For over a week, pharmaceuticals company Mylan N.V. (Nasdaq: MYL; TASE: MYL) has been in the spotlight, as the subject of the pricing of drugs in the US market again made headlines. At the center of the storm this time was Mylan's EpiPen, its emergency treatment for severe, possibly life-threatening allergic reactions that accounts for 20-25% of its profit and has a market share estimated to be over 90%.
The EpiPen affair caused Mylan's share price to slump by 13% in a week, making it a 22% decline so far this year to a price of $43. This price gives Mylan a market cap of $23 billion. Today, its share price rose 2.5% after it launched a generic version of EpiPen.
The negative sentiment towards Mylan up until today has hurt Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), which has a 5% holding in Mylan, purchased as a preliminary to a takeover bid that ultimately failed. Last year, Teva offered $82 per share for Mylan, in a bid totaling $40 billion, almost double Mylan's current market cap.
The recent drop in Mylan's share price brings it close to the low it recorded last May of $39. If it continues to fall, Teva's loss on its investment, currently $600 million on paper, will grow.
Teva recognized a loss totaling $400 million on its shares in Mylan in 2015, and it posted a further loss of $200 million in its financial statements for the first quarter of this year because of the share's weakness.
Teva CFO Eyal Desheh said a few months ago, "We did not buy the shares as a financial investment but as part of a strategy for closing a deal, and in retrospect we wound up elsewhere. I believe in Mylan. We planned to pay $82 per share and today it's traded at half that. We'll hold onto the shares until the time comes. This is not a long-term investment, we have no interest in being active in the company, and we'll find a way of selling when the price reaches where we think it should be."
For some time there have been complaints against Mylan for the way it has raised the price of EpiPen substantially in recent years. According to an item on the NBC network recently, the price of EpiPen has risen 400% in eight years, from $100 in 2008 to $500 and more today. Doctors were cited as saying that patients had told them that they could not afford the drug.
Teva's share price has also had a torrid time recently, falling 7% in the past month. In the past few days, Teva has attracted attention because of the decision by the US Patent Trial and Appeal Board invalidating two of the three patents protecting Teva's double-dose Copaxone for treating multiple sclerosis, the company's most important own-brand drug. Before the recent completion of Teva's $39 billion acquisition of Actavis, Copaxone accounted for 22% of its revenue, and it contributed $1.7 billion to its profit in the first half of this year.
Published by Globes [online], Israel business news - www.globes-online.com - on August 29, 2016
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