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Mylan shares soar after company settles with government for $465 million

Mylan NL CEO Heather Bresch holds EpiPens during a House Oversight and Government Reform Committee hearing on the Rising Price of EpiPens at the Capitol in Washington, U.S., September 21, 2016.
Yuri Gripas | Reuters

Shares of Mylan soared 12 percent in premarket trading Monday, after the drugmaker agreed to pay $465 million to settle charges that it overcharged the government for its life-saving EpiPen products.

The stock ended the day 8 percent higher.

The pharmaceutical company agreed Friday after the market closed to pay the U.S. Department of Justice and other agencies over the classification of its EpiPen Auto-Injector.

At issue was whether the anti-allergy EpiPen should be classified as a generic or a brand-name drug under Medicaid Drug Rebate program.

Following news of the settlement, Raymond James analyst Elliot Wilbur upgraded Mylan's shares to "strong buy" from "market perform," citing valuation.

The "announced settlement with the Department of Justice (DOJ) over EpiPen rebates eliminates what has become a significant overhang on shares, enabling focus to now shift back to basic fundamentals vs. ongoing speculation over downside scenarios around EpiPen," Wilbur told investors.

In August, the pharmaceutical company was scrutinized by lawmakers after consumers saw a sixfold increase for the auto-injector device, which can save the lives of people suffering severe allergic reactions.

"This agreement is another important step in Mylan's efforts to move forward and bring resolution to all EpiPen Auto-Injector related matters," Heather Bresch, CEO of Mylan, said in a written statement.

Also Friday, Mylan lowered its full-year earnings forecast to between $4.70 and $4.90 a share, from its previous guidance of $4.85 to $5.15 a share.

Even with Monday's gains, Mylan's stock is down 28 percent year to date.

MYL 2016 Chart