When Mylan N.V. (NASDAQ:MYL) reported its first-quarter results earlier this year, the company's year-over-year revenue and earnings comparisons were helped significantly by Mylan's acquisitions in 2016. Without the impact of those deals, particularly the acquisition of Swedish drugmaker Meda, Mylan's first quarter wouldn't have looked nearly as positive.
Mylan announced its second-quarter results before the market opened on Wednesday. The impact of acquisitions again made a huge difference, but was overshadowed by problems in the U.S. generics market. Here are the highlights from Mylan's second-quarter update.
Mylan results: The raw numbers
|$2.97 billion||$2.56 billion||
Net income from continuing operations
|$297 million||$168.4 million||
What happened with Mylan this quarter?
Mylan's revenue increase stemmed entirely from its international operations. North American sales in the second quarter fell 9% year over year to $1.28 billion. However, revenue in Europe soared 59% over the prior-year period to $954.3 million, while sales in the rest of the world increased 29% year over year to $692.6 million.
The company continues to reap rewards from last year's acquisitions. Net sales from Meda and the non-sterile, topical-focused business of Renaissance Acquisition Holdings, LLC totaled $633.1 million. Without those two buyouts, Mylan would have seen a decline in revenue in the second quarter from the same period last year.
Headwinds in North America continue to plague Mylan. The company reported lower volume and prices for its generic-drug business. Mylan isn't the only generic-drug maker experiencing these problems: Teva Pharmaceutical also reported significant weakness in its U.S. generics business during the second quarter. Mylan also saw lower sales for its EpiPen auto-injector due to increased competition, the impact of the launch of the authorized generic, and higher accrued governmental rebates.
While Mylan's GAAP net income jumped considerably due primarily to the drugmaker's 2016 acquisitions, adjusted earnings, however, declined from the prior-year period, largely because of expenses related to those acquisitions.
What management had to say
CEO Heather Bresch stated: "Our industry, along with the entire healthcare sector, is at an inflection point. This is providing investors an opportunity to differentiate between pharmaceutical companies focused solely on generics and/or specialty medicines and those capable of delivering a broad and diverse portfolio across multiple channels in various geographies, which remains Mylan's strategy."
Rajiv Malik, Mylan's president, added:
Our global integrated platform has long given us the strength to manage whatever headwinds come our way and ensure sustainable growth. By having always managed Mylan for long-term success, we have been able to harvest many exciting opportunities, the most recent of which include our Meda and Topicals Business acquisitions, which continue to meet and exceed our expectations.
We also continue to navigate a challenging competitive and pricing environment and expect generic price erosion for the year of mid-single digits globally, with high-single-digit erosion expected in North America. Furthermore, we continue to make great progress on our key pipeline programs, and while we may experience delays, mostly in the U.S., in realizing some of these opportunities, our confidence in our ability to bring these important products to market and maximize their potential has not changed.
Note that Malik stated that Mylan "may experience delays, mostly in the U.S." His choice of words was more tentative than the company will actually be. Bresch said that Mylan will push back all major U.S. launches from 2017 to 2018, including the expected launches of generic Advair and generic Copaxone, because of "ongoing challenges and the uncertain U.S. regulatory environment."
As a result of this decision, Mylan now expects full-year 2017 revenue between $11.5 billion and $12.5 billion. The company also slashed its adjusted earnings per share guidance to a range of $4.30 to $4.70. Mylan previously expected full-year adjusted earnings per share between $5.15 and $5.55.
You might think the delay of generic launches from this year to next year might improve Mylan's outlook for 2018. However, that's not the case. Bresch said that the company is changing its target for adjusted earnings per share for 2018 from $6 to "at least $5.40."
The U.S. generics business remains in a tough spot. Pharmacy benefits managers and insurers are pushing hard for lower prices. That continues to be bad news for Mylan and others. However, Mylan is still in solid shape financially, with strong cash flow and a manageable debt level. Sooner or later, the landscape in the U.S. for generics will improve. Mylan has what it takes to continue generating profits -- even if they're lower than desired -- until that happens.