Higher Specialty Drug Sales Help Mylan N.V. in Q2

By Keith SpeightsMarketsFool.com

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There has been good news and bad news for Mylan (NASDAQ: MYL) over the past year or so. Revenue for the big generic-drugmaker has steadily climbed, but earnings have fallen. Mylan announced its second-quarter financial results after the market closed on Tuesday. Have the company's diverging trends changed? Here are the highlights.

Mylan results: The raw numbers

Metric

Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)

Revenue

$2.56 billion

$2.37 billion

8%

Net income from continuing operations

$168.4 million

$167.8 million

0.4%

Earnings per diluted share

$0.33

$0.32

3.1%

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DATA SOURCE: MYLAN. YOY: YEAR OVER YEAR.

What happened with Mylan this quarter

Generic drugs contribute the largest amount to Mylan's top line. The drugmaker's generics segment posted second-quarter sales of $2.14 billion, a 4% increase from the prior-year period. These gains stemmed largely from new products launched since July 2015.

Mylan's bigger growth engine, though, came from specialty drugs. The specialty-drug segment kicked in revenue of $402.5 million, up 33% year over year. This nice jump resulted from several factors, including a positive impact from customer contract negotiations related to EpiPen and higher sales of Perforomist and Ultiva.

Earnings increased only slightly compared with the second quarter of 2015. The GAAP results were affected byunrealized mark-to-market losses on foreign currency contracts andthe write-off of financing fees related to termination of a credit agreement for financing the Meda acquisition.

On a non-GAAP basis, though, Mylan reported solid earnings growth. Adjusted earnings jumped nearly 25% year over year to $592.4 million. The company posted adjusted earnings per share of $1.16, a 28% increase from the prior-year period.

Profitability improved in the second quarter despite higher spending. Mylan noted that research-and-development spending increased primarily as a result of its collaboration with Momenta Pharmaceuticals (NASDAQ: MNTA). The two companies announced a partnership in January to develop and commercialize six of Momenta's biosimilar candidates.

What management had to say

Mylan CEOHeather Bresch was pleased with the company's solid second-quarter results. Bresch stated:

Bresch also commented on recent business development activity:

Looking forward

Despite posting good numbers for the second quarter, Mylan's shares dipped more than 2% in after-hours trading. The less-than-enthusiastic response by investors might have stemmed from revenue coming in a little below expectations.

Over the long run, though, Mylan's prospects seem solid. The drugmaker's partnerships with Momenta and Indian biopharmaceutical company Biocon position Mylan to go after the emerging biosimilar market. Momenta's biosimilar candidate for rheumatoid arthritis biologic Orencia is especially promising. Mylan now claims15 biosimilar/insulin analog generic products in development resulting from the collaborations with Momenta and Biocon.

Mylan's recent acquisitions also should help the company succeed. Finalization of the Meda buyout gives Mylan opportunities to expand its over-the-counter business and build a bigger presence in emerging markets. The purchase of Renaissance gives Mylan 25 additional products and a foothold in the dermatology market.

The second-quarter results were solid, if not spectacular. More importantly, Mylan's partnerships and acquisitions this year should give long-term investors reason to be optimistic about the future.

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Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Momenta Pharmaceuticals and Mylan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.