Taking on massive debt to swallow Merck KgaA's much larger generic drug business could have killed Mylan
Revenue was up 12.6%, and that was with a huge currency headwind from Mylan's sizable international presence; at constant currencies, sales were up about 23% year over year. Much of the increased revenue was from the launch of generic versions of Abbott Labs'
Revenue from those high-margin items and a cutback on research and development spending lead to adjusted operating income (not including last year's goodwill impairment, among other things) that was more than double the year-ago quarter. Combine that with lower interest payments as interest rates have fallen and the company has paid back some of its debt, and you've got a pretty solid quarter.
Mylan raised the bottom end of its 2009 adjusted EPS guidance so that it now expects to earn between $1.00 and $1.10 per share. Even at the low end, that's a healthy 25% increase over last year. Mylan won't be able to grow the bottom line like this forever, but the company looks like it should be able to get a few more cost synergies from the acquisition and is still looking for adjusted EPS of $1.50 to $1.70 in 2010. It's only midway through the digesting of its huge purchase, and investors should be rewarded if Mylan can pull it off.
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