Mylan Reports Strong Second Quarter 2016 Results Including Total Revenues Up 8%

HERTFORDSHIRE, England and PITTSBURGH, Aug. 9, 2016 /PRNewswire/ -- Mylan N.V. (NASDAQ, TASE: MYL) today announced its financial results for the quarter and six months ended June 30, 2016.

Second Quarter 2016 Financial Highlights

• Total revenues of $2.56 billion, up 8% compared to the prior year period
  • Generics segment third party net sales of $2.14 billion, up 4% compared to the prior year period
  • Specialty segment third party net sales of $402.5 million, up 33% compared to the prior year period
  • Current quarter total revenues were not significantly impacted by the effect of foreign currency translation
• U.S. GAAP diluted earnings per ordinary share ("EPS") of $0.33, up 3% compared to the prior year period primarily due to higher sales and gross margins, partially offset by increased non-operating expenses driven mainly by certain Meda transaction related acquisition and financing costs
• Adjusted diluted earnings per ordinary share ("adjusted EPS") of $1.16, up 28% compared to the prior year period

Six Months Ended June 30, 2016 Financial Highlights

• Total revenues of $4.75 billion, up 12% compared to the prior year period
  • Generics segment third party net sales of $4.07 billion, up 10% compared to the prior year period
  • Specialty segment third party net sales of $650.4 million, up 27% compared to the prior year period
  • The unfavorable impact of foreign currency translation on current year total revenues was approximately $33 million, or 1%
• U.S. GAAP diluted EPS of $0.36, down 22% compared to the prior year period primarily due to higher operating expenses, driven mainly by certain Meda transaction related acquisition and financing costs
• Adjusted EPS of $1.92, up 19% compared to the prior year period

Mylan CEO Heather Bresch commented, "Our strong second quarter results delivered year-over-year total revenue growth of 8% and adjusted EPS growth of 28%. This solid performance, which included continued strength in our generics business and double digit revenue growth in our Specialty business, yet again underscores the strategic value of Mylan's diversification and scale as well as our differentiation within our industry. Given our performance to date this year and our current trajectory, we are committed to our 2016 adjusted EPS guidance range of $4.85 to $5.15.

"We also are very excited about the completion of our Meda transaction, as well as the Renaissance topicals transaction that we completed in June, which continue to build on our unique global platform to create even greater scale, breadth, diversity and access across products, geographies and sales channels. These transactions also further strengthen our already very strong cash flows. We see significant opportunities to further differentiate Mylan for our customers, patients and other stakeholders as we bring these assets together."

Total Revenues

*Beginning in the first quarter of 2016, the Company reclassified sales from its Brazilian operation from Rest of World to North America. The amount reclassified for the three and six months ended June 30, 2015 was approximately $11.1 million and $21.3 million, respectively.

Total Revenue

Genericssegment third party net sales were $2.14 billion for the quarter, an increase of 4% when compared to the prior year period. Generics third party net sales were not significantly impacted by the effect of foreign currency translation in the second quarter of 2016.

• Third party net sales from North America were $1.01 billion for the quarter, an increase of 6% when compared to the prior year period. This increase was principally due to net sales from significant new products launched since July 1, 2015 ("new products") as a result of leveraging our strong global platform, partially offset by lower pricing and volumes on existing products. The unfavorable impact of foreign currency translation on current period third party net sales was approximately $4.8 million, or 1% within North America.
• Third party net sales from Europe were $604.2 million for the quarter, an increase of 6% when compared to the prior year period. This increase was primarily the result of net sales from new products combined with higher volumes on existing products, while pricing was essentially flat in the current period as a result of our diversified product portfolio. The favorable impact of foreign currency translation on current period third party net sales was approximately $5.6 million, or 1% within Europe.
• Third party net sales from Rest of World were $523.2 million for the quarter, a decrease of 2% when compared to the prior year period. New product introductions across the region and higher sales in Japan and emerging markets positively impacted sales in the quarter. Lower pricing and sales volumes in the region, including the anti-retroviral ("ARV") franchise, unfavorably impacted third party net sales. However, sales within our ARV franchise progressively improved throughout the quarter as HIV tender volumes increased, resulting in sales growth on a sequential basis of more than 30% compared to the first quarter of 2016. Third party net sales from Rest of World were not significantly impacted by the effect of foreign currency translation during the second quarter of 2016.

Specialtysegment third party net sales were $402.5 million for the quarter, an increase of 33% when compared to the prior year period. This increase was primarily the result of higher unit volumes and the realization of the benefits of customer contract negotiations over the last several quarters related to the EpiPen® Auto-Injector, and higher sales of the Perforomist® Inhalation Solution and ULTIVA®.

Total Gross Profit

Gross profit was $1.17 billion and $1.01 billion for the second quarter of 2016 and 2015, respectively. Gross margins were 46% and 43% in the second quarter of 2016 and 2015, respectively. Adjusted gross profit was $1.45 billion and adjusted gross margins were 56% for the quarter compared to adjusted gross profit of $1.28 billion and adjusted gross margins of 54% in the prior year period. Gross margins and adjusted gross margins were both positively impacted primarily by new product introductions and favorable Specialty sales in the second quarter of 2016.

Total Profitability

Earnings from operations were $410.9 million for the quarter, an increase of 49% from the comparable prior year period. This increase was primarily due to higher revenues and higher gross profit.

R&D expense increased from the comparable prior year period due to the continued development of our respiratory, insulin and biologics programs and expenses incurred during the current quarter related to the Company's collaboration with Momenta Pharmaceuticals, Inc. ("Momenta"). SG&A expense increased from the comparable prior year period as we invested in our continued growth. These increases were partially offset by decreases in consulting and professional services expense and legal expense due to higher acquisition related costs incurred in the prior year period.

U.S. GAAP net earnings attributable to Mylan N.V. ordinary shareholders ("net earnings") increased by $0.6 million to $168.4 million for the quarter ended June 30, 2016, as compared to $167.8 million for the prior year period. Second quarter 2016 net earnings were negatively impacted by increased non-operating expenses including unrealized mark-to-market losses on the Company's SEK denominated foreign currency contracts and the write off of financing fees related to the termination of the Bridge Credit Agreement originally entered into on February 10, 2016 (the "2016 Bridge Credit Agreement") in connection with Mylan's public offer to the shareholders of Meda to acquire all of the outstanding shares of Meda (the "Offer"). U.S. GAAP diluted EPS increased from $0.32 to $0.33 as a result of higher earnings from operations and a lower average share count, partially offset by higher non-operating expenses. Adjusted net earnings increased by $118.1 million to $592.4 million compared to $474.3 million for the prior year period. Adjusted EPS increased 28% to $1.16 compared to $0.91 in the prior year period.

EBITDA, which is defined as net earnings (excluding the non-controlling interest and losses from equity method investees) plus income taxes, interest expense, depreciation and amortization, was $621.7 million for the quarter ended June 30, 2016, and $558.3 million for the comparable prior year quarter. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $821.4 million for the quarter ended June 30, 2016 and $693.5 million for the comparable prior year quarter.

Total Revenue

Genericssegment third party net sales were $4.07 billion for the six months ended June 30, 2016, an increase of 10% when compared to the prior year period. The unfavorable impact of foreign currency translation on Generics third party net sales was approximately $32.7 million, or 1% for the six months ended June 30, 2016.

• Third party net sales from North America were $1.93 billion for the six months ended June 30, 2016, an increase of 7% when compared to the prior year period. This increase was principally due to net sales from significant new product introductions as a result of our strong global platform, and to a lesser extent, the two additional months of net sales from our established products ("incremental established products sales") when compared to the six months ended June 30, 2015. This increase was partially offset by lower pricing and volumes on existing products. The unfavorable impact of foreign currency translation on the current period third party net sales was approximately $12.0 million or 1% within North America.
• Third party net sales from Europe were $1.19 billion for the six months ended June 30, 2016, an increase of 22% when compared to the prior year period. This increase was primarily the result of the incremental established products sales, and to a lesser extent, net sales from new products. In addition, there were higher volumes on existing products, while pricing was essentially flat in the first half of 2016 as a result of our diversified product portfolio. Third party net sales from Europe were not significantly impacted by the effect of foreign currency translation during the six months ended June 30, 2016.
• Third party net sales from Rest of World were $944.0 million for the six months ended June 30, 2016, an increase of 3% when compared to the prior year period. This increase was primarily driven by the incremental established products sales, and to a lesser extent, new product introductions, as well as higher sales in Japan and emerging markets. These increases were partially offset by lower pricing and sales volumes in the region, including the ARV franchise. However, sales within our ARV franchise progressively grew throughout the first half of the year, and on a sequential basis second quarter sales increased over 30% from the first quarter of 2016. The unfavorable impact of foreign currency translation on current year third party net sales was approximately $18.4 million, or 2% within Rest of World.

Specialtysegment third party net sales were $650.4 million for the six months ended June 30, 2016, an increase of 27% when compared to the prior year period. This increase was primarily the result of higher unit volumes and the realization of the benefits of customer contract negotiations over the last several quarters related to the EpiPen® Auto-Injector, and higher sales of the Perforomist® Inhalation Solution and ULTIVA®.

Total Gross Profit

Gross profit was $2.08 billion and $1.84 billion for the six months ended June 30, 2016 and 2015, respectively. Gross margins were 44% and 43% for the six months ended June 30, 2016 and 2015, respectively. Gross margins were positively impacted primarily by new product introductions and favorable Specialty sales, partially offset by higher amortization expense due to acquisitions completed in 2015. Adjusted gross profit was $2.63 billion and adjusted gross margins were 55% for the six months ended June 30, 2016 compared to adjusted gross profit of $2.27 billion and adjusted gross margins of 54% in the prior year period. Adjusted gross margins were positively impacted primarily by new product introductions and favorable Specialty sales in the first half of 2016.

Total Profitability

Earnings from operations were $516.5 million for the six months ended June 30, 2016, an increase of 18% from the comparable prior year period. This increase was primarily due to higher revenue, including third party net sales growth of 10% and 27% in the Generics and Specialty segments from the comparable prior year period, respectively, and higher gross profit.

R&D expense for the six months ended June 30, 2016 increased from the comparable prior year period due to an upfront payment to Momenta for $45.0 million and additional expenses incurred in the current period related to the Company's collaboration agreement. In addition, R&D expense increased due to the two additional months of expense related to our established products in the current year and our continued investment in the development of our respiratory, insulin and biologics programs. SG&A expense increased from the comparable prior year period principally due to the two additional months of expense related to our established products in the current year. These increases were partially offset by decreases in consulting and professional services expense and legal expense due to higher acquisition related costs incurred in the prior year period.

U.S. GAAP net earnings decreased by $42.1 million to $182.3 million for the six months ended June 30, 2016, compared to $224.4 million for the prior year period. U.S. GAAP diluted EPS decreased from $0.46 to $0.36 as a result of higher operating expenses, including higher amortization expense related to acquisitions completed during 2015, unrealized mark-to-market losses related to the Company's SEK denominated foreign currency contracts, the write off of financing fees related to the termination of the 2016 Bridge Credit Agreement and a higher average share count due to the impact of ordinary shares issued in the prior year in the transaction in which Mylan N.V. acquired Mylan Inc. and Abbott Laboratories' non-U.S. developed markets specialty and branded generics business (the "EPD Transaction"). Adjusted net earnings increased by $195.3 million to $978.7 million for the six months ended June 30, 2016 compared to $783.4 million for the prior year period. Adjusted EPS increased 19% to $1.92 for the six months ended June 30, 2016 compared to $1.62 in the prior year period.

EBITDA was $1.04 billion for the six months ended June 30, 2016, and $898.8 million for the comparable prior year period. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $1.41 billion for the six months ended June 30, 2016 and $1.20 billion for the comparable prior year period.

Cash Flow

Net cash provided by operating activities was $497.1 million for the six months ended June 30, 2016 compared to $381.7 million for the prior year period. The increase in net cash provided by operating activities was primarily the result of higher earnings from operations.

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