share count. Management gave '16 EPS guidance of $4.85-$5.15 or $5.00 at the midpoint (consensus was $4.97). This guidance includes one quarter for Meda, but MYL is committed to the guidance even without Meda.

The updated model for 4Q15 results includes the acquisition of Meda, which decreased the '16E EPS estimate. MYL expects 1Q EPS to be flat YOY, 3Q the highest, followed by 4Q.

Deal information:

1) With Meda, MYL would have had $11.8B in sales and $3.8B in EBITDA in '15 versus the $9.4B and $3.0B MYL reported

2) Operational synergies of $350MM by year 4

3) $0.35-$0.40 accretive in '17, we previously estimated '17 EPS of $5.20 for MYL standalone (consensus was $5.32)

4) Meda helps MYL achieve its goal of having a global OTC business of $1B

5) Pro-forma leverage 3.8x, ample capacity to do more deals

6) Expect 6, $1B franchises at close

7) Maintain investment grade credit rating.

For an analyst ratings summary and ratings history on Mylan click here. For more ratings news on Mylan click here.

Shares of Mylan closed at $50.54 yesterday.

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