April 19, 2002
Pharmaceuticals, Specialty
United States
Medicis Pharmaceutical Corp. (MRX)[30]
Key Statistics
Quarterly Earnings Per Share (fiscal year ends June)
52-Wk Range
Price Target
Return Pot’l.
Mkt. Cap(MM)
Sh. Out.(MM)
FC Cons.:
Inst. Hldgs.
Avg. Volume(K)
Medicis Pharmaceutical Corp. develops and markets products for treatment of dermatologic conditions. Key products include Dynacin(for acne), Loprox for skin infections and Lustra (for skin discolor).
Source: UBS Warburg LLC and First Call consensus estimates Medicis: Earnings Beat Estimates.Again
3Q02 EPS beat estimates by $0.01 – Yesterday, Medicis announced EPS of
$0.50 (versus $0.42 in 3Q01); this was $0.01 ahead of the UBS Warburg
estimate and Street consensus. This is the 35th consecutive quarter Medicis has
met or beat Street estimates.
Strong top-line growth drives upside in quarter –Sales grew 34% to $56.6
million, nearly $800,000 above our forecasts. Key brands’ prescription trends
showed strong growth in the quarter, up 75% over 3Q01 (12% excluding
Orapred). Margins improved significantly, by 104 basis points, as a result of a
favorable product mix (as seen with the shift to the higher margin Alustra and
100 mg dose of Dynacin). The tax rate came down 100 basis points sequentially,
beating our expectations by 100 basis points. Total spending levels were almost
$700,000 higher than anticipated, driven entirely by higher than expected
SG&A. R&D spending came in light; almost 40 basis points as a percent of
C.J. Sylvester
Christina Ghorban, Associate Analyst
UBS PaineWebber Inc. is an affiliate of UBS Warburg LLC.
The information and opinions in this report are provided to UBS PaineWebber Inc. by UBS Warburg LLC.
Medicis Pharmaceutical Corp. April 19, 2002
Key products should continue to support top-line growth in 2002 – We expect five key products to contribute
significantly to top-line growth in 2002: the Plexion line, the Lustra line, Loprox, Omnicef and Orapred. Medicis’
acquisition of Ascent Pediatrics, completed in November 2001, was immediately accretive to revenue growth. The
acquisition has not only provided a foothold in the pediatric market, but also additional marketing opportunity for
existing dermatology products in the pediatric realm. Medicis has already seen encouraging early results marketing both
Loprox and Ovide in the pediatric market.
We are currently forecasting 26% revenue growth in fiscal 2002 to Investment Summary - Medicis is trading at a 20% relative premium to the S&P based on estimated 2003 earnings and
a Mid-Cap Pharma Universe group multiple (a 17% premium to the UBS Large Cap Universe). Medicis continues to
provide surprises on the acquisition and product licensing front. The Omnicef and Ascent deals are examples of that. We
are beginning to see a solid strategic move to begin to broaden the company’s therapeutic focus outside of the
dermatology market. We believe the company’s strong cash balance will enable it to continue to be acquisitive. If Medicis
chooses to make acquisitions outside of the dermatology market, we believe the company will remain with the discipline it
has successfully used to deal with product acquisitions in the dermatology market. We forecast Medicis’ earnings to grow
19% in fiscal 2002, which does not include acquisition possibilities, strategic collaborations, or new introductions from
the company’s internal R&D pipeline. Medicis has established itself as one of the most consistent earnings growers in
the industry.
We continue to rate MRX Buy with a 12-month price target of $65, based on 28x our 2003 calendar EPS estimate of$2.31.
Additional Information
Table 1: P&L GROWTH ANALYSIS (in thousands):
Yr/Yr Change
Net Sales
Oper./Pretax Income
Net Income
Operating EPS
Yr/Yr Change
Target is for 5% of sales; recent variability may be due to timing ofpayments to contract research and development organizations 100 basis points lower than our expectations Table 3: Key Products:
TRx’s (GrowthQ/Q)
Dynacin (acne)
Gains in higher priced 100mg dose should offset significant revenueerosion 2 UBS Warburg LLC
Medicis Pharmaceutical Corp. April 19, 2002
Loprox (antifungal)
Triaz (acne)
Up 30 basis points in total market share year-to-date Lustra (skin discoloration)
Plexion (rosacea)
Ovide (lice treatment)
Orapred (steroid)
Key Brands Total
Statement of Risk
Risks generally applicable to the pharmaceutical sector include: development risk (uncertainty regarding the timing,efficacy and market potential of new products), commercial risk (threats from new/existing competition, pricingpressures), regulatory risk (timing/status of approvals, changes in labeling or new warnings on existing products), patentrisk (products losing patent protection may face significant market share/price erosion, potential litigation) and foreignexchange risk (due to the large base of non-U.S. sales for these companies).
3 UBS Warburg LLC
Medicis Pharmaceutical Corp. April 19, 2002
30. UBS Warburg is acting as a financial advisor to this company.
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