MORGANTOWN — Mylan NV saw its first quarter 2019 revenues fall 7% compared to Q1 2018, and its stock share price fall 15 percent compared to the same period. Mylan CEO Heather Bresch said the earnings fell within the expected range and represented a solid start to the year.
European and North American net sales both fell, and remediation at the Morgantown plant continued to play a role in revenue decline.
Mylan’s quarterly report, filed with the U.S. SEC, said revenues were $2.5 billion, compared to $2.68 billion in Q1 2018.
Earnings per share were 82 cents, down 15% from Q1 2018’s 96 cents.
European net sales totaled $895.3 million, down $143.1 million or 14% compared to Q1 2018. “This decrease was primarily the result of the unfavorable impact of foreign currency translation, lower volumes of existing products driven by the timing of purchases of our products by customers and temporary business disruptions due to the adoption of serialization across Europe and, to a lesser extent, pricing.”
Rest of World sales were up. They totaled $642.4 million, an increase of $15.7 million or 3% over Q1 2018. “This increase was primarily the result of new product sales and higher volumes of existing products. The increase in net sales as a result of new product sales was primarily due to new product sales in Australia, Japan and China.”
North America sales totaled $922.9 million, down $62.4 million or 6% compared to Q1 2018.
“This decrease was due primarily to lower volumes on existing products, primarily driven by changes in the competitive environment and the impact of the Morgantown plant remediation activities, partially offset by new product sales. … Pricing also declined when compared to the prior year period.”
Mylan discussed the Morgantown remediation at some length.
As previously reported, in December 5 2016, Mylan announced a restructuring program to streamline operations globally.
That program, other than the additional restructuring and remediation activities at the Morgantown
Plant, was substantially complete as of last December, Mylan said. As a result, management believes the potential annual savings will range from $400 million to $475 million once fully realized, with the majority of these savings improving operating cash flow.
Regarding Morgantown, as previously reported, last April 2018, the U.S. Food and Drug Administration completed an inspection there and made observations through a Form 483. “The Company submitted a comprehensive response to the FDA and committed to a robust improvement plan.”
Mylan also commenced, during the second quarter of 2018, restructuring and remediation activities aimed at reducing complexity at the plant, which include the discontinuation and transfer to other manufacturing sites of a number of products, a reduction of the workforce and extensive process and plant remediation.
Then, in the fourth quarter of 2018, Mylan received a warning letter related to the previously disclosed observations at the plant. “The issues raised in the warning letter are being addressed within the context of the company’s comprehensive restructuring and remediation activities.”
The plant continues to supply products, Mylan said, “however, these activities have led to a temporary disruption in supply of certain products. Importantly, the profitability of the transferred and discontinued products is not proportionate to the reduced volumes of those products as the company expects that manufacturing costs related to transferred products will be reduced and many of the discontinued products have lower than average gross margins.”
Mylan once again said it expects no significant new product revenue from the Morgantown plant in 2019, “and we are forecasting that only five of our top 50 and only one out of the top 10 gross margin generating products will be manufactured in Morgantown in 2019.”
For the first three months of 2019, Mylan said, it spent about $69.6 million for incremental manufacturing variances, site remediation and restructuring charges related to the Morgantown plant.
“At this time, the total expenses related to the additional restructuring and remediation activities at the Morgantown plant cannot be reasonably estimated. Mylan remains committed to maintaining the highest quality manufacturing standards at its facilities around the world and to continuous assessment and improvement in a time of evolving industry dynamics and regulatory expectations.”
Mylan CEO Heather Bresch commented: “Mylan’s first quarter represents a solid start to the year and we remain positioned to reaffirm our guidance for 2019. We continue to manage an increasingly diverse portfolio of products across all three segments of our business, and given the evolution of our commercial and geographic mix, see opportunities to enhance our investments for certain areas of our portfolio.
“In the U.S., where the industry continues to experience volatility,” she said, “we are leveraging past experience and applying key learnings to our largest launches, like Wixela, [generic Advair Diskus] even as we advocate for policies that seek to put the patient first.”
“With that said, our top-line results fell within the range of where we thought they would be at $2.5 billion. On the bottom line, we came in ahead of where we expected at $0.82 of adjusted EPS.”
Mylan notes various matters of litigation in its earnings report. It mentions the ongoing litigation in eastern Pennsylvania federal court, filed by attorneys general of nearly all the states, alleging collusion and price fixing among a number of generic drugmakers, including Mylan.
Mylan reports that this month, some attorneys general notified Mylan they will be filing a new complaint alleging anticompetitive conduct regarding additional drugs.
Mylan also reports it is engaged in ongoing talks with the U.S. Veterans Affairs Department regarding pricing of the Epi-Pen for insurance coverage.
Consolidated lawsuits in Kansas federal court alleging anticompetitive pricing of Epi-Pens is set for trial in November 2020.
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