Mylan Beats on All Fronts - Analyst Blog
July 27 2011 - 10:41AM
Zacks
Mylan Inc.’s (MYL) second quarter 2011 earnings
(excluding special items) of 52 cents per share were above the
Zacks Consensus Estimate of 45 cents as well as the year-ago
earnings of 37 cents per share. Earnings growth was driven by
increase in generics revenue and improved gross margins.
Quarter in Details
Total revenues at Mylan climbed 15% over the prior year to $1.57
billion driven by increased sales of generic drugs and the positive
impact of foreign exchange (Fx). Revenues were also ahead of the
Zacks Consensus Estimate of $1.50 billion. Total revenues comprise
both net revenues and other revenues from third parties.
Mylan reports revenues through two segments: Generics and
Specialty.
Generic third party net sales, derived from sales in North
America, Europe, Middle East & Africa (EMEA), and the Asia
Pacific, climbed about 17% to $1.44 billion in the second quarter
of 2011. Third party net sales declined in EMEA on a constant
currency basis, but grew in other markets like Asia-Pacific and
North America.
Third party net sales in North American markets rose 27.2% to
$749.1 million in the reported quarter. The increase was mainly
attributable to new product launches, the important ones being the
generic versions of AstraZeneca's (AZN) Entocort,
Novartis' (NVS) Femara and
Cephalon's (CEPH) Amrix. Results were aided by the
September 2010 purchase of Bioniche Pharma.
Third party net sales from the EMEA market of $378.7 million
remained flat year over year, benefiting from the positive impact
of Fx. Excluding the positive impact of Fx, sales in EMEA reported
a decline, mainly attributable to increased competition resulting
in lower pricing and volume in some European markets like Germany
and France. However, Italy did well in the quarter.
Third party net sales in Asia-Pacific spurred 17.2% to $310.9
million, driven by increased sales of anti-retroviral finished
dosage products and active pharmaceutical ingredients (API) from
the company’s Indian subsidiary, Matrix. Foreign exchange benefit,
to the tune of 10%, was a major catalyst.
Third party net sales from the Specialty division climbed 6.2%
to $131.7 million, boosted by pricing benefits of the EpiPen
Auto-Injector and volume growth of the Perforomist Solution.
Adjusted gross margins improved to 48% (from 45% in the
prior-year quarter), mainly due to new product launches in North
America coupled with favorable pricing for EpiPen.
2011 Guidance Reiterated
Mylan tightened its outlook for 2011. Mylan expects 2011
adjusted earnings in the range of $1.95–$2.05 (old guidance:
$1.90–$2.10) which includes headwinds in Europe. The Zacks
Consensus Estimate, currently at $2.00, is within the guidance
range. The company maintains its revenue and earnings growth
guidance at a respective 15% and 20%, aimed for end 2013.
Our Recommendation
We currently have a Neutral long-term recommendation on Mylan.
The shares carry a Zacks #3 Rank (short-term Hold rating). Mylan is
one of the leading players in the US generics market. The company
holds immense potential as many blockbuster drugs are slated to
lose patent exclusivity in the forthcoming period.
We are encouraged by Mylan’s robust generic pipeline. However,
competition in the generic segment is strong with players like
Teva Pharmaceuticals (TEVA), Watson
Pharma (WPI), Par Pharmaceuticals (PRX)
and Sandoz -- the generics arm of Novartis - in the field. We also
remain concerned about lackluster growth in the European generics
business. We intend to remain watchful until better visibility is
obtained on top-line growth prospects in Europe.
ASTRAZENECA PLC (AZN): Free Stock Analysis Report
CEPHALON INC (CEPH): Free Stock Analysis Report
MYLAN INC (MYL): Free Stock Analysis Report
NOVARTIS AG-ADR (NVS): Free Stock Analysis Report
PAR PHARMA COS (PRX): Free Stock Analysis Report
TEVA PHARM ADR (TEVA): Free Stock Analysis Report
WATSON PHARMA (WPI): Free Stock Analysis Report
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