It's Not As Frightening As It First Appears

On the surface, Mylan's (Nasdaq: MYL  ) earnings report wasn't pretty. Revenue fell by 24%, and the company lost $0.13 per share. Dig a little deeper, though, and you'll see the generic-drug maker is far from a copycat of its struggling branded-drug-making counterparts.

On the revenue side, last year's number included the sale to Forest Labs (NYSE: FRX  ) of some of Mylan's royalty rights to blood-pressure drug Bystolic. Excluding that, revenue rose 5.2%, which isn't bad especially when you consider that Mylan's foreign sales had a serious currency headwind.

Interestingly, revenue from its branded-drug division, Dey, rose by 20% year over year. Mylan was going to sell Dey but didn't, probably because it couldn't find a buyer willing to pay enough. Looks like that was a pretty smart move.

The net loss for the quarter was attributable to a $121 million charge to settle a Department of Justice investigation over calculations of Medicaid drug rebates. The previously announced settlement isn't a great thing, but it's not the only drugmaker to have been stung by the DOJ, and things could have been a lot worse: Eli Lilly (NYSE: LLY  ) recently paid more than $1.4 billion to settle a lawsuit with the DOJ, and Pfizer (NYSE: PFE  ) topped that with a $2.3 billion charge. If you look just at earnings from operations, Mylan is looking healthy, with a solid 17% increase year over year.

The benefit from Mylan's larger size after acquiring Merck KGaA's generic-drug business is starting to show. The company may be at a slight disadvantage since it isn't as big as rivals Teva Pharmaceuticals (Nasdaq: TEVA  ) and Novartis (NYSE: NVS  ) , but its smaller size also gives it a bit more room to run.