Mylan, Inc.'s
(
MYL
) first quarter 2012 earnings (excluding special items) of 52 cents
per share beat the Zacks Consensus Estimate by a penny. First
quarter earnings increased 18.2% from a year ago.
Higher revenues and gross margin expansion led to the rise in
first quarter 2012 earnings. On a reported basis (including special
items), the generic player earned 30 cents per share as compared
with 23 cents in the year-ago quarter.
The Quarter in Detail
Revenues climbed 10% to $1.59 billion, just above the Zacks
Consensus Estimate of $1.58 billion. Mylan reports revenues from
two segments: Generics and Specialty.
Generics sales (after adjusting inter-segment revenues)
increased 5.2% to $1.42 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 5.3% to
$1.41 billion in the first quarter of 2012.
Specialty segment sales (after adjusting inter-segment revenues)
increased 53.5% to $177 million, while third party revenues from
the segment increased 67.3% to $162.3 million. The specialty
segment was driven by revenues from its flagship product, Epipen
auto-injector for severe allergic reactions. The product has a
market share of above 95% in the US.
Along with the results, Mylan announced that the company and
Meridian Medical Technologies, a subsidiary of
Pfizer
(
PFE
), entered into an agreement with
Teva Pharmaceutical Industries Limited
(
TEVA
). As per the terms of the agreement, Teva may launch a generic
version of Epipen auto-injector on June 22, 2015, subject to
certain regulatory conditions.
Third-party net sales declined in EMEA, but grew in other
markets like Asia-Pacific and North America. Third-party net sales
in North American markets climbed 15.2% to $776.6 million in the
reported quarter. The increase was mainly attributable to new
product launches, which include the generic version of
Forest
Laboratories'
(
FRX
) Lexapro.
Third-party net sales from the EMEA market declined 13.7% to
$335.6 million. The decline was mainly attributable to pricing and
volume pressure in European markets. Third party net sales in the
Asia Pacific market climbed 8.2% to $298.7 million.
Adjusted gross margins improved to 48% (from 47%), mainly due to
new product launches in North America coupled with favorable
pricing for Epipen, partially hampered by pricing pressure in the
generic segment globally.
Research and development expenses increased approximately 7.5%
to $80.9 million in the reported quarter. Selling, general and
administrative expenses rose 20.3% to $336.8 million.
Outlook
Mylan reiterated its earnings guidance of $2.30 to $2.50 per
share for 2012. Second-quarter 2012 earnings per share are expected
to be in line with the first quarter, while earnings are expected
to increase significantly in the third quarter. The 2012 Zacks
consensus earnings estimate at $2.42 per share, is in the middle of
the guidance range.
The company expects 2013 earnings to be approximately $2.75 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 lackluster performance in the EMEA
region. Additionally, with most large branded drugs due to lose
patent exclusivity within 2017-2018, we have little visibility on
the growth prospects for generic companies like Mylan beyond that
time frame.
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.
FOREST LABS A (
FRX
): Free Stock Analysis Report
MYLAN INC (
MYL
): Free Stock Analysis Report
PFIZER INC (
PFE
): Free Stock Analysis Report
TEVA PHARM ADR (
TEVA
): Free Stock Analysis Report
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