UPDATE 2-Mylan 2nd-qtr profit up on US generic drug sales

Wed Jul 27, 2011 9:00am EDT

* EPS ex-items 52 cents vs Street view 45 cents

* Revenue up 15 pct to $1.57 bln (Updates with analyst comment, Teva details, new products)

By Toni Clarke

BOSTON, July 27 (Reuters) - Mylan Inc (MYL.O) reported higher-than-expected second-quarter earnings on Wednesday as new product launches drove strong sales of its generic drugs in the United States, offsetting weaker sales in Europe, where the company faces pricing pressures.

Rival Teva Pharmaceutical Industries TEVA.O, by contrast, reported weaker-than-expected North American sales, offset by relatively strong results in Europe.

Unlike Teva, Mylan benefited from some major new product launches in the United States. New products carry higher margins than older products. On the other hand, Teva posted relatively strong sales in Europe while Mylan was hurt by pressure to cut prices, particularly in France.

Mylan's net profit rose to $146.4 million, or 33 cents a share, from $51.5 million or 16 cents a share a year ago. Revenue rose 15 percent to $1.57 billion, helped in part by favorable foreign currency exchange.

Earnings excluding one-time items were 52 cents a share. Analysts on average had expected 45 cents, according to Thomson Reuters I/B/E/S. Analysts expected revenue of $1.49 billion.

"It's tough to argue with a solid beat which, based on our conversations with investors, was far from certain," said Aaron (Ronny) Gal, an analyst at Sanford Bernstein, in a note to clients.

New product revenue from the United States included the company's launch of Budesonide, the generic version of AstraZeneca Plc's (AZN.L) Entocort EC, a treatment for Crohn's disease; Letrozole, the generic version of Novartis AG's (NOVN.VX) breast cancer drug Femara; and Cyclobenzaprine Hydrochloride, the generic version of Cephalon Inc's CEPH.O muscle relaxant Amrix. These gains were partially offset by a decrease in revenue from existing products, mainly as a result of lower pricing.

Many countries in Europe are increasing their use of generic drugs. However, there is pressure from governments to hold prices down.

Mylan's sales of generic drugs rose to $1.44 billion from $1.23 billion a year ago. Revenue from North American sales rose 27.2 percent to $749.1 million.

Revenue from Europe rose slightly, to $378.7 million from $378 million. Foreign currency exchange had a positive impact on sales, reflecting the weakening of the U.S. dollar against the euro.

Excluding currency benefits, revenue from Europe would have declined 12 percent due to lower volume and pricing in a number of European markets, primarily France and Germany, the company said. But it reported continued market share gains in Italy.

"The EU weakness at minus 12 percent stings, particularly when Teva simultaneously reports 4 percent improvement," said Gal. "However, Mylan consistently reiterated it was expecting pressure in France and would be down in Europe in the second quarter as a result."

Overall, Teva posted a profit of $1.10 a share, slightly topping Wall Street's estimate of $1.08 a share.

Mylan tightened the range of its earnings forecast for 2011 to $1.95 to $2.05 a share excluding items, from a previous forecast of $1.90 to $2.10 a share.

"We remain extremely confident in our ability to achieve not only our current goals, but also our long-term growth targets of 15 percent and 20 percent growth in revenues and EPS, respectively, by the end of 2013," said Robert Coury, the company's chief executive, in a statement. "We believe 2012 especially is shaping up to be an exceptional year for Mylan."

The company completed a share repurchase program by buying about 14.8 million shares for $350 million. (Reporting by Toni Clarke; editing by John Wallace and Matthew Lewis)

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