US healthcare environment weighs on Mylan's second-quarter results, prompts strategic review

Headline results for the second quarter:

Revenue

$2.8 billion (forecasts of $3 billion)

-5%

Profit

$37.5 million

Versus $297 million

Note: All changes are versus the prior-year period unless otherwise stated

What the company said:

"Our Europe and Rest of World segments continue to deliver growth in line with our expectations," noted CEO Heather Bresch, adding "our results and guidance for 2018 are directly correlated with the ongoing rebasing of the US healthcare environment." President Rajiv Malik suggested that Mylan's investments "will drive long-term growth for the company, despite some near-term market challenges in the US."

Mylan's board added that it formed a strategic committee to review "a wide range of alternatives to unlock the true value of our one-of-a-kind platform." The company noted that the move comes in response "to the negative trends and dynamics playing out in the US market place - which we believe are unsustainable for the healthcare system over the long-term."

Mylan further revealed that it received a warning letter from the FDA following an inspection of its Morgantown manufacturing facility in West Virginia. The company said it has "submitted a comprehensive response to the FDA and committed to a robust improvement plan," in addition to cutting its workforce at the site and discontinuing the production of a number of products.

Other results:

  • North America segment: $1 billion, down 22 percent, due to lower volumes on products including EpiPen
  • Europe segment: $990.6 million, up 4 percent, primarily attributable to favourable currency effects
  • Rest of World segment: $764.1 million, up 10 percent, driven by new product sales offset by lower prices

What analysts said:

"The restructuring that began in the second quarter is clearly late to address what has been a material change in the generics business that began in early 2016," noted RBC Capital Markets analyst Randall Stanicky.

Looking ahead:

Mylan expects annual revenue in the range of $11.25 billion to $12.25 billion, which is essentially flat at the mid-point versus 2017, down from an earlier estimate of $11.75 billion to $13.25 billion. The company explained that the revised guidance includes "resizing of US product opportunities and the negative impact on operations of the restructuring and remediation programme in Morgantown." Mylan added that full-year earnings per share are predicted to be in the range of $4.55 to $4.90, cut from a prior forecast of $5.20 per share to $5.60 per share. Analysts anticipate earnings of $5.28 per share on $12.24 billion in sales.

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