Mylan Inc. (NASDAQ: MYL) is one of the world's biggest drugmakers, and it's also one of Fool contributor Todd Campbell's worst-performing stock picks. The company's EpiPen fiasco, and worries over investigations into generic-drug pricing, have sent shares falling, but the long-term potential for disrupting the market for biologics with biosimilars remains significant.
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In this clip from The Motley Fool'sIndustry Focus: Healthcarepodcast,analyst Kristine Harjes asks Todd to explain why he's sticking with Mylan, despite its current challenges.
A full transcript follows the video.
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This video was recorded on May 3, 2017.
Todd Campbell:My loser isMylan. Mylan,you may know, over the course of last year,has been the subject of a lot of negative press,first for their EpiPen product, which got called out foregregious --I think that's fair for me to say personally,what I feel wereegregiousprice hikes for the productthat we're a big driver of revenue growth for this one product, EpiPen. Then, some concerns over the course of the past year over somecollusion among some of these generic-drug makers onpricing of certain products, which,obviously, has not been proven, but there's still some rumors and things going down that have weighed down the share price.I stepped in and bought Mylan in two blocks -- one block of it inJuly of 2015, andI added to it last fall. ButI'm still down, even after lowering my average cost, 23% on that investment. It's really due to thenegative publicity that we've seenover the course of the last year.
Kristine Harjes:Were you eventhinking about EpiPenwhen you first bought into this company? It'sprimarily a generic-drug maker.
Campbell:No.EpiPen was not the reason I bought this stock. And that's one of the reasons I added to this position last fall. This is why youtake the long-term approach. You say,what was my reason for buying it? My reason for buying it, Kristine, was biosimilars, whichyou and I have talked about ad nauseam at various pointsover the course of the last year and a half.
Harjes:They'rekind of a big deal in healthcare.
Campbell:Right. Kristine,want to give a quick and dirty on what a biosimilar is?
Harjes:Sure. Biosimilars are basicallygeneric versions of really complex biologic drugs. If you want more than that,shoot me an email. We've talked about them, as Toddso appropriately put it, ad nauseam on this show. Butwe also have a really good article on fool.com thatexplains everything you need to know about them. If you want that,you can email me,email@example.com. But if you're just looking for the basics, justthink of it as a complicated generic drug.
Campbell:Yeah. And the marketopportunity, theoretically, is huge, because you have $100 billion in branded-drug sales inbiologics that are losing patent protection over the course of the next five years or so. So you have a gold rush going onamong different drug makers including Mylan to develop these alternative options, to these top-selling biologics. Perhaps there is no company that has made as big a push R&D-wise intodeveloping biosimilars as Mylan. They have 16 different biosimilars in their R&D pipeline, and they have a couple that are closing in on potentialcommercialization here in North America. When I went out and bought shares of this, it wasn't with the view thatEpiPen is a significant one of their sellers andcontributesa lot of their profitability. It was,how will the market look for biologic drugs in 10 years, 20 years, 30 years? And are we on the cusp ofsomething like we saw on the 1990s, whensmall-molecule generic drugs firststarted to gain a toe hold, and now they account for 90% of allprescriptions written?
Harjes:Right. So theopportunity is still clearly there for biosimilars. It sounds to me like you're holding on to Mylan. Are you bullish on it going forward?
Campbell:I am. If I'm still long it -- and I added to it a year ago,after determining thatif the EpiPen issuedidn't really affect my thinking for getting into it, yeah,nothing has changed tomake me think they're going to fail in biosimilars, or they won't be a major player. This is a global company. You have 600 millionpeople living in the world right now over age 65. By 2030, you're going to have a billionpeople over 65. There's a lot of demand coming down the line forpharmaceuticals. And Mylan, both throughgenerics and hopefully through biosimilars, is one ofthe largest by volume producers ofmedicine that gets prescribed.
Harjes:Yeah.I think when you look at this company,it's a really good learning opportunity to see that when share prices dipfor reasons outside of what your original thesis was, if that thesisremains intact,that could be a really good time to buysome more of them,if you're still confident in your thesis.