Good morning, my name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mylan First Quarter 2019 Earnings Conference Call and Webcast. [Operator Instructions] Thank you. I will now turn the call over to Melissa Trombetta, Head of Global Investor Relations. Please go ahead..

Thank you. Christie. Good morning, everyone. Welcome to Mylan's first quarter 2019 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 2019. These forward-looking statements are subject to risks and uncertainties that could cause further 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 today, as well as our supplemental earnings slides, all of which are posted on our website at investor.mylan.com for a further explanation of those risks and uncertainties and the limits applicable to forward-looking statements.

Mylan routinely posts 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 Reg FD.

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 those 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 first quarter earnings release and supplemental earnings slides, as well as on our website.

Let me also remind you that the information discussed during the call, except for 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..

commodity, complex and specialty. Each of these markets is being challenged in different ways. The probability - the profitability of commodity products, for example, has been affected by accelerating competition and pricing pressures.

For complex products, generics uptake is being affected by formulary design and the distorted financial incentives in the system for brands to maintain preferred coverage status. In response, our experience and applied learnings helped us to adapt ahead of our Wixela launch by informing our unprecedented launch and pricing strategy.

In specialty products, don't even have a tier to incentivize generic or biosimilar pull through, further depressing patient utilization rate. We experienced this phenomenon through our Glatiramer Acetate launch and adapted our commercial strategy to further incentivize uptake.

Our track record of obtaining approvals on complex specialty and biosimilar products is matched by us adapting our commercial strategy at launch, demonstrating a proven ability to compete in the current environment.

As I've said before, it's clear that value has been extracted from the market and while we're not immune, I do believe our platform has certainly proven to be more resilient. Despite this strength, we continue to see opportunity for much needed reform and are actively advocating for policies that put the patient first.

In short, when it comes to insuring patients can access high quality, more affordable treatment options, our position is that in order for innovation and competition to drive each other, generics need to be treated as generics and brands as brands and specialty products formulary design should go from one tier to at least two, to provide incentives for preferred generics and biosimilar uptake.

CMS has recognized the importance of these issues and as more examples continue to demonstrate how problematic policies are that these favored generics, we are hopeful the administration will address these for Part D patients and their rebate role.

Moving forward, as we shared with you last quarter, we have formalized a business transformation office to bring a disciplined financial lens to the way we're managing our business. Today, Mylan is a hybrid across generics, brands and specialty business models.

Our success will in part be determined by our ability to leverage the best of each model to ensure the most competitive cost structure, while simultaneously allocating the right resources across the right mix of products, geographies and pipeline.

Our ultimate goal is to maximize the assets we've brought together over the past decade and we partnered with a well-known management advisory firm, specializing in economic profitability to wrap the requisite, the requisite resources around this important work.

Given our evolution from an acquisitive company to one focused predominantly on organic growth, not to mention, current market dynamics, we believe it's an opportune moment to manage this company for value.

In practice, this means, looking at every product at an SKU level and its performance across every channel, customer and market, this data informs decisions around both good and bad revenues and cost in order to determine what portions of the business are value-creating versus value consuming and to manage accordingly.

It may seem straightforward that few companies commit the time, energy and resources to the effort. The ones that do experience premium returns every three to five-year horizon and benefit even longer-term from the discipline of managing a company to this level of granularity.

As you can see, we're continuing to challenge the status quo on nearly every possible front and we couldn't do it without the support and daily contributions of our workforce of more than 35,000 people around the globe. I'm grateful for their hard work and dedication to quality, integrity and doing what's right for the patients who rely on us.

With that, I'll turn the call over to Ken to share more details on the quarter..

Thanks, Heather, and good morning, everyone. I'll take a few minutes to provide a quick overview of our financial results for the first quarter. Total revenues of $2.5 billion were 7% lower than the prior year or 2% lower excluding the negative impact of foreign exchange.

On a constant currency basis, net sales in both Europe and North America were down 6% and were partially offset by an increase in Rest of World, which was up 11%.

The decrease in North America was primarily driven by lower volumes due to changes in the competitive environment and the impact of the Morgantown plant remediation activities and to a lesser extent, negative pricing impacts.

These declines were partially offset by new product sales including Wixela and Fulphila and increased market share on our generic Copaxone.

The decline in Europe was primarily due to lower volumes of existing products driven by timing of purchases of our products, by customers and temporary business disruptions due to the adoption of serialization across Europe, and to a lesser extent, pricing. Partially offsetting these items were new product sales.

Growth in rest of world was primarily driven by new product sales in key countries such as Australia, Japan and China in addition to higher volumes of existing products, including those in our ARV franchise partially again offset by lower pricing.

Moving to segment profitability, excluding approximately $70 million relating to the Morgantown restructuring and remediation program combined regional segment profitability declined 8% versus the prior year.

The Europe and Rest of World, were down 21% and 12% respectively, reflecting expected incremental investments in selling and marketing versus 2018, as well as unfavorable impacts from foreign exchange.

North America, up 1%, reflects contributions from new product sales and increased generic Copaxone sales, which more than offset impacts from lower volumes on existing products.

During the quarter, total adjusted SG&A was relatively flat year-over-year, reflecting incremental investments in selling and marketing, offset by benefits from ongoing integration activities along with the favorable timing of certain G&A items.

For the remainder of the year, we'll continue to make our investments as efficiently as possible, monitoring and managing such cost to support our top line expectations. For the quarter, we reported adjusted net earnings of $422 million and adjusted EPS of $0.82.

Adjusted EPS versus the prior year primarily reflects the impact of the decline in our total revenues. Adjusted free cash flow for the three months ended March 31 was slightly better than our expectations at $27 million, a decrease of $637 million compared to the prior year.

As we previously discussed, we expect over $1 billion of new product launches in 2019, which requires incremental investment in net working capital.

During the quarter, the year-over-year decline was primarily driven by these investments, including the impact of receivables related to our North America, Generics business and timing of payments of accounts payable.

For the remainder of the year, we expect to benefit from growing adjusted earnings, coupled with targeted initiatives to drive working capital velocity improvements. At the end of Q1 2019, our debt to adjusted EBITDA leverage ratio increased slightly to 3.95 times and was in line with our expectations and in compliance with our covenant requirements.

As anticipated, our capital deployment priority is focused on deleveraging throughout the year, as we previously stated, we intend to repay more than $1.1 billion of debt in 2019, including scheduled maturities in June and November.

We remain fully committed to our investment grade credit rating and to further reducing leverage as we work towards our long-term average debt to adjusted EBITDA leverage ratio target of approximately 3.0 times. We anticipate that we'll achieve this target through both continued debt repayment and EBITDA expansion.

Finally, as you've heard earlier, we are reaffirming our full year 2019 guidance that we provided this past February, including total revenues to be in the range of $11.5 billion to $12.5 billion and it's important to note that out of the more than $1 billion in new product revenues this year, we've already launched over two-thirds of the related products.

In addition, we expect full year adjusted EPS to be in the range of $3.80 to $4.80 and adjusted free cash flow in the range of $1.9 billion to $2.3 billion.

A quick comment on calendarization as you think about modeling, we continue expect adjusted EPS to be approximately 4 to 5 percentage points higher in the second half of 2019, as a percentage of the total year, relative to the contribution in the second half of 2018.

This is due to the higher profitability of new product launches and the expected favorable impact of investments in selling and marketing. With that, we'll now open the call for your questions..

[Operator Instructions] We'll take our first question from Elliot Wilbur of Raymond James..

Thanks, good morning. Last couple of times on the conference calls, you guys have talked about the formation of this business transfer nation office and instilling sort of a new capital markets discipline sort of across the company across all systems divisions, product lines, et cetera.

I guess from an external vantage point anything that we can see or anything that you could talk about in terms of maybe tangible outcome measures that have been delivered as a result of this new capital markets discipline or I guess it's just maybe going to be a little bit difficult for us to kind of see some of these measures actually worked through the company and unless we kind of see over performance in terms of near-term financial.

So I'm just wondering if there's anything you guys can sort of 0.2 in terms of outcome measures there that have been generated as a result of these new efforts.

And then just kind of a corollary for Ken for sometimes, you guys have talked about sort of maybe looking at new or alternative financial metrics or at least sharing with us some of these different metrics in terms of how you guys think about the business and I'm just kind of wondering sort of where we are on that process and what's on those metrics might be.

Thank you..

As you noted, we have been talking about the work that we've been doing on this front and certainly look forward to putting more substance around that for you guys at Investor Day later this year and I think that as you think about the work that we started in the fall that's going through 2019 would really benefit us 2020 and beyond.

So certainly there is nothing to see from 2019 perspective, I think that this work for those familiar with it is, as I mentioned, a very granular level every SKU and you can imagine across our 7,500 products business in 165 countries that we're in and really taking this financial lens and disciplined approach is certainly going to allow us to reallocate in some respect our resources and the key brands and some of the opportunities that we have and continued us to bring that focus across the geographies and business we're serving.

So, we'll look forward certainly to bringing more of that around Investor Day, as to the metrics and I can let Ken, certainly supplement but that will obviously coincide as we think about 2020 and beyond in the right metrics that we believe are the right ones to measure our performance as well as our outlook.

So certainly, there'll be more of that to come as we look at those complementing, our existing start plan, and our existing opportunities as we said, predominantly organic to continue to grow and deliver future shareholder return..

Yes. And I think Heather covered most of that already. But the metrics, we will be looking at are definitely coming out of this review. And as you said, it's a very granular review, I would say the granularity of it is the new piece.

Looking at the business with a disciplined lens on returns and where we invest the money and how we actually measure the business as we go down the path is something that has been built into the business. But this next step of taking it to a granular level and looking product by product.

Our product family by product family and looking at all the cost it takes to generate that revenue and to support that revenue is really the work that we're doing and it's not just being done only in this business transformation office that we talked about by our teams across the world. So as Heather said there's a lot of work going into it.

We'll come back to you with some metrics. We’ll talk about those at our upcoming Investor Day later this year and we would intend to tell you how those kind of effect, how you should look at us and measure us and ask questions on it as we move into 2020 in later years..

And I would just add to come full circle. We absolutely see financial benefits to that. I think as you look at the returns in the value, as you look at value creating and value consuming assets. There's absolutely financial benefits to be gained from this exercise. So we look forward to bringing that forward..

Your next question is from Chris Schott of JPMorgan..

Just had a couple questions on the European business.

I think your business eroded about 6% constant currency in the quarter, can you quantify how much of that is the impact from the serialization and timing of purchases versus how much of that is from just price and broader business erosion? As my second part of this question is then when we think about the disruptions from serialization.

Is this something that just pushes out into 2Q or later in the year, what do we think about this more as a reduction in channel inventories and just I'm still struggling a little bit how we get from the Q1 results to the mid-single digit growth that you're targeting for the year. Thanks very much..

Hi Chris, this is Rajiv.

I'll take your question, the business in Europe, primarily, I'll call it as a stable and steady with key brands, responding to the selling and marketing investments which were putting on, this is a timing issue and this is primarily due to -- not due to the pricing, but primarily due to that disruption, because of the implementation of serialization lastly without third party manufacturers, it's behind us, we have come to the normal state of the supply, and the second big factor was of course ForEx but on consistency that 6% is primarily due to the serialization..

When you think about getting to the mid-single digit growth as we move through the year also repeat that statement that we made as we gave our guidance for this year of the new product launches, specifically in Europe and rest of world, they would be more back-end weighted, we obviously had a large product launch in the U.S.

that you're all aware of, which is Wixela in the first quarter, but you will see more growth in the second half coming from new products in the other two segments being Europe and rest of world.

And on top of that, as we also said, as we're investing in selling and marketing, as we move into this year, we'll see the benefits of that more occur in the second half..

Your next question is from Greg Gilbert of SunTrust..

First for, Heather. I just want to be clear, this economic exercise that you're talking about that is not to be confused with the strategic review, being conducted by the independent Board members, right. The last call you said that review is nearing completion. And my second question is for Ken.

What are these working capital investments, tied to the new launches. Are these launches that have already been done, but not yet launched, are these potential products that you're not guiding to but hoping for please put some color around this pretty big working capital investments. Thank you..

Yes, two separate and distinct this economic contribution work that we're doing is certainly something management giving where we are after the 10 years of integrating assets really our opportunity to step back and like I said, take this moment in time to truly drive this company and manage and on value so that exercise is what I'm speaking out.

To your point on strategic committee, again, believe what I said last quarter still remains true, which is, there is a tremendous amount of work being done and that when they're ready to report the strategic committee will report on where they are, and we believe that will be in the near term..

And on working capital investments if you'll indulge me for just a minute. I'll give you a couple of tangible examples. So maybe that helps you understand what we mean by the commitment and the resources for new product launches. If you think about timing of new product launches.

I'll give you two examples, we launched our generic Copaxone, in the fourth quarter of 2017. Therefore, if you think about how those receivables build and get collected and how that affects the year-over-year comparison. It was launched in the quarter so by the time you got to the end of 2017.

We had a measurable amount of receivables from the launch process sitting on our books. They got collected in the first quarter of 2018. So when you compare that to the Wixela move we launched Wixela in mid to late February.

So by the time we get to the end of the first quarter you actually still have the receivables or many of them sitting on the books but you then collect in the next quarter.

So when we talk about working capital commitments to support new product launches, that's one of the ways that we mean and part of that is timing because that doesn't mean we're not going to get those receivables in the door, but when you count at quarter end and based upon the timing of when you launch, you could have some comparability issues on a year-over-year quarter.

So that's for those that we've actually launched, but then I'll also tell you that there are working capital commitments as we get ready for launches.

As we build up inventory and if you look at our inventory balance between December 31st of 2018 and the first quarter of 2019, you will see a couple of hundred million dollars of inventory growth and a part of that is due to preparation for launches of products as we move into the next few quarters.

So it's a combination of both of those things and that commitment to net working capital while it may be timed a little bit differently is obviously good and supported by the fact that we have regulatory approvals for not only those obviously already launched.

But the remainder substantially all of the remainder of the pipeline that's to be launched for the balance of this year..

Your next question is from Jason Gerberry of Bank of America..

Heather, you made a comment just about payers giving preference for brands. I know in the case of Advair, Express Scripts had given some preference to brand.

So as we think about Wixela I’m trying to forecast that through the rest of the year, it does look like market share had started to stabilize over the last few weeks and any color you can provide us on what's going on at the payer level, is this improving in anyway? Any signs that you could see an uptick in market share for Wixela? Thanks..

Sure. I'll start and then Tony, if there's anything you want to add. I think as you pointed out, the launch, we are very happy and pleased with the launch and the market uptake, certainly as we've talked about these complex products. We certainly had not thought about them in the traditional oral solid dose sense and kind of that market share uptake.

We've certainly looked at these much more of a longer ramp with a - then a longer tail, especially in the sense of generic Advair because we certainly don't see competition anytime soon. And I think that as your commentary around, do we see that stalling a little bit? Yes, I think you had the first uptake because of – I think the successful launch.

I think we continue to be encouraged by opportunities that we have that we think will continue to bring that uptake closer to where our expectations were. Because I think if you look at the entire generic marketplace between the AG and Mylan, the uptake I think it's running about 45% to 50%.

So you're seeing that uptake and – but I absolutely see further opportunity for Mylan as we continue to work with the payers and continue to make sure that net is at the right place for everybody in the supply chain including the patient at the pharmacy counter. So it's certainly a balancing act across all of those fronts..

And thanks, Heather. And maybe just to mention, I think what's very important with Wixela is, we knew coming into this product launch that half of the business.

With the Med D business half of it was a commercial business and it was really why the strategy on this low WAC at point of launch that transparency and visibility that talk to payers, ensure the pharmacies and the patient were all kind of connected in terms of how we can drive affordability and access.

And if I think about this launch, three months post-launch almost 50% generic utilization on a complex product. This is actually going very well and I think there is additional opportunity to work with the stakeholders in the system.

Great opportunities with our payers, and PBM partners to drive additional ramp and share over the coming months throughout the end of 2019..

Your next question is from Gary Nachman of BMO Capital..

How are you thinking differently about the extent of spending levels this year It sounds like tone may have changed a little bit there. And I know you reaffirmed guidance, but if the topline doesn't materialize the way you hope, where would you consider scaling back on the spending side.

And then just on biosimilars, just give us an update there and what sort of contribution you're expecting this year and how much that could potentially ramp up next year? Thank you..

So I'll start on the spending or the investment. Look, we still see that 21% to 22% range as the right range. As I said in my opening remarks that we will certainly be conscientious around the returns and what – that is returning from a – return on investment perspective.

But I can tell you that certainly as you think about our product mix, both as we continued to diversify away from commodity type product.

So as you look at even here in the U.S., our specialty products, these complex products that have different services and things wrapped around them as we think about launch and providing the same services as the brands do to the customers and our patients.

Just as when you go to Europe and look at our mix between brands and OTC, obviously these sales and what we're already seeing benefits from quite honestly is that investment in these key brands and what they're returning from that investment and certainly our rest of world where we've got the highest growth potential as we're bringing those assets into the market, as the dollars required at launch time and giving that couple of years time to reap benefit is something that we're certainly committed to.

So I think on the very near term, we're obviously watching closely and we'll continue to manage this platform and all the moving pieces of it responsibly.

I think that we'll also continue to show that willingness to invest over the longer term is something that has paid dividends to let us be where we are today with the products that we're able to launch.

And now, I think being able to provide that level of investment continues to differentiate the hybrid model that we've created and that ability to provide everything from being competitively on a cost structure basis as well as allocating the right resources behind important products and key brands that we have in our portfolio..

Thank you. Our next question is from....

On biosimilars, the launch of Fulphila, the launch of Ogivri in Europe, Hulio in Europe will continue to drive that significant contribution in the new launch bucket. Fulphila has been a very successful launch from a U.S. perspective and will be a key contributor.

We are also getting launch, getting digital launch, our biosimilar to Trastuzumab at that time and we will be here at the time of the market formation in U.S..

And your next question is from Liav Abraham of Citi..

Ken can you provide the actual dollar revenue number for Q1, new product launches, both in the U.S. and ex-US? Thank you..

Sure Liav, thanks for the question. For the first quarter, it was approximately $250 million and I would tell you there is more heavily weighted to the U.S., you wouldn't be surprised by that based upon the Wixela launch.

So I'd say approximately $200 million of the $250 million came out of the U.S., the remaining piece was split relatively evenly between Europe and rest of world.

And also it also further supports the commentary that I provided earlier that says we had anticipated just as we had anticipated, the new product revenues in Europe would be more – Europe and rest of world would be more weighted to the second half..

Your next question is from Umer Raffat of Evercore..

Rajiv, I'm still trying to learn a little more about field relations so bear with me here but with my sense that what serialization required was anti-tampering and unique identifiers on in machine and human readable forms on medicines.

Was that effectively the scope of it, and if so my question is wasn't it well understood that there is a deadline and because this topic didn't come up across all the earnings I have been listening to across the sector so that was one.

And then one for you Ken as well on SG&A, I noticed stock-based comp was excluded this quarter in the GAAP to non-GAAP.

Was that an accounting change and was that stock-based comp exclusion embedded in the SG&A guidance for the year?.

So Umer, I'll take the first one. Thanks for your question. We have 45 internal sites, which are absolutely ready to go. And there was no hiccup as per as those 45 sites were concerned. But in Europe, our business is still quite a bit of reliance on a lot of third parties, and while we have been working feverishly with them.

It's sometimes when the data transfer happens from the third-parties to our system and when you see that volume that's what perhaps was not anticipated. And second is from yes U.S. it's just according and the temporary dense, but in Europe, the pharmacies also needs to be ready to accept that and that's where the second point of the misalignment.

The good news is that we are all over it and it's behind us and there is no, as we go on the rest of the year. There is no further impact of serialization on the supply disruption in fact we are back, we have created the backlog and back on the normal trajectory..

More on the stock-based comp. you're correct. You say that it was added back in the quarter it’s an adjustment to the quarter, but let me give you a little bit broader color to that to know what's going to happen for the year. As you may remember and as we disclosed as we move through 2018.

We had basically reversals of stock-based comp expense ultimately relating to Blue Team 6 where we did not achieve that target. And as a result of those movements and reversals of previous expense, we actually ended 2018 with basically net zero stock-based comp in our 2018 results. So as we moved into 2019 as we put together our numbers for 2019.

And based upon how many companies handle stock-based comp and there GAAP to non-GAAP results. We made the decision to adjust it out of our numbers to make the year-over-year numbers comparable. So you don't have the noise from no comp – stock-based comp in 2018 and you do have the stock based comp in 2019.

So yes, it was anticipated it may have some choppiness within the quarters by a couple of pennies just because in some quarters, we're recording expense last year and in some quarters, we were taking back expense, but I can tell you for the year.

The result, based upon – the way we're treating it from an accounting perspective now, is that you will have zero in 2018. Because of the way that the adjustments came through and you will have zero in 2019 based upon us adding it back to our results..

Your next question is from Ami Fadia of Leerink..

Just had a follow-up question on Advair, generic Advair do you need the market share to go up meaningfully from here to the rest of the year in order to pay to your total new product sales target.

And separately with regards to the strategic review, can you give us any more color around what additional needs to be done before you're ready to share some of that with us. And is that something that would be shared at the Analyst Meeting or could happen prior to that? Thank you..

So maybe just start with Wixela very quickly as I mentioned yes, we are very happy with the initial three months result of Wixela. And when I think more than anything is the opportunity we have here near term for the rest of the 2019 and beyond.

So we’re going to be very smart and how we look at the tactics to drive the appropriate share to maximize this product, not just for 2019 and the years beyond. And I think we are working with those stakeholders, who are working over that kind of matrix of each other.

Between the pharmacy and the payer and we're actively working with them to make sure we can increase that share in the coming months..

And as far as the strategic review as I mentioned earlier, I'm not going to speak on behalf of the Board and the strategic review committee they're doing their work. And as I said expect that they will come out when appropriate, and discuss where they are with that. And as I said, I believe that will be in the near term..

Your next question is from David Risinger of Morgan Stanley..

Yes, thank you. I guess first Ken could you just speak to your expectations for GAAP cash flow and adjusted cash flow for 2019 and whether there are any changes versus your expectations in February.

And then I guess my second question is with respect to the revenue hockey stick that's reflected in guidance given the 1Q - obviously 1Q came down and you're reiterating your revenue guidance, it is a range, but could you help us understand you know why the revenue will step up so dramatically starting in the second quarter and how we should be modeling this hockey stick over the next three quarters? Thank you..

Thanks, David on adjusted cash flow. I'll start out with and that is what we give you guidance on absolutely no changes. I mean, as we said, well, the first quarter was light in absolute dollars on cash flow.

It was actually slightly better than we expected based upon our working capital initiatives, even though we did have an investment and some timing issues around the support of new product launches. So I can tell you very clearly the guidance that we're giving today of $1.9 billion to $2.3 billion is exactly the same as we told you in February.

As far as the revenue, I'll give you a couple of comments and maybe someone else wants to chime in but also just. I think one of the biggest things to remember. And I just gave Liav, these numbers for new product revenues.

In the first quarter we had approximately $250 million of products revenues coming from new products launched and or carried over from last year. We have a roadmap to $1.1 billion of new product launch revenues in 2019. So we started that, we've seen the influx starting to come in, but we only seen $250 million from at this point in time.

The good news about all of that is that we have actually launched about two-thirds, maybe slightly more than two-thirds of the products to generate that $1.1 billion and those that haven't been launched have already been in almost all cases they're all regulatory and science approval process.

So part of what we expected and are reiterating today is that this would be a heavier new product revenue contribution in the second half versus the first and that's one of the primary reasons for the change in the trend line as we move from first quarter through the four..

Your next question is from Louise Chen of Cantor..

So can you just help us maybe give a little bit more color for the revenue growth from first quarter to second half 2019, we break out a little bit more. What's new launches in the year to give some color there let us understand and then upcoming launches that haven't yet happened in any significant product in there. Thank you..

Louise, I think I understand what you're asking. But let me see if I can answer it this way, the biggest buckets.

If we take the 1 billion one of new product revenues for 2019, you can kind of at this point divided into three buckets, about a third of it comes from the carryover impact of products that were launched in 2018 but hadn't had the full-year impact in 2018.

So there is a carryover benefit into this year of those, and obviously they been launched in they have traction and they're moving through the process. The next third is primarily from Wixela from the generic Advair launched, the full year impact of that in 2019.

So there's two-thirds of the 1 billion and the remaining one-thirds comes from those products that we will be launching as we move forward from this point. So I think that's what you're looking for as far as carryover and in year impact and you can break it into those three buckets..

Your next question is from Irina Koffler of Mizuho..

Just focusing a little bit more on the big picture, do you think the company would be more competitive if focus itself around selling higher, some higher margin branded products that would also allow you to leverage the sales force towards some of your more complex in Specialty Generics and would you be willing to consider acquiring any. Thank you..

Sure. So let me start by just saying, I think as you continue to see our evolution and we've shared some graph, I think even in our slides today that show our evolution around the buckets commoditized generics complex and specialty. We continue to see that value and moving up that value chain of products like a generic Advair, Copaxone or Herceptin.

These products that obviously are going to be the bulbous of continued opportunity and growth from that perspective, the complement that we certainly have the branded side of our business, which we have continued to build a very good respiratory niche.

So as we utilize our sales force and sales representatives to go out and continue to build on our YUPELRI launch, our performance and continue to build around that expertise in respiratory.

We also benefit from some smaller sales forces that give us a lot of synergy between our institutional business as we continue to grow our injectables business, as well as niche opportunities whether that's wraparound services for Copaxoneor being able to be very targeted around women's health products.

So we have actually created a lot of nimbleness from how we're attacking the commercial side and the infrastructure from a sales force perspective, so that we absolutely can continue to layer in their products that makes sense that again if we look at reallocating resources and capital behind, those products that have not only brand in nature, but from our perspective give a have a therapeutic benefit and it's synergy with where our we are trying to in energy is.

And yes, we're constantly looking at products that complement that to acquire as we said that now with this infrastructure, we're able to layer end products like TOBI, which we acquired last year that's allowing us to utilize this expertise in a very targeted way and absorbing those overhead expenses.

Maybe just to add, I think we've given ourselves to do these acquisitions, 5,000 salespeople throughout the world covering all regions and we have a global key brand portfolio really that's growing. Many of them double-digit, products like Creon, DYMISTA, Dona, Brufenand Elidel outside of the U.S.

and I think this sets us up very well to position ourselves for growth in both these hybrid products like biosimilars in these markets as well as its brands. So I think we are well positioned to succeed there. And also in our largest U.S.

generics market, if you see that construct our business,23%, 25% is coming from the commoditized bucket, whereas 65% -- 75% is between the biosimilar and the complex products like Wixela or Copaxone..

Your next question is from Tim Chiang of BTIG..

It's really more of a financial question.

Ken, could you talk a little bit about what the impact of the serialization that you talked about in Europe, and how that impacted your cash flows, can you just like your free cash flows were much lower than a year ago period, and how you sort of look at how those free cash flows are going to develop for the rest of the year?.

Yes, I would tell you that as far as the cash flow we called out what the major drivers and the cash flow changes were kind of in the new products. Timing, as well as some inventory build related to preparations for new products. So it's not a significant driver of free cash flow.

And I think we've commented on serialization as far as you're seeing the...

The total impact of serialization from top line was about $60 million. It's not that it's seasonal..

Your next question is from Navin Jacob of UBS..

So just on the U.S. business.

Broadly speaking, wondering if you could give us an update on generic pricing, is it has stabilized? You had previously stated that things appear to be stabilizing, wondering if there's any change there, is it similar to what you were seeing in Q4 of 2018? And then also if you could help us with the volume comments in the U.S., any color on the magnitude of the Morgantown remediation versus competition impact on volumes versus any other impact that you're seeing, would be very helpful to us.

Thank you..

So maybe on the U.S. pricing, yes, I would say, we see similar trends that we've seen throughout 2018 and the end of 2018 here in the first quarter. Like I said, previously, I always thought like stable is zero. I wouldn't say word zero, but I would also say, I don't see accelerated erosion in the U.S. market.

As it relates to volume maybe I'll comment on someone else could add. Yes, we had done a number of discontinuations throughout 2018 over 100 SKUs that we had discontinued as part of a process to continue to prune our portfolio and that certainly has played a big role in how much we've seen year-over-year volume declination..

Yes, I don't think there's much to add on that. I think that it continues to be right where we expected and as Tony mentioned not, certainly not from a sequential perspective much change from Q4 to Q1..

Thank you. We have reached the end of our Q&A. This does conclude today's Mylan first quarter 2019 earnings call and webcast. Please disconnect your lines at this time and have a wonderful day..