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Mylan (MYL) Misses on Q2 Earnings & Sales, Lowers View

Mylan N.V. MYL reported disappointing second-quarter 2017 results wherein both earnings and sales missed estimates. The company also lowered its guidance. Shares are trading down due to dismal results.

Mylan’s stock fell 16.7% year-to-date compared with the industry’s decline of 14.9%.

The company reported earnings of $1.10 per share, which missed the Zacks Consensus Estimate of $1.18 and was down from $1.16 reported in the year-ago quarter.

Second-quarter revenues of $2.96 billion missed the Zacks Consensus Estimate of $3.00 billion. Nevertheless, the top line recorded 15.7% year-over-year growth on the back of acquisitions.

Mylan N.V. Price and EPS Surprise

 

Mylan N.V. Price and EPS Surprise | Mylan N.V. Quote

Quarter in Detail

The company report results in three segments on a geographic basis – North America, Europe and Rest of World.

North America segment third party net sales came in at $1.28 billion, down 9% due to a decline in sales of existing products as a result of lower volume and pricing which more than offset the acquisitions of Meda AB and the non-sterile, topicals-focused business of Renaissance Acquisition Holdings, LLC. Sales of the EpiPen Auto-Injector declined in the current quarter due to increased competition and the impact of the authorized generic launch. Generics products experienced price erosion in the mid-single digits.

Third party net sales from Europe were $954.3 million, up 59% propelled by the acquisition of Meda which was partially offset by lower volume on existing products. Unfavorable foreign currency translation had an impact of 3% within Europe.

Rest of World segment third party net sales of $692.6 million was up 29% fueled by the Meda acquisition. Moreover, net sales from existing products increased due to higher sales from the anti-retroviral franchise while sales from new products and higher volumes on existing products more than offset lower pricing. Foreign currency translation had a favorable impact of 2%.

Adjusted gross margin declined to 54% from 56% in the year-ago quarter due to lower gross profit from the sales of existing products in North America, including the EpiPen Auto-Injector, partially offset by the contributions from the acquired businesses.

2017 Outlook Lowered

Mylan now expects revenues of $11.5–$12.5 billion in 2017, down from the earlier projection of $12.25–$13.75 billion in 2017. The company now projects earnings in the range of $4.30–$4.70, down from the previous projected range of $5.15–$5.55. The guidance was lowered as a result of expected delays in the timing of certain key new product launches.

Ongoing challenges in the U.S. and uncertain regulatory environment in the region has led the company to defer all major launches in the U.S. from the 2017 guidance to 2018 including generic Advair and generic Copaxone. Pricing in generics is expected to decline in mid-single digits globally, with high-single-digit erosion expected in North America.

Our Take

Mylan’s second-quarter results were dismal as the company missed on both earnings and sales estimates due to challenges in North America. Pricing continues to impact results and the company projects mid-single digit price erosion globally. The decrease in guidance was also disappointing. The company recently suffered a few setbacks.

Mylan received a complete response letter from the FDA regarding its abbreviated new drug application ANDA for the generic version of GlaxoSmithKline plc’s GSK asthma drug Advair Diskus.

On a positive note, the FDA Oncologic Drugs Advisory Committee recently unanimously recommended approval of Mylan's biosimilar version of Roche Holding AG’s RHHBY breast cancer drug Herceptin.

Zacks Rank & Key Pick

Mylan currently carries a Zacks Rank #4 (Sell).

A better-ranked stock in the health care sector is Gilead Sciences, Inc. GILD which carriesa Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gilead’s earnings per share estimates increased from $7.92 to $8.53 for 2017, over the last 30 days following strong results in the second quarter. The company delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 8.18%.

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