Mylan reports total revenues of $1.35 billion for fourth-quarter 2009

Mylan Inc. (Nasdaq: MYL) today announced its financial results for the three and twelve months ended December 31, 2009.

Financial Highlights

• Adjusted diluted earnings per share (EPS) of $0.33 and $1.30 for the three and twelve months ended December 31, 2009, compared to $0.26 and $0.80 for the same prior year periods;
• Total revenues of $1.35 billion for the three months ended December 31, 2009;  
• Total revenues of $5.09 billion for the year ended December 31, 2009;
• On a GAAP basis, earnings per diluted share of $0.01 for the three months ended December 31, 2009;
• On a GAAP basis, earnings per diluted share of $0.30 for the year ended December 31, 2009.  

Mylan's Chairman and CEO Robert J. Coury commented: "I'm pleased to report very strong fourth quarter results capping off another extremely successful year, our second full year of operating the New Mylan. With that said, we are reaffirming our 2010 guidance of $1.50 to $1.70, which I fully expect will translate into an industry-leading EPS growth rate over the 2008 to 2010 period. I anticipate that this strong growth will continue, and we are projecting revenues in excess of $8.5 billion in 2013, representing a top-line CAGR of 15%, from 2010.  We are also projecting EPS in excess of $2.75 in 2013, which represents a CAGR of 20%. Additionally, I fully expect we will be able to deliver EPS in excess of $2 in 2011.  We also anticipate generating cumulative operating cash flows of approximately $4 billion by the end of 2013. With that said, we expect to continue to lead the sector in EPS growth, which we believe will benefit all shareholders and other stakeholders."

Coury continued: "The most important aspect of our expected growth is that it is predominantly organic and all of the work necessary to achieve these results is already completed, or will be by the end of 2010. Primary drivers of this future growth include portfolio expansion, increased diversification, additional operational efficiencies, further deleveraging of our balance sheet, additional investment in our infrastructure and, of course, our unwavering commitment to quality and excellence. This anticipated growth is even more impressive considering that it does not include any M&A activity or any meaningful contribution from generic biologics or our future generic Copaxone launch, which could only provide additional upside after the expiration of the 30-month stay in March 2012."  

Heather Bresch, Mylan's President added: "The effort that we have put forth in transforming Mylan into a fully-integrated, globally diverse operation is clearly evident in the powerful financial results for 2009. The foundation of our robust 2009 results was the strength and diversity of our base business, which was augmented by a voluminous number of new product launches throughout the world, the ongoing benefit of synergies and operational efficiencies and an enhancement of our customer base as a result of our enduring reputation as a reliable source of supply."  

Financial Summary

Mylan previously had three reportable segments, "Generics", "Specialty" and "Matrix." The Matrix Segment had consisted of Matrix Laboratories Limited (Matrix), which was previously a publicly traded company in India, in which Mylan held a 71.2% ownership stake. Following the acquisition of approximately 25% of the remaining interest in Matrix and its related delisting from the Indian stock exchanges, Mylan now has two reportable segments, "Generics" and "Specialty." We changed our segments to align with how the business is being managed after those changes. The former Matrix Segment is included within the Generics Segment. Information for earlier periods has been recast.

Total revenues for the quarter ended Dec. 31, 2009 increased $148.7 million, or 12% to $1.35 billion from $1.20 billion in the same prior year period. Revenues in the current quarter were favorably impacted by the effect of foreign currency translation, reflecting a weaker U.S. dollar.  Translating current year revenues at prior year exchange rates would have resulted in operational year-over-year revenue growth, excluding foreign currency, of $70.3 million, or approximately 6%.  

Generics revenues, which are derived from sales in North America, Europe, the Middle East and Africa (collectively, EMEA), and Asia Pacific were $1.29 billion in the current quarter, compared to $1.13 billion in the same prior year period.  

Total revenues from North America were $545.0 million for the three months ended December 31, 2009, compared to $561.7 million for the same prior year period, representing a decrease of 3%.  Prior year revenues included a substantial contribution from levetiracetam, which was launched by Mylan in November 2008.  Additional generic competition on levetiracetam entered the market in mid-January 2009.  

Helping to offset some of the effect of this additional competition were products launched in North America subsequent to December 31, 2008, which contributed revenues of approximately $81 million, including lansoprazole delayed-release ("lansoprazole DR") capsules, 15 mg and 30 mg, the generic version of Tap Pharmaceuticals' proton pump inhibitor Prevacid® DR Capsules.    

Total revenues from EMEA were $481.8 million in the current quarter, compared to $372.2 million in the same prior year period, an increase of 29%. Excluding foreign currency, calculated as described above, EMEA operational revenues increased by approximately 19% over the prior year period. Higher revenues were realized in most major European markets, including record quarterly revenues in France, EMEA's largest market, Spain and Italy.  In France, increased revenues were the result of higher volumes and new product launches.  New product launches were also primarily responsible for the increase in revenues in Spain, while regulatory changes which resulted in a favorable impact on pricing drove sales in Italy.  In the U.K., prior period revenues were negatively impacted by excess supply that existed in the market at that time.  

Sales in Asia Pacific are derived from Mylan's operations in India, Australia, Japan and New Zealand. Asia Pacific revenues were $309.1 million in the current quarter, compared to $232.3 million in the same prior year period, an increase of 33%.  Excluding foreign currency, calculated as described above, operational sales increased approximately 20%, primarily driven by increased sales in Japan and India.  Also contributing to the increase in Asia Pacific revenues are higher third-party sales of active pharmaceutical ingredients (API).  API is also sold to Mylan subsidiaries in conjunction with our vertical integration strategy.

Specialty, consisting of Mylan's Dey business, which focuses on the development, manufacture and marketing of specialty pharmaceuticals in the respiratory and severe allergy markets, reported total revenues of $87.5 million for the current quarter, an increase of 8% from $81.2 million for the three months ended December 31, 2008, led by Perforomist® Solution, Dey's Formoterol Fumarate Inhalation Solution (Perforomist Solution).  Sales of Dey's EpiPen® Auto-Injector were consistent on a year over year basis and, as has been previously noted, fourth quarter sales of the EpiPen Auto-Injector are seasonally the lowest.  

Included in total Specialty revenues for the three months ended December 31, 2009 and 2008, are intersegment revenues of $25.6 million and $3.7 million.  The increase in the current year reflects an increase in sales of generic products to North America through greater horizontal integration.      

Consolidated gross profit for the three months ended December 31, 2009, was $516.0 million and gross margins were 38.2%, compared to gross profit of $394.7 million and gross margins of 32.8% in the same prior year period.  Gross profit in both periods is negatively impacted by certain purchase accounting related items totaling $72.4 million and $145.6 million for the quarters ended December 31, 2009 and 2008, which consisted primarily of incremental amortization related to purchased intangible assets and step-up in inventory.  Excluding these amounts from both periods, gross margins were 43.5% in the current year compared to 44.9% in the prior.

Earnings from operations were $60.0 million for the three months ended December 31, 2009, compared to $34.6 million for the same prior year period.  

During the three months ended December 31, 2009, the Company recorded net unfavorable litigation charges of $114.2 million.  This amount consisted of a charge of $160.0 million related to a settlement in principle to resolve certain claims relating to the Company's outstanding pricing litigation, as well as to reserve for remaining pricing lawsuits to which the Company is a party, partially offset by litigation-related recoveries. The settlement is contingent upon execution of definitive settlement documents, and federal government and court approval. Excluding the impact of litigation and purchase accounting related items in both periods, as mentioned above, earnings from operations were $246.6 million compared to $196.9 million, an increase of $49.7 million or 25% over the prior year.  This increase in operating income in the current quarter is due primarily to increased sales and gross profit, as discussed above, as operating expenses (R&D and SG&A) in total remained consistent.  

R&D expense decreased by $5.3 million in the current quarter, and is reflective of certain restructuring activities undertaken by the Company with respect to the previously announced rationalization and optimization of the global manufacturing and research and development platforms.  SG&A expense increased by $3.6 million in the quarter primarily due to the unfavorable impact of foreign exchange.  Excluding this impact, SG&A costs decreased, also primarily as a result of restructuring programs with respect to the realignment of the Dey business and the right-sizing of certain businesses in markets outside of the U.S.

Interest expense for the three months ended December 31, 2009, totaled $78.3 million compared to $98.4 million for the three months ended December 31, 2008. The decrease is due to the reduction of our outstanding debt balance, through repayments made in December 2008 and throughout 2009, as well as lower overall interest rates.  In March 2009, we pre-paid all of our 2010 scheduled debt maturities on our term loans, and in December 2009 we pre-paid all of our 2011 scheduled debt maturities.  Included in interest expense for the three months ended December 31, 2009 and 2008 are $11.2 million and $10.9 million of accretion of the discounts on our convertible debt instruments.  Other income, net, for the current quarter was a loss of $7.6 million compared to $9.2 million in the same prior year period.  Other income, net, in the current period includes a loss of $11.7 million on Matrix's sale of a subsidiary.    

Total revenues for the year ended December 31, 2009 were $5.09 billion compared to $5.14 billion for the prior year. Included in total revenues in the prior year was other revenue of $468.1 million of previously deferred revenue related to the sale of our rights in Bystolic™.  Excluding other revenue from both years, net revenue increased by $384.2 million, or 8% from $4.63 billion in the prior year to $5.02 billion in 2009.

Net revenues in the current year were unfavorably impacted by the effect of foreign currency translation, primarily reflecting a stronger U.S. dollar.  Translating current year revenues at prior year exchange rates would have resulted in year-over-year operational revenue growth of $558.9 million, or approximately 12%.  

Generics revenues were $4.70 billion in the year ended December 31, 2009, compared to $4.29 billion in the prior year.  

Total revenues from North America were $2.18 billion for the year ended December 31, 2009, compared to $1.87 billion for the prior year, representing an increase of 16%.  This increase was the result of new product revenue of approximately $322.5 million, mainly Divalproex Sodium Extended-Release tablets, Mylan's version of Abbott Laboratories' Depakote® ER.  

With respect to existing products, higher volumes, primarily due to Mylan's ability to remain a source of stable supply as certain competitors experienced regulatory and supply issues, nearly offset the unfavorable pricing that resulted from the loss of exclusivity and increased competition on certain products.    

Mylan's position as a stable and reliable source of supply to the market resulted in continued strong sales and gross profit from the Fentanyl Transdermal System (Fentanyl), Mylan's AB-rated generic alternative to Duragesic®, despite the entrance into the market of additional generic competition.

Total revenues from EMEA were $1.66 billion in the current year, compared to $1.64 billion in the prior year. Excluding the impact of foreign exchange, EMEA operational revenues would have increased by approximately 8%.  Increased revenues from new product launches in France and Spain, favorable pricing in Italy, and a full year of revenue contribution from the Central and Eastern European businesses acquired in June 2008, served to offset lower revenues brought about by continued pricing pressures in certain European markets, including Germany.

Total revenues in Asia Pacific were $1.0 billion in the current year, compared to $911.1 million in the prior year period, an increase of 10%.  Excluding the impact of the foreign exchange, operational sales in the current year increased by approximately 17%.  The increase in Asia Pacific was primarily realized by strong, double-digit growth in India, driven by higher sales of both generics and API, as well as increased sales in Japan.

Specialty reported total revenues for 2009 of $455.7 million, an increase of $38.5 million or 9% from $417.2 million for the prior year.  Increased sales of Dey's EpiPen® Auto-Injector and Perforomist Solution in the current year were partially offset by lower sales of DuoNeb® as a result of the unfavorable impact of generic competition, which first entered the market in 2007.    

Consolidated gross profit for the year ended December 31, 2009, was $2.07 billion and gross margins were 40.7%, compared to gross profit of $2.07 billion and gross margins of 40.3% in the prior year.  Excluding Bystolic and the effect of certain purchase accounting related items described above, which totaled $282.5 million and $481.4 million for the year ended December 31, 2009 and 2008, gross margins were 46.3% in the current year, compared to 44.6% in the prior.    

Earnings from operations were $523.4 million for 2009, which included net unfavorable litigation charges of $225.7 million.  For 2008, earnings from operations were $297.9 million, which included a goodwill impairment charge of $385.0 million, and unfavorable litigation charges of $16.6 million.  Excluding these items, as well as the impact of the Bystolic revenue in 2008 and the purchase accounting related items in both periods, as mentioned above, earnings from operations for 2009 were $1.03 billion compared to $712.8 million for the prior year, an increase of 45%.  

This increase in operating income in the current year is due to increased revenue and gross profit, as well as lower overall operating expenses, which decreased as a result of the favorable effect of the stronger U.S. dollar and by synergies realized as a result of ongoing restructuring initiatives. In addition, SG&A in the prior year included higher costs as a result of a greater amount of activity associated with the integration of the former Merck Generics business.  

Interest expense for calendar year 2009 totaled $318.5 million compared to $380.8 million for calendar year 2008. The decrease is due to the reduction in the Company's outstanding debt balances, through repayments made in December 2008 and throughout 2009, as previously discussed, as well as lower overall interest rates.  Included in interest expense for 2009 and 2008 were $42.9 million and $29.5 million of accretion of the discounts on the Company's convertible debt instruments.  Other income, net, for 2009 was $22.1 million, versus $11.3 million for the same period in the prior year.  

EBITDA, which is defined as net income (loss) (excluding the non-controlling interest and income from equity method investees) plus income taxes, interest expense, depreciation and amortization, was $156.6 million for the quarter ended December 31, 2009 and $947.9 million for the year then ended.  After adjusting for certain items as further discussed below, adjusted EBITDA was $311.5 million and $1.25 billion for the three and twelve month periods.  

The Company's cash position remains strong at December 31, 2009, with cash and short-term investments of over $400 million driven by cash provided by operating activities of $605.1 million for the year ended December 31, 2009.  Cash used in investing activities for 2009 was $335.0 million, which primarily consisted of $187.4 million of cash paid for acquisitions, net of proceeds from dispositions, of which $182.2 million was spent to acquire the additional shares of Matrix, and capital expenditures of $154.4 million. Cash used in financing activities was $454.4 million for 2009, which included cash dividends of $139.0 million paid on the Company's preferred stock, and repayments made on long-term debt in the amount of $350.0 million.

SOURCE Mylan Inc.