Mylan Is at Risk From These Insurmountable Sector Headwinds
Mylan earnings on tap.

While noting that Mylan NV (MYL) has a robust long-term pipeline and a diversified revenue base, RBC Capital Markets LLC analyst Randall Stanicky thinks the pharmaceutical company is not immune to the broader challenges facing the generic drug industry.

In a note on Friday, Aug. 4., Stanicky reduced his price target on the stock to $33 from $41 and maintained his sector reform rating.

"We are reiterating our near-term cautious stance following negative data points that continue to build," Stanicky wrote, adding that it was accentuated by Mylan peer Teva Pharmaceutical Industries Ltd.'s (TEVA) second-quarter results released on Aug. 3., "combined with risk we continue to see to MYL's 2Q and 2017 outlook against lack of capitulation thus far."

The capitulation, he said, could occur when Mylan reports its second-quarter numbers on Wednesday, Aug. 9.

"MYL management has done a good job executing in a challenging environment but we see sector headwinds as insurmountable near-term with targets that need to move lower," Stanicky wrote. Among the headwinds are accelerating generic approvals and rising consortium pressures.

When Mylan reports its second-quarter results, Stanicky expects a  "2Q miss ($1.10 versus $1.17) and 2017 guide down."

Teva, for its part, on Aug. 3 cut its full-year guidance and slashed its dividend 75% owing to weaker U.S. markets and the ongoing political turmoil in Venezuela.

Teva reported second-quarter non-GAAP earnings per share of $1.02 per share and revenue of $5.7 billion. Analysts had forecast, on average adjusted EPS of $1.06 on revenue of $5.72 billion, according to Bloomberg.

Dr. Yitzhak Peterburg,  Teva's interim president and CEO, said in the earnings release that Teva experienced accelerated price erosion and lower volume in its U.S. generics business due to "customer consolidation, greater competition as a result of an increase in generic drug approvals by the U.S. Food and Drug Administration, and some new product launches that were either delayed or subjected to more competition."

Shares of Mylan closed down about 92 cents, of 3%, to $32 on Monday. Teva's American depository shares closed at $18.59 apiece or down bout 10%.

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