Mylan ( MYL ) delivered disappointing results across the board in April when the drugmaker provided its first-quarter update. Investors were left wondering what Mylan might do to turn things around. They now have an answer.
On Monday, Mylan and Pfizer announced plans to combine Pfizer's Upjohn unit with Mylan in an all-stock transaction. Pfizer's shareholders will own 57% of the combined company, with Mylan's shareholders owning 43%.
This big story overshadowed Mylan's other news: The drugmaker reported its second-quarter results before the market opened on Monday. Here's what you need to know about how Mylan performed in the second quarter.
Mylan results: The raw numbers
|$2.85 billion||$2.81 billion||
Net income (loss)
|($168.5 million)||$37.5 million||
Adjusted earnings per share (EPS)
What happened with Mylan this quarter?
Mylan's fortunes improved in the second quarter in the important North American market. Net sales for the company's North American segment increased by 2% year over year to $1.02 billion. This growth was driven in large part by higher sales of Fulphila (Mylan's biosimilar to Neulasta) and by Wixela Inhub (Mylan's generic version of Advair).
The story wasn't as good in Europe, though, at least not at first glance. Mylan reported that net sales from its Europe segment were $989.6 million, down $1 million from the prior-year period. However, the main culprit was currency headwinds. On a constant-currency basis, Mylan's European net sales increased by 6% year over year, thanks primarily to the launches of new products such as Hulio, its biosimilar to Humira.
Mylan's strongest performance in the second quarter came from geographic regions outside of North America and Europe. The company's "rest of world" segment generated net sales of $805.2 million, up around 5% from the prior-year period on a reported basis. On a constant-currency basis, the segment's net sales increased by 10% year over year. Mylan attributed the growth primarily to higher sales in China and new products launched in Australia and emerging markets.
Although Mylan's revenue increased in the second quarter, its bottom line deteriorated for several reasons. The company's gross profit fell due in part to amortization from product acquisitions and expenses related to the recall of Valsartan products. Mylan's operating expenses also increased, primarily as a result of higher spending on selling and marketing activities and higher litigation expenses.
What management had to say
Mylan CEO Heather Bresch stated, "Mylan's second-quarter performance was strong as we delivered or exceeded on expectations across all financial metrics. In addition, based upon our strong execution against our plan, we remain on track to deliver on our 2019 guidance."
CFO Ken Parks added:
Mylan continues to generate strong cash flow with approximately $724 million of adjusted free cash flow in the second quarter of 2019, up 9% from the prior year and ahead of our expectations. Our performance highlights our stable and durable cash flow profile and allows us to remain committed to our deleveraging strategy to repay $1.1 billion of debt by the end of 2019. We also remain fully committed to maintaining our investment-grade credit rating.
Mylan reaffirmed its full-year 2019 guidance of total revenue between $11.5 billion and $12.5 billion. The company also continues to project adjusted EPS between $3.80 and $4.80, with adjusted free cash flow between $1.9 billion and $2.3 billion.
This outlook doesn't include any impact of the proposed combination with Pfizer's Upjohn unit because the transaction isn't expected to close until mid-2020. This merger will result in major changes for Mylan, though.
CEO Heather Bresch and CFO Ken Parks announced that they will leave Mylan after the transaction is completed. Michael Goettler, the current group president for Upjohn, will be the CEO of the new company, which will be renamed next year. Mylan president Rajiv Malik will serve as president of the combined company.
While investors' attention will rightly focus on the combination with Upjohn over the coming months, Mylan's improving revenue will still be a key thing to watch. Mylan's products will be important in the success of the new company that's on the way.