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Mylan Inc (NASDAQ:MYL)

February 21, 2012 1:00 pm ET

Executives

Kris King -

Robert J. Coury - Executive Chairman and Chairman of Executive Committee

Heather Bresch - Chief Executive Officer and Director

John D. Sheehan - Chief Financial Officer and Executive Vice President

Rajiv Malik - President

Harry A. Korman - Chief Operating Officer

John Thievon -

Analysts

Christopher Schott - JP Morgan Chase & Co, Research Division

Elliot Wilbur - Needham & Company, LLC, Research Division

Randall Stanicky - Canaccord Genuity, Research Division

Randall Stanicky - Goldman Sachs Group Inc., Research Division

Michael Faerm - Crédit Suisse AG, Research Division

Jami Rubin - Goldman Sachs Group Inc., Research Division

Christopher Caponetti - Morgan Stanley, Research Division

Douglas D. Tsao - Barclays Capital, Research Division

Marc Goodman - UBS Investment Bank, Research Division

John T. Boris - Citigroup Inc, Research Division

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

Sumant S. Kulkarni - BofA Merrill Lynch, Research Division

Kris King

Hello, good afternoon, everyone. I'm Kris King, Vice President of Global Investor Relations for Mylan. We're very pleased to have you all here today, live, those via webcast and those that are on the telephone. We have a very exciting afternoon planned for you. So please sit back, relax. We really hope you enjoy it. We hope you enjoyed the opening video.

Our first presenter is Robert J. Coury, Mylan's Executive Chairman. Following Robert's introductory remarks; Heather Bresch, Mylan's CEO, will provide you with Mylan's strategic vision for 2012 and beyond. We will then move to our CFO, John Sheehan, for a review of our 2011 financial achievements and our future expectations, including our 2012 guidance and then a discussion of our growth targets and drivers for 2013 and beyond. Following John, Rajiv Malik, Mylan's President; and Hal Korman, Mylan's COO, will walk you through our operational and commercial initiatives for 2012 and beyond and provide greater insight into our longer-term growth drivers and initiatives. We will then take a short 15-minute break. After which, John Thievon, President of Mylan Specialty, will provide you with an overview of this very important business, including a deeper dive into EpiPen.

At the conclusion of the formal presentations, we will conduct the Q&A with all of the presenters today. We expect our meeting to -- excuse me. We expect our meeting and webcast to conclude at approximately 5 p.m. After which, we invite you to join us for a brief reception.

Before we begin, I'd like to just run through a few housekeeping items. Today's webcast contains streaming slides, the full deck, including the webcast, will be available within 3 hours following the conclusion of today's event. Additionally, it'll be archived for up to 30 days. Also, all of the material in today's presentation cannot be recorded or rebroadcast without Mylan's expressed written permission.

During today's event, including the Q&A, we will be making forward-looking statements, including those related to our anticipated business levels, our future earnings, our planned activities, our anticipated growth and other expectations and future targets. I would like to direct you to the statement regarding our projections and forward-looking statements in our presentation today, as well as those available on our press release issued earlier today.

With that, it's my great pleasure to introduce Mylan's Executive Chairman, Robert J. Coury.

Robert J. Coury

Thank you, Kris. Thank you, and hello to everyone, and thank you for participating in Mylan's Investor Day. I'd like to welcome all those joining us here in person in New York, as well as all those via webcast, including many of our employees around the world. I'd also like to take a moment to recognize the passion, the dedication of all of our global workforce of more than 18,000 people, as it is their hard work and commitment and dedication that again allows us to deliver very, very strong results and allows us to have such confidence on our future. On behalf of our Board of Directors and our entire management team, I would like to thank each and everyone of them.

The last time I stood before you at an event like this was over 4 years ago, October of 2007, just following the completion of the acquisitions of the former Merck's Generics business and Matrix Laboratories. At that time, I laid out for you exactly what we intended to achieve as results of those acquisitions, and today, I'm here to tell you about all what we've accomplished and, more importantly, where we go from here.

Mylan's mission is to provide the world's 7 billion people with access to high-quality medicines. In 2007, I told you the importance of scale, scale, scale, scale and scale, specifically, scale in manufacturing. Since 2007, we have more than doubled our manufacturing capacity approximately to 45 billion doses today and still growing strong.

Scale in research and development. Since 2007, we have exponentially expanded our R&D capabilities. We have significantly grown our volume of ANDAs and dossiers filed while reducing our cost per submission significantly.

Scale in the breadth and depth of our product portfolio. Since 2007, we have more than doubled the size of our portfolio and vastly expand the therapeutic categories in dosage forms. The breadth and depth includes our strong Mylan Specialty business, formerly known as Dey, which has contributed significantly to growth and diversity of our platform.

Scale in our commercial footprint. Back then, we were selling in to 90 countries. Today, we are selling in to 150 countries and territories and still expanding.

I also told you 4 years ago that these acquisitions and the resulting scale and breadth would make Mylan the partner of choice in our industry around the world. This has certainly been the case and has been demonstrated by the number of high-quality partnerships we have forged to date. Just to name a few: Biocon's collaboration on our biogenerics; our Famy Care collaboration for oral contraceptives; our Natco collaboration for Copaxone; and of course, our Pfizer partnership of our respiratory platform and now for EpiPen. Even though these are just a few, you can certainly expect that there's going to be more. In fact, we are hoping to announce a couple more here very soon.

Finally, I call for the importance of scale in terms of size, sheer size in this industry. As you have seen this morning, we have grown 2011 revenues to $6.1 billion, adjusted EBITDA to $1.7 billion and adjusted operating cash flow to approximately $900 million. We've accomplished all this while at the same time derisking our business model. We now have in place a very powerful sustainable platform, while reducing our exposure to any one product or geography. This scale has allowed us also to better absorb the natural, inherent unpredictability and volatility in this competitive industry. And this is even more critical today than ever.

Even with all these said, at Mylan, we are just simply beginning. For example, I believe in 2012 it'll be the best year in the Mylan's 50-year history, driven by more date-certain product launches than ever before, supplemented by the continued strong growth in our business, and we remain committed to our adjusted earnings per share target of $2.75 for 2013. Our confidence comes as a result of the last several years of very hard work and execution while at the same time delivering on strong results for the past 16 quarters.

Now looking forward, beyond 2013, we will lay out for you today the numerous opportunities that we have already cultivated in-house, opportunities that I believe will drive continued annual double-digit earnings growth for years to come. Today, we are targeting adjusted earnings per share of $6 for 2018.

And again, I want to note that we expect to achieve these targets with opportunities we already have in-house. And it should also be noted that this target does not require the influx of additional external capital but does account for the reinvestment of the substantial cash generated by operations back into the business.

And with that said and before I turn the podium over to Heather, I hope after today's presentation, you could all understand why and share with me why I've never been more confident about Mylan and its future as I am today. Thank you.

Heather Bresch

Thank you, and thank you, Robert. So before I get started, I also want to thank you for being with us today. As Robert said, I hope you can hear the passion and commitment and confidence that we have in everything that we're going to discuss this afternoon and look forward to answering questions, and hopefully, you feel that same confidence when you leave today.

So before I get started, I'd like to bring up the management team that'll be participating in today's session with us: John Sheehan, our CFO; Rajiv Malik, our President; Hal Korman, our Chief Operating Officer; and John Thievon, President of our Specialty division.

So I'm going to talk a little bit today about the blueprint and really teeing up not only the platform that we have today and where that is going over the next 5 years, but also the tremendous amount of opportunities that will be followed in deeper dives which -- with each of the presenters here today, and also teeing up the tremendous growth that we see forward in this industry around the rest of the world, but also still here in the United States as it pertains to Mylan, and how we believe that we're going to be able to get our disproportionate share of all the opportunities.

So just quickly, as Rob talked about, starting in '07 when we were -- had our Investor Day, kicking off really the merge of Mylan and Matrix and Merck Generics, we really have doubled almost every important metrics since that point in time and truly integrated into one company. So our commercial presence, our platform was -- we're selling into 150 countries, and that truly is giving us, as we've said, all the assets and flexibility, we believe, we need to reach this world's 7 billion people.

Our manufacturing. If you look at the capacities that we've been able to grow up until this point, impressively, they are going to almost double again over the next 5 years. And if you look at the diversification, strategically -- and again, Rajiv and Hal will be speaking more to this point. But I think it's important to note, we believe very strategically, our operations in North America with finished oral solid dosage form, as well as building our other capabilities around transdermal patches, nebules, packaging, semi-solids. So we're continuing to add to that capacity and believe that it does offer strategic advantage to have the size, the facility we do in the United States for those market.

In Europe, we continue to grow our capabilities. When you look at not only oral solid dose, dry powder inhaler, injectables packaging, we're continuing to add capacity, again, to serve that market and, strategically, be able to make those decisions of where we're producing, how we're producing, best to reach any of our individual markets.

And of course, Asia Pacific, our fastest-growing from a capacity perspective. You look at India alone going to 50 billion doses. So our ability to now pool the diversity not only of the platform but have levers that strategically allow us to be into any market in a very timely, timely fashion.

R&D. We've said before and as we've met with many of you over the years, we've talked about the fact that, truly, the marriage with Matrix and Mylan on the R&D front probably was our first largest success from an integration perspective. We truly were able to make 1 plus 1 equal 5. When you look, just alone, at our United States ability, not only with submissions but launches, it's unprecedented, the growth, and we don't see it stopping. And that's we're going to talk to about today, our pipeline and our ability for this R&D machine to keep doing the submissions for all of our markets around the world.

Europe. We continue to grow these capabilities, in Ireland and U.K. and again, India and Japan, both R&D centers, and again, India really focused on growing at being a hub in addition to our Morgantown, West Virginia facility.

So when you combine this entire platform and now look at our truly global workforce deployed around the world and our ability to continue to generate these opportunities with not only North America, Europe, India growing to 12,000, this is where we anticipate to be by the end of 2012, which is significant growth over 2011. The end of 2011, we were about 18,500 employees. So again, we're adding tremendously around the entire globe in every region.

So when you think about the fact that we've now pulled together truly one platform that's being able to generate, not only maintain, our core base business but continuing to allow us to generate voluminous amount of opportunities, you then step back and say, "What is the industry we're participating in?" And we believe it's an industry that's got tremendous growth in front of it. So when you look at some of the macro trends that are supporting this generic growth, you look at the -- just start with the population growing. It's going to go from 7 billion to 8 billion by 2025. And then you look at the aging population, those that are going to be 60 plus is going to grow at 3.5x the rate of the total population. So those 2 metrics alone show the tremendous growth out in front of us.

When you look at the increase in life expectancy, people are living longer. People are living longer and the incident of chronic diseases are increasing. There's people now -- I think there's about 50% of the population of chronic diseases with at least 1 and 75% that have 2. So again, that need for that being able to maintain sustainable, affordable medication has never been more important.

The growing middle-class. We expect to have 1 billion new members to the global middle class by 2020. 2/3 of the new global middle class will be from India and China. Again, I think that it shows just the importance of not only the emerging markets but the emergence of people being able to really afford and demand access to healthcare.

The improving emerging market infrastructure. We continue to read about government initiatives and the initiatives that this new global middle class is demanding: To have access to medicine. We believe that we're positioned better than anybody to not only deliver it but to help remove the barriers to allow access to the affordable medication.

The shift to healthcare costs from the payer to the consumer. If you look historically as developing countries emerge and become more developed, the government begins to play more and more of a role in the delivering of that healthcare. Until that happens, that burden is on the consumer. So their ability to be able to afford medication, again, just increases their demand of high-quality affordable medicine.

And lastly, just the unsustainable healthcare spending. When you look at the global spend that's happening today in every region, I -- there is consensus, obviously, through not only North America, Europe and the rest of the world, that we have got to continue to find ways to afford the projections. When you start talking about biologics and how all of these other medicines start rolling in, the ability to be able to contain healthcare costs is one of the #1 issues on almost for every country. And again, we believe that, that tees up the ability for our industry, generics and Mylan to be not only that partner of choice but a provider of high-quality medicine and access into all of these markets.

So our mission statement. I mentioned earlier that we are working around the world to provide 7 billion people access to high-quality medicine. And these aren't just words on the screen, and Mylan's not just a company. We are a cause and our employees believe and get up everyday and come to work because we are building a company that can reach not only the 7 billion people, whether that's through innovation, again, access, breaking down those barriers to allow affordable medication to get into the hands of the patients who need them.

And we've said that we believe we have the platform today that's going to allow us to reach these 7 billion people. I believe that healthcare and how we deliver healthcare is going to evolve tremendously over the next few years, as technology continues to become much more of an integral part to not only from the doctor's side but the pharmacy side. I believe we have huge opportunities to take the infrastructure and the platform we have today and the commercial footprint and, again, be better situated than anybody, to not only take advantage of the macro trends but from an innovation perspective, be it at that front end of delivering, again, high-quality affordable medicine.

When you look at our innovation, we're going to talk a lot today about our portfolio diversity and some drivers. You look at our ARV franchise. We continue to be one of the largest finished dosage form suppliers and one of the most affordable, highly effective on second line therapy. And we're also innovating, whether it's pediatric formulations or heat-stable Ritonavir, continuing to make sure that we're meeting the needs and the demands of people living in rural sub-Saharan Africa. So -- and then when you look at respiratory, neurology, biogenerics, these are all drivers that we're going to talk more in detail today about, but again, all things that we are doing and continue to do everyday.

Reliability and service. I mean, this is really our hallmark, and we believe Mylan is a bellwether for the quality that we should be demanding out of any products sold, not only in the United States but around the world. And our long-standing commitment to quality is exceptional, and I believe that we have the lowest incident rate of any quality issues of any other company in the world. And I believe that, everyday, the FDA is raising the bar, raising the bar not only here in the United States but around the rest of the world is going to continue to be a differentiator for Mylan.

Doing what's right. Quality is not a function or a department. Quality is a mindset. It's a way of life. It's part of our culture. It's part of who we are, and it's embedded in everything we do. And this goes back to our beginning. So Mylan's now over 50 years old, and it's always been about doing what's right and not what's easy and doing that all the time. And I think, again, huge differentiator for Mylan and really tees up about not only the opportunities we have at hand, but where it will continue to be a driver for us going forward.

Passionate leadership. You know, this again I would say is a hallmark for Mylan. We have always been out there, not only building a company, driving a company, driving an industry and, now, driving it globally. It's not just enough to consistently make billions of doses of high-quality medicine, but we have to make sure people have access to them. And I really believe this is what separates Mylan from the rest. We are constantly doing what we believe is the right thing to be doing to push policy for the generic industry, both in the United States, as well as around the rest of the world.

And when you look at some of the initiatives, policy initiatives that we, ourself, are driving, I think and I hope you'll be able to see today how each one of these is a driver and helping to -- yes, indirectly, certainly benefit Mylan but benefit the growth and the sustainability of the generic industry.

And it really comes down to access. We truly believe and live by that you can do good and do well at the same time. So as we're driving for the right policies to grow this industry, it's continuing to build shareholder value. So we believe that doing this things and being out there as a force and leading the industry and driving it, again, as we're doing all of that, it continues to build upon shareholder value.

So if you look at the 5 buckets of our policy initiatives, increasing generic utilization. Again, that access to affordable medicine. When you look at Southern Europe and their utilization rates, France at 24%, 25%, Italy in the high teens. You saw today where Greece announced that their package was accepted, and one of their drivers in that package to affordable healthcare was driving generic utilization. So we believe that all the work that we're doing with governments to show them that, from an economic perspective, generic utilization is much more sustainable to deliver healthcare cost reduction than a price cut. And I believe that we're slowly starting to see them understand that. I mean, Italy itself has grown almost 10% in their increase of generic utilization over this past year. The

Biogenerics pathway. Again, the law that passed a couple of years ago, we believe does not create the best pathway for a truly interchangeable biogeneric industry. Mylan will be able to participate, and I'm excited for you to hear about our products, our development, our timelines and how we're going to monetize these opportunities. Mylan's in a position to monetize however that market forms. But again, we believe that there should be an interchangeable and direct pathway for biogenerics, and we're fighting for that.

Our one quality standard. I think all the work we're doing around globalizing the FDA, the reality is that FDA is being governed by a 1938 law that was written from a domestic viewpoint. Today, that domestic agency is needed to govern a very global industry. So the law needs updated. The generic industry again stepped up to the plate, and we're the first industry to say, "Look, we want our fees to go towards a level-playing field and be able to have one quality standard of any product being sold in the United States." And again, I think that Mylan is going to truly benefit from that bar to be raised around the rest of the world.

Stemming the tide of HIV/AIDS. I think this is one area where there's not many diseases were you actually have a cure and a way to maintain a quantity for life for somebody, and really the only thing stopping it is people having access to it. There are still over 10 million people in sub-Saharan Africa that have HIV/AIDS and are not able to get the medication they need. So the disease continues to spread.

So the world AIDS conference is being held in the United States for the first time in 20 years, and we're working with the administration, from a policy perspective, of treatment is prevention. And the only way we're going to reach the 15 million people is truly getting out in front and streamlining the supply chain, which we're continuing to do.

And last but not least, EpiPen. This product -- this has really been a passion of mine since really understanding and bringing in the Dey assets and looking at how underappreciated -- and I guess that's probably the best word I can say, underappreciated asset in this EpiPen franchise. I think you've all witnessed the tremendous growth that we had this year, Q4, Q3, I mean, growing at phenomenal rates, and we certainly don't see that stopping. We see that our ability to educate and bring awareness around this product, the opportunity is tremendous. And again, it's doing well and doing good. You probably all seen the unfortunate tragic events that happened month after month, whether it's a 7-year-old in a Virginia school who died because the EpiPen wasn't in her name or a seventh grader in Illinois. So working to improve that education and awareness, not only tremendous opportunity but the right thing to do.

So just to mention the strategic drivers that we're going to be talking to today. We see our platform as a driver in and of itself. When you look at almost doubling from where we are to where we're going by 2016, up to an 82 billion dose capacity, over 2,000 launches, over $1 billion, almost $1.5 billion in CapEx and $2 billion in R&D, between the investments and our capacity, it's truly phenomenal of what -- not only we're going to be able to suppor,t, but in every region of the world.

So just quickly to touch upon the drivers that we'll be taking a deeper dive in. Portfolio diversity. Again, we're going to be not only doubling our portfolio, but continuing to innovate and add the products that are a differentiator and provide very sustainable growth.

Biogenerics. Again, this should be the next huge bolus of opportunity for the generic industry in the United States but globally as well. And obviously, as you're going to see today, we're going to be there to monetize and be part of this extremely important property.

Our respiratory. We finished the acquisition from Pfizer on the respiratory franchise and are excited to share with you when we believe we'll have our generic Advair AB rated on the market place in Europe, as well as in the United States.

Neurology. Copaxone, we've talked a lot about the fact that we truly believe and still we're very confident that we have an AB-rated product that we'll be ready to monetize as early as possible.

Our Institutional division. As we continue, we had the Bioniche acquisition now almost 2 years ago and really now not only building upon that opportunity in the United States but again globally building our Institutional platform. That's also an extremely important precursor to our -- us being able to monetize the biogeneric opportunities around the globe.

ARVs, I've spoke about. We are a leader and driver in this, and it's been -- it has grown at double-digit accelerated growth. And again, we don't see that stopping.

Increasing generic utilization. When you can increase even 1% generic utilization in some of these countries, especially where we maintain leadership positions, our ability to get a disproportionate share of that increase, certainly, not only, again, is incremental and opportunity upside, but again it's promoting that -- just access and the growth of our industry overall.

Geographic expansion. We're excited to be launching our India commercial and the opportunity again that, that country is going to bring us, as we continue to look at China and Brazil and some of the other emerging markets.

Our global policies, which I talked about earlier, really being a driver for us as we're out there driving on the front lines and driving a global industry, to be able to really, again, monetize what that means not only for the industry but to our shareholders.

And lastly, our Specialty division. I hope you can hear the excitement in my voice, not only about EpiPen but the whole franchise, from a respiratory and an allergy perspective. We believe we are well positioned to not only maximize and leverage the assets we have but to be able to add and complement when the infrastructure and the disease states that we're already in.

So with all of these, we believe that when you step back, we have many things that differentiate Mylan in today's pharmaceutical industry. But we believe that creating a consistent brand would be a differentiator in and of itself. As we say, if there -- if you have a choice, you can build a brand. And we believe that given the differentiators, who -- that what makes Mylan who we are today should be something we're saying in a unified voice so that everybody could answer, why Mylan, whether it's why your neighbor should be taking a Mylan product, why you should work at Mylan, why customers trust in Mylan. And we did a whole campaign that we're unveiling globally about just that, why Mylan and how we can continue to articulate the differentiators.

And we did a lot of extensive research around the globe and found that there was some common threads of what was important to the different constituencies. And it was around that certainty. And it was around being sure that whatever was most top of mind to that consumer or customer in any given market. That either one, the quality. That our standards were as high as their's. In some countries, that took the forefront. In some, it was partner and making sure that it's a partner they could trust and have a reliable supply. And for some, it was optimizing time. As you look at the demands from a pharmacy today, being able to have whether it's unit dose, compliance packaging, the blue bottles that we launched here in the United States, again, it's continuing to allow them to be more effective and efficient in what they're trying to do.

So you know a couple of quotes that I thought really resonated and drives home while we do believe that branding and having a global consistent voice is a differentiator all by itself, great companies that are built to last. It's not about a product or a country. It's really about leading an entire industry and innovating how you're delivering healthcare into that industry, and we believe that that's exactly what we're doing.

On top of that, again, back to what I will say as our hallmark, that quality. Our ability to deliver quality, reliable products now around the globe truly sets us apart from everybody else. So with that, I would now like to invite you to see inside.

[Presentation]

So thank you. And with that, I'm excited to now turn it over to John Sheehan. Thank you very much.

John D. Sheehan

Good afternoon, everybody, and I'm really pleased to be here with you today. As Kris mentioned, I'd like to briefly touch on the past with our 2008 through 2011 financial accomplishments, but then mostly look forward, look forward to 2012, '13 and then beyond '13. I'd also like to cover with you what we -- the achievements we've made in our capital structure over the last years and where we see that capital structure going and the financial flexibility that this company has on a prospective basis.

So let's start by looking inside Mylan's 2008 through 2011 financial results. And in early 2008, in early 2010, Mylan provided longer-term financial guidance and targets, and we've consistently executed against each of those targets. We've executed against them partly because those are not just external targets that we provide to the investment community, but they're internal targets that our leadership team is held accountable for around the globe. And we're -- we have been totally aligned internally and externally, our internal management team and our external financial commitments.

And when you look at the last 4 years, at the top line, we've grown the top line by nearly 10% on a compound annual growth rate. More importantly, we've grown the gross margin by 200 basis points over that period of time. That growth in the gross margin from 46% to 48% has fueled our bottom line at a rate greater than the top line. EBITDA, a proxy for cash flow, has grown 17.5% on an annual basis over the 4-year period of time, and that cash flow has allowed us to reinvest the cash back into the business and to also prepay our borrowings. Our adjusted diluted EPS has grown at 36 -- almost 37% over the last 4 years.

And the performance, the consistent execution that we've had on these commitments over the last 4 years is important from my perspective. It's important because what you're going to hear and what you're going to see today from this management team are not just words and pretty charts, they represent the internal commitments that we've made, and they represent the plans and the initiatives, the opportunities that we're working on everyday to hit those targets.

If I cover 2011 for just a few moments. We're very pleased with the financial performance that we reported this morning for 2011. We grew our top line by 12% year-over-year. That was on the back of 46 new launches here in the United States, 15 of which were first-to-file -- sorry, limited competition launches and 9 of those limited first-to-file opportunities. We launched over 270 products in Europe in 2011. Our Specialty business grew by over 30% year-over-year on the back of the strength of EpiPen. So we had a very strong year from a top line.

And at the bottom line, we reported $2.04, which was above the high end of our guidance range for -- that we had provided in October for 2011. When you look at the quarter, the quarter was also quite strong at $0.53 a share. And we were, at one point, $53 billion of revenue for the quarter. We were negatively affected by foreign exchange year-over-year. That impacted us by 1%. And sequentially in the quarters, it affected us by 2.5% or nearly $40 million of revenue. And that was foreign exchange associated principally with the euro and, importantly, with the rupee.

At the bottom line, at $0.53 a share, the -- that did -- we did benefit from the reduction in the tax rate for the annual year, from 27% to 26%. That was something that we had talked about very clearly in our third quarter earnings call. But overall, at $2.04, we believe that was a very strong year for Mylan.

And when you look at the last 4 years and the financial performance that we've provided and the 2011 financial performance, you have to recognize that that's in a very difficult macro -- global macroeconomic environment as each of us are obviously painfully aware. And so we believe that this financial performance is a testament to the strength and to diversity of Mylan's global platform.

So let me turn now to 2012 financial guidance. Let me start with our top line. We're projecting a guidance range for 2012 of revenue of $6.8 billion to $7.2 billion. At the midpoint of the guidance range, that's a 13% year-over-year increase in our revenues.

And gross profit margin. We are increasing our guidance range for 2012 by a full percentage point from our previous 47% to 49% to 48% to 50%. We have consistently, over the last 4 years now into 2012, been increasing our gross profit margin.

SG&A. We're maintaining our guidance range of 18% to 20% while we invest back into our business through increased marketing and advertising for the global brand, as Heather was just showing you, to drive future growth in our business.

Research and development. We're increasing our guidance range to 5.5% to 6.5% from a previous 5% to 6% that takes -- as we absorbed the investments in our global respiratory platform. We did operate in 2011 at the lower end of our 5% to 6% guidance range, but that was through the efficient operation of our R&D network globally. And our R&D teams around the globe met all of their commitments, and they filed over 160 NDA applications around the globe in 2011.

At the EPS level, $2.30 and $2.50 a share of guidance range, that is -- at the midpoint of that guidance range of $2.40 and nearly 20% year-over-year increase and at the high end of the guidance range, a 23% increase in our year-over-year earnings.

I'll talk more about cash flow in just a few moments, but I'll just touch on the tax rate that we are maintaining, the 26% tax rate. We are feeling some upward pressure on our tax rate as a result of a greater proportion of our global earnings being -- coming from our U.S. operations.

And in terms of the average diluted share count at 430 million to 440 million shares, the midpoint of that guidance range represents an average share price for 2012 of $25 a share and the high end of that guidance range represents an average share price for 2012 of $30 a share.

So how will we achieve this financial performance for 2012? Well first, it starts with date-certain launches that we have in our pipeline. We've shown you various versions of this chart over the last year. And as Robert indicated earlier, this is going to be our single largest year in terms of date-certain launches. We have them almost throughout every month of the year, but with a disproportionate amount being in the second half of the year and representing in total $33 billion of global brand value. It is these date-certain launches that will provide a significant revenue increase to us year-over-year.

But Mylan is not about individual products or individual launches or even date-certain launches, and therefore, we have a number of growth drivers that are going to drive our business in 2012. First of all, it's new products. We will launch 650 new products globally in 2012, approximately 300 of those coming from Europe, another 35 coming from the United States and through India and our rest of world export operations, over 200 products. The products in the United States represent over $40 billion in total of IMS brand value. In addition to that, we'll have the carryover from products that launched in the latter part of 2011 that will contribute to our 2012 earnings.

But it's also not just simply about new products. Mylan is definitely not just about new products. And what you'll hear about today, especially from Hal and Rajiv, is the strength of our core or base business. And that core and base business is supported by our supply chain integrity, our global manufacturing network that can produce 45 billion doses annually, 45 billion high-quality doses annually. And therefore, that supply chain provides our commercial teams around the globe with the opportunity to be responsive to market opportunities.

In 2012, we will grow our Mylan Specialty business with the -- led by EpiPen, by 30%, again. And we will grow our generics business by 13%. Importantly, we have assumed a similar level of base business or price -- base business erosion or price erosion in 2012 to what we experienced in 2011, with the United States in low-single digits and the -- in the Europe with a low double-digit price erosion. Also importantly, this plan does not rely on Europe to grow in 2012 to make these numbers. Europe would be -- growth in Europe would be an upside opportunity for us.

We will continue to diversify our product portfolio and our -- and to expand geographically during the course of 2012, as we launch products in India here at the beginning of 2012 for the first time. And we will continue to be the strategic partner of choice. Robert mentioned a number of the strategic partnerships, whether they be Biocon or Natco or Pfizer, and we would expect to those partnerships to continue. In addition to that, we'll continue to do business development transactions to drive shareholder value.

If I take those growth drivers and we look at then a bridge from our 2011 to our 2012 revenue, we will grow from the $6.1 billion in 2011 to the midpoint of the guidance range of $7 billion with a slight negative effect of foreign exchange year-over-year, but with the base business volume and mix more than offsetting the price erosion, and then with $800 million of new product launch revenue in 2012. As I said, our Specialty business will grow year-over-year by 30% and the generics business by 13%.

If I then turn to the bridge for 2012 EPS guidance, we will grow from the $2.04 in 2011 to the midpoint of our guidance range of $2.40 on the back of the $800 million, $870 million of total revenue growth, as well as the increased gross margin range that I provided for -- to the midpoint of 49%.

In addition to that, we will take a portion of that sales growth and the margin growth and reinvest it back in our business through increased SG&A for marketing and advertising and increased R&D for the absorption of the R&D platform for respiratory. We will see a slightly lower level of interest expense as a result of the capital markets refinancing transactions that we've done over the last 2 years, and then we have small impacts coming from the tax rate and share count. And overall then, a midpoint of our guidance range of $2.40 per share.

So let me turn then now to 2013 and how this company continues to grow from 2012 into 2013. First of all, we are fully committed to and reconfirming our $2.75 per share EPS target for 2013. In addition, we are updating our revenue target for 2013 to $7.5 billion. As I'm sure you're aware, at the beginning of 2010, we laid out a target for revenue in 2013 of $8.5 billion. Since that time, the global macroeconomic environment has clearly changed dramatically. And as a result, we are pushing out our $8.5 billion target by one year to 2014.

We will achieve $2.75 per share in 2013 through over 500 new product launches in 2013 and that includes 2 launches here in the United States that represent $2.5 billion of branded value. In addition to that, we will have in 2013 the carryover of products that were launched in 2012 that carryover into 2013 and especially in the second half of the year. Those products that we launched in '12, when combined with the revenue in '13, represent over $1 billion of combined revenue in those 2 years. We will continue to expand our India commercial operations, and we will expand our portfolio of women's health products around the globe.

It is also -- a key to our growth is the stability of our base business and the complexity of our product portfolio that sustains the product life cycle of Mylan's products longer than its peers. And Hal and Rajiv will show that to you in their presentation. We will see the acceleration of Mylan's global institutional business, the continued growth of EpiPen and the Specialty business and the continued growth in our antiretroviral products for treating the AIDS virus.

Finally, we do expect to see our margins continue to increase in 2013 as we continue the vertical integration of our overall technical operations and we continue the operational efficiency in our overall supply chain. Lastly, we would expect around the globe for our generic utilization and penetration to increase.

So if I take those -- each of those drivers and I look at then a bridge from 2012 to 2013 for revenue, we see the revenue growing with our volume and mix of products more than offsetting the price erosion in the business. That price erosion is not dissimilar from 2012. And also, we would expect to see $300 million of new product revenue in 2013 that drives us to the $7.5 billion of overall revenue.

From an adjusted diluted EPS perspective, at the growth from $2.40 to $2.75 will be achieved partly through the sales growth but also through the continued growth in our gross margins and also from the leveraging our -- the other operating cost within our network. We would expect to see our SG&A and R&D costs leveling out in 2013 versus the investments we made in 2012. In addition to that, as I mentioned, with respect to the tax rate, we are feeling upward pressure and, as a result, have projected that starting in 2013, that we would be seeing a 27% tax rate rather than the 26% that we've used for 2012 and then a very small impact from the higher share count.

If I then turn to beyond 2013 and what are all of the growth drivers that are continuing to drive this company's growth past 2013, first of all, I can assure you that we are extremely confident and we'll achieve double-digit earnings growth annually after 2013.

When you look at how do we achieve that growth, what this chart lays out for you is the key metrics associated with each of the opportunities within our platform that Heather reviewed with you, and Rajiv and Hal are going to go into the operational drivers of each of these opportunities. But if I just walked through with you for a few moments, our antiretroviral platform is a $300 million global platform today that will grow by 13% annually through -- on a CAGR basis from 2011 through 2016.

Our EpiPen as Heather will mention -- Heather and John Thievon will mention later, only 7% of the population of at-risk for anaphylaxis today is treated using an EpiPen. There is a tremendous amount of unmet need, and we, through a direct-to-consumer advertising campaign, have been increasing substantially the awareness with respect to this risk. And we've seen through the beginning of 2012, a 25% increase in the scripts for EpiPen over the growth we already were seeing in the second half of 2011. In addition to that, we've been growing EpiPen outside of the United States at double-digit rates.

Our global Institutional franchise. This is a $500 million global business today that will grow to $1 billion by 2016. And the supply chain integrity, the global manufacturing network and quality that we have inherent in that network, each 1% decrease in cost of goods sold provides us with a benefit of $35 million of gross profit. Our India commercial operations, where it is our target to be a top 10 player in this market. And that's a $13 billion market that's growing at a 14% annual rate.

Southern Europe generic utilization. While we have, as you know, gotten out of the business in 2011 of projecting when Europe will begin to grow and when utilization rates will increase, but we do believe, and Heather pointed out the news out of Greece today and the provision for that, including an increase in generic utilization, an increase of just 10% in the generic utilization rates in Southern Europe will provide $300 million of additional revenues to Mylan.

In neurology, on the back of generic Copaxone, a product that we will be in a position to launch as soon as the appropriate hurdles are overcome, and we are readying for commercialization, that's a $3 billion U.S.-branded product, with limited -- that will have limited competition.

We will use our $1 billion of financial flexibility annually to continue to grow geographically and to grow our product portfolio. You're also going to hear more about our COMBO product today. This is a Specialty product for treating COPD conditions that we expect in the late 2015 timeframe to receive an approval for and would have peak sales of $500 million.

Respiratory, through our collaboration and the acquisition of Pfizer respiratory platform, we are developing a generic form of Advair, and this is an $8 billion global product that we would be able to launch in Europe in 2015 and in the United States in 2016.

And finally, in the biogenerics. You'll hear more from Rajiv in how -- about the products that we are currently bringing to market. But those represent $32 billion of equivalent products. So we have a plethora of key drivers and opportunities that we are developing in-house today to drive double-digit earnings growth post-2013.

I'd also like to cover a misperception that we believe exists with respect to competition for our EpiPen Auto-Injector. We recognize that, at some point, the FDA may approve an AB-rated generic product that would be a competitor to EpiPen. But we've looked at similar situated products to the -- to that type of a competition, and we believe that we -- that a competitor product would achieve only about a 25% to 40% generic utilization rate over a 30-month period of time. And based upon the economics associated with the EpiPen, that this would represent an approximately $0.08 to $0.12 per share in financial impact to us after consideration of cost reductions that we would be able to make associated with the change.

And so that represents less than 5% of Mylan's overall earnings per share. We've seen reports that have taken this risk and characterized it as approximately $0.50 a share. And we don't believe that -- we wanted to make sure you understood that that's not really at all in the right realm, and this is a very manageable risk.

In addition to that, we believe there are mitigating factors that will reduce the risks associated with generic penetration for EpiPen, including the fact that the pen is not a monthly prescription but annually. And in addition to that, as a life-saving device, we do believe that there will be patient hesitancy to move away from the product and to one that operates differently or looks differently.

But we also believe that the EpiPen competition represents an opportunity, and that opportunity is the shared voice of another party making -- increasing the awareness of the risk of anaphylaxis. When we consider that opportunity and on top -- and the low penetration of EpiPen today, what that gives us is the opportunity to increase the market by 15% to 20% over and above the increases that Mylan would -- Mylan and EpiPen would otherwise be driving. And when we quantify that market expansion and recognizing that EpiPen would still continue to get the majority share of that, what we see is a 10% to 15%, up $0.10 to $0.15 per share upside coming from that shared voice. And that -- so that from our perspective, the opportunities associated with EpiPen and EpiPen competition continue to outweigh the risks.

So let me turn now to our capital structure and financial flexibility. Over the last 2 years, we have taken significant steps to restructure our balance sheet and our overall capital structure. It really starts with the strong cash flow that this company has generated over the last 3 years, as we've increased our operating and free cash flow by approximately $100 million each year. In addition to that, we -- at December 31, 2011, we achieved a gross debt-to-EBITDA leverage ratio of 2.9, below our long-term target of 3:1, an accomplishment that we're very proud of. Third, through a series of capital markets transactions, we refinanced and extended our debt maturities out through 2020. Next month, we do have $600 million due under our convertible notes that we will repay using existing liquidity, but we don't have any significant debt maturities again thereafter until 2015.

Our overall effective interest rate today is about slightly over 5%, and we have a 70-30 fixed-to-floating rate interest rate profile, which we believe is very appropriate, given the interest rate environment that we're operating in.

And lastly, over the course of 2011, through our share repurchase program and warrant repricing transactions, we reduced significantly the dilution risk to our shareholders. And now, as a result of those transactions, at a share price of $30, our shareholders are protected at 440 million shares, up to $30 per share, which is a significant improvement from where we started 2011.

So on the -- from my perspective, on the back of those achievements -- excuse me, on the back of those achievements over the last 2 years, 2012 is an inflection point. We will generate over $1 billion annually in 2012 and beyond in financial flexibility. And I define financial flexibility as free cash flow plus borrowing -- available borrowing capacity to achieve our 3:1 long-term debt-to-EBITDA ratio. That's $1 billion a year of cash that we can invest back into our business to increase shareholder value.

When we look at our capital deployment priorities, what I want to start with here is to make sure you know that we believe that through the opportunities I showed you before, that we have the right global platform today to be successful and we don't need to do a transformational transaction.

We also thought it was important to lay out the financial parameters of a transaction or -- and transactions that we would be prepared to do. I think the most important parameter here, or one of the most, and there's only 2, but one of the most important ones, is that we would stay within the terms of our current secured credit facility. As you know, we redid that facility in the fourth quarter of 2011, and it calls for a maximum gross debt-to-EBITDA ratio of 4.25:1.

In addition to that, any transactions that we will do would need to be accretive to earnings. And these are financial parameters that we would use in conjunction with any transactions that we would look at.

So what kind of transactions would we look at? First of all, portfolio expansion. We've talked about increasing the diversity and the difference in our therapeutic categories and dosage forms. The acquisition of Bioniche in 2010 is a very good example of a transaction that we did to increase our therapeutic categories in dosage forms.

Over-the-counter transactions, transaction to increase our opportunities in over-the-counter or any complementary assets for our specialty business. From a geographic perspective, we are not presently in Central or Eastern Europe in any significant way. So it's something that would allow us to have a presence in those -- in that area. Or in India, in the emerging markets in India, whereas we -- if we could accelerate our growth in the Indian market, or to enter into the Latin American or Chinese markets.

And then also from other shareholder value accretion transactions, whether it be to accelerate the prepayment of our debt or future share buyback transactions or other, what I called shareholder-value-enhancing opportunities that may exist.

What we recognize here at Mylan is that we're 100% committed to increasing shareholder value. This management team, through the financial commitments that we make and the opportunities that we're driving, our sole goal is to increase shareholder value. And as Heather said, you can do good and do well at the same time.

So a couple of measures of how we've been achieving the increase in shareholder value. This chart shows you our cash return on invested capital, which since 2008 has increased every single year and since 2010 has exceeded our weighted average cost of capital. Or if you turn to our total return of Mylan stock versus the S&P 500, we've significantly outperformed the market since 2008.

So lastly, if I go back to where I began, Mylan has been delivering over the last 4 years on it's financial commitments. We laid out -- I laid out for you in this presentation financial commitments for 2012, 2013 and beyond. And I can assure you that just as we performed over the last 4 years, we will continue to perform into the future.

With that, thank you very much. So I'd like to introduce Rajiv and Alec and Hal Korman to take you through the -- our operational initiatives.

Rajiv Malik

Good afternoon, everybody. We're very pleased to be here in front of you to further build upon what Heather and John had laid out. Heather and John introduced several drivers -- strategic drivers for the future growth in a very high level, and we are going to embellish upon some of those, put some life and color around those.

In the next few minutes, me and Hal will walk you through our operational platform, just not -- commercial platform, technical operations, S-plus modern differentiation.

Harry A. Korman

So specifically, hopefully, we give you some color when we talk about our portfolio, what the robustness of that is when we talk about the platform, where our customers see it, how we monetize that platform. And in an overall how we see a number of these different pieces folding in.

Rajiv Malik

So let's start with the platform from operations point of view. And we term this supply chain integrity. There has been a lot of discussion and news about some supply disruptions, product shortages, how does new quality or how this new world from FDA point of view is evolving. And we said, why not we evaluate our platform from that point of view, from that context? And for us, these operations are basically a global network of R&D manufacturing intertwined with the fabric of the quality with a wider asset and reflect scale, robustness, sustainability, speed, flexibility, ability to manage COGS and I said the most important one, the quality.

Harry A. Korman

I think you saw on one of Heather's slides, when you think customer perception, I don't believe our customers around the globe look at Mylan and our platform the same way they look a lot of other generic companies. So one of the things we did when we looked at market research around our customers, around the globe and asked them what was most important to them. And clearly, there's differences in the different markets, whether it's prescription, substitution, distribution. But key was quality. I think Mylan's quality reputation is well received in stands there and is a differentiator. Second was partnership opportunities. So I think we'll get into that when we talk about the platform and the portfolio and how we can apply that portfolio to enhance our partnership opportunities with our customers and meet that need.

And the last is it really can be done in 2 ways. It's time optimization, as Heather has showed in her opening slides. And when you think about that, you can think of it in a couple of ways as they're looking for more time in their day-to-day business. So we have some innovation in differentiators we do. The other is about service levels and their ability to spend time, whether they have to be looking for other products. So I think, as you'll see, as we talk about this platform how Mylan clearly is recognized as the gold standard in service levels of delivering products to the customers at the right time at the right price.

Rajiv Malik

So let's look into the global manufacturing network: 23 facilities around the globe; 7 solid dosage form facilities; 9 API facilities, mostly in India and China; 3 dedicated packaging centers, one, which I would like to specifically mention is the Hungarian one, which we just commercialized over a month back. State-of-the-art facility will work 300 million packs. Just to address the complexity of the Europe as a region. We have some centers of excellence when it comes to the manufacturing, whether it's the transdermal facility, our nebules facility, our injectable. It's a small facility, but we still have a beautiful plant over there in Galway, Ireland. And Texas, where we have our semi solids. But I think I would like to spend a minute on the 7 finished dosage sites, which we have.

Proximity to the key markets is one of the key drivers of this strategy, and we'll discuss about how it helps us in the business. And what are we doing with this in terms of the future? We are investing for our future. We are investing close to about $1.5 billion in the next 3 to 4 years. We are ramping up different areas, so whether it's injectables, we have the larger investment that's going on. We are investing about $250 million on our dry powder inhalers. We'll talk more about this opportunity. We are further ramping up our API capacity, $150 million around that. And oral solids, which continue to grow. And we'll talk about -- but I think one thing that I need to call out over here is this ramp-up in the workforce. It's one thing to hire, it's another thing to train and then put them into operations. And we have proved it. We have proved it over the last 4 years, so we feel very confident that we'll be able to replicate the same.

In terms of capacity. This investment, and if you relate it to capacity, we are almost building another Mylan. We are doubling Mylan in terms of the capacity in the next 4 years. While the API capacity will go up to from 3,000 kiloliters to about 4,500 kiloliters, which we believe is one of the largest capacity in the world. We have our oral solid dosage going up from 45 billion to 82 billion. We are more than doubling our transdermal capacity from 105 million capacities to 225 million. We are investing in semi solids, but more importantly, we are investing injectables, where we see a huge opportunity, from about 10 million going to 100 million in the next 4 years. And many of these projects are early on. And the last but most important, our investments in the dry powder inhalers, where we are investing about $250 million in Ireland. Project is already underway to build up 25 million units capacity.

Harry A. Korman

So I think if you think of one thing Rajiv said, you can't add a workforce overnight and you can't build plants overnight. So if you look here, I think the key takeaways are: One, why the doubling of Mylan? So if you look at that first 4- or 5-year set, there were about 60 billion doses of generics growth in a global platform. Think of what we've seen over the last few years: Service disruptions, drug shortages. And over that time, as Rajiv had said, we had already started to grow our platform.

More importantly, if you look between 2011 and 2016, we're going to see 118 billion new doses of generics into the global marketplace. And where is Mylan, this doubling of Mylan? What does it mean? We're going to add really, in essence, 2 Mylans into this work -- into the enterprise, or I should say into the marketplace. I don't believe you see anyone else growing their manufacturing capabilities and their platform to meet this need that we clearly see. And we've really have been able to capitalize that over the last couple of years, as I said, on drug shortages and optimization or opportunization of our firm portfolio. I mean, again, looking for us to position ourselves to be able to take 20% of the global generic marketplace by 2015.

Rajiv Malik

And what does this platform offer us from business point of view? So let's address 3 separate sections. The geographic diversity of manufacturing sites. It provides us balance. Now proximity to key markets gives us ability to capture Day-1 launches, and we believe we have done it very well over the past. The sustainability of robust supply. If there is any disruption, our ability to respond to that market is much better than competition. Risk mitigation. Just -- we have leveraged our network just to risk-mitigate our key products. Very recently, we did a exercise that Morgantown, which is our largest facility, 20 billion doses in U.S.A. And we saw some stats that almost 50% gross margin of our North American business, which is the largest business, comes from one of this facility. And all what we had done over the last few years, we just wanted to validate that. And we're very happy to see that 90% of those gross margins are secured through a dual source or a risk-mitigation exercise through this network. So that's what this -- that sort of flexibility is what this network provides us.

Our vertically integration, we have talked about this. Yes, we have about -- our pipeline, 50% vertically integrated. We have our commercial pipeline, about 25% vertically integrated. We have repatriated products over the last few years. We have about 75% products today internally manufactured. That gives us ability to manage the COGS.

We have vertically integration also gives us ability to have some first-to-files, some work around those patents, the API patents. And last but not the least and most important, the quality had Heather embellished it very well, said it very well. It's in the DNA, it's a state of mind. It's just not one another function. It's about doing what's right and not what's easy. And we believe that this EQUIP FDA what basically raise the bar of quality across the globe. Many other countries, the competition which comes from across from the globe will have to meet those standards, will have to respond to those needs and that's an opportunity for a company like Mylan.

Harry A. Korman

And that differentiation truly does get monetized. If you think of a couple different ways. We've had late label changes in the U.S. marketplace. And our ability to make those changes within a 24-hour period of time on the U.S. soil and launch those products has given us a different percentage of the market share. We've been able to gain more and keep that for a longer period of time when those happen.

We've seen the opportunity to just optimize ourselves so we can react quicker because we have manufacturing in each of these different locations and supply hubs there and quicker from a replenishment standpoint relative to those. And I think the last that recently just happened up in Canada, we had a case where a notice of compliance or approval came quickly. No one was really supplying it. And while we were ready, because of that proximity to the manufacturing site, which we try to do normally as one of our strategies, we were able to rapidly resupply and able to again, to secure and take a larger market share than we might not have been able to have we not have that proximity.

Rajiv Malik

Let's talk about R&D, the one function which we are already proud of. And that's been poster child of the new Mylan. When Mylan, Merck and Matrix were being integrated, I think this is one function, which just set another all-new standards. A very strong team of 1,300 scientists across the globe. We call it 24/7 because they work around the globe. They work as teams. And we are working -- these 2 teams are, especially one in India and one in U.S., they are working around the clock. And we are investing for our future of $2 billion in the next 4 years. We have 9 sites across the globe, again. But the 2 big sites are, as I mentioned earlier, are one in the Morgantown and the second in Hyderabad, India. These are the 2 key sites with the multiple product capabilities. We have a dedicated site for Japan. But in addition to that, we have certain centers of excellence for transdermal patches. We have a facility at Vermont. We have nebules at California, injectables coming from Ireland, R&D. And the 2 recent additions are Cambridge and Sandwich. This is around the drug -- dry powder inhaler. This is where the R&D for the DPIs is based on. And our API facility, which is a strong team of 400 scientists. They started off Hyderabad some stats with just 175 strong pipeline of the drug must suffice in U.S.A., 100 drug must suffice for Europe, 75 CP applications, again, from the Europe point of view. And a part of that R&D is dedicated to the cost optimization. Because life cycle management is a very vital part of this business.

Harry A. Korman

I think Rajiv, as Heather said when we first started, 1 plus 1 equaling 5. I've been down or had been down in Morgantown by our R&D, and I think one of the real keys prior to this new collaboration, this new set up, we will get maybe 15, 20 submissions out of our R&D group on an annualized basis in Morgantown. Now as Rajiv said, where we put this collaboration together, this intellectual stimulation and challenge, what we're seeing now is more than double the applications coming out just for the U.S. and even more so for the rest of the world out of Morgantown. But we've done that without any headcount additions. So when we kind of looked at it and we looked at our R&D spend, again, it gives us that opportunity to reinvest to other new and additional opportunities.

Rajiv Malik

R&D has literally transformed our business. And a picture says a thousand words. When we started in 2007, this was largely a solid dosage form company, a small pipeline of 125 products, and a percentage of that was transdermals. Today, it's not so. We have diversified technology platform. We have injectables. We continue to emphasize on double solids because that's also still a big part of our portfolio -- patches, nebules, softgels, semi solids, nasals. You name it and we have it over here. So this is just not the numbers. This the qualitative aspect, which we want to share with you because we are a much broader, much more diversified technology platform as far as the R&D is concerned.

Harry A. Korman

And while we've launched different products in other parts of the world, where we have some of this experience on them, we've learned commercially on how do you launch those, whether it's some of the liquids or the nebules or such. The other piece is our customers now are starting to look at us in the North American platform as well as a new source for these types of products. And I think one of the things that really stood out, they're beginning to expect, I think when we look at our injectable platform, that we're going to bring that same Mylan service levels. And what that does is it really gives us confidence that as we introduce these new products, we know we can again gain a very substantial or a disproportionate share relative to the time where we begin to enter on these products.

Rajiv Malik

Another aspect, I think, I would like to mention about how this R&D transformation has put us in a very different position with what we were 4 years back. Just look into from the efficiencies or productivity point of view. Just -- it's not just the reduction of the cost of developing any ANDA. Yes, from 2.9 to 1.4. Yes, it does gives us more dollar do more products. But we achieve this steady state when it comes to our U.S. India filings. Almost a run rate of 65 to 70 ANDAs every year. That put us in a position of a very strong pipeline, as does the pending ANDAs for FDA is concerned. 173 ANDAs, worth about 99 billion doses with a lot of first-to-file opportunities, which we'll talk about.

So this is what will carry on the momentum for '12, '13 and beyond. But this was not done at the cost of the rest of the globe. Our rest of the global business, whether it was Europe or other business, have not seen internal filings the last 3 years. We today are filing in the run rate of about 700, 800 or 900 applications, approximately 300 application, 350 applications for Europe, about 200, 250 applications for our antiretroviral franchise and about another 50 for Asia PAC and Japan.

So we are continuing that momentum for the years to come. And that has put us, again, into a leadership position, which we are very proud of and very pleased with. As far as the U.S. ANDA approvals are concerned, we are today the leading company over there. It was Teva a few years back, but we have caught up and we continue to hold this -- we will -- we are very confident that we'll continue to hold this position.

Harry A. Korman

And I think you look at 2 things here. I think one, if you remember that slide Rajiv showed about the global submissions that we're making. That's really created globally where we're becoming, I call it a must partner. Because I think people see and we share our pipeline and they know to have access to that, to capitalize on that partnership theme that we've talked about, they need to do business with Mylan. And it's positioning us in a very good place on a global food basis. If we look in the U.S. marketplace, I think the slide that you see up on the screen is something that brings certainty to our customers. And I could think, I've been with Mylan over 20 years, and relative to being there on a Day-1 launch when we're supposed to be there, I don't think we've ever missed. And that's a certainty, and you look at it here, that they now know. Mylan is bringing more products than any other company in the U.S. marketplace. And again, that gives us continued confidence on how we can manage the market shares that we look for on the U.S. marketplace.

Rajiv Malik

And what are we doing for our future? We're spending for our future about $2 billion over the next 4 years. If you just look into the left of the slide, that's for 2012. We're spending roughly around 60%, approximately $240 million to $250 million in the generics. We're spending about $60 million when it comes to the biologics, about $50 million for respiratory and another $50 million for our specialty business.

This pie is going to change over the years. But maybe not when it comes to generics focus, that's not changing because that's a larger amount. That's as 6% of a larger revenue base. So we'll still be spending roughly around $240 million or $235 million even in '15, '16. On generics, we're spending about $100 million on biologics, another $50 million, $60 million on respiratory and specialty will be around $125 million. So that's the investment for the future.

Harry A. Korman

So when we look at portfolio diversity, I think the commonest term we all hear is about the U.S. generic cliff. And I think, hopefully, when you get through this section, you'll maybe see what Mylan doesn't feel that U.S. generic cliff actually applies completely to us because there's really a difference there. And I'll tell you as a commercial person what we're going to show you in this next slide. I mean, it excites you. And I think if you put it up there, Rajiv.

Rajiv Malik

Yes.

Harry A. Korman

I jumped one slide ahead, so I apologize.

Rajiv Malik

So let me set it up for you, Hal. Currently, we talked about R&D machine is set up about 800 to 900 submissions. It's easy to set up submissions relatively than to launch run rate. And it took us time because you are building up the pipeline. But now the pipeline is churning. And we are looking into almost 600 to 650 launches every year, year-over-year for the next couple of years. Again, the driver behind '13, '14 and beyond.

Harry A. Korman

So the other, before we get to this slide I'm just dying to get to. If you look at that right the country launches and something to keep in mind, rest of the world has a different dynamic than what we see in the U.S. The U.S., we see a launch, a big peak and it comes down and finds a balance. The rest of the world really sees peak sales being achieved in years 2 and years 3. And so when you look at the approvals that we've got there. Certainly, some in Canada, where this happens, in the North American numbers, you've got the EMEA numbers of launches, not only that we had in '11, but also in '12. And then the Asia-Pacific launches that we have. These are really the things that, as John said, are going to help cascade us on earnings through '12 and through '13 and beyond that, as we continue to launch numerous products around the globe. So slide I've been dying to get to. I think just look at the raw numbers on this. And when you heard us talk about the doubling of Mylan, you're looking in 2007, we had about 2,400 products in our portfolio that we were marketing. We believe by the end of this year, we'll be around 4,700 products in that time, close to doubling. And look in the next 3 years, we're going to be up to 6,700-plus products on our portfolio. I dare say that no one else has this kind of growth in their portfolio planned over this period of time. Think about it a couple of different ways. I mean, clearly, you see the numbers, the share numbers in EMEA that we believe will help propel us and keep that market going. But you think of the U.S., it took us 50 years to get to 250 products in our portfolio. We're going to accomplish doubling that in a 5-year period of time.

I look at Canada as an example where we did that. It took us a little bit longer when we first built this platform because we were learning a few things about the regulatory process in the Canadian market. But we've suddenly found that the promises and the statements we made to our customers that we would double this portfolio are actually taking place. In the last quarter alone, we launched 7 products in Canada, which was more than we had done in the year before that. So we know we see this growth, and it's the growth that compounds over the years in these other markets.

And even in Asia-Pacific, where pricing pressures and then the Australian market take place. As one of the key pieces that are part of EAPD is that you have to have a pipeline behind it. Because certainly, yes, prices come down. But the real opportunity is then the next 18 months as you're in those products. And I think what we're really confident about that helps us grow that marketplace and bridge till we get to this new therapies is the fact that we have the right portfolio in place in that market to continue to grow it.

Rajiv Malik

And after every call with one of you, John or Kris King, they come back and talk to us about cliff and start asking about this cliff. And let's look into -- we did a small exercise of just looking into the U.S. as a market, key market and what's the U.S. market. And...

Harry A. Korman

I think what some of those things were, and we talked and John talked, our portfolio is differentiated. So we're going to have a slide in a couple from now that will help really frame that up for you. But I think there's a couple of things. It's a continuous stability slide. We really see the diversity of our portfolio allows us to maintain share in the products that we're in. These are products that are heavily towards chronic therapy. And I think as Heather said in the early slides, we see the demographics across the globe that we see the aging. We see that in the U.S. as well. And many of these products through either share increase or through just this continued natural growth of some of these older molecules allows us to have a better stable platform here in the U.S. We've got a couple of other things that this portfolio has allowed us to do and people have said it differently than I see. Some talk about not as much price pressure. But one of the things we see with ours is there's pricing appreciation opportunities with our portfolio. And I think that's one of the things that offset declining prices. And I think that's an important piece to us. Opportunities to increase shares on the right products. It's not to say we will never rationalize a product at Mylan. But we don't do it at the expense of our customers or our patients. But we look at where it fits in the life cycle and where it's important to us. And I think the other thing that we've seen is probably unprecedented right now in the short term is we're -- our partners are beginning to look at this and I believe really see this differentiation in the U.S. market that they're talking long-term programs. Long-term commitments, not a product-by-product, SKU-by-SKU basis. But they want to talk about strategically aligning, and at least that's our experience with those customers at Mylan.

Rajiv Malik

So this was the $30 billion bucket from where we are operating today in the U.S. market. The next bucket, which is $99 billion, is where we talked about that 173 ANDA spending approval, 43 potential first-to-files representing about $27 billion of annual sales. Let's look into the next bucket. $91 billion bucket. That's where some of our biogenerics pipeline or Advair-like product kick in. And there are several other 329 products, which are already in -- at the different stages in the development. And we are not going for any vacation because there is still work out there in another $96 billion bucket.

Harry A. Korman

And I think if you look at that sweep, the one thing to keep in mind in that $91 billion bucket is what Rajiv showed the dynamics of how many applications we're filing on an annualized year and even here in the U.S. So as products are getting approved, Mylan's filling those same approvals as fast or if not faster. So again, we don't see quite that cliff dynamic coming. The second piece we have here, as Rajiv's showing this $96 billion. He's going to cover what some of the, I'll say more -- maybe opportunities are in there. But what it really shows there's also a lot of product out in the marketplace, when you look on the right-hand side of this graph, that our competitors have that Mylan's not yet in and we still have opportunities to target these where we see value in these types of products. So on an overall basis, there's $6 billion worth of generic value in the U.S. that Mylan hasn't put into its pipeline today, covering 250 products, that we still continue to review this GAAP analysis as a very robust process on a quarterly basis.

Second, we're looking against the #1 player in the U.S., Teva. You can see there's $1.7 billion worth of products that Teva has in their portfolio. Only 45 products at Mylan hasn't put into their portfolio yet today that we can continue to build upon as we find our customers' needs, require it and where we see opportunity to optimize an opportunity or monetize that opportunity in a different way.

This is the slide we kind of talked about that kind of shows the difference, why is it sustainable. And I think it really prove -- the proof is in the pudding. If you look at it, Mylan has a substantial portion, or 40%, maybe it's actually -- I don't know, John, what the right substantial category is. But over 40% of our margin is capturing products that are 4 to 10 years old.

So think about that. These are long, sustainable driving products. As unique about these products, most have 4 or more competitors still in them. So whether it's our ability to drive the cost of the product to the right place, the uniqueness of that product, our capabilities to manufacturing to not be over -- I'll say, not have the capacity to continue to move those products, we have this unique piece to our portfolio. We have both ends of it. A lot of new products coming in those first years, where we have some of that pricing dynamics before they settle. And if you look at the 10- to 20-year products that are in that portfolio, you get 2 benefits there. I mean, we find one. There's new life cycle that's coming up on old generics. I mean, we can monetize those, and we have a lot of them. And that's again, something that our 50 year history allows us in the U.S. So again, it gives us this robustness to keep driving those gross margins because we have that many products in the portfolio. So again, we look at this, and we don't see quite the same dynamics of this cliff.

Rajiv Malik

Hal, just a couple of case. We had an internal year-end review, and it was very pleasing to see that out of the top 10 products of U.S.A., only one was a launch from 2011, rest 9 were those products, which Hal is talking about, whether it was 2- to 4-year of the products like that.

And we talked about that last piece of $96 billion, where we still believe that there are $58 billion of the brand value products. We are -- we need -- We yet to start work and evaluate them from the market point of view. So there are certain biogenerics opportunities over there off certain more products -- more opportunities like inhalation.

We talked about quantitative aspect of the R&D. Let's look at it a little bit qualitatively. So as we said, it's just not solids. So even within the solids, we have the controlled substances, the high potent products, very strong with the modified release dosage forms. We are adding 23% of the pipeline is to the injectables and ophthalmics. We have more and more -- we'll talk a little bit more about patches, certain complex injectables, like difficult to correct price like Copaxone or in even oxybutynin-like opportunities, certain derma products and respiratory products.

We are moving a little bit away from just commodities and spending time on the limited competition, high barrier-to-entry or even maybe generics plus, looking for some opportunity to create a differentiation. And one area which we would like to talk to you about was transdermals. We have a very strong platform, but we don't believe we have leveraged it enough. There is a very strong IP around matrix patch platform, but we are now further expanding this technology by getting into the melt extrusion and hydrogels.

We're looking beyond generics. We are looking to -- look into certain existing brands. Do they have some deficiencies or issues which can be modified or which can be addressed through these technologies? We're looking to develop some novel transdermal products.

We have all the products out in the market, like Fentanyl, Clonidine, Nitroglycerin, but we have a very exciting pipeline also. We have 6 products under active FDA review. We believe we have one first-to-file and one first-to-market opportunity in this category. And we have a good pipe -- a strong pipeline. And more importantly, we are excited because we are now taking these products beyond U.S.A. to different geographies.

Harry A. Korman

And I think we can look at a couple, whether it's Fentanyl, whether it's Nitroglycerin, should have launches either late '12, early '13 in the other countries. So again, we're continuing to deploy those products that we know have good sustainable value and a differentiation category across the globe now.

Rajiv Malik

Let's talk about biogenerics. This is an area which has been on the spotlight for several months now, several years now. And we don't talk a lot about this after signing our Biocon deal. But sometime being late is not so disadvantageous, especially when there's a lot of uncertainty around because it gives us time to pull our act together. And I think we took our time. We made the right choice. We very strongly believe that we made the right choice when it comes to the finding the right partner. We spent a lot of time to identify the right portfolio. And we'll share with you.

We picked out the products mostly around oncology and autoimmune disease state. When this regulatory pathway is evolving, when there are so many other uncertainties, we vent the prospects to set up the highly-skilled technical team with the regulatory capability, strong legal capabilities internally. We have been ramping up our capacities, which we have in joint investments to the Biocon. And we are very pleased with the progress, which we had made after signing the collaboration with Biocon, identifying the right portfolio. We have 5 products in development. We'll share with you where exactly they are in the life cycle of the development. We have over first product getting into the clinical just in a couple of weeks. We're expanding our product pipeline further, and more importantly, we are building internal capabilities so whether it comes to R&D or even manufacturing. And we believe in years -- couple of years from now, we will have multiple products in the Clinical Development, some applications in across the globe. And I'm not talking just as a U.S. market. This is as a global market. And we will simultaneously will be looking into our commercial capabilities and ramp up what we need to do in that space.

So maybe this is what everybody has been asking us. Yes, we have 5 products under Biocon collaboration. We have the Herceptin in the Phase 1. We have Neulasta in oncology in preclinical stage. We have Avastin. And again, on oncology, therapeutic category in a process scale-up stage, which is going very well. We have 2 products, Humira and Enbrel, late stage where we are very close to finish our cell line development. We have one product, which is not disclosed by the name over here because of some collaboration issues. But we are very -- this is a very exciting product, and we are in a pre-clinical stage in this. In relation to this, we continue to look for strengthening this pipeline, building this pipeline and also ramping up. And we believe -- we're very confident that maybe we didn't start at a time when many other company has started, but we have caught up and will be there for key molecules, for key geographies at the time of the market formation.

Harry A. Korman

So I think one thing everyone knows is implementation of a pathway and how you're going to commercialize it really still is in the discussion phase, I'll say from knowing how the approval process is going truly play out. I think one of the things or 2 of the things that we found, as we've talked to customers, and I think Rajiv said it, we've had the opportunity to be at the right time in this process. And we've gotten feedback from our customers that clearly we're in the right position to launch these types of products. And I'd look at it as a confirmation of what Rajiv's saying out-of-market formation. And some of the things that make it differently, we have all the continuums covered. So as a multi-source or generic company, we're already well positioned, whether it's a retail sales force that's going to be pushing through it or is going to be a doctor-, physician-type of detail, whether it's clinical in the hospitals, through our medical liaisons, Mylan will be ready when this opportunity comes. And our conversations with our customers I think only kind of -- only reaffirm that.

Rajiv Malik

Let's talk about a very exciting opportunity in the respiratory space. We have been looking very actively over the last 3 to 4 years to bridge this gap. We scanned almost the whole world to look for different technology platforms, different devices. And we could not have come to this -- we could not have picked up a better partner or better device or better platform, which was Pfizer's. Pfizer has spent years to develop this device and millions of dollars, hundreds of millions of dollars to come to stage where they were. And if you look into picking up -- you're having that device, having that team which worked around that because that -- we acquired that team with very strong 50 scientists from Pfizer, which is a part of -- they have Mylan in place now. And Mylan's ability to execute a generic strategy. We believe, and we'll tell you why we believe we are so confident. And this is not the path which we are exploring for the first time. Many others have gone this path and came back and said they don't see generic Advair happening. We are very confident that it's happening, and we'll share with you why we believe it can happen.

So there's a little background with this. When Pfizer was developing this product way back and when they were ready with his, being a brand company and having a respiratory portfolio, their approach, very naturally, the SEDAR for another ANDA around this product. SEDAR looked into the device and said, "No, you need to go and talk to the OGD because this is a device which is very comparable to Advair."

Pfizer's team had an FDA meeting back in December, January of 2009 and January of 2010, where they shared their whatever they have done so far with the FDA and came to an understanding of the path. And what was that path? The same path which they shared with us FDA presented and approval of '11 as a first step towards how do they see a generic drug dry powder inhaler coming. What are their expectations and which was very consistent with what they shared with the Pfizer's team. It's around 4 buckets. First one, the device and formulation. It's a size and shape -- they're looking for a similar size and shape. And we believe this device, which we have, is very intuitive and very close to the Advair. Same operating principle. The same number of doses and qualitative and quantitatively formulation design similarities. The next step they are looking for is the in vitro performance, the equivalents and emitted doses, aerodynamic particle size distribution and comparable resistance. The third one, which is one of the very important criteria is the equivalent systematic exposure -- systemic exposure based on the pharmacokinetic data and required for all strengths, all potencies. And the last but not the least, the equivalent local delivery. Again, this is based on the pharmacodynamic endpoints showing dose response.

We have a very solid position and direction on the first 3 items mentioned over here, based on the work which has been done over the last few years. And we are, we believe we have a very clear path forward to demonstrate the local delivery through our therapeutic equivalent studies.

So we started with the Pfizer's patented device design and development, as well as the filling technology with the FDA meeting behind us and a clear path forward, and we closed the deal in December. It's like we have been working for months and year together because the same team is continuing this. And we're not losing any time and any integration or stuff like that. They are right there because they know these timelines and we have simultaneously U.S. as well as the European and the rest of the world path being well. We believe we are very well lined up for a submission in Europe in the second half of '14 and for U.S.A. in the first half of '15, and looking for a '15 launch in Europe or a '16 launch in U.S.A.

Harry A. Korman

And I think, Rajiv, a couple of things that we know. We've had that experience with devices and certainly, with the generic innovation. And whether it's looking at how to bring this to fruition on a commercial basis or scientifically, and we can go back whether it was a product, where we took device along with a product and we're able to get an approval in this pathway. And I think that's one of the things that gives us that confidence. The other that was just unique about this product, when we did our press release, I don't think we've ever had a greater number of calls from our customers who showed immediate interest. And part of what that at least makes me look at is that means other people are close to getting this product done. And I think that's one of the other things, knowing our innovation and where we can take this product on a commercial basis, that makes it so exciting.

Rajiv Malik

As we've mentioned, we are currently in an investment phase. We are building up and ramping up quickly this manufacturing facilities in Ireland. And I feel very confident that we'll be able to bring the first generic Advair into the market.

Let's talk about another gem in our portfolio of respiratory, and this is the combo product, which we have been talking of. It's a combination of the steroid and LABA. We struggled a little bit for a couple of years to get to the same page when it comes to the regulatory part with FDA. We had a very successful meeting about a month back. And we have a very, very well laid out common understanding with the FDA what we need to do beyond this. We have already kick-start this Phase IIb study, and we're looking to get our Phase III started by March of '13, our NDA submitted in '14 till somewhere in the second half of '14 and looking for the last quarter or second half of '15 launch. You're going to hear more from John Thievon about what this opportunity is about. But I just wanted to flag it, mention it from the science point of view.

Yes, one thing more. We have this very strong IP around it, which will take us to 21 -- 2021 or 2022.

Let's talk about the Copaxone. This project reflects our team's scientific ability to manage not only the complex projects, but also manage the complex partnerships. Yes, Natco started this project. They had a molecule, but there are a lot for us to be done between when we acquired this and where we had to go, and that's where Mylan took the driving seat. A perfect collaboration between the teams. How strong, scientifically backed this and I was [ph] would be reflected that -- and that got accepted within 70 days after submission, whereas some other filers, they took about a year to walk through that. Ever since its acceptance, we have been very actively engaged with FDA -- during the FDA review, and we have been working to meet with their expectations. It's been a very thorough review, and we are very pleased with the progress which we have made. And with every day, we are inching close to where we have to, to be in the state of readiness for the launch at any time when the other issues get settled.

Harry A. Korman

So I think, Rajiv, the other is, this is a therapeutic category that Mylan's well familiar with. We have a very strong presence. What you probably didn't know is we're the second most widely dispensed pharma company in the neurology segment. So as we look to commercialize this out into the future, we already have a presence and are building a name recognition that will be able to have that kind of penetration into this that'll be appropriate for, again, a difficult-to-develop product that I think will have that long-term value, whether you're the innovator or you're the first generic in that marketplace.

So maybe just to quickly hit on -- and probably not say quickly, our institutional platform that we have. A couple of things, I think first, most people don't recognize Mylan as being the fifth largest, at least if you want to look at IMS data on a global basis for injectables. So Heather, I've talked to you about how we've combined the Bioniche and the UDL platform from a U.S. perspective, but not to lose fact that in Europe, we also have a platform where we're #1 in the generic segment in France. You can see we've got more products in the European platform. We've got a concentration into the oncology group. I think what Rajiv pointed out, we're building the internal capabilities now to further do that from a manufacturing, to be able to give us that position on a cost of goods basis when you look at our margins. And we've got the unique platform here in the U.S. And we can continue to build on that here as well, as another product that I'm not sure everybody recognizes, a brand product we have in this segment, Ultiva, remifentanil used in anesthesiology. That's a very nice brand niche for us, with patent protection for a number of years, and we continue to build onto that portion of the platform. We've got some unique products, whether it's Maxolon or the recently introduced Levetiracetam where I think, again, we're trying to bring that innovation and bring solutions that can help pharmacy and recognize it. So we'll spread this again on a further basis into the global platform, more into Europe as we're focusing on it. And I think the other unique thing that we've really seen is we can leverage this hospital platform and begin to bring it across the channel and bring more value to our retail products as well, as they're starting therapies there, as we're targeting products, as we look at the U.S. healthcare to make sure patients don't go back into readmission within 30 days. And we think we have a special place that we can bring additional innovation to from the Mylan perspective.

Rajiv Malik

I think how -- you're absolutely right about the growth opportunity because I think it's all about the focus, and Bioniche gave us that opportunity to bring focus to this area. And we see our R&D ramping up. We see -- we're investing very aggressively in ramping up our manufacturing capabilities and building up the plants. And we still believe a right portfolio, a right degree of vertical integration will be a long-term sustaining factor for this business. And we will be very well placed for that.

Harry A. Korman

I think Heather said that we'll grow this platform from $500 million to $1 billion, and I think we continue to look for our upsides that we bring the same Mylan quality reputation for servicing in this marketplace and supplying the customers in times of need.

Rajiv Malik

Let's talk about antiretrovirals. You heard a couple times through Heather and John. This is one thing, which we -- unfortunately, because I've been a test from the Matrix but it's not about what you acquire, it's about what you do with the acquisition. This is a perfect example of that. So when Mylan acquired Matrix Laboratories, we were just starting from scratch literally from scratch. We are an API company. Matrix was an API company with no -- not even a first step. We had just established our R&D team, and that's when we said, "Let's build this portfolio and then finish to assist." We came from behind. We have a very strong competitive landscape. We have zip [ph] and vaccine, our vendo hetero, and you name it. They were all there. We talked through the portfolio, and we had the vertical and division capabilities, and I think focus and passion drove this portfolio in 2007 from 0 -- today, so we're a $300 million portfolio. We not only developed the product within this time, we got them distributed across the different geographies, the platform, the U.S. and all that, but we also commercialized that portfolio. And this is growing because there's a lot of science behind that. So whether it was innovation, whether it was a new stable economy, whether it was looking into the first -- a change in just the first-line therapy, picking up Tenofovir, adding Lamivudine and Efavirenz and going to an NDA route. That's the largest growth driver today in this segment. And then looking at, okay, if DNA is one such big driver, the pregnant mother scan ticket, what do you do with that. Find that gap, address that through to TLN [ph], which is a developing combination, which is safe for the pregnant mothers. So it continues. So now whether it's the Atazanavir and Ritonavir NDA, that combination, the second line in the box, that's why we have stayed ahead of the competition. We know we were late. We could not have won at the first light, but we made that -- in a right picks. We have a strong pipeline from the API point of view, the first line dosage form, second line dosage form. We continue to work with the agencies like WHO and many more other out there, to understand where this whole therapy is going, continue to reduce the pill burden and leverage strategic partnership. We are very proud of some of the relationships which we have cultivated in this space, whether it was Gilliard or some others. And we see a lot of that happening in years to come, and we believe this will be one of the strong growth drivers for next few years.

Harry A. Korman

So I think the next one was to talk about generic utilization. And then you heard early in the slide that an additional 10% generic utilization in Europe can bring an opportunity of a top line of $300 million in revenue. I think some of the key things that I look at, there's still headwinds in Europe. We're not here to tell you that there aren't headwinds, but we're well positioned in the key countries that have this opportunity, and we still believe that the competitive advantage to us. I look at it from my experience in the U.S. market if we want to look back Medicaid D back in 2005 where we saw this rapid explosion of generic utilization, substitution and conversion. And you see some of those same things on the horizon for Europe. And that's the piece, while not built into the numbers, that we're going to take a focus on. Because again, we believe we see things that we learn in the U.S., we brought another team member over from Australia who's working with her global team that has key experience in a substitution market, and we believe we can begin to differentiate Mylan in this segment by helping the pharmacist substitute. Because basically what they've been doing is just putting it out there. And I think the growth for this market -- and it's not going to just be Mylan, and I think we've seen the beginning, some other companies looking at it, but we're going to have to increase generic utilization. We're going to have to do that by equipping the pharmacist better in a more efficient way, so we can have an impact in these markets. And we've already taken some of those first steps. In Italy, we're already using technology to give better visibility to pharmacy, make the call on them when we talked about time optimization, to take more time out of the normal processes of how they used to sell product in that marketplace and allow us to focus what's going to drive that market. So we still see this is a great opportunity, not built into the numbers, but we see it, and we're acting on it. And I think we're going to move through the policy piece that you know Mylan has passion in, and put that into the Retail segment there where we're well positioned and we have the right number of people to do that, that will see a benefit for us in these per markets as well. And we know the demographics are just right for this as we looked long-term in this marketplace.

Rajiv Malik

And Hal, just marry what you just said with what's happening on that operation stage. I think this is one area where we could not get all the value, which we believe we will bring to the front operations side, just because of the long regulatory timeline of 3 to 4 years for internal portfolio to kick in and we had to spread the uncertainties. But what we did, we did some low-hanging fruits, some vertical integration of the existing portfolio, repatriation. Even when we did repatriation, we had some existing contracts, which we just couldn't walk through. So we believe that we have done -- today, as I've mentioned, we have 75% internally manufactured products globally. Europe, still, we need to move beyond where [ph] -- to that number. Vertical integration is very much on the way, but we are -- I'm excited both the internal pipeline kicking from '12 onwards. That will help us a lot to manage this COGS. And I believe these headwinds are going to change one day, and when they change, we'll be very uniquely placed to capture the disproportionate growth of this expansion or increase in utilization.

Harry A. Korman

So I think we can head -- so if we look at geographical expansion, I think Heather hit it in a quick place that we currently have Mylan products on the shelves in over 150 territories. We obviously have every intention to continue to grow that further.

Rajiv Malik

And I think India is the first step into our emerging market strategy. It was very logical and a natural step for us. We have, perhaps, the largest multinational employed in India. And being there, knowing that market and having a lot of opportunity from that market point of view, a $13 billion market today, growing our CAGR up about 14%, when you're having our manufacturing assets over there. It was very logical and natural step for us. We are launching in another couple of months with our antiretrovirals portfolio and women health, respiratory and nutrition. And that's not -- that's a big need [ph]. And in the first few years, we are looking to establish a strong field for us to address 85,000 doctors across the globe. This portfolio is largely around chronic therapy, and we are moving away. This is where we see a lot of growth happening over there. And this is -- why I said it's first step? Because I think once we have India established, we can -- we then have another portfolio which we can export or which we can take many other emerging geographies.

Harry A. Korman

So I think the other area we look, you see our first jump into the emerging markets with India, and Rajiv can touch on others. The other way is we're going to expand our businesses through the export business. So it's one way we view as the ability to jumpstart business in a number of these other countries around the globe where we can gain experience, where we've got antiretrovirals that provide us an entry into these particular marketplaces. We map out those that have a regulatory pathway, that we can really leverage up our platform that we have through that process, and it gives us experience in these markets. And in the past, what we did is we looked at it as an opportunistic basis and how we entered into a market whether we could sell a product. We've already change that focus. We've got a dedicated team now. They're in these countries. They're building relationships with the appropriate distribution channels and learning it, and really setting the stage for us to make those decisions to then deploy additional resources into these countries where we can maximize the growth. And the most likely targets right now where we're seeing it are in the Southeast Asian part of the globe. But again, as we move towards that mission of driving towards providing affordable access to these 7 billion people, it's a key part of our strategy.

Rajiv Malik

Hal, it's about leveraging what you have. We have an excellent awareness about the distribution network for various countries through our area business. So we said, okay, when you look into emerging markets, you need to learn about these markets, and this is one way to learn through these markets. Our export business of ARV gave us the insight in a country like Thailand where we slowly kept on, just not understood how this market works, that it was the [ph] and all that distribution channel. We have a business, which is today, let's say, around $35 million, and that's very logical for you to go there and, okay, set up some ground presence to go from there. And that's why we said, okay, we have product portfolio, we have partnerships around the product portfolio, we are very well placed from the COGS point of view, why not we export this portfolio to the various geographies before we go and establish ground presence over there. So that's why I said it's precursor to our putting the next step into those emerging markets. And we are not finished yet. As John talked about the flexibility and the finances, and Heather mentioned about the mission of $7 billion. We continue to look in the opportunity into Central Eastern European countries, China and Latin America. Again, China, because of our presence over there, we are learning fast and we're learning because we sure don't want to be late. But we continue to look for any strategic partner relationships or any opportunities -- other organic opportunities, which are compelling come our way. We are on the job and looking for these things for the portfolio expansion.

Harry A. Korman

So maybe as we wrap it up here, some of the key takeaways. As we said, hopefully you got a better clarity on our platform. How it differentiates Mylan, the size we're taking it to, why we're taking it to that size and the benefit that, that really can provide Mylan over these next 5 years. And I believe it's uniquely different than what we're seeing other people, and certainly no one of this type of scale. Hopefully, you got a little better look of the portfolio. John gave you some of the dates, certain ones. I know, certainly, you'd like all of them. But if you think of that sheer size, if you look at what the value of those products mean in years 2, 3 in the rest of the world, you think of the number of products, the diversity of products. And what our customers are looking for, clearly, I hope you took away that, that's a distinguishing difference between Mylan and anyone else in this business. And then looking at where we're excited. The opportunities we have long-term, when we look at whether it's John's business with Perforomist or a COMBO, whether it's the Advair or generic, whether it's the Biologics, and that we've already had those dialogues with our customers. So while maybe not everyone recognizes where we've advanced in turning this into a commercial reality, I think we know we're well positioned, we know we're not behind in the these products, and we really know these are the areas that are going to drive us as a future for Mylan.

Rajiv Malik

I could not have agreed with you more, Hal, because it's not just doubling of Mylan, it's doubling in a very exciting way. We have a very strong platform, a robust platform to grow from. And I'm very passionate and excited about what lies ahead of us, and I'm very confident because now it comes to execution, and we are second to none when it comes to that. Thank you very much.

Harry A. Korman

So I think we're at a break with...

Heather Bresch

Yes, we're going to now have the 15-minute quick break and then we'll be back in here to talk about specialty and Q&A.

[Break]

Operator

Ladies and gentlemen, please welcome Heather Bresch and John Thievon.

Heather Bresch

So now that we've, I hope, laid out and put some visibility and transparency around not only our current platform, what you've heard all of us talk about, really we believe being a differentiator and a driver for us, but all of the opportunities around our generics business globally, as important as the driver of our specialty business. Today, it represents almost 10% of Mylan's revenue. And not only is it an important strategic driver, but we see the growth just to be exponential, especially with the EpiPen franchise, as well as some of the things that John will be talking to on the respiratory products.

One thing that I wanted to just build upon is John Sheehan's slide talking about EpiPen and why we believe that it's unique. Being in the generic industry for 20 years, I can tell you, we've seen -- I say no launch is ever the same. We've launched obviously hundreds and thousands of products in these 20 years, and we've become very astute to trends and the utilization and why some differ. So I can tell you when we started looking at EpiPen after believing that there was somewhat of a misperception about what the downside potentially could be if an AB rate of generic would come to market. And again, I'd continue to reiterate, we think that bar is pretty high for a drug and device for a life-threatening situation. But in looking at some compounds that you could remotely even equate to an EpiPen, we go back and look at a Dilantin. Mylan was one of the first generic companies on the market. Within 4 years, the first 4 years of having generics on the market to Dilantin, we'd only penetrated about 35% to 40% generic utilization. So patients were making a conscious decision. As you know, it was characterized as a narrow therapeutic index, and the brands did a very effective job of ensuring that the brand equity that they were going to build upon, and that customers made that decision every month when they would go into the pharmacy to continue to pay the higher co-pay to keep the brand. When we look at Femara, another very hard to manufacture product that we brought to the market, a generic patch, transdermal patch. Our device was different than those brands. Because of IP and patent protection, our device wasn't superior to the brand product and the patients -- again, doctors made a conscious decision to pay that higher co-pay every month when they would go in to get it for the device. So I would say, in my 20 years, that's as close as we can come to giving you some equivalent products to look at, historically. And again, over 4 years, Femara has had about 35%, 40% generic penetration. And it's still not anywhere near today what typical generic penetration is on a product. So I think that when you take those factors and then overlay that EpiPen is for a life-threatening situation, at that moment in time, you want the tried and true, you want to know your safe, your children are safe, you're prepared and your comfortable if you need to use it in that situation. So I just wanted to take the opportunity, like I said, not only to talk about the excitement we have around the specialty division, but to put in context the downside. But most importantly, and what John's going to focus on is all the upside potential that we see over these next years with EpiPen and our specialty franchise. John?

John Thievon

Thank you. Before I get started, thank you, Heather, thank you to my colleagues out here, and thank you to everybody who's here physically, also on the webcast. Just to give you some perspective, this is my 85th day here at Mylan Specialty. And we've talked about Mylan Specialty throughout the presentation so far. And obviously, it was the Dey company to what most of you would known. Just wanted to take the opportunity to reinforce what the Mylan Specialty name. It certainly means to me through our sales force and to everybody associated with the old Dey Company, which is now Mylan Specialty, and I think we really focused on the synergies of the entire organization. Mylan is a worldwide company, has channel expertise, managed market expertise. It has expertise around the world, and I certainly come in here from the outside so it would be great to leverage all of the expertise around the world, as well as the expertise with EpiPen, performance and some of the things we talked about. And there's no better commitment to the company of changing the name to Mylan Specialty. So I think there's no doubt, moving forward, that Mylan Specialty is here to stay and here with a lot of support. So I appreciate that. So I'm going to focus on -- we'll take the little history of what the company has done, which has been quite impressive for both EpiPen and Perforomist, then focus on the future. And the good news, we have prescription data, which I know most of you are looking, NPAs through February 10, which we'll be able to look at in this presentation. So I'll get right into it. So the 2011 accomplishments for the company, I've bucketed them to more easily explain more of the great things that have happened. Touch base a little bit here and get into a little more detail as we go through the presentation. Number one, we've built out the team. So I was fortunate to enter a team that has a phenomenal amount of talent in the financial area, you have manage care, trade, marketing, human resources, everything that you would look to, to build out a specialty pharma company. And where we don't have some of the expertise, we can either go get it or just reinforce in those areas. We'll talk to you about a bunch of partnerships around the world that's going to allow us to take EpiPen, as well as some of the other products, the COMBO and then some other things Rajiv and Hal spoke about. We'll talk about the U.S. brand success, which I think is phenomenal. But we will -- I will show you why the opportunity is so great in front of us. You hear about EpiPen market share being at 98%, 99% share. It's important to note that's the auto-injector marketplace, which is how it is defined. I will show you that. Although we have that high percentage, we have a very small share of the potential of the anaphylaxis marketplace. Talk about how we're doing with EpiPen throughout the rest of the world, and talk about the financial results.

So John Sheehan touched base on this before. For Mylan Specialty, you see a 30% compounded annual growth rate. And this is across the board here. You see EpiPen obviously as the driver, but you'll see the Perforomist is also a product that's growing at a very nice rate. And you'll see that the internal pipeline for both COMBO, as well as some of the Advair generic will fit very nicely, as well as all of the other potential that we have in getting products that will sit in our current sales force structure, which we'll get into. So here's the growth drivers. I'm going to go through these, and Heather is going to jump in, certainly on a couple of these right at the beginning. This -- so we're focused -- 2 therapeutic classes. We have allergy where EpiPen sits, and we have respiratory where Perforomist sits currently, and then we can add in more when the pipeline fits in. So the first one, this is the slide that when I got in -- that when I got here, we started looking at exactly what the marketplace is for EpiPen. There's 28 million -- this is in the United States, 28 million people have the potential for an anaphylactic reaction. If you look at EpiPen, which nobody will argue is the market leader, there is 2 million patients that have EpiPen in a 12-month period or 7% of the 28 million. So you look at this, and you say, all right we have an awareness issue because I don't think there's anybody around that would say, if we could give a child a product like EpiPen that potentially will save their life if this happens. I don't think anybody would ever say no to that. So you would argue that this should be at 28 million. Well, we're going to show you some of the things were going to do to close that gap. But this is the opportunity, what's in front of us. So it's all of these patients that we need to get to, and I think Heather will talk about that is our goal. So the first part, and this is where Heather's going to jump in, but we are partners with Pfizer on EpiPen. Pfizer, as you know, acquired King Pharmaceuticals. So today, Mylan and Pfizer are partners on EpiPen, but it's not just a partnership of a traditional marketing partnership, and we'll put up this slide and Heather is going to speak to this.

Heather Bresch

So as many of you know, after Pfizer obviously acquired King, I can tell you I couldn't have been more excited about what I believe that the potential of now our partnership could be together with Mylan and Pfizer. There's not a better commercial organization in the world in marketing, and certainly developing and building awareness around the therapeutic category. So we had already been exploring the opportunity and the potential from a traditional, as well as a nontraditional sense, so marrying that up with Pfizer and having the opportunity to show them what we believe commercially was possible. One on the traditional sense, and John will speak to our sales force, and direct to consumer advertising. But more importantly, and I think again, a very unique characteristic of EpiPen is the nontraditional channels of growth, which is awareness and education in communities around schools. I mentioned in my opening that unfortunately there have been these tragic deaths and continue to be unnecessary tragic deaths because of the lack of awareness or preparedness with EpiPen auto-injector in an anaphylactic situation. That really accelerated. One, Congress looking at initiatives, bills at a federal level. And that is where Pfizer -- again, that commitment and excitement over what we can do to reach these 28 million patients is all that's in front of us, and it's real. And not only are we doing that here in the United States, but as you're going to see, the penetration rate in other countries is less than it is here in the United States. So again, the opportunity is growing both of these buckets, both in the traditional sense and the nontraditional sense from a marketing perspective.

John Thievon

Thanks, Heather. And I think the key takeaways there are if we -- and there has been some success and there's been some noise out there where there are EpiPens in schools. And the message there is that when the kids are in school, there is the EpiPen there. But the commercial message is going to be, they're only in schools 6 hours a day, the rest of the time they need to have an EpiPen with them in every place where they go. And that is what -- we are going to take some of these nontraditional messages and make sure commercially, everybody has access to an EpiPen. So here's how we're going to get there. So the first part we'll focus on is our direct-to-consumer. We launched the direct-to-consumer, both the branded and unbranded advertising last year in a 3-month period, so July, August, September. You see the plan for 2012, not only do we take TV from 3 to 7 months, we have a year-long program with television magazines, digital, keeping in mind our target audience is females ages 19 to 49 that have children under 17. So you can imagine the magazines and the digital and the TV shows that this will be hitting. So this is what we did last year. This is what we're going to do this year to increase awareness. All right, so this slide has 3 data points. I just showed you where we were in DTC last year, and most people in this room will not argue that DTC generally works, all right? So if you look between July and September, our DTC last year, you see that the marketplace grew. Now this is the auto-injector market, which we are a majority of the auto-injector market, anywhere from 97% to 99%. There's a couple other products in there that have insignificant share. You look at the marketplace for 2011 versus 2010, 10% growth, which is a good thing. That means more people are not only aware they're going and filling prescriptions. But, so the first 6 weeks ending July 10, the prescriptions for the auto-injector marketplace are up 25%. We feel like this is the noise we made in the marketplace with our sales force, the noise we're making with DTC, some of the things that Heather just spoke about. This is a very good trend, and this is what we're looking at every Monday just as you are. This is a good start to the year.

Heather Bresch

And just to complement that, I think that's why when we said the shared voice. So with the Sanofi product, when it comes to market, that shared voice, you can see the results. And again, building upon what I spoke of early, the brand equity that we have, getting our disproportionate share as that education and awareness increases. When I mentioned the other couple of products from an AB generic penetration perspective, again, I said these were payors making a conscious decision every month to continue to pay a higher co-pay. With EpiPen, you only get your refill once a year. So patients for a very minimal cost, to be able to stay with that tried and true, we believe is a very, very significant reason as to why EpiPen is very unique in its space.

John Thievon

So this is where we're starting this year. Obviously, the volume's higher, and we're going to be monitoring this on a weekly basis. But let's view one of our commercials from last year.

[Presentation]

A series of both branded and unbranded, the unbranded obviously increases the awareness. The branded gets the name in front of the consumer, and physicians are consumers as well. But being that EpiPen is a prescription product, we now have to take this to the next level and connect the dots. So what's the next logical thing is the sales force expansion. This is another reason our company is so excited is I don't know if any other companies out there that are actually expanding their sales force. So that being said, this just gives you an example where we were in 2011, keeping in mind those first 6 data points that we showed you before ends February 10, we've gone from 22,000 doctors to 40,000 doctors. Our sales or the new sales force did not reach the street till February 1. So they've only had 6 or 7 days to impact that. So some of the other noise has been helpful, but moving forward, we have a significant greater reach to the target audience. So that will drive more prescriptions to the pharmacy.

Okay, so that's what we're doing in the United States. What are we doing around the rest of the world? So these are some of the highlights of what's happening, and we always say we're just getting started around the rest of the world. But with that being said, last year we did sign -- or actually December of 2010, basically a year ago, a 10-year deal with Meda, which as you know is a large multinational company. And they are promoting in 18 countries. And if you look at on the Europe slide here, they are seeing significant growth. And we'll show you in the next slide where that growth can go around the world. But this is taking at least sales reps on the street and talking to physicians, and we're seeing a change. Then we're going to talk about what we'll do on top of this. Canada, Pfizer promotes EpiPen in Canada. And you'll see in the next chart, Canada is doing extremely well. We did secure last year favorable pricing, NIH pricing in Japan, which allows patients to have access to EpiPen at a much reduced price, which we think will drive business significantly. And then the rest of the world, you see Alphapharm, which is a Mylan subsidiary. They're doing very well in Australia. But this kind of gives you a perspective of what the opportunity for growth is. If you look at North America, United States and Canada there, I just told you we're promoting, Pfizer's promoting, we have had some DTC, we're talking about some of this noise that's going on. And you can just see that index is significantly higher than the rest of the world. The incidents in Europe is very similar, and you're starting to see Australia, we talked about Alphapharm, but the U.K. is doing well. But all of these other countries, we talked about Japan. If you look at Japan at the end of that, you can imagine as we take not only what we're doing with sales reps, but also this access awareness preparedness message that we're going to roll out throughout the world, there's substantial opportunity for EpiPen in the rest of the world.

So that's the first therapeutic class. Second therapeutic class I wanted to address is respiratory, and also we'll tie into the respiratory pipeline. So respiratory itself is the second largest global therapeutic category at $35 billion at an 8.7% growth rate. That's across all indications as most of you know. Perforomist, our current product, is for chronic obstructive pulmonary disease or COPD. And if you look at the prevalence of that piece of that larger market, there's 26 million patients in the United States today. We're projecting -- the data is projecting 29 million by 2015, which ties in kind of what Rajiv and Hal talked about in terms of the COMBO approval. So it's a very large market with $12 billion and millions of patients. So where do we compete right now? Perforomist competes in the long-acting beta agonist marketplace. There's one competitor in there, and the product is doing very well. I'll show you on the next slide, it's growing year-over-year. But it plays in a smaller area, but still a significant product. Now this is where the COMBO product that Rajiv mentioned. I'll go into a little bit more detail in a minute, but the COMBO market or the COMBO product will play in a much larger area. And currently, there is not a nebulized form of ICS/LABA. So I feel like we're going to be in a position when that product's approved. So what's Perforomist doing? Perforomist, again, is for COPD. Our sales reps call on physicians, and we've seen growth of 23% 2011 over 2010. And we're continuing to understand the marketplace. A lot of the business for this product goes through home healthcare, and we've done a lot of that, talk about leveraging the Mylan strength around the world we've used Mylan Institutional and Mylan North America to help us understand that part of the business a lot greater. And that's been very successful. So there are a lot of synergies that we can recognize. So this product's doing well. We continue to see it doing well. This is the slide that Rajiv talked about a little bit. We see this as a peak sales somewhere around $500 million. That fixed-dose combination, as I mentioned before, the ICS area, a $5 billion marketplace. The beauty of this, with our current sales force roughly around 300, we had approval in the second half of 2015. Our existing sales force could put this product in the bag as soon as it's ready, and we are off to the races. And we've also developed relationships with pulmonologists who were majority of the writer of these products, as well as primary care. So this product had fit into our portfolio -- will fit into our portfolio very nicely for the growth. Also, some of the products we've talked about in the Advair space, there are other products that could come as a result of that relationship and that technology, so we feel like we're poised for the COMBO. We're positioned well for the COMBO, positioned well for some of these other products, and then any other products that are available out there where we could leverage our current sales force. We feel like we're well positioned to do that as well.

So just to summarize, I think the Mylan Specialty name has a lot of meaning, and it has just a lot of opportunity for us to leverage. I have worked in the first 80 days or so, I mean I've met more people around the organization, including the gentleman on the stage and some in the audience around the world. Everybody is aligned to grow all of the business. So we have all of the bubbles that we just talked about, good near-term pipeline, continuing to look for additional product opportunities. I know I couldn't be more excited to be here, and I appreciate the time. And at that point, I'll turn it back over to you.

Heather Bresch

So look, maybe just a couple of remarks and summary here before we turn it over to Q&A. Like I said, hopefully after now, understanding a bit more about the platform, really coming together as one company, all of the opportunities that we have not just in the pipeline, but that we're executing now, that are real opportunities showing in how they're going to monetize, when they're going to come into our portfolio. Looking at our specialty division and the growth that we see from all of the opportunities we currently have, and as John said, ones that we'll still add. And I hope that one thing that is hard to exude is truly the specialness of Mylan. And think, if anything, the culture of our employees, the ability to make impact around this world is significant. And that's what we get up everyday to do. And hopefully, as you can see, as I started off the presentation today, reaching 7 billion people are not just words on a sheet of paper, it's something that we're committed to do and believe that we have the best platform in the world to do it. So with that, they always say a picture says a thousand words, so we're going to put up one last chart. And John, if you want to join me up here and...

John D. Sheehan

So let me try to take you through this chart a little bit. What we sought to do here this afternoon with you is to lay out through the growth in our base business, through the continued growth in our gross margins, through new product launches in 2012 and 2013, why we are confident of achieving $2.40, midpoint of our guidance range for 2012 and $2.75 per share as our target earnings for 2013. When we looked past 2013, we sought to provide as much transparency as we could to you on all of the initiatives and all of the opportunities that we're working on internally today to drive our growth, to drive our double-digit earnings growth post-2013. And we've gone through an exercise internally ourselves to take those opportunities and extend them out. Because some of them admittedly do go out for a period of time, the respiratory platform, the launching in the 2015-2016 timeframe, the Biologics program, launching in the 2015-2016 timeframe. COMBO product for treating COPD launching in late 2015. But as we extend out these opportunities, we see a future that is very bright from Mylan. And when we extend out the financials associated with them, we believe that we will be doubling Mylan over the 2013 to 2016 timeframe. We'll be doubling Mylan in several different ways, both in terms of manufacturing capacity to have the network, the manufacturing capability to meet the demand for the market share we believe we will procure. From the product portfolio, Hal showed you the chart that he was so excited about he couldn't even wait to talk about it before it got on the screen, and that product portfolio will double over the 2013 to '18 timeframe. And then lastly, and maybe most importantly to the people in this room, our earnings. And so from those -- just from the internal opportunities that we've showed you here today, we believe that Mylan can achieve an earnings per share of $6 per share in 2018. And with that, we very much appreciate your attention, and I'll turn it over to Robert for closing remarks.

Robert J. Coury

Thank you. So first of all, thank you very much and I'd ask first that you join in with me for what I consider to be an excellent presentation. I want to thank Heather, John and the management team. I think they deserve a round of applause. And just before we open it up to questions, a couple of things. One, I know it's been 4 years, but now you can expect this at least once a year. Back then, we weren't ready. Today, as you could see through the presentation and through probably the most transparency we have showed you, the most visibility we have ever showed you looking forward today is because the company has matured. I can only tell you this, it was about 10 years -- prior to 10 years of me coming into Mylan, I was in private practice for 18 years. And in 18 years, I looked at a lot of companies. And I had the great advantage of knowing what makes a difference inside of a company, and how do you -- coming from a small boutique firm and competing with all the big majors out there, how do you make a difference. And making a difference has always been our motto. And I figured out how to make that difference, and it was the David and Goliath story. How can you take that slingshot with one stone and do a lot of damage. I can tell you, it comes down to people. That's all I could tell you. Mylan is like the 12th man on the field. There's not another company like Mylan. We just -- Mylan doesn't just operate a company. Mylan, it just doesn't run a company. Mylan drives a company, and that's the difference. We're driving an industry now, and now we're driving it globally. So I can tell you, I can't not only thank the management team, but all the people who supported for this particular presentation. And more importantly, all of our employees. I know you hear me say that every quarter like it's a bunch of words. It's not words. These people make the difference. And so much so that I figured out on these business models -- because every business model, people have doubt. But when in doubt -- how do you give the benefit when in doubt. You do it by the type of people that you cultivate, the culture of a company. So I can't tell you -- again, I want to thank all of our employees around the world, the support that we get is just unbelievable. And I want to say a special thank you to all of our employees in India. I want you to think about this, guys. Think about this metric. I know that you're all U.S. concentric and you don't have the opportunity to get around the world to see it firsthand like we do. But in India, we started out at 2,300 employees when we bought Matrix. It's only 4 years ago. We're at 8,500 and growing. We're going to grow up to 12,000 this year alone. Anybody can talk that talk, but my god if Mylan and now Matrix Mylan -- Mylan walked that walk. Because is not just about bringing people on, it's about bringing it on at an accelerated pace and never dropping our guards. It never was about quantity with Mylan, never was about quantity. It's always about quality. And quality doesn't just rest in your products. It's quality in the person, it's quality in your people, it's quality in the company. Everywhere you go in Mylan, you'll see it doesn't change. If you land in Australia, you're going to hear the same things. India, Japan, the language doesn't change. Why is this important? Because there's not another company in our sector, not one, that's truly globalized. Our global supply chain is second to none. Go talk to our competitors, they've never were able to accomplish a global system -- they're run more regionally and they're run more locally. But this global supply chain is an advantage. At 45 billion doses and growing to 82 billion, the growth in front of us is unbelievable. And I truly believe, again, when in doubt, at least the people at Mylan have earned the benefit. And I also believe -- and it's my prediction, I've said this a long time ago and it's the going to happen. When investors go back and go do their work, and they go put pencil to paper and they study the company, and they look at what we presented here today, they're going to do the work and people are going to take positions because you know us at Mylan. If we put a number there like $6, you know what kind of work goes into that. That's not a number, that's -- and by the way, that's only what we already have. So, yes, you can expect more activity. It's going to come. And I'm not saying that you don't have to count on 100% of what we showed you. And let's say the more activity comes makes up for some of that shortfall, but not 100% of it's going to fall. Therefore, do I believe in my heart that we should even be able to do better than that as we go forward? I think so. Because I don't see anybody going to the beach here. So with that said, I really believe Mylan will be the new bellwether of the generic industry. It will be the leader in the industry. I don't think there's another company, especially with some of the announcements you've heard with some of our competitors. We are the only standout company with quality from head to toe, thanks to our people and thanks all of you for your confidence and support. And I'd like to open it up to questions.

Question-and-Answer Session

Heather Bresch

So I hope you're all enjoying this afternoon. I hope there's a lot of new exciting information for you. Just give us a few minutes to deal with a few set changes, but just a couple of things. So we've got about an hour dedicated to Q&A today. A few housekeeping notes again. If you could please, we have, I believe, 3 mic runners. If you could please signal if you have a question. Also, please stand up, state your name and company. It's helpful to us and also those on the webcast. So with that, I think we are ready to begin.

Christopher Schott - JP Morgan Chase & Co, Research Division

It's Chris Schott at JPMorgan. First question I had was just elaborating a bit more in the Copaxone dialogue. What gives you comfort of putting a second half '13 target out there? And second, here's clarifying how you risk adjust everything, but your 2013 guidance, is the 275 level doable? If Copaxone is delayed you don't get that in '13, just to clarify. The second question was regarding Europe, and you've highlighted this opportunity of share being this incremental $300 million of opportunity. How attractive is that market share at this point from a gross profit standpoint? Has price reached a point where it's just not that attractive of a business? Is there still money to be made in some of these markets as prices come down? And can you just elaborate a little bit more on that?

Heather Bresch

So all right, I'll start with your Copaxone, and please, anyone else jump in. I think, as you know, the trial took place. We can have decision any day. And typically, when you think about just the legal parameters and our environment here in the United States with Hatch-Waxman and look at not only the district court level, but then on appellate level. So typically we add in our modeling and looking at products at least a 12- or 13-month period from district court decision to appellate court. Obviously, after a district court decision, though, we have the ability to analyze that decision and make a decision at that point in time whether you would launch at risk or not. So from a legal perspective, obviously, a decision coming whenever -- March, April and then adding 12 months onto that, you're into that March, April time period of 2013. But like I said, there is obviously still an opportunity that, that could happen sooner depending on the court outcome. From a regulatory perspective, I think I touched upon it, Rajiv touched upon it, we still remain very confident. And when our discussions with the FDA, the discussions we've had up until this point and the pathway that we believe our regulatory application is on to be AB rated to Copaxone. Anything else...

Rajiv Malik

I think you said it pretty well. Because of the interaction with the FDA, it's been different than other NDAs just because of the first offer [ph] or whatever. That gives us confidence where we are exactly in that time cycle.

John D. Sheehan

And I think that the -- another part of Chris's question there was with respect to our confidence in $2.75 with or without Copaxone. And I would say that we are confident at $2.75 with or without Copaxone.

Heather Bresch

Okay, so now moving to Europe. Look I continue -- I've been talking about this a long time and telling you guys that making these policy changes, getting into these governments, showing them the economies around generic utilization versus price cuts, and I can tell you sometimes nothing moves all that fast in Europe, as many of you know. And so the silver lining I see, especially in light of some of the austerity and perhaps that forced the conversation a little faster than it normally would've in Europe. But I can tell you -- let's take Italy. Italy has grown about 10% generic utilization. We have been able to take our disproportionate share, and that market has grown tremendously for us, and we don't see that stopping. Apply that same metric to a France, to a Spain. Spain which has just recently gone totally INN substitution. It's still in a bit of chaos, the marketplace needs to settle out. The dust needs to settle a bit, that we believe we're well positioned to capture our disproportionate share just as we have in Italy. And so when we put those metrics up there around that utilization increase and what that can mean, 10% increase across those markets, not only is it real, but, yes, I think those dollars are still extremely valuable and significant. And marry that now up to what Rajiv and Hal spoke about from our cost of goods, our margin expansion. So when you look at what we've been able to do, what we're in control of, which is continuing to internalize our opportunities and pipeline, vertically integrate, submit, launch more products than ever in the history of our company throughout these markets. That, if at the end of the day, you believe Europe is still going to need affordable pharmaceuticals and more so now than ever, there isn't a company better positioned with global scale bringing in to each of these countries than we are. So they say the strong survive. Definitely, it's been a tumultuous time. And as John said, we said we were out of the business of predicting when that comes back, but all I can tell you is there's definitely glimpses that the governments are getting it and that we're going to be able to continue to grow.

Robert J. Coury

Yes. Let me just add, I think a metric that'll be very helpful for you for the last part of your question was just the profitability, and if it's worth it or not. I think let's not forget that the United States is probably the most commoditized market in the entire world, okay? Let's not forget that. Let's just take amlodipine. Amlodipine is the best example. What was it? Norvasc was one of the $3 billion, $4 billion worldwide, $3 billion here, right? Okay. It went down to what? $30 million?

Heather Bresch

[indiscernible]

Robert J. Coury

I mean -- and we were still making -- we maintain a 50% margin, but more importantly, our gross margin for something that went from $3 billion down to $30 million was still very, very strong. But that's what scaled does. And the truth is, we learned that here in the United States. And while we believe that we are going to be a standout in the rest of the world, our minds, our operational, our global technical operations were trained in the most highly commoditized market. So when you start with that mindset and then go global, that's where we have that distinct advantage. Where others have failed is that Europe, if you can recall, they don't have that price gouging. They get one price change a year, and it lasts for the whole year. They're not used to the maneuvering the speed. They're not used to competing. Well, they're getting to learn now, and that's why we believe very strongly what we're doing. We -- just like our specialty business I told you 2, 3 years ago, that was an incubator. We were incubated in that business, getting it ready to do. We made that turn. Now watch, in Europe, while all the macro trends are going on, we are -- believe me when I tell you, we're not sitting still but we're incubating exactly that next strategy that when it makes that turn to bring our training ground here in the United States to the rest of the world.

Rajiv Malik

And, Rob, just to add to that, this has given us pause or whatever is happening at that macro space over there has given us a time to redefine and look into this business in a very different way, every aspect of the business, just not operations, just how do we sell the product over there, select the product over there. How do we launch it over there. We are looking and we're taking this opportunity to revisit every aspect of this business.

Robert J. Coury

And the only reason why we have that time is because it's not meaningful anymore to us. When you just get killed like the way we got killed in Europe, when it becomes not meaningful anymore, it does give you that time to think, to rebalance yourself, because that's why we stopped, get out of that business. Our earnings are not predominantly driven by Europe. But we absolutely see, as John mentioned, anything that -- any turn that we get, that should be additive to our future earnings.

Harry A. Korman

And I'll just add, if you think of the U.K. -- excuse me, the U.K. marketplace which is the most mature in Europe, it's moved to distribution, but they do have opportunities when supply becomes an issue that you can get paid or optimized what the value of your product is. So yes, it has a life cycle, but if we look at the oldest, most mature market there, we do see when it gets to that point, you still have this opportunity to see for better margins, particularly if you have a platform to support that kind of a marketplace.

Heather Bresch

Okay, I think we have Ronny in the front row?

Harry A. Korman

Percentages, yes.

Robert J. Coury

I think Rajiv mentioned that $300 million. Go ahead, Rajiv.

Rajiv Malik

Let's start with the ARV. The finished gross at the ARV business combined will be in the range of over $300 million, $350 million. I think in this space, FDF is the one which is driving the growth because that's where we have been leading the market formation with the new dosage forms, and it's growing at about 13% CAGR. Okay, we'll be growing at 13% CAGR between now and '16.

Heather Bresch

And as far as your EpiPen question, so just remind you, Mylan actually owns the worldwide rights to the name EpiPen. So the partnership is around the device, and I believe our current, we just renewed within the last couple of years goes to about 2020 and with continuing renewable. We've been in partnership now with Meridian for over 20 years.

John D. Sheehan

So if I take the portion of the questions that Ronny had dealing with the profitability of our business, and I -- let's look at it at the gross margin level, and I'll take -- you mentioned 3 in the generic space, right, North America, Europe and Asia-Pacific. So only add the forth in our specialty business. And I don't think it's probably any surprise to anybody in the room that our specialty business has the best margins, and driven by the EpiPen and performance products. When you look at the generic segment and the 3 segments, what I would say is, and what I have said in other forums, is that the North American profits are above the corporate average. The Asia-Pacific operations are more or less at the corporate average, and the European operations are below the corporate average. I -- at this point in time, I'm not sure we want to go a whole lot farther than that but -- it's probably farther we've gone before, so -- and...

Robert J. Coury

This time, we're growing up, right?

John D. Sheehan

But as we demonstrated during the course of 2011, we don't need Europe to grow to make our earnings. And therefore, as we look to 2012, 2013, the guidance that we provided today doesn't rely on Europe.

Robert J. Coury

And look, we're just as perplexed what occurred macroly in Europe as anybody else. But again, exactly why we de-risk our business model. So we never have to, again, rely. Do you remember all those years, Ronny, with Fentanyl domestic in the United States? Do you remember that was the big overhang? Well, it's no longer, nor it's going to be a geographical region. And so we're very, very fortunate. But we saw this and created a platform to withstand this.

Heather Bresch

How about Elliot in the upper left?

Elliot Wilbur - Needham & Company, LLC, Research Division

Elliot Wilbur from Needham & Company. Had a couple of questions around the EpiPen franchise as well you provided a very persuasive demonstration of sort of the underutilization of EpiPen Auto-injectors on a unit basis globally. And I'm just curious, what would a dollar of EpiPen sales in the U.S. look like on average outside the U.S.? And then, do you have a sense of how many patients who actually get an EpiPen prescription actually refill after one year? My sense is that probably not enough, so there's probably a lot of old product out there. And if so, how do you change that? And then on the franchise as a whole, how exactly did you basically double the reach of the sales force with only about a 40% increase in the number of reps? Then I have a follow-up question for John as well. You have a couple of large date certain launches over the course of 2012. Anything you'd like to say about quarterly earnings progression during the year?

Robert J. Coury

We said we'd mature. We didn't say our IQ kept growing to remember all those questions. Keep that microphone in case we forget it to you.

Heather Bresch

Okay, Phillip, I guess, on the EpiPen. And then, John, feel free to chime in. But I think that first, when you look at that reach and as you said the persuasiveness of the opportunity in front of us. But 2 very important points. So yes, we're reaching only 7% of the population today that we believe to be at risk. And of those, we know that only about 50% are getting refilled. So we identified that as an opportunity several months back. And again, I think this shows you our ability to harness our expertise around North America. So we start putting in channel programs with our retail trade and using Mylan Pharmaceuticals as our -- the avenue with whether it's the Walgreens or the CVS in the large chains to be able to get some refill programs put into place, because we believe that to be very low hanging fruit. People don't remember or people are unaware even of the expiration date. So we're looking at a lot of actually innovation as well that would be able to let the patient know when their product expires and that they need to get it refilled. As far as the sales force, I don't know, John, if you want to comment, because it really had to do with targeting, believe it or not, in our ability of how we're reaching not only the most high prescribers but that pediatric...

Robert J. Coury

John?

John Thievon

Yes, it's -- I mean, without giving away all of the target information, the reason the number is different is because -- a decile 10 doctor is worth a lot more volume than a decile 4 doctor. So it was a reshuffling of the way we're targeting and also indexing EpiPen higher than other products in our portfolio. So it's a disproportionate -- doctors here are -- it's not a 1:1 ratio, in fact, it's like -- it's significantly different. So what I'm talking about, that kind of reach, you do have the number of doctors, but I'm talking about the reach to volume or accessible volume, so that's the difference.

Heather Bresch

Yes. And the very first EpiPen question, I'm not sure I remember it was $1?

Robert J. Coury

He said we did okay showing the 7% in the untapped market. I got the first one, but I think was the refill.

Heather Bresch

No, there's sense about the $1.

Elliot Wilbur - Needham & Company, LLC, Research Division

X U.S., the relative value.

John Thievon

I don't know how much visibility we want to give to pricing between United States and the rest of the world.

Robert J. Coury

No, we don't normally get into that.

John Thievon

Yes.

Heather Bresch

No, but I guess, just to perhaps underscores, Japan is a great example of that product. EpiPen had been in the market for almost 7 years and not on the reimbursement list from MHLW. They were persuaded by patient groups and advocacy groups that have a very loud voice in the space around the world. And put it on the reimbursement list and that starts in April. So we've got, relatively speaking, a very good price for that country. And as far as Europe is concerned, we say all the time the brand price, as Robert was even talking about that dynamic earlier. So the brand never reaches as high as it perhaps does here in the U.S., but also the generic is never as low. So you have much more of a, I will say, parameters around both that the high and the low around Europe.

Robert J. Coury

But let me just add to Europe. We just renegotiated an agreement with a company over there. I think we announced the Meta [ph], a very, very powerful situated company over there throughout Europe, already in one year. And believe me, our plan is to take all the best practices that we're doing here, all the track record, all the learning curve here between us and Pfizer, and take it right over there to Europe and give to Meta [ph]. But without really doing any of that and seeing any benefit yet, we had, I think, a 33% increase year-over-year, year-over-year. So we haven't even -- this is going to be like a tsunami, the opportunity for EpiPen as a whole. And over there, by the way, you should know, we do have competition over there and still maintain that type of growth level with competition.

John D. Sheehan

So I think Elliot's last question was with respect to quarterly phasing for 2012. I would see as 2012 developing fairly similarly to 2011 with the second half of the year being stronger than the first half of the year, Q3 being our strongest quarter of the year on the back of the strength of EpiPen, which has its strongest quarter with the back-to-school season. And then in terms of Q1, I see Q1 developing fairly closely, slightly less than Q4 2011 from an operational perspective. And just you have to remember that from a tax perspective in Q4, we did adjust our tax rate downward for the calendar year '11 from 27% to 26%. That gave us a lower tax rate into Q4 2011. We would expect the tax rate in Q1 2012 to be 26%. So operationally, slightly lower than Q4 and tax at 26%.

Robert J. Coury

Can you get Randall a microphone?

Heather Bresch

Sure. We go to Randall right in the middle.

Randall Stanicky - Canaccord Genuity, Research Division

Randall Stanicky from Canaccord Genuity. Robert, on the third quarter call, you talked about potential uptick for a sizable deal possibly on the brand side. Can you give us an update there? Secondly, on Copaxone, have you asked the FDA if you have to do clinicals? And then, John, can you just confirm, is there business development in guidance?

Robert J. Coury

Why don't you go first since that's an easy one to cover.

John D. Sheehan

Sure. There is not any significant level of business development...

Robert J. Coury

Other than which you present?

John D. Sheehan

Yes, yes. And I -- obviously, licensing transactions and the in sourcing of products, that's part of our business.

Randall Stanicky - Goldman Sachs Group Inc., Research Division

No deals though?

John D. Sheehan

Not deals.

Rajiv Malik

On Copaxone, we won't bring up clinicals with them but the data which we have presented them, they never brought it up. No apparent discussions.

Robert J. Coury

And let me just add, by now, you have had certainly heard if that need to get done. That's as far as clear as I can be. In terms of the M&A stuff, I don't know why people may have in their head that we're going to do anything other than what we say we're going to do. And what we're going to do is focus on opportunities, and I believe that there are many of them. I believe that there's going to be many opportunities in Europe. I believe that there's going to be many opportunities in Asia-Pacific. But what John mentioned in that type of activity is that we have -- we're very -- now that we got the balance sheet right down to where we told you we would get it, and I can tell you that we're very comfortable in that 3%, 3.5% range. If we go up a little bit, we will come down. But the deal has to be accretive. We're not going to jeopardize the earnings momentum that we have. I can tell you that right now, okay. We didn't kill ourselves 3, 4 years ago and go through what we needed to go through to create such a powerhouse platform only to give it back. We did it so that we can have a sustainable earnings growth model.

Heather Bresch

I think we're going to go to Mike at the end of the same row and then we'll go to Jami following Mike.

Michael Faerm - Crédit Suisse AG, Research Division

Mike Faerm with Crédit Suisse. Two questions. First, regarding the 2013 guidance, your EPS remained $2.75 on a lower revenue base. Could you help us understand what else changed in your thinking that enabled EPS to remain constant?

Robert J. Coury

Well, I mean, again, we are a company that focuses on earnings per share, earnings per share, earnings per share. A lot of why the top line came down and nothing to do with our doing. Just take a look at; Europe's constant pricing down, pricing down, pricing down, so that's pretty easy. Now what we've demonstrated that we can do, because we're so committed to driving earnings and earnings growth and haven't ate that double-digit CAGR as we look forward, we've -- I think we even said this in 2010 that the opportunities to grab and yield more efficiencies. If you recall, we first put out synergies around 300. We've increased it to 350, 400, 500, and then we said we'll stop counting. It hasn't stopped. But the efficiencies and most importantly, and this is the key, and if you listen to Hal Korman, I was -- it was unbelievable. I was very proud how excited he came across because he ran the North American operation for a long time. And I hope what you see is that because of this business, we have to pick products 3, 5, sometimes 7 years in advance. That at Mylan, our product portfolio selection was just spot on, spot on to have less competition, spot on to have those products that are difficult to manufacture, difficult to formulate, maintain high gross margins. So when you look at our entire portfolio, it's the portfolio mix combined with the efficiencies of how we drive our business that's allowing us to maintain and sustain such powerful earnings growth.

Randall Stanicky - Goldman Sachs Group Inc., Research Division

And the second question is regarding the R&D spending that you laid out. The spending from 2013 to '16 is a significant step up from the 2011 levels. Just trying to understand to what extent is that representative of sort of a new base level to think about going forward?

Robert J. Coury

I'm sorry, I just -- so I can understand that.

Heather Bresch

R&D, he's just saying, is up to 6% in those out years.

Randall Stanicky - Canaccord Genuity, Research Division

In a dollar perspective, it's I think $2 billion over 4 years. Is that sort of representative of what we should think about going forward?

Rajiv Malik

We extrapolate where our business -- or if I just take 10%, we say double-digit growth out there. If we grow that and take 6% off that, what that dollars comes to.

Robert J. Coury

I would say yes. Yes for this reason. As I -- we mentioned on the quarterly conference call before, and now you saw, you're going to get a point where maybe 240 million, 250 million on generics, right? But if you look at the way where the industry is going, we expect, as our top line grows, I'd say yes for your modeling, only because we expect to invest more and more research and development and biologics, our brand vision, all those particular areas. So I would say yes in your modeling.

Heather Bresch

And that being a differentiator in and of itself, because how many companies are going to be able to spend $2 billion to be in this very niche highly complex products.

Robert J. Coury

Very few.

Heather Bresch

Jami stage left, about midway down please.

Jami Rubin - Goldman Sachs Group Inc., Research Division

Jami Rubin with Goldman Sachs. Just back on EpiPen, you talked about an approximate 30% growth rate in 2012. And I'm just wondering, how much of that is just switching from 1 pack to 2 pack? And can you double the price? And how much of that is market expansion? And if you could talk about how much of the EpiPen franchise has been switched to the 2-pack? And also on pricing, how much flexibility do you think you have on pricing with that brand going forward? And my last question relates to Doryx. I know your embroiled in a lawsuit with Warner Chilcott. Warner Chilcott having just been denied at citizen's petition. How do you think about the risk adjustment of Doryx in your model this year?

Robert J. Coury

Well, I think for Doryx, I think we've given a range, a pretty wide one. I think there's reasons why we've given a range. I think that as you see as the year goes on, I think you're going to see us tie in and potentially even modify that range. Do I think there's opportunities, positive opportunities? I think -- this year, I think there's a lot more positive opportunities than there are negative. Going to this year, I feel very strongly about that. You never heard that come out of me before. In terms of the EpiPen mix, I would say that growth is all of the above. Everything you mentioned I think is a part of where we see in that mix. Do you want to add anything to that?

Heather Bresch

Yes. Because I would say that the 2-pack, the single packs has been out of the market for now 6 months. So the growth that you're seeing is not a switch from single to double. We're still -- we're just seeing market expansion in the truest sense of new prescriptions written.

Robert J. Coury

Was there another question I didn't answer, Jami?

Jami Rubin - Goldman Sachs Group Inc., Research Division

Pricing.

Heather Bresch

Pricing flexibility. Of course, like with any brand, we do have pricing flexibility. I think that this is a product that is very fair in value when you think about it treating a life-threatening disease. And our price point to deliver now 2 EpiPen's per script. So that is something as you've seen historically with us that we've continued to be able to use our flexibility to do that, and we'll be doing that going forward.

Robert J. Coury

And I think the cost benefit that you should be looking for, if we can get, and especially children, if we're only getting 7% of the market, and there's 28 million children, and it's going to take us in order to make this awareness to get to them, it's going to cost us more, you can rest assure from pricing, I don't think anybody is going to argue as we increase price and help pay for this cost to get to these children that don't have access, I think that risk benefit will far outweigh any lifesaving other medicine that's out there today.

Heather Bresch

Chris Caponetti, a little further down.

Christopher Caponetti - Morgan Stanley, Research Division

It's Chris Caponetti for Dave Risinger who's on the webcast, but he gave me a list of questions. So first, on Australia. How are the price cuts, I think it's on April, going to impact just the trajectory of Asia-Pac growth in 2012? And then second, on EpiPen, just back to that, how should we think about the probability of an AB rated generic before the patent expired, I think it's in 2025?

Heather Bresch

So I'll start with EpiPen, your second question. I think FDA has been pretty transparent on the subject matter through citizens petitions, and they've said if you need to retrain on a device that is not the same first, and then that second overlay, that if it's more life-threatening situation, that even raises the bar that much further. So obviously, EpiPen fits in both of those. We believe that our IP around our pen and the device, and the drug and device is very strong. And then obviously, because it is more life-threatening disease that to not for family, a caregiver, a child to have to in that moment that you could be facing a fatal situation to not be familiar, we think is very, very high risk, to Rob's point, the risk reward ratio. So I believe the barrier to be very, very high and I think even here the people that are supposedly working on an AB rated to tell you that, that barrier is very high.

Robert J. Coury

And let me just add one thing before you go to Australia. Look, you can rest assured that in our models, we have to think, we think it's prudent and appropriate to think that there's going to be a competitor. So you should think about that. Now let me tell you, I don't think there's going to be a competitor anytime soon. I don't know what more to tell you other than I can go and tell you what I've been telling you. I don't think there's been too many times we have been that far off. I think that what we're seeing, all the intelligence that we get, we think there's a lot of runway. However, from a prudent point of view, we have it in our model, but I hope today what you picked at between John Sheehan and Heather in their presentation, one thing I can tell you, there was a huge disconnect, the huge gap is if an AB rated would come in, that somehow, this would be a traditional or standard -- generic utilization would happen in it's -- the way it happens 99% of the time. This is a very unique product, and I do not believe that you're going to get that generic utilization. You're going to get it, right? But you're not going to get it -- like for example, I don't think -- we're in control of the brand. Let's talk about whether or not there's going to be an authorized generic. You guys haven't thought that through, right? Let's talk about with Sanofi. If we didn't think that there was -- that the upside opportunity of the untapped market here was so great that so far outweighed have another competitor, do you really think we would have settled with Sanofi? So think about what went on in our minds in that business proposition. Because the upside potential in this untapped market is so huge, it will more than offset -- well, first of all, Sanofi we think is going to lift the entire market. But we have an AB rated, we think that upside is more going to offset and that's why I think we put in, what, John, what do we say, $0.08 to $0.10?

Heather Bresch

Yes, we gave a range around the downside. The $0.10 would be enough.

Robert J. Coury

Okay? I hope that helps you.

Elliot Wilbur - Needham & Company, LLC, Research Division

[indiscernible]

Robert J. Coury

Yes, all of that is there.

Heather Bresch

Yes, we've accounted for in the...

John D. Sheehan

Yes, it is. Yes, it is. So Australia, if I covered -- come to your question on Australia. Number one, the 2012 guidance does include or contemplate the imposition of the price cuts that are taking place in Australia effective April 1 through the EAPD legislation. Number two, we're very proud of our Australian operations, and we wish there were more people in Australia, because even though we have a very strong business there, it's less than 5% of consolidated Mylan. And therefore, the -- while certainly, the price cuts may slow the overall growth that we would report with respect to the Asia-Pacific region, it's not going to materially impact Mylan.

Robert J. Coury

But let me tell you where will material impact Mylan, and it already has to a large degree. That management team that we have down there and what they've done since August '08, prices that went off the cliff is really, to me, one of the best examples in the entire world of how to be able to maintain that #1 position, maintain your market share, and deal with a -- not -- I'm not talking about a change where it glided down. I'm talking about a cliff. So what we were able to do is we were able to take that platform, watch what they did, you'd take that knowledge base, that intellectual knowledge and you bring it to other countries who are moving in that direction. That's where the real value is. On top of what we do here, 20 million people or not, that intellectual property value is where the real value is. And I would tell you the same for India. In India, I speak very highly of it. It's like my second home. It is my second home, okay? Think about how much people we have down there. I called -- I said 3 years ago, it would be the hub of Mylan, the center of the universe, and it is. So the launch commercially there is just the natural, because we have a very powerful management team already in place down there. So as we roll out commercially, we will do the exact same thing I told you about Australia. We're going to use India's commercial platform as the steppingstone that lever the other emerging markets, because that's our strategy.

Heather Bresch

We're going to go to Doug, and then we move on to Mark after Doug.

Douglas D. Tsao - Barclays Capital, Research Division

Doug Tsao, Barclays Capital. John, I was just hoping you could walk through first some of the swing factors that would take you to the top end or the bottom end of the guidance range. And then as well as sort of turn in to gross margin. Just curious if you could provide some more color in terms of how we should think about the improvement we're seeing in the relative contributions from product launches versus operational improvements as well as mix, obviously, with contribution from EpiPen being so strong. And then finally, just a question for Heather regarding the draft items we got regarding biosimilars. From your comments, you clearly seem to indicate or believe that the pathway for interchangeability is insufficient. How do you see that being rectified from a process standpoint with the agency? Or would that need to be revisited in legislation?

Robert J. Coury

So maybe before you go to there, unless you guys want to get out of here 5:00 tomorrow evening, the amount of ups and downs that we have in our model, so you understand when I say ground-up, ground-up. There are -- I mean, what probability weight, there are a voluminous amount of scenarios that we think we have upsides. There's a number that we have downsides. And that's what I meant to you, because with that detail, that this year I can tell you, I feel strongly that there's probably more upside than there is downside. But, nonetheless, there is a voluminous amount, and we wouldn't get in to that level of detail.

Douglas D. Tsao - Barclays Capital, Research Division

[indiscernible]

Robert J. Coury

I think I just did. Okay, Heather?

Heather Bresch

Biologics. So this law passed almost 2 years ago, and I think that when -- we really digested the law that passed. What I will say and what I continue to stay in Congress is it's a law that is not going to provide affordable high-quality, biogenerics anytime soon. And I think what is evident by that is this is now a department one employee at the FDA. One is responsible for biogenerics. So when you think about back in 1984, with the law that passed was supposed to be similar in nature, not that it looked like [indiscernible] but [indiscernible] created the abbreviated new drug application and created that process. 3 months after or 3 weeks after that law passed, FDA put out a document that said, here's the opposite generic drugs. Here is where you submit your ANDA. Here's what needs to go into the ANDA. Here's who you call. And I believe there was something like 200, 300 applications within a month of that issuing. Here we are 2 years later, one employee, no applications have come through. The guidance that just came out does not go far enough on interchangeability. And while we are still digesting the guidance and how we will work within that framework if need be, the reality is the law does need change. I don't believe that's something in this administration, but the next administration is going to have to deal with the fact because it's just the sheer health care costs expenditure that's required on the biological front. We're not going to be able to afford without an affordable high-quality pathway in place. So the score, the bill score that we were supposed to say $10 billion over 10 years or 2 years in, we're not -- don't see $1 of savings coming our way. So it's going to be a high priority. I think it has to be a high priority for the next administration. And we certainly have done our part about what that -- what the law, the changes would need to be. And I think you already see bio TNF [ph] that they believe they worked very hard to get a very bio friendly law, and they don't think it should change. So it's going to be a typical David and Goliath, but I think our Congress has no choice but to deal with the issues that are laid forth in the current law.

Douglas D. Tsao - Barclays Capital, Research Division

[indiscernible] gross margin?

Heather Bresch

Gross margin expansion?

Douglas D. Tsao - Barclays Capital, Research Division

Yes, sort of relative [indiscernible] from operations through these product lines [indiscernible]

John D. Sheehan

Yes, certainly, product mix with the strong launches that we have and especially not only just simply new product launches, but the fact that they're in the North American region. It's helpful. No doubt about it. The growth in EpiPen is helpful to margin. But I don't minimize in the slightest the value that is being derived from the vertical integration that we've been doing as...

Heather Bresch

The operational leverage.

John D. Sheehan

The operational leverage from -- of the former Merck KGaA product portfolio. And Rajiv and his team have done an excellent job as we brought those products in house. And that is a big -- also a big part of what's been driving our gross margin increases.

Kris King

Marc Goodman.

Marc Goodman - UBS Investment Bank, Research Division

Marc Goodman from UBS. So first, in India, can you give us a sense of what's realistic to think about how big this business can be, I mean, you said $100-million business in year 2, 3, 4? Just give us a sense of that. Second question is on France. Can you give us a sense of the metrics, in 2011, the market grew x in volume versus price? And how you're thinking about 2012 since that's such an important market for you? And then third, the $8.5-billion change to the $7.5 billion as far as guidance, what percent of that billion dollar change was Europe? And what else was there? I mean, obviously, we understand that there's a lot of stuff going on. But was Europe 50% of that? And then, what was the other 50%?

John D. Sheehan

So -- go ahead. Do you want to...

Heather Bresch

Okay. So maybe we'll start building. We'll go backwards. So I think that as you look at that, I would say we didn't come out and give percentages around. But I think 2 major things to think about. Certainly, the macro headwinds in Europe and the price cuts that we have seen certainly accelerated since we gave that guidance back in 2010. I think another driver is timing of approvals. When you look here in the United States, the regulatory average timing of approving an ANDA has gone to 31 months. So while Mylan still beats that industry average, it certainly is longer than some anticipated. So again, the very good news is they're coming. As Rajiv and Hal showed you, we have over 170 ANDAs on file. We believe the generic user fee bill that was just introduced goes to 2 things, leveling the playing field on the quality and the standard of the product being sold here, but it also goes to that backlog. And it gives us back down to a 10- to 12-month approval time by year 4 or 5. So I would say, those are the 2 major contributing factors. Timing on these regulatory launches that the ones that perhaps didn't happen in '11 will happen in '12 and so on, that those come in and then obviously Europe. I don't know if there's anything else or not.

John D. Sheehan

No, I think that's it.

Robert J. Coury

So we just did a rebasing on the timing, and just pushed it all out which actually helped us in 2013 as well. In terms of India, Rajiv, do you want to just -- I mean, from an organic perspective, obviously, markets are going to be very small and we start from an organic perspective. But that organic is really just a jump start for us in terms of what we're looking at down there to be quite frank with you. And -- but we have enough of product portfolio. We did a lot of homework in terms of what products of ours we want to bring to the market. We've spent a lot of time talking to a lot of other Indian commercial players. So our product portfolio, you can look at because it's mainly chronic. It's going to be very complementary to a lot of other product portfolios that are out there that are much more acute in nature in terms of its treatment. But then I think you should expect that we're going to ramp the commercial activities up down there in India to be one of the major players down there. That's our objective. Rajiv, do you want to add anything else?

Rajiv Malik

None exactly.

Heather Bresch

John?

Robert J. Coury

Jim or John has got a...

John T. Boris - Citigroup Inc, Research Division

John Boris with Citi. First question just says to with creation shareholder value. Obviously, acquisitions were very important part of that. You've executed nicely on a pathway to getting to 275. You've put out there a pretty big bogey of $6 in 2018. Can you maybe articulate for us, especially in light of indicating that portfolio diversity and geographical mix is going to be important hitting that? How you envision creation of value? And how acquisitions play a role on that? Second question for Heather on EMEA. I think I saw a number of about 3,100 employees that you had in Europe. Can you give us an idea of how much that's down? And is there any additional leverage in being able to take that down further? And then last question, just has to do with supply chain. We've seen major pharma, obviously, attack emerging markets with some wins, some losses. How can you compete from the standpoint of the supply chain that you have in place now with some of the major pharmas that's seem to be doing okay, and in some instances, not doing so well?

Robert J. Coury

Well, I'd like to take the first and the last one. You take the middle one in terms of EMEA, whatever the question is there.

Heather Bresch

So just quickly on that. So remember, the employee count is not just commercial and sales. It's also our operational, our manufacturing, our R&D facilities, packaging facilities throughout Europe. So we have continued to look at the markets. As Rajiv was explaining, we've right sized over time. We continue to look at that infrastructure. And yes, we believe that there's still ways that will continue to optimize that these markets switch totally to a substitution, and we're able to continue drive. And again, coming back to where I think launching our global brand, that differentiator. Because remember, throughout Europe, even as these markets go to substitution, chains are not throughout Europe. So that ability and need to review differentiate yourself with the pharmacists is still needed. So we're balancing all of that and absolutely believe on the commercial sales front, there is still optimization. But again, remember, we're also adding, as you look at doubling our capacity over these next 5 years, there's growth in Europe for that as well.

Robert J. Coury

So let's see, the first question was M&A kind of mindset, shareholder value. And the last one, I think, was something about the brand and the generics. Well, let me start there, because that's easier. I think what you're seeing is, I'm not going to call it a truce. I'm going to call it a pause because, first, the brands try to get into generics all by themselves, right? We saw many cycles of that. John, you've been around a long time. They failed miserably and figured they can't do it on their own. Then, there's all this big stuff about let's go buy generics, okay? If we go buy them, okay, well, certainly, I don't want to -- I don't think that I actually Ranbaxy transaction should be an example or indicative of how to do that. But I will tell you that I'm not saying that they're not going to do that in the future. I think their biggest threshold honestly is they don't know how to run the generics business. And I think that's what's stopping them. So I think there's a lot from the managerial point of view. The mindset of running a generics versus the mindset in the big brand pharma, the competition, big brand pharma has competition amongst each other sideways. Now imagine you have a generic competition competing down there. They don't understand the speed and flexibility and what we got to do to survive and be at the top of our game. I think what I meant when I said before that the walls are coming down, I think I gave the interview to Marc Goodman. I said the walls are coming down. I think that's going to go away in time. I think that they're going to figure this thing out. But why call it a pause right now? Take a look at the collaborations that are being form between brand and generics right now. I think they figure out instead of maybe buying them right now, maybe let's just kind of do a pause. Let's do some collaborations and rather than own each other and go through all those social issues, right? Let's see -- let's them do what they do good. Let us do what they do good. Let's see if we can find value for both of us. I think there is value for both of us to be able to do that. And I think that -- so I think that's the kind of stage where in now. In terms of shareholder value, when I tell you get up in the morning, we eat, live, sleep and drink, go to bed, well for some for us who don't sleep, that's all we have in our mind. So if I look at you from the board of directors, from the board of directors on down, I can only tell you that, that is our major, major focus. So I want you to look at the assets, these global assets that we're responsible for, okay? We're responsible for global assets. We're not just a United States company anymore. We have strong presence in Europe, strong presence in Asia-Pacific. You can rest assure when it comes to allocation of capital that we are highly sensitive about, one, making sure that we look at all the assets and shore those assets up where we need to, but all of it with the mindset of not ever interfering with the earnings trajectory that we have in place. That I can tell you. But sustainability of these earnings are more important to us than some flick, some jump, only for it not to be sustainable. So there's a lot of work that gets done at Mylan, again, from that board level on down, on how to take this capital allocation and where to deploy that capital. Too much in any one place I don't think is good, but sustainability is what we're looking for. So commitment in our earnings, commitment to earnings growth and do things that we believe are going to be sustainable, not just a quick hit. I hope that was helpful.

Heather Bresch

Maybe just a complement to shareholder value, but also that's why we wanted to be able to show in that $6, from $2.75 to $6, laid out 11 growth drivers, and really showed you how they come in to the market, how we look to monetize them. So as I think Robert mentioned earlier, you can take 100% of that obviously as you said none of us are going on vacation, which -- so he lied to us a little bit ago as we work up for this. But in any event, the opportunities that we laid out for you in these growth drivers are things that we already have. They're either partnerships already in place, things we're executing to and we're continuing to bring in opportunities, product opportunities, therapeutic category. So what we have truly wanted to try to lay out is that as you look at that bridge from $2.75 to $6, it's really just that slide that John put up that summarize all of the 11 growth drivers, the kind of dollars either the market that we're growing to be entering when we enter it, and when we're going to enter it is really how you get to that $6 on top of our current core base business and the longevity at some of these opportunities that are coming up.

Robert J. Coury

And I'll emphasize a couple of things. That does include, as we said, the reinvestment of our own internal generated free cash flows, okay? But as we said, if we said $6 and we didn't show you any opportunities, and we just said, trust us, we're going to get there. Could you imagine the emphasis we'd have to put on M&A activity to be able to make that happen? So we started with a very clean baseline, John. And what we did is we took every single opportunity we showed you. We probability weighted it. We cut it up. We entered the market. We estimated how many competitors we're going to have. We put dollar figures to it. We went on tax effected it and come out with earnings per share. And we added them altogether and said cumulatively, we feel very confident, just what we have right now. That's what we have. So now, if you want to model and say, well, I see, everything has to hit exactly at the same time. What if it doesn't at Mylan? Let me 50% probability weight if some things don't hit. It's not like we're going to stop. You will hear about more collaborations. You're going to hear about -- you're going to see more activity. Yes, we're going to do things that I told you within that framework of parameters. So our starting point is powerful on that $6, because it's not like we have nothing that we have to go get. We already have it. So if you want to model and say, well, what if they don't get it all, but then there's more things that come on, that's why I feel fairly confident that we should even beat that.

Heather Bresch

We're going to go to Frank and, then we'll move down to Sumant afterwards.

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

Frank Pinkerton from SunTrust. First question. Can you talk about return on research dollars spent especially as you accelerate that over the next couple of years, maybe give us what goes into one of these projects? How the management team measures that? And ultimately, where you guys come out or you think the return on your research dollars are going to be?

Robert J. Coury

Right. I think you need to separate the portfolios between generics and brand. So it's pretty easy for us since a lot of what we spent on the generic side, we told you, we exponentially have increased our returns because you can only imagine that's low hanging fruit, right? Because when we pulled the companies together, everybody is going after the exact same product. But we just didn't cut the dollars and add that at the bottom line. What you heard from us was the collaboration between our Morgantown R&D center and especially our India R&D center, and really it was the intellectual collaboration that really accelerated that return by some of the output that took us from, what, #2 you saw on the Slide in terms of product approvals to clearly #1 in the last 2 years. And as Rajiv said, we're not going to -- that's not going to -- we don't see that ending. Do you want to add anything to the generic side? On the brand side, we're very -- I mean, it's not like we have 50 to 100 products like we have 1,000 on the generic side. We are very, very, very focused. For example, this whole respiratory, this generic Advair, and I was hoping that and I hope you picked up, we went to great lengths to be able to say to you that not only are we going to be the first generic Advair out there, but from all the intelligence that I've seen, everybody else that has try to be a generic Advair, nobody is as far long as we see ourselves. And thanks to Pfizer, got to give them all the credit, because what we -- our specialty is not the device. Our specialty is the formulation and the generic process. So what Rajiv said is when they went into the FDA and actually filed for a 5051, right, 5051. When the FDA tells you, wait a minute, no, no, no, that is exactly like what's already out there, you don't want an NDA. You want a -- you go to the office of generics and get a 505J. Oh, my God, that's like 80% of the hurdle. So imagine, if you have that asset that they realize they're not into the generic formulation side. The next natural thing for them to do, which was very smart and brilliant on their part, go find the best generic company that you can line up with that can do the formulation part on a device that's pretty much done and make it happen. That's why it's so [indiscernible]. And I'll tell you, by doing the math, you do the math. You cut it up, look at how many players you're going to have, go ahead and tax effect it, even take on profit share. That one opportunity alone that's fairly near term, a few years out, is significant in terms of reoccurring sustainable earnings per share. And in terms of the rest of our dollars as we spent, we're going to look to supplement our specialty business, and we're going to look at other opportunities.

Rajiv Malik

We are spending more on some derma products which involve clinical trials but have much more sustainable returns. We are spending more on the customers, again, from the sustainability point of view. So yes, there's definitely a consideration on the quality of the returns.

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

Okay, great. And just as a follow-up, John, for you, I could ask this question all the time. Can you please speak to collections and if you can do it geographically? And just also in your contracting for Europe and how the language reads? And what's going on there from a standpoint of DSOs?

John D. Sheehan

Year-end receivables, when you say collections?

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

Yes, you're right. Sorry.

John D. Sheehan

So I assure you that we are monitoring our European receivables extremely carefully. I would say that on a country-by-country basis that our receivable profile is similar to our peers.

Robert J. Coury

What I would say with one caveat, the real bigger issue I see here is in Central or Eastern Europe. It's more that side. And I don't think Western Europe has come even close so far to what we've seen in Central or Eastern Europe. And we don't have a lot of emphasis over there as a whole.

John D. Sheehan

Right. So we have not experienced a significant deterioration. Our receivables are largely current and in accordance with the terms. And so -- but I assure you, my treasurer is here. I'm all over among the subject about once a month to understand the status of that.

Heather Bresch

To be sensitive of the time, we can take our last question from Sumant.

Sumant S. Kulkarni - BofA Merrill Lynch, Research Division

Sumant Kulkarni on behalf of Greg Gilbert from BofA Merrill Lynch. Three quick ones. How's the company thinking about the evolution of U.S. versus x U.S. revenues as we move from 2012 through '18? And how do you think the absolute level of SG&A dollars is going to change to -- come for the change in dynamics in x U.S. markets? Secondly, on injectables specifically, how is your investment in that space going to help you? And how quickly can you capitalize on the chart that is in the U.S. supply chain there? And finally, a bigger picture one. You're spending a lot on internal capabilities and you showed an impressive slide with a lot of internal capabilities. But if there is, for lack of a better term, a hole in today's capabilities at Mylan, what would it be and how would you fill it?

Robert J. Coury

Device, device, device. I mean, because we have assembled everything. And I've said this before, that's why there's no need for any major acquisition to bring some other core competency on. But I would say the only thing we're not into right now is device. But then I would say it's a major big, big hole. All the other ones are not that material. In terms of Europe, in terms of the SG&A, the way I would say it, you saw the slide, you saw the total number of products that were submitted and expected for both the U.S. and EMEA. And remember, I said in the U.S., you do a little bit, you get a lot. Everywhere else, you need to do a lot to get a little bit. I would say that the U.S. will continue to be a very strong growth driver for us because if you remember, I'm not sure how long ago we showed you this, but I think we showed that the total generic markets base in the United States, I think the largest player at the time was Teva. They had like 24% at that time. I think we have like 12%, 11% or 12% on the slide that we showed you guys. So you can only imagine where Teva hit that peak, they hit that ceiling, we still have another 10% to 12% of therapeutic categories in dosage forms to bring in just to hit to where they are. So our growth opportunity in the United States is still massive. And I don't want to take away from that. In Europe, I would say that the SG&A effects over in Europe is one of the levers that we have. I think that as you continue to see some of these countries move in the direction of increased generic utilization, I think that they're going to quickly realize and yield to the fact that their current health care infrastructure, the system that exist there, does not marry out to the pricing strategy that they want or the increased generic utilization. So I see where we maybe add some SG&A, maybe on our specialty, I see as adjusting in Europe some of that SG&A. And you want to add anything?

Heather Bresch

Yes. And I think again, what we're doing on the commercial side very similar to what we did on the technical side. Whether it was optimizing manufacturing, optimizing an R&D, we're optimizing now our sales and especially our marketing. So the launch of these global campaign is to be able to bring Europe into any country like the significance and the differentiator of a very well done campaign instead of having each country do their own. So it's just the pure synergies of what we have in front of us on the commercial front is fairly significant.

Robert J. Coury

Rajiv, do you want to add on injectables?

Rajiv Malik

Yes. On injectables, I think as for as ramping up and factory capabilities, I wanted on yesterday basis. So just not building it up, we are looking for every possible option or there even to acquire facility just to break this gap. And just not from the shortages point of view, but because we have our portfolio ramping up and we need a home perhaps just to not bring the products later on but have it home and file it from there. So we are very aggressively looking in at this ramp up.

Kris King

That brings an end to our Q&A session today. I'd like to turn it back over to our CEO, Heather Bresch.

Heather Bresch

So again, thank you, guys, very much. I hope you've enjoyed this afternoon as much as we have. And I think that now, immediately following, we have a cocktail reception at the back door.

Robert J. Coury

Yes. There's Kool-Aid, no alcohol.

Heather Bresch

So anyway, out the back door for the next hour. So we look forward to seeing you there. Thank you.

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