Mylan Reports Full Year and Fourth Quarter 2017 Results and Provides 2018 Guidance

HERTFORDSHIRE, England and PITTSBURGH, Feb. 28, 2018 /PRNewswire/ -- Mylan N.V. (NASDAQ: MYL) today announced its financial results for the year ended December 31, 2017 and Fourth Quarter 2017 and provided 2018 guidance.

Full Year 2017 Financial Highlights

• Total revenues of $11.91 billion, up 8% compared to the prior year
  • North America segment third party net sales of $4.97 billion, down 12%; unchanged compared to 2016 when excluding the decrease in sales of the EpiPen® Auto-Injector of approximately $655.4 million
  • Europe segment third party net sales of $3.96 billion, up 34%
  • Rest of World segment third party net sales of $2.83 billion, up 19%
• U.S. GAAP EPS of $1.30, up 41% compared to the prior year
• Adjusted EPS of $4.56, down 7% compared to the prior year
• U.S. GAAP cash provided by operating activities of $2.06 billion, up 1% compared to the prior year
• Adjusted free cash flow of $2.63 billion, up 23% compared to the prior year
• During 2017, the Company repurchased approximately 12.4 million ordinary shares at a cost of approximately $500.2 million under its previously approved share repurchase program. In January 2018, the Company repurchased an additional 9.8 million ordinary shares at a cost of approximately $432.0 million and completed that share repurchase program.

Fourth Quarter 2017 Financial Highlights

• Total revenues of $3.24 billion, down 1% compared to the prior year period
  • North America segment third party net sales of $1.30 billion, down 17%; and down approximately 8% excluding the decrease in sales of the EpiPen® Auto-Injector of approximately $131.9 million
  • Europe segment third party net sales of $1.07 billion, up 16%
  • Rest of World segment third party net sales of $815.7 million, up 12%
• U.S. GAAP diluted earnings per ordinary share (“U.S. GAAP EPS”) of $0.46, down 41% over the prior year period.
• Adjusted diluted earnings per ordinary share (“adjusted EPS”) of $1.43 in line with our expectations, down 9% over the prior year period.

Mylan is not providing forward looking guidance for U.S. GAAP reported financial measures or a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP measure because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items without unreasonable effort. These items include, but are not limited to, acquisition-related expenses, restructuring expenses, asset impairments, litigation settlements and other contingencies, including changes to contingent consideration and certain other gains or losses. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for the guidance period.

Mylan CEO Heather Bresch commented, “Mylan’s business continues to deliver solid results and I am pleased once again to provide a strong outlook for growth, especially given the U.S. environment. Our performance is a testament to the strength, diversification and resilience of our unique global platform, and it demonstrates that Mylan truly is built to last. In 2017, we delivered an 8% increase in total revenues year over year, as strong performances by our Europe and Rest of World segments more than offset ongoing volatility across the healthcare industry in the U.S. marketplace. Adjusted EPS fell 7% compared to 2016, as we absorbed a decline in profitability of approximately $500 million associated with the rebasing of EpiPen, while adjusted free cash flows grew more than 20% year over year, to $2.63 billion.

“We’re anticipating a strong financial performance in 2018, with revenues of $11.75 billion to $13.25 billion, representing year-over-year growth of approximately 5% at the midpoint, and adjusted EPS in the range of $5.20 to $5.60, representing year-over-year growth of approximately 18% at the midpoint. As important, we look forward to continuing to lead the charge to break down barriers to access to affordable medicine around the world.”

President Rajiv Malik said, “2017 clearly demonstrated the strength of our scientific, clinical, regulatory, and intellectual property capabilities and the positive momentum we have built to bring complex products to the market. We realized many opportunities incubated over the last several years, including key product approvals like the first 40 mg/mL strength of glatiramer acetate in the U.S. and Europe, trastuzumab, the first biosimilar to Herceptin® for the U.S. market as well as the first generic version of Allergan’s Estrace® Cream. We have also created a diversified commercial platform across geographies and channels with a differentiated and durable product portfolio. This unique platform makes us a partner of choice for our customers around the globe.”

“2018 will be a year of execution, including our expectation of significant launches such as generic Advair® in the U.S. and pegfilgrastim, our first biosimilar launch in the U.S., insulin glargine in Europe and hundreds more across the globe. We will continue to execute integration activities to further optimize our cost structure. At the same time, we will be strategically reinvesting in our business, especially in areas such as sales and marketing and lifecycle management of several global key products, all supported by our ONE Mylan approach across geographies and channels.”

Mylan CFO Ken Parks added, “In 2017, Mylan once again benefited from our diversified global platform which drove significant cash flow generation. Our adjusted free cash flow increased 23% to $2.63 billion. In 2018, we remain committed to deleveraging, while allowing for financial flexibility as we continue to execute on our business plan, and maintaining our commitment to an investment grade credit rating.”

Fourth Quarter 2017 Financial Results

Total revenues were $3.24 billion in the fourth quarter of 2017, compared to $3.27 billion in the prior year period. Third party net sales for the current quarter were $3.19 billion compared to $3.22 billion for the prior year period, a decrease of $31.8 million, or 1%. Below is a summary of third party net sales in each of our segments for the three months ended December 31, 2017:

• Third party net sales in the North America segment totaled $1.30 billion, a decrease of $262.1 million or 17% from the prior year period. Third party net sales were negatively impacted in the current quarter due to a decline in sales of existing products as a result of lower pricing and volume, partially offset by new product introductions. As anticipated, our North American generics business experienced higher price erosion than in previous quarters, including the impact of the loss of market exclusivity of olmesartan and olmesartan HCTZ. Sales of the EpiPen® Auto-Injector declined in the current quarter by $131.9 million as a result of the impact of the launch of the authorized generic, higher governmental rebates as a result of Mylan agreeing to the terms of a $465 million settlement with the U.S. Department of Justice and other government agencies related to the classification of the EpiPen® Auto-Injector for purposes of the Medicaid Drug Rebate Program (the “Medicaid Drug Rebate Program Settlement”) and increased competition. The impact of foreign currency translation on current period third party net sales was not significant.
  
• Partially offsetting the decrease in North America was third party net sales growth in the Europe segment of $143.8 million, or 16% in the current quarter. Third party net sales in Europe totaled $1.1 billion in the current quarter. The increase was primarily the result of new product introductions across the region combined with favorable volume and pricing on existing products. The favorable impact of foreign currency translation on current period third party net sales was $87.4 million or 9%.
  
• Third party net sales in the Rest of World segment totaled $815.7 million in the current quarter, an increase of $86.5 million, or 12%. This increase was primarily driven by new products and increased net sales from our anti-retroviral (“ARV”) franchise and higher sales in emerging markets, which were driven primarily by higher volumes. These increases were partially offset by lower pricing in the region. The favorable impact of foreign currency translation was $25.1 million, or 3%.

Other third party revenues for the current quarter were $49.1 million compared to $46.2 million in the prior year period, an increase of $2.9 million, which was principally due to an increase in royalty income.

Gross profit was $1.29 billion and $1.34 billion for the fourth quarter of 2017 and 2016, respectively. Gross margins were 40% and 41% in the fourth quarter of 2017 and 2016, respectively. Adjusted gross profit was $1.80 billion and adjusted gross margins were 55% for the fourth quarter of 2017 compared to adjusted gross profit of $1.85 billion and adjusted gross margins of 57% in the prior year period. Gross margins and adjusted gross margins were negatively impacted in the current quarter as a result of lower gross profit from the sales of existing products in North America, including the EpiPen® Auto-Injector, partially offset by contributions from new products.

R&D expense for the fourth quarter ended December 31, 2017 was $202.4 million, compared to $194.6 million for the prior year period. This increase was primarily due to the timing of expenditures for certain clinical activities and expenses related to the Company’s collaboration with Momenta Pharmaceuticals, Inc. (“Momenta”).

SG&A expense for the fourth quarter ended December 31, 2017 was $659.1 million, compared to $708.5 million for the prior year period. The decrease from the comparable prior year period was primarily due to lower restructuring related costs and the positive impact of integration activities in the current quarter.

Litigation settlements and other contingencies, net for the fourth quarter ended December 31, 2017 was $12.7 million, compared to $116.1 million for the prior year period. The decrease from the comparable prior year period was primarily a result of the prior year litigation charge for the modafinil antitrust litigation matter.

U.S. GAAP net earnings decreased by $173.2 million to $244.3 million for the three months ended December 31, 2017, compared to net earnings of $417.5 million for the prior year period and U.S. GAAP EPS decreased to $0.46 from $0.78 in the prior year period. The reduction in U.S. GAAP net earnings is principally the result of the recognition of a tax benefit in the prior year of $192.6 million as compared to tax expense in the current period of $82.8 million, which also includes the provisional impact of $128.6 million related to the enactment of the Tax Cuts and Jobs Act of 2017. U.S. GAAP earnings before income taxes increased in the current quarter by approximately $102.2 million as a result of lower operating expenses as discussed above. Adjusted net earnings decreased by $76.9 million to $765.3 million as compared to $842.2 million for the prior year period and Adjusted EPS decreased to $1.43 from $1.57 in the prior year period mainly driven by lower gross profit from net sales in North America partially offset by the impact of integration activities.

EBITDA was $962.2 million for the current quarter and $878.5 million for the comparable prior year period. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $1.12 billion for the current quarter and $1.21 billion for the comparable prior year period.

Year Ended December 31, 2017 Financial Results

For the year ended December 31, 2017, Mylan reported total revenues of $11.91 billion, compared to $11.08 billion for the prior year period, representing an increase of $830.8 million, or 8%. Third party net sales for the year ended December 31, 2017 were $11.76 billion, compared to $10.97 billion for the prior year period, representing an increase of $792.9 million, or 7%. Contributing to the overall increase in total revenues were incremental net sales from the acquisitions of Meda AB (publ) (“Meda”) and the non-sterile, topicals-focused business (the “Topicals Business”) of Renaissance Acquisition Holdings, LLC totaling approximately $1.41 billion. This increase was partially offset by a net decrease in net sales from existing products and lower new product introductions of approximately $764.1 million. Below is a summary of third party net sales in each of our segments for the year ended December 31, 2017:

• Third party net sales in the North America segment totaled $4.97 billion, a decrease of $659.9 million or 12% from the prior year. Net sales of existing products decreased principally due to lower pricing and, to a lesser extent, lower volume. This was partially offset by incremental net sales from the acquisitions of Meda and the Topicals Business, totaling approximately $340.0 million. For the year ended December 31, 2017, as anticipated, the U.S. generics products experienced price erosion in the high-single-digits, which includes the impact of loss of exclusivity of armodafinil, olmesartan and olmesartan HCTZ during 2017. Sales of the EpiPen® Auto-Injector declined approximately $655.4 million from the prior year as a result of the impact of the launch of the authorized generic, higher governmental rebates as a result of the Medicaid Drug Rebate Program Settlement, and increased competition. Excluding the negative impact of the lower sales of the EpiPen® Auto-Injector of approximately $655.4 million, overall third-party sales in North America were unchanged in 2017 compared with 2016. The impact of foreign currency translation on current period third party net sales was insignificant within North America.
  
• Third party net sales in the Europe segment totaled $3.96 billion, an increase of $1.00 billion or 34% from the prior year. This increase was primarily the result of incremental net sales from the acquisition of Meda of approximately $833.2 million during the year ended December 31, 2017. Net sales of existing products increased primarily as a result of sales of new products and favorable pricing and volume. The favorable impact of foreign currency translation on current period third party net sales was $89.7 million, or 3%. Constant currency third party net sales increased by approximately $914.8 million, or 31% when compared to the prior year.
  
• Third party net sales in the Rest of World segment totaled $2.83 billion, an increase of $448.3 million or 19% from the prior year. This increase was primarily the result of incremental net sales from the acquisition of Meda totaling approximately $229.2 million. In addition, net sales from existing products increased principally as a result of higher volume, particularly from our ARV franchise, and to a lesser extent in Australia and emerging markets. Throughout the segment, higher volumes and sales of new products more than offset lower pricing. The favorable impact of foreign currency translation was $52.2 million, or 2%. Constant currency third party net sales increased by approximately $396.1 million, or 17%.

Other third party revenues for the year ended December 31, 2017 were $147.7 million, compared to $109.8 million for the prior year period, an increase of $37.9 million. The increase in other third party revenues was principally the result of an increase in royalty income from arrangements acquired in the Meda acquisition.

Gross profit for the year ended December 31, 2017 was $4.78 billion and gross margins were 40%. For the year ended December 31, 2016, gross profit was $4.70 billion and gross margins were 42%. Gross margins were negatively impacted in the current period by incremental amortization expense as a result of the acquisitions of Meda and the Topicals Business and by lower gross profit from the sales of existing products in North America, including the EpiPen® Auto-Injector, partially offset by the contributions from the acquired businesses. Adjusted gross profit was $6.42 billion and adjusted gross margins were approximately 54% for the year ended December 31, 2017, compared to adjusted gross profit of $6.21 billion and adjusted gross margins of approximately 56% for the year ended December 31, 2016. Adjusted gross margins were negatively impacted in the current period as a result of lower gross profit from the sales of existing products in North America, partially offset by the contributions from the acquired businesses.

R&D expense for the year ended December 31, 2017 was $783.3 million, compared to $826.8 million for the prior year, a decrease of $43.5 million. The decrease was due to lower spending when compared to the prior year as a result of the Company’s reprioritization of global programs. Partially offsetting this decrease was the impact from incremental R&D expense related to the acquisitions of Meda and the Topicals Business of approximately $45.4 million in the current year.

SG&A expense for the year ended December 31, 2017 was $2.58 billion, compared to $2.50 billion for the prior year, an increase of $79.7 million. The increase is due primarily to additional incremental expense related to the acquisitions of Meda and the Topicals Business which increased SG&A by approximately $213.1 million. Restructuring charges recorded in SG&A were $133.6 million and $113.1 million, respectively, for the years ended December 31, 2017 and 2016. Partially offsetting these increases were acquisition related costs which were $110.8 million lower than the prior year as well as the year over year benefit of integration activities.

Litigation settlements and other contingencies, net decreased from the prior year period primarily due to the prior year charges for the Medicaid Drug Rebate Program Settlement and the modafinil antitrust litigation matter and the recognition in the current year of a net gain in fair value adjustments related to contingent consideration liabilities.

U.S. GAAP net earnings increased by $216.0 million to $696.0 million for the year ended December 31, 2017, compared to $480.0 million for the prior year. U.S. GAAP EPS increased from $0.92 to $1.30 in the current year. Adjusted net earnings decreased to $2.44 billion in the current year from $2.55 billion in the prior year and Adjusted EPS decreased to $4.56 in the current year from $4.89 in the prior year primarily driven by the lower gross profit from the sales of existing products in North America, partially offset by the contributions from the acquired businesses and the impact of integration activities.

EBITDA was $3.30 billion for the year ended December 31, 2017, and $2.21 billion for the prior year period. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $3.79 billion for the year ended December 31, 2017 and $3.68 billion for the prior year period.

Cash Flow

U.S. GAAP net cash provided by operating activities was $2.06 billion for the year ended December 31, 2017 compared to $2.05 billion for the prior year period. Capital expenditures were approximately $275.9 million for the year ended December 31, 2017 compared to approximately $390.4 million for the prior year period. Adjusted net cash provided by operating activities was $2.88 billion for the year ended December 31, 2017 compared to $2.52 billion for the prior year, driven by higher litigation and restructuring payments partially offset by lower acquisition related payments. Adjusted free cash flow, defined as adjusted net cash provided by operating activities less capital expenditures, net of proceeds from certain asset sales, was $2.63 billion for the year ended December 31, 2017, compared to $2.13 billion in the prior year. The increase in 2017 to adjusted free cash flow was driven primarily by the change in adjusted net cash provided by operating activities and lower capital expenditures.

Guidance

Mylan expects 2018 total revenues in the range of $11.75 billion to $13.25 billion, the midpoint of which represents an increase of 5% versus 2017. As discussed in the “Non-GAAP Financial Measures” section below, Mylan is not otherwise providing forward looking guidance for U.S. GAAP reported financial measures or a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP measure. Adjusted EPS is expected to be in the range of $5.20 to $5.60, the midpoint of which represents an increase of 18% versus 2017.

Conference Call

As previously announced, Mylan N.V. will host a webcast at 5:00 p.m. ET today, to discuss the Company’s financial results for the fourth quarter and year ended December 31, 2017, along with financial guidance for 2018. The webcast can be accessed live by calling 800.514.4861 or 678.809.2405 for international callers (ID#: 4095484) or at the following address on the Company’s website: investor.mylan.com. A replay of the webcast also will be available on the website.