Mylan N.V. (NASDAQ: MYL) today announced its financial results for the three and nine months ended September 30, 2020.

Third Quarter 2020 Financial Highlights

• Total revenues of $2.97 billion, a slight increase on an actual basis and a slight decrease on a constant currency basis, compared to the prior year period.
• Revenue Highlights:
  • North America segment net sales of $1.03 billion, down 5% on an actual and constant currency basis.
  • Europe segment net sales of $1.12 billion, up 7%, up 2% on a constant currency basis.
  • Rest of World segment net sales of $795.5 million, up less than 1%, up 3% on a constant currency basis.
• U.S. GAAP net earnings of $185.7 million, compared to U.S. GAAP net earnings of $189.8 million in the prior year period.
• Adjusted net earnings of $679.7 million, compared to adjusted net earnings of $604.4 million in the prior year period.
• Adjusted EBITDA of $1.01 billion, compared to adjusted EBITDA of $922.8 million in the prior year period.

Nine Months Ended September 30, 2020 Financial Highlights

• Total revenues of $8.32 billion, a slight increase on an actual basis, up 1% on a constant currency basis, compared to the prior year period.
• Revenue Highlights:
  • North America segment net sales of $3.02 billion, essentially flat on an actual and constant currency basis.
  • Europe segment net sales of $3.08 billion, up 5% on an actual and constant currency basis.
  • Rest of World segment net sales of $2.13 billion, down 5%, down 1% on a constant currency basis.
• U.S. GAAP net earnings of $245.9 million, compared to U.S. GAAP net loss of $3.7 million in the prior year period.
• Adjusted net earnings of $1.72 billion, compared to adjusted net earnings of $1.56 billion in the prior year period.
• Adjusted EBITDA of $2.64 billion, compared to adjusted EBITDA of $2.48 billion in the prior year period.
• U.S. GAAP net cash provided by operating activities for the nine months ended September 30, 2020 of $1.20 billion, compared to net cash provided by operating activities of $1.12 billion in the prior year period, and adjusted free cash flow for the nine months ended September 30, 2020 of $1.51 billion, compared to $1.29 billion in the prior year period.

Mylan is not providing forward-looking information for U.S. GAAP reported financial measures or a quantitative reconciliation of forward-looking non-GAAP financial information. Please see "Non-GAAP Financial Measures" for additional information.

Mylan Chief Executive Officer Heather Bresch commented: "As we prepare to officially conclude the Mylan story and provide what will be the company's final earnings update, Mylan's strong year-to-date results once again demonstrate the benefits of the diverse and durable platform that we have created. I'm extremely proud of how Mylan has performed over the last nine months during these unprecedented times. I sincerely thank our 35,000 employees across the globe for their consistent performance and dedication to providing access to medicine to patients around the world, even while navigating the realities of a global pandemic. It is this unwavering commitment to our mission that has served the company well for almost 60 years, and I am confident will pave the way for the success of Viatris in the years to come."

Mylan Executive Chairman Robert J. Coury commented: "On behalf of Mylan's Board of Directors and all Mylan employees, I would like to thank Heather for her truly exemplary leadership and lasting contributions to the company, the industry and patients around the world. As we officially close the book on Mylan, I would also like to offer my sincere appreciation and gratitude to all the Mylan employees, both past and present, for their extraordinary resilience and determination to help us reach this pivotal moment in our 60-year history.

"With just 10 days until we close our proposed combination with Pfizer's Upjohn business, we are excited to bring the two organizations together. Starting on Day 1, management's full attention will now be turned towards executing upon the integration plan and developing Viatris' operating strategy. We intend to provide details on Viatris' strategy, including 2021 guidance, at our upcoming Investor Day, to be held in late February or early March 2021.

"At that time, the management team will outline how Viatris can deliver on its stated commitments and roadmap to maximize value creation, including the realization of $1 billion in synergies and the generation of strong and accelerating free cash flows. Viatris remains committed to returning capital to shareholders with an expected dividend of at least 25% of free cash flows, based upon GAAP operating cash flow less capital expenditures, beginning after the first full quarter of Viatris' operations, with the expectation to grow the dividend thereafter. We further stand behind our commitment to deleverage towards our target leverage ratio of 2.5x over time and are committed to maintaining an investment grade rating."

RECENT DEVELOPMENTS

Upjohn Transaction Update

On September 14, 2020, the European Commission (the "Commission") approved the divestiture buyers with which Mylan entered into agreements for the sale of certain of Mylan's products in Europe, which was a requirement of the Commission's conditional approval of the proposed transaction pursuant to which Mylan will combine with Pfizer Inc's ("Pfizer") Upjohn business (the "Upjohn Business") (the "Combination") in a Reverse Morris Trust transaction in April 2020.

On October 30, 2020, Mylan and Pfizer announced that the U.S. Federal Trade Commission (the "FTC") accepted a proposed consent order, which concluded the FTC's review of the proposed Combination. The parties have now obtained all required antitrust clearances for the Combination. The Combination is expected to close on November 16, 2020.

In connection with the proposed Combination, Mylan shareholders will receive one share of Viatris Inc. ("Viatris") common stock for each Mylan ordinary share held by such holder (subject to any applicable withholding taxes). No action is required by Mylan shareholders to receive such shares of Viatris common stock. It is expected that at the beginning of the trading day on November 17, 2020 (which is expected to be the first trading day after the closing date), Viatris will trade on Nasdaq under the ticker symbol "VTRS" and will no longer trade in the "when-issued" market, and Mylan shares will no longer trade on Nasdaq.

Third Quarter 2020 Financial Results

Total revenues for the three months ended September 30, 2020 were $2.97 billion, compared to $2.96 billion for the comparable prior year period, representing an increase of $10.4 million, or less than 1%. Total revenues include both net sales and other revenues from third parties. Net sales for the current quarter were $2.95 billion, compared to $2.93 billion for the comparable prior year period, representing an increase of $19.9 million, or 1%. Other revenues for the current quarter were $24.0 million, compared to $33.5 million for the comparable prior year period.

The increase in net sales was primarily the result of an increase in net sales in the Europe segment of 7% and a slight increase in net sales in the Rest of World segment. These were partially offset by a decrease in net sales in the North America segment of 5%. Mylan's net sales were favorably impacted by net sales from new products of $170.1 million, as well as the effect of foreign currency translation on current period net sales of approximately $38.4 million, or 1%. The impact of foreign currency translation on current period net sales primarily reflects changes in the U.S. Dollar as compared to the currencies of Mylan's subsidiaries in the European Union, partially offset by the negative impact of subsidiaries in India. On a constant currency basis, net sales decreased by approximately $18.5 million, or 1%. This decrease was primarily driven by lower volumes, and to a lesser extent, pricing from net sales of existing products, partially offset by new product sales. In the third quarter of 2020, we estimate that the COVID-19 pandemic negatively impacted our net sales by approximately 3%, primarily driven by lower retail pharmacy demand, lower non-COVID-19 related patient hospital visits and a lower number of in person meetings with prescribers and payors, as well as the impact on the back to school sales of the EpiPen® Auto-Injector. Below is a summary of net sales in each of our segments for the three months ended September 30, 2020:

• Net sales from North America segment totaled $1.03 billion in the current quarter, a decrease of $59.8 million or 5% when compared to the prior year period. This decrease was primarily driven by lower volumes, and to a lesser extent, pricing from net sales of existing products partially offset by new product sales, including sales from the launch of dimethyl fumarate capsules, a substitutable generic of Biogen Inc.'s Tecfidera®. The decrease in net sales of existing products was primarily driven by lower EpiPen® Auto-Injector volumes partially due to the negative impact of COVID-19 which resulted in lower back to school sales and changes in the competitive environment, including for Levothyroxine Sodium. These decreases were partially offset by increased volumes on Wixela™ Inhub™. The impact of foreign currency translation on current period net sales was insignificant within North America.
• Net sales from Europe segment totaled $1.12 billion in the current quarter, an increase of $77.9 million, or 7%, when compared to the prior year period. This increase was primarily due to the favorable impact of foreign currency translation of approximately $57.9 million or 5%, and new product sales. The favorable impact of these items was partially offset by lower volumes from net sales of existing products primarily due to the negative impact of COVID-19. Pricing was relatively stable in the quarter when compared to the prior year period. Constant currency net sales increased by approximately $20.0 million, or 2%, when compared to the prior year period.
• Net sales from Rest of World segment totaled $795.5 million in the current quarter, an increase of $1.8 million or less than 1%, when compared to the prior year period. This increase was primarily driven by new product sales, including sales of Remdesivir in India. This increase was partially offset by lower pricing, primarily due to government price reductions in Japan and Australia, and volumes from net sales of existing products, and the unfavorable impact of foreign currency translation. While volumes of existing products in the Company's anti-retroviral franchise were higher compared to the prior year period, this increase was offset by lower volumes from net sales of existing products, partially driven by the negative impact of COVID-19 primarily in China, Russia and Japan. Overall, net sales from Rest of World were unfavorably impacted by the effect of foreign currency translation by approximately $18.7 million, or 2%. Constant currency net sales increased by approximately $20.5 million, or 3% when compared to the prior year period.

U.S. GAAP gross profit was $1.16 billion and $1.07 billion for the third quarter of 2020 and 2019, respectively. U.S. GAAP gross margins were 39% and 36% in the third quarter of 2020 and 2019, respectively. U.S. GAAP gross margins were positively impacted by margins on sales of new products of 380 basis points, primarily in the North America segment, and lower amortization expense from acquired intangible assets of 160 basis points. These items were partially offset by lower gross margins from the net sales of existing products of 260 basis points, primarily in the North America segment. Adjusted gross profit was $1.63 billion and adjusted gross margins were 55% for the third quarter of 2020 compared to adjusted gross profit of $1.56 billion and adjusted gross margins of 53% in the prior year period.

R&D expense for the three months ended September 30, 2020 was $129.8 million, compared to $167.9 million for the comparable prior year period, a decrease of $38.1 million. This decrease was primarily due to lower expenditures related to the reprioritization of global programs, and higher payments in the prior year period related to licensing arrangements for products in development.

Selling, general and administrative ("SG&A") expense for the three months ended September 30, 2020 was $658.4 million, compared to $632.7 million for the comparable prior year period, an increase of $25.7 million. The increase was primarily the result of higher consulting fees and other expenses primarily related to the pending Combination totaling approximately $74.0 million in the current year period, including approximately $30.0 million related to obligations to reimburse Pfizer for certain financing costs under the Business Combination Agreement and Separation Agreement (the "Combination Agreements"). Partially offsetting this increase were lower selling and promotional expenses, including through our active management and certain lower expenses as a result of COVID-19.

During the third quarter of 2020, the Company recorded a net charge of $18.9 million in Litigation settlements and other contingencies, net compared to a net gain of $51.9 million in the comparable prior year period. During the three months ended September 30, 2020, the Company recorded a $16.9 million loss for fair value adjustments related to Pfizer's proprietary dry powder inhaler delivery platform (the "respiratory delivery platform") contingent consideration and a net charge of approximately $2.0 million related to a number of litigation matters. During the three months ended September 30, 2019, the Company recognized a gain of approximately $51.9 million primarily related to the previously disclosed Celgene Corporation ("Celgene") settlement of $62.0 million partially offset by certain litigation related charges.

U.S. GAAP net earnings decreased by $4.1 million to earnings of $185.7 million for the three months ended September 30, 2020, compared to earnings of $189.8 million for the prior year period and U.S. GAAP EPS decreased from $0.37 in the prior year period to $0.36 in the current quarter. The Company recognized a U.S. GAAP income tax provision of $55.9 million, an increase of $59.9 million over the $4.0 million benefit for the comparable prior year period. During the current quarter, the Company recognized an expense as a result of adjustments to reserve for uncertain tax positions and the assessment of the realizability of deferred tax assets. During the three months ended September 30, 2019, the Company recorded a $42.0 million benefit resulting from refinements to previous estimates in conjunction with the filing of the Company's 2018 U.S. federal tax return, which revised the estimated impact of the Company's valuation allowance on its interest limitation deductions and the estimate of available foreign tax credits. Also impacting the current year income tax benefit was the changing mix of income earned in jurisdictions with differing tax rates. Adjusted net earnings increased to $679.7 million compared to $604.4 million for the prior year period.

EBITDA was $794.1 million for the current quarter and $794.8 million for the comparable prior year period. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $1.01 billion for the current quarter and $922.8 million for the comparable prior year period.

Nine Months Ended September 30, 2020 Financial Results

Total revenues for the nine months ended September 30, 2020 were $8.32 billion, compared to $8.31 billion for the comparable prior year period, representing an increase of $13.8 million, or less than 1%. Total revenues include both net sales and other revenues from third parties. Net sales for the nine months ended September 30, 2020 were $8.23 billion, compared to $8.21 billion for the comparable prior year period, representing an increase of $25.2 million, or less than 1%. Other revenues for the nine months ended September 30, 2020 were $90.3 million, compared to $101.7 million for the comparable prior year period.

The increase in net sales was primarily the result of an increase in net sales in the Europe segment of 5% which was partially offset by a decrease in net sales in the Rest of World segment of 5% and a slight decrease in net sales in the North America segment. Mylan's net sales were unfavorably impacted by the effect of foreign currency translation, primarily reflecting changes in the U.S. Dollar as compared to the currencies of Mylan's subsidiaries in India. The unfavorable impact of foreign currency translation on current year net sales was approximately $93.5 million, or 1%. On a constant currency basis, the increase in net sales was approximately $118.7 million, or 1% for the nine months ended September 30, 2020. This increase was primarily driven by new product sales of $342.8 million, and to a lesser extent, higher volumes of existing products, partially offset by lower pricing on sales of existing products. We have estimated that the net impact of the COVID-19 pandemic decreased net sales during the nine months ended September 30, 2020 by approximately 2%, caused by the same drivers for the three month period. Below is a summary of net sales in each of our segments for the nine months ended September 30, 2020:

• Net sales from North America segment totaled $3.02 billion during the nine months ended September 30, 2020, a decrease of $11.7 million or less than 1% when compared to the prior year period. This decrease was due primarily to lower pricing on sales of existing products, partially offset by new product sales and, to a lesser extent, higher volumes on sales of existing products. Lower pricing on sales of existing products was driven by changes in the competitive environment, including for Levothyroxine Sodium, and lower volumes were primarily driven by the EpiPen® Auto-Injector, partially offset by increased Wixela™ Inhub™ volumes. The impact of foreign currency translation on current period net sales was insignificant within North America.
• Net sales from Europe segment totaled $3.08 billion during the nine months ended September 30, 2020, an increase of $150.0 million or 5% when compared to the prior year period. This increase was primarily the result of new product sales and higher net sales of existing products, partially as a result of increased volumes which were driven by the resolution of supply disruptions encountered in the prior year period. The remainder of the increase in net sales was the result of expected net sales growth in the region partially offset by the negative impact of COVID-19. Pricing was relatively stable when compared to the prior year period. Net sales were also favorably impacted by the effect of foreign currency translation of approximately $3.3 million, or less than 1%. Constant currency net sales increased by approximately $146.7 million, or 5%, when compared to the prior year period.
• Net sales from Rest of World segment totaled $2.13 billion during the nine months ended September 30, 2020, a decrease of $113.1 million or 5% when compared to the prior year period. The decrease was primarily due to the unfavorable impact of foreign currency translation and, to a lesser extent, by lower pricing on net sales of existing products, primarily driven by government price reductions in Japan and Australia. The decrease in net sales was also due to lower volumes on net sales of existing products related to the estimated negative impact from COVID-19 in China, Russia and Japan. Partially offsetting lower net sales of existing products were new product sales, including Remdesivir in India and emerging markets. Overall, net sales from Rest of World were unfavorably impacted by the effect of foreign currency translation of approximately $92.7 million, or 4%. Constant currency net sales decreased by approximately $20.4 million, or 1%, when compared to the prior year period.

U.S. GAAP gross profit was $3.09 billion and $2.81 billion for the nine months ended September 30, 2020 and 2019, respectively. U.S. GAAP gross margins were 37% and 34% for the nine months ended September 30, 2020 and 2019, respectively. Gross margins were positively impacted by lower amortization expense from acquired intangible assets and intangible asset impairment charges realized in the prior year period of 265 basis points. In addition, gross margins were positively impacted as a result of higher gross profit from sales of new products of 255 basis points, primarily in North America and, to a lesser extent, sales of existing products in Europe. Gross margins were negatively impacted as a result of lower gross profit from sales of existing products in Rest of World and North America of 240 basis points. In addition, gross margins were negatively impacted by incremental costs incurred as a result of the COVID-19 pandemic, including a special bonus for plant employees. Adjusted gross profit was $4.49 billion and adjusted gross margins were 54% for the nine months ended September 30, 2020 compared to adjusted gross profit of $4.44 billion and adjusted gross margins of 53% in the prior year period.

R&D expense for the nine months ended September 30, 2020 was $400.3 million, compared to $488.1 million for the comparable prior year period, a decrease of $87.8 million. This decrease was primarily due to lower expenditures related to the reprioritization of global programs, and higher payments in the prior year period related to licensing arrangements for products in development.

SG&A expense for the nine months ended September 30, 2020 was $1.98 billion, compared to $1.91 billion for the comparable prior year period, an increase of $74.0 million. The increase was due primarily to higher consulting fees along with other expenses primarily related to the pending Combination totaling approximately $235.5 million in the current year period, including approximately $115.0 million related to obligations to reimburse Pfizer for certain financing costs under the Combination Agreements. Partially offsetting this increase were lower selling and promotional expenses, including through our active management and certain lower expenses as a result of COVID-19.

During the nine months ended September 30, 2020 the Company recorded a net charge of $36.5 million in Litigation settlements and other contingencies, net compared to a net gain of $30.3 million in the comparable prior year period. During the nine months ended September 30, 2020, the Company recorded a $35.6 million loss for fair value adjustments related to respiratory delivery platform contingent consideration. Additionally, the Company recorded a net charge of approximately $0.9 million related to a number of litigation matters. Litigation settlements for the nine months ended September 30, 2019, consisted of litigation related gains of approximately $1.4 million primarily related to a favorable litigation settlement related to the previously disclosed Celgene matter of $62.0 million offset by litigation related charges for settlements reached related to the modafinil antitrust matter of $18.0 million and the settlement with the U.S. Securities and Exchange Commission ("SEC") in connection with the SEC staff's investigation of the Company's public disclosures regarding its 2016 settlement with the Department of Justice concerning the EpiPen Medicaid Drug Rebate Program of $30.0 million. Additionally, the Company recognized a gain of $28.9 million for fair value adjustments related to the respiratory delivery platform contingent consideration.

U.S. GAAP net earnings (loss) increased by $249.6 million to earnings of $245.9 million for the nine months ended September 30, 2020, compared to a loss of $(3.7) million for the prior year period. The Company recognized a U.S. GAAP income tax provision of $46.4 million, compared to a U.S. GAAP income tax provision of $22.9 million for the comparable prior year period, an increase of $23.5 million. During the nine months ended September 30, 2020, the Company recognized a net charge as a result of adjustments to reserves for uncertain tax positions, partially offset by changes in the assessment of the realizability of deferred tax assets. During the nine months ended September 30, 2019, the Company reached a settlement in principle with the U.S. Internal Revenue Service ("IRS") to resolve federal tax matters related to the February 27, 2015 acquisition by Mylan N.V. of Mylan Inc. and Abbott Laboratories' non-U.S. developed markets specialty and branded generics business, including adjusting the interest rates used for intercompany loans and confirming our status as a non-U.S. corporation for U.S. federal income tax purposes, and recorded a reserve of approximately $140.0 million as part of its liability for uncertain tax positions, with a net impact to the income tax provision of approximately $129.9 million related to this matter. During the nine months ended September 30, 2019, primarily due to the settlement in principle reached with the IRS and the expiration of federal and foreign statutes of limitations, the Company increased its net liability for unrecognized tax benefits by approximately $46.1 million. Also impacting the current year income tax expense was the changing mix of income earned in jurisdictions with differing tax rates. Adjusted net earnings increased to $1.72 billion compared to $1.56 billion for the prior year period.

EBITDA was $1.95 billion for the nine months ended September 30, 2020, and $1.93 billion for the comparable prior year period. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $2.64 billion for the nine months ended September 30, 2020 and $2.48 billion for the comparable prior year period.

Cash Flow

U.S. GAAP net cash provided by operating activities for the three and nine months ended September 30, 2020 was $525.0 million and $1.20 billion, compared to $487.8 million and $1.12 billion in the comparable prior year periods. Capital expenditures were approximately $38.2 million and $126.1 million for the three and nine months ended September 30, 2020 compared to approximately $42.3 million and $139.6 million for the comparable prior year periods.

Adjusted net cash provided by operating activities for the three and nine months ended September 30, 2020 was $668.2 million and $1.63 billion compared to adjusted net cash provided by operating activities of $584.4 million and $1.43 billion for the comparable prior year period. Adjusted free cash flow, defined as adjusted net cash provided by operating activities less capital expenditures, was $630.7 million and $1.51 billion for the three and nine months ended September 30, 2020, compared to $542.1 million and $1.29 billion for the comparable prior year period.

About Mylan

Mylan is a global pharmaceutical company committed to setting new standards in healthcare. Working together around the world to provide 7 billion people access to high quality medicine, we innovate to satisfy unmet needs; make reliability and service excellence a habit; do what's right, not what's easy; and impact the future through passionate global leadership. We offer a portfolio of more than 7,500 marketed products around the world, including antiretroviral therapies on which approximately 40% of people being treated for HIV/AIDS globally depend. We market our products in more than 165 countries and territories. We are one of the world's largest producers of active pharmaceutical ingredients. Our approximately 35,000-strong workforce is dedicated to creating better health for a better world, one person at a time. Learn more at Mylan.com. We routinely post information that may be important to investors on our website at investor.mylan.com.