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Mylan, Inc.’s (MYL - Analyst Report) fourth-quarter 2012 earnings (excluding special items) of 65 cents per share beat the Zacks Consensus Estimate by a penny. The earnings beat was primarily attributable to higher revenues. Earnings also increased 23% from the year-ago quarter. On a reported basis (including special items), fourth quarter 2012 earnings surged 30% to 39 cents per share.

Revenues climbed 13% to $1.72 billion. Revenues were marginally short of the Zacks Consensus Estimate of $1.73 billion.

Mylan reports revenues from 2 segments: Generics and Specialty.

Total Generics segment sales increased 9.8% in the fourth quarter of 2012 to $1.57 billion. Generic third-party net sales, derived from sales in North America, Europe, the Middle East & Africa (EMEA) and Asia-Pacific, climbed 10% to $1.56 billion.

Segmental third-party net sales grew in all the three regions. Third-party net sales in North American markets climbed 10% to $810.9 million in the final quarter of 2012. The increase was mainly attributable to new product launches, which contributed $181 million to the third-party net sales from the region. We note that Mylan launched approximately 600 products across the globe in 2012.

Third-party net sales from the EMEA market improved 6% to $368.3 million. Strong performance in France, Italy and UK due to new product revenue and favorable volume boosted EMEA revenues. Third-party net sales in the region were, however, negatively impacted by foreign currency movements. Third party net sales in the Asia-Pacific market increased 13.9% to $384.8 million on the back of strong sales in the Indian market.

Total Specialty segment sales increased 30.8% to $162 million, while total third-party revenues from the segment jumped 47.4% to $155.1 million. Specialty segment sales were driven by the strong performance of its flagship product – EpiPen auto-injector – for severe allergic reactions.

Adjusted gross margins improved to 49% (from 48%), mainly due to new product launches coupled with increased sales of EpiPen, partially hampered by pricing pressure in the Generic segment.

Research and development (R&D) expenses increased 54.9% to $117.7 million in the final quarter of 2012 due to higher investment in the pipeline. Selling, general and administrative (SG&A) expenses escalated 20.6% to $362.9 million.

Full-year earnings came in at $2.59 per share, a penny above the Zacks Consensus Estimate and 27% above the year-ago earnings. Full-year earnings were towards the higher end of the company’s projected range of $2.50–$2.60 per share. Revenues climbed 11% to $6.8 billion in 2012, in line with the Zacks Consensus Estimate.

Outlook

Apart from releasing its earnings results, Mylan also provided its 2013 guidance. The company expects adjusted earnings for 2013 to the range of $2.75–$2.95 per share, up 10% year over year. The company expects 2013 revenues in the range of $7–$7.4 billion, up 6% year over year. The Zacks Consensus Estimate for 2013 is currently pegged at $2.81 per share, on revenues of $7.1 billion. The company expects adjusted earnings in the range of 60-62 cents for the first quarter of 2013. The Zacks Consensus Estimate for the first quarter of 2013 currently stands at 68 cents per share, well above the company’s projected range.

Mylan, which is targeting adjusted earnings of $6.00 per share in 2018, expects to provide a detailed long-term outlook on its investor day in Aug 2013.

Mylan Eyes Agila

In order to strengthen its presence in the high potential generic injectables market, Mylan announced that it has inked a deal to buy Agila Specialties private limited – the injectable drugs division of India’s Strides Arcolab limited – for $1.6 billion in cash. Mylan intends to fund the deal through a $1 billion senior unsecured bridge term loan in addition to its available cash balance and existing lines of credit.

The acquisition, which has been approved by Mylan’s board of directors, is expected to close by the end of the year. Mylan expects the deal to boost its adjusted earnings per share immediately after closure.

Mylan currently carries a Zacks Rank #2 (Buy). However, companies like Lannett Company, Inc. (LCI - Snapshot Report), QLT Inc. (QLTI - Analyst Report) and SIGA Technologies, Inc. look more attractive with a Zacks Rank #1 (Strong Buy).

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