Earnings Beat at Mylan
Mylan Inc.’s (MYL) second quarter 2013 earnings (excluding special items) of 68 cents per share surpassed the Zacks Consensus Estimate by a penny. Earnings increased 13% from the year-ago quarter. Adjusted earnings for second quarter 2013 were at the high end of the guidance range of 66-68 cents provided by the company.
The year-over-year rise in earnings was primarily attributable to higher revenues despite the negative impact of foreign currency movements. On a reported basis (including special items), second quarter 2013 earnings climbed 39% to 46 cents per share.
Revenues climbed 1% to $1.70 billion, but were short of the Zacks Consensus Estimate of $1.74 billion. Foreign exchange movements hurt revenues by 1%. Recently, another generic player, Dr. Reddy’s Laboratories (RDY), too had reported lower-than-expected revenues.
Mylan reports revenues from 2 segments: Generics and Specialty.
Generic third-party net sales, derived from sales in North America, Europe, the Middle East & Africa (:EMEA) and Asia-Pacific, declined marginally to $1.45 billion.
Segmental third-party net sales were disappointing in North America. Third-party net sales in North American markets declined 14.3% to $717.6 million in the second quarter of 2013. The decline was mainly attributable to the below par showing of new products during the second quarter of 2013.
The products contributed $91 million to third-party net sales from the region in the second quarter of 2013 as against $240 million a year ago. We remind investors that Mylan’s segmental revenues in the second quarter of 2012 benefited from the revenues of its generic version of Forest Laboratories’ (FRX) Lexapro (depression). Mylan launched its generic version of Lexapro in early 2012.
Third-party net sales from the EMEA market improved 14.9% to $375.5 million. Strong performance in France boosted EMEA revenues.
Third party net sales in the Asia-Pacific market increased 16.2% to $357.4 million on the back of strong sales in the Indian market. Foreign currency movements, however, adversely impacted revenues from the region. Excluding the impact of foreign currency movements, segmental sales climbed 24% in the second quarter of 2013.
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Third-party net sales in the Specialty segment increased 14.7% to $236.9 million. Specialty segment sales were driven by the strong performance of its flagship product – EpiPen auto-injector – for severe allergic reactions.
Adjusted gross margins were flat at 49%. Margins were positively impacted by new product launches coupled with increased sales of EpiPen. The positive impact was cancelled by the pricing pressure in the Generic segment, resulting in flat gross margin.
Adjusted operating expenses declined marginally to $420.3 million during the reported quarter.
Outlook
Mylan expects adjusted earnings for the third quarter of 2013 in the range of 77 cents to 79 cents. The Zacks Consensus Estimate for the third quarter is 87 cents. Adjusted earnings in the final quarter of 2013 are expected to be slightly higher than the third quarter figure.
Due to weaknesses in the Indian and Japanese currencies versus the dollar, Mylan now expects revenues for 2013 at the low end of the previously forecasted range of $7.0–$7.4 billion. The current Zacks Consensus Estimate hints at revenues of $7.1 billion for 2013.
Within the Generics division, sales in the North American market are expected to grow in single digits. Sales in the EMEA and APAC regions are projected to grow in the mid-to-high teens for 2013. Sales in the Specialty segment are forecasted to grow by approximately 20% or more in 2013.
The company still expects adjusted earnings for 2013 in the range of $2.75–$2.95 per share. The pre-earnings Zacks Consensus Estimate is $2.87 per share.
Mylan expects revenues in 2014 to increase 12% over 2013 levels. Adjusted earnings in 2014 are expected to climb 19% from the mid-point of the projected range for 2013. Adjusted earnings for 2018 are still expected to be at least $6.00 per share.
Mylan currently carries a Zacks Rank #3 (Hold). Companies such as Actavis, Inc. (ACT) appear to be more attractive in the generic space with a Zacks Rank #2 (Buy).
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