Fresh off an M&A spree, Mylan may need another buy to keep growing: analyst

Mylan only recently wrapped up a series of buyouts aimed at delivering future growth, but the way things are going, it might just have to rely on more M&A.

With organic sales declining in North America, its EpiPen franchise losing ground and generic pricing constrained, Mylan “will feel increasing pressure to do a large transaction” in the second half of this year, Wells Fargo’s David Maris said in a Thursday note.

Mylan turned in revenue of $2.72 billion for the first quarter, up 24% versus last year, but that Q1 hike largely stems from a series of recent buys rather than growth in its underlying business.

The company shelled out $7 billion to pick up Sweden-based Meda last year, and spent another $1 billion on Renaissance Holdings, the topical skin-med specialist. Late last year, with those deals and more in the bag, the drugmaker announced it would lay off up to 3,500 employees as part of a cost-cutting plan.

Related: Mylan eyes up to 3,500 layoffs in post-M&A cost-cutting drive

Fast forward to today, and in order to keep delivering growth as other areas of the business struggle, Mylan might want to think about doing yet another deal, Maris figures.

“In our experience, companies facing organic declining businesses that are currently showing high reported growth often do deals to be able to continue to show high reported deal-fueled growth,” the analyst wrote in a Thursday note.

Industry-watchers don’t have to be reminded about the company’s tough situation with EpiPen, a saga that started last year with countless headlines about several years of price hikes Mylan took on the lifesaving allergy injector. Now, new competition and a cheaper authorized generic are hurting a once-reliable sales engine.

Related: EpiPen set to lose $800M in sales by 2018, thanks to new rivals, authorized generic

Another challenge is the company’s now-delayed generic to GlaxoSmithKline’s lead product Advair. Back in March, the FDA turned away the company’s generic application with a Complete Response Letter citing “major” problems. The Advair copycat was expected to be a big driver of sales growth this year.

Speaking with analysts and investors on Wednesday, Mylan’s president Rajiv Malik said the company has a “difference of opinion” with the U.S. drug regulator over its generic Advair application. It remains to be seen when the company might get its copycat to the GSK blockbuster on the market.

All of that considered, RBC Capital Markets analyst Randall Stanicky wrote early Thursday that “uncertainty will linger” over the copycat. Stanicky figures Mylan’s opportunity with an Advair generic is now likely “a matter of how much of a 2018 opportunity it can be” rather than in 2017.