Asterisks were needed on several numbers when Mylan N.V. (MYL) reported its first-quarter results in May. The drugmaker's revenue then was boosted by foreign exchange fluctuations, and its earnings were helped a lot by tax benefits.
By contrast, when Mylan announced its Q2 results before the market opened on Wednesday, fewer caveats were required -- but that wasn't necessarily a good thing.
Mylan results: The raw numbers
|$2.81 billion||$2.96 billion||
Net income from continuing operations
|$37.5 million||$297 million||
Adjusted earnings per share (EPS)
What happened this quarter?
Mylan operates globally, and in much of the world, it's performing pretty well. Net sales in Europe were up 4% to nearly $991 million. Net sales in all other countries outside of Europe and North America looked even better, with a year-over-year jump of 10% to $764 million.
But North America continued to be a problem area. Net sales in the region of $1 billion were 22% lower than in the prior-year period. Among the issues dragging down revenues were product discontinuations, problems at one of its U.S. manufacturing facilities, and lower prices for many of its products. It also experienced significantly lower sales volumes for its EpiPen auto-injector.
The drugmaker's overall revenue decline trickled down to its bottom line. Gross margin fell partially due to this revenue drop, but also from costs associated with product acquisitions, and expenses related to the resolution of issues at its Morgantown, West Virginia, manufacturing facility. Taking an additional bite out of Mylan's GAAP net income was a 14% year-over-year jump in research and development spending, an increase due in part to collaboration agreements.
The year-over-year comparisons on adjusted EPS weren't great, but they weren't nearly as troubling as Mylan's GAAP net income deterioration -- the adjusted earnings excluded a number negative impacts.
However, there was one bright spot for Mylan in the second quarter: Adjusted free cash flow increased nearly 8% year over year to $661.4 million.
What management had to say
Mylan CEO Heather Bresch stated:
During the second quarter, Mylan continued to do its part to expand access to medicine around the world. Our Europe and Rest of World segments continue to deliver growth in line with our expectations. However, our efforts to serve patients in the U.S. have been shaped by the industry's transformation there, and our results and guidance for 2018 are directly correlated with the ongoing rebasing of the U.S. healthcare environment. That said, the fundamentals of Mylan's global business remain strong. We're especially confident in our ability to deliver on Mylan's long-stated global strategy, which is predicated on driving access to medicine through scale, a diversified portfolio, and geographic reach. The result is a durable global business capable of delivering on our mission for years to come.
The rest of the year is likely to be bleaker than was previously expected. Mylan lowered its 2018 revenue guidance from a $11.75 billion to $13.25 billion range to a $11.25 billion to $12.25 billion range.
The drugmaker projects adjusted EPS for 2018 will be between $4.55 and $4.90. Three months ago, the company was anticipating full-year adjusted EPS between $5.20 and $5.60. The only good news in Mylan's revised guidance is that the company still expects adjusted free cash flow of $2.1 billion to $2.5 billion.
Despite the weaker outlook for the year, Mylan has some positives to look forward to over the longer run. The company recently launched its biosimilar to Amgen's Neulasta, and prospects for European approval of its Humira biosimilar appear good.
The biggest thing for investors to look forward to, though, relates to an announcement made by Mylan's board of directors on Wednesday morning. In a press release, the board reiterated its confidence in Mylan's future, but also stated that it is "actively evaluating a wide range of alternatives to unlock the true value" of the company's "one-of-a-kind platform." No details were provided about what options they could be considering.