Mylan Q2 Results Miss View, Cuts 2018 Outlook; To Evaluate Alternatives

(RTTNews) - Mylan N.V. (MYL) reported a profit for the second-quarter 2018 that declined 87 percent from last year. Both Adjusted earnings per share and revenue for the quarter missed analysts' expectations. It cuts to its 2018 profit and revenue guidance. The company said it is evaluating a wide range of alternatives, because it believes the public markets undervalue the company.

Mylan Chief financial officer Ken Parks said, "Despite the rebasing of our adjusted EPS guidance, we remain confident in our full year adjusted free cash flow outlook and intend to repay more than $1.1 billion in debt maturing over the next 12 months utilizing our solid cash generation."

In the Wednesday pre-Market trade, MYL is trading $36.75, down $1.79 or 4.64 percent.

The company cut its 2018 adjusted earnings per share guidance to a range of $4.55 - $4.90, from the prior guidance of $5.20 to $5.60. Analysts expect annual earnings of $5.25 per share.

It now expects 2018 revenue of $11.25 billion to $12.25 billion, compared to the previous guidance of $11.75 billion to $13.25 billion. Analysts expect revenues of $12.17 billion for 2018.

Mylan said it believes that the US public markets continue to underappreciate and undervalue the durability, differentiation and strengths of Mylan's global diversified business, especially when compared to its peers around the globe. The Board has formed a strategic review committee and is actively evaluating a wide range of alternatives to unlock the true value of one-of-a-kind platform.

The Board has not set a timetable for its evaluation of alternatives and there can be no assurance that any alternative will be implemented.

Meanwhile, Mylan reported that its net earnings for the second-quarter ended June 30, 2018 decreased 87.4 percent to $37.5 million, from the prior year's $297.0 million, with earnings per share declining to $0.07 from $0.55 in the prior year.

The company recognized a U.S. GAAP income tax benefit of $18.8 million, compared to an income tax provision of $27.7 million for the comparable prior year period. Adjusted net earnings decreased to $551.5 million compared to $589.9 million for the prior year period.

Adjusted earnings per share for the second-quarter decreased to $1.07 from $1.10 in the prior year period. Analysts polled by Thomson Reuters expected the company to report earnings of $1.22 per share for the second-quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter were $2.76 billion, compared to $2.93 billion for the comparable prior year period, representing a decrease of $171.0 million, or 6%. Other revenues for the quarter were $52.8 million, compared to $35.7 million for the comparable prior year period, an increase of $17.1 million. The increase in other revenues was primarily the result of consideration received from a license of intellectual property during the current quarter.

Total revenues for the second-quarter decreased 5 percent to $2.81 billion from $2.96 billion last year. Wall Street analysts had a consensus revenue estimate of $2.96 billion for the second-quarter. The decrease in total revenues included lower net sales in the North America segment of 22%. This decrease was partially offset by net sales increases in the Europe segment of 4%, and in the Rest of World segment of 10%. The overall decrease in total revenues was primarily driven by a decrease in net sales from existing products.

Net sales from existing products, partially offset by new product launches, decreased on a constant currency basis by approximately $222.0 million primarily as a result of lower volumes, and to a lesser extent, pricing. Net sales were also negatively impacted by approximately $12.9 million due to the adoption of new accounting standards.

Mylan's total revenues were favorably impacted by the effect of foreign currency translation, primarily reflecting changes in the U.S. Dollar as compared to the currencies of Mylan's subsidiaries in the European Union, which was partially offset by the unfavorable impact from changes in the Indian Rupee. The favorable impact of foreign currency translation on current quarter total revenues was approximately $65.5 million, resulting in a decrease in constant currency total revenues of approximately $219.4 million, or 7%.

Mylan said that the U.S. Food and Drug Administration recently completed an inspection at Mylan's plant in Morgantown, West Virginia and made observations through a Form 483. The Company has submitted a comprehensive response to the FDA and committed to a robust improvement plan. In addition, the Company has recognized that the industry dynamics and regulatory expectations have continued to evolve.

During the second quarter of 2018, the company commenced a restructuring and remediation program at the Morgantown manufacturing facility. The program, which includes a reduction of the workforce and the discontinuation of a number of products, is aimed at reducing complexity at the facility. These actions have had a significantly negative impact on production levels, product supply and operations.

Also, the company has incurred significant expenses for incremental manufacturing variances, site remediation and restructuring charges. The Company expects that remediation activities, lower production levels, the negative impact on operations and related expenses to continue through the end of 2018.