Welcome to Mylan's First Quarter Earnings Conference Call and Webcast. Hosting the call today from Mylan is Ms. Kris King, Vice President of Global Investor Relations. Today's call is being recorded and will be available for replay beginning today at 7:30 p.m. Eastern Time. The dial-in number is (800) 585-8367 or (404) 537-3406 for international callers, with pin number 33371489. For those listening to the rebroadcast, the statements on today's call are as of May 2, 2013. [Operator Instructions]
It is now my pleasure to turn the floor over to Kris King. You may begin.
Thank you, Maria. Good afternoon, everyone. Welcome to Mylan's First Quarter 2013 Earnings Call. Joining me today for the 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, estimates, guidance, trends, forecasts, potential, intend, continue and variations of these words or comparable words.
Our forward-looking statements made today include, among others, statements relating to anticipated business and product performance levels; trends in European and outher countries; planned launches of and anticipated exclusivity periods for new products; our ability to achieve forecasted full year results while absorbing the impact of negative price pressures; expectations for capital expenditures; expectations for R&D, SG&A and other spending; our guidance range; future earnings; planned activities; anticipated growth; the consummation of a planned transaction and other expectations and targets for future periods, including our expectations regarding the second quarter and for 2013 overall. Because these statements are forward-looking, they inherently involve risks and uncertainties and, accordingly, our actual 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 factors set forth under forward-looking statements in our recent earnings press release dated today, May 2, 2013, as well as the risk factors set forth in our report on Form 10-K for the period ended December 31, 2012, and in our other SEC filings. You can access our Form 10-K and other filings, including our 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.
In addition, during the call, we will be referring to certain actual and projected financial metrics of Mylan on an adjusted basis, which are non-GAAP financial measures. It should be noted that non-GAAP measures, such as adjusted revenues, adjusted gross margin and adjusted diluted earnings per share, should be used only as a supplement to, not as a substitute for, or as a superior measure to measures of financial performance prepared in accordance with generally accepted accounting principles, or GAAP.
Please refer to today's 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 our first quarter results 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 expressed written permission.
With that, I'll now turn the call over to Heather.
Thanks Kris, and good afternoon, everyone. Thanks for joining us. I'd also like to welcome and recognize Mylan's employees around the world. It's because of their continued dedication and hard work that we once again delivered a very strong quarter. And on behalf of the Board of Directors and our entire management team, I'd like to congratulate them on a job well done.
Our first quarter results are right in line with our expectations. On the top line, we delivered $1.63 billion, a year-over-year increase of 5% on a constant currency basis. On the bottom line, we delivered $0.62 per adjusted diluted share, a year-over-year increase of 19% that placed us at the upper end of the EPS guidance range we provided during our call in February. We remain very confident in our full year guidance ranges, including our adjusted EPS range of $2.75 to $2.95.
In our Generics segment, we reported third-party net revenues of $1.41 billion, which represents year-over-year growth of 2% on a constant currency basis, and we continue to expect to launch approximately 500 products globally this year, and remain confident that this segment will deliver revenue growth of 3%.
We were pleased with the performance of our North America region during the quarter and continue to show strong momentum. Although third-party net revenues declined 4.5% year-over-year to $733 million, recall that in the first quarter of 2012, we launched the first generic version of Lexapro and it was one of our largest launches to date. When we exclude the revenues associated with this product from our North America results, the region grew at a very strong double-digit rate.
Worth noting is the performance of Mylan Institutional, as we continue to leverage that platform to take advantage of opportunities in the marketplace, underscoring why we have taken additional steps to further bolster our strength in this attractive category.
In our EMEA region, we posted our third consecutive quarter of growth. Third-party net revenues totaled $370 million, representing a year-over-year growth of 10% on a constant currency basis. France and Italy continue to be significant contributors to the region's growth, and we're also seeing increased opportunities in the U.K. We expect Generics to be a growth driver for us throughout the year, particularly as generic utilization continues to rise in every one of our major markets, as governments increasingly recognize the importance of generics to the sustainability of health care systems.
Our Asia-Pacific business performed well during the first quarter. Third-party net revenues totaled $305 million, representing year-over-year growth of 10% on a constant currency basis. Strong growth in our anti-retroviral franchise helped drive this result. We see substantial growth and opportunities still ahead for this business, as we continue to garner significant share and tenders in South Africa and India. In addition, we expect to see accelerated growth during the second half of this year in our ARV commercial activities in the private sectors of both countries.
You may recall that on January 1, we began our exclusive, long-term, strategic collaboration with Pfizer in Japan. Our combined portfolio now exceeds 300 products, covering numerous therapeutic categories. We intend to launch generic Tacrolimus in the new Pfizer-Mylan packaging in June, and expect that it will be the sole generic on the market for 6 months. Importantly, the collaboration has been very well received by health care professionals.
As for our Specialty business, we reported third-party net revenues of approximately $212 million during the first quarter, a 24% increase compared to the same period last year. We continue to expect that our Specialty business will deliver revenue growth of 30% this year, and that it will remain a very important strategic growth driver over the long term.
With respect to EpiPen, we're very pleased with its performance during the first quarter. Although total scripts were down 4.4% year-over-year, the decline was due almost entirely to the very long, cold winter we experienced this year in the U.S. in contrast to the winter of 2012, which was the warmest on record. Further, with spring finally here, script growth in the market over the last 2 weeks has averaged more than 8%, and we have captured the majority of that growth. We also announced a coupon offer last week that is designed to encourage patients to obtain sufficient quantities of EpiPen, so that they have access to this life-saving medication anywhere they may need it.
The first quarter also reflected a new market entrant in mid-January. Its share over the last 8 weeks has remained flat, coming in at just below 4%, and its trending under our current expectations. As you may know, this year marks EpiPen's 25th anniversary. We are rolling out a series of events to continue to educate and build awareness around anaphylaxis. Additionally, we continue to see many states taking proactive measures to help ensure that students have access to EpiPens in schools. In addition to the 14 states that already allow access, 26 states have bills working their way through legislatures, and we remain confident that it's only a matter of time until the rest of the states follow suit.
With that, I'll turn the call over to John.
John D. Sheehan
Thank you, Heather, and good afternoon, everyone. Today, I'm going to be referring to financial metrics that have been prepared on an adjusted basis. These are non-GAAP financial measures, and I refer you back to Kris' comments at the beginning of today's call regarding our use of adjusted measures. I am pleased with our financial results for the first quarter of 2013, a great start to what we will believe be -- what we believe will be another successful year for our company.
Our Q1 results were in line with our expectations, and we remain confident that our full year results will be achieved within our guidance, as detailed in February during our earnings conference call. In addition, we continue to work towards completing our acquisition of Agila, which we expect to close in the fourth quarter of 2013, subject to regulatory approval and certain closing conditions.
Our double-digit adjusted diluted EPS growth in the first quarter versus the comparable quarter of the prior year was achieved, in part, through strong results at our Specialty business, which generated revenue growth of 24% for the quarter, fueled by sales of EpiPen. Continuing the positive trend that we experienced starting in the second half of 2012, our European business, powered by our operations in France, grew by 10% on a constant currency basis as compared to the first quarter of the prior year. And our Indian business continued to grow at a strong double-digit rate on a constant currency basis, with favorable sales of both anti-retro API and finished dosage form product.
Getting into the details, let me now walk you through our financial results for the first quarter of 2013. I will also provide an update on our capital structure, Agila transaction financing and our liquidity position.
Starting at the top of our income statement. Total revenues for the quarter were $1.63 billion, an increase of approximately 3% when compared to last year's first quarter revenues of $1.58 billion or approximately 5% on a constant currency basis. Within our Generics segment, third-party revenues were $1.41 billion, a slight increase when compared to the first quarter of the prior year and in line -- and fully in line with our expectations.
Our Specialty segment's third-party revenues increased over $40 million or 24% when compared to the same prior year period. For the remainder of 2013, we are forecasting a continuation of the unfavorable translation impact on sales denominated in certain foreign currencies, principally the Indian rupee and the Japanese yen, which we experienced in the first quarter. Therefore, we currently anticipate that our total revenues for 2013 will be towards the lower half of our previously disclosed guidance range of $7 billion to $7.4 billion.
Looking at our operating profitability measures. Adjusted gross margin for the first quarter of 2013 was a very strong 49%, up approximately 1 percentage point from the same prior year period. This strong quarter margin is primarily the result of the growth in our Specialty business. Within Generics, gross margins remained stable when compared to the same prior year period, despite a lower contribution from new products in the first quarter of 2013.
Adjusted operating income was $383 million for the first quarter of 2013. Consistent with our top line growth, this represents a 4% increase compared to the prior year. This is primarily the result of the improvement in gross margin, as previously discussed, partially offset by our planned increase in R&D.
R&D expense, on an adjusted basis, was $103 million or approximately 6.3% of total revenues and up approximately 30% from the prior year. We continue to invest a significant amount in our biologics and respiratory platforms, which accounts for the majority of the increase from the prior year. Excluded from adjusted R&D expense are certain third-party licensing payments made during the quarter of $23 million for the acquisition of products under development.
Our guidance range for adjusted R&D expense for the full year remains at between 6% and 7% of total revenues. At the same time, SG&A, also on an adjusted basis, was $310 million or approximately 19% of total revenues, at the midpoint of our full year guidance range of 18% to 20%. Excluded from adjusted SG&A is approximately $19 million of costs, principally banking fees and due diligence-related expenses related to our planned acquisition of Agila.
Adjusted EBITDA for the 3 months ended March 31, 2013, was $443 million, an increase of 8% when compared to the prior year, and remains forecasted at $1.9 billion to $2.1 billion for the full year.
Moving on to our consolidated non-operating financial metrics. Adjusted interest expense for the first quarter of 2013 was $63 million. We continue to benefit from low, short-term interest rates. As of March 31, 2013, the average rate on all of our outstanding borrowings was approximately 4.3%. We continue to use interest rate swaps in order to target a long-term 70-30 fixed-to-floating debt portfolio, which we believe is an optimal ratio.
The effective tax rate in the current quarter was 26.5% as compared to 25% in the fourth quarter of last year, and at the midpoint of our full year 2013 tax rate range of 26% to 27%. As we continue to review our 2013 tax planning strategies and the anticipated mix of our earnings, we expect that our full year effective tax rate may be closer to the lower end of the guidance range.
First quarter adjusted net income was $246 million or $0.62 per share, a 19% increase from our Q1 2012 adjusted diluted EPS of $0.52 and in line with our expectations. Our guidance range for adjusted diluted EPS for 2013 remains at $2.75 to $2.95 per share.
With respect to the second quarter, we expect that adjusted diluted EPS will be in the range of $0.66 to $0.68. We continue to anticipate our third quarter will be the strongest quarter of the year, and we are forecasting our fourth quarter to be comparable to or slightly stronger than the second quarter.
Turning to our cash flow metrics. Cash flow from operations on an adjusted basis was approximately $90 million. Our GAAP cash flow from operations for the current quarter was approximately $88 million, leaving us with unrestricted cash and cash equivalents totaling at almost $300 million.
The first quarter is historically the heaviest in terms of the usage of cash as a result of the timing of certain payments, including taxes, interest and incentive compensation. And we are still forecasting our full year 2013 adjusted operating cash flow to be within our guidance range of $1 billion to $1.2 billion.
First quarter capital spending was $53 million, and we continue to expect full year capital expenditures to be within our guidance range of $300 million to $400 million. Additionally, during the first quarter, we completed the previously announced share repurchase program by purchasing approximately 16 million shares of common stock for approximately $500 million, consistent with our objective to return capital to our shareholders.
As part of our ongoing efforts to optimize our capital structure, in the first quarter and subsequent to the announcement of the Agila transaction, we entered into forward-starting interest rate swaps for a significant portion of the transaction's overall financing. By entering into these swaps, we are confident that we will be able to finance the Agila transaction at an effective weighted average interest rate below 4%, assuming no significant deterioration of Mylan's credit spreads.
To further improve our existing capital structure, in early April, we executed an additional $1.8 billion of forward-starting interest rate swaps that fixed the benchmark interest rate on planned debt issuances in 2014 and 2015. We intend for these debt issuances to fund the redemption of our high-yield bonds maturing in 2018 and 2020. The respective first-call dates for each of these bonds is November of '14 and July of 2015. Assuming that our credit spread does not change from its current level, we expect that these transactions, together with certain other planned capital structure transactions, will reduce our existing interest expense levels by approximately $50 million in 2014, exclusive of the impact of the anticipated Agila acquisition financing.
At the end of the first quarter, following the share repurchase and the additional borrowings under the revolving credit facility and AR facilities, our gross notional debt-to-EBITDA leverage ratio was 2.9:1, leaving us with about $2 billion of financial flexibility to continue to take advantage of further accretive opportunities. We remain committed to our 3:1 long-term gross leverage target. And when our leverage exceeds that target, we remain committed to deleveraging within an 18-month period.
To summarize, our first quarter was strong and in line with what we had anticipated. We remain confident in our financial targets for 2013, and we look forward to updating you on our strategy and longer-term outlook at our Investor Day on August 1.
That concludes my remarks, and I'll turn the call over to the operator for Q&A. Operator?
[Operator Instructions] Our first question comes of the line of Marc Goodman of UBS.
Marc Goodman - UBS Investment Bank, Research Division
If I -- first, can you give us a little more flavor on Europe, kind of dig into France specifically and talk about kind of volume versus price and what's happening there and whether your market share is remaining relatively steady? Are you willing to give up a little bit of share for profitability? Just give us the dynamic there, please, for France. And then also just talk about Italy a little bit as well. And then just on Epi -- and then just -- obviously, EpiPen has been a huge topic of conversation. The numbers came in pretty good in the quarter, and you're still confirming, for the full year, the numbers. And you made a comment that the allergy season and the winter and how that played out. I'm just curious, how much of EpiPen is that seasonal issue with respect to allergies versus how much of EpiPen is just your traditional -- you're worried about a bee sting, or you're worried about that type of event?
Okay, sure. Okay, so starting in Europe. So Marc, I would say we're just seeing more of what we reported last quarter, which is volume more than offsetting price and, especially in our largest market like France, that really driving that growth. Italy, certainly second, as far as growth rate. And we see kind of -- as we've said, all of our major markets, we've seen this generic utilization continuing to increase. As you know, there's still a good bit of runway room there. I mean even when you look at the entire market of France, it's still in the mid-20s as far as generic penetration. So we feel that there it -- it's -- like we said, continue to be a growth driver this year. We continue to see some stability. And I can assure you, as I think we maintained over the last couple of years, as Europe was facing its challenges, but we were making sure that we did balance profitability and making sure that we wanted to continue to grow our business in a sustainable way. And I think that our numbers show that, not only did we do that, but we've certainly been able to also hang on to our share and stay the market leader in France. As far as EpiPen goes, I'm very encouraged by the last couple of weeks. I mean, I -- we couldn't have had 2 more diverse bookends as far as the comparator, as far as year-over-year goes. So last year, as I mentioned, the warmest on record. This year, one of the coldest and extended. So we absolutely see a direct correlation between temperature and snowfall, specifically in the central and northeast regions, with EpiPen sales. I mean, we went back and looked down to zip code as far as temperatures and weather and that impact and trends over the last couple of years. And that's why I was confident to say that we believe almost all of that 4% was entirely due to the weather. And over the last couple of weeks, the spring has finally arrived. As I said, we see now an average of 8% growth year-over-year, and that's still to a pretty significant growth last year. I mean, we're still dealing with weeks where we were having unprecedented market growth last year. So coming off of -- to grow over still a very high base, I find very encouraging. And like I said, we do see a lot of seasonality for sure, that's why third quarter will continue to be our strongest quarter yet due to that seasonality. But what we have seen with the education and awareness and growing that around this at-risk population, that we do see, for instance, these hot -- these trends growing outside of just that typical Q3 growth. So overall, I, like I said, continue to see EpiPen being very strong, accelerated growth and very encouraged by the most recent script trends, and we expect that to continue as we certainly now enter what, for us, will be our push on direct-to-consumer advertising and all of our other initiatives.
Our next question comes of the line of Jami Rubin of Goldman Sachs.
Jami Rubin - Goldman Sachs Group Inc., Research Division
Heather, if you could address what's going in the U.S. Generics business. I mean one of your other competitors reported weak sales in generics, and obviously, there's a lot lumpiness because of difficult year-over-year comparisons. But what are you seeing? And I think I heard you say you still expect to achieve 3% growth in your total Generics business. That would require a significant recovery in the following 3 quarters. So if you could just talk about what are those first-to-file opportunities? Or how we should think about the outlook of that business? And I know this is a year where you're up against very difficult comparisons because there were, as you said, a voluminous number of new product launches last year. But how should we think about 2014 and going forward? I'm not asking you for guidance, obviously, but just how we should conceptually think about it.
Yes. So look -- yes, and I think I'd start with the fact that -- as I've often said, I think it's very difficult, as large and diverse as many of the companies have become, to try to use one brush to paint all. I think when we look at the brand business, that's very dependent on individual portfolios and product mix, as I think that, that is very much at play here for our industry. We joked when people kept asking last year about the patent cliff. And I said, "You know, I think it's relative." We don't see a cliff. We see continued opportunity on numerous product fronts and still numerous therapeutic and different dosage forms, just like our recent announcements of adding to our injectables business. So from my perspective, we see the generic industry alive and well. We still see a lot of runway room here the United States. I think we'd still continue to see somewhat of a stability in the pricing environment. There's still a good bit of market interruption, especially in the institutional space. But we're seeing that across the board that we've been able to very opportunistic about. So I would say that we've got a very strong outlook. We've got over 180 ANDAs on file with the FDA. We have over 35 first-to-files. So the business is very strong, very healthy. We see growth. And as far as the percentages, remember that we -- I just talked about Europe being the growth driver for us, Asia Pacific. So as you mentioned, the 3% is our total global Generics segment. So that -- and we obviously feel confident about hitting the 3%.
Jami Rubin - Goldman Sachs Group Inc., Research Division
Can I just ask a follow-up, Heather? Can you -- is there any color you can provide us on the Pfizer partnership in Japan? Are you seeing revenues from that yet? And anything that you could share with us would be very helpful.
Yes. I mean, it's -- right now, it's right in line with our expectations. As I mentioned, we're launching Tacrolimus and expect that to be an exclusive launch. All of the new packaging is rolling out. So I mean, the partnership has gone extremely well. And like I said, it's continuing right now to be right in line with our expectations. And we think that, certainly over the longer term, that's just going to continue to build and build as we're able to build that portfolio and the brand. Okay, thank you.
Our next question comes from the line of Douglas Tsao of Barclays.
Douglas D. Tsao - Barclays Capital, Research Division
Just in terms of the North America Generics business, we've obviously seen some moderation in terms of the pricing environment for the base business. I was just curious if you could provide some perspective in terms of what you're seeing there, and as well as sort of dynamics in terms of market share vis-à-vis sort of individual products and sort of customer relationships right now.
There -- I don't have much more to add on the pricing environment, except that it's the generic industry. It's going to continue to have different products affected at different times. But overall, we're still seeing a fairly stable pricing environment from an erosion perspective and, certainly, continue to see our volumes growing. And like I said, we're still on track to launch 500 products globally and still a significant amount in the United States. So from a product -- the breadth of our product and the pricing environment, we continue -- that's why, I wanted to stress that we see a lot of strong momentum for us in that business. As far as the -- our customers go, obviously, as I've said before, I think the consolidation with our customers is actually advantageous, because as they become larger and larger, their needs and their -- the need for them to have reliable suppliers that can provide the capacity they need is, I think, where only a very few can. So I think Mylan is in a great position, as not only we have significant capacity today, but as we've said, we're doubling the size of Mylan over the next few years. And that ability to be able to meet the global demand that many of our customers are facing now, we think we're positioned great to take advantage of that opportunity.
Our next question comes from the line of Elliot Wilbur of Needham & Company.
Elliot Wilbur - Needham & Company, LLC, Research Division
A couple of questions around the EpiPen franchise. Heather, I think, during the course of your prepared commentary, I think I heard you say something about instituting a coupon program. And I'm just wondering if that's something along the lines of a 0 co-pay coupon. And if you can maybe just talk about whether or not the entrance of Auvi-Q has caused you to change anything in terms of your marketing game plan, call activity or call frequency. And then as a follow-up to that, I mean it looks like we've -- you've gone the longest period of time without instituting a price increase on EpiPen since late 2009. I'm just wondering if you think the product is basically, essentially fully priced in terms of the value proposition. And we're probably looking at something more in line -- in terms of thinking about price increases going forward, something more in line with the sort of normalized pharmaceutical inflation rather than the price increase levels we've seen in the past.
Okay. So I'll start with the coupon. It is a 0 co-pay coupon. And as I mentioned, it's really been encouraging multiple scripts. As you know, it's important that people have EpiPens readily available and accessible wherever they need them. So it's been -- we're very happy with the coupon. And in fact, we've seen higher pens-per-scripts count as we continue to see people not only asking, as you know, the guidelines. The guidelines that are out there around anaphylaxis say that you should always be carrying 2 with you. So that has helped drive that scripts -- pens per script. But we've also seen some good positive results from our coupon, which we just launched over the last couple of weeks. As far as Auvi-Q, as I mentioned, they're currently trending under our expectations. So I'm very proud about not only the brand equity or our -- we believed that EpiPen, not only had a very strong brand, but that tried-and-true product sense that we believe EpiPen brings to the market, we continue to see that holding ground. And like I said, I continue to now be encouraged by the last couple of weeks that are showing just year-over-year growth in the overall epinephrine market, and us able to capture more than half of that. So feel very good about the EpiPen franchise and believe that we absolutely will deliver on the 30% growth for the Specialty segment. And as far as pricing goes, look, I think we'll continue -- we continue to have opportunities around prices, as other brands do, and we'll continue to make decisions based on that opportunity going forward. But I'd, by no means, say that there's no room for price anymore in EpiPen.
Our next question comes from the line of Shibani Malhotra of RBC Capital.
Shibani Malhotra - RBC Capital Markets, LLC, Research Division
So yesterday, on an earnings call, one of your competitors in injectables said that, while companies are getting into the market, there's going to be a lot more consolidation in the industry. So I was just wondering, Heather, if you can talk about how you see the injectables landscape playing out, in particular, in the U.S. And then one for John and you. You talked about the $4 billion in accretive -- $4 billion you had available for accretive transactions last year. And clearly, you bought Agila and purchased your shares. How should we be thinking about the way you're going to spend the rest of the $2.5-ish billion that is left?
Okay. So as far as the injectables space, look, I mean, obviously, with our announcement of planned acquisition of Agila, we believe that this sector is ripe for a consolidation. I think that between the market shortages and the significant problems that many manufacturers are having, continue to make it very ripe for consolidation. So I believe that, that's a great sector of the market, a high gross margin. I think that's going to continue even as other players come in. But -- so totally agree with the consolidation point. As far as our M&A activity, I guess what we'll continue to underscore is that we continue to look at everything. And -- but we are committed to the parameters we laid out there last year, which is being an accretive transaction and remaining investment grade. So I would say there's a lot of different ways to get there and look at things. But just assure that we're -- still got a lot of activity under way.
John D. Sheehan
I agree with that. I did. I'm just going to say don't have anything to add to that. That's absolutely correct so...
Our next question comes from Greg Gilbert of Bank of America.
Gregory B. Gilbert - BofA Merrill Lynch, Research Division
Heather, you talked about some opportunity in the U.K. Can you expand on that? Secondly, are you still expecting respiratory guidelines shortly? And third, do you think any of the recent changes at OGD in staffing and structure, not PDUFA but other stuff, will slow anything that's material to Mylan?
Okay. I'll start with the U.K. and then I'll let Rajiv hit the respiratory point. So listen, U.K. actually similar situation, we were able to take advantage of some product opportunities because of market shortages. So I think, again, we're really seeing in some of these countries, where as we got our supply chain to be more in-house, as we mentioned before, we spent a lot of time bringing in those products that were in-license before and we're now about 70% of everything that we're selling, we're manufacturing or controlling that supply chain. So we really see that benefit, not only to be continuing to grow our product portfolios in some of these other attractive markets, but then also have the ability to take advantage of market opportunities. And that's what we've seen in U.K. and see some further opportunity going forward. Rajiv, do you want to add more to it?
Yes. On respiratory, I think we'll continue to work with the FDA very closely towards the AB-rated program and FDA -- we -- just because we are working with the FDA, we will know if FDA is very close to finalization of the some -- the guidance around these respiratory products, the DPIs, the dry-powder inhalers.
Yes. And I'm sorry. I'm not sure. I think there was a third...
The FDA, restructuring at FDA.
Look, I think that, obviously, under PDUFA, it has a lot of requirements and parameters out there as far as the structure and their ability to not only add the personnel needed, but the inspection around the approval and Office of Generic Drugs. So look, we continue to work closely with FDA on all fronts to do whatever we can to help on that front, and to continue to make sure that the legislation is getting implemented as it was intended.
Our next question comes from the line of Andrew Finkelstein of Susquehanna Financial.
Andrew Finkelstein - Susquehanna Financial Group, LLLP, Research Division
Maybe you can talk a little bit in more detail about how the constant currency growth is looking across various parts of Asia Pac and then how much of the currency headwind is affecting you, just so we can think about how to forecast that going forward. And then on EpiPen, Heather, can you give any more color on how the new coupon program is expected to affect the net pricing on the product? What's the typical co-pay that patients are paying? And then if it's a 0 co-pay, obviously, you're picking up that difference, so any color there would be appreciated.
John D. Sheehan
Sure. So I'll -- this is -- I'll start, I guess, just a couple of points. First of all, with respect to the currency headwinds, as I indicated in my prepared remarks, principally relates to the Japanese yen and the Indian rupee. And in our first quarter press release, you can see in the materials and in the attachments the impact that currency had on each of the various regions, and that it's principally in Asia Pacific. As I indicated in my prepared remarks, the -- as a result of the currency headwinds, which we, at least at the moment, are forecasting to continue for those 2 currencies throughout 2013, that we would see ourselves, rather than being at the midpoint of the guidance range for revenue of $7 billion to $7.4 billion, to be on the lower end of that. So I think that implies a roughly $100 million worth of currency impact. And as I said, it relates principally to that region.
And as far as EpiPen goes, I mean, there's obviously numerous, different insurance programs around the country. So as what people are paying in co-pay varies. But I would say, on average, that the coupon, for us, it would not be affecting the price. And the coupon, for us, as we work with the insurance and those programs is really all more like a rebate. So like I said, again, it's just to help encourage people that do have co-pays, that they could be able fill 2 or 3 scripts at a time.
Our next question comes from the line of Chris Schott of JP Morgan.
Christopher T. Schott - JP Morgan Chase & Co, Research Division
Just 2. First, coming back to the injectable side of the business, as you kind of are just looking for a much broader move into this market, can you just comment a little bit about how you feel pricing is in this setting? I guess with the shortages that are out there with investments people are making, do you think prices are appropriate at these levels? Or do we need to see further price resets at some of these older products just, again, given the dynamic of how much investment used to go into this space? Second was on Europe, just interested in your thoughts on the sustainability of these utilization trends we're seeing. Do you see this as a multi-year opportunity? Or just kind of what inning do you think we are of this uptick in utilization. I'm trying to think, as we're looking out beyond '13, how should we be kind of thinking about growth in that region?
Okay, sure. So as far as the institutional market goes, I mean, look, I think that this is -- there were a lot of different dynamics at play here. Certainly, obviously, we've seen severe supplier issues. But I also think that we -- that, that space got to where they --- it was chasing the floor. So I think that there was very whacked-out prices, dirt cheap, literally cheaper than dirt for some of those older products. And the bar needs to go. It needed to go up from a quality perspective, and it needs to go up and get rebalanced from a pricing perspective. So I think that we have certainly seen that. And I'm not -- there's extremes on both ends. But I think, overall, the bar is going up. And so that stability and that tide will go with it. And so I see that staying, because I think people realized the detriment it did to this therapeutic category by having the dynamics in place that were. So hopefully, now, especially with the enhanced FDA actions around inspections and quality and GMP, that this will be something that will be the new standard going forward. As far as utilization, I absolutely think that, that will continue. I mean, what we've always said is, once a government realizes the economics and the year-over-year continuing of those economics with utilization versus a price cut, it's significant. And so what we see with utilization rates going up is behavior changes. You don't get consumer behavior changes with price cuts to the manufacturer. But -- so we -- I absolutely believe it's for years. Because it's not flipping a switch. It's not going to go from 24 to 44 overnight or wherever it may be able to go to. I think it's just going to be a steady rise, as we've been seeing in Japan, once the government focused and put targets out there, just that steady continued increasing, I think that's what we're going to -- should expect out of Europe.
Our next question comes from the line of David Risinger of Morgan Stanley.
David Risinger - Morgan Stanley, Research Division
I have 2 questions. The first is, in terms of the new launch revenue that came in at $117 million, that was below our forecast. And it would be great if you could help frame the contribution of Diovan HCT and the Actos. Because I'm just wondering if there's any destocking ahead of the loss of 180-day exclusivity or something like that, and how we should think about those. And then, second, I don't know if you can provide any color, but if you could please comment on the Copaxone U.S. patent appeal process, timing, et cetera, on that September of 2015 patent.
John D. Sheehan
So the $117 million of new product revenue that you referenced, David, that's in North America. And as you know, we don't break out individual product revenues. So that I can't provide a whole lot of color on that, other than I would say that there was -- that the $117 million was fully in line with our expectation. And number two, I don't think there were any unusual impacts on new product revenues, such as you were suggesting.
And as far as Copaxone, all arguments are actually next week. And so, I won't try to forecast the timing of a ruling in that. As you well know, it could be 2 months, it could be 12 months. So -- but the oral arguments are next week.
Our next question comes from the line of Randall Stanicky of Canaccord Genuity.
Randall Stanicky - Canaccord Genuity, Research Division
Just 2 questions, one for Heather and one for John. Heather first, you gave some pretty helpful color around EpiPen and what a potential impact of generic would have in 2015 at your Analyst Day last year. I'm just wondering if anything has changed or if we can still look at that as a rough guide of what you think the current impact would be. And then I have a follow-up for John.
Okay, yes. No, I absolutely do. And Randall, we've continued to make sure that, as far as everything from the rating and the substitutability that -- around, that I believe the bar is fairly high to get an AB-rated EpiPen due to the device needing to work the same and so forth. So not only do I continue to still believe the bar to be very high to even get generics approved, to be AB-rated. But if that were to happen, then yes, I'm absolutely very much confident in the assumptions I gave, that it would be a very unique and -- I tried to call out a couple of other compounds that have very slow conversion. We absolutely believe it would fall on that category.
Randall Stanicky - Canaccord Genuity, Research Division
Okay, that's helpful. And then, John, just a quick question. What's the likelihood or potential that we see another buyback this year?
John D. Sheehan
Well, obviously, the decisions with respect to share repurchase programs are made actually at the board level and all. And so, we do maintain $2 billion of financial flexibility, as I indicated in my prepared remarks and all. And we're always -- we, as the management, and the Board of Directors are always evaluating shareholder value accretion transactions. And we think our stock has been a very good investment for us over the last couple of years. But I probably have to stop short of speculating as to whether we'll do another one or not.
Our next question comes from the line of Tim Chiang of CRT Capital.
Timothy Chiang - CRT Capital Group LLC, Research Division
I had 2 questions. One, Heather, how -- can you comment on how you're doing on Zovirax ointment? I know you guys got the approval on the generic about a month ago. And I had a follow-up for John.
Look, we don't comment on individual launches. But I -- we're -- it's a great product, and we're the only generic out there. So anyway, it's -- we believe it will be a nice product for us.
Timothy Chiang - CRT Capital Group LLC, Research Division
And John, just a follow-up on the stock buyback question. I think your guidance reflects that your share count could be around -- as low as 385 million shares this year. So I guess you still have some room potentially to buy stock back, is that right?
John D. Sheehan
Well, I think that the weighted average diluted shares in Q1 is slightly below 400 million. That obviously reflects the fact that the share repurchase program only was effectuated towards the latter part of the quarter. So I do think that as we move into Q2, in particular, that you'll see the share count drop from that, which is in the first quarter. And just to be clear, the guidance that we provided -- we were clear on the fourth quarter earnings call and guidance that the share repurchase program of $500 million was included in the guidance and share count that we had provided to you.
Your next question comes from the line of Ronny Gal of Bernstein.
Aaron Gal - Sanford C. Bernstein & Co., LLC., Research Division
I have 2 of them. First, Heather, have you guys estimated the number people who currently do not have coverage for EpiPen, who might be able -- eligible to get reimbursed for the drug once the exchanges come into play next year? And second, one of the other companies in a similar market just made a deal with an external funder source for $150 million to just fund the first 3 programs -- their first 3 biosimilar programs. Kind of looking at the cost of those programs, should we expect a significant increase in R&D? Are you considering getting a financial partner as well to support those programs and accelerate a few of them forward? Can you just give us a little bit -- an idea of how you think about funding the clinical cost of biosimilars?
Okay. So as far as -- I believe it's very insignificant, the amount of patients out there that don't have coverage. But that being said, there's still a lot of opportunity for the at-risk population. We're only covering about 10%, 11% of that today. So I think any time that health care is extended or given more coverage, especially in an area where you still have such underutilization, there can always be incremental benefit. As far as the biosimilars, I mean, I think, obviously, when we came out with this year's guidance, we spoke very specifically about our R&D and did kind -- now with being at 6% to 7% of revenue, that we were now in a position to have significant dollars for our R&D platforms to fund things, specifically around our biologics programs, our respiratory programs, like generic Advair and such. So we believe obviously that, that's again a differentiator to be able to, not only be continuing to invest in core generic products, but now have the hundreds of millions needed to fund these very difficult and hard-to-manufacture and formulate products. Rajiv, anything you...
No. You covered everything.
John D. Sheehan
Good, just that -- well, we already have a partner with Biocon, too, right, Heather?
Yes. No. I mean, right, we're partnered on several of our products. But anyway, that's obviously all full loaded in our budget.
Part of the budget, yes.
Okay, guys, well, thank you so much for the call. Bye. Thank you, operator.
Thank you. This concludes today's first quarter 2013 earnings call. You may now disconnect, and have a great day.
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