Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Mylan Labs -- Ignore unavailable to you. Want to Upgrade?

To: mact who wrote (371)	12/24/2001 9:23:06 PM
From: Lance Bredvold	Respond to of 384

You have inspired me to get into a bit of a review of MYL and, since I have been familiar with Johnson and Johnson for some time I pulled up the Yahoo charts going back as far as they would go for the two companies. Mylan only went back to 88 but I found it quite surprising that despite my regarding Mylan as a pretty lackluster stock of late, both they and JNJ managed to double every 4 years over that 15 year period; an 18+% growth rate. However, when I checked a bit further back on some Value Line charts I realized that Yahoo had picked an unusual year to start their records of Mylan's price. The end of 88 followed a number of years of downward average prices. Even the crash of 87 did not result in a bounce in Mylan's price after the drop and by early 89 the price was just as low as it had been after the crash of Oct. 87 (slightly under $2.5 at today's prices. I had been seeking to determine whether the major pharmaceutical companies didn't move in opposite directions from the generic producers since I knew that JNJ had grown rapidly several years in a row, but then would settle for from 1 year to 2 years at times that I suspected were usually determined by threats to drug prices from the US Government. Clinton had made a big deal of knocking unfair pricing by pharma's during his campaign and was really threatening the industry at the beginning of his term so from early 93 until late 94 the prices of most pharma's were declining. I assumed that generics in general and Mylan in particular, would have been strong during those 2 years and actually the price did move up early in that period but began getting weak in early 94 and was down nearly to its beginning price by the time JNJ, LLY and I presume other majors began their huge price runup of 95-2000. But the death of McKnight confuses those results in my opinion and it is possible that Mylan would have remained strong throughout the pharma's decline had he remained the chairman. Now we have seen the PE's of the pharma's expand to unsustainable levels, and I have been selling calls on JNJ for a couple of years every time their price gets up to 30 times earnings since I don't regard that as a sustainable multiple. Now we are hearing more talk in government of high drug costs to be contained, Merck has announced that it will make no more profits next year and others have reported a weak fourth quarter. My guess is that we are in a consolidation period for pharmas (actually have been since early 2000, but still JNJ is up at my extravagant multiple) and perhaps a period of relatively enthusiastic pricing for generics. Of course we also have the biotechs which seem to be pretty strong, but both of those sectors seem to me to be driven by new patentable drugs while Mylan, despite its attempt to produce patented product, remains largely blessed by drugs coming off patent. So I guess my prognosis for Mylan relative to its nongeneric competition is pretty positive over the next couple of years. I really have little opinion about how Mylan will do relative to the other generic manufacturers. All a pretty general and useless review of where I see Mylan's value. Apparently the factories and employees are at least average and probably superior, Mylan has displayed lots of practice at getting along with the FDA (gg) and filing for drugs coming off patent. Apparently they can produce and distribute as well as anyone and their name has been pretty good in my opinion--hoping the recent unpleasantness with the FDA did not damage their reputation all that much with consumers or prescribing agents, but I don't really know if there was any damage. I don't suppose most people buy generics because of a particular brand, but, on the other hand, I have felt reassured when I recognized the name on some generic drug I bought. Lance