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Mylan (MYL) to Report Q1 Earnings: What's in the Offing?

Zacks Equity Research

Mylan N.V. MYL is scheduled to report first-quarter 2019 results on May 7, before the market opens.

The company’s performance has been dismal so far with an earnings miss in three of the trailing four quarters. Mylan reported average negative earnings surprise of 2.87% over the said time frame. In the last reported quarter, the company’s earnings lagged estimates by 2.26%.

Factors to Consider

The company posts results in three segments on a geographic basis, which are North America, Europe and Rest of World.

The North America segment is facing challenges at the moment.  Mylan proactively discontinued a number of products while also transferring some to other sites. These moves caused a temporary disruption in the supply of certain products and also weakened volumes in North America generic sales. Such steps, in turn, will affect the company’s sales platform in the first quarter.

Moreover, Teva Pharmaceutical Industries Ltd. TEVA won the FDA approval of the first generic version of Mylan’s EpiPen and EpiPen Jr (epinephrine) auto-injector for the emergency treatment of allergic reactions including those that are life-threatening (anaphylaxis) in adults and pediatric patients. This will certainly have a bearing on EpiPen sales. A slower-than-expected uptake of generic Copaxone, even after reducing the price by more than 60%, has already adversely impacted sales in North America and sales of the same should lag in the quarter under review.

Meanwhile, new product sales and higher volumes from the existing product line-up drove sales in Europe.

During the earnings call, we expect investors to focus on the performance of EpiPen, newly launched biosimilars and other updates from the company’s pipeline.

Mylan received a significant boost when the FDA approved its generic version of GlaxoSmithKline’s Advair Diskus — Wixela Inhub — following a few setbacks. Notably, this is the first generic of Advair Diskus that gained the nod. This, in turn, will give Mylan an edge over its competitors. During the quarter under review, Mylan launched the generic and should boost sales.

The company’s biosimilar business also continues to gain traction. New launches like Fulphila, a biosimilar to Neulasta; Ogivri, a biosimilar to Herceptin; Semglee, a biosimilar to Lantus; Hulio, a biosimilar to Humira and ABEVMy a biosimilar to Avastin should fortify the product portfolio and boost performance in the first quarter.

Share Price Performance

Mylan’s stock has inched up 1% in the year so far, underperforming the industry’s’growth of 5.8%.

 

Earnings Whispers

The proven Zacks proven model does not conclusively show that Mylan is likely to beat estimates this quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Mylan has an Earnings ESP of -4.75%, representing the difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Mylan currently carries a Zacks Rank #3. While the rank is favourable as it increases the predictive power of ESP, the company’s negative ESP leaves surprise prediction inconclusive.

We caution against Sell-rated stocks (#4 or 5) going into earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few pharma companies worth considering as per our model, these have the right mix of elements to beat on earnings this reporting cycle.

Horizon Pharma HZNP has an Earnings ESP of +25.00% and a Zacks Rank of 3. The company is scheduled to release first-quarter results on May 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aduro Biotech, Inc. ADRO has an Earnings ESP of +82.00% and a Zacks Rank #2.

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