EUR 850.00 For Business Accounts Only

Morningstar | MYL Updated Star Rating from 07 May 2019

While normalized EPS came in slightly above expectations, overall revenue was soft, largely driven by lower-than-expected volumes (partially due to timing issues), adverse foreign currency exchange rates, and, to a lesser degree, pricing. Competitive pressures do not appear to have let up and include uptake challenges due to payor preferences for branded drugs . Despite the reaffirmed guidance and timely new product launches, shares are down 17% intraday due to the skepticism in back-end loaded guidance. Management reaffirmed full-year revenue, earnings, and free cash flow guidance of $11.5 billion to $12.5 billion, $3.80 to $4.80, and $1.9 billion to $2.3 billion, respectively. We maintain our no-moat rating and $33 fair value estimate.

Management indicated that the necessary approvals have been granted to help pave the way toward the $1.1 billion new product revenue target for fiscal 2019, $250 million of which were recorded in the first quarter. The new product revenue target consists of 2018 product launch carryovers, the launch of Wixela (a generic form of respiratory drug Advair, launched in the first quarter), and the new product launches that will occur throughout the year. Net debt ticked up due to recent product launch investments, but management confirmed that it is on track to achieve a leverage ratio of 3.0 times by year-end. For the fiscal first quarter, revenue declined 7% year over year to $2.5 billion, while normalized EPS declined 15% year over year to $0.82. Normalized EBITDA margin declined to 29% from 30% last year.

Although we are encouraged by the progress on the new product launches, overall management tone seemed more cautious. We still would exercise caution on this name as there are too many moving parts and we are concerned about the back-end loaded guidance.