Shares of Mylan Inc., the biggest U.S. maker of generic drugs, rose 17 percent Thursday after profits beat expectations, sales tripled from acquisitions and the company reaffirmed its access to cash.
Mylan, which had lost half its value this year as investors fretted over debt from the purchase of Merck KGaA's generics business, leaped $1.19 to $8.17.
Mylan paid $6.7 billion, more than its own market value, for Merck KGaA's generics business last year to increase manufacturing capacity and reach fast-growing European markets. The unit contributed 40 percent of Mylan's revenue in the quarter, the Canonsburg company said today in a statement.
"The new Mylan has clearly demonstrated that it can execute and it has solidly done so for the past three quarters," said Corey Davis, an analyst at Natixis Bleichroeder in New York, in a note to clients yesterday. "The stock should react very positively."
Mylan has more than $1 billion in cash and untapped credit and won't need access to capital markets again "in the foreseeable future," Chief Financial Officer Ed Borkowski said in the statement. The company can pay its debt and compliance with loan covenants "will not be an issue for the foreseeable future," he said.
"Liquidity concerns are unfounded," said Ronny Gal, an analyst at Sanford Bernstein & Co. in New York, in a note to investors. He recommended buying the stock, with a price target of $12.
Third-quarter net income grew to $172 million, or 45 cents a share, from $150 million, or 60 cents, in the year-earlier period, the company said. Profit adjusted for one-time items beat by 12 cents the 11-cent average estimate of analysts surveyed by Bloomberg.
Revenue was $1.66 billion, including $687 million from the former Merck KGaA unit. The sale of rights to the blood pressure drug Bystolic added $455 million. Without acquisitions, sales volume was "consistent" with the year-earlier period, Mylan said.
The Merck KGaA deal made Mylan the world's third-biggest maker of copied medicines with the size and low costs it needs to survive in the competitive industry, said CEO Robert J. Coury on Oct. 9. Acquisitions have helped makers of generic drugs offset low prices as more copies of brand-name medicines become available.
Mylan increased its forecast for 2008 earnings to the range of 64 cents to 67 cents, excluding certain items, from 47 cents to 53 cents. That reflects an additional $75 million to $100 million the company expects to save as it digests the Merck KGaA business.
Mylan sold rights to Bystolic to Forest Laboratories Inc. in February and completed the transfer last month, the company said. Mylan retains royalty rights to the drug through 2010, it said.
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