Mylan Q1 Earnings Meet Expectations, 2015 Guidance Upheld

Mylan’s (MYL - Analyst Report) first-quarter 2015 earnings (excluding special items) of 70 cents per share were in line with the Zacks Consensus Estimate. Earnings increased 6% from the year-ago quarter driven by higher revenues.

Mylan Inc. - Quarterly EPS | FindTheCompany

Revenues climbed 9% (15% on a constant currency basis) to $1.87 billion, missing the Zacks Consensus Estimate of $2.01 billion. Mylan recorded year-over-year growth on the back of solid revenue growth at the Generics segment. Foreign currency exchange rates negatively impacted revenues by $93 million in the first quarter of 2015.

First Quarter in Details

Generics third-party net sales, derived from sales in North America, Europe and rest of the world, climbed 9% to $1.64 billion. Segmental third-party net sales grew 8% to $844.8 million in North America. New product launches, acquisitions and favorable pricing aided revenues.

Third-party net sales from the European market increased 14% to $406.2 million driven by net sales from the acquisition of Abbott's (ABT) non-U.S. developed markets branded generics business, partially offset by unfavorable currency translations. Third party net sales from rest of the world rose 6% to $392.5 million. Segmental performance improved on the back of acquisitions, new product launches in Australia and increased sales of its antiretroviral products.

Third-party net sales in the Specialty segment jumped 8% to $211.1 million. Specialty segment sales were boosted by the strong performance of its flagship product – EpiPen Auto-Injector – for severe allergic reactions. Sales of the product improved due to increased volume.

Adjusted gross margin during the first quarter of 2015 expanded to 53% from 50% in the year-ago quarter on the back of new product introductions and net sales from acquisitions.

2015 Outlook Reiterated

Mylan reiterated its 2015 guidance. The company expects adjusted earnings per share in the range of $4.00 to $4.30. The company expects revenues in the range of $9.7 billion to $10.1 billion. The Generics segment is expected to see revenue growth of approximately 40% in 2015. The guidance assumes the launch of AB-rated generic Copaxone in the second half of 2015.

Specialty revenues are expected to be flat in 2015. The company expects to face generic competition for EpiPen Auto-Injector in the second half of 2015.

The Zacks Consensus Estimate for 2015 earnings is at $4.18 per share on revenues of approximately $9.9 billion.

For the second quarter of 2015, the company expects earnings in the range of 86 cents to 90 cents per share.

Our Take

Mylan’s first-quarter earnings were in line with expectations. We are looking forward to the potential launch of generic versions of Copaxone, which should boost revenues further.

Teva Pharmaceutical Industries Ltd. (TEVA - Analyst Report) has proposed to acquire Mylan for $82.00 per Mylan share, which Mylan has rejected. We could see a better offer from Teva in the near term.

Meanwhile, Mylan remains committed to acquiring Perrigo Company (PRGO -Analyst Report). In its latest offer, Mylan has proposed to acquire Perrigo for $232.23 per share in a combination of cash and stock.

Mylan believes that the transaction will be accretive to adjusted earnings on a fully synergized basis. The company expects to realize annual pre-tax operational synergies of at least $800 million by the end of year four after completing the deal.

Mylan holds a Zacks Rank #3 (Hold). Biogen (BIIB - Analyst Report) is a better-ranked stock in the health care space carrying a Zacks Rank #1 (Strong Buy).