MYL Mylan NV

By Mark Maremont 

Mylan NV on Monday clarified the profit it said it made from its lifesaving EpiPen drug, days after House members badgered the company's chief executive to justify the device's steep price increases.

Testifying before a congressional committee last week, CEO Heather Bresch said Mylan's profit was $100 for a two-pack of the injectors, despite a $608 list price. Her claim was met with skepticism.

In response to questions from The Wall Street Journal, Mylan said Monday that the profit figure presented by Ms. Bresch included taxes, which the company didn't clearly convey to Congress. The company substantially reduced its calculation of EpiPen profits by applying the statutory U.S. corporate tax rate of 37.5% -- five times Mylan's overall tax rate last year.

Without the tax-related reduction, Mylan's profits on the EpiPen two-pack were about 60% higher than the figure given to Congress, or $166, it said in a new regulatory filing to the Securities and Exchange Commission Monday. The company said it expects to sell about 4 million EpiPen two-packs in the U.S. this year.

Mylan said it now has provided the House Government Oversight Committee slightly changed and more detailed figures on its EpiPen profits, clarifying that the profit estimate was after taxes.

Mylan's explanation left some analysts scratching their heads.

The 37.5% tax rate Mylan applied to EpiPen "has nothing to do with reality," said Ryan Baum, an analyst with SSR Health LLC, a health-care investment-research firm in Stamford, Conn.

Mylan had a 7.4% overall tax rate last year, he said, and a negative effective tax rate in the U.S. due to a negative provision for deferred taxes.

"That implies this notional [$100] profit figure also has nothing to do with reality," Mr. Baum said.

In a statement, the company called the inclusion of a statutory tax rate for the product -- in this case the U.S. corporate rate -- "standard" in single-product profit analysis. It also said it didn't include corporate expenses, which would have further reduced EpiPen's profitability, and called its calculations "appropriate and conservative."

Ronny Gal, an analyst at Sanford C. Bernstein, said Mylan "in a way" is correct to apply a statutory U.S. tax rate. "If EpiPen was its own company, it would be taxed at 37.5%. It's just that it's being taxed at a much lower rate" because of corporate tax-reduction strategies.

In its filing Monday, Mylan said its after-tax calculation wasn't done according to generally-accepted accounting principles and the estimated tax impact on EpiPen profits "was not directly derived from Mylan's reported results."

Rep. Elijah Cummings (D., Md.), the ranking Democrat on the House Oversight committee, said in a statement Monday: "We didn't believe Mylan's numbers last week during their CEO's testimony, and we don't believe them this week either." He said the committee is awaiting more documents to show what the actual profits have been.

Mylan, which moved to the Netherlands last year for tax purposes but is managed from Canonsburg, Pa., for weeks has been under fire over repeated price increases on EpiPen. The penlike injector delivers an emergency shot of epinephrine to counter severe allergic reactions.

Mylan acquired rights to EpiPen in 2007, and has raised list prices by 550% since then to the recent $608 level, according to Truven Health Analytics.

During the hearing, Ms. Bresch said Mylan has responded to criticism, in part, by introducing an identical generic version, priced at $300 for a two-pack.

Ms. Bresch came to the hearing with a poster that showed how various costs along the way resulted in a $100 profit per two-pack. A major factor, the poster said, were "direct EpiPen related" costs that Mylan pegged at $105 per two-pack.

The poster didn't say anything about tax costs, which it turns out made up the majority of the $105. Mylan's chief executive similarly didn't mention the tax calculation in her testimony, even when Rep. Jason Chaffetz (R., Utah), the committee chairman, zeroed in on the $105 direct-cost figure and asked "what is in that number?"

Ms. Bresch cited sales, marketing and disease-awareness costs.

The $100 profit figure, or $50 per pen, was greeted with incredulity by committee members. Rep. Stephen Lynch (D., Mass.) said "the numbers don't work, based on the documents you've given us."

Rep. Buddy Carter (R., Ga.), a pharmacist, called Ms. Bresch's explanation of EpiPen's pricing a "shell game." He reminded Ms. Bresch she was under oath and asked: "Is that the truth, $50 per pen?"

"Yes," Ms. Bresch replied. "Our profit is approximately $50 per pen."

Without the tax reduction, the company's profit is $83 per pen, the filing shows.

Write to Mark Maremont at mark.maremont@wsj.com

(END) Dow Jones Newswires

September 26, 2016 19:55 ET (23:55 GMT)

Mylan NV (NASDAQ:MYL)
Historical Stock Chart
From Mar 2024 to Apr 2024

Mylan NV (NASDAQ:MYL)
Historical Stock Chart
From Apr 2023 to Apr 2024