Analyst Conference Summary

generic pharmaceuticals

conference date: July 29, 2019 @ 5:30 AM Pacific Time
for quarter ending: June 30, 2019 (second quarter, Q2)
Note: Press release plus conference on the proposed merger with Pfizer's Upjohn division.

Forward-looking statements

Overview: Good as revenue up y/y. But swamped by Pfizer merger proposal. GAAP loss due to items, cash flow and non-GAAP earnings strong.

Basic data (GAAP):

Revenue of was $2.85 billion, up 14% sequentially from $2.50 billion, and up 2% from $2.81 billion in the year-earlier quarter.

Net income was negative $168.5 million, down sequentially from $25.0 million, and down from $37.5 million year-earlier.

Earnings Per Share (EPS), diluted, were negative $0.33, down sequentially from $0.05 and down from $0.07 year-earlier.

Guidance:

None.

Conference Highlights:

The big news is the proposed merger, and creation of a new company, with Pfizer's Upjohn division. The press conferernce covered that rather than second quarter results. Will be subject to approval by Mylan shareholders, and regulators.

Non-GAAP net income was much higher than GAAP net income mainly because of $440 million in purchase accounting related amortization and $112 million in special items in cost of sales.

Non-GAAP numbers: EPS $1.03, up 26% sequentially from $0.82, and down 4% from $1.07 year-earlier. Net income $533 million, up 26% sequentially from $422 million, and down 3% from $552 million year-earlier. EBITDA was $597 million, Adjusted EBITDA $847 million. Gross margin 53.8%, up from 53.3% year-earlier.

Cash and equivalents balance was $212 million, down sequentially from $230 million. Long Term Debt was $12.6 billion, down sequentially from $13.1 billion. Cash flow from operations was $669 million. Capital expenditures were $ million. Adjusted free cash flow $724 million.

Cost of sales was $1.92 billion, leaving gross profit of $933 million. Operating expenses of $837 million consisted of: research and development $148 million; selling general and administrative $669 million; $21 million litigation expense. Leaving income from operations of $95 million. Interest expense was $131 million, and other expense was $16 million. Income tax $116 million.

Mylan has about 225 ANDAs pending with the FDA. Over 1,200 products in the pipeline, 940 regulatory submissions [must be multiple countries] are pending approval and over 3000 submissions are planned. Believes approvals are simply a matter of time. Has over 4,200 active patents. Mylan operates in 165 countries and has over 7,500 marketed products, including over 200 brand products. Mylan is #6 worldwide for prescription volume, and is #2 in the U.S. and #1 in France. Sells over 600 products in the U.S.

The biologics/biosimilar pipeline has 16 unique products in it. Mylan is already marketing Hertraz (Trastuzumab - Herceptin) in 15 countries. Partnered with Biocon and Momenta for this. Working on a botox biosimilar with a partner.

Mylan remains committed to reducing its debt. No debt matures soon. Goal is 3.0 debt to adjusted EBITDA. Ended Q1 at 3.95, up slightly sequentally.

Q&A summary:

I am not summarizing the session. Investors will need to sort through the merger agreement and the results from Pfizer and Mylan to determine a fair price for shares.

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