Mylan continues to deliver a strong set of numbers, posting double digit growth in both revenue (12%) and earnings (15%). Revenue growth of 12% in constant currency is driven by a) 51% growth in specialty business and b) 12.5% growth in North American generic market. New launches in the US, stability in EU markets and a firm volume growth in Japan are key positives. About Copaxone ruling, the company will appeal in the higher court, and is confident of getting FDA approval before the patent expiry (NATCO is a formulation partner).
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Higher R&D, SGA impact operating performance
Mylan’s Q2CY12 results depict a healthy earnings growth of 15%YoY and revenue growth of 7%YoY (12% in CE). Though vertical integration has led to an increase in gross margins by 30bpsYoY, the higher investment in R&D and SGA has impacted operating performance as margins contracted by 110bps to 22.4%. Lower interest and tax expenses led to 15% growth in earnings. The management has maintained its guidance for CY12.
Focus on niche segment to sustain growth in US
Mylan’s US generic business grew by 12.5% to USD845mn, driven by new launches such as Doryx, Escitalopam and Abacavir which have contributed ~30% of US revenues in Q2CY11. The management has indicated that portfolio diversity continues to be an important driver of US growth and incrementally, the company is relying on niche segments such as injectibles, ophthalmics, patches, soft-gel caps, derma and respiratory. Overall, theses segments put together now contributes over 43% of US generic sales.
Increased generic penetration in EU augurs well for long term growth
Despite the difficult macro environment, Mylan has seen some stability in EU though revenue for the quarter declined marginally by 3%YoY. Many EU countries such as France, Spain, Italy, Portugal and Belgium are encouraging generic utilization which augurs well for long term growth.
Key strategic initiatives on track: Positive read through for Biocon
Mylan, post discussions with FDA, is confident to enter biosimilars market in the US by 2016. Its bio-generics pipeline consists of five molecules (targeting USD33bn market) and is developed in collaboration with Biocon. About Copaxone ruling, the company will appeal in the higher court and is confident to receive FDA approval before the patent expiry (NATCO is a formulation partner). Further, on respiratory platform, Mylan is on track to launch generic Advair by 2015/16 in EU/US respectively.
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