Moody's Affirms Mylan (MYL) at 'Baa3'; Moves Outlook to Developing (TEVA)

Moody's Investors Service affirmed the Baa3 senior unsecured rating of Mylan Inc. (subsidiary of Mylan NV, together Mylan (Nasdaq: MYL)) and changed the outlook to developing from stable. The change in outlook reflects heightened event risk and uncertainty around the direction of the ratings given Teva Pharmaceutical Industries Ltd's (Teva, A3 negative, (NYSE: TEVA)) unsolicited offer to acquire Mylan. Teva's offer follows Mylan's unsolicited offer to acquire Perrigo Company plc (Baa3 stable), which Perrigo subsequently rejected. While many uncertainties remain, Moody's believes that Mylan will resist being acquired by Teva and may raise its offer for Perrigo (NYSE: PRGO) or pursue other takeover defense strategies. The developing outlook reflects the potential for negative rating pressure if these defense strategies result in a significant increase in financial leverage or business risk. Further, the potential for positive rating pressure exists if Mylan is acquired by a higher-rated entity like Teva.

Rating affirmed:

Senior unsecured notes, at Baa3

Outlook Actions:

....Outlook, Changed To Developing From Stable

RATINGS RATIONALE

Mylan's Baa3 senior unsecured rating reflects its strong global position in generic pharmaceuticals, solid growth outlook, and Moody's expectation that financial policies will be consistent with an investment-grade rating. Mylan has consistently communicated a target leverage ratio of 3.0x (not including Moody's adjustments).

Moody's could upgrade Mylan's ratings if the company successfully launches a number of its high value products (for example, Copaxone, Advair, biosimilars) while refraining from significant debt funded acquisitions and share repurchases such that financial policies support debt/EBITDA that is sustained below 2.5 times and operating cash flow to debt that is sustained above 25%.

Moody's could downgrade the ratings if Mylan is expected to sustain debt/EBITDA above 3.5 times. This could occur if Mylan pursues extremely large debt-financed acquisitions or if EBITDA significantly contracts due to pricing pressure or other operating setbacks. Liquidity deterioration could also lead to a downgrade.

The principal methodology used in these ratings was Global Pharmaceutical Industry published in December 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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