Analyst Conference Summary

generic pharmaceuticals

conference date: March 2, 2015 @ 1:30 PM Pacific Time
for quarter ending: December 30, 2014 (fourth quarter, Q4 2014)

Forward-looking statements

Overview: Strong 2015 guidance.

Basic data (GAAP):

Revenue of was $2.08 billion, flat sequentially from $2.08 billion, and up 15% from $1.81 billion in the year-earlier quarter.

Net income was $189.2 million, down 62% sequentially from $499.1 million but up 5% from $180.2 million year-earlier.

Earnings Per Share (EPS) were $0.51, down 60% sequentially from $1.26 and up 6% from $0.48 year-earlier.

Guidance:

Adjusted EPS for 2015 now $4.00 to $4.30 (up 17% y/y at midpoint). Revenue $9.6 to $10.1 billion (up 28% y/y at midpoint). EBITDA $2.9 to $3.3 billion. Non-GAAP net income $1.975 to $2.15 billion. Operating cash flow $1.6 to $1.8 billion. Tax rate 19% to 21%. Capital expenditures $400 to $500 million. Includes single-digit price erosion on existing products.

Conference Highlights:

Mylan's success is particularly notable given the delays in the FDA approvals in generic and biosimilar therapies. But Mylan received more FDA approvals in 2014 than any other company.

Closed the acquisition of Abbott's non-U.S. developed markets specialty and branded generics business on February 27. Believes integration will be smooth. Was purchased without adding to debt.

In process of acquiring Famy Care's women's health care business. Paying a mid-teen multiple for a high-growth business that will be immediately accretive on finalization.

Continues to work to extend access to Epipen, which in 2014 became Mylan's first $1 billion product.

Still believes Copaxone equivalent is going forward despite delays at FDA. Advair equivalent should be submitted to the FDA for approval by the end of the year.

Detailed other growth drivers for 2015 and 2016, including Gilead deal.

Non-GAAP numbers: EPS $1.05, down 9% sequentially from $1.16, but up 35% from $0.78 year-earlier. Net income $419.8 million, down 9% sequentially from $462.8 million, and up 36% from $308.1 million year-earlier.

EBITDA was $548.8 million, down sequentially from $652.7 million, and up from $308.1 million year-earlier. Adjusted EBITDA was $682.1 million.

Cash and equivalents balance was $225.5 million, up sequentially from $199.6 million. Long Term Debt was $5.7 billion, flat sequentially from $5.7 billion. Cash from operating activities not given for the quarter, but $1.2 billion for full year. Capital expenditure for full year were $325 million. All major debt is now at under 4% interest.

Generics segment revenue was $1.8 billion, up 12.5% y/y from $1.6 billion.

Specialty Third Party Net Sales were $243 million, up 38% y/y from $176 million.

Cost of sales was $1.11 billion, leaving gross profit of $969 million. Operating expenses of $576.5 million consisted of: research and development $150.2 million; selling general and administrative $425.6 million; litigation settlement benefit $1 million. Leaving income from operations of $392.5 million. Interest expense was $82 million, and other expense was $38 million. Income tax provision was $82 million. Earnings to non-controlling interest $1.3 million.

Expects R&D expense to continue to increase throughout the year to support biosimilar applications.

Mylan has about 300 ANDAs pending with the FDA. Believes approvals are simply a matter of time.

The adjusted diluted EPS target for 2018 remains a minimum of $6 per share.

Q&A:

EpiPen 2015? We have grown the market in unconventional ways. We educated and enlarged access. Epipen has brand awareness, comfort and ease of use, but we will continue to innovate. But we have no plans for a new product or device. Our guidance includes how we see the multi-player environment and pricing.

European plan? Abbott gives us room to leverage our other products in Europe and other areas. It is not about a specific product, but the breadth of the franchise. We will keep you updated.

Another material M&A transaction is likely in 2015. We can be smart and patient, while we look at everything.

Respiratory strategy? COPD and infrastructure, more complex, difficult to manufacture products that we have acquired have barriers to entry. Our scale allows us to maximize products, including new ones when they come to market. We are now manufacturing about 80% of what we sell around the world.

Hepatitis C partnership opportunity compared to HIV? We continue to have a very good relationship with Gilead, as shown by our receiving exclusivity in India. We work with Gilead to bring these products to millions of new patients.

SG&A expense going forward? For 2015 we are focused on business continuity and Abbott acquisition. We will continue to invest in products like Epipen

Copaxone? We have submitted all answers to all questions by the FDA. That gives us confidence in an approval this year.

In 2014 we saw volume overcome price erosion for Epipen in Europe. We are factoring in similar price erosion in 2015.

Lidoderm should get approved soon, but like must therapies a delay would not in itself make us miss our guidance, we have such a broad portfolio.

Details of European nations? France is our major company. The market is highly competitive, we are regaining market share. Abbott's strength will help in Germany, the U. K. and eastern Europe.

Asia? Grew double digits in 2014, led by India. We are doing well in Japan and Australia.

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