Analyst Conference Summary

conference date: August 1, 2013 @ 1:00 PM Pacific Time
for quarter ending: June 30, 2013 (second quarter 2013)

Forward-looking statements

Note: the presentation on this date was also Mylan's analyst day presentation. This summary is focused on Q2 results.

Overview: Revenue growth was anemic, but profit growth was strong.

Basic data (GAAP):

Revenue of $1.702 billion was up 1% from $1.688 billion in Q2 2012.

Net income was $177.7 million, up 28% from $138.6 million year-earlier.

Earnings Per Share (EPS) were $0.46, up 39% from $0.33 year-earlier.

Guidance:

Total 2013 revenue is expected to be at least $7.00 billion. EBITDA at least $1.9 billion; Non-GAAP Net Income $1.06 billion; Non-GAAP EPS at least $2.75, up to $2.95; operating cash flow at least $1.0 billion. Capital expenditures will be between $300 and $400 million. Tax rate 26% to 27%. Revenue expected to be at the low end of the earlier guidance range by the weakening of the Rupee and Yen vs. the U.S. Dollar. R&D expense nearer to 7% than to 6%.

For Q3 2013, non-GAAP EPS is expected between $0.77 and $0.79, and Q4 is expected to be slightly higher.

Projecting full-year 2014 revenue up 12% over 2013, with non-GAAP EPS up 19%.

Conference Highlights:

Growth was particularly robust in Europe and Asia. The Specialty segment saw double-digit growth to $236.9 million, and may hit 20% for the year. But currency translation had a negative overall revenue impact of 1%. So without currency fluctuations, revenue would have been up 2% y/y.

Escitalopram launch in 2012 led to difficult comparisons this quarter. The Epipen auto-injector was the most significant contributor in the Specialty segment.

Non-GAAP numbers: EPS $0.68, up 13% y/y from $0.60. Gross profit was $834.2 and gross margin was 49.0%. Operating earnings were $413.9 million. Net earnings were $261.6 million, up 3% from $254.0 million year-earlier. EBITDA was $423.1 million, compared to $392.1 million year-earlier.

Mylan has built a state-of-the art facility to manufacture generic anti-retroviral drugs, and already has a 40% market share in the developing nations. Expects to launch generic Geretide for repertory indications in Europe in 2015. The respiratory COMBO nebulized OCS/LABA for treating COPD launch expected in the second half of 2016. A number of other new or soon to be introduced generic drugs and biologics are expected to drive growth through 2018.

Cash and equivalents balance was $277 million. Debt was $5.8 billion. Cash from operating activities was $283 million. Capital expenditures were $126 million. Inventories ended at $1.6 billion.

Cost of sales was $959.3 million, leaving gross profit of $742.4 million. Operating expenses of $433.8 million consisted of: research and development $111.4 million; selling general and administrative $315.4 million; litigation settlement $7.0 million. Leaving income from operations of $308.6 million. Interest expense was $81.8 million, and other expense was $7.2 million. Income tax provision was $41 million.

Biologic biosimilar development is in varying stages by product, includes substitutes for Herceptin, Neulasta, Humira, Avastin, and Enbrel. Only Trastuzumab (Herceptin) has gotten past the preclinical stage at present. One insulin analog, Glargine (Lantus) has completed Phase I. However, there is no clear pathway for biosimilars in the U.S. yet.

Hopes to become a solution provider in HIV/AIDS through partnerwhip with Zyomyx to do low-cost rapid patient testing.

Agila acquisition should close in Q4 (which will add to debt), and injectables as a whole are expected to grow at a CAGR of over 30% per year.

Expects single-digit annual price reductions to be offset by introducing some 600 new products per year.

Believes can excede $6 per share in EPS in 2018.

Believes Mylan is the best-positioned generic provider to the increasingly globalized international healthcare market.

Q&A:

Why consider larger acquisitions given your strong internal program? If we did large, could be synergistic, bolt ons, or products where we want to achieve scale. We are only 12% of the U.S. generic market so far. Looking at where the healthcare system will be five or more years into the future.

Use of equity in acquisitions? Deals must be accretive. We don't need to make acquisitions; only if attractive.

Joint verture with Pfizer in Japan is a great sucess. Brand company respect generics now. It is all about scale now. Given our operation efficiencies, we are in a position to accelerate our acquisition of market share. Cost of goods sold is crucial to increasing market share.

Copaxone and Lidoderm in 2014 outlook? We don't want to snub the FDA, but the appelate court decision motivates them to (hopefully) give a final approval of Copaxone; we are very, very confident based on our discussions with the FDA. Of course there are many variables and components to the 2014 guidance. We are confident; we are doubling our patch technology to accomodate Lidoderm.

Any Agila manufacturing issues? We deal with manufacturing issues every day. We bought Agila for what we are going to do with it when the acquisition is final. We are confident they will get through this. Given 7 billion people access to quality, low cost drugs is how we will create value.

Mylan is working on building devices to deliver insulin as well as the capacity to manufacture it.

EMEA success, reasons for? Behavior. Price cuts only last so long, because they don't change behavior. Cost containment can be more sustainable with more utilization, starting with Italy, then Spain. Moving into central eastern Europe will also help.

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