By Samuel Taube
The last time we looked at Mylan (Nasdaq: MYL) was in a Stock Grader profile more than six months ago. That was right in the middle of the company’s first EpiPen scandal, when Mylan came under heavy political fire for more than doubling the injector’s price. Despite all the outrage around the move, our fundamental factor test rated Mylan stock as grade A.
At the time, our research showed that the drugmaker had a solid balance sheet. The firm was awash in bad PR, but that didn’t seem to be affecting its finances on a large scale.
Mylan may not be so lucky with its second EpiPen scandal. This time, the problem isn’t the price – it’s the product itself. Several reports of malfunctioning injectors have surfaced in recent weeks, prompting a multinational recall. Mylan stock is down more than 14% from its high last month as a result.
It’s one thing for Mylan to defend itself from allegations of overcharging. But defending itself from allegations of overcharging and poor product quality could be much harder.
Can Mylan shake off another scandal? Or is the stock really in trouble this time?
Mylan’s Second EpiPen Scandal
If you paid a gigantic markup for an allergy rescue injector, you’d at least expect it to work reliably. But that’s not the case with Mylan’s EpiPens.
Last month, two reports came to light in which the device failed to activate when used by anaphylactic shock victims. Extreme allergic reactions can turn deadly in minutes, so this defect represents a serious danger to Mylan’s customers.
The problem allegedly started with Mylan’s manufacturing partner, Meridian Medical Technologies, a unit of Pfizer (NYSE: PFE). Meridian claimed that only one lot of EpiPens was defective, so it initiated a small recall in parts of the United States.
Then, last week, Mylan expanded the recall to include 13 lots distributed across four continents. It’s unclear whether there’s evidence of defects in the other 12 lots – or whether Mylan is just being careful. You can check the recall status of your EpiPens by looking up their lot numbers and following the instructions here.
Very Bad Timing
If you look at Mylan’s two recent scandals individually, neither one is necessarily fatal. Mylan obviously isn’t the first drugmaker to be accused of price gouging, and it’s not the first to grapple with safety issues for a mass-market product.
But how many pharma companies have suffered both scandals within the span of a year? We couldn’t find any. It’ll be difficult for Mylan to recover the goodwill it has lost – especially in the current political climate. Both President Trump and his Democratic opposition have recently discussed cracking down on price gouging and other misconduct in the pharma industry.
The two scandals come at an especially bad time for Mylan, as it is also starting to clash with competitors for the first time in years. The Auvi-Q, a competing rescue injector from private pharmaceutical company Kaléo, will re-enter U.S. markets later this year.
Ironically, Kaléo had to pull the Auvi-Q from the market …read more
Source:: Investment You
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