Greater EpiPen Access, Price Transparency Should Dampen Concern; Goldman Maintains Mylan's Conviction Buy Status

Mylan NV MYL's announcement that it will offer patient assistance via a coupon that could effectively slash the price of its EpiPen drug by 50 percent should "quell" investor concern, at least according to Goldman Sachs' Jami Rubin.

Rubin commented in a report that he's "encouraged" by the "fast and decisive" action Mylan has taken. More importantly, the analyst added that Mylan has now provided "greater price transparency" by indicating the net price on its EpiPen is $274 for two units compared to a list price of $608.

"We note the headline controversy around Epipen pricing has been around its list price and Mylan's disclosure on gross to nets should help quell some of that concern," Rubin wrote. "Further, we note that as pricing continues to be a headline risk for the industry, this might encourage other pharma companies to provide greater price transparency and reveal how much of the list price benefit is passed onto the middle men in the supply chain."

Related Link: Biotechs Are Getting Crushed After Clinton And The White House Trash EpiPen Price Hike

Rubin estimates that EpiPen's margins stand at around 50 percent, which implies around $1.16 in earnings per share, or approximately 23 percent of his 2016 earnings per share estimate of $5.00. The analyst expects the contribution of EpiPen to fall to 20 percent by 2018.

Rubin also suggested that the 11 percent decline in Mylan's stock price this week is "overdone" and there is "limited risk" from the measures announced as the company already offers significant discount and rebates.

Bottom line, Mylan's stock is trading at approximately 7.5x the analyst's 2017 estimated P/E versus its peers that trade in the 9 to 10 multiple range.

Shares remain in Goldman Sachs' Americas Buy List along with a Buy rating and $60 price target.