Will Mylan (MYL) Disappoint Investors This Earnings Season?

Mylan N.V. (NASDAQ:MYL) is scheduled to report fourth-quarter 2017 results on Feb 28, after market closes.

The company’s performance has been mixed so far, having topped earnings estimates in two and missing in other two of the trailing four quarters. The company reported an average negative earnings surprise of 1.05% over the said time frame.

Last quarter, the company missed earnings estimates by 9.84%. Let’s see how things are shaping up for this announcement.

Mylan’s stock has returned 34.1% in the last six months as against the industry’s decline of 11.0%. The approval of generic Copaxone 40mg provided a boost to the stock.

Factors to Consider This Quarter

The company’s third-quarter results were dismal due to lower EpiPen sales. Nevertheless, Mylan raised the lower end of the sales guidance banking on the launch of the generic version of Copaxone.

Mylan won FDA approval for a generic version of Teva Pharmaceuticals (NYSE:TEVA) Copaxone 40 mg in 2017. Notably, this is the first generic of Copaxone that has been approved. Since Mylan was one of the first applicants to submit a substantially complete ANDA for glatiramer acetate Injection, 40 mg/mL, containing a Paragraph IV certification, the company and other first filers may be eligible for 180 days of generic drug exclusivity. According to QuintilesIMS, sales of Copaxone 20mg/mL dose was approximately $700 million and for the 40 mg/mL dose was $3.64 billion for the 12-months period ending July 31, 2017.

The company now expects revenues of $11.75-$12.5 billion in 2017, up from the earlier projection of $11.5-$12.5 billion. The Zacks Consensus Estimate for revenues in 2017 is $11.95 billion. The company now projects earnings per share in the range of $4.45-$4.70, up from $4.30-$4.70 while the Zacks Consensus Estimate for the same is $4.55.

The approval comes as silver lining for distraught Mylan given the ongoing challenges in the United States and uncertain regulatory environment. Mylan’s Specialty segment, of which EpiPen is the most significant product, continues to be weak. Sales of EpiPen Auto-Injector are anticipated to continue to decline in the current quarter as a result of increased competition and the impact of the authorized generic launch. Meanwhile, the company’s efforts to get Advair’s generic approved faced a jolt when the FDA issued a complete response letter to its ANDA for generic Advair Diskus.

Nevertheless, newly launched products are likely to perform well and drive the top line. The acquisitions of Meda and the Renaissance Topicals Business are also expected to boost the top line in the generics segment. The FDA recently approved Ogiviri, the biosimilar version of Roche Holdings (OTC:RHHBY) Herceptin. Mylan recently obtained tentative FDA approval under the U.S. President's Emergency Plan for AIDS Relief (PEPFAR) for its New Drug Application for Dolutegravir, Emtricitabine, and Tenofovir Alafenamide Tablets, 50 mg/200 mg/25 mg.

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

Earnings Whispers

Our proven model doesn’t conclusively show that Mylan is likely to beat estimates this quarter. 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) to be able to beat on earnings. 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 -0.05%. 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 favorable, the company’s negative ESP makes surprise prediction difficult. Note that we caution against Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement especially when the company is seeing negative estimate revisions.

Stock to Consider

Here is one health care stock that you can consider, as our model shows it has the right combination of elements to post an earnings beat this quarter.

Exelixis (NASDAQ:EXEL) is scheduled to release fourth-quarter 2017 results on Feb 26 after the market closes. The company has an Earnings ESP of +8.94% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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