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

Jami Rubin - Goldman Sachs & Co. LLC Aharon Gal - Sanford C. Bernstein & Co. LLC Elliot Wilbur - Raymond James & Associates, Inc. Gregg Gilbert - Deutsche Bank Securities, Inc. Liav Abraham - Citigroup Global Markets, Inc. (Broker) Chris Schott - JPMorgan Securities LLC Douglas Tsao - Barclays Capital, Inc. Irina R.

Koffler - Mizuho Securities USA LLC Akash Tewari - Evercore Group LLC.

Good day, ladies and gentlemen, and welcome to the Mylan Fourth Quarter and Full-Year 2017 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, today's conference may be recorded.

I'd now like to introduce your host for today's conference, Ms. Melissa Trombetta, Head of Investor Relations. Ma'am, please go ahead..

Thank you, Liz. Good evening, everyone. Welcome to Mylan's fourth quarter 2017 earnings conference call. 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 guidance for 2018. 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 furnished to the SEC on Form 8-K earlier this evening, as well as our supplemental earnings slides, all of which are posted on our website at investor.mylan.com for a fuller explanation of those risks and uncertainties, and the limits applicable to forward-looking statements.

Mylan routinely post information that may be important to investors on this website, and we use this website address as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC's regulation fair disclosure.

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 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 our fourth quarter earnings release and supplemental earnings slides.

Let me also remind you that the information discussed during this call, with the exception of the participants' questions, is the property of Mylan and cannot be recorded or rebroadcast without Mylan's express 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 afternoon, everyone, and thank you for joining our call. I recognize that a reoccurring theme on many of these calls hosted by pharmaceutical companies in recent quarters relates to the ongoing challenges affecting our industry and the entire healthcare sector in the U.S.

I know that's created a lot of uncertainty about what the future holds for our industry. But the fact is, tremendous opportunity awaits the company that's both willing and able to break down the barriers to access to affordable medicine around the world, invest in capacity, and launch new products. Mylan is that company.

Having built a one-of-a-kind platform whose strength, diversification and resilience positions us like no other company to provide the kind of leadership needed to truly deliver Better Health for a Better World. We continue to lead the charge to remove barriers to access globally. A couple of great examples to illustrate this.

One is our generic RESTASIS, which we look forward to launching in the United States. This product may not become a significant financial driver for us as it will open the market for all, but it is a great example of our ability and willingness to fight the good fight to make an important ophthalmic product available to many more Americans.

Similarly in Europe, we overcame numerous IP barriers to secure approval to market the first generic of the 40 milligram strength of Glatiramer Acetate, which we since launched in Netherlands, Germany, the U.K. and Norway.

This development builds upon approvals received in 2016 for the 20 milligram strength, which already is available in several European markets. We're happy for the many additional MS patients these products will help. In various emerging markets, we've partnered with other companies to break down barriers as well.

Our launches during the year of MyHep All, which treats hepatitis C in India, and our introduction of the first half based, fixed-dose combination to be offered to patients being treated for HIV in developing countries are perfect examples.

I'd like to point out that our commitment to steaming the tide of HIV is Mylan's most compelling example to-date of our commitment to breaking down barriers to access. More than 40% of people being treated for the disease globally depend on the Mylan product.

As you consider the statistic, keep in mind that combating infectious diseases is but one of the multiple therapeutic areas Mylan is focused on. In fact, you can count on us to do next for cancer and diabetes what we've already done for HIV, as we dramatically expand the number of patients served.

With all this said, Mylan was by no means immuned in 2017 to the industry's turbulence, particularly as experienced in the U.S., the world's largest pharmaceutical market. But we believe we were best positioned to absorb the impact, deliver growth and expand access.

In fact, it was precisely because we saw where the industry was heading that we embarked about a decade ago on our journey to transform Mylan and move into the much larger and more stable global community we now live.

As a result, we're able to leverage the benefits of scale, diversification and integration, giving us deep confidence that Mylan truly is Built to Last, as demonstrated by our performance this year. We delivered solid financial results. For instance, with total revenues rising 8% year-over-year to approximately $12 billion.

More than half of this amount was generated outside of the United States, owing to the scope and scale of our operations. Adjusted EPS fell 7% compared to 2016, as we absorb the decline in profitability of approximately $500 million associated with the rebasing of EpiPen.

We also generated $2.6 billion in adjusted free cash flow, up more than 20% year-over-year from durable, recurring revenues across all markets around the world. Further, consistent with our commitment to maintain a healthy balance sheet, yet another quality that distinguishes Mylan, we accelerated debt repayments of about $1.36 billion.

We also completed our $1 billion share repurchase program, returning capital to our shareholders at a time when we recognize our shares as being substantially undervalued. For all of these accomplishments, I'd like to take a moment on behalf of our board and entire leadership team to thank all Mylan employees.

Their outstanding execution and unwavering commitment to differentiate Mylan and deliver Better Health for a Better World is why we couldn't be more excited about our prospects for 2018. As you'll see, our focus for the year is not executing and leveraging everything we've brought together to continue carrying out our ONE Mylan strategy.

That means further integrating Mylan to optimize our global cost structure. It means realizing the value of every single launch around the world, including important ones, like Glatiramer, Wixela, and pegfilgrastim in the U.S.

And despite the continued value we expect to generate with new product launches, we remain proud of the diversification we've achieved, as demonstrated by the fact that no single product is expected to account for more than 3% of our revenues.

Moreover, given the growth we expect to see in our Europe and Rest of World segments this year, we anticipate that they'll account for an even greater proportion of our total revenue. That will, again, help offset continued volatility in the U.S. as our customer base continues consolidating and concentrating and as competitive pressures persist.

Given this dynamic, we'll no longer provide guidance around pricing as it will put us at a competitive disadvantage. Moving on to guidance. We look forward to delivering a strong financial performance this year.

Specifically, we expect to generate total revenues of between $11.75 billion to $13.25 billion, representing a year-over-year growth of approximately 5% at the midpoint. This guidance assumes flat growth in North America and high single-digit growth in Europe and Rest of World.

On the bottom line, we expect to deliver adjusted EPS in the range of $5.20 to $5.60, representing year-over-year growth of approximately 18% at the midpoint. In addition, we're looking to generate adjusted free cash flows between $2.1 billion to $2.5 billion.

Finally, we will continue to engage with all of our stakeholders about our story and being Built to Last. And as part of this, we look forward to hosting an investor event on April 11 in New York. And with that, I'll now turn the call over to Rajiv..

Thank you, Heather, and good afternoon, everyone. I would first like to thank our employees for their unwavering dedication as we close out another strong year and successfully executed on many fronts, both commercially and operationally.

I echo Heather's excitement for our Investor Day in April and look forward to highlighting the strength of our platform and our industry-leading differentiated pipeline. I will now walk you through the key drivers of our 2018 outlook. We see 5% top-line growth while targeting EPS growth of 18% at the midpoint of our guidance range.

During 2018, we will focus the execution of our significant launches, like generic Advair and many more, to further strengthen our durable portfolio. At the same time, we'll continue to focus on Mylan integration while leveraging our cost of goods structure, our globally vertically integrated platform as well as our optimize G&A footprint.

At the same time, we'll be strategically reinvesting in our business, especially in the area such as sales and marketing and lifecycle management of several global key banks. All of these efforts will further ensure that Mylan is Built to Last.

From a segment perspective, in North America, specifically in USA, we have several exciting opportunities such as the launches of generic Advair and pegfilgrastim, our first planned biosimilar launch in the U.S. We also will continue to build upon the momentum from our Q4 2017 launches of Glatiramer Acetate and generic ESTRACE Cream.

Another important effort will be around further strengthening our ARV franchise in U.S., as we will be very shortly launching our novel ARV combination of (11:05) in addition to recently launched first generic of Efavirenz. Our U.S.

portfolio is now and will increasingly be more durable and diversified as a result of our meaningful investments in recent years in injectables, OTC, respiratory, biosimilars and dermatology. These differentiated and robust offerings give us a greater ability to weather the ever-changing dynamics of the U.S. market.

In Europe, the 2018 growth will be driven by our established brands, our OTC portfolio, as well as several new launches such as Glatiramer Acetate 40 mg/mL, (11:49), as well as our Insulin Glargine. We continue to invest in the lifecycle management of some of our key brands in the region, including Creon, Influvac and DYMISTA.

For Creon, we are developing the two additional new strength. And for Influvac, we successfully developed a quadrivalent vaccine, which has been approved in 2017 and will be launched commercially in 2018. As we expand our ARV presence around the world, we are now the leading generic player in the major European markets also.

These drivers, along with our well-balanced portfolio, has led a sheer number of products across more than 35 countries in the region will continue to drive the long-term durability of our European business and especially help us consolidate and strengthen our leadership position beyond France and Italy.

In rest of the world, the growth in 2018 will be driven by portfolio expansion of our OTC and established brands across several new geographies such as China, Brazil, Turkey and Russia. We see sizable opportunities in these high-growth markets. We also continue to expand our biologics portfolio and pipeline across many emerging markets.

Another key driver for this segment continues to be our HIV and infectious disease franchise. Mylan has been the first to market suppliers for nearly half the new medicines approved under PEPFAR since 2009. And 2017 was no different as we got approval of Dolutegravir, Emtricitabine and TAF tablets.

Also late last year, we launched HepBest 25-milligram, a once daily tablet for treatment of chronic Hepatitis B in adults. Our vertically integrated platform and the capacity we have created over the last decade has helped us to stay and lead in many of these highly competitive tender markets. Turning to our pipeline.

I'm especially proud of our deep scientific clinical regulatory and intellectual property capabilities and the positive momentum we have built to bring complex products to the markets.

During the last quarter, Mylan and Biocon, Trastuzumab was the first FDA-approved biosimilar to Herceptin and represent a significant achievement for Mylan as it also was our first biosimilar approved in the U.S. We also received approval of Brazil's first trastuzumab biosimilar in partnership with Biocon and Libbs.

Marking another positive step in increasing access to this critical product for the patients with HER2-positive breast and gastric cancers around the world. We have currently secured marketing authorization in 20 emerging markets for trastuzumab.

In the U.S., we continue executing on our BLA for pegfilgrastim and are confident as we approach our FDA action date in June of this year. We are looking forward to launching this product in U.S. in the second half of 2018.

Also, last quarter, the EMA accepted our resubmissions for both trastuzumab and pegfilgrastim, and we continue to work with EMA to move these programs forward and launch them in European markets at the earliest opportunities.

Regarding our proposed biosimilar to EYLEA, we along with our partner, Momenta, previously announced that FDA has accepted our R&D. We plan to begin Phase III trials in the first half of 2018 and look forward to updating you as our program progresses.

For our Bevacizumab proposed biosimilar to Avastin, we obtained marketing and export authorization in India and launched last quarter. We are planning more than 30 submissions in 2018 in rest of the world markets.

For developed markets, including Europe, U.S., Australia, and New Zealand, our Phase III clinical study is progressing well and we target to file our BLA at the end of 2019. We also believe that we are now positioned to potentially launch adalimumab, a proposed biosimilar to HUMIRA, at market formation in Europe later this year.

We look forward to discussing this program in more detail in our April Investor Day. Moving to our insulin programs. We're pleased with CHMP's decision last month to recommend approval of Mylan and Biocon's Biosimilar Insulin Glargine. This further validates our abilities to deliver on our complex product portfolio globally.

We expect to begin launching the product across various markets in Europe in the second half of 2018. For U.S. market, our application is in active review with the agency, and we are responding to the information request as and when they are received.

We also continue to communicate and pursue with agency towards defining a pathway for substitutability. Last week, our partner, Biocon confirmed that their insulin facility in Malaysia received, from FDA, 6 observations during their PAI.

We, along with Biocon, are viewing FDA's comments and feel confident in our ability to quickly address the observations. In December, U.S.

Patent and Trademark Appeal Board instituted IPR review on all claims against two Orange Book-listed patents, in reference to Insulin Glargine, marking another step forward in our ongoing efforts to bring a substitutable version to the patients as soon as possible.

We're also very pleased to report the progress of our other insulin pipeline program as we move insulin aspart, a biosimilar to NovoLog into the clinic. Moving on to respiratory. We continue to advance our program with the FDA on our generic Advair application.

Over the last few weeks, the FDA has provided us feedback on almost all the disciplines in the form of several information requests. We have already responded to some of these requests and are in the process of responding to rest. We remain optimistic about this very exciting opportunity, for a June 2018 approval and launch.

We look forward to bringing this product to market as soon as possible and providing an affordable alternative to patients. Moving on to our nebulized program of revefenacin. FDA recently accepted Mylan and Theravance Biopharma's NDA for revefenacin in adults with COPD and have signed a PDUFA date of November 13, 2018.

We believe that revefenacin when approved, will offer a convenient once daily nebulizer option for patients and will further strengthen Mylan's robust and growing respiratory portfolio.

Earlier this week, Theravance Biopharma announced the completion of a Phase 3b study of revefenacin, which is intended solely for commercialization purposes and not required for FDA approval.

While numerical improvements for revefenacin over tiotropium are not statistically significant for the primary endpoint, the study provided important insights for the use of the product if approved, in patients with COPD. Moreover, revefenacin was generally well tolerated and no new safety issues were identified.

Regarding generic Symbicort program with our partner, 3M. As we previously announced, the pivotal PK studies are now completed with BE demonstrated for both low and high strength products. We have completed the clinical equivalence study and are on schedule to submit our 505(j) ANDA by the end of June 2018.

Regarding our generic RESTASIS program, we are working towards our target action date of July 2018. This product has been another example of Mylan leading the fight for access to affordable medicine.

Earlier today, we announced the global collaboration and licensing agreement with our partner Revance, for the development strategy and commercialization of our post biosimilar to BOTOX. We plan to work together to advance the regulatory approvals in the development of this important biosimilar product and commercialization in U.S. and towards Europe.

The manufacturing process and the know-how owned by our partner for the process and selling (21:24) capabilities, combined with Mylan's scientific, regulatory, and legal capabilities, will differentiate us and our ability to bring this drug to market.

The addition of this product further solidifies Mylan's long-term commitment through the development and commercialization of biosimilars and complex products globally. This is just another example how Mylan today is being viewed as a partner of choice due to our ability to execute on science and commercialization capabilities.

We continuously look for opportunities, and 2017 was no different. For example, we executed on a portfolio of specialty dermatology products, the addition of a brand Cold-EEZE to our OTC baskets and a niche portfolio of complex and hard-to-make APIs.

As I said before, I have never been more excited about the future of Mylan, with our continued diversification across channels and geographies in addition to our unique and durable platform. With that, I will turn it over to Tony..

olmesartan and olmesartan/HCTZ. As we have continued to maintain full-year price erosion in our North American generic business came in as we estimated in the high-single digits.

As Heather stated, going forward, we will no longer be giving country-specific generic price erosion results or expectations as we feel this places us at a competitive disadvantage in the market.

Our results in North America were more than offset by strong growth in our Europe and Rest of World segments, which together now account for nearly 60% of Mylan's revenues. In Europe, sales totaled almost $4 billion, a year-over-year increase of 34%. This strong organic growth came from countries like Italy, the U.K.

and Germany, as well as a positive impact in key markets such as Italy, France and the U.K. from Meda acquired products. Notable, too, was the stability and performance of our strong, durable brands in the region such as Creon, Betadine, Brufen, Influvac and DYMISTA, which represent nearly $500 million in sales for this region.

Building on my earlier comments related to complex products, we received marketing authorization for the first-generic of the 40-milligrams strength of Glatiramer Acetate in partnership with Synthon and launched in the Netherlands in the fourth quarter, followed by launches in Germany, the U.K. and Norway earlier this year.

We are excited about the opportunity to continue launching the product throughout Europe as additional approvals are received. Our Rest of World segment generated sales of $2.8 billion, a year-over-year increase of 19%. This strong growth was driven in part by new Meda assets, as well as very strong performance within our ARV tender businesses.

Key brands such as Elavil and Hertraz in emerging markets and AMITIZA in Japan also helped grow the top-line. Additionally, Australia grew 17% year-over-year as a result of growth in brands, generics and our partnership efforts. We are pleased with the performance in this region and continue to see growth opportunities in our portfolio.

While Ken will go into a detailed financial guidance, I'd like to take a moment to underscore my optimism and excitement as we head into 2018. As Rajiv outlined, I am encouraged by our commitment to reinvest in our business, especially in the areas of sales and marketing. Doing so will allow us to keep leveraging our global commercial platform.

In addition, it will ensure commercial readiness as we launch Glatiramer in additional markets around the world and boost conversion rates as we introduce our other key products such as pegfilgrastim and generic Advair and as we expand our global key brands.

In summary, we continue to believe that our distinct product mix of generics, brands and over-the-counter medications across a range of therapeutic categories sold in multiple sales channels and combined with an expansive geographic reach and a one-of-a-kind commercial platform position Mylan better than any other company in the industry to be the partner of choice to our customers and deliver better health for patients.

And it's why we couldn't be more excited about Mylan's very bright future in all of our regions. My excitement is brought to life each day, not only by the nearly 7,000 people around the world who make up our commercial team, but also everyone at Mylan for their dedication to our customers and to the patients who depend on our products.

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

Thanks, Tony, and good afternoon, everyone. Turning to our financial results. Rajiv and Tony have already taken you through the details of our consolidated and segment revenues, which were in line with our expectations. I'll cover the remainder of our financial results. Adjusted SG&A increased 3% in the quarter versus the prior year to $602 million.

For the full-year, adjusted SG&A increased slightly to $2.4 billion and declined 40 basis points as a percentage of total revenues. The dollar increase is due primarily to the full-year impact of the acquisitions of Meda and Renaissance.

It's important to note that both the quarter and the full-year benefited from our ongoing integration activities, which partially mitigated this impact as we continue to optimize our cost structure. Adjusted R&D was approximately 5% of total revenues for the quarter, which was in line with the prior year.

For the full-year, adjusted R&D was down 80 basis points to 5.5% of total revenue versus the prior year, mostly due to the reprioritization of global programs. Our adjusted effective tax rate for both the quarter and the full-year 2017 was 18% and was in line with the low end of our revised guidance. Moving on to segment profitability.

As a result of the declines in third-party net sales, including EpiPen, segment profitability in North America declined 12% in the quarter to $687 million. Partially offsetting this decline, segment profitability expanded in Europe and the Rest of World segments by 76% and 6%, respectively, reflecting new product sales contributions.

Europe also benefited from higher volumes in our base business, along with favorable pricing and integration activities.

For the full-year, combined regional segment profitability grew 5% versus the prior year, Europe grew 62% and Rest of World grew 54%, both benefiting from the full-year impact of acquisitions and the impact of our ongoing Mylan integration activities.

This growth was partially offset by a 15% decline in North America, mostly due to lower pricing and lower volumes on existing products including EpiPen.

Adjusted net earnings declined to $765 million and adjusted EPS declined 9% to $1.43 in the quarter, both driven by lower gross profit from third-party net sales in North America, partially offset by the impact of integration activities.

On a full-year basis, we reported adjusted net earnings of $2.4 billion and adjusted EPS of $4.56, both in line with our revised guidance ranges.

The 7% decline in adjusted EPS versus the prior year reflects the approximately $500 million negative profit impact from EpiPen, partially offset by favorable impacts from the Meda and Topicals Business acquisitions, along with the benefits from integration activities. Turning to our cash flow and liquidity metrics.

Adjusted net cash provided by operating activities totaled $2.9 billion for the 12-months ended December 31, 2017 compared to approximately $2.5 billion in the prior year period. Capital expenditures totaled $257 million compared to approximately $390 million in the prior year.

As we've said previously, we're fully committed to maintaining a healthy investment grade balance sheet and to continuing to de-lever. During 2017, we demonstrated that point by paying down our debt by approximately $1.4 billion while at the same time, continuing to invest in the business.

At the end of 2017, our debt-to-adjusted EBITDA leverage ratio was 3.8 times and was in compliance with our debt covenant requirements. Based on our adjusted EBITDA growth and debt reduction assumptions in 2018, we expect to reduce our leverage ratio to below 3.5 times.

We remain committed to our long-term target ratio of 3.0 times, as well as our investment grade credit rating. Our strong cash flow performance track record reflects the strength and the durability of our portfolio. Moving to 2018.

At a high level, we expect total revenues in the range of $11.75 billion to $13.25 billion, which represents an increase of 5% at the midpoint versus full-year 2017. Full-year adjusted EPS is also expected to increase from $4.56 in 2017 to a range of $5.20 to $5.60, an 18% increase at the midpoint.

And finally, we expect adjusted free cash flow in the range of $2.1 billion to $2.5 billion. As you heard from Rajiv and Tony, in our top-line outlook, we expect positive volume growth and a significant contribution from new product launches, including and pegfilgrastim.

This is coupled with the carryforward impact of 2017 launches, including Glatiramer Acetate. These are expected to more than offset the competitive market dynamics in the U.S.

As shown on Page 10 in the investor presentation, you'll see we expect adjusted gross margin to expand over 180 basis points at the midpoint from 2017 to 2018 while absorbing the expected global pricing headwinds.

This expansion is driven by the benefit of new launches and increased volumes in addition to our ability to further leverage Mylan integration as we continue to identify opportunities to optimize our global cost structure. For 2018, we do expect the potential slight upward pressure on our adjusted effective tax rate at the midpoint of our guidance.

As I mentioned earlier, our 2017 rate was 18%, and we're now estimating for it to be in the range of 17.5% to 19% in 2018. The slight increase is due to implementation of the tax reform changes that were passed late last year, as well as the changing mix of geographic profits as our portfolio continues to diversify globally.

As shown on the adjusted EPS bridge on slide 12, you clearly see the positive contribution from the gross profit growth driven by new product launches and volume from existing products. We're able to invest more in the selling portion of SG&A as we continue to reap benefits from our Mylan integration activities.

In addition, we expect a slight benefit from lower R&D spending focused on less crowded, more complex, hard to produce niche products.

Finally, we expect interest, tax, shares and FX to be a net positive impact on adjusted EPS and is mainly driven by the lower share count following the completion of our $1 billion share repurchase program in the beginning of 2018.

As a result of our continued strong cash flow generation; for the full-year, we expect to generate between $2.1 billion to $2.5 billion of adjusted free cash flow, net of capital expenditures between $300 million and $500 million.

Our ability to generate strong cash flows reflects the strength and durability of our portfolio resulting from the decade-long transformation of our business into a global, diversified player and is supported by the strength of our balance sheet, which provides us with financial flexibility to invest in the future of our business.

A quick comment on calendarization as you think about modeling for 2018. We expect total revenues to be second-half weighted similar to 2017. However, we expect adjusted EPS to be slightly more heavily weighted to the second half relative to 2017 due to higher profitability of new product launches, which will be second-half weighted.

Finally, we also expect Q1 to contribute slightly less adjusted EPS on a relative basis than it did in the prior year. We're very proud of the business that we built over the last decade and we believe that we're uniquely positioned to fully realize the value of the transformation and our differentiated portfolio.

It's that differentiated business model, our global talent, our execution track record, and our ability to generate significant cash flows that give us the confidence in our ability to successfully execute through the dynamic nature of our business. With that, we'll now open the call for questions..

Our first question comes from the line of Jami Rubin with Goldman Sachs. Your line is now open..

Thank you. Just wondering if you could give us a little bit more color on your biosimilar BOTOX program with Revance. If you can talk about some of the technical hurdles in achieving these timelines, et cetera.

And was wondering if you would consider bringing other aesthetic products, like fillers, to be in a position to have a more complete aesthetics offering to compete with Allergan? Thanks..

Hi, Jami, thanks for your question. Actually, we will be looking forward to give you more details about the program, the timing and where we are, what we have evaluated from our partners strength point of view. When we talk to you or meet you in our April Investor Day.

And also about the line extension and the other aesthetic products that, that subject will also be addressed at the same time..

Yes. And I would just add to that, Jami. Obviously, as we talked about diversification, we're looking obviously across the whole product line, about things that have a, no reimbursement or cash pay, which, again, we think would complement our existing U.S. business. Thanks..

Our next question comes from the line of Ronny Gal with Bernstein. Your line is now open..

Hi. Good evening, and thank you for taking my question. One brief one to Ken.

What do you expect would be the adjustment to the cash flow in 2018? Are we expecting this to be a large number or small? And then more specifically in biosimilar, HUMIRA; Rajiv, do you expect to getting the market to open in October 2018, essentially as your program move forward, so now, you now expect to be ready then or is it more that they expect market opening to be later and thus, your product will get there on time?.

Thanks, Ronny. On the question on cash flow. As you know, in 2017, we have larger adjustments to cash flow as we pay the settlement of $465 million under the CMS, DOJ arrangement. As we move into 2018, the adjusted cash flow is not anticipating similar type adjustments. So I would tell you that right now, we're anticipating those to be smaller..

And Ronny, regarding your question on biosimilar to HUMIRA, we are very much looking forward to potentially launch this product in October of 2018 as market formation takes place..

Our next question comes from the line of Elliot Wilbur with Raymond James. Your line is now open..

Thanks. Good afternoon. Just a question for the team on expected new products approval pace or pipeline yield in the U.S. in 2018.

I guess, outside of the complex generic products, which FDA seems to always make more complex than they should be, but there also seem to be a fairly significant slowdown in the rate of approvals, at least over the past couple of months.

I just want to get your thoughts or perspective on that and whether or not you've built in additional cushion in terms of probably early adjusting the new product outlook based on the possibility of much slower review times than we've seen in the past couple of years? Thanks..

Sure, I'll start and then certainly, Rajiv, if you want to add anything. What I would say, Elliot, is I don't think 2017 has been different than the last couple of years in the sense of seasonality with approvals coming in from the FDA Q4 and especially, December have always been their largest month of approval.

So as you look from December and trend that to January, February, I wouldn't necessarily call that a down tick in approvals from an annualized basis.

And on your timing question, what I would say, we continue to be – see improvement in meeting these timelines, especially as we're in the post GDUFA filings and especially now coming into GDUFA II, that, one, the lines of communication, the back and forth, the more transparency around these files, especially around the complex products.

We continue to see enhancement then. So we look forward to that continuing under Dr. Gottlieb's leadership. And look, that's why we're excited about this year, our approvals, and look forward to some of these various important launches..

Our next question comes from the line of Gregg Gilbert with Deutsche Bank. Your line is now open..

Thanks you. Ken, I was hoping if you could talk about how any future capital deployment factors into the EPS ranges for the year.

And on generic Advair and biosimilar Neulasta, can you help us at least directionally with gross margin; is it higher, lower, or similar than corporate average? I think that, any color on that and biosimilars in general would be appreciated by all? Thanks..

Thanks, Gregg. So I think some of a – couple of the key points is, as you know and as we said and have released earlier, one of the bigger capital deployment, things that we've done and just finished up in the first quarter, was the completion of the $1 billion share buyback program.

And obviously, that's going to complement EPS in 2018 and the growth year-over-year. But I would also tell you that we have consistently said over the last 12 to 18 months that once Meda was completed, we're not looking at large transformational assets and businesses to bring into the portfolio.

But we do have this large, healthy and growing cash flow stream and cash flow bucket that we'll continue to look at product additions in certain gaps as we look at growing our OTC space, as we look at growing our Derm space, things like that. So, they will have some contribution.

But the reality is, is we look at one of the primary areas for capital redeployment this year is, as I stated, which is in paying down debt, following the share repurchase program to reduce our leverage ratio below 3.5 times while we get to the end of 2018 and remain committed to that investment grade balance sheet..

Our next question comes from the line of Liav Abraham with Citi. Your line is now open..

Good afternoon.

Just another question on generic Advair, can you just give us a little bit more flavor on the information request that you've received from FDA? Apart from these, are there any outstanding issues? And where do you stand on the manufacturing front? And then as it relates to guidance, can you confirm that you can make your guidance without any of these big launches such as Advair or Neulasta that you're anticipating this year? Thank you..

Thanks, Liav. In fact, we are very happy with the pace at which FDA has reviewed this ANDA after we have submitted the response to the CRL in August of 2017.

And we have been getting – especially over the last eight weeks, we have got continuous feedback from FDA in terms of several information requests, some of those requests have already been responded to and some of them are being responded. We don't see any red flags. We don't see any big hurdles.

Yes, there is a lot of clarification which we need to provide, but that's what we are left with. And as well as the manufacturing is concerned, we don't see any constraints for manufacturing the requisite quantities for the launch and what we have built in our plan..

And as far as your question around guidance, I would say this year is no different than in year's past. I believe that we've always taken a very practical approach to how we probability weight our launches to, and that's why we give a range around our – around what we're expecting. And as I've often said, all good things don't happen at one time.

All bad things don't happen at one time. It's really about managing this global business across all of our segments, as well as this year, really executing on these launches. So as always, as the year goes through, as we see changes or to change those ranges, we will.

But we feel good about the range we've given and the way that we've modeled our business to manage to hitting our target..

Our next question comes from the line of Chris Schott with JPMorgan. Your line is now open..

Hi. Great. Thanks very much for the question. Just two quick ones here. First, prior commentary, I think, had been for earnings of at least $5.40 in 2018. Your formal guidance here is $5.20 to $5.60. I know it's not a huge change.

But can you maybe just help us bridge a little bit in terms of what changed in terms of underlying outlook here? Is this just more pressure on that U.S.-based business that we're seeing across the space? Or is it something with new launches and pipeline? And then the second one was just an update on generic RESTASIS and the opportunity here.

Is that something you're thinking about for 2018? Just any more color on approval timelines. Thank you..

Hi, Chris. Thanks. As far as our – I guess, what I would say, Chris, is I think $5.60 is more than $5.40. And so we've said at least $5.40 our target. The mid-point is $5.40. As you know, there's a lot of moving pieces and parts that go into us giving that range. So really, nothing has changed.

I think, again, there's a lot of moving pieces and parts, as I said earlier. And I think our track record of showing our ability to manage those has been very good, and I'm excited about this year. I'm excited about the opportunities. And as I said, as things roll in, we'll continue to hone in on that and so that's what I would say on the guidance..

On RESTASIS, Chris, we have a target action date of July 2018. We don't have any significant or any scientific issues which need to be resolved. And now we are waiting to hear from FDA. And we look forward to bring this product to the market in 2018..

Our next question comes from the line of Douglas Tsao with Barclays. Your line is now open..

Hi. Good afternoon. Thanks for taking my questions. Just, Rajiv, maybe a little bit of an update on the pegfilgrastim product.

And one question I had was why was it that with trastuzumab, you simply had the PDUFA date delayed by a few months and yet you had got a Complete Response Letter even though it seems like with both, it was more of manufacturing issues rather than clinical?.

So let me give you the status of pegfilgrastim and that – we have responded to the deficiencies, which we received in the last quarter. We have heard from FDA on several of those issues already. And we are already received certain information request. We feel very confident on the science part, on the execution of everything which was asked.

And I think we have responded and we have a pretty good place on that. I think the only place where we're waiting now this – between that the tune action date, and this is (52:39) FDA may like to have another look into the manufacturing facility, although they have already approved or given us an approval on Herceptin, but that's up to FDA.

We continue to work with the FDA very closely to respond to everything, which has been asked thus far. We don't see any hurdles. And I cannot comment about what assumptions or why they did, what they did in Herceptin in extending the product by three months.

But in this case, they have given us now a target action date of early June, which we are very optimistic that by this time, all these issues will be resolved. And we look forward to launch this product in the second half of this year..

Our next question comes from the line of Marc Goodman with UBS. Your line is now open..

Hi. This is Owais (53:29) for Marc. You provided some – you indicated some countries, where you saw – overseas where you saw some good growth such as Italy and Australia.

Just wondering like what other countries – if you can provide a little more details in countries that you've seen may not seen as robust of a growth in BOCs (53:53)?.

Maybe I'll take a shot at this. Yes, we've seen some really great growth outside of the U.S. in markets like Italy, France, U.K, Germany, in particular last year. There's tremendous opportunity in the U.K.

and Germany specifically to continue to grow our opportunity in those markets as well as many of the emerging markets, we've seen great growth in Australia, like I said, 17% year-over-year. And we think we're going to have a great year in 2018 as well. So we have great confidence in where our business has been in 2017 outside the U.S.

and where is going here in 2018..

Tony, just to add, we've been very excited with our opportunities and growth we are seeing in Brazil, China, Russia, although it's a small base, but there are many opportunity, many opportunities, which have been incubated and are being now realized in the next – in 2018, as well as 2019 as we go along..

Our next question comes from the line of Irina Koffler with Mizuho. Your line is now open..

Hi. Thanks for taking my question. You mentioned that you wanted to make investments in sales and marketing.

And I was just wondering if you could expand on that? And whether this investment would be completed in this year, or is it more of a head count expansion that will carry cost into the next year?.

Thank you for the question. I think it will be twofold. Quite frankly, I think there will be certain investments that we see providing immediate value from a marketing perspective in key markets that from an OTC and established brand perspective.

Additionally, from building an infrastructure in countries like China and Russia where we're adding sales force to ensure that we can cover broader and wider array of products that will carry on pass this year as well..

And Irina, I would just add to that that where you'll see in the charts that we provided you, that you see that we're continuing to reap benefits from our G&A initiatives. Meaning, where Mylan ONE integration initiatives. And as we move through the year, we look at how do we take that money and invest it to grow the top-line and bottom-line.

And there's, obviously, more to be done in that area. We continue to have Mylan integration activities under in process..

And our next question comes from the line of Umer Raffat with Evercore. Your line is now open..

Hi, it's Akash on for Umer. Just a couple of questions. Number one, you guided to flat year-over-year in North American sales. Can you talk about what contribution from launches you're baking into have flat growth in a base case? And then also, Rest of World's profitability has been pretty choppy for you guys since Q4.

Can you talk about how you expect profitability to kind of evolve going forward? And then what the contribution was to segment profit in Q4 specifically? Thanks..

I think on the segment profit piece for Rest of World, in the charts you'll be able to see both the fourth quarter and the full-year that profitability has expanded in not-only Rest of World, but Europe, as we move through the year. Now you will see that the fourth quarter had a little bit less profit expansion than what we had for the year overall.

But that market can be a little bit choppy based upon tenders. But what we like is the fact that it continues to grow, it continues to follow the top-line. And as Tony just talked about, we've only begun to scratch the surface in many of the markets that we can enter into. So I wouldn't be too concerned about a quarter.

And again, I would say that it's a good, healthy quarter. But what I would do is continue to watch what we're doing and how we're diversifying broadly across that Rest of World market..

And I guess, just to add to your question about the U.S.

in North America, it's just – here's what I would say as you think about the generic industry as a whole, the real drivers to the success of this business as new product launches and high-volumes and offsetting erosion and other products as they can offer or have other competition enter the market.

So as you look at our business now, the size of our business and the scale across the diversified portfolio we have, it's taken all that into consideration. We're not – we long ago stopped giving any kind of product by product basis.

And what I would say is, again I'll just reiterate, I think our track record speaks for itself, is that giving working a lot of probability, waiting in practicality into the numbers that we come forward with as it results to all segments and rolling up to the EPS guidance that we've given..

And that concludes today's question-and-answer session. I'd like to turn the call back to Ms. Trombetta for any closing remarks..

I just want to thank, everyone, for joining our call today. We look forward to seeing you at our Investor Day on April 11th. This concludes our call. Have a great night..

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