Sell Dey? Perhaps Another Day

So much for Mylan's (NYSE: MYL) plans to sell off its specialty pharmaceutical subsidiary, Dey, which it acquired in a deal with Merck KGaA to expand its own generic-drug business. The company has decided to hold onto the branded-drug business. And that's probably a good thing.

The company didn't say why it decided to keep Dey -- just that it completed a "comprehensive review of strategic alternatives." I could be wrong, but I think that's code for “no one was willing to offer us enough for it.”

However, Mylan still needs cash to pay off the huge loans it took out to help pay for the acquisition.

One solution was to sell off some of its assets, like royalty rights for high-blood-pressure medication Bystolic -- sold to partner Forest Labs (NYSE: FRX) -- and Dey. With the change of heart over the latter, it's decided to issue $400 million in cash convertible notes due 2015 -- hopefully at a lower interest rate than the current loans.

If it can find another way to pay down the debt, keeping Dey could pay off in the long term for both the company and its investors. Other generic-drug companies, like Teva Pharmaceuticals (Nasdaq: TEVA), Barr Pharmaceuticals (NYSE: BRL), and Par Pharmaceutical (NYSE: PRX), have been pretty successful at selling the higher-margin branded drugs. And pharmaceutical companies like Novartis (NYSE: NVS) and Sanofi-Aventis (NYSE: SNY) have or are trying to get a generic counterpart, so it's not like the two can't coexist.

Mylan's been punished pretty hard by investors since it announced the acquisition of Merck KGaA's generic-drug business. If it can hit its guidance of tripling adjusted EPS from 2008 to 2010, investors who buy in at these levels could be handsomely rewarded.