Comparing year-over-year results for Mylan
Net revenue rose 56% for the first quarter to $542.7 million. Subtracting the $91 million in revenue generated by Matrix, the old Mylan sill grew revenue by an impressive 30% over the same quarter last year.
Much of that growth was due to $84 million in sales of its generic version of Pfizer's
Another new product is faring much better: the generic version of Ditropan, a medication for overactive bladder made by Johnson & Johnson
The Matrix acquisition has done more for Mylan than just give it a presence in India to compete against Dr. Reddy's Laboratories
In Merck's generic drug business, Mylan is swallowing a company one and a half times as large as it is. It's financing the acquisition by taking on a huge amount of debt. After the merger is finalized in October, the company will make a substantial equity offering to generate cash to pay off some of the debt. Mylan will be so much larger than it is now that the increased number of shares shouldn't affect EPS too much. Mylan will need to balance its desire to pay off debt with shareholders' desire to not decrease their equity too much by offering too many shares. Investors will either need to trust that management will strike the right balance, or they should sit on the sidelines and wait to see what the new larger-than-life Mylan looks like on the other side of the merger.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is an Inside Value recommendation and Johnson & Johnson was picked by the Income Investor team. The Fool's disclosure policy ensures that you know all that information.