Business Corpus: Mylan Exploring Options As 'Unsustainable' Trends Hound Sales, ProfitMylan stock tumbled after the drugmaker missed second-quarter expectations, issued lagging guidance for 2018 and announced a strategic review. The post Mylan Exploring Options As 'Unsustainable' Trends Hound Sales, Profit appeared first on Investor's Business Daily.

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The U.S. market "continues to underappreciate and undervalue" Mylan's (MYL) global business, the generic drugmaker said Wednesday after its quarterly metrics and full-year guidance lagged expectations.

So Mylan is exploring strategic alternatives. But analysts could only fathom what those alternatives might be. The board said in a statement it hopes to "unlock the true value of our one-of-a-kind platform." It didn't put a timetable on the strategic review process.

Mylan noted that its international business now represents more than 60% of total sales. But in the U.S., "negative trends and dynamics" are "unsustainable," the board said. U.S. regulators are pushing for speedier generic drug approvals to stoke competition and cut prices.

In morning trading on the stock market today, Mylan stock plummeted 6.6%, near 36. That tugged down No. 1 generic drugmaker Teva Pharmaceutical (TEVA) by 1.8%. Broadly, generic drug stocks dipped just a fraction.

Quarterly Metrics Lag

For the second quarter, Mylan reported adjusted income of $1.07 per share, declining 3% and missing analyst views for $1.23. Sales of $2.81 billion fell 5% and lagged expectations for $2.96 billion.

The biggest pain came from Mylan's North America segment where $1 billion in sales fell 22% year over year. Mylan cited lower volumes on existing products, including emergency allergic reaction injection EpiPen, for the dip. Pricing "also declined slightly."

In Europe, sales declined 3% on a constant-currency basis to $990.6 million. Sales from the rest of the world climbed 11% on a constant-currency basis to $764.1 million. These segments are growing in line with expectations, Chief Executive Heather Bresch said in a prepared statement.

"However, our efforts to serve patients in the U.S. have been shaped by the industry's transformation here, and our results and guidance for 2018 are directly correlated with the ongoing rebasing of the U.S. health care environment," she said.

Mylan's 2018 guidance also undercut analyst estimates. It projected $11.25 billion to $12.25 billion in sales, missing views for $12.24 billion. Adjusted profit of $4.55-$4.90 per share also lagged analysts' model for $5.28.

Generic Drugs Challenged

Evercore analyst Umer Raffat says the U.S. is key for Mylan. He noted that it's not clear what direction the No. 2 generic drugmaker will take in its strategic review. Better disclosures for key sales drivers could help clear up "valuation disconnects," he said in a report to clients.

"Keep in mind that although (foreign sales) may seem like a higher multiple business for now, the true growth engine for Mylan going forward comes from the U.S.: biosimilar launches," he said.

Biosimilars are copycats of branded biologic drugs created by firms like Amgen (AMGN) and AbbVie (ABBV). Mylan has several biosimilars approved including a copycat of Amgen's bone marrow-stimulating drug Neulasta.

Mizuho analyst Irina Koffler noted a number of larger companies are also trying to divest their generic portfolios. Therefore, "we don't expect this announcement to encourage investors," she said in a report.

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