Medicis Pharmaceutical Corp.’s (MRX) second quarter fiscal 2011 earnings per share (EPS) inched up 1.8% from the prior-year quarter to 64 cents, and were in line with the Zacks Consensus Estimate. Higher revenues during the quarter helped boost earnings.
Quarterly revenues increased 9.9% to $190.8 million, beating the Zacks Consensus Estimate of $188 million. Elevated revenues from non-acne products and other non-dermatological products led to the improved top-line performance.
While, second quarter earnings came in at the higher end of management guidance, revenues were closer to the lower end of the guidance range. Medicis Pharma was expecting earnings in the range of 61 cents to 66 cents per share on revenues of $185 million to $197 million.
Quarterly Highlights
Non-acne product sales came in at $57.7 million, up 40.7%, primarily due to increased sales of Dysport, Vanos, Loprox and Restylane. The non-acne group consists of Dysport, Perlane, Restylane and Vanos.
Revenues from other non-dermatological products went up 27.7% during the quarter to $10.0 million. The non-dermatological products franchise comprises Ammonul, Buphenyl and contract revenue.
However, Medicis Pharma’s acne product sales were down 1.3% year on year to $123.1 million. The early discontinuation of Triaz and the halt of the promotion of Plexion, led to uninspiring sales in the business franchise. Acne products primarily comprise of Solodyn and Ziana.
Gross margin for the reported quarter declined 20 basis points (bps) to 90.4%. Research and development (R&D) expenses were $15.2 million, compared with $7.4 million in the second quarter of 2010, selling, general and administrative (SG&A) expenses shot up 17.3% to $90.4 million.
During the quarter, Medicis Pharma approved a stock repurchase plan, where in it plans to buyback stock worth up to $200 million.
Outlook Updated
For 2011, Medicis Pharma expects earnings in the range of $2.25 to $2.56 per share (previous guidance: $2.45 – $2.60) on revenues of $718 million to $758 million (previous guidance: $735 million – $770 million). The current 2011 Zacks Consensus Estimate of $2.54 is towards the higher end of the guidance range.
Medicis Pharma also updated the earnings and revenue guidance range for the remaining quarters of 2011. For the third quarter, earnings are expected to range from 48 cents to 67 cents per share (previous guidance: 63 cents – 68 cents) on revenues of $175 million to $195 million (previous guidance: $190 million – $202 million). The Zacks Consensus Estimate of 66 cents per share for the third quarter of 2011 lies within the company’s guidance range.
For the final quarter of 2011, earnings are projected in the range of 63 cents to 75 cents (previous guidance: 71 cents – 76 cents) on revenues of $187 million – $207 million (previous guidance: $195 million – $206 million).
Medicis Pharma expects gross margin to be about 90 – 92% of revenues in 2011. While SG&A expenses are expected to come in at about 46 – 48% of revenues, R&D expenses are expected to be about 6 – 7% of revenues.
Our Take
We currently have a Neutral recommendation on Medicis Pharma. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. We believe that Medicis Pharma will look to shift patients to the new dosages of Solodyn (55 mg, 80 mg, 105 mg) so as to reduce the impact of generics of older dosages post November 2011.
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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