Analyst Conference Summary

conference date: October 31, 2013 @ 7:00 AM Pacific Time
for quarter ending: September 30, 2013 (third quarter 2013)

Forward-looking statements

Overview: Lack of growth in last year countered by promises of growth in 2014.

Basic data (GAAP):

Revenue of was $1.767 billion, up 4% sequentially from $1.702 billion, but down 2% from $1.802 billion year-earlier.

Net income was $158.9 million, down 11% sequentially from $177.7 million, and down 25% from $211.3 million in the year-earlier quarter.

Earnings Per Share (EPS) were $0.40, down 13% sequentially from $0.46 and down 22% from $0.51 year-earlier.

Guidance:

Narrowing full 2013 guidance to non-GAAP EPS of $2.80 to $2.90. This included financing for Agila acquisition. $350 million full year capital expenditures.

Confident in 2014 targets given on analyst day. (12% y/y revenue growth, 19% EPS growth)

Conference Highlights:

Strong year over year performance given 2012 was a launch year for many new products. 2013 has seen delays in regulatory approvals from the FDA. Revenue in the U.S. was particularly weak y/y. Specialty segment, including Epipen and Perforomist, showed strong over 18% y/y growth.

Respiratory program is on track. Expects to be first with generic Advair in U.S. market. Is in discussion with FDA.

Agila acquisition still expected to close in Q4, despite warning letter to Agila from FDA. Agila will be held to Mylan's one global quality standard, post closing. Interest expense will increase by about $10 million per quarter due to debt taken to purchase Agila.

Generic Lidoderm will not be launched until Q1 2013.

Indian business did particularly well.

New product launches were $108 million in the quarter, weak compared to $299 million year-earlier, with most of the decline in North America.

$707 million of revenue was in North America. EMEA up 6% (constant currency basis) to $361.7 million. APAC were $330.6 million, down 2.5%, but up 13% on a constant-currency basis, led by India and Japan.

Performance products grew over 20% y/y.

Non-GAAP numbers: EPS $0.82, up 21% sequentially from $0.68 but down 1% y/y from $0.83 year-earlier. Net earnings were $324 million, up 24% sequentially from $261.6 million. EBITDA was $401.4 million, down from $534.2 million year-earlier. Adjusted EBITDA was $534.2 million.

Non-GAAP gross margin 50%.

Cash and equivalents balance was $364.9 million. Debt was $5.8 billion. Cash from operating activities was $354 million. Inventories ended at $1.65 billion.

Cost of sales was $958.9 million, leaving gross profit of $808.5 million. Operating expenses of $468.7 million consisted of: research and development $114.0 million; selling general and administrative $364.9 million; litigation settlement benefit $10.2 million. Leaving income from operations of $339.8 million. Interest expense was $74.0 million, and other expense was $70.6 million. Income tax provision was $35.8 million.

R&D expense was up due to investment in respiratory and other franchises. Q4 R&D will be at the high end for the year.

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. Generic Herceptin is ready for launch in India.

Share count increase 8.5 million shares in the quarter due to dilution on outstanding warrants on convertible notes.

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

A $500 million share repurchase plan was announced.

Q&A:

More on FDA Agila warning letter? There is a bucket of issues and problems. We have been working closely with Agila, which does not distract from the strategic opportunity. We understand the issues raised and Agila's response. These are very manageable issues.

Delays in FDA approvals? The FDA is going through a transition period, with the generic office getting equal standing with new drugs. They are trying to bring down the time required for generic approvals. These are just timing issues, not risks to approvals.

Generic Advir? FDA is actively engaged, they know the complexity of the product and science. We are confident of filing in 2015 and approval in 2016.

Lidoderm? There is still a possibility of approval this year, but we decided to plan for 2014. There are no approval issues, it is just a timing issue.

Agila FDA warning letter, is it necessary to close the deal? We think an import ban is very unlikely. We are marching to the closure of the deal in Q4.

Sales to Walgreen? Consolidation in this industry is our friend. They need a high-volume reliable supply chain, as we have seen with Walgreen. We will absolutely provide our customers with price in return for volume. This creates stability for both parties. You won't see any material impact on our gross margin from this.

Resistance to substitution? We will have an AB rated, substituted Copaxone. A clinical trial requirement has never been a discussion with the FDA. We expect to be in the market on patent expiration.

Upcoming launches? The driver is the sheer volume of launches. 2012 was a high year. It is not about any one product. New launchers will continue to drive global growth.

Epipen competition? We had a phenomenal quarter. Education effort is working, we believe we will get a disproportionate share in this market for years to come.

Agila's other plants? All five facilities in India had FDA inspections in the past few months. It is a single issue facility.

The convention in France driving higher generic utilization, as we predicted, had a jump start, and is now leveling off. But we see the growth continuing.

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