Medicis Pharmaceutical Corp. (MRX) posted fourth quarter 2010 earnings of 60 cents per share, in line with the Zacks Consensus Estimate but down 12.9% year over year from the year-ago earnings of 68 cents per share. Higher operating expenses led to a decline in earnings during the quarter. Quarterly revenues increased 1.7% to $182.1 million, but were slightly below the Zacks Consensus Estimate of $184 million. Increased sales of Restylane and Dysport helped boost revenues.
Fourth quarter earnings and revenues came within the guidance range provided by the company. Medicis Pharma was expecting earnings in the range of 57 cents to 62 cents per share on revenues of $180 million to $185 million.
For 2010, Medicis Pharma’s earnings increased 36.2% to $2.28, missing the Zacks Consensus Estimate by a cent. Higher revenues accounted for increased earnings. Revenues for the year amounted to $700 million, just missing the Zacks Consensus Estimate of $703 million, but were 22.4% above the year-ago figure. Increased sales of Solodyn, Triaz, Ziana, Restylane, Vanos and Dysport led to the annual growth.
As in the fourth quarter, full year figures also conformed to the company’s revenue ($698 million to $703 million) and earnings ($2.25 to $2.30 per share) guidance range.
Quarterly Highlights
Medicis Pharma’s acne product sales amounted to $118.9 million during the fourth quarter, down 9.5% year over year. Increased returns reserves associated with the latest strengths of Solodyn, plans of early discontinuation of Triaz in 2011 and the promotion halt of Plexion, all led to the uninspiring sales in this business franchise.
Non-acne product sales came in at $50.2 million, up 33.8% year over year, primarily due to increased sales of Dysport and Restylane. The non-acne group consists mainly of Dysport, Perlane, Restylane and Vanos.
Revenues from other non-dermatological products increased 28.9% during the quarter to $13.0 million. Higher sales of products from this group, mainly comprising Ammonul, Buphenyl, and Liposonix along with contract revenue, led to the gain.
Research and development (R&D) expenses were $25.2 million, compared with $19.7 million in the fourth quarter of 2009. The year-ago figure included a higher payment to a partner.
Selling, general and administrative (SG&A) expenses shot up 38.1% to $83.0 million on higher variable costs.
Outlook
For 2011, Medicis Pharma expects earnings in the range of $2.40 to $2.60 per share on revenues of $730 million to $770 million. The current Zacks Consensus Estimate for 2011 is $2.56 per share, within the guidance range.
Medicis Pharma also provided guidance for earnings and revenues for each of the four quarters of 2011. For the first quarter of 2011, the company expects earnings in the range of 45 cents to 50 cents per share on revenues of $160 million – $170 million. The Zacks Consensus Earnings Estimate for the quarter is 61 cents per share.
For the second quarter, earnings are expected to range from 61 cents to 66 cents per share on revenues of $185 million to $195 million. Medicis Pharma expects third quarter earnings to lie between 63 cents and 68 cents per share on revenues of $190 million to $200 million. The final quarter of the fiscal year sees peak guidance for both earnings and revenues, with the former in a band of 71 cents to 76 cents on revenues of $195 million – $205 million.
Medicis Pharma expects R&D expenses to increase in 2011, given its plans to work on the development of its pipeline products.
Further, the company expects cash flows from operations to exceed $200 million in 2011. It also anticipates cash, cash equivalents and short and long-term investments to amount to about $925 million by the end of 2011.
Our Take
We currently have a Neutral recommendation on Medicis Pharma. The company received approval for additional dosage strengths (55 mg, 80 mg, 105 mg) of acne treatment drug, Solodyn, in August 2010.
Medicis Pharma currently has US Food and Drug Administration’s approval for eight strengths of Solodyn – 45 mg, 55 mg, 65 mg, 80 mg, 90 mg, 105 mg, 115 mg and 135 mg – offering greater prescribing flexibility to physicians.
We believe that Medicis Pharma will look to shift patients to the new dosage strengths so as to reduce the impact of generics of older dosages post November 2011. On the fourth quarter call, Medicis Pharma stated that the 65 mg and 115 mg strengths, which were approved in July 2009, and the new 55 mg, 80 mg and 150 mg strengths, accounted for 82.5% of new prescriptions and 87.8% of total prescriptions.
However, we are concerned about the competitive threats to Dysport (used for the treatment of glabellar lines) from Allergan Inc.’s (AGN) Botox.
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