Mylan: Private Equity And / Or Consolidation

The recent history of generic drugmakers has not been a happy one. Regulatory pressure and competition in the space have been a double whammy that many have not been able to withstand. In the case of Mylan, the revenue dive and $14bn of debt mean that tinkering around the edges  – the latest Aspen drug buy,  is certainly not enough. However, all may not be lost even after the recent share price collapse, with it likely that activist Elliott will do its normal thing and be an activist investor to sort the situation out. Indeed, while generic drugmakers may be out of favour on the stock market, they are the kind of situation which should be cat nip to the private equity brigade. This is particularly said on the basis that so much generic drug real estate around, and so many struggling, the time is ripe for consolidation in the sector. Such conditions suit private equity investors just fine.

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As far as the price action situation of Mylan, it can be seen on the daily chart that the stock is effectively trading at a multi-year line of support at $19, and have the Relative Strength Index, at record lows. This should mean that even if the companies problems are not ironed out straight away, we should still see a near term bounce to the low $20s. If others, as well as Elliott (perhaps a seasoned strategic investor) enter the picture for the purposes of rescue and recovery, we could see more gains even than this: back to $30 plus where the stock was as recently as February.

Author: Zak Mir

Financial commentator, interviewer, technical analyst

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