Bank of America analyst David Maris, who downgraded Mylan last week, saw the Matrix deal as a bad move and recommended staying away from Mylan's stock.

"Given their limited history of targeting and integrating companies, we would avoid the shares," Maris stated in a note issued Monday.

"We see no reason for investors to buy (Mylan) shares ahead of what might be a difficult transition from a single-business, domestic company to a multinational, multi-segment company," he added.

Maris, who rated the stock a "sell," did not respond to United Press International's request for comment.

Mylan, still reeling from a drop in its share price last week, said it plans to acquire up to 71.5 percent of Matrix for approximately $736 million in an effort to increase its global presence and bolster its supply chain.

Mylan did not respond to UPI's request for comment by press time.

"This is an extremely complementary transaction that accomplishes a number of Mylan's key objectives," Robert Coury, the company's vice chairman and chief executive officer, said in a statement.

"Mylan is executing on its commitment to establish a global platform and expand its dosage forms and therapeutic categories," Coury added. "Additionally, this acquisition deepens Mylan's vertical integration and enhances its supply chain capabilities."

Mylan said Matrix will provide it with access to emerging markets in India, China and Africa as well as a distribution network in Europe via Matrix's subsidiary Docpharma.

Mylan said it also sees an opportunity in Matrix's selection of active pharmaceutical ingredients, or API. Matrix is the world's second-largest API player, with more than 165 in the market or under development. The company also has six approved API manufacturing facilities.

Despite Mylan's view of Matrix's attributes as positive, Maris said these factors could backfire. He noted that Matrix operates in nine countries in which Mylan has no experience. In addition, one-third of Matrix's revenues come from API, an area in which Mylan's lack of familiarity could drive off customers.

"Given (Mylan's) limited integration experience and with (Mylan's) COO leaving on September 1 after 30 years, we believe the integration may be a major challenge," Maris stated.

In addition, Maris said he thinks Mylan is paying too much because the $736 million price tag is approximately 32 times the amount of free cash flow Matrix had last fiscal year.

Mylan's stock plunged more than 10 percent in one day earlier this month when the Food and Drug Administration approved Lavipharm's competing generic version of Johnson & Johnson's Duragesic painkiller patch. Mylan might have taken a bigger hit than it otherwise would have because it had erroneously projected the FDA would not approve any other generic Duragesic competitors for the remainder of the fiscal year.

Prudential analyst David Woodburn said in a recent report the Lavipharm approval poses problems for Mylan.

"This event raises the risk that additional competitors could get approval," Woodburn stated. "It also increases the importance, at least in our model, of (Mylan) being able to launch it's generic version of Ditropan XL this fiscal year in order to make the lower end of earnings guidance." Ditropan is Johnson & Johnson's overactive-bladder therapy.

Woodburn noted that his model had already assumed additional competition for generic Duragesic, but not until the latter half of 2007, so the Lavipharm approval resulted in a reduction in revenue and earnings per share for Mylan.

Woodburn dropped $10 million in revenue for the second quarter of 2007 and $5 million in the third quarter, thus dropping Mylan's EPS for 2007 from $1.30 to $1.27. In addition, he reduced his EPS estimate for the second quarter of this year by 2 cents to $0.28 and by 1 cent to $0.27 for the third quarter.

Mylan shares were down $0.24 to $20.35 in late-day trade Monday.

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