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Mylan (MYL) Beats on Q1 Earnings, Revenues Miss Estimates

Mylan N.V. MYL reported first-quarter 2017 results wherein earnings of 93 cents per share beat the Zacks Consensus Estimate by a penny and was up from 76 cents reported in the year-ago quarter.

We note that shares of Mylan have outperformed the Zacks categorized Medical-Generic Drugs industry in the year so far with the stock dipping 2.2% compared with the industry’s decline of 3.4%.

First-quarter revenues of $2.72 billion missed the Zacks Consensus Estimate of $2.83 billion. Nevertheless, the top line recorded 24% year-over-year growth on the back of acquisitions.

Quarter in Detail

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

North America segment third party net sales came in at $1.21 billion, up 5% due to contribution from the acquisitions of Meda AB and the non-sterile, topicals-focused business of Renaissance Acquisition Holdings, LLC which more than offset the decline in sales of new products and  negative impact of lower pricing and reduced volumes of existing products due to increased competition. Sales of the EpiPen Auto-Injector declined in the current quarter as a result of increased competition and the impact of the authorized generic launch.

Third party net sales from Europe were $892 million, up 53%, propelled by the acquisition of Meda which was partially offset by a net decrease in net sales from new products and lower volume and pricing on existing products.  Unfavorable foreign currency translation had an impact of 4% within Europe.

Rest of World segment third party net sales of $580.5 million was up 34% 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 3% in the Rest of the World segment.

Adjusted gross margin declined to 53% from 54% 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 Reiterated

Mylan expects revenues between $12.25 and $13.75 billion in 2017. The company projects earnings in the range of $5.15–$5.55 per share for 2017.

Our Take

Mylan’s first-quarter results beat on earnings but missed the top line due to decline in EpiPen sales as a result of increased competition and entry of generics. Pricing continues to impact results and the company projects mid-single digit price erosion globally for the year. The company recent 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's GSK asthma drug Advair Diskus. In Apr 2017, Mylan received a warning letter from the FDA for its manufacturing facility in India.

The FDA cited significant violations of current good manufacturing practice (CGMP) regulations for finished pharmaceuticals in the warning letter. The violations relate to the agency’s inspection in Sep 2016 and even though the company had responded to the same, the agency deemed them inadequate. The FDA warned that until Mylan redresses the violations completely and confirms its compliance with CGMP, the approval of new applications and the listing of the company as a drug manufacturer may be withheld.

The FDA has earlier accepted biologics license application for a biosimilar version of Amgen’s AMGN Neulasta (pegfilgrastim) and a biosimilar version of Roche’s RHHBY Herceptin.

Mylan N.V. Price and Consensus

Mylan N.V. Price and Consensus | Mylan N.V. Quote

Zacks Rank

Mylan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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