Viatris Inc. (VTRS) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2013 Year End Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kris King, Vice President of Investor Relations. You may begin.

Thank you, Tom. Good morning, everyone. Welcome to Mylan's fourth quarter and 2013 earnings call. Joining me for today's call are Mylan's Chief Executive Officer, Heather Bresch; President, Rajiv Malik; and Executive Vice President and Chief Financial Officer, John Sheehan. During today's call, including the Q&A, we will be making numerous forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often may be identified by the use of words such as may, will, could, should, would, project, believe, anticipate, expect, plan, estimate, guidance, trend, forecast, potential, intend, continue, pursue and variations of these words or comparable words. Our forward-looking statements made today include, among others: statements relating to our ability to identify, acquire and integrate complementary or strategic acquisitions of other companies, products or assets; our expected or targeted future financial and operational performance, result, metrics and plans and expectations related thereto; anticipated business levels; planned launches of and anticipated exclusivity periods for new products; expectations regarding the integration of Agila; expectations for R&D and other spending; planned activities; anticipated growth; and other expectations and targets for future periods, including our expectations regarding the first quarter of 2014 and 2014 overall and subsequent years. Because forward-looking statements inherently involve risks and uncertainties, the actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the impact of competition; changes in third-party relationships; the company's ability to successfully integrate Agila and achieve anticipated synergies; and the success of clinical trials and the company's capacity to bring new products to market, including but not limited to where we use our business judgment and decide to manufacture, market and/or sell products directly or through third parties, notwithstanding the fact that allegations of patent infringement have not been finally resolved by the court. For more detailed information on the risks and uncertainties associated with the company's business activities, please see the factors set forth under Forward-Looking Statements in our recent earnings press release dated February 27, 2014, as well as the risk factors set forth in our reports on Form 10-K for the period ended December 31, 2012, and Form 10-Q for the period ended September 30, 2013, and in our other SEC filings. You can access our Form 10-K, Form 10-Q and other SEC filings, including our earnings press release, which we filed on Form 8-K, through the SEC website at www.sec.gov, and we strongly encourage you to do so. We undertake no obligation to update our forward-looking statements, whether as a result of new information, future events or otherwise. Today's call, including the Q&A, should be listened to and considered in its entirety and understood to speak only as of today's date. In addition, during this call, we will be referring to certain actual and projected financial measures of Mylan on an adjusted basis, which are non-GAAP financial measures. It should be noted that non-GAAP measures, including, but not limited to, cost currency revenues, adjusted gross profit, adjusted EBITDA and adjusted EPS, should be considered only as a supplement to, not as a substitute for or as a superior measure to, the measures of financial performance prepared in accordance with generally accepted accounting principles, or GAAP. These non-GAAP measures are presented in order to supplement your understanding and assessment of our actual financial performance. Management uses these measures internally for forecasting, budgeting and measuring operating performance. Please refer to today's earnings press release, which is available on our website as well as on the SEC website, as it contains detailed reconciliations of the non-GAAP financial measures we use to the most comparable financial measures prepared in accordance with GAAP. Before I turn the call over to Heather, let me also remind you that the material in the call, with the exception of the participant 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 later today and will remain available for a reasonable amount of time. With that, I'll now turn the call over to Heather.

Thank you, Kris. And good morning, everyone, and thanks for joining us today. 2013 represented yet another very strong year for Mylan. We delivered impressive financial results and further positioned our company to generate sustainable long-term growth for our shareholders while continuing to fulfill our mission of setting new standards in health care and providing 7 billion people access to high-quality medicine. During our Investor Day last August, we spoke to you about powerful trends that are changing the face of health care around the world, including spiraling health care costs, growing consumer involvement in health care decisions and heightened awareness of the importance of drug quality. By building the integrated global operating and commercial platform that we have today, we have created the scale, diversity, innovation and control over both the cost and quality of our products that we believe is needed to continue to be a leader in our industry and shape its future. This platform also has been instrumental in our ability to consistently deliver outstanding financial results, and 2013 was no different. As you have seen, our revenues for 2013 totaled $6.9 billion, a 4% constant currency increase compared to '12. And adjusted EPS totaled $2.89, a 12% increase compared to the prior year. This performance is noteworthy for 2 reasons. First, 2012 was an unprecedented year for the industry and for Mylan in terms of new product launches in the U.S., including several first-to-file and first-to-market opportunities. Second, in 2013, regulatory delays in the U.S. prevented us from launching several significant products we had expected to introduce toward the end of last year. Despite these headwinds, we are very well positioned going into 2014 as we continue to do what we do best: leverage our one-of-a-kind platform, execute relentlessly across our business and maximize opportunity so as to deliver on our financial objectives. Moreover, we also continued to make significant progress in '13 on many of the key long-term growth drivers we have identified, demonstrating our continued ability to deliver while positioning our company for future growth. For instance, we completed the acquisition of Agila, creating a global leader in the injectables space. This includes an exceptional R&D capability and manufacturing platform and one of the broadest portfolios in the industry. The transaction immediately gives us an even stronger platform in developed markets, provides us with expansion opportunities in exciting new markets and brings us new therapeutic categories, such as oncolytics. In 2013, we also expanded our commercial operations in India. We launched a portfolio of women's care products and continued to build out the ARV franchise. Recently, in partnership with Biocon, we received approval to launch, in India, our first biologic product, Hertraz, which we did earlier this month. The launch was an important milestone as we prepare to introduce biosimilars in other markets around the world in the coming years. Our Specialty division continues to show strong performance. Specialty revenues grew 18%, driven by increased sales of EpiPen. Last year, we celebrated EpiPen's 25th anniversary and helped more people at risk for life-threatening allergic reactions gain access to epinephrine. For instance, we worked with organizations and local advocates to successfully pass legislation to allow school access to epinephrine in 17 states in 2013, bringing the total to 31 states with such legislation. As impressive, we continued to grow the product in an expanding market, despite 2 new entrants. Since its introduction, nearly 55 million EpiPen units have been dispensed, and the product remains the world's #1 dispensed epinephrine auto-injector. We made good progress in the fight against HIV/AIDS. We established an exclusive agreement with Zyomyx, a diagnostics company, to distribute its proprietary point-of-care CD4 T-cell count test. This is a great example of how we're striving to meet the evolving needs of our customers and patients by offering health care solutions beyond pharmaceuticals. We also launched a broad portfolio of ARV products in South Africa, which has the world's largest HIV/AIDS population. Our scientists continue to distinguish Mylan as a company capable of developing a diverse array of complex and hard-to-manufacture products. A great example is our respiratory franchise. We continue to anticipate being the first company to bring an AB-rated substitutable generic form of Advair to the market in 2016. Near term -- nearer term, we continue to expect to launch an AB-rated form of Copaxone at market formation later this year. Mylan's performance during 2013 reflects the hard work and dedication of our employees around the world, and I'd like to take this opportunity on behalf of Mylan's Board of Directors and senior leadership team to sincerely thank them for their unwavering commitment. Let me now turn to our outlook for 2014 and note that we'll provide you with a longer-term update this summer at our annual Investor Day event. In line with the targets we provided at Investor Day, we are providing 2014 guidance of revenues between $7.8 billion and $8.2 billion, an increase of 16% compared to 2013. On the bottom line, we anticipate adjusted diluted EPS to be in the range of $3.25 to $3.60, an increase of 19% compared to 2013. With the volume of approvals we are expecting in 2014, we are confident in our guidance ranges, irrespective of delays in any one approval. Given the significant regulatory delays in 2013, should all of our approvals come to fruition, this year could exceed our current expectations. We are also reaffirming our 2018 adjusted diluted EPS target of at least $6. Growth will come from a variety of sources across our diverse platform. In North America, we expect that timely approvals of new products in the U.S. will be critical to delivering on our growth targets. We look forward to launching a number of exciting transdermal and complex products this year. We continue to work very closely with the FDA to help ensure that the agency meets all of its obligations under PDUFA, which include enhancing safety, access and transparency. Further, we expect our injectables platform to come on strong for us in 2014, as we will double the size of this business this year and are now beginning to leverage this asset commercially around the world, particularly in the U.S. In addition, we continue to see a favorable market environment for our base business in North America. And as always, we stand ready to serve customers in the event of market supply disruptions, a capability that has long differentiated our company. In Europe, we expect continued growth this year, primarily by growing volumes in key markets, which will offset anticipated government-mandated price cuts by continuing to enhance our cost structure and leverage our supply chain, and launching new products. In Asia Pacific, we continue to expect robust growth from our antiretroviral franchise. In addition, we expect strong performance from our business in Japan, where we saw a significant turnaround as part of our collaboration there with Pfizer that exceeded our expectations. As far as Specialty division, we look forward, this year, to EpiPen becoming Mylan's first billion-dollar product. Despite our success to date, we're still only serving about 10% of the at-risk population. Finally, in addition to executing on our existing business drivers in 2014, we currently expect to be in a position to execute on another substantial transaction this year. With that, I'll turn the call over now to Rajiv, who will provide more color around our business and growth drivers. He'll be followed by John, and we'll do the same with respect to our financial performance.

Thank you, Heather, and good morning, everyone. As Heather mentioned, we continued to execute rigorously on many of our key growth drivers over the course of 2013, and we anticipate making significant further progress over the course of 2014. In the fourth quarter, we completed the acquisition of Agila, creating a global leader in injectables. We are making good progress integrating this business. We are particularly pleased with the progress that our quality team is making on implementing Mylan's one global quality standard across Agila's entire injectable network and enhancing their overall systems. Since closing, we have implemented a number of key commercial enhancements that will reduce Agila's historic long-term reliance on a business-to-business model, unlock commercial rights and economics in many of Mylan's key growth markets and increase value to Mylan. Some of these key changes include beginning full commercialization rights for most of Agila's U.S. portfolio, both market and pipeline products, including all oncolytics; and regaining significant product rights in Canada, Australia, Brazil, Japan and South Korea. As a result, less than 30% of acquired Agila portfolio is now business-to-business, as against 60% prior to our acquisition. In 2014, we anticipate launching 127 injectable products globally and 36 in the U.S. through our combined platform. We are starting to see increasing benefits of our approaching customers with an integrated portfolio of products across our business lines, what we call Mylan One. Oncology is a good example of this commercially integrated approach, and it's an area that has been significantly strengthened by addition of Agila. We also continue to expand our operations into new markets through Agila, while also continuing to build organically in India. For example, we are further expanding our current portfolio of antiretroviral products and innovative women's health care franchise by launching an oncology business anchored by our Hertraz trastuzumab product development partnership with Biocon. We soon, also, will be launching a critical care portfolio and are on track to have commercial verticals in 5 therapeutic categories in India by the end of 2014. Mylan continues to be a commercial partner of drugs [ph] around the world. Building on our strong existing partnerships for generic antiretroviral products, Mylan also has just named -- Mylan also was just named the year's exclusive branded medicines business partner for India. We also continue to successfully operationalize and execute on our collaboration with Pfizer in Japan and are very pleased with the turnaround of our business there. During 2013, we transitioned more than 250 Mylan products to Mylan-Pfizer co-branded packaging, and these are now being actively marketed by Pfizer's strong sales force, who were able to maximize a number of Day 1 launches, including Tacrolimus, which was our most successful product launch ever in Japan. As a result, according to IMS, Mylan-Pfizer's combined market share increased by more than 4 percentage points and is now more than 5.5%, and we expect to see continued growth from this partnership in 2014. We also made progress against our commitment to double our size in terms of manufacturing capacity and product portfolio. We completed the expansion of our transdermal patch facility in the U.S.A. in preparation for pending launch of our generic Lidoderm and other exciting transdermal products. In addition, we completed the acquisitions and integrations of additional FDF manufacturing sites in India focused on oral solids and injectables. We continue to build and diversify our pipeline of complex products with a strong future growth potential. We continue to expect to launch an AB-rated form of Copaxone at market formation this year. We are actively working with the FDA to secure approval and have not received any question from FDA that would lead us to believe that the agency is changing their position that a clinical study is not required for the approval of this product. As you can see from Slide 11, 2014 will be a critical in terms of execution around several of our key R&D programs. And as a result, our investment in R&D will increase by more than $100 million. Let me touch on some of the key development equities this year. We are moving towards commencing our clinical trials for our generic version of Advair in a few months. The guidelines issued by FDA regarding generic Advair were a positive development and right in line with our expectations that we outlined during our Investor Day last August, reinforcing our belief that our program is very much on track. Our continued conversations with the FDA have further validated this. We are initiating our pivotal PK studies soon based upon positive outcomes from pilot human PK evaluations. We'll also initiate our clinical trials in Q2 2014. Given all these factors, we continue to anticipate being the first company to bring an AB-rated generic form of Advair to market in 2016. With respect to Seretide, we filed a submission for our MDI product for approval in Europe in the fourth quarter, and we expect to launch a substitutable product in Europe in the first half of 2015. These submissions have been recently validated by MHRA and German health authorities, indicating that the products are under active review. We also are making progress on our COMBO product for the treatment of COPD. We have concluded our Phase IIb trials and will be analyzing the data and preparing for our Phase III clinical trials in COPD. As part of development and commercialization program with Biocon for a generic version of 3 insulin analog products, we expect to move our Glargine product into our Phase III clinical trials this year. We continue to believe we have the opportunity to be one of the first generic entrants in the developed markets into the rapidly growing diabetes area. We are also continuing our Phase III clinicals for our trastuzumab biosimilar. Our ability to invest in these kinds of significant R&D programs while maintaining and growing our core Generics business, as well as investing in the extensive manufacturing capabilities required, is what has fueled our success to date and, in many cases, put us in front of our competitors. We look forward to delivering these products to the market as soon as possible. Now let me turn the call over to John for more detail on our financials.

Thank you, Rajiv, and good morning, everyone. Today, I'm going to be referring to certain financial metrics that have been prepared on an adjusted basis. These are non-GAAP financial measures. I refer you back to Kris' comments at the beginning of today's call regarding our use of non-GAAP measures. Before we begin, I'd like to take a moment to introduce Colleen Ostrowski as our new Senior Vice President and Treasurer. In addition to her role as Treasurer, Colleen will also have overall responsibility for Mylan's Investor Relations and will be supported by Kris King. Our financial results for the fourth quarter of 2013 were in line with our expectations and represent a strong finish to another successful year for our company. As detailed on Slide 13, 2013 capped a 6-year period where we generated exceptional adjusted EBITDA and adjusted EPS growth for our shareholders through consistent execution despite difficult economic conditions in many locations around the world. Let me walk you through our financial results for the full year of 2013, which built upon already -- an already robust 2012 double-digit growth. As a reminder, the operating results of Agila have only been included in Mylan's consolidated financial statements since the acquisition date of December 4, and they weren't material to the quarter. Also, as a result of the acquisition, we've revised the Asia Pacific region within our Generics segment to include the operating results from Agila's Brazilian operation, and we'll now refer to this region as the Rest of World. Additionally, in 2014, our regions within our Generics business will be North America, Europe and Rest of World. The Rest of World region will also include our export businesses, which to date have been included in the EMEA region. Our double-digit adjusted diluted EPS growth in the fourth quarter was achieved through strong results at our North American Generics business, whose top line grew by 7% in the quarter due to favorable product mix; as well as our Specialty business, which generated revenue growth of 13% for the quarter, fueled by an EpiPen sales growth rate in the high teens. Finally, in the Rest of World region, our Indian business continued its double-digit constant currency revenue growth. Starting at the top of our income statement, on Slide 15, total revenues for the full year were $6.9 billion as compared to $6.8 billion in 2012. And for the fourth quarter of 2013, they were $1.8 billion as compared to last year's fourth quarter revenues of $1.7 billion. Foreign currency, especially the U.S. dollar relative to Asia Pacific currencies such as the rupee, the yen and the Australian dollar, negatively affected our top line in 2013. Excluding the effect of foreign currency, our top line grew by 4% for the full year in 2013 and by approximately 7% in the fourth quarter, which was in line with our guidance from February 2013. Within our Generics segment, third-party revenues were $1.6 billion for the quarter and $5.9 billion for the full year, up 7% in constant currency versus the 2012 fourth quarter and 1% versus the full year 2012. Revenues from our North American Generics business were approximately $854 million for the quarter, an increase of 7% when compared to the prior year period. Revenues from new products in the quarter in North America totaled $77 million as compared to $181 million in the comparable prior year period. As you will recall, the fourth quarter of last year was positively impacted from the 2012 launches of Valsartan, HCTZ and pioglitazone. Offsetting the lower level of new product revenues in North America was increased volumes and favorable product mix. Revenues in North America for the full year were $3 billion, representing a decrease of 7% as compared to 2012, even though revenues from new product launches in 2013 declined approximately 75% as compared to 2012. Turning to our other regions within our Generics segment. Constant currency third-party revenues in EMEA increased 3% in the current quarter. And the full year revenues in EMEA totaled $1.5 billion, an increase of 8% on a constant currency basis. We are particularly encouraged by our double-digit revenue growth in 2013 for France and Italy, as new product introductions and volume growth more than offset the negative impacts from single-digit price erosions in the region. In the Rest of World region, we grew constant currency third-party revenues by approximately $41 million or 11% in the fourth quarter, principally as a result of the growth by our Indian operations, specifically within our antiretroviral business. For the full year, revenues totaled $1.4 billion, representing constant currency growth of 14% as a result of the strong performance by our Indian operations and the double-digit growth in Japan as a result of new product introduction and volume growth driven by our collaboration with Pfizer Japan. Within our Specialty segment, third-party revenues in the fourth quarter increased $20 million or 13%. And for the full year, revenues increased over $146 million or approximately 18% when compared to 2012. We remain confident in our ability to continue to generate growth in our EpiPen franchise and maintain our leadership position within the market. Adjusted gross margin for the fourth quarter of 2013 was a very strong 51%, up over 2 percentage points from the same prior year period. And our full year adjusted gross margins were 50%, up slightly from 2012. Our strong margins are primarily the result of growth in our Specialty business and an improved product mix within our Generics business due to an increase in sales of high barrier-to-entry products. Additionally, our margins continue to benefit from the efficiencies of our vertically integrated platform. For 2013, adjusted earnings from operations was $1.7 billion, up slightly from the prior year. Adjusted operating income in -- for 2013 includes an additional $70 million of investment in R&D. As planned, we continue to invest a significant amount in our respiratory and biologics platforms, which accounts for the majority of the increase from the prior year. Adjusted EBITDA was $1.96 billion for the full year of 2013, which is near the midpoint of our guidance range of $1.9 billion to $2.1 billion. Fourth quarter adjusted net income was $308 million or $0.78 per share, a 20% increase from our Q4 2012 adjusted diluted EPS of $0.65 per share and in line with our expectations. Of -- our full year adjusted net income was $1.14 billion or $2.89 per share, a 12% increase from our 2012 adjusted diluted EPS of $2.59 and at the upper end of our guidance range. With that, I'd now like to discuss our guidance -- financial guidance for 2014, which can be seen on Slide 16. Our adjusted diluted EPS guidance for 2014 is $3.25 to $3.60 per share. This guidance range is arrived at with the following income statement line item metrics, all of which are on an adjusted basis, with the exception of total revenues and CapEx: Total revenues of 7.8% to $8.2 billion, with Specialty generating growth of approximately 20% and our Generics business generating approximately 15% revenue growth. I'll speak further in a few minutes on the drivers of our year-over-year revenue growth. Gross margins between 51% and 53%, the midpoint of which is 200 basis points higher than 2013. Drivers of this increase include new product revenues, EpiPen growth and the strength of our North American Generics business as we continue to benefit from an improved product mix combined with the efficiencies of our global platform. R&D of between 7% and 8% of total revenue as we continue to invest in our future, and SG&A of between 18% and 20% of total revenue. Included in our earnings release this morning is a table of assumed foreign exchange rates used in developing our 2014 financial guidance. Using all of these guidance metrics, we project adjusted EBITDA of between 2.4 and 2.4 -- $2.2 billion and $2.4 billion. We expect our adjusted effective tax rate to be in the range of 24% to 26%, net income to be between $1.3 billion and $1.5 billion and adjusted EPS to increase 19% as compared to the midpoint of our 2014 guidance range. In addition to the above, we are providing the following additional adjusted 2014 guidance metrics: adjusted cash provided by operating activities of $1.2 billion to $1.4 billion and capital expenditures of between $350 million and $450 million, yielding an adjusted free cash flow guidance range of $750 million to just over $1 billion, with a midpoint of $900 million. Our strong free cash flow provides us the flexibility to reinvest in our business, returning capital to shareholders, and/or pursue other strategic uses of our capital. Finally, we are projecting an average diluted share count of between 389 million and 405 million shares. As a reminder, under our cash convertible notes, we have approximately $43 million warrants outstanding, with the majority of the warrants having a strike price of $30. For every dollar that our average stock price increases above $30, the diluted impact of the warrants and employee stock options is initially approximately 1.3 million shares. This diluted impact decreases as our average stock price increases. For changes in our average stock price between its current level and the $60 -- the average diluted impact -- and $60, the average diluted impact is approximately 600,000 shares. As you will see later in our Capital Structure Achievements slide, our 2014 projected diluted share count range is based upon an assumed share price in the range of $40 to $60 per share. Slide 17 represents a projected bridge between our actual revenues for 2013 of $6.9 billion and the midpoint of our 2014 guidance range of $8 billion. We expect new product launches to contribute approximately $700 million of incremental revenue in 2014. Volume growth in our base business will serve to offset single-digit price erosion on our existing products. Additionally, the benefits of a full year of Agila are incorporated into each of the individual regions within our Generics business. We expect that Agila will be the engine to drive our injectables growth by providing products to our commercial businesses around the globe. Slide 18 shows a projected bridge between our actual 2013 adjusted diluted EPS of $2.89 and the midpoint of our 2014 guidance range of $3.43. New product launches and margin expansion will drive our earnings growth in 2014. With respect to new product launches, all unsettled products are in our guidance at risk-adjusted amounts and include the estimated impact of competition. In addition, our interest expense is forecasted to increase by approximately $35 million due to higher debt associated with the Agila acquisition, partially offset by lower rates from proactively managing our debt. We expect our third quarter EPS to once again be the strongest quarter in terms of earnings and slightly stronger than our second quarter. We expect the first quarter EPS to be approximately equal to our Q1 2013 EPS. Turning to our cash flow and liquidity metrics on Slide 19. Cash flow from operations on an adjusted basis was $1.2 billion for the full year, leaving us with unrestricted cash and cash equivalents totaling almost $300 million. We continue to benefit from short -- low short-term interest rates. As of December 31, 2013, the average rate on all of our outstanding borrowings was slightly below 4%. We continue to use interest rate swaps in order to target a long-term 70-30 fixed floating debt portfolio, which we believe is an optimal ratio. As we previously stated, in 2014, we intend to redeem our high-yield bonds maturing in 2018. During 2013, we executed forward starting rate -- starting interest rate swap that fixed the benchmark interest rates on the planned debt issuance that will fund this redemption. Capital spending for 2013 was $335 million, which was below the midpoint of our guidance range of $350 million. And that was a result of timing of spending. In addition, during 2013, we repurchased approximately 29 million shares of our common stock for $1 billion. Over the past 3 years, we have returned nearly $2.4 billion to shareholders through our share repurchase programs, and we will continue to look at additional opportunities to return capital to shareholders. At the end of the quarter, following the share repurchase programs and the additional borrowings due to the Agila acquisition, our gross debt-to-EBITDA leverage ratio is approximately 3.5:1. We continue to have ample borrowing capacity and financial flexibility and remain committed to our 3:1 long-term gross leverage ratio target. To summarize, our fourth quarter provided a strong finish to 2013 and provides yet another example of our ability to manage our business through a variety of industry and market headwinds while producing top and bottom line growth for our shareholders. We look forward to doing more of the same in 2014 and beyond. That concludes my remarks. And I'm now going to turn the call over to the operator for Q&A. Operator?

[Operator Instructions] Our first question comes from the line of Douglas Tsao from Barclays.

Heather, I was just hoping you could perhaps provide a framework for us in terms of how you're thinking about M&A right now and your sort of strategic priorities, given -- now that you've accomplished sort of the platform in terms of the injectables business and where you stand right now.

Sure. So you know, Doug, I think we've been pretty transparent about having parameters in place, and we're certainly committed to those. But I will tell you that we are looking -- we're not going to limit ourselves in really looking at anything that is accretive and continues to strategically complement on the platform that we've got in place. So we believe there's a lot of interesting opportunities out there that now are continuing to present themselves. And as you know about this team, we certainly aren't standing still. And now, with Agila closed and integration well on track, we believe that we're well poised for a transaction.

And just a quick follow-up. Do you see any value in terms of expanding your brand business in terms of addressing some of the consolidation that we're seeing now on the part of purchasers?

As we've said, when you look at the assets that we currently have in our Specialty business, from EpiPen to Perforomist, us continuing to invest in the respiratory franchise, we believe that there's great opportunity to continue to leverage our infrastructure in that platform even to a greater extent and believe that, as we've said, really, the lines between generics and brands continue to come down. I think, when you look at even partnerships like we have in Japan with Pfizer, it's our ability to organically continue to produce these opportunities, partner in interesting ways, as well as look at bringing in other products that would enhance, like I said, the infrastructure we have. We believe this respiratory niche is a great niche and fits perfectly with our innovative capabilities as well as, like I said, our commercial infrastructure. So I think you should look for us to do across the entire spectrum of the industry and be looking at everything.

And our next question comes of the line of Greg Gilbert from Merrill Lynch.

Heather, can you comment on the size range of the "substantial deals" that you're looking at currently? And as part of that, a very specific question, is Mylan willing to be -- become a non-U.S. company, from a domicile standpoint, if it's in the right interest -- the best interest of shareholders?

Sure. So Greg, I guess what I would say is we're not limiting ourselves, but what we've said is it's going to be accretive. So I think that pretty definitively lays out the spectrum of transaction that we could do. And as far as where we're domiciled, an inversion, synergy plays. Again, we've said our business model is not going after a transaction for a transaction's sake. So that is not going to be a primary driver. It could be an added-on benefit of a deal that's accretive and strategic to us, but it's not going to be the primary driver.

And our next question comes from the line of Randall Stanicky from RBC Capital Markets.

John, just with respect to Q1, the guidance, I think you had mentioned it was going to be similar to last year. Can you just, perhaps, help us, is there anything to read into your view or expectations around an approval in mid-March on Lidoderm?

I would say to you that, quite honestly, as Heather mentioned or we've talked about in the past, we expected a Lidoderm approval in the fourth quarter, and that didn't come to pass. And so I think we've been -- I'm being fairly conservative in our expectations. And I would say that a Lidoderm approval in the first quarter would represent an upside to the first quarter.

And our next question comes from the line of Ken Cacciatore from Cowen and Company.

I was wondering, to try to get a little bit more nuance on the parameters of an acquisition, would you consider a merger of equals? And then, we are in interesting times here. Things are moving fairly fast. I was wondering if you'd even contemplate an exit, maybe enjoying upside via others' equity. Just -- can you give us some nuanced thoughts about conversation in what is a rapidly evolving environment?

Well Ken, I guess what I would say is, as you'd noted, there is a lot happening in the industry today. And as I said earlier, we're not standing still. I think that this management team has been pretty active in the past. We continue to, as I said, be looking at everything. I think that our opportunity, our business model is to continue to build upon the great company that we've put in place today. And I think we continue to show our ability to perform while we're not only growing the opportunities we're having currently, but looking at acquisitions that make sense to just further our growth and accelerate our growth. So I would say, as I said earlier, we're not limiting ourselves to the transactions we're looking at, but they're going to be accretive, and we intend to continue to be a leader in this industry and continue to shape this industry.

And our next question comes from the line of Marc Goodman from UBS.

Heather, can you talk about Europe a little bit in the fourth quarter? Obviously, your main countries that are important, Italy and France, how they did in the quarter, maybe from a growth perspective, and how you're thinking about them in 2014? Obviously, France has been unusually strong for the past 1.5 years. I was wondering how you're thinking about that strength continuing into this year. And then just to confirm a couple of things that you guys said, you mentioned something about the COMBO product, a Phase IIb. Did you say that the data was very strong, and you're moving to Phase III, or you haven't made that decision yet? And then, on Lidoderm, I was just curious, why are you not expecting Lidoderm to be approved in March after the 6 months of exclusivity are up for Actavis? Or are you?

You -- we should get creative with asking one question, Marc. So I'll start was the last one, Lidoderm. As you know, I never -- we never perceived the first-to-file to be blocking our approval. We believe they forfeited their 180. So what I will say, the good news is there's nothing on our side keeping us from approval. So we believe it is just a timing issue. As John said, I was vocal about expecting it in Q4 of last year, so I believe that approval could be any day. But as John said, we're being conservative in our approach, just given the delays we have seen with the FDA. And again, that's why we're saying it could be upside to us if we get it in Q1. As far as Europe goes, and then I'll let Rajiv comment on COMBO -- as far as Europe goes, look, overall, and not necessarily looking at quarter-to-quarter, I guess what I would say, when I look at the annual growth, year-over-year, and what we're projecting again for this year for Europe, I'm pleased. I believe that we saw during kind of the lows of Europe, we were able to really put to work what we could control, which was our supply chain, cost of goods, products we were launching, vertically integrating them. And we've now seen all that hard work continue to pay off, in addition to seeing a bit of growth in these countries, like you mentioned, in France and Italy, continuing to see volume offset price cuts that we've taken into consideration. So look, I still say utilization rates are low, comparatively speaking, so I think that runway is still very much there, especially in countries like Italy. And as we've said, we're going to continue to look to grow this European business. We think there's a lot of opportunities to add to our platform there, especially when we look at areas like Central and Eastern Europe. So I'm happy with what we're seeing in Europe. We do continue to see them being a growth driver, and we continue to see a lot of opportunities to add to that business. So, Rajiv, COMBO?

And regarding COMBO, we just finished our Phase IIb trials and are currently analyzing. And very soon, we'll be meeting FDA to reconfirm our Phase III program.

And our next question comes from the line of Liav Abraham from Citi.

My question relates to Copaxone. You reiterated this morning that you feel that, with regard to generic Copaxone, you'll be there at market formation. What is your current thinking or your base case assumption regarding when that will be? Do you still think it will be the end of May this year, or because of the delays that you mentioned with the FDA, do you think that this, too, could be delayed? And then if you could give some comments [Technical Difficulty]

So you got cut off, but we'll at least answer the Copaxone. We are targeting for the -- that patent -- the patent expiration date in May and have been working very closely with the FDA. They continue to prioritize market formation generic products, which obviously, Copaxone is a very large and important one. So look, we are optimistic and hopeful that the FDA is not going to let this important date go by. But again, it just all comes down to timing. We believe we -- that again, nothing kind of rests on our side of the fence, that we've completed everything we needed to complete for Copaxone approval.

And our next question comes from the line of Ronny Gal from Sanford Bernstein. Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division: My, I guess, 2-part question, and the first one will be around EpiPen. We've seen the scripts down a little bit. You're holding your shares real nicely at 90%, but the scripts look a little bit down year-over-year since the beginning of 2014. Can you, then, comment a little bit about the product, and when are we going to be able to see what you got for next generation for EpiPen? And then, staying with the complex product, I wasn't sure if Rajiv mentioned it, if [indiscernible] is expected going to Advair pivotal this year? And on Glargine, do you expect to start the pivotal this year? And when should we see a short-acting insulin from you guys?

Okay. Thanks, Ronny. So I'll start with EpiPen. Look, I think, if you remember, last year at this time, I was saying we were having the coldest winter in the history, at least for the recent history, I would say, only to be now topped by this winter, which is even colder and longer than last year. So I believe that we're going to see the natural return of EpiPen once the sun comes out for a bit more than 5 minutes. And so, look, I think that the runway for EpiPen is still significant. As I mentioned earlier, we're still only treating about 10% of at-risk patients. We continue to be very active in getting legislation passed that's certainly continuing to, we think, grow the market, grow the script trend that you're seeing. And we think 2014 is going to be a great year and, as I mentioned, believe it will be Mylan's first billion-dollar product this year. So I think every -- things couldn't be better on the front of EpiPen. And as far as our longer term, as I mentioned earlier, we'll be giving an update on our longer-term view of our -- all of our business and growth drivers this summer at Investor Day. And at that time, we'll be talking more about the life-cycle management of EpiPen. But again, we see this franchise and the brand equity of it to be very strong and significant.

So Ronny, on generic Advair, 2 important milestones will be happening later this year. So in a couple of months, based on the successful pilot PK study that Abacavir received, we'll be starting, first of all, pivotal clinical trials in the next couple of months. And with a similar -- at the same time, we are starting with our pivotal PK studies. So these are 2 important milestones. Also, later this year, we are starting Phase III for Glargine, followed by the short-acting.

[Operator Instructions] Our next question comes from the line of Jami Rubin from Goldman Sachs.

Heather, I'm just curious to know if your increased confidence in the new product approvals, specifically Lidoderm and Copaxone, are on the back of the onetime status update from the FDA. And how much of the $700 million of new products is accounted for by incremental Agila sales?

Well, so let me start with, Jami, we're not breaking out and, as you know, we don't break out product-by-product or lines of sales. Agila is now totally integrated into our business, and we've said what's most important is not what they were doing on a standalone basis, but what we were going to be able to do with that platform as part of our overall platform. So our injectable business, as we've said, we see doubling this year, so it's a very important driver and will continue to be through 2018. And I think, as we've said, we're driving for -- and everything that we're doing and executing on is towards that $6 in 2018. And our ability -- really, a lot of things may have some timing implications quarter-to-quarter or so forth, but certainly, nothing at all has changed about our long-term picture and everything that we're doing to execute on delivering that $6. And as far as the confidence around -- the confidence around approvals, I would say our confidence comes into the fact that they will be giving approvals at some point. I mean, it can't -- the delays that we've seen, they're going through a massive transformation at OGD. We continue to stay very close to them on the overall transformation as well as day-to-day tactics around getting these products approved, especially, as I mentioned, market formation products. So look, I think that it's very high on FDA's radar screen. They want -- they know their mission is to get affordable medicine out there as timely as they can, so that's where my increased confidence comes from.

And our next question comes from the line of David Buck from Buckingham Research.

Two quick ones for Heather. Can you talk a little bit about the GDUFA process and whether you're -- you've put in an expectation of any increase in timeline for approvals this year, and the fear that came out of GPhA is that you'll see more complete responses as opposed to outright approvals. And just secondly on -- for John, I guess, can you talk a little bit about how you've incorporated some of the consolidation into the pricing assumptions for this year?

So as far as GDUFA goes, I mean, look, we knew -- and GDUFA overall contemplated, certainly, from a timeline perspective, that all this change wasn't going to go to happen overnight, that it was going to be over the course of these 3 to 5 years on all fronts. Not just so -- I keep reminding people there were 3 important pillars of GDUFA: access, safety and transparency. I think the safety aspect, as far as inspections and having the FDA be able to have the reach and scope to assure good manufacturing practices on facilities making products for the U.S., is extremely important. And, obviously, you've seen a lot of activity around that. I think the transparency in being able to then be able to show what companies are doing and what their scorecards are from a quality perspective continues to have focus. But I'd say this last one, access, which is making sure that we're getting products approved in a timely fashion, and as you know, those metrics -- we're supposed to see those approval times go down into the 10- to 12-month range over these years. So I think when you talk about complete response letters and, again, where they want to move towards, it's not going to happen overnight. And I think that, right now, is what you're seeing in this transition of going from how they used to approve ANDAs to how they want to approve ANDAs. And some of the pain we're feeling right now is working through that transition because of all of the ANDAs that were already on file at the FDA. So look, it's just -- it's a work in progress, something we're close to and, listen, something that is very much high at the highest levels of the FDA on their radar screen, that they need to make sure they're fulfilling all 3 pillars of GDUFA. So that's what I would say. And that's why I think, when you hear us talk about our guidance and the ranges we have out there, we've said that, look, if everything would come to fruition and break loose, from the '13 launches we didn't get to what we're expecting in '14, we could exceed our current -- the current expectations we have today. But we think we've taken a very measured approach to waiting on what we're seeing and feeling at the FDA at the moment.

And David, on the second part of your question with respect to the current consolidation among our customer base and that being taken into consideration in our guidance, on Chart 17, I provided a revenue bridge. And both as it relates to pricing assumptions, as well as volume, both are taken into consideration -- we took what's happening in our industry into consideration in both of those lines.

And our next question comes from the line of Chris Schott from JPMorgan. Christopher T. Schott - JP Morgan Chase & Co, Research Division: Just a follow-up on the business development from the 2-part question. I guess, first, when -- with the scale and type of deals you're currently considering, I guess, are these substantially different than, let's say, a year ago in terms of the focus of the company or how large you're willing to go with transactions? And the second part of that question is -- I just want to make sure I understood the comments from earlier. What is Mylan's view on getting substantially larger on the branded side of this business, not just a tuck-in or a single product acquisition, but something that would substantially increase the branded portion of the revenue base?

Okay, Chris. So look, I guess what I would start with is what continues to change is the size of our balance sheet and the flexibility that we have. So again, I think, to just be very clear and transparent, we've said it needs to be accretive, and we're not going to limit ourselves. So I think that, as we continue to grow, that ability of what we can acquire continues to grow as well. And as far as the branded side of the business, again, I think we're not limiting ourselves to saying we're just looking at generic opportunities or brand opportunities. And I think that, when you look at the kind of complex, high barrier-to-market products on -- even on the Generics side that we're bringing to market, a Copaxone, a generic Advair, I think that there is -- they're not launched in the same way that a traditional generic product in the retail sector is launched. So as you think about the infrastructure needed to be successful with those types of product, that's where we say we continue to be able to leverage that Specialty franchise or infrastructure and think that, especially as we think about who we're calling on today, that we've got great opportunities to complement that as well and continue to build on the commercial side. I think, if you look at operational excellence we've achieved and continue to, as we've said, look at other things that would add continued dosage forms or therapeutic categories, that remains a priority. But with that being said, we're also looking at things that would expand our commercial excellence and the infrastructure and that sales and marketing on a global basis. So we're looking at anything that would be strategic and complement us and be accretive. And I would say, as I mentioned earlier, we see several interesting things out there that would accomplish this.

And our next question comes from the line of Elliot Wilbur from Needham & Company. Elliot Wilbur - Needham & Company, LLC, Research Division: A question for Heather. With regard to the top line outlook parameters that you're providing us with today, certainly, quite a bit more robust than you had talked about back at your August Analyst Day and, if I'm not mistaken, kind of at the high end of the range, probably one of the highest growth rates, if achieved, that the company would have delivered in something close to 20 years. So I'm just wondering specifically kind of what has changed over the last couple of months to give you so much more confidence in your top line outlook. And as a corollary to that, you're still sticking with roughly the same adjusted EPS growth guidance, even though you're talking about the midpoint of top line growth being essentially 4 percentage points higher. So I'm sort of wondering why we're not seeing some more of a step-up in bottom line growth relative to top line growth expectations.

Yes. Well, Elliot, I guess, maybe the good or bad news is I've been here for more than those 20 years that, I guess, you're talking about on what kind of growth Mylan has achieved. But I think you -- and what we tried to convey at our Investor Day last year is our continued, balanced look at top and bottom line growth. I mean, we've said before it's striking that right balance. Certainly, what we've been able to show, up until this point, that we've been very much able to execute and to pull upon this global platform and the diversity of it to manage our business and deliver the EPS growth. I think that as, now, we continue to mature and our operational excellence is where it is, we continue to see that, as we add important things like our injectables platform and the kind of growth and the opportunities that, that's providing across our entire global business, that's what you see coming in here to 2014. So what I would say is we continue to focus on both top and bottom line knowing that what we've shown, and I think our track record speaks for itself, that our ability to manage this business and deliver on that bottom line is critically important. But obviously, we're showing our ability to perform while we continue to have opportunities kind of compound themselves. And so I think what you're seeing in 2014 to be the first of, of a series of growth, as we've shown in our projections, as I said earlier, everything we're doing, executing to that $6 in 2018, is going to be that continued balance of growing top and bottom line. And we just see a ton of opportunities. Like I said, if we -- if everything comes to fruition in 2014, it could even exceed our current -- these current expectations.

And our last question comes from the line of Jason Gerberry from Leerink Partners.

I just wanted to follow up on your last comment, just about the potential upside to guidance. I'm just getting a handle on your conservatism around the Copaxone opportunity. Obviously, there's a lot of swing factors in kind of sizing up that market opportunity. Could you talk a little bit about -- are you expecting all 3 players in the market at formation? How are you thinking about that? And then, there's a lot of difference of opinion on the managed care outlook for this market. So I'm just kind of curious, your intelligence, are you expecting payers to get aggressive with implementing step eds [ph] for the 20-milligram generic?

So look, Jason, as I said in my opening remarks, we're confident in these ranges, irrespective of any one approval coming or not coming in 2014. And that's what we've taken into consideration in the range that we've given. I think, as far as Copaxone goes, as I've said, it's not your typical generic launch, but we are -- we have invested, and we think that we certainly will be very successful with this launch, as we are -- have been with many of our other products, taking into consideration the way you need to launch and the players that are at the table. We don't talk about our assumptions about any one product, but I would, again, say I think our track record shows that we take a very responsible approach about how we weight these opportunities. And again, that's why we're confident in the ranges that we have out there for 2014. So I want to thank you and thank everybody for joining us today, and look forward to seeing you soon.

Thank you. Operator, you can close out the call now.

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