Mylan (MYL) Q1 Earnings: Will The Stock Pull A Surprise?

Mylan N.V. (NASDAQ:MYL) is scheduled to report first-quarter 2017 results on May 10, before the market opens. The company’s performance has been mixed so far, having beaten earnings estimates in three of the trailing four quarters and missing once.

Overall, it has delivered an average positive surprise of 1.39%.

Last quarter, the company recorded a positive earnings surprise of 11.3%. Let’s see how things are shaping up for this announcement.

Shares of Mylan have performed better than the Zacks categorized Medical-Generic Drugs industry in the past one year with the stock losing 5.5% compared to the industry’s decline of 10.4%.

Factors to Consider This Quarter

Mylan expects revenues between $12.25 billion–$13.75 billion in 2017. The company projects earnings in the range of $5.15–$5.55 per share for 2017.

Mylan’s Generics segment has been performing well over the last few quarters and should continue the momentum this quarter as well. Moreover, the company has seen quite a few generic launches over the past few quarters and this one was no exception. Newly launched products should perform well and aid the top line, while acquisitions are likely to contribute meaningfully, thereby driving segmental growth.

However, Mylan’s Specialty segment, of which EpiPen is the most significant product, continues to be weak. In Dec 2016, Mylan announced the launch of the authorized generic for EpiPen Auto-Injector at a wholesale acquisition cost of $300 per epinephrine injection USP two-pack, which is more than 50% lower than the WAC of EpiPen 2-Pak Auto-Injectors.

Mylan received a complete response letter from the FDA regarding its abbreviated new drug application (ANDA) for the generic version of asthma drug Advair Diskus. The company is in the process of reviewing this response letter and will provide an update on its application at the earliest. Mylan also has plans to complete its review and discuss the FDA's feedback with the agency.

In Apr 2017, Mylan received a warning letter from the FDA for its manufacturing facility in India. The FDA cited significant violations of current good manufacturing practice (CGMP) regulations for finished pharmaceuticals in the warning letter. The violations relate to the agency’s inspection in Sep 2016 and even though the company had responded to the same, the agency deemed them inadequate.

The FDA warned that until Mylan redresses the violations completely and confirms its compliance with CGMP, the approval of new applications and the listing of the company as a drug manufacturer may be withheld. The facility at Nashik produces antiretroviral therapies used to treat HIV. Mylan currently has nine API and intermediate manufacturing facilities and a total of sixteen finished dosage form facilities, which includes nine oral solid dose facilities and seven injectable facilities, all located in India.

On the earnings call, we expect the company to shed light on this.

Earnings Whispers

Our proven model does not conclusively show that Mylan is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to likely post an earnings beat. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -3.3%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Zacks Rank: Mylan currently has a Zacks Rank #3 (Hold). As it is, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider instead, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

FibroGen, Inc. (NASDAQ:FGEN) has an Earnings ESP of +23.81% and a Zacks Rank #3. The company is expected to release results on May 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Immune Design Corp. (NASDAQ:IMDZ) has an Earnings ESP of 11.3% and a Zacks Rank #3. The company is expected to release results on May 9.

Horizon Pharmaceuticals, plc. (NASDAQ:HZNP) has an Earnings ESP of +4.0% and a Zacks Rank #3 (Hold). The company is expected to release results on May 8.

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