The boon of generic pharmaceutical cost efficiency only works when the effectiveness of the generic product matches that of the original. An expert in the art of creating difficult-to-formulate and high-barrier-to-entry generic equivalents is headquartered in Canonsburg, Pennsylvania.

Mylan Laboratories (NYSE:MYL) is one of the world's leading makers of generic drugs, providing 160 products in nearly 400 strengths, covering 46 therapeutic categories. The firm is active in the development and production of sophisticated dosage forms, such as transdermal patches, extended-release tablets and capsules. It is also a leading supplier of unit dose pharmaceuticals to hospitals and other institutions. Customers include wholesalers, distributors, retail drugstore chains and government agencies. Competitors include Teva Pharmaceutical Industries (NASDAQ: TEVA) and Watson Pharmaceuticals (NYSE: WPI).

The stock is up over the past month, on word of various regulatory and legal developments that can benefit the firm. Also, there was word last week that Mylan issued upside guidance for FY07. The company now sees EPS of $1.60-$1.63, versus prior guidance of $1.50-$1.55 and Street consensus of $1.52. MYL shares popped on the news and have since been defining a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with two "buys," fourteen "holds" and one "sell." Analysts see a 15% average annual growth rate, through the next five years. The MYL P/E ratio (25.18), PEG ratio (0.90), Price to Cash Flow ratio (12.15), Price to Free Cash Flow ratio (20.98), Sales Growth rate (29.08%), EPS Growth rate (76.00%), Operating Margin (36.38%), Net Profit Margin (23.89%), Return on Assets (17.13%), Return on Investment (19.82%), Return on Equity (37.20%) and Net Income per Employee ($119.39k) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 65% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $18.65 and $23.49. A stop-loss of $19 looks good here. Note that the firm is expected to announce fiscal fourth quarter results in mid-May.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.