Medicis Pharmaceutical Corp. (MRX) posted third quarter 2010 earnings of 58 cents per share, beating the Zacks Consensus Estimate by a cent and exceeding the year-ago earnings of 50 cents per share by 16.5%. Higher revenues accounted for increased earnings.

Revenues

Quarterly revenues increased 16.8% year over year to $177.3 million, slightly below the Zacks Consensus Estimate of $180 million. Increased sales of Solodyn, Ziana, Restylane, Vanos and Dysport helped boost revenues.

Medicis Pharma’s acne product sales amounted to $118.5 million during the third quarter, reflecting an increase of 10.9% from the year-ago quarter. Strong demand for Solodyn, Triaz and Ziana, the main products in the acne segment, resulted in higher sales.

Non-acne product sales came in at $49.5 million, up 39.4% year over year, primarily due to increased sales of Dysport, Vanos and Restylane. The non-acne group consists mainly of Dysport, Perlane, Restylane and Vanos.

Revenues from other non-dermatological products declined 2.1% during the quarter to $9.3 million. Reduced sales of Buphenyl led to the decline. This group primarily comprises Ammonul, Buphenyl and Liposonix and also includes contract revenue.

Expenses

Research and development (R&D) expenses were $12.4 million, compared with $27.4 million in the third quarter of 2009. The year-ago figure included an upfront payment to a partner.

Medicis Pharma expects R&D expenses to continue fluctuating in the coming quarters due to variable development milestone payments to be made under license and development agreements.

Selling, general and administrative (SG&A) expenses shot up 15.9% to $83.3 million from $71.9 million in third-quarter 2009. SG&A expenses increased due to higher variable costs.

Outlook

For fiscal 2010, Medicis Pharma expects earnings in the range of $2.25 to $2.30 per share on revenues of $698 million to $703 million. The current Zacks Consensus Estimate for fiscal year 2010 is $2.28 per share, at the mid-point of the guided range.

Medicis Pharma also provided guidance for earnings and revenues for the fourth quarter of 2010. The company expects earnings in the range of $0.57 – $0.62 per share on revenues of $180 million – $185 million. The fourth quarter Zacks Consensus earnings Estimate is 60 cents per share.

Our Take

We currently have a Neutral recommendation on Medicis Pharma, which is supported by a Zacks #3 Rank (short-term Hold rating). Medicis Pharma recently received approval for additional dosage strengths (55 mg, 80 mg, 105 mg) of acne treatment drug, Solodyn.

The company currently has the US Food and Drug Administration’s approval for eight dosing 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 the company will look to shift patients to the new dosage strengths so as to reduce the impact of the entry of generic versions of older dosages post November 2011. On the third 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 70.0% of new prescriptions and 66.8% of total prescriptions.

On the flip side, we are concerned about the competitive threats for Dysport from Allergan Inc.’s (AGN) Botox and a lack of pipeline visibility.

 
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