Mylan’s Pursuit of Perrigo Could Yield Massive Synergies
Mylan Misses Analyst Expectations in 1Q15
Mylan’s earnings per share growth
Mylan (MYL) has primarily grown through mergers and acquisitions. The company has a proven track record of deriving significant synergies from these deals and making them accretive to its EPS (earnings per share). Since 2007, Mylan has acquired five companies and its adjusted EPS has grown at a CAGR (compound annual growth rate) of 27% between 2008 and 2015.
According to Mylan estimates, the acquisition of Perrigo would generate a minimum $6 EPS by 2018.
Significant benefits
These are the major drivers that would contribute to Mylan’s EPS target:
diversified and differentiated product portfolio
expanding geographic reach
operational synergies of at least $800 million
robust pipeline to drive growth
The combined company would have pro forma revenue of ~$15.3 billion on the basis of 2014. As well, it would have a diversified product portfolio of generic, specialty, and OTC (over-the-counter) drugs contributing the following percentages to net revenues:
generics – ~50%
specialty and branded generics – ~21%
OTC – ~29%
The combination would also have a significant commercial presence, covering ~145 countries with a robust product pipeline to drive long-term growth. Mylan has more than 3,700 global filings pending regulatory approval. As well, 269 ANDAs (abbreviated new drug applications) are pending FDA (U.S. Food and Drug Administration) approval, including 44 pending first-to-file opportunities.
Perrigo’s 31 ANDAs are pending FDA approval. It has also identified more than 30 new product opportunities worth over $3.5 billion for fiscals 2015 to 2017. Perrigo forecasts a potential $1 billion from new products over the next three years.
Investors can get broader exposure to the pharmaceutical industry with the iShares US Healthcare ETF (IYH). IYH has ~5.38% of its holdings invested in Actavis (ACT), Hospira (HSP), Mallinckrodt (MNK), Impax (IPXL), and Perrigo (PRGO).
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