Zacks_Analysts' Blog : Mylan Settles with Roche for Xeloda - Analyst Blog

Mylan Inc. (MYL) recently announced that it has entered into a settlement and license agreement with Roche (RHHBY) bringing an end to its ongoing litigation with the latter relating to Roche’s cancer drug Xeloda. Mylan was looking to launch a generic version of the drug which is used for the treatment of metastatic breast and colorectal cancers. Xeloda generated revenue of $570 million in the trailing twelve months ending June 30, 2011, according to IMS Health.

The details of the agreement have been kept confidential. The agreement will be applicable once it is reviewed by the US Department of Justice and the Federal Trade Commission.

Mylan also recently announced that its Indian subsidiary, Matrix, has received tentative approval from the US Food and Drug Administration (FDA) to market a novel co-packaged version of HIV/AIDS treatment in certain developing countries outside the US. The approval has been received under the President's Emergency Plan for AIDS Relief (PEPFAR).

Our Recommendation

We currently have a Neutral long-term recommendation on Mylan. The shares carry a Zacks #2 Rank (short-term Buy rating). Mylan is one of the leading players in the US generics market. The company holds immense potential as many blockbuster drugs are slated to lose patent exclusivity in the forthcoming period. We are encouraged by Mylan’s robust generic pipeline. However, competition in the generic segment is strong with players like Teva Pharmaceuticals (TEVA), Watson Pharma (WPI), Par Pharmaceuticals (PRX) and Sandoz - the generics arm of Novartis (NVS) - in the field. Moreover, we are concerned about lackluster growth in the European generics business. We intend to remain watchful until better visibility is obtained on the top-line growth prospects in Europe.