Mylan, Inc.'s
(
MYL
) second quarter 2012 earnings (excluding special items) of 60
cents per share beat the Zacks Consensus Estimate by 5 cents.
Second quarter earnings increased 15% from the year-ago quarter.
Higher revenues and gross margin expansion led to the rise in
second quarter 2012 earnings. Revenues climbed 7% to $1.69 billion,
beating the Zacks Consensus Estimate of $1.66 billion. Third party
revenues for the second quarter went up 6.9% to $1.68 billion
including approximately 5% negative currency impact.
On a reported basis (including special items), second quarter 2012
earnings remained flat at 33 cents per share.
The Quarter in Detail
Mylan reports revenues from two segments: Generics and Specialty.
Total Generics segment sales increased 3.3% to $1.49 billion in the
reported quarter. Generic third-party net sales, derived from sales
in North America, Europe, Middle East & Africa (EMEA) and Asia
Pacific, climbed 2.8% to $1.48 billion in the second quarter of
2012.
Total Specialty segment sales increased 38.6% to $207.7 million,
while third party revenues from the segment increased 50.8% to
$198.6 million. Specialty segment sales were driven by the strong
performance of flagship product, EpiPen auto-injector for severe
allergic reactions.
Third-party net sales declined in the EMEA and Asia-Pacific but
grew in North America. Third-party net sales in North American
markets climbed 12.8% to $845.3 million in the reported quarter.
The increase was mainly attributable to new product launches, which
include the generic equivalent of Mayne Pharma's Doryx (150 mg),
which is marketed by
Warner Chilcott
(
WCRX
).
Third-party net sales from the EMEA market declined 13.7% to $326.6
million. The decline was primarily due to negative currency impact.
Pricing pressure in the European markets also affected the sales.
Third party net sales in the Asia Pacific market fell 1.1% to
$307.5 million due to unfavorable foreign currency translation.
Adjusted gross margins improved to 49% (from 48%), mainly due to
new product launches coupled with favorable pricing and volume on
EpiPen, partially hampered by pricing pressure in the generic
segment globally.
Research and development (R&D) expenses increased 30.2% to
$94.4 million in the reported quarter, due to higher investment in
the pipeline.
Selling, general and administrative (SG&A) expenses rose 14.3%
to $359.2 million. Higher SG&A expense was due to increased
EpiPen related commercialization costs and higher employee benefit
costs.
During the second quarter of 2012, Mylan completed the share
repurchase program announced in May. The company repurchased
approximately 23.4 million shares (worth $500 million) of common
stock.
Outlook Maintained
Mylan reiterated its guidance announced earlier in May 2012. The
company continues to expect 2012 adjusted earnings in the range of
$2.45 to $2.55 per share. The 2012 Zacks Consensus Estimate of
$2.48 per share is slightly tilted towards the lower end of the
guidance.
The company expects 2013 earnings to be approximately $2.75 per
share. The 2013 Zacks Consensus Estimate is pegged at $2.73 per
share.
Our Recommendation
We are encouraged by Mylan's geographic reach and product depth
along with a robust generic product pipeline.
However, we are concerned about the company's performance in the
EMEA region. Additionally, with most large branded drugs due to
lose patent exclusivity in the 2017-2018 period, we have little
visibility on the growth prospects of generic companies like Mylan
beyond that timeframe.
Thus, we prefer to remain on the sidelines and have a Neutral
recommendation on Mylan. The stock carries a Zacks #3 Rank (Hold
rating) in the short term.
MYLAN INC (MYL): Free Stock Analysis Report
WARNER CHIL PLC (WCRX): Free Stock Analysis
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