Mylan, Inc. (NASDAQ:MYL) Nasdaq 39th London Investor Conference Call December 4, 2018 4:45 AM ET
Heather Bresch - CEO
Unidentified Company Representative
Good morning, everyone. We are extremely pleased to welcome Mylan, one of the world's leading pharmaceutical companies to our London program for the first time. Please feel free to submit your Q&A through the app that’s listed on the slide above.
Joining us from Mylan is their CEO, Heather Bresch. Thank you, Heather.
Hi. Thank you. Good morning. Nice to see all of you.
I’ll reference you to our forward-looking statement and it’s also located on our website as well. I'll give just kind of a broad overview about Mylan and then certainly time for Q&A at the end.
So, at Mylan, we're committed to setting new standards in healthcare and providing access to the world's 7 billion people. And you know as we always say, these aren't words just on a sheet of paper, they're truly the cause that drives our 35,000 employees around the world.
If you look quickly, we've had 60 years of unconventional success, starting in 1961 as a domestic company out of the United States. We continued to grow with the generic market in the United States and remained a domestic company until 2007, at which time we launched a global strategy to build scale around our capabilities, around API to be vertically integrated from our acquisition of Matrix in India. We did one of the largest first healthcare transactions in India. And as we moved forward with our acquisition of Merck's Generics shortly thereafter in 2007 and since then adding complementary strategic acquisitions around product portfolios, injectables. We then did the Abbott transaction that really brought us a great platform, mainly out of Europe with branded and branded generic products. And then most recently, our Meda acquisition. And we've said that as we look now at our global footprint from a commercial and an operational perspective, we truly have all the assets we need. And it's really now about maximizing those assets and how we're bringing assets to every part of the world to maximize our commercial footprint.
So, we believe we have a very differentiated business model. It is about one, driving access. So, as we continue to meet unmet needs and drive portfolio around franchises and therapeutic categories, it's continuing to build upon that diversification and having a balanced portfolio that's split between generics, brands and OTC. And that diversification continues to drive our durability, and our ability to not only generate significant free cash flows but continue to reinvest from an R&D perspective in complex products as well as continuing to look at specialty products.
So, just a quick snapshot. We're organized around three geographic segments, our North America, where we’re the second largest provider of prescription drugs in the United States with a portfolio of over 650 products. Europe, we certainly have scale across all the 35 European countries. And I as I said with our acquisition both of Abbott and Meda really gave us a diversified portfolio across Europe. And then of course Rest of World, while our smallest division, one of our fastest growing. And as we're continuing to grow and build out in the emerging markets, we also handle our HIV portfolio out of our Rest of World region. And we're one of the largest provider there of the medicines. In fact 40% of every -- of all people living with HIV/AIDS is on a Mylan product. So, again, it's something that we've really driven, both at access, the diversification and durability around that franchise.
And if you look, it truly has been about balancing products, markets and channels, and continuing to build out that whether you look at the different types of markets, when you look at the globe, basically you get distribution, tender, substitution and prescription. And we believe that that has given us the best opportunity to both the behind the counter and front of the counter and a relationship with a physician, meaning the most to our customers and to the patients we serve.
And just a quick snapshot of our franchises. We truly do touch across the spectrum of franchises. And you look at the therapeutic categories, I mean, from CNS to from diabetes to oncologies, we truly have one of the largest portfolios that span everything from diagnosis to treatment through maintenance therapy. So, again, it's about meaning that most, not only to our customers and our patients that we serve but continuing to also look at wraparound services that, as healthcare is going to continue to evolve, our ability to make sure that we're keeping people healthy. As I said, we -- it’s supposed to be health care, not sick care. So, as we continue to think about how technology and the role that health care delivery and that intersection between technologies, patients and how they receive their healthcare, we believe again, Mylan offers one of the most diversified platforms across the industry.
And just a snapshot again of our segments. This gives some flavor about the product and our portfolio mix. So, if you look on a consolidated basis, more than half of our products are brand products. So, if you look between brand, brand generics and OTC products. And you look, we further break out, the North America, the U.S. generic business because that's very different animal in the U.S. and it is across the rest of the world. So, while we've continued to invest across a robust portfolio, generics and complex and biosimilars, you can see, as in Europe, we really have that -- we've got about a third of our business in OTC, about a third in brand and a third in the generic. And then of course Rest of World, as I said, while our smallest, one of our fastest-growing segments.
Just a quick look at our R&D, because I believe again our investment that the diversification and durability allowing us to continue to invest in R&D has been something that Mylan has done consistently over the last decade, especially when you look at entering the biosimilar market insulins, these are the products that of course take years to develop and years to bring through the regulatory channels across the globe. And we've continued to look at these opportunities as a global one. We've said a long time ago, especially as you think about biosimilars that it's truly a global marketplace. And being able to bring these important products across both developed and developing countries is what Mylan has been committed to. And you can see, as you work yourself up the supply chain that we continue to invest in this more complex. We have a great respiratory niche with nebulization as well as our development of device and drug combinations. And again, the biosimilars, one of the largest portfolios in our industry.
So, bringing all of that together, the diversity, the complexity and the scale has really built this durability. And again, let us absorb, it's not about any one product or any one market, and it's not about any one type of channel. So, again, as we think about the balance mix and continuing to be able to absorb volatility, whether they're with regulatory environments, with countries, the ability to us to have a business now balanced across U.S., Europe, and Rest of World really gives us an opportunity to not only maximize the assets to our footprint but to be able to absorb the challenges and opportunities and to be able to seize upon those because our commercial platform again spans the globe. We have over 50 operational facilities, and we’re selling into over a 165 countries. So, for us, as we think about the future over the next decade, it's about not only maximizing but continuing to bring these organic opportunities that we've invested in over the last 10 years.
And if we look back just over the last several years, we've been consistent on our execution and our commitment. You look at our revenues, our growth around revenues, our cash flow as well as EPS. And I think that again thinking about the different challenges any market is going through, our ability to manage and take our diversification and really absorb that volatility has been something that we're continuing to invest in. And while we need no more, as I said, large assets, we are constantly looking at products. So, if there are products out there, that would be a nice complement to the infrastructure or the sales force that we already have in place, and that's something that we continue to see a lot of great opportunities. And while we've stayed very committed to our investment grade, again, we're generating significant free cash flow. So, it gives us that optionality to continue to reinvest in our business.
And all of that lets us have great impact in bringing better health for a better world. And doing good and doing well, that's been part of Mylan’s DNA for now almost 60 years that we're continuing to champion access and bring health care, like I said, both in the developing and the developed world. I think that's something that differentiates us in doing well, giving consistent and great shareholder returns and being very mindful that striking that balance is a very important cause especially with the business that we do and the patients we serve.
So, with that I'll certainly open it up to any questions from the audience as well as if there's any that comes through on the app.
Q - Unidentified Analyst
Can you just discuss a little bit about how the Fulphila launch has been going? And whether you plan on changing anything with relation to how the coherence launch has been going?
Sure. As we have talked about, when you look at these complex products and the biosimilars and the pull-through, we certainly see a very different uptake; it’s not the small molecule where you have this immediate pull-through and utilization, 80%, 90%, when you think about the United States and even across the globe. That utilization uptake, call it, varies. In a lot of countries, we certainly see the bio similar with a very different look. And it differs between as you know, if it's a hospital, institutional business or if it's coming through on the pharmacy or specialty pharmacy.
So, as we talked about, Fulphila, we said we were very unsurgical in that launch, as you know. You’re dealing with a very different size of inventory, how we can make sure to manage that supply chain. And as we see a much slower ramp, we also see a much longer tail. So, we think we -- it exceeded our expectations as far as being able to consistently build. And I think over 2019, it will continue to be a very important great product for us.
Thank you. Could you give a little more color around the delay in the launch of generic Advair?
Sure. Again, a product that we invested in almost nine years ago, and very proud about the respiratory -- the science that has really played into developing this device into our combination. As we said just recently on our Q3 call, we certainly are expecting it literally any day. We have been in constant communication. What I can continue to communicate is there is no outstanding science issue, nothing in our -- on our side. It's truly administrative at this point, and we look very forward to bringing this very important product to the market. Anything from the app?
Okay. Well -- yes.
Can you elaborate a little bit on the European business? There is always so much focus on the U.S. side of things. If you could kind of explain a little bit more about what your plans are for the European business? What you would view as potentially some of the real strengths of the European business, some of the differentiators, and then, potentially, what some of the threats are, specifically to your European business? That would be great.
Sure. No, and I appreciate that because you're right, we say -- some might think very too U.S.-centric or shareholder-centric, when one of the aspects of growing this global business was to have that scale to be able to absorb, not only across the globe but within the geography. So if we think about our European business across 35 countries, and as I showed on the slides, really the most balanced portfolio of many of our other regions because about a third in OTC, a third in brands and a third in generics. And we believe that over these last couple of years, we didn't just integrate Meda, we truly integrated Mylan and bring a One Mylan to the marketplace because, as you know, every country in Europe is very different. So, to talk about Europe with one brush is -- does not do justice to the different dynamics in every country. So, whether that's from the tender business -- and we believe that as you look at the countries with tendering, given our vertical integration, our operational platform, it allows us to be very competitive across the tender markets, when you look at the substitution and prescription markets being behind the counter and front of the counter. As you know, in Europe, the pharmacy plays a much different role and the individual pharmacies play a much different role than in the U.S. And that opportunity to have the relationship with the pharmacy as well as being able to pull through the prescriptions to the physicians as well as CX opportunities which, as you know, are very beneficial throughout Europe.
So for us that scale that we've now built across the 35 countries, again allows for any particular country being up or down, as you know, there can be countries have whether it's once a year or every other year price changes. We continue to see nice utilization, continued uptick. Our largest country, France, hovers around that 30% generic utilization. So, for us, we're not only maximizing these opportunities with the physician and the pharmacy, but we're continuing to bring important products, like insulin or biosimilars, across that geography. So, could not be more excited about the opportunity that one, from an infrastructure perspective of pulling through opportunities that require the sales force as well as certainly the footprint with pharmacy, again, and being able to compete in these different channels. So, when you look at the hundreds thousands of products that we're launching, it’s for us about continuing to bring that mean the most to our customer and the patient but also importantly the investment we've made in this pipeline, and now having the infrastructure both commercially and operationally to maximize these across every country in Europe. Thank you.
So, clearly, you're sitting with about $14.5 billion in debt. Does that put you in a position where you’re growth constraint going forward? And also, if so, what are you doing to sort of manage that debt down?
Sure. As I said, we’ve completely committed to investment grade and making sure that not only when you look at the significant free cash flow that we're generating, we believe it gives us ample opportunity to not only be focused on paying down our debt but also being able to seize on opportunities -- but niche opportunities, products. We've said we don't need to go out and do any large transaction. We believe we have the assets we need. It truly is about being much more strategic about a product opportunity. So, we've been very active and have continued to build that into our model from a BD perspective. But for us. it's much more now about taking the organic opportunities over the billions we've invested over the last several years in our pipeline and maximizing those across the globe. So, very focused on balancing debt repayment as well as being able to strike on opportunities as you know. It's really a buyer's market. There's been a lot of companies divesting either because of consolidation or getting out of certain products that we feel that given our differentiated business model, really gives us an opportunity to strike on some of those that have been very nice addition. Thank you.
Maybe you can just be a bit more specific on how you're trying to compete against Amgen and Neulasta and -- because they're emphasizing the delivery mechanism that they have which still differentiates their products? And I guess it's hospital based. So, you need to have some kind of a protocol that you can compete against them. And maybe you can be a bit more specific on how you plan to -- what's your plan of attack in that regard I guess.
Sure. So, as you know, Neulasta is really divided into two products. Onpro, which I believe you're discussing, the device -- the newer device product as well as the original product. And that really is about split 50-50. So, we're not competing in the Onpro market, except for as purchasers have continued to because of the more affordable option driving people to the original product. From a institution perspective, to your point, it's a part B institutional product. We have one of the largest portfolios, the injectable business that we acquired several years ago, not only gave us a broad mix of injectables on the market but again a very nice strong pipeline. So, we have hundreds of products that we're servicing the hospital market. So, our opportunity to again take a robust portfolio and not only with commodity and complex but products like Neulasta. So, Mylan, we very much have enjoyed a great launch. And like I said I continue to see, we believe that not only did the launch go very well but again, as we're seeing these complex products, there's a much longer tail to these products. And our ability as we've built these relationships with GPOs because of our broad portfolio, we're truly not -- like I said, not only able to have a successful launch but continue to have exciting products coming over the next couple of years, again in the this institutional space.
Maybe just a follow-on. How do you think pricing will evolve over time? Obviously, it's going to be much more benign, I guess.
We have been -- I would say what we have focused on the most with the complex and the biosimilars is the utilization, and making sure where -- we've been pretty vocal about the system not working as it was intended around the specialty side of the house and allowing as much pull-through that competition and innovation balancing each other. So, I can tell you, we've been very, we've been very focused on trying to ensure, and as you've seen a lot of different policy initiatives come out. So, I believe that while that while this industry has always been competitive, and I think that's where Mylan and our differentiated model really giving us that ability to compete across the globe, as well as in any of these individual markets. That ability to compete, we're going to always be right there. But, I think on these products, the hurdle rate for the investment is significant, as you know. So, while there's a slower uptake and yet a longer tail, also fewer players. So, I think the lines between the brand and the generic are just continuing to be blurred with companies really having both and launching not only the brand but their generic.
You still see a much less number of competitors. And I think -- so, like I said, our ability to not only compete in any of the individual markets but given the size of our pipeline that we're looking at these as really global assets and being able to compete on that global basis.
On Neulasta, will you be looking to target the 340B institutions? And particularly, will you be looking to get 340B pass-through status? And would you expect to make an announcement on this anytime?
There's nothing that I'll say specifically around 340B, except as know, there's been a lot of, again, policy discussions. And a lot of the different things we are looking at could impact 340B. But there's nothing specifically from a targeting perspective.
Well, thank you. It's been great to be with you guys this morning. And I look forward to any follow-up you may have.