Mylan Announces Third Quarter 2020 Financial Results and Looks Ahead to the Launch of Viatris Inc.
Mylan N.V. (NASDAQ: MYL) reported third quarter 2020 revenues of $2.97 billion, a slight year-on-year increase. North America net sales were $1.03 billion, down 5%, while Europe net sales rose 7% to $1.12 billion. U.S. GAAP net earnings totaled $185.7 million, showing a slight decline from $189.8 million last year. For the nine months ended September 30, total revenues reached $8.32 billion, with adjusted net earnings of $1.72 billion, up from $1.56 billion. Operating cash flow increased to $1.20 billion.
- Adjusted net earnings increased to $1.72 billion, up from $1.56 billion in the prior year.
- Adjusted EBITDA rose to $2.64 billion compared to $2.48 billion in the prior year.
- North America segment net sales decreased by 5% to $1.03 billion.
- Rest of World segment net sales fell by 5%, down 1% on a constant currency basis.
HERTFORDSHIRE, England and PITTSBURGH, Nov. 6, 2020 /PRNewswire/ -- Mylan N.V. (NASDAQ: MYL) today announced its financial results for the three and nine months ended September 30, 2020.
Third Quarter 2020 Financial Highlights
- Total revenues of
$2.97 billion , a slight increase on an actual basis and a slight decrease on a constant currency basis, compared to the prior year period. - Revenue Highlights:
- North America segment net sales of
$1.03 billion , down5% on an actual and constant currency basis. - Europe segment net sales of
$1.12 billion , up7% , up2% on a constant currency basis. - Rest of World segment net sales of
$795.5 million , up less than1% , up3% on a constant currency basis. - U.S. GAAP net earnings of
$185.7 million , compared to U.S. GAAP net earnings of$189.8 million in the prior year period. - Adjusted net earnings of
$679.7 million , compared to adjusted net earnings of$604.4 million in the prior year period. - Adjusted EBITDA of
$1.01 billion , compared to adjusted EBITDA of$922.8 million in the prior year period.
Nine Months Ended September 30, 2020 Financial Highlights
- Total revenues of
$8.32 billion , a slight increase on an actual basis, up1% on a constant currency basis, compared to the prior year period. - Revenue Highlights:
- North America segment net sales of
$3.02 billion , essentially flat on an actual and constant currency basis. - Europe segment net sales of
$3.08 billion , up5% on an actual and constant currency basis. - Rest of World segment net sales of
$2.13 billion , down5% , down1% on a constant currency basis. - U.S. GAAP net earnings of
$245.9 million , compared to U.S. GAAP net loss of$3.7 million in the prior year period. - Adjusted net earnings of
$1.72 billion , compared to adjusted net earnings of$1.56 billion in the prior year period. - Adjusted EBITDA of
$2.64 billion , compared to adjusted EBITDA of$2.48 billion in the prior year period. - U.S. GAAP net cash provided by operating activities for the nine months ended September 30, 2020 of
$1.20 billion , compared to net cash provided by operating activities of$1.12 billion in the prior year period, and adjusted free cash flow for the nine months ended September 30, 2020 of$1.51 billion , compared to$1.29 billion in the prior year period.
Mylan is not providing forward-looking information for U.S. GAAP reported financial measures or a quantitative reconciliation of forward-looking non-GAAP financial information. Please see "Non-GAAP Financial Measures" for additional information.
Mylan Chief Executive Officer Heather Bresch commented: "As we prepare to officially conclude the Mylan story and provide what will be the company's final earnings update, Mylan's strong year-to-date results once again demonstrate the benefits of the diverse and durable platform that we have created. I'm extremely proud of how Mylan has performed over the last nine months during these unprecedented times. I sincerely thank our 35,000 employees across the globe for their consistent performance and dedication to providing access to medicine to patients around the world, even while navigating the realities of a global pandemic. It is this unwavering commitment to our mission that has served the company well for almost 60 years, and I am confident will pave the way for the success of Viatris in the years to come."
Mylan Executive Chairman Robert J. Coury commented: "On behalf of Mylan's Board of Directors and all Mylan employees, I would like to thank Heather for her truly exemplary leadership and lasting contributions to the company, the industry and patients around the world. As we officially close the book on Mylan, I would also like to offer my sincere appreciation and gratitude to all the Mylan employees, both past and present, for their extraordinary resilience and determination to help us reach this pivotal moment in our 60-year history.
"With just 10 days until we close our proposed combination with Pfizer's Upjohn business, we are excited to bring the two organizations together. Starting on Day 1, management's full attention will now be turned towards executing upon the integration plan and developing Viatris' operating strategy. We intend to provide details on Viatris' strategy, including 2021 guidance, at our upcoming Investor Day, to be held in late February or early March 2021.
"At that time, the management team will outline how Viatris can deliver on its stated commitments and roadmap to maximize value creation, including the realization of
RECENT DEVELOPMENTS
Upjohn Transaction Update
On September 14, 2020, the European Commission (the "Commission") approved the divestiture buyers with which Mylan entered into agreements for the sale of certain of Mylan's products in Europe, which was a requirement of the Commission's conditional approval of the proposed transaction pursuant to which Mylan will combine with Pfizer Inc's ("Pfizer") Upjohn business (the "Upjohn Business") (the "Combination") in a Reverse Morris Trust transaction in April 2020.
On October 30, 2020, Mylan and Pfizer announced that the U.S. Federal Trade Commission (the "FTC") accepted a proposed consent order, which concluded the FTC's review of the proposed Combination. The parties have now obtained all required antitrust clearances for the Combination. The Combination is expected to close on November 16, 2020.
In connection with the proposed Combination, Mylan shareholders will receive one share of Viatris Inc. ("Viatris") common stock for each Mylan ordinary share held by such holder (subject to any applicable withholding taxes). No action is required by Mylan shareholders to receive such shares of Viatris common stock. It is expected that at the beginning of the trading day on November 17, 2020 (which is expected to be the first trading day after the closing date), Viatris will trade on Nasdaq under the ticker symbol "VTRS" and will no longer trade in the "when-issued" market, and Mylan shares will no longer trade on Nasdaq.
Financial Summary
Three Months Ended | Nine Months Ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
(Unaudited; in millions, except %s) | 2020 | 2019 | Percent Change | 2020 | 2019 | Percent Change | |||||||||||||
Total Revenues (1) | $ | 2,972.1 | $ | 2,961.7 | —% | $ | 8,322.5 | $ | 8,308.7 | —% | |||||||||
North America Net Sales | 1,028.8 | 1,088.6 | (5)% | 3,023.3 | 3,035.0 | —% | |||||||||||||
Europe Net Sales | 1,123.8 | 1,045.9 | 3,080.7 | 2,930.7 | |||||||||||||||
Rest of World Net Sales | 795.5 | 793.7 | —% | 2,128.2 | 2,241.3 | (5)% | |||||||||||||
Other Revenues | 24.0 | 33.5 | (28)% | 90.3 | 101.7 | (11)% | |||||||||||||
U.S. GAAP Gross Profit | $ | 1,158.5 | $ | 1,072.4 | $ | 3,090.3 | $ | 2,810.2 | |||||||||||
U.S. GAAP Gross Margin | 39.0 | % | 36.2 | % | 37.1 | % | 33.8 | % | |||||||||||
Adjusted Gross Profit (2) | $ | 1,629.1 | $ | 1,564.4 | $ | 4,492.3 | $ | 4,438.2 | |||||||||||
Adjusted Gross Margin (2) | 54.8 | % | 52.8 | % | 54.0 | % | 53.4 | % | |||||||||||
U.S. GAAP Net Earnings (Loss) | $ | 185.7 | $ | 189.8 | (2)% | $ | 245.9 | $ | (3.7) | nm | |||||||||
Adjusted Net Earnings (2) | $ | 679.7 | $ | 604.4 | $ | 1,721.2 | $ | 1,559.1 | |||||||||||
EBITDA (2) | $ | 794.1 | $ | 794.8 | —% | $ | 1,946.1 | $ | 1,925.7 | ||||||||||
Adjusted EBITDA (2) | $ | 1,009.7 | $ | 922.8 | $ | 2,639.0 | $ | 2,480.4 | |||||||||||
(1) | Amounts exclude intersegment revenue that eliminates on a consolidated basis. | |||
(2) | Non-GAAP financial measures. Please see "Non-GAAP Financial Measures" for additional information. | |||
Third Quarter 2020 Financial Results
Total revenues for the three months ended September 30, 2020 were
The increase in net sales was primarily the result of an increase in net sales in the Europe segment of
- Net sales from North America segment totaled
$1.03 billion in the current quarter, a decrease of$59.8 million or5% when compared to the prior year period. This decrease was primarily driven by lower volumes, and to a lesser extent, pricing from net sales of existing products partially offset by new product sales, including sales from the launch of dimethyl fumarate capsules, a substitutable generic of Biogen Inc.'s Tecfidera®. The decrease in net sales of existing products was primarily driven by lower EpiPen® Auto-Injector volumes partially due to the negative impact of COVID-19 which resulted in lower back to school sales and changes in the competitive environment, including for Levothyroxine Sodium. These decreases were partially offset by increased volumes on Wixela™ Inhub™. The impact of foreign currency translation on current period net sales was insignificant within North America. - Net sales from Europe segment totaled
$1.12 billion in the current quarter, an increase of$77.9 million , or7% , when compared to the prior year period. This increase was primarily due to the favorable impact of foreign currency translation of approximately$57.9 million or5% , and new product sales. The favorable impact of these items was partially offset by lower volumes from net sales of existing products primarily due to the negative impact of COVID-19. Pricing was relatively stable in the quarter when compared to the prior year period. Constant currency net sales increased by approximately$20.0 million , or2% , when compared to the prior year period. - Net sales from Rest of World segment totaled
$795.5 million in the current quarter, an increase of$1.8 million or less than1% , when compared to the prior year period. This increase was primarily driven by new product sales, including sales of Remdesivir in India. This increase was partially offset by lower pricing, primarily due to government price reductions in Japan and Australia, and volumes from net sales of existing products, and the unfavorable impact of foreign currency translation. While volumes of existing products in the Company's anti-retroviral franchise were higher compared to the prior year period, this increase was offset by lower volumes from net sales of existing products, partially driven by the negative impact of COVID-19 primarily in China, Russia and Japan. Overall, net sales from Rest of World were unfavorably impacted by the effect of foreign currency translation by approximately$18.7 million , or2% . Constant currency net sales increased by approximately$20.5 million , or3% when compared to the prior year period.
U.S. GAAP gross profit was
R&D expense for the three months ended September 30, 2020 was
Selling, general and administrative ("SG&A") expense for the three months ended September 30, 2020 was
During the third quarter of 2020, the Company recorded a net charge of
U.S. GAAP net earnings decreased by
EBITDA was
Nine Months Ended September 30, 2020 Financial Results
Total revenues for the nine months ended September 30, 2020 were
The increase in net sales was primarily the result of an increase in net sales in the Europe segment of
- Net sales from North America segment totaled
$3.02 billion during the nine months ended September 30, 2020, a decrease of$11.7 million or less than1% when compared to the prior year period. This decrease was due primarily to lower pricing on sales of existing products, partially offset by new product sales and, to a lesser extent, higher volumes on sales of existing products. Lower pricing on sales of existing products was driven by changes in the competitive environment, including for Levothyroxine Sodium, and lower volumes were primarily driven by the EpiPen® Auto-Injector, partially offset by increased Wixela™ Inhub™ volumes. The impact of foreign currency translation on current period net sales was insignificant within North America. - Net sales from Europe segment totaled
$3.08 billion during the nine months ended September 30, 2020, an increase of$150.0 million or5% when compared to the prior year period. This increase was primarily the result of new product sales and higher net sales of existing products, partially as a result of increased volumes which were driven by the resolution of supply disruptions encountered in the prior year period. The remainder of the increase in net sales was the result of expected net sales growth in the region partially offset by the negative impact of COVID-19. Pricing was relatively stable when compared to the prior year period. Net sales were also favorably impacted by the effect of foreign currency translation of approximately$3.3 million , or less than1% . Constant currency net sales increased by approximately$146.7 million , or5% , when compared to the prior year period. - Net sales from Rest of World segment totaled
$2.13 billion during the nine months ended September 30, 2020, a decrease of$113.1 million or5% when compared to the prior year period. The decrease was primarily due to the unfavorable impact of foreign currency translation and, to a lesser extent, by lower pricing on net sales of existing products, primarily driven by government price reductions in Japan and Australia. The decrease in net sales was also due to lower volumes on net sales of existing products related to the estimated negative impact from COVID-19 in China, Russia and Japan. Partially offsetting lower net sales of existing products were new product sales, including Remdesivir in India and emerging markets. Overall, net sales from Rest of World were unfavorably impacted by the effect of foreign currency translation of approximately$92.7 million , or4% . Constant currency net sales decreased by approximately$20.4 million , or1% , when compared to the prior year period.
U.S. GAAP gross profit was
R&D expense for the nine months ended September 30, 2020 was
SG&A expense for the nine months ended September 30, 2020 was
During the nine months ended September 30, 2020 the Company recorded a net charge of
U.S. GAAP net earnings (loss) increased by
EBITDA was
Cash Flow
U.S. GAAP net cash provided by operating activities for the three and nine months ended September 30, 2020 was
Adjusted net cash provided by operating activities for the three and nine months ended September 30, 2020 was
Conference Call, Earnings Materials, and Guidance
Due to the proposed combination and upcoming transaction close with Pfizer's Upjohn business, Mylan will not be holding a third quarter conference call to review results and will no longer provide financial guidance for 2020. A copy of the earnings release along with the "Q3 2020 Earnings Presentation" will be available at investor.mylan.com.
Non-GAAP Financial Measures
This press release includes the presentation and discussion of certain financial information that differs from what is reported under accounting principles generally accepted in the United States ("U.S. GAAP"). These non-GAAP financial measures, including, but not limited to, adjusted gross profit, adjusted gross margins, adjusted net earnings, EBITDA, adjusted EBITDA, adjusted R&D and as a % of total revenues, adjusted SG&A and as a % of total revenues, adjusted earnings from operations, adjusted interest expense, adjusted other (income) expense, net, adjusted effective tax rate, leverage target, notional debt to Credit Agreement Adjusted EBITDA leverage ratio, long-term average debt to Credit Agreement Adjusted EBITDA leverage ratio target, adjusted net cash provided by operating activities, free cash flow, adjusted free cash flow, constant currency total revenues and constant currency net sales are presented in order to supplement investors' and other readers' understanding and assessment of the financial performance of Mylan N.V. ("Mylan" or the "Company"). Management uses these measures internally for forecasting, budgeting, measuring its operating performance, and incentive-based awards. Primarily due to acquisitions and other significant events which may impact comparability of our periodic operating results, Mylan believes that an evaluation of its ongoing operations (and comparisons of its current operations with historical and future operations) would be difficult if the disclosure of its financial results was limited to financial measures prepared only in accordance with U.S. GAAP. We believe that non-GAAP financial measures are useful supplemental information for our investors and when considered together with our U.S. GAAP financial measures and the reconciliation to the most directly comparable U.S. GAAP financial measure, provide a more complete understanding of the factors and trends affecting our operations. The financial performance of the Company is measured by senior management, in part, using adjusted metrics included herein, along with other performance metrics. In addition, the Company believes that including EBITDA and supplemental adjustments applied in presenting adjusted EBITDA and Credit Agreement Adjusted EBITDA (as defined below) pursuant to our Credit Agreement is appropriate to provide additional information to investors to demonstrate the Company's ability to comply with financial debt covenants and assess the Company's ability to incur additional indebtedness. The Company also believes that adjusted EBITDA better focuses management on the Company's underlying operational results and true business performance and, beginning in 2020, is used, in part, for management's incentive compensation. We also report sales performance using the non-GAAP financial measures of "constant currency" total revenues and net sales. These measures provide information on the change in total revenues and net sales assuming that foreign currency exchange rates had not changed between the prior and current period. The comparisons presented at constant currency rates reflect comparative local currency sales at the prior year's foreign exchange rates. We routinely evaluate our net sales and total revenues performance at constant currency so that sales results can be viewed without the impact of foreign currency exchange rates, thereby facilitating a period-to-period comparison of our operational activities, and believe that this presentation also provides useful information to investors for the same reason. The "Summary of Total Revenues by Segment" table below compares net sales on an actual and constant currency basis for each reportable segment for the quarters and year to date periods ended September 30, 2020 and 2019 as well as for total revenues. Also, set forth below, Mylan has provided reconciliations of such non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures. Investors and other readers are encouraged to review the related U.S. GAAP financial measures and the reconciliations of the non-GAAP measures to their most directly comparable U.S. GAAP measures set forth below, and investors and other readers should consider non-GAAP measures only as supplements to, not as substitutes for or as superior measures to, the measures of financial performance prepared in accordance with U.S. GAAP.
For additional information regarding the components and uses of Non-GAAP financial measures refer to Management's Discussion and Analysis of Financial Condition and Results of Operations--Use of Non-GAAP Financial Measures section of Mylan's Quarterly Report on Form 10-Q for the three months ended September 30, 2020 (the "Form 10-Q").
Mylan is not providing forward-looking information 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, including integration, 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 relevant period. The stated forward-looking non-GAAP financial measures, Viatris ≤ 2.5x sustained leverage target is based on the ratio of (i) targeted long-term average debt, and (ii) targeted long-term Credit Agreement Adjusted EBITDA. However, the Company has not quantified future amounts to develop the target but has stated its goal to manage long-term average debt and adjusted earnings and EBITDA over time in order to generally maintain the target. These targets do not reflect Company guidance. References to Viatris free cash flows are to U.S. GAAP net cash provided by operating activities minus capital expenditures.
Reconciliation of U.S. GAAP Net Earnings to Adjusted Net Earnings
Below is a reconciliation of U.S. GAAP net earnings (loss) to adjusted net earnings for the three and nine months ended September 30, 2020 compared to the prior year period:
Three Months Ended | Nine Months Ended | ||||||||||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||
U.S. GAAP net earnings (loss) | $ | 185.7 | $ | 189.8 | $ | 245.9 | $ | (3.7) | |||||||
Purchase accounting related amortization (primarily included in cost of sales) | 368.5 | 408.5 | 1,072.5 | 1,283.9 | |||||||||||
Litigation settlements and other contingencies, net | 18.9 | (51.9) | 36.5 | (30.3) | |||||||||||
Interest expense (primarily clean energy investment financing and accretion of contingent consideration) | 5.3 | 6.6 | 16.6 | 20.8 | |||||||||||
Clean energy investments pre-tax loss | 2.9 | 10.4 | 37.4 | 43.6 | |||||||||||
Acquisition related costs (primarily included in SG&A) (a) | 72.3 | 43.0 | 218.2 | 56.6 | |||||||||||
Restructuring related costs (b) | 14.5 | 0.8 | 47.0 | 78.3 | |||||||||||
Share-based compensation expense | 15.1 | 16.1 | 49.8 | 50.9 | |||||||||||
Other special items included in: | |||||||||||||||
Cost of sales (c) | 83.6 | 70.9 | 299.3 | 268.1 | |||||||||||
Research and development expense (d) | 3.7 | 40.3 | 45.8 | 100.5 | |||||||||||
Selling, general and administrative expense | 7.5 | 8.4 | 12.9 | 33.1 | |||||||||||
Other expense, net | — | — | (16.4) | — | |||||||||||
Tax effect of the above items and other income tax related items | (98.3) | (138.5) | (344.3) | (342.7) | |||||||||||
Adjusted net earnings | $ | 679.7 | $ | 604.4 | $ | 1,721.2 | $ | 1,559.1 | |||||||
Significant items include the following: | ||||
(a) | Acquisition related costs consist primarily of transaction costs including legal and consulting fees and integration activities. The increase for the three and nine months ended September 30, 2020 relates to transaction costs for the pending Combination, including approximately | |||
(b) | For the three months ended September 30, 2020, charges of approximately | |||
(c) | Costs incurred during the three and nine months ended September 30, 2020 include incremental manufacturing variances and site remediation activities as a result of the activities at the Company's Morgantown plant of approximately | |||
(d) | R&D expense for the three and nine months ended September 30, 2020 consists primarily of amounts for product development arrangements, including with Revance Therapeutics, Inc., of approximately | |||
Reconciliation of U.S. GAAP Net Earnings to EBITDA and Adjusted EBITDA
Below is a reconciliation of U.S. GAAP net earnings (loss) to EBITDA and adjusted EBITDA for the three and nine months ended September 30, 2020 compared to the prior year period:
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||
U.S. GAAP net earnings (loss) | $ | 185.7 | $ | 189.8 | $ | 245.9 | $ | (3.7) | |||||||
Add / (deduct) adjustments: | |||||||||||||||
Clean energy investments pre-tax loss | 2.9 | 10.4 | 37.4 | 43.6 | |||||||||||
Income tax provision (benefit) | 55.9 | (4.0) | 46.4 | 22.9 | |||||||||||
Interest expense (a) | 117.3 | 128.9 | 353.4 | 391.3 | |||||||||||
Depreciation and amortization (b) | 432.3 | 469.7 | 1,263.0 | 1,471.6 | |||||||||||
EBITDA | $ | 794.1 | $ | 794.8 | $ | 1,946.1 | $ | 1,925.7 | |||||||
Add / (deduct) adjustments: | |||||||||||||||
Share-based compensation expense | 15.1 | 16.1 | 49.8 | 50.9 | |||||||||||
Litigation settlements and other contingencies, net | 18.9 | (51.9) | 36.5 | (30.3) | |||||||||||
Restructuring, acquisition related and other special items (c) | 181.6 | 163.8 | 606.6 | 534.1 | |||||||||||
Adjusted EBITDA | $ | 1,009.7 | $ | 922.8 | $ | 2,639.0 | $ | 2,480.4 | |||||||
(a) | Includes clean energy investment financing and accretion of contingent consideration. | ||||||||||
(b) | Includes purchase accounting related amortization. | ||||||||||
(c) | See items detailed in the Reconciliation of U.S. GAAP Net Earnings to Adjusted Net Earnings. | ||||||||||
About Mylan
Mylan is a global pharmaceutical company committed to setting new standards in healthcare. Working together around the world to provide 7 billion people access to high quality medicine, we innovate to satisfy unmet needs; make reliability and service excellence a habit; do what's right, not what's easy; and impact the future through passionate global leadership. We offer a portfolio of more than 7,500 marketed products around the world, including antiretroviral therapies on which approximately
Forward-Looking Statements
This release contains "forward-looking statements." Such forward-looking statements may include, without limitation, the launch of ViatrisTM; Mylan's strong year-to-date results once again demonstrate the benefits of the diverse and durable platform that we have created; with just 10 days until we close our proposed combination with Pfizer's Upjohn business, we are excited to bring the two organizations together; starting on Day 1, management's full attention will now be turned towards executing upon the integration plan and developing Viatris' operating strategy; we intend to provide details on Viatris' strategy, including 2021 guidance, at our upcoming Investor Day, to be held in late February or early March 2021; at that time, the management team will outline how Viatris can deliver on its stated commitments and roadmap to maximize value creation, including the realization of
Additional Information and Where to Find It
This release shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. In connection with the Combination, Upjohn and Mylan have filed certain materials with the SEC, including, among other materials, the Form S-4, Form 10 and Prospectus filed by Upjohn and the Proxy Statement filed by Mylan. The Form S-4 was declared effective on February 13, 2020 and the Proxy Statement and the Prospectus were first mailed to shareholders of Mylan on or about February 14, 2020 to seek approval of the Combination. The proposed transaction was approved by Mylan's shareholders on June 30, 2020. The Form 10 was declared effective on June 30, 2020. Upjohn made available the Final Information Statement on or about August 6, 2020. Upjohn and Mylan intend to file additional relevant materials with the SEC in connection with the Combination. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT MYLAN, UPJOHN AND THE COMBINATION. The documents relating to the Combination (when they are available) can be obtained free of charge from the SEC's website at www.sec.gov. These documents (when they are available) can also be obtained free of charge from Mylan, upon written request to Mylan or by contacting Mylan at (724) 514-1813 or investor.relations@mylan.com or from Pfizer on Pfizer's internet website at https://investors.Pfizer.com/financials/sec-filings/default.aspx or by contacting Pfizer's Investor Relations Department at (212) 733-2323, as applicable.
Mylan N.V. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited; in millions, except per share amounts) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | |||||||||||||||
Net sales | $ | 2,948.1 | $ | 2,928.2 | $ | 8,232.2 | $ | 8,207.0 | |||||||
Other revenues | 24.0 | 33.5 | 90.3 | 101.7 | |||||||||||
Total revenues | 2,972.1 | 2,961.7 | 8,322.5 | 8,308.7 | |||||||||||
Cost of sales | 1,813.6 | 1,889.3 | 5,232.2 | 5,498.5 | |||||||||||
Gross profit | 1,158.5 | 1,072.4 | 3,090.3 | 2,810.2 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 129.8 | 167.9 | 400.3 | 488.1 | |||||||||||
Selling, general and administrative | 658.4 | 632.7 | 1,983.2 | 1,909.2 | |||||||||||
Litigation settlements and other contingencies, net | 18.9 | (51.9) | 36.5 | (30.3) | |||||||||||
Total operating expenses | 807.1 | 748.7 | 2,420.0 | 2,367.0 | |||||||||||
Earnings from operations | 351.4 | 323.7 | 670.3 | 443.2 | |||||||||||
Interest expense | 117.3 | 128.9 | 353.4 | 391.3 | |||||||||||
Other (income) expense, net | (7.5) | 9.0 | 24.6 | 32.7 | |||||||||||
Earnings (Loss) before income taxes | 241.6 | 185.8 | 292.3 | 19.2 | |||||||||||
Income tax provision (benefit) | 55.9 | (4.0) | 46.4 | 22.9 | |||||||||||
Net earnings (loss) | $ | 185.7 | $ | 189.8 | $ | 245.9 | $ | (3.7) | |||||||
Earnings (Loss) per ordinary share: | |||||||||||||||
Basic | $ | 0.36 | $ | 0.37 | $ | 0.48 | $ | (0.01) | |||||||
Diluted | $ | 0.36 | $ | 0.37 | $ | 0.48 | $ | (0.01) | |||||||
Weighted average ordinary shares outstanding: | |||||||||||||||
Basic | 516.9 | 516.0 | 516.8 | 515.5 | |||||||||||
Diluted | 517.7 | 516.2 | 517.3 | 515.5 | |||||||||||
Mylan N.V. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited; in millions) | |||||||
September 30, | December 31, | ||||||
ASSETS | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 664.5 | $ | 475.6 | |||
Accounts receivable, net | 2,964.1 | 3,058.8 | |||||
Inventories | 3,022.0 | 2,670.9 | |||||
Prepaid expenses and other current assets | 684.1 | 552.0 | |||||
Total current assets | 7,334.7 | 6,757.3 | |||||
Intangible assets, net | 10,965.8 | 11,649.9 | |||||
Goodwill | 9,817.3 | 9,590.6 | |||||
Other non-current assets | 3,125.3 | 3,257.7 | |||||
Total assets | $ | 31,243.1 | $ | 31,255.5 | |||
LIABILITIES AND EQUITY | |||||||
Liabilities | |||||||
Current portion of long-term debt and other long-term obligations | $ | 3,237.8 | $ | 1,508.1 | |||
Current liabilities | 4,037.6 | 4,061.0 | |||||
Long-term debt | 9,101.5 | 11,214.3 | |||||
Other non-current liabilities | 2,318.3 | 2,588.3 | |||||
Total liabilities | 18,695.2 | 19,371.7 | |||||
Mylan N.V. shareholders' equity | 12,547.9 | 11,883.8 | |||||
Total liabilities and equity | $ | 31,243.1 | $ | 31,255.5 | |||
Mylan N.V. and Subsidiaries Reconciliation of Non-GAAP Financial Measures (Unaudited; in millions) | |||||||||||||||||||||
Summary of Total Revenues by Segment | |||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||
September 30, | |||||||||||||||||||||
(in millions) | 2020 | 2019 | % Change | 2020 | 2020 | Constant | |||||||||||||||
Net sales | |||||||||||||||||||||
North America | $ | 1,028.8 | $ | 1,088.6 | (5) | % | $ | 0.8 | $ | 1,029.6 | (5) | % | |||||||||
Europe | 1,123.8 | 1,045.9 | 7 | % | (57.9) | 1,065.9 | 2 | % | |||||||||||||
Rest of World | 795.5 | 793.7 | — | % | 18.7 | 814.2 | 3 | % | |||||||||||||
Total net sales | 2,948.1 | 2,928.2 | 1 | % | (38.4) | 2,909.7 | (1) | % | |||||||||||||
Other revenues (3) | 24.0 | 33.5 | (28) | % | (0.2) | 23.8 | (29) | % | |||||||||||||
Consolidated total revenues (4) | $ | 2,972.1 | $ | 2,961.7 | — | % | $ | (38.6) | $ | 2,933.5 | (1) | % | |||||||||
Nine Months Ended | |||||||||||||||||||||
September 30, | |||||||||||||||||||||
(in millions) | 2020 | 2019 | % Change | 2020 | 2020 | Constant | |||||||||||||||
Net sales | |||||||||||||||||||||
North America | $ | 3,023.3 | $ | 3,035.0 | — | % | $ | 4.1 | $ | 3,027.4 | — | % | |||||||||
Europe | 3,080.7 | 2,930.7 | 5 | % | (3.3) | 3,077.4 | 5 | % | |||||||||||||
Rest of World | 2,128.2 | 2,241.3 | (5) | % | 92.7 | 2,220.9 | (1) | % | |||||||||||||
Total net sales | 8,232.2 | 8,207.0 | — | % | 93.5 | 8,325.7 | 1 | % | |||||||||||||
Other revenues (3) | 90.3 | 101.7 | (11) | % | — | 90.3 | (11) | % | |||||||||||||
Consolidated total revenues (4) | $ | 8,322.5 | $ | 8,308.7 | — | % | $ | 93.5 | $ | 8,416.0 | 1 | % | |||||||||
(1) | Currency impact is shown as unfavorable (favorable). | |||
(2) | The constant currency percentage change is derived by translating net sales or revenues for the current period at prior year comparative period exchange rates, and in doing so shows the percentage change from 2020 constant currency net sales or revenues to the corresponding amount in the prior year. | |||
(3) | For the three months ended September 30, 2020, other revenues in North America, Europe, and Rest of World were approximately | |||
(4) | Amounts exclude intersegment revenue that eliminates on a consolidated basis. | |||
Reconciliation of Income Statement Line Items
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. GAAP cost of sales | $ | 1,813.6 | $ | 1,889.3 | $ | 5,232.2 | $ | 5,498.5 | |||||||
Deduct: | |||||||||||||||
Purchase accounting amortization and other related items | (368.5) | (408.6) | (1,072.5) | (1,284.0) | |||||||||||
Acquisition related items | (9.4) | (0.8) | (11.5) | (2.9) | |||||||||||
Restructuring and related costs | (8.7) | (11.4) | (17.6) | (72.2) | |||||||||||
Share-based compensation expense | (0.4) | (0.3) | (1.1) | (0.8) | |||||||||||
Other special items | (83.6) | (70.9) | (299.3) | (268.1) | |||||||||||
Adjusted cost of sales | $ | 1,343.0 | $ | 1,397.3 | $ | 3,830.2 | $ | 3,870.5 | |||||||
Adjusted gross profit (a) | $ | 1,629.1 | $ | 1,564.4 | $ | 4,492.3 | $ | 4,438.2 | |||||||
Adjusted gross margin (a) | 55 | % | 53 | % | 54 | % | 53 | % | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. GAAP R&D | $ | 129.8 | $ | 167.9 | $ | 400.3 | $ | 488.1 | |||||||
Deduct: | |||||||||||||||
Acquisition related costs | (0.1) | (0.3) | (0.3) | (0.6) | |||||||||||
Restructuring and related costs | 0.1 | 0.1 | (0.3) | — | |||||||||||
Share-based compensation expense | (0.5) | (0.6) | (1.6) | (1.6) | |||||||||||
Other special items | (3.7) | (40.3) | (45.8) | (100.5) | |||||||||||
Adjusted R&D | $ | 125.6 | $ | 126.8 | $ | 352.3 | $ | 385.4 | |||||||
Adjusted R&D as % of total revenues | 4 | % | 4 | % | 4 | % | 5 | % | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. GAAP SG&A | $ | 658.4 | $ | 632.7 | $ | 1,983.2 | $ | 1,909.2 | |||||||
Add / (Deduct): | |||||||||||||||
Acquisition related costs | (62.9) | (41.9) | (206.5) | (53.1) | |||||||||||
Restructuring and related costs | (5.7) | 10.5 | (29.0) | (6.1) | |||||||||||
Purchase accounting amortization and other related items | — | 0.1 | — | 0.1 | |||||||||||
Share-based compensation expense | (14.2) | (15.2) | (47.1) | (48.5) | |||||||||||
Other special items and reclassifications | (7.5) | (8.4) | (12.9) | (33.1) | |||||||||||
Adjusted SG&A | $ | 568.1 | $ | 577.8 | $ | 1,687.7 | $ | 1,768.5 | |||||||
Adjusted SG&A as % of total revenues | 19 | % | 20 | % | 20 | % | 21 | % | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. GAAP total operating expenses | $ | 807.1 | $ | 748.7 | $ | 2,420.0 | $ | 2,367.0 | |||||||
Add / (Deduct): | |||||||||||||||
Litigation settlements and other contingencies, net | (18.9) | 51.9 | (36.5) | 30.3 | |||||||||||
R&D adjustments | (4.2) | (41.1) | (48.0) | (102.7) | |||||||||||
SG&A adjustments | (90.3) | (54.9) | (295.5) | (140.7) | |||||||||||
Adjusted total operating expenses | $ | 693.7 | $ | 704.6 | $ | 2,040.0 | $ | 2,153.9 | |||||||
Adjusted earnings from operations (b) | $ | 935.4 | $ | 859.8 | $ | 2,452.3 | $ | 2,284.3 | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. GAAP interest expense | $ | 117.3 | $ | 128.9 | $ | 353.4 | $ | 391.3 | |||||||
Deduct: | |||||||||||||||
Interest expense related to clean energy investments | (0.9) | (1.4) | (3.0) | (4.6) | |||||||||||
Accretion of contingent consideration liability | (3.0) | (3.8) | (9.4) | (12.0) | |||||||||||
Other special items | (1.4) | (1.4) | (4.2) | (4.2) | |||||||||||
Adjusted interest expense | $ | 112.0 | $ | 122.3 | $ | 336.8 | $ | 370.5 | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. GAAP other (income) expense, net | $ | (7.5) | $ | 9.0 | $ | 24.6 | $ | 32.7 | |||||||
Add / (Deduct): | |||||||||||||||
Clean energy investments pre-tax loss (c) | (2.9) | (10.4) | (37.4) | (43.6) | |||||||||||
Other items | — | — | 16.4 | — | |||||||||||
Adjusted other (income) expense, net | $ | (10.4) | $ | (1.4) | $ | 3.6 | $ | (10.9) | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. GAAP earnings (loss) before income taxes | $ | 241.6 | $ | 185.8 | $ | 292.3 | $ | 19.2 | |||||||
Total pre-tax non-GAAP adjustments | 592.4 | 553.0 | 1,819.6 | 1,905.6 | |||||||||||
Adjusted earnings before income taxes | $ | 834.0 | $ | 738.8 | $ | 2,111.9 | $ | 1,924.8 | |||||||
U.S. GAAP income tax provision (benefit) | $ | 55.9 | $ | (4.0) | $ | 46.4 | $ | 22.9 | |||||||
Adjusted tax expense | 98.4 | 138.4 | 344.3 | 342.8 | |||||||||||
Adjusted income tax provision | $ | 154.3 | $ | 134.4 | $ | 390.7 | $ | 365.7 | |||||||
Adjusted effective tax rate | 18.5 | % | 18.2 | % | 18.5 | % | 19.0 | % | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. GAAP net cash provided by operating activities | $ | 525.0 | $ | 487.8 | $ | 1,195.6 | $ | 1,117.0 | |||||||
Add / (Deduct): | |||||||||||||||
Restructuring and related costs (d) | 61.6 | 58.4 | 192.3 | 198.6 | |||||||||||
Corporate contingencies | 1.0 | (43.5) | 16.2 | (50.1) | |||||||||||
Acquisition related costs | 27.1 | 22.2 | 80.8 | 22.2 | |||||||||||
R&D expense | 34.9 | 59.5 | 85.1 | 125.5 | |||||||||||
Other | 18.6 | — | 63.4 | 19.2 | |||||||||||
Adjusted net cash provided by operating activities | $ | 668.2 | $ | 584.4 | $ | 1,633.4 | $ | 1,432.4 | |||||||
Deduct: | |||||||||||||||
Capital expenditures | (38.2) | (42.3) | (126.1) | (139.6) | |||||||||||
Proceeds from sale of property, plant and equipment | 0.7 | — | 2.0 | — | |||||||||||
Adjusted free cash flow | $ | 630.7 | $ | 542.1 | $ | 1,509.3 | $ | 1,292.8 | |||||||
(a) | U.S. GAAP gross profit is calculated as total revenues less U.S. GAAP cost of sales. U.S. GAAP gross margin is calculated as U.S. GAAP gross profit divided by total revenues. Adjusted gross profit is calculated as total revenues less adjusted cost of sales. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. | ||||||
(b) | U.S. GAAP earnings from operations is calculated as U.S. GAAP gross profit less U.S. GAAP total operating expenses. Adjusted earnings from operations is calculated as adjusted gross profit less adjusted total operating expenses. | ||||||
(c) | Adjustment represents exclusion of activity related to Mylan's clean energy investments, the activities of which qualify for income tax credits under section 45 of the U.S. Internal Revenue Code of 1986, as amended. | ||||||
(d) | For the three and nine months ended September 30, 2020 includes approximately | ||||||
Reconciliation of EBITDA and Adjusted EBITDA
Below is a reconciliation of U.S. GAAP net earnings to EBITDA and adjusted EBITDA for the respective quarterly periods:
Three Months Ended | |||||||||||||||
December 31, | March 31, | June 30, | September 30, | ||||||||||||
U.S. GAAP net earnings (loss) | $ | 20.5 | $ | 20.8 | $ | 39.4 | $ | 185.7 | |||||||
Add / (deduct) adjustments: | |||||||||||||||
Clean energy investments pre-tax loss | 18.5 | 17.3 | 17.2 | 2.9 | |||||||||||
Income tax (benefit) provision | 114.7 | 9.9 | (19.4) | 55.9 | |||||||||||
Interest expense | 126.0 | 119.9 | 116.2 | 117.3 | |||||||||||
Depreciation and amortization | 547.7 | 415.0 | 415.7 | 432.3 | |||||||||||
EBITDA | $ | 827.4 | $ | 582.9 | $ | 569.1 | $ | 794.1 | |||||||
Add / (deduct) adjustments: | |||||||||||||||
Share-based compensation expense | 5.9 | 19.4 | 15.3 | 15.1 | |||||||||||
Litigation settlements and other contingencies, net | 8.9 | 1.8 | 15.8 | 18.9 | |||||||||||
Restructuring, acquisition related and other special items | 217.1 | 146.6 | 278.4 | 181.6 | |||||||||||
Adjusted EBITDA | $ | 1,059.3 | $ | 750.7 | $ | 878.6 | $ | 1,009.7 | |||||||
September 30, 2020 Notional Debt to Twelve Months Ended September 30, 2020 Mylan N.V. Adjusted EBITDA as calculated under our Credit Agreement ("Credit Agreement Adjusted EBITDA") Leverage Ratio
The stated non-GAAP financial measure September 30, 2020 notional debt to twelve months ended September 30, 2020 Credit Agreement Adjusted EBITDA leverage ratio is based on the sum of (i) Mylan's adjusted EBITDA for the quarters ended December 31, 2019, March 31, 2020, June 30, 2020 and September 30, 2020 and (ii) certain adjustments permitted to be included in Credit Agreement Adjusted EBITDA as of September 30, 2020 pursuant to the revolving credit facility dated as of July 27, 2018 (as amended, supplemented or otherwise modified from time to time), among Mylan Inc., as borrower, the Company, as guarantor, certain affiliates and subsidiaries of the Company from time to time party thereto as guarantors, each lender from time to time party thereto and Bank of America, N.A., as administrative agent (the "Credit Agreement") as compared to Mylan's September 30, 2020 total debt and other current obligations at notional amounts.
Three Months Ended | Twelve Months | ||||||||||||||||||
December 31, | March 31, | June 30, | September 30, | September 30, | |||||||||||||||
Mylan N.V. Adjusted EBITDA | $ | 1,059.3 | $ | 750.7 | $ | 878.6 | $ | 1,009.7 | $ | 3,698.3 | |||||||||
Add: other adjustments including estimated synergies | (4.8) | ||||||||||||||||||
Credit Agreement Adjusted EBITDA | $ | 3,693.5 | |||||||||||||||||
Reported debt balances: | |||||||||||||||||||
Long-term debt, including current portion | $ | 12,284.1 | |||||||||||||||||
Short-term borrowings and other current obligations | 1.4 | ||||||||||||||||||
Total | $ | 12,285.5 | |||||||||||||||||
Add / (deduct): | |||||||||||||||||||
Net discount on various debt issuances | 28.0 | ||||||||||||||||||
Deferred financing fees | 52.0 | ||||||||||||||||||
Fair value adjustment for hedged debt | (35.4) | ||||||||||||||||||
Total debt at notional amounts | $ | 12,330.1 | |||||||||||||||||
Notional debt to Credit Agreement Adjusted EBITDA Leverage Ratio | 3.3 | ||||||||||||||||||
Long-term average debt to Credit Agreement Adjusted EBITDA leverage ratio target of ~3.0x
The stated forward-looking non-GAAP financial measure, targeted long term average leverage of ~3.0x debt-to-Credit Agreement Adjusted EBITDA, is based on the ratio of (i) targeted long-term average debt, and (ii) targeted long-term Credit Agreement Adjusted EBITDA. However, the Company has not quantified future amounts to develop the target but has stated its goal to manage long-term average debt and adjusted earnings and EBITDA over time in order to generally maintain the target. This target does not reflect Company guidance.
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SOURCE Mylan N.V.
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