Mylan raised the price of EpiPen, which accounts for 40 percent of its operating profits, to $600 for a two-pack from 2007 levels of $50 for a single EpiPen.
"We now assume that MYL launches its authorized generic (AG) by year-end, and takes 75 percent of the brand's volume in 2017 (MYL expects 85 percent at some point)," analyst Gregg Gilbert wrote in a note.
"We assume a net price on the AG of $200 (MYL's estimate; compares to the net on the brand of $274), and a gross margin of 65 percent, which compares to the 75 percent gross margin on the brand implied by MYL's comments (price of $274 and COGS of $69)," Gilbert continued.
Meanwhile, Gilbert still expects additional generic competition from 2018 onward and cut his 2017 EPS view to $5.57 from $5.68.
"Despite what is likely to remain a volatile and headline-heavy period, we are sticking with our Buy rating based on valuation and the premise that MYL will continue to deliver on its globally diverse, vertically-integrated generic business," Gilbert highlighted.
That said, the analyst warned that investors will punish the stock severely if Mylan fails in its core business and/or the newly-acquired Meda business.
In addition, Gilbert trimmed his price target on the stock to $58 from $60.
At time of writing, shares of Mylan fell 1.34 percent to $42.02.
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