Melissa Trombetta - Mylan NV Heather M. Bresch - Mylan NV Rajiv Malik - Mylan NV Anthony Mauro - Mylan NV Kenneth Scott Parks - Mylan NV.

Elliot Wilbur - Raymond James & Associates, Inc. Gary Nachman - BMO Capital Markets (United States) Jami Rubin - Goldman Sachs & Co. Gregg Gilbert - Deutsche Bank Securities, Inc. Douglas Tsao - Barclays Capital, Inc. Tim Chiang - BTIG LLC Umer Raffat - Evercore Group LLC David R. Risinger - Morgan Stanley & Co.

LLC Marc Goodman - UBS Securities LLC Aaron Gal - Sanford C. Bernstein & Co. LLC Andrew Finkelstein - Susquehanna Financial Group LLLP Christopher Schott - JPMorgan Securities LLC.

Good day, ladies and gentlemen, and welcome to the Mylan's first quarter earnings 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 is being recorded.

I would like to introduce your host for today's conference, Melissa, Head of Global Investor Relations. Ma'am, you may begin..

Thank you, Terence. Good morning, everyone. Welcome to Mylan's first quarter 2017 earnings conference earnings. Joining me for today's call are Mylan's Chief Executive Officer, Heather Bresch; President, Rajiv Malik; Chief Commercial Officer, Tony Mauro; and Chief Financial Officer, Ken Parks.

During today's call, we will be making forward-looking statements on a number of matters, including our financial outlook and 2017 guidance. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections.

Please refer to the earnings release we submitted to the SEC on Form 8-K earlier this morning, which is also posted on our website for a fuller explanation of those risks and uncertainties and the limits applicable to 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. We will refer to these measures as adjusted and present them in order to supplement your understanding and assessment of 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 our first quarter earnings release, which I just mentioned and which can be found on our website at newsroom.mylan.com.

Let me also remind you that the information discussed during this 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'd like to turn the call over to Heather..

Thanks, Melissa, and good morning, everyone. Thank you for joining today's call. Mylan's first quarter results marked the start of what we believe will be another great year of performance for our company.

On the top line, we generated total revenues of more than $2.7 billion, a year-over-year increase of 24%; and on the bottom line, we delivered adjusted net earnings of $500 million, or $0.93 per adjusted diluted share, a year-over-year increase of 22%.

Not only is this a strong performance as the quarter goes, it also once again demonstrates the resiliency of the global platform we've built and our ability to absorb both our industry's natural volatility as well as additional headwinds, related to particular product and/or markets.

Over the past few years, our strategic acquisitions and ability to truly integrate Mylan had allowed us to transform ourselves into a highly differentiated and diversified organization, as evidenced by our geographical reach, our broad portfolio, our extensive pipeline, and our ability to expand the world's access to high quality products.

This organization enables our unique go-to-market approach in-country, optimizing our brand, branded generic, generic and OTC products. In fact, it's precisely this unique profile and approach of how, to how we now run and drive our businesses that led us to change our reporting from product-focused segments to geography-focused segments.

For these reasons, we remain confident in our ability to meet our full-year adjusted EPS guidance range of $5.15 to $5.55, which is not dependent on any one product. Our strong first quarter results are set against a backdrop of the global debate regarding healthcare and, to a degree, unprecedented here in the U.S.

The current debate continues to focus both on how healthcare has delivered as well as its price, and we are encouraged by the recent multiple actions of players across multiple industries that help reduce the burden to patients.

As a leading generics company, Mylan has a 55-year history of providing access and serving as part of the backbone of healthcare systems around the world that help supply affordable medicine, and we fully intend to keep doing our part to deliver better health for a better world.

I'd like to take this opportunity on behalf of Mylan's board and our entire leadership team to thank all of our employees around the world for their outstanding teamwork and execution during the quarter and for their continued commitment to serving all of our stakeholders around the world.

In addition, we continue to build our bench strength and I'd like to welcome Dan Gallagher, who joined Mylan last month as our Chief Legal Officer.

His extensive experience in regulatory matters, financial markets and corporate legal affairs and governance makes him an excellent addition to our senior leadership team and further depth to our already strong legal organization. He will prove invaluable as we maximize our many opportunities. With that, I'll now turn the call over to Rajiv..

Thank you, Heather, and good morning, everyone. Before I begin, I too would like to thank our employees around the world for their continued dedication and hard work as well as their unwavering focus on our mission and business objectives.

It is this focus from each and every one of them that allowed us to again deliver strong performance around the world. Let's turn to the first quarter results where we have reported according to our new regional segments. I'll provide an overview of our top line performance and Ken will get into segment profitability.

Overall, our total business delivered revenue of approximately $2.7 billion for the quarter, an increase of 24% compared to the prior year. This performance is once again driven by the strength, diversity and the resilience of the assets we have assembled and successfully integrated.

The global pricing environment was again consistent with our expectations and previous guidance. Tony will provide an update on this topic shortly. In North America, our business grew approximately 5% to more than $1.2 billion. This increase was primarily due to net sales from the acquisitions of Meda and the Renaissance Topicals Business.

These increases were partially offset by the net impact of lower net sales from new products and existing products. As anticipated, sales of EpiPen Auto-Injector declined in the current quarter as a result of increased competition and the impact of lower priced authorized generic.

Excluding the impact of EpiPen, our North American business would have been up approximately 20%. This year, EpiPen will represent less than 5% of global revenues and less than 10% of sales in North America. In Europe, sales totaled about $900 million, a year-over-year increase of 53%.

The increase was primarily the result of net sales from acquisition of Meda. We continue to grow our leadership position in key European markets, such as Italy, where we recently became the generics market leader, and France. We also continued to experience sustained growth in our key products across the region.

In Rest of the World, sales totaled about $580 million, a year-over-year increase of 34%. This increase was primarily driven by acquisition of Meda. In addition, net sales from existing products increased, as high volumes offset lower pricing throughout the segment.

We were especially pleased to see a return to strong growth in our ARV franchise, with double digits year-over-year growth. We look forward to continued opportunities for growth in ARV with the launch of our TLE400 product in the developing world.

We continue to make good progress in the integration of Mylan and are on track to realizing our synergy targets, as evidenced by the decrease in our SG&A spend on a percentage basis year over year. We also continue to leverage revenue synergy opportunities by operating as One Mylan.

With now three quarters under our belt, these acquisitions are exceeding our expectations, and we are well-positioned to leverage these assets and see continued benefits from these assets. With regards to our operating platform, Mylan has always had a deep and unwavering commitment to quality everywhere we operate.

FDA standards for our industry continue to evolve, and this continues to raise the bar for every player in our industry, which is something we very much welcome.

For Mylan's part, we are dedicated to continually enhancing our systems and processes with a deliberate and thorough approach to ensure sustainable quality across our entire network of facilities, working closely with FDA to resolve any issues that come our way. As you are aware, we recently received a warning letter at our Nashik site in India.

We are working closely with the FDA to respond to and address the issues raised in the letter as comprehensively and expeditiously as possible. Production from Nashik site continues uninterrupted, and we anticipate no material impact to Mylan's overall business as a result of this warning letter.

At the same time, we have successfully completed remediation efforts at the three sites acquired from Agila that were under FDA warning letters.

The warning letters have been lifted at both SFF [Specialty Formulation Facility] and SPD [Sterile Product Division] sites and we are pleased with our progress at OTL [Onco Therapies Limited] site, which also was very recently inspected by FDA.

I note that during the quarter, we had 15 inspections by various global regulators across our 50 facilities. In fact, the Nashik site is in good standing with other global regulatory entities, including WHO and MHRA, which inspected the site following FDA and issued a GMP compliance certificate.

Turning now to some of our key pipeline programs, with regards to our biosimilar portfolio, we continue to make good progress on our applications and are working closely with the various health authorities on the reviews and with regard to the GCP and GMP inspection of our facilities.

We remain on track with all key programs, including insulin glargine. As a reminder, during the quarter we announced that we agreed to the terms of a global settlement with Genentech and Roche in relation to patents from Herceptin, which provides Mylan with global licenses for our trastuzumab product, excluding Brazil, Japan, and Mexico.

This global license will provide a clear pathway for Mylan to commercialize its product in various markets around the world commencing on the license effective dates. As of this quarter, we now have approval for our trastuzumab biosimilar in 15 developing markets.

On the respiratory front, we received a Complete Response Letter from FDA regarding our ANDA for generic Advair Diskus. We have carefully assessed the CRL, which represents a full review of the ANDA from all FDA disciplines. Although it's designated as a major CRL, we have a difference of opinion with the agency on certain items raised in the CRL.

We believe that the resolution of some of these points, based on our previously agreed-upon protocols with FDA, can potentially change this major designation of the CRL. In any event, the agency has again explicitly confirmed that they consider this application a high priority.

For these reasons, it's important for us to have this interaction with the FDA before we can comment further upon the potential impact of the CRL. Regardless of the timing, we remain confident that there will be a significant market opportunity for a substitutable generic to Advair and that demand for this product will be strong.

I would also like to note that we are ready from both a manufacturing and commercial perspective to launch upon approval. It's important to note that our Dublin manufacturing facility was inspected by FDA in June of 2016, and we have been informed that this facility is in good standing.

Turning to Copaxone, we have a target action date for both the 20-milligram and 40-milligram for next month. We see no reason that these dates cannot be met. We believe that all scientific questions have been resolved to FDA satisfaction and we also believe that there are no facility GMP issues that should be a barrier to approval of this ANDA.

Generally speaking, we believe that the process for approving complex generics continues to be an area that requires greater focus and clarity. And we believe that FDA is committed to enhancing its capabilities and approach in this area.

We are encouraged by the comments by the new FDA Commissioner that this process will be a priority for him, as he assumed his new office. We remain very committed to investing in complex products through our robust R&D efforts.

Mylan is distinguished from many of our competitors as a result of our willingness to make the substantial investments required over the long term to continue to bring these needed products to the patients.

Although you will continue to see some variability in our quarterly R&D spending due to the timing of program spend, there is no change to our overall commitment to investment in R&D. With that, I'll turn the call over to Tony for some additional perspective on commercial landscape. Thank you..

Thank you, Rajiv, and good morning, everyone. As Rajiv noted, we have continued to see growth across all of our regions, with very strong double-digit growth in Europe and Rest of World and solid performance in North America. We also continue to see growth from our global key brands around the world.

As in previous recent quarters, the pricing environment remains a topic of much discussion throughout our industry.

We are pleased that as a result of our diversity from a product, channel and geographic perspective, our expectations for the global pricing environment are unchanged, and we are still predicting mid-single-digit price erosion globally for the year. This quarter, we actually saw price erosion in the low single digits on a global basis.

While price erosion in our U.S. generics business was in the mid-single digits. Looking ahead in the U.S., we have several meaningful first-to-market products that launched in 2016 that have come off their exclusivity periods, which will cause fluctuations and skew year-over-year comparisons in the coming quarters.

This being said, excluding these products from our future outlook, we expect that our U.S. base business will continue to maintain annualized erosion in the mid single-digits. Let me reiterate again that we continue to believe we will see mid single-digit price erosion for our global business for the remainder of the year, including all products.

With respect to EpiPen, the authorized generic continues to gain traction and now represents almost 40% of the epinephrine auto-injector market. Additionally, we have seen market growth pick up to more than 10% year over year for the category.

The AG also continues to have the lowest wholesale acquisition cost of any Epinephrine Auto-Injector on the market. That said, competitive activity in the space continues to be robust and our overall shares declined from last year.

You are aware of the worldwide recall of 20-plus lots of EpiPen by the manufacturer Pfizer's Meridian Medical Technologies. We quickly implemented a voucher program for patients to replace any impacted products and have successfully been executing on this program.

We in partnership with our customers continue to communicate to impacted patients and replace their product as efficiently as possible while ensuring these patients have no additional out-of-pocket costs. We also note that Meridian Medical Technologies is contractually responsible for the recall costs.

We continue to be very pleased with the contribution from the assets we have acquired, which have even further strengthened our broad portfolio offering for our customers. For example, during the first quarter, we completed our acquisition of Cold-EEZE, as we continue to expand our OTC business. Cold-EEZE is now Mylan's largest U.S.

consumer healthcare brand and we look forward to serving this loyal customer base and supporting this well-known brand. With that, I will turn the call over to Ken..

Thanks, Tony, and good morning, everyone. Let me add a little more detail on our financial results. First quarter revenues grew to $2.7 billion, and that's an increase of 24% over the first quarter of last year.

This increase included growth in third-party net sales of 5% in our North America segment, 53% in our Europe segment, and 34% in our Rest of World segment. The key drivers to these increases were net sales from the acquisitions of Meda and the Renaissance Topicals Business, which totaled approximately $607 million in the quarter.

These increases were partially offset by an $86 million net decrease in the combination of sales driven by the impact of new product launches and lower volume and pricing on existing products. For the quarter, we continued to experience global generic price deflation in the low single-digits.

As Rajiv mentioned, net sales from our North America segment reached $1.2 billion and grew by 5%, up approximately 20% excluding EpiPen Auto-Injector.

Net sales from acquisitions contributed approximately $182 million of the sales growth, and partially offsetting this increase was a net decrease in sales from the combination of new product launches and lower volume and pricing on existing products. In addition, segment profitability increased 3%.

Net sales in our Europe segment increased by approximately $308 million or 53%.

The acquisition of Meda contributed approximately $338 million of the sales growth and this increase was partially offset by a net decrease in sales from the combination of new product launches and lower volume and pricing on existing products as well as the unfavorable impact of foreign currency translation of approximately 4%.

Segment profitability in Europe increased approximately 88% year over year. Net sales from our Rest of World segment increased by approximately $146 million or 34%. This increase was driven largely by the acquisition of Meda, which totaled approximately $87 million.

In addition, higher volumes from existing products, primarily in our antiretroviral franchise, plus an increase in new products more than offset ongoing pricing headwinds. Net sales in this segment were favorably impacted by approximately 3% due to the impact of foreign currency translation.

Segment profitability in Rest of World increased approximately 159% in the quarter. Adjusted gross margin for the first quarter of 2017 were 53%.

That's down less than 60 basis points from the prior year, primarily due to the impact from the launch of the EpiPen Auto-Injector authorized generic, as well as additional competition and partially offset by the contributions from prior-year acquisitions.

Moving on to our operating expenses, on an adjusted basis, R&D declined to $151 million, equating to approximately 6% of revenues, which was in line with our expectations. SG&A expense, also on an adjusted basis, increased to $592 million, primarily as a result of selling and marketing costs from the acquired businesses.

However, SG&A expense as a percentage of revenues declined by 1.3 percentage points to approximately 22% of sales, as increased revenues from the acquired businesses and benefits to Mylan integration were realized in the quarter. Our adjusted tax rate was 17.5% for the first quarter of 2017, which was also in line with our expectations.

Adjusted net earnings increased by $114 million to $500 million in the quarter and adjusted diluted EPS was $0.93 compared to $0.76 in the prior-year quarter. Turning to cash flow and liquidity, adjusted cash provided by operating activities was strong at $536 million for the first three months of the year compared to $202 million for the prior year.

The increase in the current quarter was mostly driven by favorable timing of working capital, including receivables, due to the December launch of EpiPen authorized generic. We have no amounts outstanding on our accounts receivable securitization or revolving credit facility.

At the end of Q1 2017, our debt-to-adjusted-EBITDA leverage ratio declined to approximately 3.7 times as compared to 3.8 times at the end of 2016. On a net debt-to-adjusted-EBITDA basis, we were at 3.5 times at the end of the first quarter.

We are fully committed to our investment-grade rating and to reducing our debt, as evidenced by our voluntary prepayment of $550 million on our 2016 term loans during the first quarter.

We have no significant near-term debt maturities and we remain committed to moving towards our long-term average target leverage ratio of approximately 3 times EBITDA. We have the financial flexibility to achieve this goal while still deploying capital for strategic acquisitions.

As you can see, we started off the year strong and we're very pleased with our operational and financial results for the first three months of the year. We remain committed to our previously communicated full year 2017 adjusted EPS guidance range of $5.15 to $5.55, which keeps us on track to realizing our $6 adjusted EPS goal in 2018.

In terms of phasing, we continue to see the relative percentage contribution from the first half of 2017 to be consistent with the percentage contribution of the first half of 2016. With that, we'll now open the call for questions..

Thank you. And our first question comes from Elliot Wilbur from Raymond James. Your line is open..

Thanks, good morning. First question for Heather, Rajiv, Tony.

I guess specifically with respect to the evolving consortium dynamics and particularly the McKesson-Walmart collaboration, a lot of small to mid-sized manufacturers have pointed to this dynamic as having a significant negative impact on their business or at least creating a potential to having a significant negative impact on their business.

I'm just wondering what Mylan's position is on the evolution of that particular consortium, whether or not you're actually seeing a current impact or this is something that you think is going to play out over the next couple of quarters, and then just maybe conceptually how much risk that creates around your mid-single-digit pricing erosion assumption..

Okay, Elliot. Thanks. I'll start off and then Rajiv or Tony can chime in. Elliot, I think this is no different than the consolidation we've seen over the last several years.

When you look at our customer base, the consolidation, especially from a global perspective, what we've said then and remains true today is that consolidation is really a benefit to a company like ours at Mylan, given our portfolio, our breadth.

and our geographical reach, our ability to not only supply the level of demand that is needed but to be able to do so on a global basis. And I think what we've seen as a continued strength as these customers have consolidated our ability to really leverage our entire portfolio as well as our pipeline. We've got some important products coming.

And what I would say is I can appreciate some of the players that are in one country or geographically landlocked or from a product perspective not being able to meet some of the supply and demand needed on a global basis.

So I think this further underscores Mylan's differentiated and diversified platform and is allowing us to meet and exceed quite honestly what we have done in the past with some of these players as they're looking at a different business model..

Thanks, Heather. And, Elliot, yes, historically we've seen consolidation and the consolidation of businesses and aggregating these models together have some effect on erosion.

What we continue to see, though, is that we have this differentiated platform with a diverse portfolio of products, best-in-class service levels, and the inclusion of new products into this mix in terms of always adding to what we've had.

So we're excited to service McKesson, Walmart, and all our customers, and we want to mean more to them in the future. So I think that scale along with our geographic overlap plays a very important role into our success in that business..

And I would just add that we have taken into consideration this alliance into our projections..

And that reminded me and, Elliot, I don't think we can underscore this enough, we mentioned this at Investor Day, but the continuity of our management team. We've been together over a decade working with these customers and bringing that leadership.

And I think as we look at all that's happening externally and the environment around us, that's continued to play a critical role in our ability to leverage our business. Thank you..

And our next question comes from Gary Nachman from BMO Capital Markets. Your line is open..

Hi, good morning. On generic Advair, can you give some more color at a high level on what the key differences are between you and FDA? What areas are they focused on? And then it sounds like timing is a bit up in the air.

When do you think you will be able to meet with them? And on Copaxone, just describe your readiness to launch that product, both the 20-milligram and the 40-milligram, if you actually get the approval at the action date next month..

So let me take the easy one first, which is Copaxone, and just talk about our readiness. Yes, you will expect us to be in a state of readiness from the manufacturing point of view – from commercial manufacturing point of view in anticipation of the target action dates.

Regarding generic Advair, so let me reiterate that this submission was done in complete accordance to the product-specific guidance and pre-agreed protocols. And we have not been asked to do any additional clinical endpoints or device-related studies at this juncture.

What we have been asked is now that some of the studies, especially the device-related studies, we have now been asked to analyze and report our findings of our study against the newly issued industry draft guidance for conduct of human practice studies – draft guidance.

So that's what we want to go back and discuss with FDA, and we can get this meeting any day. We have been waiting for this meeting and it can happen any moment or any day. And we can only comment upon the potential impact of the CRL once we have these discussions behind us. So that's what we are waiting for before we comment upon any impact on timing..

And our next question comes from Jami Rubin from Goldman Sachs. Your line is open..

Thank you. Ken, maybe for you, and I just want to say I do appreciate the increased transparency. We always want more, though. And based on our math, it seems that most of the miss in North America was EpiPen. And if you could, just confirm that that was the case.

Based on triangulating your numbers, it seems that EpiPen came in at around $123 million, which was well below what we were thinking. And I'm just wondering if that's related to the recall. Is that the new level of sales that we should expect? Will that continue to erode? Help us to think about that.

And secondly in terms of your revenue guide, which I don't know that I heard you reiterate – if you do want to, this is a good opportunity. If not, that says something too. But to hit the low end of your revenue guide would seem to require about $350 million in the new product sales.

I think you had talked about $850 million in new product sales at your Analyst Day. So obviously, some things work; some things don't work. But if you could comment on that math, I would appreciate it. Thanks..

All right. Jami, I first have to jump in and just say thank you for the acknowledgment on transparency. As we said, many of us have had many discussions. And we told you, I personally said that, look, I want to continue to try to give the right visibility into this business. That's what we're here to do. We've got a lot of moving pieces and parts.

We're trying to be reflective of how we're running and driving this business, which is completely leveraging all of these channels from generic brands and branded generics and OTCs and how we're leveraging those in country. So I really appreciate your recognition of that, and we're going to continue to do so.

And the one thing I'll just say on EpiPen and then I'll let Ken get into some of the financials is that, as we said on Investor Day, Jami, we anticipated a big change in EpiPen, and we knew that it would continue to be a mix between the AG and the brand and we continue to see that conversion.

But the reality is people had a very strong loyalty to the brand EpiPen and it's continued to be an education to let them know that it's the same product. But what I will say about EpiPen, it's what we expected, and obviously that continues to be into the guidance that we reiterated this morning..

I'll also say thank you for the comment because we are truly the way we put the release together and including providing you a number for North America excluding EpiPen, we'll still allow you to have that visibility into what's going on with the EpiPen product. With that number, you've done the math, you can model it, you're right in the ballpark.

As far as projecting out the year, we don't give any quarterly kind of run rate on EpiPen. But as Heather said, what happened in the quarter was very consistent with what we expected. The recall did occur. We've disclosed both in the Q and in our commentary that the costs of the recall are recoverable.

That has driven a little bit of change in trend and some of the sales number, but nothing of significance. But to reiterate, we said at Investor Day that year-over-year EpiPen profitability at the operating profit level will be down $400 million year over year, a huge number.

$500 million at the gross profit level, offset by some reduction in spending in sales and marketing. And that's exactly where we're moving through right now. So, you've done the math, you're right in the right ballpark, and everything is exactly how we expected it.

As far as new products, we said we'd have $850 million of contribution this year year-over-year for new products. And at this point in time, we're working towards that roadmap. It's a long list of products. And whether it would be at the low end, the mid, we're generating those new product launches in order to drive to $850 million..

And our next question comes from Gregg Gilbert from Deutsche Bank. Your line is open..

Thanks, team. In the interest of transparency, have you thought about giving an EPS target for next year that does not include the help of capital deployments? And then for Rajiv, two quick ones, one on Advair. Your comments seem to suggest you're not confident that your data would fit with the draft guidance. Maybe I misread that.

But could you state how you feel about the draft guidance as a potential stumbling block? And on biosimilar Lantus or glargine, can you talk about the legal and regulatory steps between now and launch? I believe there's a stay at a minimum. Thanks..

All right, Gregg. Thanks. I'll start and then I'll let Rajiv take on the products. I guess Gregg, what I would say, I am not sure how somebody gives guidance without talking about capital deployment, whether that's in business development opportunities.

I think we were very clear and transparent on Investor Day of what we said of our assumptions leading to that $6 target that we continue to walk through over the last five years.

And that deployment of cash while maintaining our balance sheet being able to bolt-on important product acquisitions, as we've done already this year and we'll continue to do so. So, look, we continue to be executing towards the roadmap that we laid out in March and we'll continue to update as appropriately.

But what we laid out on Investor Day is what we're executing against..

Yeah, Gregg, on Advair, I mean, there is nothing in my voice you should hear that we don't feel comfortable about interpreting our data to the new guidance, but we have a difference of opinion at a policy level that agency is applying a draft guidance as against a pre-approved or pre-agreed protocol.

So that's what we're trying to discuss and negotiate with them because it all adds to the timing and the classification of the CRL. Second, on Lantus, we are very much on track and you should expect to hear from us anytime now about our regulatory filing in USA..

And our next question comes from Douglas Tsao from Barclays. Your line is open..

Hi. Thanks for taking the question. So just, Rajiv, not to sort of beat a dead horse, but just following up on Advair again.

Maybe if you could just walk through what the sort of the next steps are for you providing some – or providing the Street some clarity in terms of the roadmap forward and resolving the sort of difference of opinion? And would you pursue or think about pursuing sort of like dispute resolution within the agency?.

It's too early for us. We have sought a meeting and we have been told that FDA is working on to grant us a meeting, or very soon we'll hear from them. And I don't want to comment anything beyond that. We should be able to be in a good position to talk about it once we have this meeting behind us..

Okay. And then just in terms of the warning letter at the Nashik plant, I believe that was primarily antiretrovirals. Just curious if it was limited to that. And has the warning letter had any impact on potential approvals converting to final that you might have had tentatives on? Thank you..

Nashik is not limited to antiretrovirals. Nashik is a global site and does produce some U.S. products and some of the U.S. launches will be potentially impacted by that. But as I confirmed, they are not material to our overall Mylan's business..

And our next question comes from Tim Chiang from BTIG. Your line is open..

Hi, Rajiv. Just one last follow-up question on Advair.

In assuming that you go down the pathway with the FDA and you still have this disagreement on the draft guidance, would you guys consider still trying to launch your product, but launch it without an AB rating, just go as a 505(b)(2) or launch it as a branded generic?.

No. There's no discussion in this complete response letter or a point being made about this being not 505(j) or being about 505(b)(2). And we don't see because it is exactly – the product is exactly as per the guidance issue by the FDA. It has been accepted as 505(j). So I don't want to even think and comment about that because it's not real.

So I don't want to speculate on that..

And our next question comes from Umer Raffat from Evercore ISI. Your line is open..

Hi. Thanks so much for taking my questions. Heather, I have a few, if I may. Heather, you mentioned acquisitions are exceeding expectations and I wanted to clarify, was that a comment directed at Meda, Renaissance or also at the Abbott EPD. Ken, perhaps, a quick clarification on your end. I know you're reiterating EPS guidance.

Are you also reiterating revenue guidance? Just wanted to confirm that. And then, Rajiv, we noticed Vytorin and Seroquel XR approvals for some of your competitors, but haven't seen that press release from you guys yet.

So I just wanted to understand what the cause for the delay was or is there anything at any specific facility we should be aware of? And I just wanted to stop there..

Okay, all right. Hi, Umer. I would say we exceeded on all fronts. When we acquired the Abbott EPD business, they were showing kind of a trajectory of a flat to declining business and we said, it's not about what the business is doing on a standalone, but what we believe we can do with that business.

And I think we were able to show last year that we turned that to a flat to increasing in business.

And then as we look at bringing on Meda and Renaissance, we continue to see our ability to leverage now the infrastructure around these countries that are allowing us to maximize the products that each of these acquisitions brought us, the Mylan legacy, the Abbott, as well as now with Meda.

And so we continue to see our ability to get more out of that asset than they were doing on a standalone basis in conjunction with our existing businesses. So, yeah, we couldn't be more pleased and I think we will continue to bear fruit, the results in our really integrating Mylan and leveraging this platform will continue to show in our results..

And, Umer, thank you for the question. I actually should have answered it because it was in Jami's queue of questions a little bit earlier. Yes, the componentry of the revenue guidance we're reaffirming as well..

And, Umer, Vytorin launch has been impacted by the Nashik warning letter..

And our next question comes from David Risinger from Morgan Stanley. Your line is open..

Thanks very much. Hi, Heather and team. I have three questions, please. The first is, with respect to the U.S. price decline commentary, could you just educate us on how you calculate that? I know that Teva I think at one point was excluding price declines associated with competition after first-to-file products face competition, for example.

And also I've heard that some generic companies exclude it when they have to discontinue a product due to price decline, they exclude that from their price calculation. So, if you could just educate us on how you calculate U.S. price declines, that would be helpful.

Second, with respect to Biocon, could you please review the economics, how Mylan books revenue and profits associated with Biocon products? And I'm guessing that may differ by geography. And then, finally, you disclosed global Meda and Renaissance revenue of $606 million.

Now last year, we had run rates, and I thought these were provided by the company, or I'm not sure where we got these from, but we had a total revenue run rate of about $650 million from the two. That was $555 million from Meda and $95 million from Renaissance.

So just wanted to see if indeed those numbers are accurate and the business has decreased maybe due to divestitures. Any more color on that would be helpful. Thank you..

Okay, David. I'll maybe take some at a high level and then others can chime in. I'll start with the acquisitions. Look, as we've done for this quarter and we will do this year is break out acquisitions and that contribution.

I think I'm not sure where your numbers are – if those are old numbers, but what I will tell you, again, it's what we're doing with the asset in combination.

So while we're breaking out for one year post-acquisitions to give that visibility on our legacy business to try to start now dissecting between the acquisitions, I don't think would be useful because it's really what we're being able to drive out of this asset in totality that is driving the results that you're seeing.

As far as Biocon, I don't believe we've given the contractual relationship. What I can tell you, obviously, we have a very important partnership with Biocon and continue to be very happy with the performance both in the products that are already approved in marketing and those that are in the pipeline.

So that continues to be a very important partnership. And as far as price decline, I think, Tony laid it out. I don't know if there is any other visibility.

But I think that's why we try to give the dynamics around the fact that – where you have a first-to-market opportunity and you're the only player in the market and then there's five or six players in the market overnight, that certainly can drive a little bit of anomaly and volatility as you look at a year or comparisons year over year, which is the point we were trying to make.

However, all products in and looking at everything across our globe, we're still saying our generic price erosion is in mid-single digits without excluding anything..

Heather, I think you said it very well. David, our U.S. price erosion methodology really is about like-to-like from a year-over-year perspective. And the one thing we were noting, yes, we feel very strongly about mid-single digits globally. And in the U.S.

in 2016, we had several meaningful first-to-market launches that certainly don't have the same valuation in the corresponding period for 2017. So we wanted to note what that base business corrosion would be without those in it..

And our next question comes from Marc Goodman from UBS. Your line is open..

Yes, good morning. I was wondering if you could talk about Europe a little bit and just describe the trends that you're seeing there. Have there been any major changes in any of the key markets that you're in. And maybe you can also talk about changes from a government perspective, pricing perspective, any major stuff.

And then if you could, just talk about your performance in some of your key markets. Thank you..

So I'll just start. I would say that, Marc, this is one of the areas where I think you really see the strategic acquisitions really paying dividends.

When you look at the Mylan legacy business now with Abbott and Meda and those assets both from a geographical portfolio perspective that we've been able to pull together, and as I mentioned in my commentary, really gives us the unique go-to-market in these country strategies.

You have seen us continue to bolster our number one position in France, and I would say Italy is closing in on and we currently are number one in Italy. So you've seen us really strengthen the strong positions we've had.

And in addition to that, some of these up and coming markets that Meda brought us to really bring critical mass where we see nothing but opportunity from places like UK and some of these areas where now we have a very robust product portfolio and a really strong sales infrastructure to maximize.

So I don't know, Tony and Rajiv, any other countries, but I just couldn't be more pleased myself with what these assets coming together and what our team has been able to yield..

And I think that one of the questions was do we see any more government instituted price cuts and all that. No, Marc, we don't see at this time what we saw a few years back. And this Meda acquisition and Abbott acquisition has so well positioned us to leverage anything we drop in and add on to that platform now..

And maybe just to close, we do feel very good about the growth we've seen in our leadership markets in France and Italy as well, as some of the up and coming, like Heather said, UK, Germany, Poland, and Nordics, all of them did well..

Thank you..

And our next question comes from Ronny Gal from Bernstein. Your line is open..

Good morning and thank you for taking my question. I've got three. First one staying around with the same of Europe, can you just describe the natural seasonality of revenue and operating profit from that region? There clearly is some significant one with lower contribution in the first quarter.

Just help us figure out what the gross margin will be throughout the year. Second, we've noticed a decline if you look at IMS in just your total generic volume. I guess both sequentially and year over year about 5%.

Can you talk a little bit about when you decide it's about time to stop selling particular products? Is it something we should expect a strategic direction the company is taking to walk away from unprofitable business? And then last, obviously one of the things we're trying to do always is cross over between the previous quarter and this quarter.

Can you help us understand a little bit the contribution decline from the fourth quarter of 2016 to the one quarter of 2017 of the new product launch in the fourth quarter, just so we have an ability to separate the baseline from differentiated products?.

Okay. So, Ronny, let me try. I'm not sure I quite understand your seasonality of the first question. You look at our global business today, over half of which is coming from outside of the United States, and the fact that we've got over 2,000 products on the market, there's not a real seasonality.

With that being said, I think Ken at Investor Day laid out what we saw corresponding quarters and proportionality from 2016 to 2017 that would help for modeling purposes if you look at the percentage of the businesses.

So again, I think what we couldn't be more excited about is the resiliency of this platform and the fact that the seasonality for any product or given market, we're able to now really absorb that and show this contribution continuing to grow in a meaningful way and not being so much subjected to seasonality..

And so if you think about that, because I know what you're trying to get to, which is as we move through the year, how do you look at gross margins. What we told you about the first quarter was gross margins were down 60 basis points year over year, and that is consistent with what we projected and gave you an outlook for, for the full year.

So even though seasonality may move around a bit, and you've followed us long enough to know that the second half is a bigger half than the first half is, we don't see a significant amount of variation in that. We saw in the first quarter what we have an outlook for, for the year.

Specifically, as far as new product introductions, new product launches this year we indicated would be heavier obviously in the second half. Last year, I would say if you're looking at fourth quarter to first quarter, not significantly different because they were lighter new product launch quarters..

And just on your point about unprofitable business, I would say, I try to state in my opening remarks, we've had a long history of being committed to a very broad portfolio. And as we've said, we have over – just even here in the United States over 630 products at an average selling base of $0.25. So there's a lot that goes into that mix.

And we've continued to be committed to mean the most to our customers, and we'll continue to look at that. But I will tell you that meaning the most to our customers and having a robust portfolio is important. But that's not to say that we don't evaluate.

And if something doesn't make sense at a certain period of time, certainly I think by the sheer number of what we've got in the market, it should suggest that we're very committed to continuing to offer a broad range of products..

And our next question comes from Andrew Finkelstein from Susquehanna Financial Group. Your line is open..

Hi, good morning and thanks for taking the question. I was hoping you could talk a bit more about in terms of pricing how the relationship is evolving with the large customers. You talked about the importance of the differentiation of your scale.

But does that mean a different conversation than some of the smaller players have? One of your competitors this morning talked about the consortiums coming around to understanding the need to support as partners, companies that are in generics for the long term.

So does that play into your pricing expectations and also what tends to be a more back-half weighted U.S. generics revenue figure? And then secondly on business development. You talked about at the Investor Day having a number of potential opportunities this year.

Can you comment at all just about how the environment is evolving and how you think about valuing assets and being able to forecast the prospects for these assets or companies in an environment of some uncertainty? Thanks..

Andrew, thank you. And thank you for your questions. I think what we've continued to say and what we continue to see is it absolutely is driving a different conversation.

And as the external environment has been in, I'll call it, chaos and we've seen these cycles before over the last couple of decades that it really provides an opportunity for people to really do work about a company, their portfolio, their platform and that all generic companies aren't created equally, all branded companies aren't created equally, and all hybrid companies aren't created equally.

And I think what we've continued to show is that the assets that we've pulled together on a global basis have allowed us to drive not only a different conversation but a reliable supply chain.

Our commitment to generics over the past 55 years and certainly the investment we've made in important complex generics, like generic Advair and our biosimilars, was one of the largest pipelines in the industry.

So not only do our customers see us as valuable to be able to have a global partnership, but certainly our pipeline drives much of that conversation and relationship and the importance that we are to each other.

So I absolutely can't underscore enough that how the platform and our differentiation is absolutely allowing us to have very different conversations than if we were just in one country with a niche portfolio..

And, Andrew, regarding business development, we are executing to the plan, which we shared with you on our Investor Day. We have a very exciting and active and rich pipeline, which we are trying to close certain deals and bring products home. So we see many tuck-in opportunities out there..

And our next question comes from Chris Schott from JPMorgan. Your line is open..

Great, thanks very much. Just a couple of questions here. Just circling back to Advair, would you be able to make the low end of your 2017 EPS guidance range in the event that Advair was delayed out to 2018? I know you usually don't comment on specific products, but just given the focus on this one, I think that would be helpful.

My second question also on Advair, if your dialogue with FDA is unsuccessful, can you just give us some rough timelines on how we should think about a generic Advair approval? Is mid 2018 a reasonable timeframe to think about it, if you are unsuccessful? And my final question was actually shifting gears to biosimilars and biosimilar Neulasta in the U.S., it seems like a large and very attractive market.

Is that something that could be a contributor for you in 2018 or are there still IP hurdles we need to think about there, assuming you're approved later this year? Thanks so much..

All right. Thank you, Chris. And I'll start. This is – yes, our EPS guidance range that we've reiterated this morning and I put in my commentary is not dependent on approval of any one product, to your point. Approvals are important – are an important part of our business and we have a lot of moving pieces and parts in our guidance.

So I wanted to certainly point out, it's not – that range is not reliant on any one approval. So I think that's the point of having the range and thus being able to come out and reiterate that we're committed to this guidance range..

And, Chris, as I earlier mentioned, it will be prudent for us to wait for this dialogue before we comment on the potential impact on any timing our Advair launch. And with regarding your question on Neulasta, you can expect us to have this product end of – towards the end of 2018 or early 2019..

And at this time, I'm showing no further questions..

All right..

Thank you..

Thank you, everyone..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day..