myl-20200930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____________to___________

Commission File Number 333-199861

MYLAN N.V.

(Exact name of registrant as specified in its charter)


Netherlands						98-1493528
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Building 4, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL, England

(Address of principal executive offices)

+44 (0) 1707-853-000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading Symbol(s):

Name of each exchange on which registered:

Ordinary shares, nominal value €0.01

MYL

The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of October 30, 2020, there were 541,545,862 of the issuer’s €0.01 nominal value ordinary shares outstanding.

Table of Contents

MYLAN N.V. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarterly Period Ended

September 30, 2020


		Page
	PART I — FINANCIAL INFORMATION
ITEM 1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Statements of Operations — Three and Nine Months Ended September 30, 2020 and 2019	3
	Condensed Consolidated Statements of Comprehensive Earnings (Loss) — Three and Nine Months Ended September 30, 2020 and 2019	4
	Condensed Consolidated Balance Sheets — September 30, 2020 and December 31, 2019	5
	Condensed Consolidated Statements of Equity — Three and Nine Months Ended September 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2020 and 2019	8

	Notes to Condensed Consolidated Financial Statements	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	78

ITEM 4.	Controls and Procedures	78

	PART II — OTHER INFORMATION
ITEM 1.	Legal Proceedings	79

ITEM 1A.	Risk Factors	80



ITEM 6.	Exhibits	81

SIGNATURES		82

Table of Contents

PART I — FINANCIAL INFORMATION

MYLAN N.V. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited; in millions, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenues:
Net sales	$	2,948.1	$	2,928.2	$	8,232.2	$	8,207.0
Other revenues	24.0		33.5		90.3		101.7
Total revenues	2,972.1		2,961.7		8,322.5		8,308.7
Cost of sales	1,813.6		1,889.3		5,232.2		5,498.5
Gross profit	1,158.5		1,072.4		3,090.3		2,810.2
Operating expenses:
Research and development	129.8		167.9		400.3		488.1
Selling, general and administrative	658.4		632.7		1,983.2		1,909.2
Litigation settlements and other contingencies, net	18.9		(51.9)		36.5		(30.3)
Total operating expenses	807.1		748.7		2,420.0		2,367.0
Earnings from operations	351.4		323.7		670.3		443.2
Interest expense	117.3		128.9		353.4		391.3
Other (income) expense, net	(7.5)		9.0		24.6		32.7
Earnings (Loss) before income taxes	241.6		185.8		292.3		19.2
Income tax provision (benefit)	55.9		(4.0)		46.4		22.9
Net earnings (loss)	$	185.7	$	189.8	$	245.9	$	(3.7)
Earnings (Loss) per ordinary share:
Basic	$	0.36	$	0.37	$	0.48	$	(0.01)
Diluted	$	0.36	$	0.37	$	0.48	$	(0.01)
Weighted average ordinary shares outstanding:
Basic	516.9		516.0		516.8		515.5
Diluted	517.7		516.2		517.3		515.5

See Notes to Condensed Consolidated Financial Statements

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MYLAN N.V. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(Unaudited; in millions)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net earnings (loss)	$	185.7	$	189.8	$	245.9	$	(3.7)
Other comprehensive earnings (loss), before tax:
Foreign currency translation adjustment	687.7		(748.9)		483.1		(890.8)
Change in unrecognized (loss) gain and prior service cost related to defined benefit plans	(1.6)		(0.7)		3.4		(0.5)
Net unrecognized gain (loss) on derivatives in cash flow hedging relationships	32.5		(10.6)		(0.2)		24.8
Net unrecognized (loss) gain on derivatives in net investment hedging relationships	(114.7)		111.8		(119.7)		133.6
Net unrealized gain on marketable securities	—		0.1		0.8		0.7
Other comprehensive earnings (loss), before tax	603.9		(648.3)		367.4		(732.2)
Income tax provision (benefit)	2.8		1.2		(6.0)		14.1
Other comprehensive earnings (loss), net of tax	601.1		(649.5)		373.4		(746.3)
Comprehensive earnings (loss)	$	786.8	$	(459.7)	$	619.3	$	(750.0)

See Notes to Condensed Consolidated Financial Statements

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MYLAN N.V. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited; in millions, except share and per share amounts)


	September 30, 2020		December 31, 2019
ASSETS
Assets
Current assets:
Cash and cash equivalents	$	664.5	$	475.6
Accounts receivable, net	2,964.1		3,058.8
Inventories	3,022.0		2,670.9
Prepaid expenses and other current assets	684.1		552.0
Total current assets	7,334.7		6,757.3
Property, plant and equipment, net	2,058.3		2,149.6
Intangible assets, net	10,965.8		11,649.9
Goodwill	9,817.3		9,590.6
Deferred income tax benefit	658.1		703.1
Other assets	408.9		405.0
Total assets	$	31,243.1	$	31,255.5

LIABILITIES AND EQUITY
Liabilities
Current liabilities:
Accounts payable	$	1,447.8	$	1,528.1
Short-term borrowings	0.3		—
Income taxes payable	343.3		213.0
Current portion of long-term debt and other long-term obligations	3,237.8		1,508.1
Other current liabilities	2,246.2		2,319.9
Total current liabilities	7,275.4		5,569.1
Long-term debt	9,101.5		11,214.3
Deferred income tax liability	1,417.4		1,627.5
Other long-term obligations	900.9		960.8
Total liabilities	18,695.2		19,371.7
Equity
Mylan N.V. shareholders’ equity
Ordinary shares — nominal value €0.01 per ordinary share
Shares authorized: 1,200,000,000
Shares issued: 541,550,055 and 540,746,871 as of September 30, 2020 and December 31, 2019	6.1		6.1
Additional paid-in capital	8,688.3		8,643.5
Retained earnings	6,277.0		6,031.1
Accumulated other comprehensive loss	(1,423.8)		(1,797.2)
	13,547.6		12,883.5

Less: Treasury stock — at cost
Ordinary shares: 24,598,074 as of September 30, 2020 and December 31, 2019	999.7		999.7
Total equity	12,547.9		11,883.8
Total liabilities and equity	$	31,243.1	$	31,255.5

See Notes to Condensed Consolidated Financial Statements

Table of Contents

MYLAN N.V. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(Unaudited; in millions, except share amounts)


				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Ordinary Shares							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at June 30, 2020	541,545,308	$	6.1	$	8,673.2	$	6,091.5	24,598,074	$	(999.7)	$	(2,024.9)	$	11,746.2
Net earnings	—	—		—		185.7		—	—		—		185.7
Other comprehensive earnings, net of tax	—	—		—		—		—	—		601.1		601.1
Issuance of restricted stock and stock options exercised, net	4,747	—		—		—		—	—		—		—

Share-based compensation expense	—	—		15.1		—		—	—		—		15.1




Other	—	—		—		(0.2)		—	—		—		(0.2)
Balance at September 30, 2020	541,550,055	$	6.1	$	8,688.3	$	6,277.0	24,598,074	$	(999.7)	$	(1,423.8)	$	12,547.9

				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Ordinary Shares							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at December 31, 2019	540,746,871	$	6.1	$	8,643.5	$	6,031.1	24,598,074	$	(999.7)	$	(1,797.2)	$	11,883.8
Net earnings	—	—		—		245.9		—	—		—		245.9
Other comprehensive earnings, net of tax	—	—		—		—		—	—		373.4		373.4
Issuance of restricted stock and stock options exercised, net	803,184	—		0.6		—		—	—		—		0.6
Taxes related to the net share settlement of equity awards	—	—		(5.6)		—		—	—		—		(5.6)
Share-based compensation expense	—	—		49.8		—		—	—		—		49.8





Balance at September 30, 2020	541,550,055	$	6.1	$	8,688.3	$	6,277.0	24,598,074	$	(999.7)	$	(1,423.8)	$	12,547.9

See Notes to Condensed Consolidated Financial Statements

Table of Contents


				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Ordinary Shares							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at June 30, 2019	540,459,996	$	6.1	$	8,617.3	$	5,820.8	24,598,074	$	(999.7)	$	(1,541.7)	$	11,902.8
Net earnings	—	—		—		189.8		—	—		—		189.8
Other comprehensive loss, net of tax	—	—		—		—		—	—		(649.5)		(649.5)
Issuance of restricted stock and stock options exercised, net	279,505	—		4.2		—		—	—		—		4.2

Share-based compensation expense	—	—		16.1		—		—	—		—		16.1





Balance at September 30, 2019	540,739,501	$	6.1	$	8,637.6	$	6,010.6	24,598,074	$	(999.7)	$	(2,191.2)	$	11,463.4

				Additional Paid-In Capital		Retained Earnings					Accumulated Other Comprehensive Loss		Total Equity
	Ordinary Shares							Treasury Stock
	Shares	Cost						Shares	Cost
Balance at December 31, 2018	539,289,665	$	6.0	$	8,591.4	$	6,010.7	23,490,867	$	(999.7)	$	(1,441.3)	$	12,167.1
Net loss	—	—		—		(3.7)		—	—		—		(3.7)
Other comprehensive loss, net of tax	—	—		—		—		—	—		(746.3)		(746.3)
Issuance of restricted stock and stock options exercised, net	1,449,836	—		8.1		—		—	—		—		8.1
Taxes related to the net share settlement of equity awards	—	—		(12.8)		—		—	—		—		(12.8)
Share-based compensation expense	—	—		50.9		—		—	—		—		50.9


Cancellation of restricted stock	—	0.1		—		—		1,107,207	—		—		0.1
Cumulative effect of the adoption of new accounting standards	—	—		—		3.6		—	—		(3.6)		—

Balance at September 30, 2019	540,739,501	$	6.1	$	8,637.6	$	6,010.6	24,598,074	$	(999.7)	$	(2,191.2)	$	11,463.4

See Notes to Condensed Consolidated Financial Statements

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MYLAN N.V. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited; in millions)


	Nine Months Ended
	September 30,
	2020		2019
Cash flows from operating activities:
Net earnings (loss)	$	245.9	$	(3.7)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization	1,263.0		1,471.6
Share-based compensation expense	49.8		50.9
Deferred income tax benefit	(210.4)		(158.0)
Loss from equity method investments	37.4		43.6
Other non-cash items	134.3		124.2
Litigation settlements and other contingencies, net	43.6		13.5
Changes in operating assets and liabilities:
Accounts receivable	(27.3)		(20.7)
Inventories	(532.4)		(477.6)
Accounts payable	(99.7)		(83.2)
Income taxes	115.2		(60.2)
Other operating assets and liabilities, net	176.2		216.6
Net cash provided by operating activities	1,195.6		1,117.0
Cash flows from investing activities:
Cash paid for acquisitions, net	—		(148.7)
Capital expenditures	(126.1)		(139.6)
Purchase of available for sale securities and other investments	(96.1)		(19.5)
Proceeds from the sale of marketable securities	38.6		19.1
Payments for product rights and other, net	(97.3)		(146.5)
Proceeds from the sale of assets	2.1		24.3
Net cash used in investing activities	(278.8)		(410.9)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	33.2		6.4
Payments of long-term debt	(588.9)		(657.1)
Non-contingent payments for product rights	(139.5)		—
Change in short-term borrowings, net	0.3		(1.9)
Taxes paid related to net share settlement of equity awards	(7.1)		(8.4)
Contingent consideration payments	(48.5)		(47.8)
Payments of financing fees	(1.8)		(2.7)
Proceeds from exercise of stock options	0.6		8.0
Other items, net	(3.1)		(1.1)
Net cash used in financing activities	(754.8)		(704.6)
Effect on cash of changes in exchange rates	14.0		(16.4)
Net increase (decrease) in cash, cash equivalents and restricted cash	176.0		(14.9)
Cash, cash equivalents and restricted cash — beginning of period	491.1		389.3
Cash, cash equivalents and restricted cash — end of period	$	667.1	$	374.4

See Notes to Condensed Consolidated Financial Statements

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MYLAN N.V. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.General

The accompanying unaudited condensed consolidated financial statements (“interim financial statements”) of Mylan N.V. and subsidiaries (“Mylan” or the “Company”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q; therefore, as permitted under these rules, certain footnotes and other financial information included in audited financial statements were condensed or omitted. The interim financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the interim results of operations, comprehensive earnings, financial position, equity and cash flows for the periods presented.

The global spread of the coronavirus disease 2019 (“COVID-19”) has created significant volatility, uncertainty and economic disruption affecting the markets we serve in North America, Europe and Rest of World, including Asia. Certain significant impacts of COVID-19 on our business are discussed in these notes to the condensed consolidated financial statements.

These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in Mylan N.V.’s Annual Report on Form 10-K for the year ended December 31, 2019, as amended (the “2019 Form 10-K”). The December 31, 2019 condensed consolidated balance sheet was derived from audited financial statements.

The interim results of operations and comprehensive earnings (loss) for the three and nine months ended September 30, 2020, and cash flows for the nine months ended September 30, 2020, are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.

2.Revenue Recognition and Accounts Receivable

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes net revenue for product sales when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenues are recorded net of provisions for variable consideration, including discounts, rebates, governmental rebate programs, price adjustments, returns, chargebacks, promotional programs and other sales allowances. Accruals for these provisions are presented in the condensed consolidated financial statements as reductions in determining net sales and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash).

Our net sales may be impacted by wholesaler and distributor inventory levels of our products, which can fluctuate throughout the year due to the seasonality of certain products, pricing, the timing of product demand, customer purchasing decisions and other factors. Such fluctuations may impact the comparability of our net sales between periods.

Consideration received from licenses of intellectual property is recorded as other revenues. Royalty or profit share amounts, which are based on sales of licensed products or technology, are recorded when the customer’s subsequent sales or usages occur. Such consideration is included in other revenue in the condensed consolidated statements of operations.

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MYLAN N.V. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

The following table presents the Company’s net sales by therapeutic franchise for each of our reportable segments for the three and nine months ended September 30, 2020 and 2019, respectively:


(In millions)	North America		Europe		Rest of World		Total
Three Months Ended September 30, 2020
Central Nervous System & Anesthesia	$	181.8	$	211.5	$	81.1	$	474.4
Infectious Disease	37.3		197.2		272.6		507.1
Respiratory & Allergy	284.9		103.1		74.4		462.4
Cardiovascular	58.5		125.6		38.4		222.5
Gastroenterology	41.8		166.2		91.7		299.7
Diabetes & Metabolism	70.8		80.1		36.3		187.2
Dermatology	33.2		72.8		20.3		126.3
Women’s Healthcare	96.0		60.5		34.0		190.5
Oncology	171.4		30.4		40.0		241.8
Immunology	7.9		35.2		10.2		53.3
Other (1)	45.2		41.2		96.5		182.9
Total	$	1,028.8	$	1,123.8	$	795.5	$	2,948.1

Nine Months Ended September 30, 2020
Central Nervous System & Anesthesia	$	484.0	$	631.0	$	210.8	$	1,325.8
Infectious Disease	120.7		320.1		756.8		1,197.6
Respiratory & Allergy	890.4		362.3		165.6		1,418.3
Cardiovascular	184.4		372.7		102.9		660.0
Gastroenterology	121.0		465.6		252.6		839.2
Diabetes & Metabolism	187.4		231.7		89.7		508.8
Dermatology	87.8		215.0		57.2		360.0
Women’s Healthcare	275.9		180.6		84.9		541.4
Oncology	470.8		71.2		103.8		645.8
Immunology