Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

A congressional roasting of Mylan and its CEO Heather Bresch over EpiPen price hikes was just the beginning.

Since then, we have learned Mylan potentially misled lawmakers in that Sept. 21 hearing about EpiPen's profitability by using unrealistic tax assumptions. The Senate is joining the House in investigating Mylan, focusing on potential Medicaid fraud. And Monday, the company revealed the half-priced "authorized generic" EpiPen it has promised may not arrive until the end of the year. Mylan said in August it expected to launch the cheaper EpiPen within "weeks." 

Mylan is continually handing its critics additional ammo. It needs to dramatically overhaul its PR and strategic response to this crisis in order to avoid the sort of percussive and endless flow of negative news that could push shares even lower than they've already fallen.  

Mylanding
Mylan shares have suffered amid criticism of its EpiPen price hikes
Source: Bloomberg

Mylan's crisis response has been wanting even in the details -- like using a private jet to fly Bresch to a congressional hearing focused on price gouging and excessive profits. 

The easy and unflattering comparison here is is with Valeant, the king of troubled specialty pharmaceutical companies. After a public furor over its pricing of life-saving drugs (along with some accounting and other scandals), Valeant followed up with a succession of PR disasters and guidance cuts. It continually underestimated the business impact of its problems, and bad news seemed to emerge just about weekly. The result was extreme volatility in Valeant's shares, which is only now starting to abate after a C-suite overhaul and substantial investor pain. 

Valeant's troubles are much worse than Mylan's, but it's still a cautionary tale worth heeding.

Beyond headline risk, Mylan needs to grapple more directly with the financial impact of its EpiPen woes. Mylan has not yet changed its guidance for 2016 revenue and earnings, weeks after announcing the generic EpiPen and vowing to spend more to help patients cover costs. Wall Street analysts seem behind the curve, too, having shaved just $46 million and $182 million from the consensus revenue forecasts for 2016 and 2017, respectively.  

This despite a looming 50 percent price cut on a drug with $912 million in sales in 2015, a figure that will be substantially higher this year. 

What, Us Worry?
Analysts have yet to account for a substantial revenue hit to Mylan from its eventual release of a half-priced EpiPen
Source: Bloomberg

Though Mylan's shares have fallen more than 20 percent since its pricing issues began in earnest around August 19, the stock is still primed for more disappointment -- particularly given the company's seeming propensity to trip itself up repeatedly.

It's time for Mylan to stop making promises it can't keep, as with the generic EpiPen release. And if profit and revenue numbers look likely to disappoint, then it's better to rip that Band-Aid off now. 

The company needs to reclaim some control over its own destiny, and soon. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net