Mylan Q4 Earnings and Revenues Lag, Set To Acquire Meda

Mylan 's MYL fourth-quarter 2015 earnings (excluding special items) of $1.22 per share missed the Zacks Consensus Estimate of $1.25. However, reported earnings surged 16% from the year-ago quarter, driven by higher revenues.

Mylan Inc. (MYL) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Revenues also grew 19.6% to $2.5 billion, but fell short of the Zacks Consensus Estimate of $2.7 billion. The top line recorded year-over-year growth on the back of solid revenue growth at the Generics segment.

Full-year earnings were up 21% to $4.30 per share, while revenues came in at $9.4 billion, up 22%.

Quarter in Details

Generics third-party net sales, derived from sales in North America, Europe and rest of the world, soared 22% to $2.22 billion. Segmental third-party net sales grew 3% to $1.03 billion in North America. New product launches and acquisitions aided revenues.

Third-party net sales from the European market increased 65% to $616.4 million driven by net sales from the acquisition of Abbott Lab's ABT non-U.S. developed markets branded generics business and new product sales, partially offset by unfavorable currency translations, lower volumes on existing products and lower pricing. Third-party net sales from rest of the world escalated 29% to $570.5 million. Segmental performance improved on the back of acquisitions, new product launches in Australia and Japan, and increased sales of antiretroviral products.

Third-party net sales at the Specialty segment were up 5% to $254.1 million. Specialty segment sales benefited from higher volumes for its flagship product, EpiPen Auto-Injector, for severe allergic reactions.

Adjusted gross margin during the fourth quarter of 2015 expanded to 56% from 54% in the year-ago quarter on the back of new product introductions and net sales from acquisitions.

2016 Outlook

Mylan provided its 2016 guidance. The company expects adjusted earnings per share in range of $4.85 to $5.15, the midpoint of which represents a 16% increase. Total revenue is expected in the range of $10.5 billion to $11.5 billion, with or without Meda, the midpoint of which again represents 16% growth. The Zacks Consensus Estimate for 2016 earnings is $4.98 on revenues of $10.8 billion.

The Proposed Meda Acquisition

Meanwhile, Mylan has proposed to buy a leading international specialty pharmaceutical company, Meda, via a recommended public offer. The total offer consideration consists of a combination of cash and Mylan shares, with a value at announcement of SEK 165 per Meda share. The transaction is valued at $9.9 billion. It is expected to be complete by the end of the third quarter of 2016.

The combination of Meda and Mylan will create a global pharmaceutical leader with combined revenues of $11.8 billion as per 2015 figures. The combined company will boast of a portfolio of more than 2,000 products and critical mass across all commercial channels, including an OTC business worth more than $1 billion. The Meda acquisition will also expand Mylan's global footprint and strengthen its presence across Europe and emerging markets including China, Southeast Asia, Russia, the Middle East and Mexico.

Moreover, Mylan expects to generate synergies of approximately $1.1 billion in EBITDA. The transaction is expected to be accretive immediately and will contribute in the range of 35-40 cents per share to 2017 earnings. Thus, the transaction could accelerate the achievement of Mylan's previously stated $6.00 adjusted earnings target to as early as 2017 instead of the previous projection of 2018.

Our Take

Mylan's fourth-quarter results were disappointing, with the company missing both earnings and revenue estimates. Consequently, shares of the company dropped 9.1% in the afterhours trading session. Although we were encouraged by strong sales at the Generics segment, the performance of the company's Specialty segment remain a cause of concern. Moreover, the company is facing competitive market conditions for EpiPen Auto-Injector and has lowered the average net selling price.

We note that Mylan's offer to acquire Meda comes closely on the heels of its failed attempts to acquire Perrigo Company PRGO . Further, during its fourth-quarter results conference call, the company hinted at its intention of pursuing more acquisitions in the near-term.

Mylan sports a Zacks Rank #1 (Strong Buy). Anika Therapeutics Inc. ANIK is a well-ranked stock in the health care sector, with the same Zacks Rank as Mylan.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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