Apr 30 2010
Mylan Inc. (Nasdaq: MYL) today announced its financial results for the three months ended March 31, 2010.
Financial Highlights
- Adjusted diluted earnings per share (EPS) of $0.36 for the three months ended March 31, 2010, compared to $0.33 for the same prior year period;
- Total revenues of $1.29 billion for the three months ended March 31, 2010, compared to $1.21 billion for the three months ended March 31, 2009;
- On a GAAP basis, EPS of $0.20 for the three months ended March 31, 2010, compared to $0.23 for the same prior year period;
Mylan's Chairman and CEO Robert J. Coury commented: "Our strong first quarter results set the stage for another exceptional year for Mylan and reflect the continued positive momentum that has been building as we further cultivate and leverage our powerful global platform. Because of this sustained strength and our consistent delivery on our stated objectives, we are pleased to reaffirm our 2010 EPS guidance of $1.50 to $1.70. As anticipated, we've delivered a solid first quarter, and I remain bullish on our ability to meet the higher trajectory that we have forecasted for the second half of 2010."
Financial Summary
Mylan previously had three reportable segments, "Generics", "Specialty" and "Matrix." The Matrix Segment consisted of Matrix Laboratories Limited (Matrix), which was previously a publicly traded company in India, in which Mylan held a 71.2% ownership stake. Following the acquisition of additional interests in Matrix and its related delisting from the Indian stock exchanges, Mylan now has two reportable segments, "Generics" and "Specialty." Mylan changed its segments to align with how the business is being managed after those changes. The former Matrix Segment is included within the Generics Segment. Information for earlier periods has been recast.
Total revenues for the quarter ended March 31, 2010 increased $82.5 million, or 7% to $1.29 billion from $1.21 billion in the same prior year period. Revenues in the current quarter were favorably impacted by the effect of foreign currency translation, reflecting a weaker U.S. dollar. Translating current year revenues at prior year exchange rates would have resulted in operational year-over-year revenue growth, excluding foreign currency, of $20.6 million, or approximately 2%.
Generics revenues, which are derived from sales in North America, Europe, the Middle East and Africa (collectively, EMEA) and Asia Pacific were $1.24 billion in the current quarter, compared to $1.15 billion in the same prior year period. Included in total Generics revenues are other revenues of $13.5 million for the current quarter compared to $58.0 million in the same prior year period, a decrease of $44.5 million. The prior year includes approximately $28.5 million of incremental revenue primarily resulting from the cancellation of product development agreements for which the revenue had been previously deferred.
Total revenues from North America were $562.7 million for the three months ended March 31, 2010, compared to $593.4 million for the same prior year period, representing a decrease of 5.2%. However, excluding the incremental revenue resulting from the cancellation of product development agreements in the prior year as discussed above, North America revenues were essentially flat.
Prior year revenues included a substantial contribution from divalproex sodium extended-release tablets ("divalproex ER"), the generic version of Abbott Laboratories' Depakote® ER, which was launched by Mylan in February 2009. Additional generic competition on divalproex ER entered the market in August 2009. As such, sales of divalproex ER in the current quarter were significantly lower than in the quarter in which it was launched. Serving to offset this, however, were revenues contributed from new products launched in North America in the amount of $56.6 million, and increased revenues on certain products as a result of Mylan's ability to remain a source of stable supply as certain competitors experienced regulatory and supply issues.
Total revenues from EMEA were $410.8 million in the current quarter, compared to $357.9 million in the same prior year period, an increase of 14.8%. Excluding foreign currency, calculated as described above, EMEA operational revenues increased by approximately 8% over the prior year period. Higher revenues were realized primarily in Italy, where regulatory changes have favorably impacted sales, and in France and Spain, mainly as the result of revenue contributed from new product launches.
Sales in Asia Pacific are derived from Mylan's operations in India, Australia, Japan and New Zealand. Asia Pacific revenues were $282.3 million in the current quarter, compared to $216.3 million in the same prior year period, an increase of 30.5%. Excluding foreign currency, calculated as described above, operational revenues increased approximately 14%, mainly due to increased sales from India.
In India, the increase in third party net revenues is primarily due to higher sales of anti-retroviral ("ARV") finished dosage form ("FDF") generic products, which are used in the treatment of HIV/AIDS. In addition, contributing to the increase in net revenues in Asia Pacific are intercompany sales of FDF generic products for other indications. Also contributing to revenues in Asia Pacific are sales of active pharmaceutical ingredients ("API") which are sold to Mylan subsidiaries in conjunction with Mylan's vertical integration strategy, as well as to third parties. In total, intercompany revenues of $45.2 million and $29.8 million are included in Asia Pacific revenues for the three months ended March 31, 2010 and 2009.
Specialty, consisting of Mylan's Dey business, which focuses on the development, manufacture and marketing of specialty pharmaceuticals in the respiratory and severe allergy markets, reported total revenues of $101.0 million for the current quarter, an increase of 20.7% from $83.7 million for the three months ended March 31, 2009. The increase was the result of higher sales of Dey's EpiPen® Auto-Injector and Perforomist® Solution, Dey's Formoterol Fumarate Inhalation Solution.
Included in total Specialty revenues for the three months ended March 31, 2010 and 2009, are intersegment revenues of $16.5 million and $4.3 million, associated with the transfer, in last year's fourth quarter, of Dey's generic products to our Mylan Pharmaceuticals subsidiary.
Consolidated gross profit for the three months ended March 31, 2010, was $516.3 million and gross margins were 40.0%, compared to gross profit of $525.7 million and gross margins of 43.5% in the same prior year period. Gross profit in both periods was negatively impacted by certain purchase accounting related items totaling $71.6 million and $68.2 million for the quarters ended March 31, 2010 and 2009, which consisted primarily of amortization related to purchased intangible assets. Excluding these amounts from both periods, gross margins were 45.5% in the current year compared to 49.1% in the prior. This decrease in gross margin is primarily the result of lower revenues from divalproex ER, which was launched during the three months ended March 31, 2009, and contributed high margins during the period of exclusivity.
Earnings from operations were $198.5 million for the three months ended March 31, 2010, compared to $227.3 million for the same prior year period.
Excluding the impact of purchase accounting related items in both periods, as mentioned above, as well as the incremental other revenue from the prior year, earnings from operations were consistent at $270.1 million compared to $267.0 million. Favorable gross profit in the current year was offset by higher research and development expense (R&D) and selling, general and administrative costs (SG&A).
The increase to R&D is primarily due to the effect of foreign exchange. The increase to SG&A is due to the effect of foreign exchange as well as higher payroll and related costs. In addition, prior year operating income included $2.1 million from the favorable settlement of litigation.
Interest expense for the three months ended March 31, 2010, totaled $74.0 million compared to $85.0 million for the three months ended March 31, 2009. The decrease is due to the reduction of the Company's outstanding debt balance, through repayments made in 2009, as well as lower overall interest rates. In March 2009, Mylan pre-paid all of its 2010 scheduled debt maturities on its term loans, and in December 2009 the Company pre-paid all of its 2011 scheduled debt maturities. Included in interest expense for the three months ended March 31, 2010 and 2009 are $11.0 million and $10.2 million of accretion of the discounts on the Company's convertible debt instruments. Other income, net, for the current quarter was $1.1 million compared to $4.2 million in the same prior year period.
EBITDA, which is defined as net income (loss) (excluding the non-controlling interest and income from equity method investees) plus income taxes, interest expense, depreciation and amortization, was $302.1 million for the quarter ended March 31, 2010, and $327.9 million for the quarter ended March 31, 2009. After adjusting for certain items as further discussed below, adjusted EBITDA was $323.0 million for the current three-month period and $326.1 million for the same prior year period.
The Company's cash position remains strong at March 31, 2010, with cash and short-term investments of over $550.0 million driven by cash provided by operating activities of $240.7 million for the three months ended March 31, 2010. Included in this amount is an income tax refund of approximately $99.0 million. Cash used in investing activities for the period was $27.8 million, which primarily consisted of capital expenditures. Cash used in financing activities was $56.8 million for the quarter, which included cash dividends of $34.8 million paid on the Company's preferred stock.
SOURCE Mylan Inc.