Generic-drug maker Mylan Laboratories (NYSE:MYL) will report fourth-quarter 2007 financial results on May 24.

What analysts say:

  • Buy, sell, or waffle? With 16 analysts covering the drug manufacturer, the overwhelming majority of them say hold. The other two are evenly split with a buy and sell recommendation.
  • Revenues. After having made some acquisitions, revenues are expected to rise 47% to $477.7 million.
  • Earnings. Profits are expected to soar nearly 75%, rising to $0.47 per share.

What management says:
Mylan is quickly reaching the point where year-over-year comparisons will be meaningless because the company is really no longer what it was. At 50% greater than its current market cap, the recently announced acquisition of Merck KGaA's generics unit will vault the drug maker into the No. 3 position of largest generic drug manufacturers. CEO Robert Coury says it's required to pay up for "quality assets," but it might have swallowed a horse pill-sized company this time that will drag down performance.

What management does:
Generic drugs are a big and booming business expected to grow some 13% this year, and to as large as a $100 billion industry by 2010. In its race against industry giant Teva Pharmaceuticals (NASDAQ:TEVA), Mylan almost had to win the bidding war for the Merck KGaA unit. Coury says a series of smaller acquisitions would have been a riskier venture, but No. 2 Novartis (NYSE:NVS), through its Sandoz unit, and No. 3 Barr Pharmaceuticals (NYSE:BRL) have done OK taking on more bite-sized mergers. Margins at the Merck business will also be impacted by loss of exclusivity on its main drug, Duoneb, which could make integrating this unit a challenge.

Margin

12/05

03/06

06/06

09/06

12/06

Gross

49.6%

49.9%

50.2%

51.6%

53.1%

Operating

24.3%

25.3%

27.8%

30.8%

34.7%

Net

13.2%

14.7%

16.8%

19.1%

23.9%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The outlook for Mylan is indeed murky right now. The company has a major acquisition to digest, and while it will enjoy synergies with its other recent acquisition, Matrix Labs, investors face the prospect of shareholder dilution, a cut in its credit rating, and the suspension of its dividend. There's just no visibility on how this company will perform going forward, despite its size, and biding one's time before that clarity becomes more apparent is probably a wise move.

Related Foolishness:

Mylan has earned a four-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the stock rating service by joining today. It's free!

Barr Pharmaceuticals is a recommendation of Motley Fool Stock Advisor. There's nothing generic about the 30-day trial subscription that gives you full access to all of the market-beating recommendations.

Fool contributor Rich Duprey owns shares of Barr but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.