Investopedia: Medicis - Generic Reprieve and Shareholder Relief

Medicis (NYSE:MRX) shareholders got a big bonus with the company's latest earnings release. With generic competition for the company's key drug, Solodyn, looming, the company announced a settlement with Teva (Nasdaq:TEVA) that will postpone its entry for several years and further shield the company's key franchise. While generic competition will still come in November of this year, the company has used line extensions and settlements to shield upwards of 80% of its revenue for many years. No wonder, then, that the stock was up strongly in Monday's trading. 

A Quarter That's Almost an Afterthought
Lucky for Medicis that they had good news to report on the non-operating front, as the company's fourth quarter earnings were not likely to excite investors all that much. Revenue rose 2% but slightly missed the average expectation. Core acne product revenue dropped 10%, though due in part to planned product discontinuations. Non-acne revenue jumped 34%, largely on the backs of Dysport (botulinum toxin) and Restylane (a dermal filler).

While revenue performance was so-so, the profitability side of things was even more so. Gross margin did improve almost a full point in the quarter, but very sizable spending increases in SG&A and R&D led to a decline in operating income (even when excluding an impairment charge). Still, a lot of this was already in the models of Medicis' analysts and the company met its EPS estimate for the period.



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