Kris King - Mylan NV Heather M. Bresch - Mylan NV Rajiv Malik - Mylan NV Anthony Mauro - Mylan N.V. Kenneth Scott Parks - Mylan NV.

Christopher Schott - JPMorgan Securities LLC Aaron Gal - Sanford C. Bernstein & Co. LLC Jami Rubin - Goldman Sachs & Co. Sumant S. Kulkarni - Bank of America Merrill Lynch Elliot Wilbur - Raymond James & Associates, Inc. Douglas Tsao - Barclays Capital, Inc. Randall S.

Stanicky - RBC Capital Markets LLC Andrew Finkelstein - Susquehanna Financial Group LLLP David R. Risinger - Morgan Stanley & Co. LLC Gregory D. Fraser - Deutsche Bank Securities, Inc. Umer Raffat - Evercore Group LLC Derek C. Archila - Leerink Partners LLC.

Good day, ladies and gentlemen, and welcome to the Mylan second quarter 2016 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Kris King, Head of Investor Relations. You may begin..

Thank you, Crystal. Good afternoon, everyone. Welcome to Mylan's conference call discussing our second quarter 2016 earnings and our acquisition of Meda AB, which I will refer to as the Meda transaction.

Joining me for today's call are Mylan's Chief Executive Officer, Heather Bresch; President Rajiv Malik; Chief Financial Officer Ken Parks; and Chief Commercial Officer Tony Mauro.

During today's call, we will be making forward-looking statements regarding our financial outlook and 2016 guidance, the Meda transaction, the acquisition of Renaissance's non-sterile topicals-focused Specialty and Generics business, and other matters related to the company and its business, including regulatory matters, product development, and acquisitions.

These forward-looking statements are subject to risk and uncertainties that could cause future results or events to differ materially from today's projections.

Please refer to the earnings release we filed with the SEC on Form 8-K earlier this afternoon for a fuller explanation of those risks and uncertainties as well as the limits applicable to these forward-looking statements.

In addition, we will be referring to certain actual and projected financial metrics of Mylan on an adjusted basis, which are non-GAAP financial measures.

These non-GAAP financial measures include adjusted net earnings, adjusted diluted earnings per share, constant currency total revenues, adjusted gross margin, adjusted cash provided by operating activities, net debt to adjusted EBITDA leverage ratio, adjusted R&D expense, and adjusted SG&A expense, and are presented in order to supplement your understanding and assessment of our financial performance.

Non-GAAP measures should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP.

The most directly comparable GAAP measures as well as reconciliations of the non-GAAP measures to those GAAP measures are available in either our first or second quarter earnings releases, which are posted on our website at newsroom.mylan.com.

Let me also remind you that the information discussed on the call with the exception of the participant questions is the property of Mylan and cannot be recorded or rebroadcast without Mylan's expressed written permission. An archived copy of today's call will be available on our website and will remain available for a limited time.

With that, I'll turn the call over to Heather..

Thanks, Kris, and welcome, everyone, and thank you for taking the time to join us today. I'd also like to take a moment to welcome Ken Parks, who joined Mylan as CFO on June 6 and is here today for his first earnings call with us.

In addition, I'd like to welcome to the call all of our employees around the world, including the most recent additions to our family, the great team we acquired on June 15 from Renaissance, and on Friday the terrific team at Meda.

We're excited about both of these transactions, with the Renaissance business bringing us a complementary portfolio of about 25 branded and generic topical products, which combined with Meda's offerings positions us to be a leader in dermatology.

The Meda transaction will allow us to build even greater scale across our operations and expand the breadth and diversity of our product portfolio, geographies, and sales channels around the world. Meda also positions us to be a leader in the global respiratory and allergy market.

In addition, these transactions further strengthen our already very strong cash flows.

As with any transaction, we believe people are the most important asset, and we're delighted with how engaged the teams of both organizations are as we now focus on fully integrating these organizations, so that we can increasingly go to market as One Mylan and maximize the potential of our expanded global platform.

With that, I'd like to elaborate a bit on the commentary I provided during our call in May, namely, that we believe that the rebasing of our sector has been a healthy exercise for the industry.

It has helped investors draw more meaningful distinctions among the different types of business models in our sector because, as we have mentioned many times in the past, it simply makes no sense to paint the industry with a broad one size fits all brush, particularly when it comes to generics and specialty, which vary widely in terms of product and geography mix.

In Mylan's case, we have spent the last decade differentiating, diversifying, and derisking by expanding through organic growth and strategic acquisitions. As a result, we now have extensive manufacturing operations, whose technologies range from API to oral solids, to injectables, transdermals, and respiratory expertise.

We have a portfolio that now stands at more than 2,700 separate products, including generics, branded generics, brands, and over-the-counter medicines. We also have positioned ourselves such that we have no significant concentration in any single product, channel, or business segment.

Moreover, we have continued to grow scale throughout North America, Europe, and rest of world. All of this has enhanced our financial strength and flexibility, positioning us to continue investing and growing for many years to come. It's for these reasons we're so proud of our performance during second quarter.

On the top line, we generated total revenues of more than $2.5 billion, year over year an increase of 8% on a constant currency basis, that was fueled by solid growth in our North America and Europe generics regions and strong double-digit growth in our Specialty business.

On the bottom line, we delivered adjusted net earnings of $592 million or $1.16 per adjusted diluted share, a year-over-year increase of 28%. I'd also like to underscore that on a sequential basis, our revenues rose by 17%.

Adjusted EPS increased by 52%, and cash flows increased 240% on the strength across all geographies, all of our business units, including new launches, demonstrating the power of us truly maximizing all of our assets.

Consistent with our historic track record of delivering stronger growth in the second half and on the strength of new product launches, EpiPen seasonality, and our recently completed acquisitions, we are committed to our 2016 EPS guidance range of $4.85 to $5.15.

As I've indicated, we could not be more excited about Mylan's longer-term prospects and look forward to discussing our bright future at our Investor Day event, which we will host in conjunction with third quarter earnings.

On behalf of Mylan's board and our entire leadership team, I'd like to thank our employees for their outstanding teamwork and execution during the quarter and for their continued commitment to our cause. With that, I'll turn the call over to Rajiv..

Thank you, Heather, and good afternoon, everyone. We continued to see solid performance across our businesses during the second quarter, once again demonstrating that the scale and diversity we have created provides us with the strength, consistency, and resilience to ever-evolving market conditions, further differentiating us from our competitors.

We launched more than 100 new products across our global platforms. And with Meda, we now sell approximately 2,700 products around the world. Overall, our Generics business delivered third-party net sales of approximately $2.1 billion for the quarter, an increase of 4% compared to the prior-year quarter.

In North America, our generics business grew approximately 6% to just over $1 billion. Growth came primarily from a significant number of new product introductions, leveraging our strong global platform. We launched 18 new products during this quarter. The generic pricing environment was again consistent with our expectations and guidance to you.

Tony will elaborate on this topic shortly. In Europe, sales totaled $604 million, an increase of approximately 6% over the prior-year period. This result was mainly due to sales of new products and higher volume on existing products, as we continued to benefit from integrated approach of selling our established product assets under One Mylan.

Pricing was essentially flat in the second quarter because of our diversified product portfolio. In rest of the world, sales totaled $523 million, a year-over-year decrease of approximately 2%.

Our operations in India improved throughout the quarter, as we saw HIV tender volumes return towards our expected levels, resulting in growth of more than 30% on sequential business compared to Q1. Additionally, Japan, Australia, and the rest of the emerging markets showed favorable sales on existing products.

With that said, we continue to remain confident in the strength of these businesses. Our Specialty division delivered revenue of $403 million in the quarter, a year-over-year increase of 33%, as a result of higher sales of EpiPen, Perforomist, and ULTIVA. Tony will provide more details on this.

Our global platform has been further strengthened and diversified by the growth of our global established brand and branded generics business, as these key brands continue to perform at or above our expectations. These established brands and branded business will be even further enhanced by the addition of the Meda brands.

Meda's attractive portfolio is just one of the reasons why I share Heather's excitement about the recent completion of the transaction.

The addition of Meda strengthens our position in several therapeutic franchises, significantly expands our over-the-counter business, and accelerates our expansion in several attractive emerging markets, which will help us further maximize our efficient, high-quality operating platforms and a broad product portfolio.

During this quarter, we also completed our acquisition of the Renaissance topicals business.

By bringing together the Renaissance business with Mylan's and Meda's strong dermatology portfolio, we are confident that we will be able to drive significant growth from this franchise, especially by taking the combined portfolio and pipeline into the new markets outside of North America.

We are looking forward to now moving from pre-integration planning to truly integrating these businesses into the Mylan family. We are very excited, as we'll be moving into integration phase along with the key leaders retained from Meda and Renaissance leadership.

While we remain focused on business continuity, we also are very excited and upbeat to realize the potential and value of bringing together the best of these organizations and our combined efforts. We also continue to execute on our strategic growth drivers, and let me highlight a few of the developments during the quarter.

Turning first to our biosimilars portfolio, we are pleased to report that we remain on track to file trastuzumab, pegfilgrastim, and glargine to U.S. FDA and European Medical Agency in 2016.

Our 24-week data from our HERITAGE study for our biosimilar trastuzumab confirmed the efficacy, safety, and immunogenicity of our product being developed in partnership with Biocon. This study was presented at the ASCO meeting in June.

And we are now expecting to present our results for the 48-week extension of the HERITAGE study at the important European Society for Medical Oncology [ESMO] Congress in October.

Recently, the European Medicines Agency has also accepted for review Mylan's Marketing Authorization Application for our proposed biosimilar pegfilgrastim, also being developed with Biocon.

In addition to analytical, functional, and preclinical data, the application also includes clinical data from pivotal PK/PD and confirmatory efficacy, safety, and immunogenicity studies completed earlier this year. The results from the studies are also expected to be presented at ESMO in October.

In addition to this, we continue to make progress on our other programs and we'll continue to provide further updates as our filings are accepted. As a reminder, with our Biocon partnership and Momenta collaboration, we have access to a combined portfolio of 15 biosimilar and insulin analog generic products in development.

This is one of the industry's most robust and diverse portfolios. As we continue to invest in this important global area, we are continuing to differentiate the structure of our partnerships. For instance, with Momenta, we have a great deal of product-by-product optionality.

On the respiratory front, our partner Theravance Biopharma announced that enrollment of more than 2,300 patients has been completed in the three ongoing clinical trials comprising Phase 3 programs for revefenacin, an investigational LAMA in development for the treatment of COPD.

The replicate efficacy studies are expected to be read out in early fourth quarter of this year, to be followed by a 12-month long-term safety study and plan for an ANDA filing in 2017. Regarding generic Advair, we remain confident in our application, as we continue to be actively engaged with FDA towards the execution of this very important ANDA.

Finally, I also would like to thank our committed and talented global workforce for their significant contributions to our business and mission during this quarter. With that, I'll turn the call over to Tony for some additional perspective on the commercial landscape..

Thank you, Rajiv. As Rajiv noted, we continued to see strong growth in our global Generics business, including in the U.S., where the pricing environment continues to be a topic of much focus.

Let me reiterate that we continue to see pricing across our very broad product portfolio to be in line with our expectations, demonstrating the importance of scale and diversity.

For example, during the first six months, both our global generics business and specifically our North American core generics business saw year-over-year price erosion in the mid-single digits. Given the continued strength of this core business, we continue to anticipate price erosion in the mid-single digits for the remainder of the year.

Our North American generic business also benefited from a large number of new product launches, including the first-to-market launches of armodafinil, doxycycline 50mg, and doxycycline 200mg, representing a combined IMS total market value of $650 million. Our Specialty business also saw double-digit growth across all our major brands.

With respect to EpiPen, revenues were driven by net price favorability, due in part to payer pricing dynamics year over year, as well as strong sales volumes in anticipation of the peak season. We began realizing the benefits of customer contract negotiations over the last several quarters.

I'd note that year-over-year comps will continue to evolve until we pass the one-year mark of the Auvi-Q recall. I want to stress that we continue to invest in expanding the size of the overall market by increasing awareness and access to this important product.

We also continue to educate stakeholders about the complex supply chain dynamics as a greater share of costs are being shifted from employers to patients. Finally, I would like to echo Heather's and Rajiv's enthusiasm for the completion of the Meda transaction.

Commercially, we see significant opportunity to maximize our robust product portfolio, which now covers an even more diverse array of Rx, Gx, and OTC products across customer channels and geographies.

We see many opportunities to do more with these products across the Mylan platform as we optimize our sales force, bring new products into new countries, and maximize high-potential brands. We also continue to be uniquely positioned to reliably supply our growing global customers' increasing demands.

EpiPen is just one example of where we can do more by consolidating our expertise across Mylan and Meda. With that, I will turn the call over to Ken..

Thanks, Tony, and good afternoon, everyone. I'll start out by saying that I'm extremely pleased to be a part of this call and a part of the Mylan team. I'll now turn to our financial results. Second quarter revenues grew to $2.6 billion, and that's an increase of 8% over the second quarter last year.

As Rajiv already noted, our Generics segment grew 4% and our Specialty segment grew 33%. The generics pricing environment was consistent with our expectations and declined at a mid-single-digit rate overall in the quarter.

While foreign currency movements were volatile following the outcome of the Brexit vote in late June, the year-over-year impact of currency translation on our second quarter result revenues was insignificant due to the diversity of our portfolio of businesses across all geographies.

As Heather noted, second quarter revenues increased 17% sequentially, with growth in both of our segments and all three geographies. Adjusted gross margins for the second quarter were 56%. That's up approximately 200 basis points from the prior year and the prior quarter as a result of the new product introductions and favorable Specialty sales.

Moving on to operating expenses, on an adjusted basis, R&D expense increased slightly over the prior year, as we continued to invest in our respiratory, insulin, and biologics programs. As a percentage of revenue, second quarter R&D declined by approximately 50 basis points from the prior year to 6.6% of total revenues.

SG&A expense, also on an adjusted basis, remained essentially unchanged at approximately 21% of total revenues in the second quarter.

As a result of our strong operating performance, adjusted net earnings increased by $118 million from the prior-year quarter to reach $592 million, and adjusted diluted EPS increased 28% to $1.16 compared to $0.91 in the prior year. I will also point out that adjusted diluted EPS grew 52% sequentially from the first quarter of this year.

For the six months ended June 30, total revenues grew to $4.8 billion. That's a year-over-year increase of 13% on a constant currency basis, and includes an additional two months of sales from our established products business.

Adjusted gross margins for the six months ended June 30 were 55%, or up approximately 100 basis points from the prior-year period. Adjusted R&D and adjusted SG&A expense were approximately 7.5% and 22% of total revenues respectively for the year-to-date period.

As a result, adjusted earnings for the six months ended June 30 increased by $195 million to reach $979 million, and adjusted diluted EPS therefore increased 19% to $1.92.

Turning to our cash flow and liquidity metrics, adjusted cash provided by operating activities was strong at $485 million for the quarter, which drove the first half adjusted operating cash flow to reach $687 million.

The strong performance in the quarter reflects improvements in our operating results combined with our continued focus on effectively managing working capital.

During the second quarter of 2016, we issued $6.5 billion of senior notes in anticipation of the completion of the Meda offer and repaid $500 million of senior notes which became due in June 2016. We have no amounts outstanding on our accounts receivable securitization or our revolving credit facilities.

At the end of Q2, our net debt to adjusted EBITDA leverage ratio was 2.2 times. We remain fully committed to maintaining our investment-grade rating and reducing our leverage subsequent to the closing of the Meda transaction.

Looking ahead, we feel confident with our ability to continue to leverage our outstanding global operating platform, which now includes the recent acquisitions of both Renaissance and Meda. And we're committed to our 2016 outlook of adjusted diluted EPS in the range of $4.85 to $5.15.

In terms of phasing of our earnings for the remainder of 2016, Q3 will again be our strongest quarter and slightly higher than Q4. With that, we'll open the call up to your questions..

Our first question comes from Chris Schott from JPMorgan. Your line is open..

Great, thanks very much, just two questions for you guys. First on the U.S.

generic environment, and thanks for all the color on the call, is there any concern on your part that some of the weakness that your smaller competitors are experiencing results in more aggressive and less rational behavior from those companies, and that could ultimately impact your franchise if the market gets a little bit destabilized by that dynamic? The second question is between the very strong EpiPen trends you're seeing right now and the earlier than expected Meda close, it seems like there could be upside to the guidance range.

Are there any offsets we should thinking about, or are you just being either cautious or conservative now in terms of the range? Thanks very much..

Hi, Chris. Thanks. So I'll start on the U.S. generics, and then if Tony and Rajiv want to add anything.

I guess from my perspective, as we've continued the dialogue around the diversifying and the differentiation in product mix and the breadth of portfolio, certainly as you look at some of the smaller players, I think weaknesses from the niche products as well as perhaps how they were playing their business and positioning it.

And I think that the other thing you have to take into consideration is balancing that, to your point about does it drive more irrationality, is our customers that are continuing to get more global and their demands and needs are getting far greater. And I know Tony touched on this in his remarks, but I really think that shouldn't be underestimated.

The need for reliable supply is continuing to I think again be a differentiator for Mylan and our ability to meet these global needs in a very reliable, as we've touted before, through sheer hard work that has been put together this last decade is a supply chain that we believe is second to none.

And I think you see some value, continued value being placed on that by our customers. So I can't speak – as we've always said, our business is going to be competitive. It always has been; it always will be.

But I don't sense I would say that hyper-competitiveness that we've seen, say, five years ago when our customers were much more willing to change just based on price and not necessarily be focused on if that company could actually supply their needs.

So I think it continues to shift towards being a not only a differentiator for us, but a real value driver and growth driver for us, which is why we have the confidence around the stability in the market. As far as EpiPen goes, Chris, here is what I'd say. You've heard me say this a thousand times.

All good things don't happen at once; all bad things don't happen at once. When you're looking at the complexity of our company globally, across geographies, across channels, across products, we believe that when we came out with our guidance this year, we anticipated obviously the Meda transaction.

We anticipated a lot of probability waiting on launches and so forth. And with all that being said, I think when you look at our guidance ranges being within 3% each way of the midpoint that we believe that's a very tight range, and we believe it's taken a lot in consideration.

And we've always said when we feel that we should update or move that guidance, we're the first to come and do that to the market. But we believe right now that it is absolutely taking a lot into consideration given all of the moving pieces across our platform..

Thank you. Our next question comes from Ronny Gal from Bernstein. Your line is open..

Good afternoon and congratulations on the quarter, two questions if I can. The first one is this issue of the EpiPen cost shift to the patients you've mentioned.

Could you just discuss a little bit more about that? How does that get reflected in your earnings? And what are you currently doing in terms of your business operations to try to help the patients along; that is, do you have confidence that that issue will not begin to impact your earnings in the next few quarters? And then second, I guess for Rajiv, on Advair, I remember the GPhA, the people presenting from FDA mentioned that only 12% of end application gets approved first round.

I know Advair is very important to you, but you can just give us a feel for what makes you confident that you can get such a complex product approved first round given the rate of approval at FDA at first round..

All right. Thanks, Ronny. I'll start on EpiPen and then hand it over to Rajiv. So, Ronny, I love the opportunity to clarify this point around insurance and the changing dynamic in the payer landscape. It really is not – the point is not being made from our earnings perspective or what we see with EpiPen.

I will continue to say that we couldn't be more proud of our investment to expand and increase access and continue to see EpiPen as an important product to the community, and as again Tony mentioned, our opportunity to even enhance that throughout Europe now with the Meda transaction.

But this point, I think there has been a lot of discussion and some headlines around patients going from paying a copay to now paying the entire cost of a product.

And where EpiPen falls, because if you look on an annual basis, as a life-saving drug, to have a WAC [Wholesaler Acquisition Cost] price at just under $600, I think that you can see it falls as not an expensive product.

And so when employers through high-deductible plans that were incentivized to increase high-deductible plans through Obamacare, as people – as employers shift more cost to employees and make that everything's got to come out of pocket before you hit your deductible is where you're seeing a lot of noise around EpiPen.

And so from our perspective, we're continuing to try to do our part on educating on that supply chain, and we all know it's complex and our healthcare and insurance is complicated. But we are just continuing to try to do our part, messaging and continuing to do everything we can to ensure patients have access to our product.

And so that really is the point on the insurance, not at all from what we're projecting from a business perspective around EpiPen..

And regarding Advair, generic Advair, Ronny, our confidence comes from two data points. One, we have been seeing generic Advair as being unique in a way just given the FDA's engagement, not just after the filing but before filing, the number of interactions, agreement on protocols, agreement on what their expectations are.

All this has been built into the science, number one. And number two, you will see that over the last five months, we have seen a huge movement about the execution of this file, just to let you give an appreciation about various PAIs, Pre-Approval Inspections, which is around device or drug substance or access to drug product, is all behind us.

Our confidence again comes back from how we see the file being executed as until date. So we are I think very confident about that maybe we'll be able to improve the FDA's percentage of first-round approvals..

Thank you. And our next question comes from Jami Rubin from Goldman Sachs..

Thank you, just a couple of questions. First, Heather, I think we've talked about this before. I think you have $1 billion or so authorized for share buyback. And when you announced the Meda deal earlier this year, you had to suspend the buyback because of the pending deal.

Now that the deal is closed and if you still believe in your $6.00 number next year, the stock does look pretty cheap. Should we expect that you implement that buyback? And secondly, just a question around the IPL process, which we will hear about in the next couple weeks, you guys still don't have Copaxone 20mg on the market.

I'm just wondering if you can share with us your expectations for what the market opportunity might look like for you for Copaxone 40mg? When do you plan to launch? And without Copaxone 20mg on the market, what does that say about your confidence level with Copaxone 40mg? Thanks very much..

Thank you, Jami. As far as the buyback goes, first let me start with this. As you know, we are constantly looking at our capital allocation, and absolutely the share buyback is an option as to how we, being part of the mix, we absolutely – it’s back on the table as an option that we have, just as we’re looking at many other ways.

I can tell you, though, our priority is really to delever. It is about really making sure we’re balancing all of that. But it is absolutely back on the table as an option. And as far as the $6.00, I guess I just want to because sometimes you guys throw these little flippers in there. What we’ve committed to is $6.00 in ‘18.

What we’ve said since announcing the Meda transaction is we have the opportunity to hit that earlier. But what we are absolutely committed to is the $6.00 in ‘18. And as far as IPR, I'll speak to the confidence, and then Rajiv, anything you want to add – or Tony on the market opportunity.

We couldn't be more confident in the IPR, the process and where we stand in that, and are anxiously awaiting the results of that next week.

And I would just remind on our confidence to get the product approved, look, the reality is that the transformation that FDA has gone through and is going through over these last couple of years with GDUFA, there have been casualties to that and there have been casualties in the backlog and how they're being able to handle them as they move towards GDUFA goal dates.

Obviously, Copaxone fell prior to getting a GDUFA goal date like our generic Advair. So all I can say is speaking on the science and speaking to our application on both the 20mg and 40mg that we absolutely have all the confidence in the world of getting it.

But as you know, I've said I'll love the fact when we're not talking about when we're going to get Copaxone approval..

Heather, I will just add that we appreciate it's been a painstakingly long process with FDA, but we just have a very minor clarification from FDA we received recently which has been responded to. And there's nothing as scientifically pending at all and we are waiting to hear from FDA about the next steps.

So that's where I would say we are pretty confident of bringing this product in the market as soon as possible and hopefully in 2016..

And we think the opportunity is still significant. It's a big product, and we still believe that it's going to be – it will be a good product for us..

Maybe just to add, it's not very often in the generic marketplace we get to launch a multibillion dollar product into a limited marketplace, and I certainly think that Copaxone is one of those opportunities. So we, as Heather and Rajiv articulated, truly look forward to bringing this product to market..

Thank you. Our next question comes from Gregg Gilbert from Deutsche Bank. Your line is open. Please check that your line is not on mute. Thank you, and we'll move on to our next question from Sumant Kulkarni from Bank of America. Your line is open..

Thanks for taking my questions.

First one, could you comment on the price versus volume component of your Specialty Branded segment? And second, given the exceptional that you've had in that Specialty Brand segment that has helped your gross margins, could you comment on the trends within the generic gross margins and how sustainable those might be going forward?.

So let me start, Sumant, and then again I'll let others chime in. As far as the mix goes and I think what we tried to articulate especially on the Specialty side is that it's a combination of certainly we've seen nice growth in volume. Yes, part of that has been to the pricing dynamic, but I think more of note is this idea of the net price.

And what Tony spoke about is that our realizing these renegotiated contracts, which we've now said starting at the end of last year, that those wouldn't happen overnight. But as we've continued to renegotiate, and as we've said, it's not just about one product, it's a whole portfolio of products, we've been able to continue to see that increase.

And so again, I think as far as us realizing those margins are sustainable as we work ourselves through these contracts. And if the dynamic around the EpiPen market would ever change, those would change as well. But I think what we're continuing to benefit now is the realization of those. And I think as far as generic....

I would say – Tony, you can add, that we are holding pretty well the volumes. We see the volumes pretty flat, and we have guided you to mid-single-digits erosion over the year, and we are seeing nothing else than the middle single digits, and that's what we are forecasting for the rest of the year..

Yes, thanks, Rajiv. And I would say I know there has been a lot of short-term focus specifically, whether on U.S. generic pricing or U.S. generic margin stability. And what I would say is over the last decade we have built our portfolio for the long term, to value-create.

And I would say stability and predictability are direct results of diversity and differentiation. And you're seeing that today and as we report it the rest of the year..

Thank you. Our next question comes from Elliot Wilbur from Raymond James. Your line is open..

Thanks, good afternoon. Heather, just going back to the Meda transaction real quickly, you had earlier I guess suggested that in fact that you're still on track or for $6.00 in '18 and can pull that forward in 2017. But specifically, I think you guys had talked about $0.35 to $0.40 EPS accretion in 2017.

And obviously, given the earlier than expected close, this will mean that you're still comfortable with that metric, but I just want to confirm that..

So I guess I'd say first marginally a little earlier. We had said Q3. But I think importantly, Elliott, to your point, I, look, could not be obviously more confident in hitting the $6.00. I think that we look forward to the opportunity to bring that up.

I can't wait to get to Investor Day that we now announced to be part of Q3 because I think our opportunity to really showcase these assets that we've pulled together from Abbott to Famy Care to Renaissance to Meda is really going to showcase this platform and our ability to really maximize these assets.

So I don't want anything to take that away, and I can tell you we are very, very focused on the opportunity and how we pull that forward. So there is – like I said, I hope you can hear the inflection in my voice that there is nothing that we're more focused on. And yes, I think we're still on track.

There's nothing that has changed that would change the accretion number that we talked about. And again, I think the Q3, once we have a couple months under our belt and we're able to come forward with our long-term vision and roadmap and ability to execute against that, hopefully our track record speaks for itself.

Again, we're going to be able to show you how we're able to do more with these assets coming together than they were doing on an individual basis..

Thank you. Our next question comes from Douglas Tsao from Barclays. Your line is open..

Hi, thanks for taking the questions. Maybe if you could, start with the generics business in rest of world was below what I was looking for in my model. I was just wondering if you could provide some perspective in terms of what might have happened during the quarter.

And then just on EpiPen, if you could, provide some detail in terms of what your sense is in terms of inventory in the channel right now because that number looks very strong. Or do you think that reflected true end demand for the quarter? Thank you..

Doug, let me respond to the rest of the world business. If you recall, in the first quarter we have seen (41:45) for the HIV tenders because the global fund and Chemonics, which is a new agency managing the tenders, has not located, and it took them time for that machine to warm up. And we started seeing an influx of tenders towards the middle of May.

So we have seen sequential growth of 30% on this business. Everything is now back on the expected levels which we were expecting. So nothing is inherently weak with that business. In fact, we are very excited by the volumes being back. So that what has resulted into 2% year-over-year decline of this overall business..

And as far as EpiPen goes, Doug, no concerns at all. We see inventory absolutely in the normal range..

Thank you. Our next question comes from Randall Stanicky from RBC Capital Markets. Your line is open..

Great, thanks.

Heather, going back to the sector rebasing that you highlighted, is that over, or are we entering a cyclical patch that could last several quarters? And then to flip a prior question around, if that is the case, does that create opportunity for you as you look to consolidate the broader space? And the second question is, what is your guys' strategy to break into the U.S.

OTC market?.

Randall, as always, you do not disappoint about getting a lot into your questions. So let me start with the rebasing because I do feel passionately about this being in this industry for as long as I've been. Look, I'm hopeful that the rebasing continues, that this is not memory loss in about a month and hot air starts building back up again.

Because I think that what we found ourselves in the generic specialty sector is unsustainable business practices. And I think that it's just that simple. And I think individual companies are now having to, however much affected they may have been by an unsustainable business practice, they're having to regroup, reorganize, and rebase themselves.

My hope is, as I mentioned, that that has driven, I think, forcing a much more thoughtful look at businesses and understanding the mix because all companies aren't created equally.

And like I said, I'm hopeful that Wall Street doesn't have short-term memory loss and goes back to trying to paint all with one or trying to support what I don't believe is sustainable long term. So we believe there has been a lot of short-term focus. We had said you can't build a great company quarter by quarter; it's over the longer term.

The last decade we have continued to hopefully show that that has paid off in both the near, mid, and long term.

And we look forward to coming back out to you guys on Investor Day and showing you how, one, that the ability for us now to take this significant financial flexibility we have and continue to build and complement this platform we've put in place which we'll, to your point, continue to consolidate, I think those assets the companies need to let go of products, and small nice tuck-ins, like we just did with Renaissance.

And as far as OTC, I'll have to ask you to wait for Q3 because I think we really want to come out in a holistic way, talk about our geographies, these channels, and how truly we believe approaching these markets with a One Mylan approach we're going to be able to do more. So anyway, look forward to that..

Thank you. Our next question comes from Andrew Finkelstein from Susquehanna. Your line is open..

Good evening, thanks for taking the question.

Could you talk a bit more about the guidance for the year? Can you quantify to any extent what the contribution is from Meda and Renaissance or to the extent, aside from timing, anything in Meda that's changed? And then as you look across some of the geographies ex-U.S., is there anything you can highlight maybe as a preview of the Investor Day of areas that are first on the to-do list to begin driving those synergies from Meda, whether it's in countries like Italy, or is it bringing products across geographies? Any hints you can give there would be appreciated..

Okay, thank you, Andrew. So I'll start with integration. Look, hopefully by now the fact of our business continuity and our track record would let you realize the fact that we are not only very focused on integration but have a very disciplined approach, that it's not just about bringing a company into the fold.

It is truly about integrating businesses, people, best practices. And so as we are now doing that over these acquisitions, most recently Meda, we absolutely, I can assure you, have multiple work streams. As we had reported last quarter, actually our preplanning phase of that allows us to hit that ground running once we hit day one.

And I can tell you I'm confident that when we do lay out those plans and those opportunities, they're very robust. They cut across all geographies. So we're not prioritizing one over the other.

The benefit of having great people and bringing their management team into the fold of our management team, we're able to really divide and conquer across the globe, across channels, and across these great brands and especially this new channel of OTC. So we couldn't look more forward to coming in and highlighting all of that.

And I guess I don't feel I can give much more of a teaser than that for Investor Day. As far as guidance is concerned, look, we've got – when you look at the complexity of not only our business in general and the Generics business, both here in the U.S.

but around the globe, that's why as we continue to grow Specialty, grow Brand Generics, grow our brands, grow OTC, it is just for that reason of complexity and volatility that we've said the diversification and differentiation lets us absorb that now. Our scale, our sheer size and scale is able to absorb that volatility and manage this business.

And hopefully when I look – and that's why I said I couldn't be more proud of Q2 that we were able to be right on top of revenue, beat the EPS consensus, and all sequentially because I know many of you that I had discussions with after our last quarter, everybody felt that we were taking such a big leap from Q1 to Q2 that if we could show that this business could perform of what we said it was going to do, that certainly would pave the way for the kind of growth and hopefully market multiple that should respond to that accordingly.

So that's why I highlighted the sequential growth of not only top line 17%, bottom line 52%, and the strength of our cash flows. So like I said, I think that hopefully you're realizing our guidance takes a lot into consideration and our ability to manage to that and perform and deliver.

Again, I think this quarter just underscores this management team's ability to do that..

Thank you. Our next question comes from David Risinger from Morgan Stanley. Your line is open..

Thanks very much. I have a couple questions, please.

I guess first, with respect to Meda, I'm hoping that you could paint a picture for how you're restructuring the business and what changes you're making to Meda after acquiring it, how you're integrating it, et cetera, and also how you have to change the accounting from IFRS accounting and accounting changes that are going to result there.

And then second, with respect to the second quarter GAAP to non-GAAP, could you just provide some detail on the $174 million in restructuring and special items? I know that you completed Renaissance, and that obviously resulted in additional restructuring charges in the June quarter.

But if you could provide some details on the $174 million, that would be great. Thank you..

Sure, David. So look, David, as far as painting a picture, we will paint a very detailed picture. We obviously have owned them now for all of a week. To my point earlier, our planning around just that, the geographies, the products, unfortunately, we could get work streams and people in line.

But as you know, the Swedish takeover rules did hinder as far as some of the detail – of getting into the details. So I can assure you that over these next couple of months we will be putting the machine that we put in place from an integration office perspective.

And I can assure you, like I said, we've retained the management teams, and it is really about us integrating, as I said, best practices. This isn't just come in and do it the way Mylan has done it.

We're getting new businesses, new business channels, new products, new brands, that it is about learning from each other, and really that's been our success in the past. I look at the Abbott EPD business. We brought that business in. It was different products than we've been in before. Some different channel.

And really bringing that management team and that business in fold, we've been able to show we could do more together than they were doing on an individual basis. And I can assure you, I have all the confidence in the world that Meda will be that same story, and we look forward to coming with that very pretty picture around Q3..

And, David, on your question around the acquisition-related costs, I'll answer the question. I'll also point out that we filed our 10-Q concurrently with this call, and we have those details in there. But primarily, the biggest chunk of that $174 million of cost is really due to the financing-related acquisition costs around Meda.

And we've broken out in there that we did some purchase of Swedish kronor ahead of time. We had an unrealized loss on that due to the movement in the currency over the time period, and also the fees related to the financing and the existing bridge loan facility that we took into place.

All of that is broken out in the footnote there, but that is substantially all of the cost. And on the IFRS accounting side, as you know, we also prepare Mylan's books and records on both U.S. GAAP and an IFRS basis. We started that process last year. We will continue to basically just roll the Meda process into that.

So we've already done it through the Mylan accounts, and we'll do it the same way with the Meda accounts..

Thank you. Our next question comes from Greg Fraser from Deutsche Bank. Your line is open..

Thank you. It's Greg Fraser on for Gregg Gilbert. I had a quick follow-up on the very robust Specialty sales. You commented on the strong demand growth and the price growth, and the inventories were normal. I just wanted to confirm that there weren't any one-time type items that helped sales in Q2.

And maybe you could comment on how you're generally thinking about market penetration and growth potential for EpiPen over the longer term. Thank you..

No, I'll reiterate. There's nothing out of the norm when we look at our EpiPen business right now. And again, as we stated, we're going to have to continue to evolve until we get one year under our belt from the Auvi-Q recall because obviously how that plays out, especially in Q4, that will continue to evolve.

As far as just the overall strength of EpiPen, I think as we've talked before, the brand equity of EpiPen, the life-saving nature of this important medicine, our continuing to educate and invest in the access to this product, I believe that EpiPen will be a very, very important product for a very long time.

With that being said, I think as I said earlier in my remarks, we don't have a significant concentration from any one product or business segment at Mylan today. And as we continue to grow, just as now we're bringing Meda into the fold, EpiPen from a true dollar contribution will just continue to shrink.

So again, there's no over-reliance on EpiPen as a brand. But I can tell you that there's every bit of focus on the role EpiPen plays in the lives and saving lives and then getting to as many patients as we possibly can. So that's what I would say about our EpiPen franchise..

Thank you. Our next question comes from Umer Raffat from Evercore ISI. Your line is open..

Hi, thank you for taking my question. Heather, what was the year-over-year organic growth for the Abbott EPD business? And then what was the organic growth for the Generics business excluding Abbott and excluding any tuck-ins year over year, one? And then perhaps one for Tony as well.

Tony, so on generic Advair, Glaxo on their transcript recently said that they've absorbed a vast chunk of genericization effect through price reduction already on generic Advair. And they're saying the generics no longer have a straightforward "proposition".

How do you think about that market going into first quarter next year and your PDUFA?.

So, Umer, we have said, I think I've been pretty consistent on this for years as we bring in acquisitions. I think that as we did with Abbott, for that first year we broke out, so you could continue to see the growth from Mylan and the growth from EPD.

But honestly, because of our robust integration processes and bringing these companies together, it's now Mylan legacy. So for me to sit here and try – that is what our business is. And like I said, Q3 we'll look forward to being able to now highlight Mylan in this platform and now bringing Meda into the mix.

But it would be – it's just not even possible for us to break it apart that way anymore because we truly are going to market as One Mylan. And we've got strong products, strong brands that's complementing the retail segment, the physician channel, and now the OTC channel.

So all I can say is that we continue to see robustness around these products that we've brought in, and we continue to grow them. And as far as Advair, I can't – I'll just say that obviously when you have an $8 billion – $9 billion brand product, we couldn't be more excited to bring the generic to an affordable alternative to market.

And again, I think there will be significant barriers to entry just given the complex dynamics. And so I can't – I think it will be an incredible important product that we'll able to bring to patients..

Maybe just to add, certainly throughout the last 20 years we've seen opportunities when brands came in and tried to be generics and when generics went against other generics. It's a voluminous competition field, we certainly realize that.

And I don't think there's anybody based on our breadth of portfolio, based on our relationships with customers in the retail segment, the payer segment; that we're ready for it and we're excited about it and look forward for the opportunity to bring that product to market..

Thank you. Our next question comes from Jason Gerberry from Leerink. Your line is open..

Hi there, this is Derek on for Jason, just a couple questions. So first, could you provide the contribution from the Renaissance transaction in 2Q, and then just give some color on the growth profile of that business? And then second on biosimilars, you guys have made some regulatory progress there.

What would it take to get you to take a larger stance in that market and maybe own 100% of the economics? Thanks..

So as far as Renaissance goes, no, we don't break out product-level contribution. As I said, we acquired 25 brands and generics and brought them in the fold June 15. And as I said, when you look at that combined with now the Meda assets in derm that we are bringing on board is really going to allow us to be a leader in that space.

We think the derm space is a nice niche space. It's one that we didn't have critical mass around before.

And again, just like all of our other product lines, bringing that kind of critical mass and combined with the critical mass we have around all these other therapeutic franchises, we're again just able to leverage them and maximize them from our global customers to meaning the most to our patients.

As far as biosimilars, I would challenge that no one has doubled down in this field any more than we have. We now have access to up to 15 products, optimizing our global commercial platform. So we will continue obviously to invest very heavily.

But I would suggest that we have more investment in biosimilars today and certainly as we look over the horizon from an R&D perspective..

Okay, thank you. Thank you, guys. We appreciate all your questions and look forward to seeing you soon..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day..