Mylan N.V. (NASDAQ: MYL) is considered a serious value play in the health care sector by a key analyst. Argus has a Buy rating for the company but reduced its price target to $65, from $85. The firm believes that generic drug companies are on track to benefit from the public’s increased focus on cost-effective health care.

The company’s management — which is well-respected and whose incentives are aligned with shareholders — has established aggressive growth targets over the next six years, and has achieved early milestones. Mylan is growing organically and via attractive acquisitions, including the assets recently acquired from Abbott Laboratories.

Although the share price has fallen from its all-time high as a takeover premium originally established by Teva Pharmaceuticals, Argus believes that Mylan can more than carry on independently. The independent research firm said to look for the company to make smaller acquisitions as it pursues its long-term goals.

When Teva chose to acquire Allergan, Mylan was left to pursue Perrigo, and it has a binding proposal to acquire the company for approximately $34 billion, or $232 per share. Mylan and Perrigo have few overlapping businesses: Mylan focuses on generic and specialty branded pharmaceuticals while Perrigo specializes in over-the-counter health care products and nutritionals.

However, Argus made an interesting counterpoint to this acquisition going through:

We suspect that Mylan will eventually give up its pursuit of Perrigo, as management continues to focus on its long-term goal of mid-teens earnings growth. Indeed, on the second quarter call, CEO Heather Bresch commented that Mylan does not “have to have” Perrigo. We do expect Mylan to eventually pursue other deals, though it may have more success buying pieces of businesses, as in the case of the Abbott transaction, rather than entire companies.

A few of the key operating trends for Mylan in the second-quarter report were:

• Sales of the Epi-Pen auto-injector rose 5% to $300 million. Management expects a generic competitor to enter the market later this year.
• Generic sales in the United States (46% of second-quarter sales versus 48% last year) grew 27% and benefited from sales of new products.
• Generic sales in Europe (28% of second-quarter sales versus 22% last year) grew 62% on a constant-currency basis and benefited from the acquisition of the Abbott generic business.

Shares of Mylan were up 0.5% at $55.66 on Friday afternoon. The stock has a consensus analyst price target of $71.83 and a 52-week trading range of $44.80 to $76.69.

Mylan shares have sharply underperformed over the past quarter, declining 23% while the S&P 500 has dipped less than 1%. Over the past year, they have outperformed, with a gain of 18% versus the S&P 500’s rise of 7.5%. Over the past five years, shares have also led the market, advancing 209% while the S&P 500 has climbed 92%.

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