Mylan (MYL) Offers U.S. EpiPen Profitability Analysis; Sees Gross Margin at 75% for 2016

September 26, 2016 12:11 PM EDT
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Mylan (NASDAQ: MYL) disclosed the following in a U.S. SEC filing on Monday:

U.S. EpiPen Profitability Analysis

Following Mylan’s recent testimony before the United States House of Representatives regarding EpiPen, Mylan is providing this analysis of the profitability in the United States of EpiPen as a supplement to its testimony. Mylan does not regularly provide profitability analyses for individual products and does not intend in the future to provide product level profitabilty analysis for EpiPen or to update this analysis.

(In USD millions)

2008 2009 2010 2011 2012 2013 2014 2015 2016E [3]

Sales

184 200 281 371 622 742 933 912 1,100

Cost of Goods Sold

79 86 123 139 195 202 224 255 275

Gross Profit

105 114 158 232 427 540 709 657 825

Gross Margin

57.1% 57.0% 56.2% 62.5% 68.6% 72.8% 76.0% 72.0% 75.0%

Operating Costs [1]

34 32 43 58 121 147 184 159 154

Operating Profit

71 82 115 174 306 393 525 498 671

Estimated Implied Interest [2]

67 66 65 62 56 42 24 - -

Estimated Tax Impact

2 6 19 42 94 132 188 187 252

Tax Rate [4]

37.5% 37.5% 37.5% 37.5% 37.5% 37.5% 37.5% 37.5% 37.5%

Net Product Profitability

3 10 31 70 156 219 313 312 419

US Pens Sold (millions)

4.3 4.5 5.2 5.5 7.3 7.4 7.9 8.3 8.0

Approximate US Metrics per Pen (in dollars):

Sales

43 44 54 67 85 100 118 110 137

Cost of Goods Sold

18 19 24 25 27 27 28 31 34

Gross Profit

24 25 30 42 58 73 90 79 103

Operating Cost

8 7 8 11 17 20 23 19 19

Operating Profit

17 18 22 32 42 53 66 60 83

Net Product Profitability

1

2

6

13

21

30

40

38

52

[1]Includes direct selling, marketing, medical affairs and R&D expenses. Does not include corporate allocations or the cost of the EpiPen4Schools program.
[2]Assumes interest on the unrecovered original investment at the actual weighted average borrowing rate of 7.9% for the debt incurred with the acquisition. Approximately $850M of the acquisition price attributed to EpiPen.
[3]Before changes to patient access programs and the launch of the authorized generic.
[4]The statutory tax rate for the U.S. has been used in this product line profitability analysis.

This analysis is derived in part from data prepared in accordance with generally accepted accounting principles (“GAAP”), and a reconciliation of the EpiPen operating profit to the segment profitability of Mylan’s Specialty Segment is included below. As used in this analysis, however, net product profitability for the EpiPen product and net product profitability per EpiPen unit sold are not GAAP measures and also reflect adjustments for estimated implied interest expense and for the impact of estimated taxes that have not been determined in accordance with GAAP and are not directly derived from Mylan’s reported results. Mylan does not have 2016 GAAP guidance, and consequently cannot provide a reconciliation for 2016E to Specialty Segment profitability or Consolidated results without unreasonable effort, because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for the reconciliation. These items include, but are not limited to, acquisition-related expenses including those related to the recently closed Meda transaction, restructuring expenses, asset impairments, litigation settlements, changes to contingent consideration and certain other gains or losses. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for the guidance period.

2008 2009 2010 2011 2012 2013 2014 2015

EpiPen operating profit

71 82 115 174 306 393 525 498

Other Specialty Segment profitability

(34) (12) 8 66 13 69 140 173

Specialty Segment profitability

37 70 123 240 319 462 665 671


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