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Mylan N.V. currently changed hands at $39.97, which stood at $-4.86% during the pre-market session.

Year to date, Mylan N.V.’s stock has performed at -26.08%. In essence, the stock’s weekly performance stood at -7.11%, while -17.67% for the month, 14.08% amid the last quarter, -13.37% in the first six months and -15.71% for the prior year.   

Mylan’s EpiPen Tied Executive Pay to Strong Profit Targets

The pharmaceutical company in the middle of a firestorm over hefty price hikes on the lifesaving EpiPen claimed a special incentive plan over two years ago in which executives receive rewards if aggressive profit targets will be met.   

The board of Mylan NV has approved a one-time award for over 100 employees in early 2014, which hinged on more than doubling the adjusted per share earnings of the company in over a five-year period ending in 2018, according to Mylan’s regulatory filings.  

The estimated aggressive target requires about 16% compound annual earnings growth, suggesting a solid order for a firm that extracts nearly 90% of its revenue mainly from the generic-drug business.  

The top five executives of the company were granted an award worth $82 million overall, but analysts claimed that it would be worthless if the company’s star product EpiPen will not meet its 2018 earnings target of 90%.  

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A short-term pay tied to equally motivate targets for “adjusted diluted” earnings were also approved by the board. Meanwhile, the company estimated a 16% growth in earnings benchmark for fiscal year 2016.  

Its executives generated about 21% growth in adjusted diluted earnings in the previous year, increasing their bonuses despite a decline in net earnings.

Generally, companies usually reward their executives by means of linking incentives to pay their earnings or stock price objective, in which firms could freely raise prices.

However, some analysts claimed that Mylan’s way of showering incentives could have been led by their EpiPen’s price increase, citing high demands mainly from school-age children and others who are dependent on reverse severe allergic reactions.   

The chart below illustrates MYL respond in their recent aggressive incentives for executives, in which the stock price opened at $48.99 on August 19 and tried to break out at support 46.35 on the downside. Meanwhile, stock price followed a downward trend and touched two support lines at 45.10 and 43.86 respectively with a 17,938,600 trading volume.   

Further, MYL didn’t even showed a recoil as stock price touched the same support at 43.86 on August 25 with a trading volume of 17,728,700 after the company announced its EpiPen’s price increase.

Thus, investors traded with caution and last seen trading at $39.95 with a trading volume of 17,214,100 on August 2.

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Conclusion

Given a steep decline in Mylan shares, we conclude that stocks will remain in the bearish trend as the pharmaceutical company’s EpiPen price increases.

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