Mylan Labs Exceeds Targets

Sales and profits are better than expected.
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Mylan Laboratories

(MYL) - Get Report

issued second-quarter results that topped Wall Street expectations thanks primarily to a painkiller that accounted for about 20% of sales.

The generic-drug company earned 37 cents a share, excluding one-time items, on sales of $366.7 million for the three months ended Sept. 30. The consensus among analysts polled by Thomson First Call predicted an EPS of 32 cents and sales of $350.8 million.

On a GAAP basis, Mylan earned $77.5 million, or 36 cents a share, compared to $35.8 million, or 16 cents a share, for the same period last year. Sales for the year-ago quarter were $298 million.

Mylan's biggest product is the painkiller fentanyl delivered via a skin patch -- a generic version of Duragesic made by

Johnson & Johnson

(JNJ) - Get Report

. The patch's sales have thrived because there are no other generic fentanyl pain patches, but Mylan didn't provide a precise number for the quarter.

Robert Coury, Mylan's vice chairman and CEO, said Wednesday that extra generic competition won't affect the fiscal-year guidance of $1.35 to $1.55, excluding one-time items. The average Wall Street estimate is $1.30 for the year ending March 31, 2007.

Mylan's second quarter was aided by reduced expenses, relating to the closing of the company's brand-name drug division last year and the

licensing of an experimental blood-pressure drug to

Forest Laboratories

(FRX)

in January.

Although Mylan had tried to develop a diverse portfolio of brand-name and generic drugs, it has decided to stick with generics.

The blood-pressure drug nebivolol received conditional approval from the Food and Drug Administration in May 2005, but it hasn't come to market because the FDA has requested more tests. Two weeks ago, Forest told analysts and investors that it expects to submit the data by March, adding that it would take the agency about six months to review the application. Forest also is compiling data on nebivolol as a treatment for congestive heart failure.

Another vestige of Mylan's brand-name strategy is Emsam, an antidepressant skin patch. Emsam was developed through a joint-venture with another generic-drug company,

Watson Pharmaceuticals

(WPI)

.

They licensed Emsam to

Bristol-Myers Squibb

(BMY) - Get Report

, which told analysts last month that Emsam had been a disappointment, producing only $3 million in sales for the three months ended Sept. 30. The generic-drug companies receive milestone payments based on certain levels of sales, as well as royalties based on sales.

Coury said Mylan hadn't expected big returns from Emsam, but added that he was "very disappointed" with the drug's sales. "We still firmly believe in this product," said Coury.