Mylan, Inc. (MYL) reported third quarter earnings per share of 32 cents, above both the Zacks Consensus Estimate of 27 cents and 23 cents in the prior-year period. The company reported revenues of $1.26 billion, a 24% decline from the year-ago period.
However, the year-ago period included $455 million of revenue related to the sale of the product rights of Bystolic. Excluding this, total revenues increased 5.2% over the third quarter 2008. Revenues would have increased 9%, but for the unfavorable movement of foreign currency.
From this quarter onwards, Mylan has decided to report its results in two segments — Generics and Specialty — following the acquisition of approximately 24% of the remaining interest in Matrix and the related de-listing. The former Matrix segment has been included in the Generics segment. The Generics Segment, accounting for about 88% of total revenues during the quarter, increased marginally (3.7%) to $1.12 billion. Revenues from Specialty recorded a huge increase of 20.3% to $150.9 million.
Sales from the North American market increased 9.2% year over year to $502.5 million, primarily due to new product launches in the past 12 months along with increased volume, partially offset by unfavorable pricing as a result of additional generic competition on certain products. However, revenues from the other markets — EMEA (down 1.1%) and Asia Pacific (up 4.6%) — did not contribute much to the growth of the company.
Excluding the impact of Bystolic sale and certain purchase accounting related items, gross margins fell to 45.6% in the third quarter of 2008 compared to 46.7% in the prior year period.
Mylan is now the third-largest generic company in the world after the acquisition of Merck Generics and Matrix Labs. Currently, Mylan has 121 ANDAs pending FDA approval representing $85.7 billion in annual brand sales, according to IMS Health. Among these, 35 are potential first-to-file opportunities, representing $17.9 billion in annual brand sales.
We expect the Merck Generics acquisition to contribute significantly to the company’s long-term growth and help expand its footprint in non-US markets. Based on the strong third quarter earnings, Mylan raised its 2009 earnings guidance. The company now expects its earnings per share in the range of $1.24 – $1.28 from the earlier guidance of $1.13 – $1.20. We have a Neutral recommendation on the stock.
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