Year-over-year comparisons are rather useless, since Mylan doubled in size after the acquisition. Compared to last quarter, though, Mylan's revenue slipped about 9%. The company blamed much of that decrease on middlemen cutting its inventories. The one bright spot was its generic fentanyl patch, which gained a 50% market share after competitors Johnson & Johnson
The synergies from Mylan's latest acquisition are beginning to work, however. Even with the lower revenue, adjusted income rose 11% quarter over quarter, thanks to higher adjusted gross margins and lower selling, general, and administrative costs. The company expects about $275 million in synergies by the end of 2008.
Mylan's biggest problem right now is that it's in debt up to its eyebrows -- $5.3 billion, to be exact. Fortunately, it does have a plan to pay down some of the debt. Mylan got $370 million when it sold off some of its royalty rights for high-blood-pressure medication Bystolic to Forest Labs
Mylan predicts that earnings per share will grow by a more-than-50% compounded annual rate for the next two years. Trading around 25 times 2008 expected earnings, Mylan looks like a steal at these prices, provided the company can make its synergies work.
Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is a selection of the Income Investor newsletter. The Fool has a disclosure policy.