Analyst Conference Summary

generic pharmaceuticals

conference date: August 6, 2015 @ 7:00 AM Pacific Time
for quarter ending: June 30, 2015 (second quarter, Q2 2015)

Forward-looking statements

Overview: Bit of an off quarter.

Basic data (GAAP):

Revenue of was $1.87 billion, down 10% sequentially from $2.08 billion, and up 9% from $1.72 billion in the year-earlier quarter.

Net income was $56.6 million, down 70% sequentially from $189.2 million and down 51% from $115.9 million year-earlier.

Earnings Per Share (EPS) were $0.13, down 75% sequentially from $0.51 and down 55% from $0.29 year-earlier.

Guidance:

Unchanged for full year 2015. Non-GAAP EPS $4.00 to $4.30. See Q4 2014 Mylan summary for details.

Conference Highlights:

"Mylan remains committed to the compelling, legally-binding commitment to acquire Perrigo to generate significant value for shareholders and all other stakeholders." In other words, management does not like the Teva offer. "With Perrigo, we have the opportunity to create a one-of-a-kind global healthcare company that is positioned to capitalize on key industry trends, including the growing number of Rx to OTC switches underway, in order to redefine how healthcare is delivered."

A disproportionate part of the presentation was an extended argument for the acquisition of Perrigo.

Non-GAAP numbers: EPS $0.70, down 33% sequentially from $1.05, but up 6% from $0.66 year-earlier. Net income $309.1 million, down 26% sequentially from $419.8 million, and up 19% from $260.4 million year-earlier.

EBITDA was $340.5 million, down sequentially from $548.8 million, and down from $392.4 million year-earlier. Adjusted EBITDA was $504.6 million.

Cash and equivalents balance was $277.2 million, up sequentially from $225.5 million. Long Term Debt was $5.75 billion, up sequentially from $5.7 billion. Cash from operating activities was $267 million. Capital expenditures $48 million.

Generics segment revenue was $1.64 billion, up 9% y/y from $1.51 billion.

Specialty Third Party Net Sales were $211 million, up 8% y/y from $195 million.

Cost of sales was $1.04 billion, leaving gross profit of $830.1 million. Operating expenses of $670.8 million consisted of: research and development $169.9 million; selling general and administrative $483.2 million. Leaving income from operations of $159.3 million. Interest expense was $79.5 million, and other expense was $18.5 million. Income tax provision was $4.7 million.

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:

If Perrigo is acquired, short term vs. long-term value to shareholders, particularly given that Perrigo pays a dividend? We believe the combination offers both short and long-term value. "We are not standing still," so will look for transactions beyond Perrigo.

FTC view of combination? In payer consolidations like Express Scripts they took 8 to 9 months to get through the FTC. They consider many variables about what a consolidation would mean for the industry.

European generic business, which looks like it was down 8%? No, the Mylan legacy business in Europe grew mid-single digits y/y on a constant currency basis.

And the Abbott business? Let's now call it the Mylan EPD business, which is global.

Can you quantify the accretion in the Perrigo deal? Transactions for Mylan are not just about synergies or tax rates. They are about being strategic and complementary. "We tried to stress in the presentation that it's at least $800 million."

Endless questions about the merger resulted in endless repitition of the argument from the presentation.

EPS guidance details, implications for 2H? I have indicated that Q3 should be the strongest for the year, but Q4 should be stronger than Q2. We are anticipating new product approvals for the second half. The EDP business only had one month in Q1, it should be fully consolidated by the second half. We are excited by Q1 performance and April performance.

Were EpiPen sales weak in Q1? Y/Y may look week because of unique buy-ins in Q1 2014. The market is continuing to expand. "We are looking forward to ramping up for a big allergy season." EpiPen sales are right on track.

Foreign markets? France and Italy are growing stronger. India is doing well, especially the HIV segment. On the whole Rest of World grew 12% y/y on a constant currency basis.

Full transcript at Seeking Alpha

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