Is Mylan's FDA Warning Letter Worth Worrying About?

Mylan NV (NASDAQ: MYL) commented publicly for the first time to a FDA warning letter which it received on August 6, relating to its Agila Specialty Formulation Facility (SFF), Sterile Product Division (SPD), and Onco Therapies Limited (OTL) sites in India.

In a press release, Mylan's CEO Heather Bresch expressed the company's commitment to addressing the FDA's observations:

"We have been and will continue to work diligently to address all of the FDA's observations and have made important progress," the executive was quoted as saying.

Umer Raffat of Evercore ISI commented on the FDA letter in a brief research note.

According to Raffat, the impact to revenue is uncertain at this time. What is known is that Agila likely contributes around $300 million in revenue, 43 percent of which was U.S.-based as of 2012.

Raffat pointed out that the FDA letter does not talk about declining product entry into the US from the three facilities mentioned. In fact, the FDA did state that only if Mylan fails to correct the alleged violations, will the agency consider declining product entry.

"It doesn't seem to me that Mylan would lose out on existing sales, HOWEVER, FDA may withhold approval of new applications/supplements from products made in these facilities," Raffat wrote.

Meanwhile, Mylan already disclosed in the press release confirming that the letter "has no material impact on Mylan's business or its previously announced full year earnings guidance."

Raffat continued that it is "hard to say" if the letter contains any systemic issue, but as of Tuesday, three out of six Agila facilities in India have a warning letter. Nevertheless, he suggested that "most of the FDA observations should be addressable."