Mylan (MYL) reported first quarter earnings per share of 20 cents, down from the year-ago earnings of 23 cents. On an adjusted basis, first quarter 2010 earnings came in at 36 cents, a couple of cents above the Zacks Consensus Estimate and well above the year-ago earnings of 33 cents.

Revenues increased 7% to $1.29 billion, mainly due to a positive foreign exchange (FX) impact. Excluding the favorable FX impact, revenues would have increased 2% to $20.6 million.

Both revenue segments at Mylan recorded growth during the first quarter. While Generics accounted for about 96% of total first quarter revenues, posting sales of $1.24 billion (up 7.8%), revenues from the Specialty segment increased 20.7% to $101 million.

Specialty revenues were driven by higher sales of Dey’s EpiPen Auto-Injector, Perforomist Solution, and Formoterol Fumarate Inhalation Solution.

On a geographic basis, sales declined in North America but grew in other markets like Asia-Pacific and EMEA (Europe, Middle East & Africa).

Sales from the North American market declined 5.2% to $562.7 million, primarily due to the entry of additional generic versions of Abbott’s (ABT) Depakote in the market which was partially offset by contributions from new product launches ($56.6 million). Mylan had benefited significantly in the prior year period from sales of its generic version of Depakote, which was launched in Feb 2009.

Meanwhile, revenues from EMEA increased 14.8% to $410.8 million, mainly due to stronger performances in Italy, France and Spain. Increased sales from India helped boost Asia-Pacific revenues to $282.3 (up 30.5%).

Adjusted gross margins declined to 45.5% (from 49.1%), mainly due to lower Depakote ER generic revenues during the reported quarter. Both R&D and SG&A expenses increased due to the FX effect. SG&A spending was also impacted by higher payroll and related costs.

Mylan reiterated its earnings guidance for 2010 and expects earnings in the range of $1.50 to $1.70. We expect the Merck Generics acquisition to contribute significantly to the company’s long-term growth and help expand its footprint in non-U.S. markets. We currently have a Neutral recommendation on the stock.
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