Mylan Inc. Third Quarter 2014 Adjusted Diluted EPS Increases 41% To $1.16

PITTSBURGH, Oct. 30, 2014 /PRNewswire/ -- Mylan Inc. (Nasdaq: MYL) today announced its financial results for the three and nine months ended September 30, 2014.

Third Quarter 2014 Highlights

• Total revenues of $2.08 billion, up 18% versus the prior year period with positive growth across all regions and businesses
  • Generics segment third party net sales of $1.61 billion, up 15%
  • Specialty segment third party net sales of $462.0 million, up 29%
• Adjusted gross profit of $1.13 billion, up 25%; U.S. GAAP ("GAAP") gross profit of $1.01 billion, up 25%
• Adjusted gross margin of 54%, up from 51% in the prior year period; GAAP gross margin of 49%, up from 46%
• Adjusted diluted earnings per share ("EPS") of $1.16, up 41%; GAAP diluted EPS of $1.26, up 215%
• 2014 full year adjusted diluted EPS guidance increased to $3.54 to $3.60
• Potential opportunity to accelerate target of at least $6.00 in adjusted diluted EPS in 2018⁽¹⁾

Mylan CEO Heather Bresch commented, "We delivered outstanding third quarter results, with adjusted diluted EPS increasing 41%, and we have increased our guidance range for our full year adjusted diluted EPS to $3.54 to $3.60, representing year-over-year growth of 24% at the midpoint of the range. These strong results were delivered despite continued delays in approvals at FDA for several products that we had anticipated launching in 2014, again highlighting the strength and diversity of our global business, and the breadth and depth of our portfolio. During the third quarter, we saw double-digit revenue growth in North America, Rest of World and our Specialty segment, and we continued to execute against our growth drivers, with strong contributions from our injectables and anti-retroviral franchises, as well as from EpiPen® Auto-Injector. Further, our results underscore the importance of our integrated, high quality operating platform, which has again allowed us to maximize key market opportunities when they present themselves.

"We continue to expect that we will complete the pending acquisition of Abbott's non-U.S. developed markets specialty and branded generics business in the first quarter of 2015. We remain excited about the strategic and financial benefits of this transaction, and our engagement with the Abbott team on pre-integration planning has only further underscored the significant potential of this asset in Mylan's hands. While our teams are working diligently to complete this transaction, we continue to actively pursue additional opportunities, and we are eager to put our enhanced financial flexibility and improved capital structure to use. Finally, we continue to see potential to accelerate achievement of our adjusted diluted EPS target of at least $6.00 in 2018."

Mylan CFO John Sheehan added, "Mylan delivered yet another strong quarter, including generating significant adjusted free cash flow, which year-to-date has been in excess of $800 million, up more than 65% from the prior year period. Given this strong cash flow generation, in combination with the enhanced financial flexibility we will achieve through the Abbott transaction, including anticipated post-close gross debt to EBITDA leverage of 2.3 times, you can expect us to execute on additional strategic opportunities."

Total Revenue

Generics Segment Revenue

Genericssegment third party net sales were $1.61 billion for the quarter, an increase of 15% when compared to the prior year period. The effect of foreign currency translation on third party net sales was insignificant in the Generics segment as well as within each region of the Generics segment.

• Third party net sales from North America were $841.8 million for the quarter, an increase of 19% compared to the prior year period. The increase was primarily driven by net sales from new products and maximization of key market opportunities, partially offset by lower third party net sales of existing products as a result of lower volumes. Our high-quality operating platform continues to offer a strong competitive advantage in the U.S. market.
• Third party net sales from Europe were $351.5 million for the quarter, an increase of 1% compared to the prior year period. During the quarter, we benefited from increased volumes in Italy and France as well as net sales from new products. These increases were partially offset by lower pricing throughout Europe as a result of pricing reductions and competitive market conditions. We continue to maintain market leadership and stable market share throughout key markets in this region.
• Third party net sales from the Rest of World were $414.1 million for the quarter, an increase of 19% compared to the prior year period. This increase was primarily driven by higher third party net sales volumes from our operations in India, namely from strong growth in the anti-retroviral ("ARV") franchise which manufactures products used in the treatment of HIV/AIDS. In Japan, third party net sales were essentially flat, on a constant currency basis, as a result of lower volumes offset by new product introductions. We continue to see Japan as a key region for future sales growth as the market expands. In Australia, third party net sales increased as a result of new product sales, partially offset by pricing reductions from significant government-imposed pricing reform.

Specialty Segment Revenue

Specialtysegment reported third party net sales of $462.0 million for the quarter, an increase of 29% when compared to the prior year period. The increase was due to higher net sales of the EpiPen® Auto-Injector driven by increased volume and favorable pricing. The increased quarterly volume resulted from double-digit growth of the epinephrine auto-injector market. The EpiPen® Auto-Injector remains on track to become a billion dollar product in 2014. 

Total Gross Profit

Adjusted gross profit was $1.13 billion and adjusted gross margins were 54% for the quarter as compared to adjusted gross profit of $903.2 million and adjusted gross margins of 51% in the comparable prior year period. Strong adjusted gross margins were the result of new products and growth in the EpiPen® Auto-Injector. GAAP gross profit for the quarter was $1.01 billion and GAAP gross margins were 49% as compared to GAAP gross profit of $808.5 million and GAAP gross margins of 46% in the comparable prior year period.

Total Profitability

Adjusted earnings from operations for the quarter were $659.3 million, up 43% from the comparable prior year period. SG&A expense increased from the prior year period as a result of increased selling and marketing investments related to the EpiPen® Auto-Injector franchise as well as increased legal and marketing costs in the North American region to support anticipated new product launches. R&D expense also increased as we continued to invest in our biologics and respiratory growth platforms. GAAP earnings from operations were $495.0 million for the quarter, an increase of 46% from the comparable prior year period.

Other Operating (Income) Expense, Net in the current period recognized a gain of $80.0 million as a result of an agreement with Strides Arcolab Limited to settle a component of contingent consideration related to the Agila acquisition. Mylan recognized compensation, and the resulting positive impact on cash, for lost revenues in 2014 arising from supply disruptions that resulted from ongoing quality-enhancement activities initiated at certain Agila facilities prior to Mylan's acquisition of Agila in 2013.

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 $652.7 million for the quarter and $401.4 million for the comparable prior year quarter. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $736.0 million for the quarter and $534.2 million for the comparable prior year period. GAAP net earningsattributable to Mylan Inc. increased by $340.2 million to $499.1 million as compared to $158.9 million for the prior year comparable period. This increase was partly driven by a year-over-year benefit to income tax expense. During the quarter, we received approvals from the relevant Indian regulatory authorities to legally merge our Agila Indian subsidiaries into Mylan Laboratories Limited. This merger resulted in the recognition of a deferred tax asset with a corresponding benefit to income tax provision of $156 million.

Cash Flow

Adjusted cash provided by operating activities was $1.03 billion for the nine months ended September 30, 2014, compared to $727 million for the comparable prior year period. The increase in adjusted cash provided by operating activities is the result of growth in adjusted earnings and more efficient use of working capital. On a GAAP basis, net cash provided by operating activities was $888 million for the nine months ended September 30, 2014, compared to $689 million for the comparable prior year period. Capital expenditures were approximately $220 million for the nine months ended September 30, 2014 as compared to approximately $239 million in the comparable period in 2013. Adjusted free cash flow was $818 million for the nine months ended September 30, 2014, compared to $488 million in the comparable period in 2013.

Guidance

Given strong third quarter operational performance, Mylan is increasing its 2014 full year guidance range for adjusted diluted EPS to $3.54 to $3.60. This guidance range excludes potential launches of generic Copaxone® and generic Lidoderm®.

Mylan expects fourth quarter adjusted diluted EPS in the range of $1.03 to $1.09, an increase from adjusted diluted EPS in Q4 2013 of $0.78. The year-over-year increase is driven primarily by new product introductions during 2014 in North America and our Arixtra® agreement, combined with continued growth in the Specialty segment.

The following tables provide a summary of Mylan's 2014 fourth quarter and full year guidance ranges on an adjusted basis.

Q4 2014 Financial Guidance

* Adjusted metrics

Full Year 2014 Financial Guidance

* Adjusted metrics

** Excluding adjusted diluted EPS guidance, which was communicated via a press release on Oct. 3, 2014, prior guidance was communicated on Aug. 7, 2014 in Mylan's Q2 2014 earnings press release.

Conference Call

Mylan will host a conference call and live webcast, today, Oct. 30, 2014, at 4:30 p.m. ET, in conjunction with the release of its financial results. The dial-in number to access the call is 800.514.4861 or 678.809.2405 for international callers. To access the live webcast please log onto Mylan's website (www.mylan.com) at least 15 minutes before the event is to begin to register and download or install any necessary software.

To read full press release, please click here.

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