CB

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM CB

 

 

TENDER OFFER/RIGHTS OFFERING NOTIFICATION FORM

Please place an X in the box(es) to designate the appropriate rule provision(s) relied upon to file this Form:

 

Securities Act Rule 801 (Rights Offering)    ¨        
Securities Act Rule 802 (Exchange Offer)    x        
Exchange Act Rule 13e-4(h)(8) (Issuer Tender Offer)    ¨        
Exchange Act Rule 14d-1(c) (Third Party Tender Offer)    x        
Exchange Act Rule 14e-2(d) (Subject Company Response)    ¨        
Filed or submitted in paper if permitted by Regulation S-T Rule 101(b)(8)    ¨        

 

 

Meda AB

(Name of Subject Company)

 

 

Not applicable

(Translation of Subject Company’s Name into English (if applicable)

Sweden

(Jurisdiction of Subject Company’s Incorporation or Organization)

Mylan N.V.

(Name of Person(s) Furnishing Form)

Shares

(Title of Class of Subject Securities)

Not Applicable

(CUSIP Number of Class of Securities (if applicable))

Dr. Jörg-Thomas Dierks, CEO

Box 906

SE-170 09 Solna, Sweden

Telephone: +46 8 630 19 00

(Name, Address (including zip code) and Telephone Number (including area code) of

Person(s) Authorized to Receive Notices and Communications on Behalf of Subject Company)

Copies to:

Joseph F. Haggerty

Corporate Secretary

Mylan N.V.

c/o Mylan Inc.

1000 Mylan Boulevard

Canonsburg, Pennsylvania 15317

Tel: (724) 514-1800

and

 

Bradley L. Wideman, Esq.

Vice President, Associate General Counsel,

Securities and Assistant Secretary

Mylan N.V.

c/o Mylan Inc.

1000 Mylan Boulevard

Canonsburg, Pennsylvania 15317

(724) 514-1800

 

Mark I. Greene, Esq.

Thomas E. Dunn, Esq.

Aaron M. Gruber, Esq.

Cravath, Swaine & Moore LLP

825 Eighth Avenue

New York, New York 10019

(212) 474-1000

June 17, 2016

(Date Tender Offer/Rights Offering Commenced)

 

 


PART I – INFORMATION SENT TO SECURITY HOLDERS

Item 1.   Home Jurisdiction Documents

 

(a)

 

Exhibit No.

  

Description

99.1

   English Translation of Swedish Offer Document, published on June 16, 2016.

99.2

   EU Prospectus, published on June 16, 2016.

(b) Not applicable.

Item 2.   Informational Legends

The below legend was mailed along with the Swedish Offer Document to the Meda AB shareholders and has been included on a webpage required to be clicked through prior to accessing the Swedish Offer Document, which has been published on Mylan N.V.’s website, medatransaction.mylan.com, in accordance with Swedish requirements:

“Special notice to shareholders in the United States

This Offer is made for the securities of a foreign company. The Offer is subject to disclosure requirements of a foreign country that are different from those of the United States. Certain financial statements included or incorporated by reference in the document, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of U.S. companies.

It may be difficult for investors to enforce their rights and any claim they may have arising under the federal securities laws, since Meda is incorporated in Sweden and Mylan is incorporated in the Netherlands, and some or all of their respective officers and directors may be residents of a foreign country. Investors may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court’s judgment.

Investors should be aware that Mylan may purchase securities otherwise than under the Offer, such as in open market or privately negotiated purchases.”

PART II – INFORMATION NOT REQUIRED TO BE SENT TO SECURITY HOLDERS

 

  (1) Not applicable.
  (2) Not applicable.
  (3) Not applicable.

PART III – CONSENT TO SERVICE OF PROCESS

 

  (1) Not applicable.
  (2) Not applicable.


PART IV – SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

MYLAN N.V.
By:  

/s/ Kenneth S. Parks

Name:    

Kenneth S. Parks

Title:   Chief Financial Officer

Date: June 17, 2016

EX-99.1
Table of Contents

Exhibit 99.1

 

LOGO

 

 

Mylan’s offer to the

shareholders of Meda

 


Table of Contents

Important information

This offer document (this “Offer Document”) has been prepared in accordance with the Swedish Financial Instruments Trading Act (SFS 1991:980) (the “Trading Act”), the Swedish Takeover Act (Sw. lagen om offentliga uppköpserbjudanden på aktiemarknaden) (the “Takeover Act”) and Nasdaq Stockholm’s Takeover Rules (the “Takeover Rules”). This Offer Document has been prepared in Swedish and English. In the event of any discrepancy in content between the language versions, the Swedish version shall prevail.

The Swedish version of this Offer Document has been approved and registered by the Swedish Financial Supervisory Authority (Sw: Finans inspektionen) (the “SFSA”) pursuant to the provisions of Chapter 2 of the Takeover Act and Chapter 2a of the Trading Act. Approval and registration by the SFSA do not imply that the SFSA guarantees that the information provided in this Offer Document is correct or complete.

Mylan N.V.’s (“Mylan”) public offer to the shareholders of Meda Aktiebolag (publ.) (“Meda”) in accordance with the terms specified in this Offer Document (the “Offer”) and this Offer Document are governed by and construed in all respects in accordance with the substantive laws of Sweden, without regard to any conflict of law principles leading to the application of laws of any other jurisdiction. The Takeover Rules and the Swedish Securities Council’s rulings and statements on the application and interpretation of the Takeover Rules apply to the Offer. In accordance with the Takeover Act, Mylan has contractually undertaken towards Nasdaq Stockholm to comply with the rules established by Nasdaq Stockholm for such offers and submit to any sanctions that Nasdaq Stockholm can impose on Mylan in the event of a breach of the Takeover Rules. On February 10, 2016, Mylan informed the SFSA about the commitment to Nasdaq Stockholm. Any dispute regarding the Offer, or which arises in connection with the Offer or this Offer Document, shall be settled exclusively by Swedish Courts, and the City Court of Stockholm shall be the court of first instance.

The information in this Offer Document is only provided in contemplation of the Offer and may not be used for any other purpose. There is no guarantee that the information provided in this Offer Document is current as of any date other than the date of the publication of this Offer Document or that there have not been any changes in Mylan’s or Meda’s business since that date. If the information in this Offer Document becomes subject to any material change, such material change will be made public in accordance with the provisions of the Trading Act, which governs the publication of supplements to this Offer Document.

Except for what is stated on pages 97, 130 and 184, or otherwise expressly stated in this Offer Document, no information in this Offer Document has been reviewed by Mylan’s auditors or reporting accountants or Meda’s auditors. The figures reported in this Offer Document have in some cases been rounded off, and as a result the figures in tables may not tally with the stated totals.

Additional information

In connection with the Offer, Mylan has filed certain materials with the Securities and Exchange Commission (the “SEC”), including, among other materials, a Registration Statement on Form S-4 filed on April 11, 2016 (as amended on May 13, June 3 and June 14, 2016, the “Registration Statement”). Mylan has also filed the prospectus to be issued in connection with the Offer (the “EU Prospectus”) with the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten) (the “AFM”), which will published upon approval by the AFM. This Offer Document is not intended to be, and is not, a substitute for such documents or for any other document that Mylan may file with the SEC, the AFM or any other competent EU authority in connection with the Offer. This Offer Document contains advertising materials (reclame-uitingen) in connection with the Offer as referred to in Section 5:20 of the Dutch Financial Supervision Act (Wet op het financieel toezicht). INVESTORS AND SECURITYHOLDERS OF MEDA IN SWEDEN AND INVESTORS AND SECURITYHOLDERS OF MEDA IN THE EUROPEAN ECONOMIC AREA BUT OUTSIDE OF SWEDEN ARE URGED TO READ THE OFFER DOCUMENT THAT IS APPROVED BY THE SFSA AND ANY SUPPLEMENT THERETO, OR THE EU PROSPECTUS THAT IS APPROVED BY THE AFM AND ANY SUPPLEMENT THERETO, AS APPLICABLE, CAREFULLY AND IN THEIR ENTIRETY BEFORE MAKING AN INVESTMENT DECISION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT MYLAN, MEDA AND THE OFFER. INVESTORS AND SECURITYHOLDERS OF MEDA OUTSIDE THE EUROPEAN ECONOMIC AREA ARE URGED TO READ ANY DOCUMENTS FILED WITH THE SFSA, THE SEC AND THE AFM OR ANY OTHER COMPETENT EU AUTHORITY CAREFULLY AND IN THEIR ENTIRETY (IF AND WHEN THEY BECOME AVAILABLE) BEFORE MAKING AN INVESTMENT DECISION BECAUSE THEY WILL EACH CONTAIN IMPORTANT INFORMATION ABOUT MYLAN, MEDA AND THE OFFER. Such documents are or upon publication will be available free of charge through the website maintained by the SEC at www.sec.gov, on Mylan’s website at medatransaction.mylan.com or, to the extent filed with the AFM, through the website maintained by the AFM at www.afm.nl, or by directing a request to Mylan at +1 (724) 514-1813 or investor.relations@mylan.com. Any materials filed by Mylan with the SFSA, the SEC, the AFM or any other competent EU authority that are required to be mailed to Meda shareholders will also be mailed to such shareholders. A copy of this Offer Document will be available free of charge at the following website: medatransaction.mylan.com.

Further information

The Offer, pursuant to the terms and conditions presented in Mylan’s offer announcement dated February 10, 2016 and in this Offer Document, is not being made to persons whose participation in the Offer requires that an additional offer document or prospectus be prepared or registration effected or that any other measures be taken in addition to those required under Swedish law (including the Takeover Rules), Dutch law, Danish law, Irish law, United Kingdom law and U.S. law.

The distribution of this Offer Document and any related Offer documentation in certain jurisdictions may be restricted or affected by the laws of such jurisdictions. Accordingly, copies of this Offer Document are not being, and must not be, mailed or otherwise forwarded, distributed or sent in, into or from any such jurisdiction. Therefore, persons who receive this Offer Document (including, without limitation, nominees, trustees and custodians) and are subject to the laws of any such jurisdiction will need to inform themselves about, and observe, any applicable restrictions or requirements. Any failure to do so may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, Mylan disclaims any responsibility or liability for the violations of any such restrictions by any person.

The Offer is not being made, and this Offer Document may not be distributed, directly or indirectly, in or into, nor will any tender of shares be accepted from or on behalf of holders in, Australia, Hong Kong, Japan, Canada, New Zealand or South Africa, or any other jurisdiction in which the making of the Offer, the distribution of this Offer Document or the acceptance of any tender of shares would contravene applicable laws or regulations or require further offer documents, filings or other measures in addition to those required under Swedish law (including the Takeover Rules), Dutch law, United Kingdom law, Danish law, Irish law and U.S. law.

With regard to Meda shareholders in the European Economic Area but outside Sweden, any election to accept the Offer should only be made on the basis of information contained in the EU Prospectus that is approved by the AFM and any supplement thereto. In addition, Meda shareholders outside the European Economic Area should consider the information contained in the Registration Statement that is declared effective by the SEC. It may be unlawful to distribute the EU Prospectus or this Offer Document in certain jurisdictions. The AFM will be requested to provide the Danish Financial Supervision Authority (“DFSA”), the Central Bank of Ireland (“CBI”) and the UK Financial Conduct Authority (“FCA”), with a certificate of approval attesting that the EU Prospectus has been drawn up in accordance with Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003, as amended.

Forward-looking information

This Offer Document contains “forward-looking statements.” Such forward-looking statements may include, without limitation, statements about Mylan’s proposed transaction to acquire Meda (the “Transaction”), the Offer, Mylan’s acquisition (the “EPD Transaction”) of Mylan Inc. and Abbott Laboratories’ non-U.S. developed markets specialty and branded generics business (the “EPD Business”), the benefits and synergies of the EPD Transaction and the Transaction, future opportunities for Mylan, Meda, or the combination of Mylan and Meda if the Offer is completed (the “Combined Company”) and products and any other statements regarding Mylan’s, Meda’s or the Combined Company’s future operations, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competition, and other expectations and targets for future periods. These may often be identified by the use of words such as “will,” “may,” “could,” “should,” “would,” “project,” “believe,” “anticipate,” “expect,” “plan,” “estimate,” “forecast,” “potential,” “intend,” “continue,” “target” and variations of these words or comparable words. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: uncertainties related to the Transaction, including as to the timing of the Transaction, uncertainties as to whether Mylan will be able to complete the Transaction, the possibility that competing offers will be made, the possibility that certain conditions to the completion of the Offer will not be satisfied, and the possibility that Mylan will be unable to obtain regulatory approvals for the Transaction or be required, as a condition to obtaining regulatory approvals, to accept conditions that could reduce the anticipated benefits of the Transaction; the ability to meet expectations regarding the accounting and tax treatments of the Transaction and the EPD Transaction, changes in relevant tax and other laws, including but not limited to changes in the U.S. tax code and healthcare and pharmaceutical laws and regulations in the U.S. and abroad; the integration of the EPD Business and Meda being more difficult, time-consuming, or costly than expected; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients, or suppliers) being greater than expected following the EPD Transaction and the Transaction; the retention of certain key employees of the EPD Business and Meda being difficult; the possibility that Mylan may be unable to achieve expected synergies and operating efficiencies in connection with the EPD Transaction and the Transaction within the expected time-frames or at all and to successfully integrate the EPD Business and Meda; expected or targeted future financial and operating performance and results; the capacity to bring new products to market, including but not limited to where Mylan uses its business judgment and decides to manufacture, market, and/or sell products, directly or through third parties, notwithstanding the fact that allegations of patent infringement(s) have not been finally resolved by the courts (i.e., an “at-risk launch”); any regulatory, legal, or other impediments to Mylan’s ability to bring new products to market; success of clinical trials and Mylan’s ability to execute on new product opportunities; any changes in or difficulties with Mylan’s inventory of, and its ability to manufacture and distribute, the EpiPen® Auto-Injector to meet anticipated demand; the scope, timing and outcome of any ongoing legal proceedings and the impact of any such proceedings on financial condition, results of operations and/or cash flows; the ability to protect intellectual property and preserve intellectual property rights; the effect of any changes in customer and supplier relationships and customer purchasing patterns; the ability to attract and retain key personnel; changes in third-party relationships; the impact of competition; changes in the economic and financial conditions of the businesses of Mylan, Meda or the Combined Company; the inherent challenges, risks, and costs in identifying, acquiring, and integrating complementary or strategic acquisitions of other companies, products or assets and in achieving anticipated synergies; uncertainties and matters beyond the control of management; and inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements, and the providing of estimates of financial measures, in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), International Financial Reporting Standards (“IFRS”) and related standards or on an adjusted basis. For more detailed information on the risks and uncertainties associated with Mylan’s business activities, see the risks described in Mylan’s Annual Report on Form 10-K for the year ended December 31, 2015, its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 and its other filings with the SEC. These risks and uncertainties also include those risks and uncertainties that will be discussed in this Offer Document, the Registration Statement filed with the SEC, and the EU Prospectus filed with the AFM. You can access Mylan’s filings with the SEC through the SEC website at www.sec.gov, and Mylan strongly encourages you to do so. Mylan undertakes no obligation to update any statements herein for revisions or changes after the publication date of this Offer Document, except as required by law.

Non-GAAP and Non-IFRS financial measures

This Offer Document contains non-GAAP and non-IFRS financial measures. Non-GAAP and non-IFRS financial measures should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP or IFRS, as applicable. For more information regarding such non-GAAP and non-IFRS financial measures, including reconciliations of certain non-GAAP financial measures to their most directly comparable U.S. GAAP measure, see Appendix I to this Offer Document.

Presentation of financial and other information

This Offer Document contains historical financial information regarding Mylan and Meda that has been derived from their respective public filings and reports. Historical financial information regarding Mylan as of and for the years ended December 31, 2015, 2014 and 2013 has been derived from Mylan’s Annual Reports on Form 10-K for the years ended December 31, 2015, 2014 and 2013 and historical financial information regarding Mylan as of and for the three months ended March 31, 2016 and 2015 has been derived from Mylan’s Quarterly Report on Form 10-Q for the three months ended March 31, 2016. Mylan’s consolidated financial statements and the related notes included in such Annual Reports on Form 10-K are audited, but financial information derived from other sections of such Annual Reports on Form 10-K is unaudited. All financial information derived from Mylan’s Quarterly Report on Form 10-Q is unaudited. Historical financial information regarding Meda as of and for the years ended December 31, 2015, 2014 and 2013 has been derived from Meda’s Annual Reports for 2015, 2014 and 2013 and historical financial information regarding Meda as of and for the three months ended March 31, 2016 and 2015 has been derived from Meda’s Interim Report for January-March 2016.

Special notice to shareholders in the United States

This Offer is made for the securities of a foreign company. The Offer is subject to disclosure requirements of a foreign country that are different from those of the United States. Certain financial statements included or incorporated by reference in the document, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of U.S. companies.

It may be difficult for investors to enforce their rights and any claim they may have arising under the federal securities laws, since Meda is incorporated in Sweden and Mylan is incorporated in the Netherlands, and some or all of their respective officers and directors may be residents of a foreign country. Investors may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court’s judgment.

Investors should be aware that Mylan may purchase securities otherwise than under the Offer, such as in open market or privately negotiated purchases.

 


Table of Contents

 

 

 

Contents

 

Summary

    2   

Risk factors related to Mylan and the Offer

    15   

Risk factors related to Meda

    50   

The Offer

    57   

Background and reasons

    61   

Terms, conditions and instructions

    63   

Statement by the Meda Board

    68   

Opinion of SEB Corporate Finance

    77   

 

Information about the Combined Company

    81   

Information about Mylan

    99   

Information about Meda

    185   

Tax matters

    223   

Appendix I: Non-GAAP financial measures

    238   

Addresses

    246   
 

The Offer in brief

Mylan is making a recommended public offer to the shareholders of Meda to tender all their shares of Meda for the following Offer consideration (the “Offer Consideration”):

 

    in respect of 80 percent of the number of Meda shares tendered by each Meda shareholder, SEK 165 in cash per Meda share; and  
    in respect of the remaining 20 percent of the number of Meda shares tendered by each Meda shareholder:  

 

    (i) if the volume-weighted average sale price per Mylan ordinary share (“Mylan Share”) on the NASDAQ Global Select Stock Market (“NASDAQ”) for the 20 consecutive trading days ending on and including the second trading day prior to the Offer being declared unconditional (the “Offeror Average Closing Price”) is greater than USD 50.74, a number of Mylan Shares per Meda share equal to SEK 165 divided by the Offeror Average Closing Price as converted from USD to SEK at a SEK/USD exchange rate of 8.4158 (the “Announcement Exchange Rate”);  
    (ii) if the Offeror Average Closing Price is greater than USD 30.78 and less than or equal to USD 50.74, 0.386 Mylan Shares per Meda share; or
    (iii) if the Offeror Average Closing Price is less than or equal to USD 30.78, a number of Mylan Shares per Meda share equal to SEK 100 divided by the Offeror Average Closing Price as converted from USD to SEK at the Announcement Exchange Rate.

 

    If the aggregate number of Mylan Shares that otherwise would be required to be issued by Mylan as described above exceeds 28,214,081 Mylan Shares (the “Share Cap”)1, then Mylan will have the option (in its sole discretion) to (a) issue Mylan Shares in connection with the Offer in excess of the Share Cap and thus pay the share portion of the Offer Consideration as described above (i.e. the 20 percent set out above), (b) increase the cash portion of the Offer Consideration (so that it becomes larger than the 80 percent set out above) and thus correspondingly decrease the share portion of the Offer Consideration (so that it becomes smaller than the 20 percent set out above) such that the aggregate number of Mylan Shares issuable by Mylan in connection with the Offer would equal the Share Cap or (c) execute a combination of the foregoing.  

The acceptance period for the Offer runs from and including June 17, 2016 up to and including July 29, 2016. Settlement is expected to commence around August 10, 2016. Mylan reserves the right to extend the acceptance period and, to the extent necessary and permissible, will do so in order for the acceptance period to cover applicable decision-making procedures at relevant authorities. Mylan also reserves the right to postpone the settlement date. For further information regarding the Offer, see “The Offer” and “Terms, conditions and instructions.”

Mylan is making the Offer for several strategic reasons. Among others, the combination of Mylan and Meda will create a global pharmaceutical leader that is even more diversified and has a more expansive portfolio of branded and generic medicines and a stronger and growing portfolio of over-the-counter (“OTC”) products.2 The Combined Company will have a balanced global footprint with significant scale in key geographic markets, particularly the U.S. and Europe. The acquisition of Meda also provides Mylan with entry into a number of new and attractive emerging markets, including China, Southeast Asia, Russia, the Middle East and Mexico, complemented by Mylan’s presence in India, Brazil and Africa. Mylan and Meda have a highly complementary therapeutic presence, which will create a leading global player in respiratory / allergy, and achieve critical mass in dermatology and pain, offering greater opportunities for growth in these categories.3

The Offer provides immediate and significant value to Meda shareholders and is supported by the Meda Board of Directors (the “Meda Board”) and Meda’s two largest shareholders, representing approximately 30 percent of Meda’s outstanding shares. If the Offer is completed, Meda shareholders will become shareholders of Mylan, which has a clear track record of creating shareholder value, with an annualized five year total shareholder return of approximately 20.7 percent.4

 

Certain definitions

Mylan means Mylan N.V., or, depending on the context, the group of which Mylan is the parent company including, following completion of the Offer, Meda.

Meda means Meda Aktiebolag (publ.), corp. ID No. 556427-2812, or, depending on the context, the group of which Meda is the parent company.

Combined Company means the combination of Mylan and Meda if the Offer is completed.

Offer means Mylan’s recommended public offer to the shareholders of Meda in accordance with the terms specified in this Offer Document.

Offer Document means this offer document.

2016 Bridge Credit Agreement means the bridge credit agreement dated as of February 10, 2016 among Mylan N.V., as borrower, Mylan Inc., as guarantor, Deutsche Bank AG Cayman Islands Branch, as administrative agent and a lender, Goldman Sachs Bank USA, as a lender, Goldman Sachs Lending Partners LLC, as a lender, and other lenders party thereto from time to time.

Bridge Credit Facility means the bridge credit facility made available to Mylan under the 2016 Bridge Credit Agreement.

Euroclear means Euroclear Sweden AB.

EU Prospectus means the prospectus to be issued in connection with the Offer.

New June 2016 Senior Notes refers to the $6.5 billion aggregate principal amount of Senior Notes, comprised of $1.0 billion aggregate principal amount of 2.50% Senior Notes due 2019, $2.25 billion aggregate principal amount of 3.15% Senior Notes due 2021, $2.25 billion aggregate principal amount of 3.95% Senior Notes due 2026 and $1.0 billion aggregate principal amount of 5.25% Senior Notes due 2046, issued by Mylan on June 9, 2016, in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), to qualified institutional buyers in accordance with Rule 144A and to persons outside of the U.S. pursuant to Regulation S under the Securities Act, as amended.

Nasdaq Stockholm means the Swedish regulated market, Nasdaq Stockholm, or, depending on the context, its market operator Nasdaq Stockholm Aktiebolag.

Registration Statement means Mylan’s Registration Statement on Form S-4, which has been prepared in connection with the Offer.

SEC means the U.S. Securities and Exchange Commission.

SEK, EUR/ and USD/$ mean Swedish kronor, euro and U.S. Dollar, respectively. M means millions.

Transaction means the proposed acquisition of Meda by Mylan pursuant to the Offer.

 

1  The Share Cap will be exceeded if the Offeror Average Closing Price is less than USD 30.78, based on 365,467,371 outstanding Meda shares (the number of outstanding Meda shares as of both the date of the announcement of the Offer and the most recent trading day prior to the date of this Offer Document) and assuming that 100 percent of the outstanding Meda shares will be tendered into the Offer).
2 See, e.g., Morgan Stanley Analyst Report, “Mylan Inc.: Updating MYL stand-alone and establishing pro forma Meda deal model,” February 17, 2016.
3 See, e.g., Global Data Industry Report, “Mylan N.V. (MYL) – Financial and Strategic SWOT Analysis Review,” May 2016.
4 Total shareholder return data is from Bloomberg and reflects total return (including price appreciation and reinvested dividends) as of December 31, 2015.

 

1


Table of Contents

 

 

 

 

Summary

This summary consists of disclosure requirements known as “Elements,” which are numbered in Sections A – E (A.1 – E.7).

This summary contains all the Elements required to be included in a summary for the type of securities and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.

Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of “not applicable.”

 

 

 
Section A – Introduction and warnings
A.1   Introduction and warnings   This summary should be read as an introduction to this Offer Document.
     

Any decision to invest in the Mylan Shares being offered as part of the Offer should be based on consideration of this Offer Document as a whole by the investor.

     

Where a claim relating to the information in this Offer Document is brought before a court in a Member State of the European Economic Area, the plaintiff investor might, under the national legislation of that Member State, have to bear the costs of translating this Offer Document before the legal proceedings are initiated.

     

Civil liability in relation to this summary may attach to Mylan, including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent with other parts of this Offer Document or if it does not provide, when read together with other parts of this Offer Document, key information in order to aid investors when considering whether to invest in the Mylan Shares.

A.2   Consent to the use of this Offer Document for resale or final placement of securities   Not applicable. The Offer is not being marketed by any financial intermediary.

 

 
Section B – Issuer
B.1   Legal and commercial name   Mylan’s legal and commercial name is Mylan N.V. The registration number of Mylan N.V. with the Dutch Trade register is 61036137.
B.2   Domicile and legal form   Mylan is a public limited liability company (naamloze vennootschap) organized and existing under the laws of the Netherlands, with its corporate seat (statutaire zetel) in Amsterdam, the Netherlands, its principal executive offices located at Building 4, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL England and Mylan N.V. group’s global headquarters located at 1000 Mylan Blvd., Canonsburg, PA 15317 U.S.A.
B.3   Nature of operations and principal activities   Mylan is a leading global pharmaceutical company, which develops, licenses, manufactures, markets and distributes generic, branded generic and specialty pharmaceuticals.5 Mylan is committed to setting new standards in healthcare by creating better health for a better world, and Mylan’s mission is to provide the world’s 7 billion people access to high quality medicine. To do so, Mylan innovates to satisfy unmet needs; makes reliability and service excellence a habit; does what’s right, not what’s easy; and impacts the future through passionate global leadership.
     

Mylan offers one of the industry’s broadest product portfolios, including more than 1,400 marketed products, to customers in approximately 165 countries and territories. Mylan operates a global, high quality vertically-integrated manufacturing platform, which includes more than 50 manufacturing and research and development (“R&D”) facilities around the world and one of the world’s largest active pharmaceutical ingredient (“API”) operations.6 Mylan also operates a strong and innovative R&D

     

 

5     See, e.g., Global Data Industry Report, “Mylan N.V. (MYL)–Financial and Strategic SWOT Analysis Review,” May 2016.

       

6     See, e.g., Global Data Industry Report, “Mylan N.V. (MYL)–Financial and Strategic SWOT Analysis Review,” May 2016.

 

2


Table of Contents

Summary

 

 

 

B.3   Nature of operations and principal activities, continued   network that has consistently delivered a robust product pipeline including a variety of dosage forms, therapeutic categories and biosimilars. Additionally, Mylan has a specialty pharmaceutical business that is focused on respiratory and allergy therapies.
     

Mylan operates in two segments, “Generics” and “Specialty.” Mylan’s Generics segment primarily develops, manufactures, sells and distributes generic or branded generic pharmaceutical products in tablet, capsule, injectable, transdermal patch, gel, cream or ointment form, as well as API. The Specialty segment engages mainly in the development and sale of branded specialty nebulized and injectable products. Mylan’s generic pharmaceutical business is conducted primarily in the U.S. and Canada (collectively, “North America”); Europe; and India, Australia, Japan, New Zealand and Brazil as well as its export activity into emerging markets (collectively, “Rest of World”). Mylan’s API business is conducted through Mylan Laboratories Limited, which is included within Rest of World in its Generics segment. Mylan’s specialty pharmaceutical business is conducted by Mylan Specialty L.P.

B.4a   Recent trends  

The following general trends are applicable to Mylan. In the U.S., increased sales volumes in the generic pharmaceutical industry are due to, among other factors, Part D of the Medicare Modernization Act, under which Medicare beneficiaries are eligible to obtain prescription drug coverage from private sector providers, which may be offset by increased pricing pressures due to the enhanced purchasing power of the private sector providers that are negotiating on behalf of Medicare beneficiaries. Mylan also believes that federal or state governments will continue to enact measures aimed at reducing the cost of drugs to the public under Medicaid, a U.S. federal healthcare program. The U.S. pharmaceutical market is also undergoing, and will likely continue to undergo, rapid and significant technological changes that are expected to intensify competition. In Europe, legislative changes are expected to move all regions in Spain to INN prescribing and substitution, making pharmacists the key driver of generic usage. Under the tender system in the Netherlands and Germany, health insurers are entitled to issue invitations to tender products. Pricing pressures resulting from an effort to win the tender should drive near-term competition. In Italy, extended patent protection has resulted in slower growth in its generics market as compared to other European countries. Government initiatives to lower pricing for pharmaceutical products throughout Europe have in some cases offset Mylan’s increased sales volumes and penetration in certain growing European markets. In India, Mylan expects exports of API and generic finished dosage form (“FDF”) products will continue to increase, offset in part by increased pressure on prices driven by the intense competition in the API supply market in recent years, while in Japan, pro-generic government initiatives are expected to lead to growth in the generics market. Similarly, in Brazil, the emergence of generic drug laws has advanced growth in the generics segment of the pharmaceutical market.

     

For the three months ended March 31, 2016, Mylan reported total revenues of $2.19 billion, compared to $1.87 billion for the comparable prior year period. Mylan’s revenues for the three months ended March 31, 2016 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 Europe, India and Australia. The unfavorable impact of foreign currency translation on total revenues for the three months ended March 31, 2016 was approximately $33 million, or 2 percent. As such, constant currency total revenues increased approximately $352 million, or 19 percent. The increase in constant currency total revenues was the result of constant currency third party net sales growth in Generics of 19 percent, and Specialty of 17 percent. The impact in the first quarter of 2016 from the additional two months of net sales from the non-U.S. developed markets specialty and branded generics business (the “EPD Business”) acquired from Abbott Laboratories (“Abbott”) (“incremental EPD Business sales”) compared to the first quarter of 2015, and to a lesser extent, other acquisitions and net sales from products launched since April 1, 2015 (“new products”), totaled approximately $414.8 million. On a constant currency basis, net sales from existing products decreased approximately $60 million as a result of a decrease in pricing of approximately $62 million, partially offset by an increase in volume of approximately $2 million.

       

Cost of sales for the three months ended March 31, 2016 was $1.28 billion, compared to $1.04 billion for the comparable prior year period. Cost of sales for the three months ended March 31, 2016 was impacted by purchase accounting related amortization of acquired intangible assets of approximately $243.6 million, acquisition related costs of approximately $18.5 million and restructuring and other special items of approximately $15.2 million. The prior year comparable period cost of sales included similar purchase accounting related amortization of approximately $140.2 million, acquisition related costs of approximately $12.3 million and restructuring and other special items of approximately $8.0 million. Gross profit for the three months ended March 31, 2016 was $907.0 million, and gross margins were 41.4 percent. For the three months ended March 31, 2015, gross profit was $830.1 million, and gross margins were 44.4 percent. Excluding purchase accounting related amortization, acquisition related costs and restructuring and other special items, adjusted gross margins were approximately 54 percent for the three months ended March 31, 2016, as compared to approximately 53 percent for the three months ended March 31, 2015.

 

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B.4a   Recent trends, continued  

From time to time, a limited number of Mylan’s products may represent a significant portion of its net sales, gross profit and net earnings. Generally, this is due to the timing of new product launches and the amount, if any, of additional competition in the market. Mylan’s top ten products in terms of sales, in the aggregate, represented approximately 26 percent and 27 percent of Mylan’s total revenues for the three months ended March 31, 2016 and 2015, respectively.

     

For the three months ended March 31, 2016, Generics third party net sales were $1.93 billion, compared to $1.64 billion for the comparable prior year period, an increase of $284.7 million, or 17.3 percent. In the Generics segment, the unfavorable impact of foreign currency translation on third party net sales for the three months ended March 31, 2016 was approximately $33 million, or 2 percent. As such, constant currency third party net sales increased by approximately $317 million, or 19 percent when compared to the prior year period. Third party net sales from North America were $919.7 million for the three months ended March 31, 2016, compared to $855.0 million for the comparable prior year period, representing an increase of $64.7 million, or 7.6 percent. The increase in current quarter third party net sales was principally due to net sales from new products, and to a lesser extent, the incremental EPD Business sales, totaling approximately $135 million, offset by lower pricing and volumes on existing products. Third party net sales from Europe were $587.7 million for the three months ended March 31, 2016, compared to $406.2 million for the comparable prior year period, an increase of $181.5 million, or 44.7 percent. This increase was primarily the result of the incremental EPD Business sales, and to a lesser extent, net sales from new products, totaling approximately $191 million in the first quarter of 2016. Higher volumes on existing products, primarily in France, were offset by lower pricing throughout Europe as a result of government-imposed pricing reductions and competitive market conditions. In Rest of World, third party net sales were $420.8 million for the three months ended March 31, 2016, compared to $382.3 million for the comparable prior year period, an increase of $38.5 million, or 10.1 percent. This increase was primarily driven by the impact of the incremental EPD Business sales and sales by the female healthcare businesses acquired from Famy Care Limited (such businesses “Jai Pharma Limited”), and to a lesser extent, new product launches across the region, totaling $89 million, as well as higher volumes in Japan and Australia. These increases were partially offset by lower pricing throughout the region and a decrease in third party net sales volumes from Mylan’s operations in India, in particular, the anti-retroviral (“ARV”) franchise.

     

For the three months ended March 31, 2016, Specialty reported third party net sales of $247.9 million, an increase of $36.8 million, or 17.4 percent, from $211.1 million for the comparable prior year period. The increase was primarily the result of higher volumes of the EpiPen® Auto-Injector, which is used in the treatment of severe allergic reactions (anaphylaxis), and higher sales of the Perforomist® Inhalation Solution.

     

Mylan’s operating expenses primarily consist of R&D expenses, selling, general and administrative expense (“SG&A”) and litigation settlements. R&D expense for the three months ended March 31, 2016 was $253.6 million, compared to $169.9 million for the comparable prior year period, an increase of $83.7 million. In the first quarter of 2016, Mylan made an upfront payment to Momenta for $45 million related to the collaboration agreement entered into on January 8, 2016. R&D expense also increased due to the impact of the EPD Business. In addition, R&D increased due to the continued development of Mylan’s respiratory, insulin and biologics programs as well as the timing of internal and external product development projects. SG&A for the three months ended March 31, 2016 was $549.3 million, compared to $483.2 million for the comparable prior year period, an increase of $66.1 million. The increase in SG&A is primarily due to the additional two months of expense related to the EPD Business, which increased SG&A by approximately $67 million. During the three months ended March 31, 2016 and 2015, Mylan recorded a $1.5 million gain, net, and a $17.7 million charge, net, respectively, in the prior year period for litigation settlements. In the three months ended March 31, 2016, the gain was primarily related to the settlement of an intellectual property matter. In the prior year period, the charge was primarily related to the settlement of an antitrust matter.

     

The financial information above was derived from Mylan’s Quarterly Report on Form 10-Q for the three months ended March 31, 2016 and is unaudited.

B.5   Group   Mylan is the parent company of the Mylan group. Mylan has 170 subsidiaries in 43 countries as of December 31, 2015. Mylan’s financial results are reported on a consolidated basis with those of its subsidiaries.

 

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B.6   Major shareholders, etc.       The following table lists the names of shareholders known to Mylan to beneficially own more than five percent of the outstanding Mylan Shares as of June 9, 2016 (based on 508,364,554 Mylan Shares issued and outstanding as of such date):         
       
             Name of beneficial owners   Number of shares
beneficially owned
   

Percentage of shares and

votes beneficially owned

      
        Subsidiaries of Abbott Laboratories(1)     69,750,000(2)        13.7%       
        Wellington Management Company LLP and affiliates     44,793,344(3)        8.8%       
        BlackRock, Inc.     33,735,289(4)        6.6%       
       

(1)    Abbott and its subsidiaries that own Mylan Shares are subject to the terms of the shareholder agreement (the “Abbott Shareholder Agreement”), dated February 27, 2015, by and among Mylan, Abbott, Laboratoires Fournier S.A.S. (“Abbott France”), Abbott Established Products Holdings (Gibraltar) Limited (“Abbott Gibraltar”), and Abbott Investments Luxembourg S.à.r.l. (“Abbott Luxembourg” and, together with Abbott France and Abbott Gibraltar, the “Abbott Subsidiaries”). According to Item 4 of the Schedule 13D/A filed by Abbott on August 10, 2015, Abbott Gibraltar distributed 62,782,018 Mylan Shares to Abbott Products (“Abbott Products”), on July 28, 2015 (the “Distribution”). Contemporaneously with the Distribution, Abbott Products became a party to the Abbott Shareholder Agreement by executing a joinder agreement thereto. As a result of the Distribution, Abbott Gibraltar no longer beneficially owns any Mylan Shares. The Abbott Shareholder Agreement will terminate when Abbott no longer beneficially owns any of the Mylan Shares issued to it in connection with Mylan’s acquisition of the EPD Business (together with Mylan’s acquisition of Mylan Inc., the “EPD Transaction”). So long as Abbott beneficially owns at least five percent of the Mylan Shares, Abbott is required to vote each Mylan voting security (a) in favor of all those persons nominated and recommended to serve as directors of Mylan’s board of directors (the “Mylan Board”) or any applicable committee thereof and (b) with respect to any other action, proposal, or matter to be voted on by the shareholders of Mylan (including through action by written consent), in accordance with the recommendation of the Mylan Board or any applicable committee thereof. However, Abbott is free to vote at its discretion in connection with any proposal submitted for a vote of the Mylan shareholders in respect of (a) the issuance of equity securities in connection with any merger, consolidation, or business combination of Mylan, (b) any merger, consolidation, or business combination of Mylan, or (c) the sale of all or substantially all the assets of Mylan, except where such proposal has not been approved or recommended by the Mylan Board, in which event Abbott must vote against the proposal.

                              

   
       

(2)    Based on Schedule 13D/A filed by Abbott, Abbott Luxembourg and Abbott Products with the SEC on August 10, 2015, Abbott has sole voting power over 0 shares, shared voting power over 69,750,000 shares, sole dispositive power over 0 shares, and shared dispositive power over 69,750,000 shares; Abbott France has sole voting power, shared voting power, sole dispositive power and shared dispositive power over 0 shares; Abbott Luxembourg has sole voting power over 0 shares, shared voting power over 6,967,982 shares, sole dispositive power over 0 shares, and shared dispositive power over 6,967,982 shares; and Abbott Products has sole voting power over 0 shares, shared voting power over 62,782,018 shares, sole dispositive power over 0 shares, and shared dispositive power over 62,782,018 shares.

               

   
       

(3)   Based on Schedule 13G/A filed by Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP with the SEC on February 11, 2016, Wellington Management Group LLP has sole voting power over 0 shares, shared voting power over 13,546,750 shares, sole dispositive power over 0 shares, and shared dispositive power over 44,793,344 shares; Wellington Group Holdings LLP has sole voting power over 0 shares, shared voting power over 13,546,750 shares, sole dispositive power over 0 shares, and shared dispositive power over 44,793,344 shares; Wellington Investment Advisors Holdings LLP has sole voting power over 0 shares, shared voting power over 13,546,750 shares, sole dispositive power over 0 shares, and shared dispositive power over 44,793,344 shares; and Wellington Management Company LLP has sole voting power over 0 shares, shared voting power over 12,489,471 shares, sole dispositive power over 0 shares, and shared dispositive power over 42,867,413 shares. Based on the Schedule 13G/A, the securities as to which the Schedule 13G/A was filed are owned of record by clients of one or more investment advisers identified therein directly or indirectly owned by Wellington Management Group LLP. Those clients have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such securities. No such client is known to have such right or power with respect to more than five percent of this class of securities.

                      

   
       

(4)   Based on Schedule 13G filed by BlackRock, Inc. with the SEC on February 9, 2016, BlackRock, Inc. has sole voting power over 30,656,253 shares, shared voting power over 0 shares, sole dispositive power over 33,735,289 shares, and shared dispositive power over 0 shares.

        

   
        All shares in Mylan’s capital carry one vote, so all shareholders have a number of voting rights equal to the number of shares that they hold.        
B.7   Selected historical financial information       The following table sets forth the selected historical financial information of Mylan as of and for each of the years in the three-year period ended December 31, 2015 and as of and for the three months ended March 31, 2016 and 2015. The selected historical financial information as of and for the years ended December 31, 2015, 2014 and 2013 has been derived from Mylan’s audited consolidated financial statements. The unaudited selected historicial financial information as of and for the three months ended March 31, 2016 and 2015 has been derived from Mylan’s unaudited condensed consolidated financial statements which include, in the opinion of Mylan’s management, all normal and recurring adjustments that are necessary for the fair presentation of the results for such interim periods and dates. The historical consolidated financial statements of Mylan are prepared in accordance with U.S. GAAP. Mylan N.V. is considered the successor to Mylan Inc., and the information set forth below refers to Mylan Inc. for periods prior to February 27, 2015, and to Mylan N.V. on and after February 27, 2015. On February 27, 2015, Mylan completed the acquisition of the EPD Business. The results of the EPD Business’s operations have been included in Mylan’s consolidated financial statements since the acquisition date. The selected historical financial information may not be indicative of the future performance of Mylan.                     
           

There has been no material change in the Mylan group’s financial or trading position since March 31, 2016.

   

   

 

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B.7

 

 

Selected historical
financial information,
continued

 

      (Unaudited)
Three Months Ended
March 31,
    Year Ended December 31,  
         (USD, in millions, except per share
amounts)
  2016     2015     2015     2014     2013  
   

 

 
     

Selected Statements of Operations Data:

           
     

Total revenues

    $2,191.3        $1,871.7        $9,429.3        $7,719.6        $6,909.1   
     

Cost of sales

    1,284.3        1,041.6        5,213.2        4,191.6        3,868.8   
     

 

 
     

Gross profit

    907.0        830.1        4,216.1        3,528.0        3,040.3   
     

Operating expenses

    801.4        670.8        2,755.2        2,175.4        1,904.8   
     

 

 
     

Earnings from operations

    105.6        159.3        1,460.9        1,352.6        1,135.5   
     

Interest expense

    70.3        79.5        339.4        333.2        313.3   
     

Other expense (income), net

    16.3        18.5        206.1        44.9        74.9   
     

 

 
     

Earnings before income taxes and noncontrolling interest

    19.0        61.3        915.4        974.5        747.3   
     

Income tax provision

    5.1        4.7        67.7        41.4        120.8   
     

Net earnings attributable to the noncontrolling interest

                  (0.1)        (3.7)        (2.8)   
     

 

 
     

Net earnings attributable to Mylan N.V. ordinary shareholders

    $13.9        $56.6        $847.6        $929.4        $623.7   
     

 

 
      Earnings per ordinary share attributable to Mylan N.V. ordinary shareholders:            
     

Basic

    $0.03        $0.14        $1.80        $2.49        $1.63   
     

Diluted

    $0.03        $0.13        $1.70        $2.34        $1.58   
      Weighted average ordinary shares outstanding:            
     

Basic

    489.8        418.0        472.2        373.7        383.3   
     

Diluted

    509.6        443.8        497.4        398.0        394.5   
     

 

 
     
        

(USD, in millions)

 
     

Selected Balance Sheet data:

           
     

Total current assets

    $6,627.6        $7,426.4        $6,472.7        $6,441.2        $4,471.2   
     

Total assets

    22,644.1        22,123.8        22,267.7        15,820.5        15,294.8   
     

Total current liabilities

    3,959.4        5,228.0        4,122.2        5,304.0        2,964.0   
     

Total equity

    10,274.9        9,093.2        9,765.8        3,276.0        2,959.9   
     

Total liabilities and equity

    $22,644.1        $22,123.8        $22,267.7        $15,820.5        $15,294.8   
     
        

(USD, in millions)

 
     

Selected Cash Flow data:

           
     

Net cash provided by operating activities

    $80.5        $267.0        $2,008.5        $1,014.8        $1,106.6   
     

Net cash used in investing activities

    (160.0)        (87.5)        (1,569.7)        (800.3)        (1,868.8)   
     

Net cash provided by (used in) financing activities

    30.5        (109.0)        604.8        (267.4)        692.9   
     

Effect on cash of changes in exchange rates

    12.4        (18.8)        (33.1)        (12.9)        10.6   
     

 

 
     

Net (decrease) increase in cash and cash equivalents

    (36.6)        51.7        1,010.5        (65.8)        (58.7)   
     

Cash and cash equivalents – beginning of period

    1,236.0        225.5        225.5        291.3        350.0   
     

 

 
     

Cash and cash equivalents – end of period

    $1,199.4        $277.2        $1,236.0        $225.5        $291.3   
     

 

 
     
        

(USD, in millions)

 
     

Selected Comprehensive Earnings data:

           
     

Net earnings attributable to Mylan N.V. ordinary shareholders

    $13.9        $56.6        $847.7        $933.1        $626.5   
     

Other comprehensive earnings (loss), net of tax

    473.8        (623.9)        (777.3)        (746.9)        (153.6)   
     

Comprehensive earnings attributable to the noncontrolling interest

                  (0.1)        (3.7)        (2.8)   
     

 

 
      Comprehensive earnings (loss) attributable to Mylan N.V. ordinary shareholders     $487.7        $(567.3)        $70.3        $182.5        $470.1   
     

 

 
       
             Three Months Ended
March 31,
    Year Ended December 31,  
         Key Ratios   2016     2015     2015     2014     2013  
     

 

 
     

Gross margin

    41.4%        44.4%        44.7%        45.7%        44.0%   
       

Operating margin

    4.8%        8.5%        15.5%        17.5%        16.4%   

 

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B.8   Selected unaudited pro forma financial information   The following selected unaudited pro forma financial information gives effect to the acquisition of the EPD Business and the proposed acquisition of Meda pursuant to the Offer, both of which are accounted for under the acquisition method of accounting in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 805, Business Combinations, with Mylan as the acquirer. The consolidated financial statements of Mylan and the EPD Business are prepared in accordance with U.S. GAAP with all amounts stated in U.S. Dollars. The consolidated financial statements of Meda are prepared in accordance with IFRS and interpretations issued by the IFRS Interpretations Committee (“IFRS IC”) as adopted by the European Union (the “EU”), the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR 1 Supplementary Accounting Rules for Groups, with all amounts presented in Swedish kronor. The selected unaudited pro forma financial information has been prepared in accordance with U.S. GAAP. The selected unaudited pro forma condensed combined balance sheet as of March 31, 2016 is based on the unaudited condensed consolidated balance sheet of Mylan as of March 31, 2016 and the unaudited consolidated balance sheet of Meda as of March 31, 2016, converted to U.S. GAAP and U.S. Dollars and conformed to Mylan’s presentation, and has been prepared to reflect the proposed acquisition of Meda as if it had occurred on March 31, 2016. The selected unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015 are based on the unaudited condensed consolidated statement of operations of Mylan for the three months ended March 31, 2016, the audited consolidated statement of operations of Mylan for the year ended December 31, 2015, the unaudited consolidated income statement of Meda for the three months ended March 31, 2016, the audited consolidated income statement of Meda for the year ended December 31, 2015, with each such consolidated income statement of Meda converted to U.S. GAAP and U.S. Dollars and conformed to Mylan’s presentation, and the unaudited EPD Business combined results of operations for the period from January 1, 2015 to February 27, 2015, the acquisition date of the EPD Business, and has been prepared to reflect the acquisition of the EPD Business and the proposed acquisition of Meda as if each had occurred on January 1, 2015. The selected unaudited pro forma financial information reflects only pro forma adjustments that are factually supportable and directly attributable to the acquisition of the EPD Business and the proposed acquisition of Meda and, with respect to the selected unaudited pro forma condensed combined statement of operations, expected to have a continuing impact on the results of the Combined Company.                                  
     

The selected unaudited pro forma financial information has been derived from the more detailed unaudited pro forma financial information appearing elsewhere in this Offer Document and the related notes thereto.

   

     

The selected unaudited pro forma financial information is for illustrative purposes only. It does not purport to indicate the results that would have actually been attained had the acquisition of the EPD Business and the proposed acquisition of Meda been completed on the assumed dates or for the periods presented, or which may be realized in the future. To produce the unaudited pro forma financial information, Mylan allocated the estimated purchase price for Meda using its best estimates of fair value. Such estimates are preliminary and subject to further adjustments, which could be material. To the extent there are significant changes to the Meda business, the assumptions and estimates herein could change significantly. Due to its nature, the selected unaudited pro forma financial information addresses a hypothetical situation and does not therefore represent Mylan or the Combined Company’s actual financial position or results.

           

     

The selected unaudited pro forma financial information has been prepared assuming that 100 percent of the outstanding Meda shares will be tendered into the Offer.

   

     
      Selected Unaudited Pro Forma Condensed Combined Balance Sheet Information   
       
             March 31, 2016  
        

(USD, in millions)

  Mylan     Meda     Pro forma
adjustments
    Pro forma
combined
 
     

Total assets

    $22,644.1        $7,312.2        $  6,212.8        $36,169.1   
     

Long-term debt, including current portion

    7,408.2        2,757.2        6,429.9        16,593.3   
     

Total liabilities

    12,369.2        4,716.8        7,631.9        24,717.9   
       

Total equity

    10,274.9        2,595.4        (1,419.1)        11,451.2   

 

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B.8   Selected unaudited pro forma financial information, continued  

Selected Unaudited Pro Forma Condensed Combined Statements of Operations Information

  

       
               Three Months Ended March 31, 2016  
        

(USD, in millions, except per share amounts)

    Mylan     Meda     Pro forma
adjustments
    Pro forma
combined
 
     

Total revenues

  

    $2,191.3        $510.7        $ (14.3     $2,687.7   
     

Cost of sales

  

    1,284.3        279.2        5.4        1,568.9   
     

Gross profit

  

    907.0        231.5        (19.7)        1,118.8   
     

Operating expenses

  

    801.4        191.7        (24.3)        968.8   
     

Other expense, net

  

    86.6        28.0        (54.1)        168.7   
     

Earnings before income taxes and noncontrolling interest

  

    19.0        11.8        (49.5)        (18.7)   
     

Income tax (benefit) provision

  

    5.1        (21.9)        (9.9)        (26.7)   
     

Net earnings attributable to Mylan N.V. ordinary shareholders

  

    13.9        33.7        (39.6)        8.0   
      Earnings per ordinary share attributable to Mylan N.V. ordinary shareholders:              
     

Basic

  

    $0.03        $0.09          $0.02   
     

Diluted

  

    $0.03        $0.09          $0.01   
     

 

 
       
             Year Ended December 31, 2015  
        

(USD, in millions, except per share amounts)

  Mylan     EPD
Business
    Meda     Pro forma
adjustments
    Pro forma
combined
 
     

Total revenues

    $9,429.3        $247.0        $2,296.5        $(42.8)        $11,930.0   
     

Cost of sales

    5,213.2        90.3        1,225.2        196.7        6,725.4   
     

Gross profit

    4,216.1        156.7        1,071.3        (239.5     5,204.6   
     

Operating expenses

    2,755.2        109.0        763.8        (86.0)        3,542.0   
     

Other expense, net

    545.5               158.4        245.5        949.4   
      Earnings before income taxes and noncontrolling interest     915.4        47.7        149.1        (399.0)        713.2   
     

Income tax (benefit) provision

    67.7        8.7        17.1        (80.8)        12.7   
      Net earnings attributable to Mylan N.V. ordinary shareholders     847.6        39.0        132.0        (318.2)        700.4   
      Earnings per ordinary share attributable to Mylan N.V. ordinary shareholders:            
     

Basic

    $1.80          $0.36          $1.35   
     

Diluted

    $1.70          $0.36          $1.29   
B.9   Profit forecast   Mylan’s adjusted diluted EPS for the year ending December 31, 2016 is expected to be in the range of $4.85 to $5.15.    
B.10   Qualification of audit report   Not applicable. The auditors have not qualified their reports on the historical financial information included in, or incorporated by reference into, this Offer Document.    
B.11   Insufficient working capital   Not applicable. Mylan is of the opinion that Mylan N.V. and its subsidiaries have, and following the completion of the Transaction, the Combined Company will have, sufficient working capital for their present requirements, that is for at least the twelve month period following the date of publication of this Offer Document.      

 

 
Section C – Securities
C.1   Securities being offered and admitted to trading   The Mylan Shares are ordinary registered shares in book-entry form in Mylan’s capital, each with a nominal value of 0.01 per share. The Mylan Shares are listed on NASDAQ and the Tel Aviv Stock Exchange (“TASE”), in each case under the symbol “MYL.” The CUSIP (Committee on Uniform Securities Identification Procedures) number for the Mylan Shares is N59465109. The ISIN code is NL0011031208.
C.2   Currency   The Mylan Shares are listed and traded on NASDAQ and the TASE in U.S. Dollars. The nominal value of Mylan’s ordinary shares and preferred shares is in Euros.
C.3   Number of shares in the issuer  

Pursuant to Mylan’s Articles of Association (the “Mylan Articles”), the authorized share capital of Mylan consists of 2,400,000,000 shares, divided into 1,200,000,000 Mylan Shares and 1,200,000,000 preferred shares, each with a nominal value of 0.01. The aggregate nominal value for Mylan’s authorized share capital is 24,000,000.

As of March 31, 2016, there were 491,359,852 Mylan Shares issued and outstanding, each with a nominal value of 0.01. As of March 31, 2016, all Mylan Shares were fully paid up. There were no issued and outstanding Mylan preferred shares as of March 31, 2016.

 

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C.4   Rights attached to the securities   Mylan Shares carry a pre-emptive right with respect to issuances of Mylan Shares in proportion to the aggregate amount of the Mylan Shares held by the relevant shareholder. Mylan Shares carry no pre-emptive right with respect to issuances of preferred shares in Mylan’s capital. Also, no pre-emptive right exists upon the issue of shares (i) against payment other than in cash, (ii) to employees of Mylan or Mylan’s group companies, or (iii) to a party exercising a previously acquired right to subscribe for shares. Until February 27, 2020, the Mylan Board may restrict or exclude any pre-emptive rights with respect to any share issuance (including subscription rights thereto) that the Mylan Board is authorized to resolve upon. From and after February 27, 2020, pre-emptive rights may be restricted or excluded with respect to any share issuance (including subscriptions rights thereto) for shares pursuant to a resolution of Mylan’s general meeting (the “General Meeting”) upon a proposal duly made by the Mylan Board, or pursuant to a resolution of the Mylan Board if the power and authority to restrict or exclude pre-emptive rights has been delegated to it by the General Meeting for such period (but in any event not to exceed five years) as the General Meeting may determine. Each such delegation by the General Meeting may be extended from time to time thereby, provided that no extension will result in such delegation exceeding five years, the maximum period permitted by the applicable provision of Dutch law.
     

Each of Mylan’s shares (both ordinary and preferred) confers the right to cast one vote at the General Meeting.

     

Subject to certain restrictions of Dutch law, ordinary shares in Mylan’s capital also carry an entitlement to distributions of profits, profits from reserves and distributions of liquidation proceeds. In respect of a distribution of profits or liquidation proceeds, if preferred shares in Mylan’s capital have been issued, a preferential distribution shall first be made on those preferred shares, as specified by the Mylan Articles.

C.5   Restrictions on the free transferability   Not applicable to Mylan Shares. The Mylan Shares are listed on NASDAQ and the TASE and are transferable under the Mylan Articles. A transfer of Mylan preferred shares requires the approval of the Mylan Board.
C.6   Admission to trading   The Mylan Shares are listed on NASDAQ and the TASE, in each case under the symbol “MYL.” The Mylan Shares are not, and there is no intention for them to be, admitted to listing and trading on a regulated market in the European Economic Area.
C.7   Dividend policy   Mylan did not pay dividends in 2015, 2014 or 2013 and Mylan does not intend to pay dividends on the Mylan Shares in the near future. In the event that a dividend will be distributed, Mylan’s profits as they appear from the adopted annual accounts will be distributed as follows:
     
     

•   first, if preferred shares in Mylan’s capital are outstanding, a dividend is distributed to those preferred shares in accordance with the Mylan Articles;

     

•   second, the Mylan Board will determine which part of the profits remaining after such distribution on the preferred shares, if applicable, will be reserved; and

     

•   third, to the extent not distributed as a dividend in respect of Mylan’s preferred shares and/or reserved as described above, the profits will be available for distribution to holders of Mylan Shares, provided that any such distribution must be authorized by the Mylan Board.

     

Interim dividends may be declared as provided in the Mylan Articles and may be distributed to the extent that the shareholders’ equity exceeds the amount of the paid-up and called-up part of the issued share capital and the required legal reserves as described above as apparent from interim financial statements prepared in accordance with Dutch law.

       

Should at some future date a dividend be paid, the Mylan Shares issued in connection with the Offer would be entitled to such dividend, provided that the record date for such dividend occurs after the settlement of the Offer.

   
 
Section D – Risks
D.1   Key risks specific to the issuer or the industry   An acceptance of the Offer and ownership of Mylan Shares is associated with certain risks relating to Mylan following completion of the Offer. Meda shareholders should carefully consider the risk factors set forth in this Offer Document. These risks include the following key risks related to the industry and Mylan’s operations and financial condition:
     

•   Abbott’s subsidiaries that hold Mylan shares are collectively a significant beneficial shareholder of Mylan’s and the presence of a significant beneficial shareholder may affect the ability of Mylan’s other shareholders to exercise influence over Mylan, especially in light of certain voting obligations under the Abbott Shareholder Agreement.

       

•   Mylan expects to be treated as a non-U.S. corporation for U.S. federal income tax purposes. Any changes to the tax laws or changes in other laws (including under applicable income tax treaties), regulations, rules, or interpretations thereof applicable to inverted companies and their affiliates, whether enacted before or after the EPD Transaction, may materially adversely affect Mylan.

 

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D.1   Key risks specific to the issuer or the industry, continued  

•   Mylan has grown at a very rapid pace and expects to aggressively pursue additional acquisition opportunities that make financial and strategic sense for Mylan. Mylan’s inability to effectively manage or support this growth may have a material adverse effect on its business, financial condition, results of operations, cash flows, and/or ordinary share price.

     

•   Current and changing economic conditions have led, and/or could lead, to reduced consumer and customer spending and/or reduced or eliminated governmental or third party payor coverage or reimbursement in the foreseeable future, which could result in reduced spending on healthcare, including but not limited to pharmaceutical products, which may negatively impact Mylan’s sales, drive Mylan and its competitors to decrease prices, reduce customer’s ability to pay and/or result in reduced demand for Mylan’s products.

     

•   Mylan may decide to sell assets, which could adversely affect its prospects and opportunities for growth.

     

•   The pharmaceutical industry is heavily regulated and Mylan faces significant costs and uncertainties associated with its efforts to comply with applicable laws and regulations. For example, if any regulatory body were to delay, withhold, or withdraw approval of an application; require a recall or other adverse product action; require one of Mylan’s manufacturing facilities to cease or limit production; or suspend, vary, or withdraw related marketing authorization, Mylan’s business could be adversely affected. Delay and cost in obtaining U.S. Food and Drug Administration or other regulatory approval to manufacture at a different facility also could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

     

•   If Mylan is unable to successfully introduce new products in a timely manner, its future revenue and profit may be adversely affected.

     

•   The development, approval process, manufacture and commercialization of biosimilar products involve unique challenges and uncertainties, and Mylan’s failure to successfully introduce biosimilar products could have a negative impact on Mylan’s business and future operating results.

     

•   Mylan’s business is highly dependent upon market perceptions of Mylan, its brands, and the safety and quality of its products, and may be adversely impacted by negative publicity or findings.

     

•   Both Mylan’s generics and specialty businesses develop, formulate, manufacture, or in-license and market products that are subject to economic risks relating to intellectual property rights, competition, and market unpredictability.

     

•   A relatively small group of products may represent a significant portion of Mylan’s revenues, gross profit, or net earnings from time to time.

     

•   A significant portion of Mylan’s revenues is derived from sales to a limited number of customers. If Mylan were to experience a significant reduction in or loss of business with one or more such customers, or if one or more such customers were to experience difficulty in paying Mylan on a timely basis, Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price could be materially adversely affected.

     

•   Mylan expends a significant amount of resources on research and development efforts that may not lead to successful product introductions.

     

•   Mylan is involved in various legal proceedings and certain government inquiries and may experience unfavorable outcomes of such proceedings or inquiries.

D.3   Key risks specific to the securities   An acceptance of the Offer and ownership of Mylan Shares following completion of the Offer is also subject to risks related to the Mylan securities. These risks include the following key risks related to the industry and Mylan’s operations and financial condition, some of which apply primarily prior to the completion of the Offer:
     
     

•   The value of the share portion of the Offer Consideration is dependent on the market price of Mylan Shares. Because the market price of Mylan Shares and the exchange rate between USD and SEK may fluctuate, the market value of the Mylan Shares that will be issued in connection with the Offer may fluctuate.

     

•   The Offer may not be completed on the terms or timeline currently contemplated, or at all.

     

•   Mylan must obtain required approvals and consents to consummate the Offer, which, if delayed or not granted, may jeopardize or delay the completion of the Offer, result in additional expenditures of money and resources, and/or reduce the anticipated benefits of the Offer.

     

•   The Mylan Shares to be received by Meda shareholders in connection with the Offer will have different rights from the Meda shares.

     

•   If completed, the Offer may not achieve the intended benefits or may disrupt Mylan’s plans and operations.

     

•   While Mylan currently expects the Offer to be immediately accretive to its adjusted annual earnings per share following its completion, a decrease or delay in the expected accretive effect of the Offer to Mylan’s annual adjusted earnings per share may negatively affect the market price of Mylan Shares.

       

•   Mylan will have significant additional indebtedness which could adversely affect Mylan’s financial condition, prevent Mylan from fulfilling its obligations with respect to such indebtedness and impose other financial and operating restrictions on Mylan. Any refinancing of this debt could bear significantly higher interest rates.

 

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Section E – Offer
E.1   Net proceeds and expenses   As the Mylan Shares to be issued in connection with the Offer (plus cash consideration) will be exchanged for the outstanding Meda shares, there will be no proceeds received by Mylan as a result of the Offer.
     

The total estimated transaction costs expected to be incurred in connection with the Transaction are approximately $153.0 million. Of that total, approximately $119.7 million of transaction costs are expected to be incurred by Mylan and approximately $33.3 million are expected to be incurred by Meda. Transaction costs include investment banking, advisory, legal, valuation, Bridge Credit Facility fees and other professional fees necessary to complete the Transaction.

E.2a   Reasons for the Offer, use of proceeds   Mylan believes the Transaction has a compelling strategic fit. In an environment where scale and reach are becoming increasingly important, a combination of Mylan and Meda will create a platform for sustainable, long-term growth:
     
     

•  The Combined Company will be a global pharmaceutical leader that is even more diversified, with a stronger presence across geographies, therapeutic categories and channels, and with the enhanced breadth, scale and diversity to drive durable growth for the long term.7

     

•  Following completion of the Transaction, the Combined Company will have an enhanced financial profile with approximately USD 11.8 billion in combined 2015 sales, approximately $1.2 billion in combined 2015 operating income and combined 2015 adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) of approximately USD 3.8 billion.8

     

•  The Combined Company will have a balanced portfolio of more than 2,000 products across the branded/specialty, generics and OTC segments, sold in more than 165 markets around the world.

     

•  The Transaction will build on Mylan’s recent acquisition of the EPD Business to create an unparalleled European platform for growth – one that is well-positioned to succeed in this dynamic and challenging region.9 The Transaction also consolidates EpiPen® Auto-Injector in Europe, providing greater opportunities to build the brand in this region.

     

•  The Transaction delivers on Mylan’s long-stated commitment to develop a substantial presence in the OTC segment, by creating an approximately USD 1 billion global OTC business at close.

     

•  Mylan’s and Meda’s complementary therapeutic presence will create a scale player in respiratory / allergy, dermatology and pain products, providing greater opportunities for growth in these areas and maximizing the potential of future product launches.

     

•  By offering one of the industry’s broadest portfolios of products across all customer channels (e.g., specialty, generics and OTC),10 the Combined Company will be well-positioned to deliver greater value to customers, which is increasingly important in light of the evolving payor and distributor environment. The combined portfolio will be supported by an expansive global commercial infrastructure, with sales representatives operating in 60 countries. The Combined Company will retain significant control over its supply chain, operating one of the industry’s most extensive and highest-quality manufacturing and research and development platforms with approximately 60 facilities.11

     

•  Substantial pre-tax annual operational synergies of approximately $350 million by year four after completion of the Offer are expected to be realized as a result of savings associated with integration and optimization across cost components and functions, and through leveraging opportunities of the combined commercial platform. Components of these synergies include: (1) optimization of the combined commercial platform, (2) optimization of cost of goods sold (“COGS”) through world-class supply chain, vertical integration and global sourcing excellence, (3) elimination of redundant general and administrative costs, including public company costs, and (4) cross-fertilization opportunities of the combined product portfolio.

     

 

7     See, e.g., Global Data Industry Report, “Mylan N.V. (MYL) – Financial and Strategic SWOT Analysis Review,” May 2016.

     

8     Combined company figures are unaudited and represent an aggregation of Mylan figures derived from financial information prepared in accordance with U.S. GAAP and Meda figures derived from financial information prepared in accordance with IFRS as adopted by the EU and do not reflect pro forma adjustments (including no elimination of transactions between Mylan and Meda). The stated figure, combined 2015 adjusted EBITDA of approximately USD 3.8 billion, reflects the sum of Mylan’s 2015 EBITDA excluding certain items, primarily related to share-based compensation, litigation settlements, restructuring and other special items and Meda’s 2015 EBITDA excluding certain items, primarily related to restructuring and the divestment of the manufacturing unit Euromed in Spain.

     

9     See, e.g., JP Morgan Analyst Report, “Mylan NV: Thought Post Selloff and Mgmt Meeting Takeaways, Remain OW,” February 12, 2016.

     

10    See, e.g., JP Morgan Analyst Report, “Mylan NV: Meda Deal Strategically Attractive Despite Substantial Premium,” February 11, 2016.

       

11    See, e.g., Global Data Industry Report, “Mylan N.V. (MYL) – Financial and Strategic SWOT Analysis Review,” May 2016.

 

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E.2a   Reasons for the Offer, use of proceeds, continued  

•   Although the Transaction is not expected to be immediately accretive on a U.S. GAAP basis, the Transaction is expected to be immediately accretive to Mylan’s adjusted earnings, with accretion to adjusted earnings increasing significantly after the first full year (2017) as synergies are realized. While Mylan has not forecasted the accretion/dilution opportunity for 2017 U.S. GAAP diluted EPS due primarily to the difficulty and uncertainty of making accurate and detailed forecasts for a financial period that has not commenced and projections of purchase accounting-related amounts and that the historical financial statements of Meda are not prepared on a U.S. GAAP basis, on an adjusted basis the transaction creates an opportunity to achieve $0.35 to $0.40 adjusted diluted EPS accretion in 2017 and to accelerate achievement of Mylan’s previously stated $6.00 in adjusted diluted EPS target in 2017 versus 2018.12

     

•   While Mylan has not forecasted a pro forma U.S. GAAP leverage ratio at closing due primarily to the difficulty of estimating debt levels for both Mylan and Meda at closing due to uncertainty regarding the impact of other potential acquisition activity and the timing of closing and that the historical financial statements of Meda are not prepared on a U.S. GAAP basis, on an adjusted basis, Mylan’s pro forma leverage at close is expected to be approximately 3.8x debt-to-adjusted EBITDA. Based upon historical levels of operating cash flow for Mylan and Meda, the Combined Company is expected to generate significant operating cash flow on a U.S. GAAP basis and the significant adjusted free cash flows generated by the Combined Company will allow for rapid deleveraging. As a result, Mylan will retain ample financial flexibility to pursue additional external opportunities.

     
      Mylan believes that the Offer is compelling given that:
     
     

•   the Offer Consideration represents a meaningful premium for Meda shareholders;

     

•   at announcement, the total enterprise value of the Offer for all Meda shares, including Meda net debt, was approximately SEK 83.6 billion or USD 9.9 billion, which represents a multiple of approximately 8.9x 2015 adjusted EBITDA with synergies;13

     

•   if the Offer is completed, Meda shareholders will become shareholders of Mylan, which has a clear track record of creating shareholder value, with an annualized five year total shareholder return of approximately 20.7 percent,14 and

     

•   the Offer is fully financed and not conditional on further due diligence.

     
      In addition to the compelling value to shareholders, the acquisition of Meda by Mylan would offer substantial benefits to the other stakeholders of both companies. For example, the combination would provide a broader variety of opportunities to employees. The position of creditors, customers and suppliers would also be enhanced by the Combined Company’s scale and significant cash flows, and patients would receive improved access to high-quality medicine through increased scale across geographies and robust capabilities to drive innovation.
     

The financial information included above is unaudited.

     

 

12    Stated 2017 opportunity/2018 target; this is a long-term target only and does not represent company guidance. Adjusted diluted EPS is a non-GAAP measure and is calculated as U.S. GAAP diluted earnings per share adjusted for certain items, including purchase accounting related amortization; litigation settlements, net; interest expense, primarily non-cash accretion and certain other financing related costs; clean energy investments pre-tax loss; acquisition related costs; certain milestone payments; restructuring and other special items; and tax effect of the above items and other income tax related items.

     

13    The total Offer enterprise value (including Meda net debt) of approximately SEK 83.6 billion or USD 9.9 billion is based on (1) a Mylan Share closing price of USD 50.74 as of February 9, 2016 (the latest practicable trading day for Mylan Shares prior to the announcement of the Offer), (2) the Announcement Exchange Rate, (3) 365,467,371 outstanding Meda shares (the number of outstanding Meda shares as of both the date of the announcement of the Offer and the most recent trading day prior to the date of this Offer Document) and (4) net debt of Meda of SEK 23.3 billion as of December 31, 2015.

     

14    Total shareholder return data is from Bloomberg and reflects total return (including price appreciation and reinvested dividends) as of December 31, 2015.

E.3   Terms and conditions of the Offer   The Offer Consideration consists of:
   

•   in respect of 80 percent of the number of Meda shares tendered by each Meda shareholder, SEK 165 in cash per Meda share; and

     

•   in respect of the remaining 20 percent of the number of Meda shares tendered by each Meda shareholder:

   
     

(i)  if the Offeror Average Closing Price is greater than USD 50.74, a number of Mylan Shares per Meda share equal to SEK 165 divided by the Offeror Average Closing Price as converted from USD to SEK at the Announcement Exchange Rate;

     

(ii) if the Offeror Average Closing Price is greater than USD 30.78 and less than or equal to USD 50.74, 0.386 Mylan Shares per Meda share; or

     

(iii)if the Offeror Average Closing Price is less than or equal to USD 30.78, a number of Mylan Shares per Meda share equal to SEK 100 divided by the Offeror Average Closing Price as converted from USD to SEK at the Announcement Exchange Rate.

     
      In short, each Meda shareholder will receive between SEK 152 and SEK 165 per Meda share (based on the Announcement Exchange Rate) in a combination of cash and Mylan Shares.
     
       

If the aggregate number of Mylan Shares that otherwise would be required to be issued by Mylan as described above exceeds the Share Cap, then Mylan will have the option (in its sole discretion) to (a) issue Mylan Shares in connection with the Offer in excess of the Share Cap and thus pay the share portion of the Offer Consideration as described above (i.e. the 20 percent set out above), (b) increase the cash portion of the Offer Consideration (so that it becomes larger than the 80 percent set out above) and thus correspondingly decrease the share portion of the Offer Consideration (so that it becomes smaller than the 20 percent set out above) such that the aggregate number of Mylan Shares issuable by Mylan in connection with the Offer would equal the Share Cap or (c) execute a combination of the foregoing.

 

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E.3   Terms and conditions of the Offer, continued  

The table below sets forth illustrative examples of the Offer Consideration that Meda shareholders will receive in exchange for 100 Meda shares at different Offeror Average Closing Prices (subject to the treatment of fractional shares described below):

    

       
         Offeror Average
Closing Price (USD)
  Cash
Consideration
(SEK)(1)
    Number of
Mylan
Shares(2)
    Equivalent Value
of Share
Consideration
(SEK)(3)
   

Total
Consideration

(SEK)(4)

    Average Total
Consideration Per
Meda Share (SEK)(5)
 
     

60.00

    13,200.00        6.54        3,300.00        16,500.00        165.00   
     

55.00

    13,200.00        7.13        3,300.00        16,500.00        165.00   
     

50.00

    13,200.00        7.72        3,248.50        16,448.50        164.48   
     

45.00

    13,200.00        7.72        2,923.65        16,123.65        161.24   
     

40.00

    13,200.00        7.72        2,598.80        15,798.80        157.99   
     

35.00

    13,200.00        7.72        2,273.95        15,473.95        154.74   
     

30.00(6)

    13,200.00        7.92        2,000.00        15,200.00        152.00   
     

25.00(6)

    13,200.00        9.51        2,000.00        15,200.00        152.00   
     

 

     

(1)    Calculated as the product of (i) 80 Meda shares and (ii) SEK 165.

       

   
     

(2)    Calculated as the product of (i) 20 Meda shares and (ii) the applicable number of Mylan Shares per Meda share at the stated Offeror Average Closing Price.

        

     

(3)    Calculated as the product of (i) the number of Mylan Shares, (ii) the Offeror Average Closing Price and (iii) the Announcement Exchange Rate.

        

     

(4)    Calculated as the sum of (i) the Cash Consideration and (ii) the Equivalent Value of Share Consideration.

       

     

(5)    Calculated as the quotient of (i) the Total Consideration and (ii) 100 Meda shares.

       

     

(6)    Based on 365,467,371 outstanding Meda shares (the number of outstanding Meda shares as of the most recent trading day prior to the date of this Offer Document), the Share Cap would be exceeded at this Offeror Average Closing Price (assuming that 100 percent of the outstanding Meda shares will be tendered into the Offer). The figures shown assume that Mylan does not adjust the Offer Consideration.

          

     
      If Meda pays dividends or makes any other distributions to its shareholders with a record date occurring prior to the settlement of the Offer, or issues new shares (or takes any similar corporate action) resulting in a reduction of the value per share in Meda prior to the settlement of the Offer, the Offer Consideration will be reduced accordingly. The reduction shall first be made against the cash portion of the Offer Consideration. Mylan reserves the right to determine whether this price adjustment mechanism or condition (vii) to the completion of the Offer shall be invoked (see E.3 below). Notwithstanding the foregoing in this paragraph, Meda will be permitted to pay in 2016 its regular annual cash dividend in respect of Meda shares not exceeding SEK 2.50 per Meda share, with declaration, record and payment dates consistent with past practice, and such regular annual cash dividend shall not reduce the Offer Consideration. Meda declared its regular annual dividend of SEK 2.50 per Meda share on April 14, 2016.             
     

For each directly registered Meda shareholder, the total number of Meda shares tendered by such shareholder will be multiplied by 0.20 (subject to adjustment in the event Mylan adjusts the Offer Consideration if the Share Cap is exceeded). The number of Meda shares resulting from the multiplication will be rounded up to the nearest whole Meda share and tendered in exchange for Mylan Shares. The remaining number of Meda shares that such shareholder tendered will be rounded down to the nearest whole Meda share and tendered in exchange for cash. The Offer can be accepted for each Meda shareholder’s entire holding of Meda shares, even if such Meda shares do not correspond to a whole number of Mylan Shares.

         

     

Only whole Mylan Shares will be delivered to Meda shareholders who accept the Offer. If a directly registered Meda shareholder would otherwise be entitled to a fraction of a Mylan Share, such fraction will be aggregated with the fractions of Mylan Shares to which other directly registered Meda shareholders would otherwise be entitled and sold by Handelsbanken Capital Markets, Issue department (“Handelsbanken”) on NASDAQ on behalf of such shareholders. The proceeds of such sales will be converted from USD to SEK, rounded to the nearest SEK 0.50, and distributed as promptly as practicable following settlement of the Offer to such shareholders based on the fraction of a Mylan Share to which each such shareholder would otherwise be entitled. There will be no commission fee for such sales. By accepting the Offer, each accepting Meda shareholder authorizes Handelsbanken to sell any such fraction on its behalf and convert the proceeds of such sale from USD to SEK. For each Meda shareholder whose Meda shares are registered with a nominee, any fraction of a Mylan Share to which such Meda shareholder would otherwise be entitled will be treated in accordance with the policies and practices of such nominee.

              

      The Offer is subject to the following conditions:   
   

(i)    the Offer being accepted to such an extent that Mylan becomes the owner of shares in Meda representing more than 90 percent of the total number of shares of Meda;

        

     

(ii)    Mylan’s Registration Statement on Form S-4 in the United States, which will register the issuance of the Mylan Shares in the Offer, becoming effective under the Securities Act and not being the subject of any stop order or proceeding seeking a stop order by the SEC;

         

       

(iii)   the Mylan Shares to be issued in connection with the Offer being approved for listing on NASDAQ in the United States and the TASE in Israel;

       

 

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E.3   Terms and conditions of the Offer, continued  

(iv)   with respect to the Offer and the acquisition of Meda, receipt of all necessary regulatory, governmental or similar clearances, approvals and decisions, including from competition authorities, in each case on terms which, in Mylan’s opinion, are acceptable;

     

(v)    no circumstances having occurred which could have a material adverse effect or could reasonably be expected to have a material adverse effect on Meda’s financial position or operation, including Meda’s sales, results, liquidity, equity ratio, equity or assets;

     

(vi)   neither the Offer nor the acquisition of Meda being rendered wholly or partially impossible or significantly impeded as a result of legislation or other regulation, any decision of a court or public authority, or any similar circumstance;

     

(vii)  Meda not taking any action that is likely to impair the prerequisites for making or completing the Offer;

     

(viii) no information made public by Meda or disclosed by Meda to Mylan being materially inaccurate, incomplete or misleading, and Meda having made public all information which should have been made public by it; and

     

(ix)   no other party announcing an offer to acquire shares in Meda on terms more favorable to the shareholders of Meda than the Offer.

     
      Mylan reserves the right to withdraw the Offer in the event it becomes clear that any of the above conditions is not satisfied or cannot be satisfied. With regard to conditions (ii) – (ix), however, such withdrawal will only be made to the extent permitted by applicable law if the non-satisfaction is of material importance to Mylan’s acquisition of the shares in Meda.
     

Mylan reserves the right to waive, in whole or in part, one or more of the conditions above, including, with respect to condition (i) above, to complete the Offer at a lower level of acceptance.

E.4   Interests material to the Offer   Stena Sessan Rederi AB (“Stena”) and Fidim S.r.l. (“Fidim”), which own approximately 21 percent and 9 percent, respectively, of the outstanding shares and votes of Meda, have undertaken to accept the Offer, subject to certain conditions. The irrevocable undertakings given by Stena and Fidim relate to their entire respective holdings of Meda shares. Each of Stena and Fidim has undertaken to accept the Offer no later than five business days prior to the expiry of the initial acceptance period for the Offer. The irrevocable undertakings given by Stena and Fidim shall be terminated if (i) a third party, prior to the Offer having been declared unconditional, makes a public offer to acquire all outstanding Meda shares at an offer value exceeding the value of the Offer by more than SEK 15 per share of Meda, (ii) the Offer is withdrawn, (iii) the Offer is not declared unconditional on or before February 10, 2017 or (iv) Mylan commits a material breach of applicable laws and regulations relating to the Offer.
     

Since each of Stena and Fidim has entered into such an undertaking and a related shareholder agreement, Meda board members Martin Svalstedt, Luca Rovati, Peter Claesson and Lars Westerberg did not participate in the Meda Board of Directors’ decision to recommend the Offer. The other Meda board members who did participate in such decision unanimously recommended the Offer.

E.5   Entity offering to sell the security, shareholder agreements   Each of Stena and Fidim has entered into a shareholder agreement with Mylan. Each shareholder agreement imposes certain restrictions on Stena and Fidim, as applicable, including prohibiting transfers of Mylan Shares to competitors of Mylan and to activist investors (as defined in each such shareholder agreement), as well as certain customary standstill limitations. Each shareholder agreement also imposes non-competition, non-solicitation and non-hire restrictions on the applicable shareholder for a period of 24 months after the Offer is declared unconditional. Each of Stena and Fidim has agreed pursuant to its applicable shareholder agreement to vote its Mylan Shares in accordance with the recommendation of the Mylan Board in the period up to and including the 180th day following settlement of the Offer and not vote its Mylan Shares against the recommendation of the Mylan Board in the period after the 180th day following settlement of the Offer, in each case subject to certain exceptions relating to significant corporate transactions. Each of Stena and Fidim has also agreed not to dispose of any Mylan Shares that it owns to any third party during the period up to and including the 180th day following the settlement of the Offer.
E.6   Dilution   Based on the assumptions described below, Mylan expects that approximately 28.2 million Mylan Shares will be issued in connection with the Offer and as a result Mylan shareholders will own, in the aggregate, approximately 95 percent of the outstanding Mylan Shares on a fully diluted basis immediately after completion of the Offer and former Meda shareholders will own, in the aggregate, approximately 5 percent of the outstanding Mylan Shares on a fully diluted basis immediately after completion of the Offer.
     

Mylan has assumed, solely for the purposes of the calculations above, that (i) the number of Meda shares outstanding immediately prior to the completion of the Offer will be approximately 365.5 million, (ii) the number of Mylan Shares outstanding on a fully diluted basis immediately prior to the completion of the Offer will be approximately 515.3 million, (iii) Mylan will not adjust the Offer Consideration in the event the Share Cap is exceeded, (iv) the Offeror Average Closing Price will be between $30.78 and $50.74 and (v) 100 percent of the outstanding Meda shares will be tendered into the Offer.

E.7   Expenses charged to the investor   No commission will be charged in respect of the settlement of the Meda shares tendered to Mylan in the Offer.

 

 

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Risk factors related to Mylan and the Offer

By accepting the Offer, Meda shareholders will be choosing to invest in Mylan Shares. In deciding whether to accept the Offer, Meda shareholders should consider carefully the following risk factors and the risk factors set forth under the caption “Risk factors related to Meda,” in addition to the other information contained in or incorporated by reference into this Offer Document, including the matters addressed under the caption “Forward-looking information.”

Risks related to the Offer

The value of the share portion of the Offer Consideration is dependent on the market price of Mylan Shares. Because the market price of Mylan Shares and the exchange rate between USD and SEK may fluctuate, the market value of the Mylan Shares that will be issued in connection with the Offer may fluctuate.

Unless Mylan adjusts the Offer Consideration in the event the Share Cap is exceeded, each Meda shareholder who tenders into the Offer will receive, in respect of 80 percent of the number of Meda shares tendered by such shareholder, SEK 165 in cash per Meda share; and in respect of the remaining 20 percent of the number of Meda shares tendered by such shareholder,

 

  (i) if the Offeror Average Closing Price is greater than $50.74, a number of Mylan Shares per Meda share equal to SEK 165 divided by the Offeror Average Closing Price as converted from USD to SEK at the Announcement Exchange Rate;
  (ii) if the Offeror Average Closing Price is greater than $30.78 and less than or equal to $50.74, 0.386 Mylan Shares per Meda share; or
  (iii) if the Offeror Average Closing Price is less than or equal to $30.78, a number of Mylan Shares per Meda share equal to SEK 100 divided by the Offeror Average Closing Price as converted from USD to SEK at the Announcement Exchange Rate.

Because there is a fixed exchange ratio of 0.386 Mylan Shares per Meda share when the Offeror Average Closing Price is greater than USD 30.78 and less than or equal to USD 50.74, Meda shareholders will bear the risk of declines in the market price of Mylan Shares that

cause the Offeror Average Closing Price to fluctuate within that range.

The Offeror Average Closing Price could vary significantly from the market value of Mylan Shares as of the date of this Offer Document or as of the dates on which Meda shareholders tender their shares, which could result in the value of the share portion of the Offer Consideration being lower than it would have been as of such dates. In addition, the value of the share portion of the Offer Consideration will never exceed SEK 33 in Mylan Shares per Meda share (based on the Offeror Average Closing Price converted from USD to SEK at the Announcement Exchange Rate).

Until Mylan declares the Offer unconditional, which will not occur until such time as the conditions to the Offer, including the condition that holders of more than 90 percent of the outstanding Meda shares tender their shares into the Offer, have either been satisfied or waived, the Offeror Average Closing Price cannot be calculated. As a result, Meda shareholders may be uncertain of the value of the share portion of the Offer Consideration when they make the decision to tender their shares. Similarly, Mylan will not announce whether it is electing to adjust the Offer Consideration in the event the Share Cap is exceeded until it declares the Offer unconditional, so Meda shareholders may be uncertain of the allocation of the Offer Consideration between cash and Mylan Shares when they make the decision to tender their shares.

The terms of the Offer do not provide for an adjustment mechanism in the case of any increases or decreases in the price of Mylan Shares or Meda shares after the Offeror Average Closing Price is publicly announced, including with respect to Meda shares that are tendered during any subsequent acceptance period. While settlement for the initial acceptance

 

 

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period is expected to take place within five business days after the date that the Offer is declared unconditional, the market value of the Mylan Shares that tendering Meda shareholders will receive in the Offer could still vary significantly from the Offeror Average Closing Price.

Meda shareholders are urged to obtain current market quotations for Mylan Shares and Meda shares when they consider whether to tender their Meda shares pursuant to the Offer.

The number of Mylan Shares that will be issued as the share portion of the Offer Consideration is based upon the Announcement Exchange Rate. Fluctuations in the exchange rate between USD and SEK may further affect the value in SEK of the Mylan Shares that are issued in connection with the Offer. There will be no adjustment to the Offer Consideration based on fluctuations in currency rates from the Announcement Exchange Rate. Accordingly, if the value of SEK falls relative to USD, the Offer Consideration will consist of a lower value in SEK terms to Meda shareholders, which could cause the total Offer Consideration to fall below SEK 152 at prevailing SEK/USD exchange rates.

Meda shareholders are urged to obtain current market currency exchange rates when they consider whether to tender their Meda shares pursuant to the Offer.

The Offer may not be completed on the terms or timeline currently contemplated, or at all.

Mylan’s obligation to complete the Offer is subject to the satisfaction or waiver of a number of customary closing conditions, including (i) holders of more than 90 percent of the outstanding Meda shares tendering their shares into the Offer and (ii) receipt of all necessary regulatory, governmental or similar clearances, approvals and decisions, including from competition authorities.

Since the fulfillment of these conditions is beyond Mylan’s control, there are no guarantees as to when the Offer will be completed, or that it will be completed at all. Uncertainty in the financial markets regarding if or when the Offer will be completed may negatively affect the price of Mylan Shares and/or Meda shares. In addition, to grant such clearances, approvals, and decisions, competition authorities may impose requirements, limitations, or costs on the conduct of Mylan’s businesses or require divestitures after completion of the Offer that could delay the completion of the Offer or may reduce the anticipated benefits of the Offer.

If the proposed acquisition of Meda is not completed for any reason, Mylan and/or Meda would be subject to a number of risks, including, among others:

 

  incurring substantial expenses and costs, including legal, accounting, financing, and advisory fees, that Mylan and/or Meda would be unable to recover; and
  negative reactions from the financial markets or from Mylan’s and/or Meda’s respective customers, vendors, and employees.

Any of these factors could have a material adverse effect on Mylan’s or Meda’s respective business, financial condition, results of operations, cash flows, and/or share price.

The Offer may adversely affect the liquidity and value of non-tendered Meda shares.

In the event that not all of the Meda shares are tendered into the Offer and Mylan accepts for exchange those shares tendered into the Offer, the number of shareholders and the number of Meda shares held by individual holders will be greatly reduced. As a result, Mylan’s acceptance of Meda shares for exchange in the Offer could adversely affect the liquidity and could also adversely affect the market value of the remaining Meda shares held by the public. If Mylan becomes the owner of more than 90 percent of the Meda shares, Mylan intends to promote the delisting of the Meda shares from Nasdaq Stockholm. As a result of such delisting, Meda shares not tendered pursuant to the Offer may become illiquid and may be of reduced value.

Holders of Meda shares that do not accept the Offer and whose Meda shares are acquired by Mylan in the compulsory acquisition proceedings may not receive payment for a significant period of time after completion of the Offer.

If Mylan becomes the owner of more than 90 percent of the Meda shares, Mylan intends to initiate a compulsory acquisition procedure with respect to the remaining Meda shares in accordance with the Swedish Companies Act. It may take 18 months or more from initiation of the compulsory acquisition procedure until the arbitration tribunal decides on the purchase price. Thereafter, cash consideration will be distributed to the holders of Meda shares whose shares are acquired through the compulsory acquisition procedure, together with interest thereon at a market rate set by the Swedish Central Bank pursuant to Swedish law. If advance title (Sw. förhandstillträde) to the Meda shares is obtained by Mylan (which means that full ownership is obtained by Mylan with respect to the remaining Meda shares before the arbitration proceedings regarding the consideration have been completed), the arbitration tribunal may issue a separate award with respect to that portion of the purchase price that is not disputed by Mylan. In that case, Mylan would be obliged to pay such portion prior to the final arbitration award.

As a result, holders of Meda shares who do not accept the Offer and whose Meda shares are subsequently

 

 

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acquired in the compulsory acquisition proceedings may not receive payment for a significant period of time after completion of the Offer.

Mylan must obtain required approvals and consents to consummate the Offer, which, if delayed or not granted, may jeopardize or delay the completion of the Offer, result in additional expenditures of money and resources, and/or reduce the anticipated benefits of the Offer.

The Offer is subject to customary closing conditions. These closing conditions include, among others, the effectiveness of the Registration Statement and the receipt of the relevant approvals under the antitrust and competition laws of certain countries under which filings or approvals are required.

The governmental agencies from which Mylan will seek certain of these approvals have broad discretion in administering the governing regulations. As a condition to their approval of the Offer, such agencies may impose requirements, limitations, or costs or require divestitures or place restrictions on the conduct of Mylan’s businesses after completion of the Offer. These requirements, limitations, costs, divestitures, or restrictions could delay the completion of the Offer or may reduce the anticipated benefits of the Offer. Further, no assurance can be given that the required closing conditions will be satisfied, and, if all required consents and approvals are obtained and the closing conditions are satisfied, no assurance can be given as to the terms, conditions, and timing of the consents and approvals. Mylan’s obligation to consummate the Offer is subject to the receipt of all necessary regulatory, governmental or similar clearances, approvals and decisions, including from competition authorities, in each case on terms which, in Mylan’s opinion, are acceptable. However, pursuant to the Takeover Rules, Mylan is only permitted to withdraw the Offer on the basis of actions required to be taken to obtain regulatory, governmental or similar clearances if such actions are of material importance to Mylan’s acquisition of Meda.

If Mylan agrees to any material requirements, limitations, costs, divestitures, or restrictions in order to obtain any approvals required to consummate the Offer, these requirements, limitations, costs, divestitures or restrictions could adversely affect Mylan’s ability to integrate Mylan’s operations with Meda or reduce the anticipated benefits of the Offer. This could delay the completion of the Offer or have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or share price.

The market price of Mylan Shares after the Offer may be affected by factors different from those currently affecting Meda shares.

The businesses of Mylan and Meda differ in many respects, including relative focus on specialty brands, generics and OTC and, accordingly, the results of operations of Mylan and the market price of Mylan Shares after the Offer may be affected by factors different from those currently affecting the independent results of operations of Mylan and Meda and the market price of Meda shares.

The market for Mylan Shares may be adversely affected by the issuance of Mylan Shares pursuant to the Offer.

In connection with the completion of the Offer, and as described and based on the assumptions set forth in the section of this Offer Document entitled “Dilution, etc.” beginning on page 57, Mylan expects to issue approximately 28.2 million Mylan Shares in connection with the Offer. The issuance of these new Mylan Shares could have the effect of depressing the market price for Mylan Shares.

Other than the Mylan Shares held by Stena Sessan Rederi AB (“Stena”) and Fidim S.r.l. (“Fidim”) subject to certain selling restrictions pursuant to the shareholder agreements entered into between Mylan and each of Stena and Fidim, the new Mylan Shares to be issued in connection with the Offer will be freely tradable upon completion of the Offer. The issuance of Mylan Shares to Meda shareholders who may not have the ability or wish to hold such shares, may lead to sales of such shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market price of, Mylan Shares.

The Mylan Shares to be received by Meda shareholders in connection with the Offer will have different rights from the Meda shares.

There will be material differences between the current rights of holders of Meda shares and the rights such holders can expect as shareholders of Mylan. Under the terms of the Offer and if the Offer is completed, Meda shareholders will receive a combination of Mylan Shares and cash consideration, and will consequently become holders of Mylan Shares. Mylan is organized under the laws of the Netherlands and Meda is organized under the laws of Sweden. Therefore, differences in the rights of holders of Mylan Shares and Meda shares arise both from differences between Mylan’s Articles of Association (the “Mylan Articles”) and the articles of association of Meda (as amended) (the “Meda Articles”) and also from differences between Dutch and Swedish law. As holders of Mylan Shares, former Meda shareholders’ rights with respect thereto will be governed primarily by Dutch law,

 

 

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including the Dutch Civil Code and the Dutch Corporate Governance Code, as well as Mylan’s constituent documents. Significant differences between the rights of holders of Mylan Shares and holders of Meda shares include rights relating to the nomination of directors and the permissibility of protective measures.

Mylan’s directors are appointed by the general meeting of its shareholders (the “General Meeting”) upon the binding nomination by the Mylan Board. The General Meeting may only overrule the binding nomination by a resolution adopted by at least a two-thirds majority of the votes cast, provided such majority represents more than half of the issued share capital. In contrast, the Meda Articles do not provide for binding nominations of directors.

Under Dutch law, various protective measures are permissible. Mylan’s governance arrangements include several provisions that may have the effect of making a takeover more difficult or less attractive, including: (1) Mylan’s issuance of a call option to a Dutch foundation (which under Dutch law must act in the sole discretion of its independent board of directors, whose conduct in turn is subject to and limited by the foundation’s governing documents and a fundamental principle of Dutch law that any protective measure adopted must be an adequate and proportional response to the perceived threat) to acquire preferred shares that, if exercised, could discourage, prevent or delay a potential takeover or allow Mylan to further discuss with a potential acquiror its future plans for Mylan as well as to search for strategic alternatives; (2) requirements that certain matters, including the amendment of the Mylan Articles may only be brought to the General Meeting for a vote upon a proposal by the Mylan Board; and (3) subject the appointment of Mylan directors to a binding nomination by the Mylan Board. Mylan believes that these measures allow it to safeguard its business interests and the interests of its stakeholders against any influences or interests that might be contrary to or threaten the mission and strategy of Mylan and its stakeholders. In contrast, under Swedish law, if, based on information originating from a party who intends to launch a takeover bid in respect of the shares in the company, the board of directors (or the managing director) of such Swedish company whose shares are admitted to trading on a regulated market or a comparable market outside the European Economic Area has a well-founded reason to believe that such a bid is imminent or that such a bid has been launched, the company shall only be entitled to take measures which are intended to impair the conditions for the launching or implementation of the bid following a resolution adopted by the general meeting of shareholders, although the company may seek alternative bids.

Furthermore under the Mylan Articles, unless Mylan consents in writing to the selection of an alternative forum, the competent courts of Amsterdam, the Netherlands will be the sole and exclusive forum for any action asserting a claim for breach of a duty owed by any of Mylan’s directors, officers, or other employees (including any of Mylan’s former directors, former officers, or other former employees to the extent such claim arises from such director, officer, or other employee’s breach of duty while serving as a director, officer, or employee) to Mylan or its shareholders; any action asserting a claim arising pursuant to or otherwise based on any provision of Dutch law or the Mylan Articles; any action asserting a claim that is mandatorily subject to Dutch law; or to the extent permitted under Dutch law, any derivative action or proceeding brought on behalf of Mylan, in each such case subject to such court having personal jurisdiction over the indispensable parties named as defendants therein. As a result, it may be more difficult for holders of Mylan Shares to serve process on Mylan or its directors and officers in the United States or other jurisdictions or to bring claims in jurisdictions they find favorable. This may serve to discourage lawsuits with respect to such claims against Mylan and its directors, officers and other employees.

Certain features of Mylan’s governance arrangements or that are otherwise available under Dutch law may discourage, delay, or prevent a change in control of Mylan, even if such a change in control is sought by Mylan’s shareholders. This may affect the market price of Mylan Shares.

The primary listing of the Mylan Shares is in the U.S. which may expose non-U.S. shareholders to additional risks.

The primary listing for the Mylan Shares to be delivered in connection with the Offer will be NASDAQ, and such shares will also be listed secondarily on the Tel Aviv Stock Exchange (the “TASE”). The Mylan Shares listed on NASDAQ are traded in USD and the value of the Mylan Shares for a non-U.S. shareholder will not only be dependent on the value of Mylan following completion of the Offer, but also on the applicable exchange rate. For example, changes in the SEK/USD exchange rate may have an adverse effect on the value in SEK of Mylan Shares, notwithstanding the absence of any material events affecting Mylan’s business and its share price following completion of the Offer. Further, the fact that the Mylan Shares will not be listed in Sweden may cause additional transaction costs and logistical challenges for persons holding their Mylan Shares through Euroclear, such as delays in effecting transactions in Mylan Shares.

 

 

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Mylan does not anticipate paying dividends for the immediate future, and Meda shareholders who receive Mylan Shares in connection with the Offer must rely on increases in the trading price of Mylan Shares to obtain a return on their investment.

Mylan does not anticipate paying dividends in the immediate future. Mylan anticipates that it will retain all earnings, if any, to support its operations and to pursue additional transactions to deliver additional shareholder value. Any future determination as to the payment of dividends will, subject to Dutch law requirements, be at the sole discretion of Mylan’s board of directors (the “Mylan Board”) and will depend on Mylan’s financial condition, results of operations, capital requirements, and other factors the Mylan Board deems relevant at that time. Mylan shareholders must rely on increases in the trading price of their shares to obtain a return on their investment in the foreseeable future.

If Mylan were to pay dividends in the future with respect to the Mylan Shares, it would administer payment of such dividends to holders of shares registered with Euroclear through Euroclear. However, the methodology for providing payments of dividends through Euroclear has not yet been established and no agreement with Euroclear regarding administration of dividends has been entered into. The absence of an agreement with Euroclear does not deprive holders of Mylan Shares registered with Euroclear of the right to receive future dividend payments, if any, but may cause delays and other problems in relation to the administration of the dividend.

Furthermore, any dividends paid to holders of shares registered with Euroclear would be subject to the risk of exchange rate fluctuations. If the Combined Company were to pay dividends in the future with respect to the Mylan Shares, such dividends will be paid in USD. However, investors whose shares are registered with Euroclear would receive dividend distributions in SEK. Any depreciation of the USD in relation to SEK could reduce the value of the investment or of any dividends. In addition, the holding of shares registered with Euroclear by an investor whose principal currency is not SEK would expose the investor to additional foreign currency exchange rate risk.

Dual affiliation with securities depositories may entail logistical and technical challenges for shareholders whose shares are registered with Euroclear.

The Mylan Shares are deposited with the Depository Trust Company and the Mylan Shares to be issued in connection with the Offer will be delivered to Meda shareholders through the system of Euroclear. It is possible that this arrangement will entail logistical and

technical challenges for Meda shareholders whose shares are registered with Euroclear. Such challenges may include delays in transfers of shares between the depositories, receiving any dividends, notices distributed via the depositories, and difficulties in exercising any or all of the shareholder’s rights, such as attending annual shareholder meetings.

Meda shareholders will have a reduced ownership and voting interest after the completion of the Offer and will exercise less influence over the management and policies of Mylan than they do over Meda.

When Meda shares are accepted in the Offer, each participating Meda shareholder will become a shareholder of Mylan with a percentage ownership of Mylan that is much smaller than the shareholder’s percentage ownership of Meda. Mylan has assumed, solely for the purposes of this calculation that (i) the number of Meda shares outstanding immediately prior to the completion of the Offer will be approximately 365.5 million, (ii) the number of Mylan Shares outstanding on a fully diluted basis immediately prior to the completion of the Offer will be approximately 515.3 million, (iii) Mylan will not adjust the Offer Consideration in the event the Share Cap is exceeded, (iv) the Offeror Average Closing Price will be between $30.78 and $50.74 and (v) 100 percent of the outstanding Meda shares will be tendered into the Offer. Based on these assumptions, Mylan expects that approximately 28.2 million Mylan Shares will be issued in connection with the Offer and as a result Mylan shareholders will own, in the aggregate, approximately 95 percent of the outstanding Mylan Shares on a fully diluted basis immediately after completion of the Offer and former Meda shareholders will own, in the aggregate, approximately 5 percent of the outstanding Mylan Shares on a fully diluted basis immediately after completion of the Offer. As a result, Meda shareholders will have less influence over the management and policies of Mylan than they now have over the management and policies of Meda.

In addition, if Mylan becomes the owner of more than 90 percent of the Meda shares, Mylan intends to initiate a compulsory acquisition procedure with respect to the remaining Meda shares in accordance with the Swedish Companies Act. Because shares acquired pursuant to a compulsory acquisition procedure must be paid for in cash, holders of such Meda shares will not receive Mylan Shares as part of the consideration for their Meda shares, and former Meda shareholders will own in the aggregate a lower percentage of the outstanding Mylan Shares than they otherwise would have owned had all Meda shareholders tendered their shares into the Offer.

 

 

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Similarly, if Mylan adjusts the Offer Consideration in the event the Share Cap is exceeded (by increasing the cash portion of the Offer Consideration and correspondingly decreasing the share portion of the Offer Consideration), former Meda shareholders will receive fewer Mylan Shares than they otherwise would have been delivered had Mylan not adjusted the Offer Consideration, and former Meda shareholders will own in the aggregate a lower percentage of the outstanding Mylan Shares than they otherwise would have owned had Mylan not adjusted the Offer Consideration.

Each of Stena and Fidim may have interests in the Offer that may be different from, or in addition to, the interests of the other Meda shareholders.

Stena and Fidim, which as of February 10, 2016 owned approximately 21 percent and 9 percent, respectively, of the outstanding shares and votes of Meda, have each entered into an irrevocable undertaking with Mylan, pursuant to which each has agreed to accept the Offer, subject to certain conditions. In addition, each of Stena and Fidim have entered into a shareholder agreement with Mylan, pursuant to which, among other things, each is restricted for a certain period from disposing of the Mylan Shares it receives pursuant to the Offer and from voting against the recommendation of the Mylan Board. As a result of these agreements, each of Stena and Fidim may have interests in the Offer that are different from, or in addition to, or may be deemed to conflict with, interests of the other Meda shareholders. Meda shareholders are encouraged to evaluate the Offer based on their own individual circumstances.

Mylan will incur significant transaction-related costs in connection with the Offer, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows and/or share price.

Mylan will incur significant transaction costs relating to the Offer, including legal, accounting, financial advisory, regulatory, and other expenses, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows and/or share price. Many of these expenses are payable by Mylan whether or not the Offer is completed. Most of these expenses will be comprised of transaction costs related to the Offer, the Bridge Credit Facility and the New June 2016 Senior Notes. Mylan will also incur transaction fees and costs related to formulating integration plans. These fees and costs may be higher or lower than estimated. Additional unanticipated costs may be incurred in the integration of the two companies’ businesses. The total estimated transaction costs expected to be incurred in connection with the transaction are approximately

$153.0 million. Of that total, approximately $119.7 million of transaction costs are expected to be incurred by Mylan and approximately $33.3 million are expected to be incurred by Meda. Transaction costs include investment banking, advisory, legal, valuation, Bridge Credit Facility fees and other professional fees necessary to complete the transaction. Mylan also incurred approximately $49.0 million in financing related fees and discounts of approximately $21.2 million in connection with the completion of the offering of the New June 2016 Notes.

Although Mylan expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Mylan to offset incremental transaction-related costs over time, this net benefit may not be achieved in the near term, or at all.

The business relationships of Mylan and Meda, including customer relationships, may be subject to disruption due to uncertainty associated with the Offer.

Parties with which Mylan and Meda currently do business or may do business in the future, including customers and suppliers, may experience uncertainty associated with the Offer, including with respect to current or future business relationships with Mylan, Meda or the Combined Company. As a result, the business relationships of Mylan and Meda may be subject to disruptions if customers, suppliers, or others attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than Mylan or Meda. For example, certain customers and collaborators may have contractual consent rights or termination rights that may be triggered by a change of control or assignment of the rights and obligations of contracts that will be transferred in the Offer. These disruptions could have a material adverse effect on the business, financial condition, results of operations, cash flows, and/or share price of Mylan or the Combined Company or a material adverse effect on the business, financial condition, results of operations, and/or cash flows of Meda. The effect of such disruptions could be exacerbated by a delay in the completion of the Offer.

If counterparties to certain agreements with Meda, including certain debt agreements, do not consent, change of control rights under those agreements may be triggered as a result of the Offer, which could cause the Combined Company to lose the benefit of such agreements and incur material liabilities or replacement costs.

Meda is party to agreements that contain change-of-control, or certain other provisions that will be triggered as a result of the Offer and/or the completion of the

 

 

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Offer. If the counterparties to these agreements do not consent to the proposed acquisition of Meda by Mylan, the counterparties may have the ability to exercise certain rights (including termination rights), resulting in Meda incurring liabilities as a consequence of breaching such agreements, or causing the Combined Company to lose the benefit of such agreements or incur costs in seeking replacement agreements.

Meda also has certain debt obligations that contain change-of-control, or certain other provisions, that will be triggered as a result of the Offer and/or the completion of the Offer. If these provisions are triggered, the debt obligations may have to be repurchased, refinanced or otherwise settled.

As of March 31, 2016, approximately SEK 28.35 billion principal amount of Meda’s outstanding debt obligations and committed bank facilities contained change-of-control provisions that will be triggered as a result of the Offer. In addition, the completion of the Offer will accelerate a deferred payment of EUR 275 million relating to Meda’s acquisition of Rottapharm which otherwise would have been payable in January 2017. Mylan cannot assure you that sufficient funds will be available to repurchase any outstanding debt obligations or that Mylan will be able to refinance or otherwise settle such debt obligations on favorable terms, if at all.

The Offer, if successful, will trigger provisions contained in certain of Meda’s employee benefit plans and agreements that will require Mylan to make change in control payments.

Certain of Meda’s employee benefit plans and agreements contain provisions providing for compensation to be paid to, or received by, certain Meda employees in connection with a change in control. If successful, the Offer would constitute a change in control of Meda, thereby giving rise to change in control payments, which could have a material adverse effect on Mylan’s business, financial condition, results of operation, cash flows and/or share price.

Risks related to Mylan, the industry and the Mylan Shares

Risks related to Mylan following completion of the Offer

If completed, the Offer may not achieve the intended benefits or may disrupt Mylan’s plans and operations.

There can be no assurance that Mylan will be able to successfully integrate the business of Meda with the business of Mylan or otherwise realize the expected benefits of the Offer. Mylan’s ability to realize the anticipated benefits of the Offer will depend, to a large extent, on Mylan’s ability to integrate Meda with the

business of Mylan and realize the benefits of the Combined Company. The combination of two independent businesses is a complex, costly, and time-consuming process. Mylan’s business may be negatively impacted following the completion of the Offer if it is unable to effectively manage its expanded operations. The integration will require significant time and focus from management following the completion of the Offer and may divert attention from the day-to-day operations of the Combined Company. Additionally, completion of the Offer could disrupt current plans and operations, which could delay the achievement of Mylan’s strategic objectives.

The expected synergies and operating efficiencies of the Offer may not be fully realized, which could result in increased costs and have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or share price. In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of management’s attention, among other potential adverse consequences. The difficulties of combining the operations of the businesses include, among others:

 

  the diversion of management’s attention to integration matters;
  difficulties in achieving anticipated synergies, operating efficiencies, business opportunities, and growth prospects from combining Meda with Mylan;
  difficulties in the integration of operations and systems, including enterprise resource planning (“ERP”) systems;
  difficulties in the integration of employees;
  difficulties in managing the expanded operations of a significantly larger and more complex company;
  challenges in keeping existing customers and obtaining new customers; and
  challenges in attracting and retaining key personnel.

Many of these factors will be outside of Mylan’s control and any one of them could result in increased costs, decreased revenues, and diversion of management’s time and energy, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or share price. In addition, even if the operations of Mylan and Meda are integrated successfully, Mylan may not realize the full anticipated benefits of the Offer, including the synergies, operating efficiencies, or sales or growth opportunities. These benefits may not be achieved within the anticipated time frame or at all. Any of these factors could cause dilution to the earnings per share of the Combined Company, decrease or delay the expected accretive effect of the Offer, and/or negatively impact the price of the Mylan Shares after completing the Transaction.

 

 

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In addition, if Mylan fails to acquire 100 percent of the Meda shares in the Offer and/or until it completes a compulsory acquisition to acquire any Meda shares not tendered into the Offer, it may be more difficult to achieve the intended benefits of the Offer and could further disrupt Mylan’s plans and operations.

If goodwill or other intangible assets that Mylan records in connection with the Offer and a compulsory acquisition become impaired, Mylan could have to take significant charges against earnings.

In connection with the accounting for the Offer and a compulsory acquisition, Mylan expects to record a significant amount of goodwill and other intangible assets. Under U.S. GAAP, Mylan must assess, at least annually, whether the value of goodwill and indefinite-lived intangible assets has been impaired. Amortizing intangible assets will also be assessed for impairment in the event of an impairment indicator. Any reduction or impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, shareholder’s equity, and/or share price.

An inability to identify or successfully bid for suitable acquisition targets, or consummate and effectively integrate recent and future potential acquisitions, or to effectively deal with and respond to unsolicited business proposals, could limit Mylan’s future growth and have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or share price.

After the completion of the Offer, Mylan intends to continue to seek to expand its product line and/or business platform organically as well as through complementary or strategic acquisitions of other companies, products, or assets or through joint ventures, licensing agreements, or other arrangements. Acquisitions or similar arrangements may prove to be complex and time consuming and require substantial resources and effort. Mylan may compete for certain acquisition targets with companies having greater financial resources than Mylan or other advantages over Mylan that may hinder or prevent Mylan from acquiring a target company or completing another transaction, which could also result in significant diversion of management time, as well as substantial out-of-pocket costs.

If an acquisition is consummated, the integration of such acquired business, product, or other assets into Mylan may also be complex, time consuming, and result in substantial costs and risks. The integration process

may distract management and/or disrupt Mylan’s ongoing businesses, which may adversely affect Mylan’s relationships with customers, employees, partners, suppliers, regulators, and others with whom Mylan has business or other dealings. In addition, there are operational risks associated with the integration of acquired businesses. These risks include, but are not limited to, difficulties in achieving or inability to achieve identified or anticipated financial and operating synergies, cost savings, revenue synergies, and growth opportunities; difficulties in consolidating or inability to effectively consolidate information technology and manufacturing platforms, business applications, and corporate infrastructure; the impact of pre-existing legal and/or regulatory issues, such as quality and manufacturing concerns, among others; the risks that the acquired business does not operate to the same quality, manufacturing, or other standards as Mylan does; the impacts of substantial indebtedness and assumed liabilities; challenges associated with operating in new markets; and the unanticipated effects of export controls, exchange rate fluctuations, domestic and foreign political conditions, and/or domestic and foreign economic conditions.

In addition, in April 2015, Mylan received an unsolicited and subsequently withdrawn non-binding expression of interest from Teva Pharmaceutical Industries Ltd. (“Teva”) to acquire all of the outstanding Mylan Shares and may receive similar proposals in the future. Such unsolicited business proposals may not be consistent with or enhancing to Mylan’s financial, operational, or market strategies (which Mylan believes have proven to be successful), may not further (or be contrary to) the interests of its shareholders and other stakeholders, including employees, creditors, customers, suppliers, relevant patient populations and communities in which Mylan operates and may jeopardize the sustainable success of Mylan’s business. Moreover, the evaluation of and response to such unsolicited business proposals may nevertheless distract management and/or disrupt Mylan’s ongoing businesses, which may adversely affect its relationships with customers, employees, partners, suppliers, regulators, and others with whom it has business or other dealings.

Mylan may be unable to realize synergies or other benefits, including tax savings, expected to result from acquisitions, joint ventures, or other transactions or investments Mylan may undertake, or Mylan may be unable to generate additional revenue to offset any unanticipated inability to realize these expected synergies or benefits. Realization of the anticipated benefits of acquisitions or other transactions could take longer than expected, and implementation difficulties, unforeseen expenses, complications and delays, market factors, or deterioration in domestic and global

 

 

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economic conditions could reduce the anticipated benefits of any such transactions. Mylan also may inherit legal, regulatory, and other risks that occurred prior to the acquisition, whether known or unknown to Mylan.

Any one of these challenges or risks could impair Mylan’s growth and ability to compete, require Mylan to focus additional resources on integration of operations rather than other profitable areas, require Mylan to reexamine its business strategy, or otherwise cause a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or share price.

Mylan’s actual financial condition and results of operations may differ materially from the unaudited pro forma financial information included in this Offer Document.

The unaudited pro forma financial information contained in this Offer Document is presented for illustrative purposes only and may not be an indication of what Mylan’s financial condition or results of operations would have been had the Offer been completed on the dates indicated. The unaudited pro forma financial information has been derived from the consolidated financial statements of Mylan and Meda and certain adjustments and assumptions have been made regarding Mylan after giving effect to the Offer. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with complete accuracy. For example, the unaudited pro forma financial information does not reflect all costs that are expected to be incurred by Mylan in connection with the Offer and, if applicable, a compulsory acquisition. In addition, the final amount of any charges relating to acquisition accounting adjustments that Mylan may be required to record will not be known until following the closing of the Offer and, if applicable, a compulsory acquisition. Accordingly, the actual financial condition and results of operations of Mylan following the completion of the Offer and, if applicable, a compulsory acquisition may not be consistent with, or evident from, this unaudited pro forma financial information. In addition, the assumptions used in preparing the unaudited pro forma financial information may not prove to be accurate, and other factors may affect Mylan’s business, financial condition, results of operations, cash flows, and/or share price following closing of the Offer, including, among others, those described herein.

Mylan will need to timely and effectively implement its internal controls over Meda’s operations as required under the Sarbanes-Oxley Act of 2002.

Following the completion of the Offer, Mylan will need to timely and effectively implement its own internal controls

and procedures over Meda necessary for Mylan to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, including the requirements to provide in the future an annual management assessment of the effectiveness of internal control over financial reporting (“ICFR”) and an audit report by Mylan’s independent registered public accounting firm. Mylan intends, to the extent necessary, to take appropriate measures to establish or implement an internal control environment at Meda so that Mylan meets the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 when required. However, it is possible that Mylan may experience delays in implementing any required controls or may be unable to implement the required internal financial reporting controls and procedures with respect to Meda. In addition, in connection with the audit of ICFR required under the Sarbanes-Oxley Act of 2002 by Mylan’s independent registered public accounting firm, Mylan may encounter problems or delays in completing the implementation of any recommended improvements or the independent registered public accounting firm may be unable to conclude that Mylan’s ICFR is effective. If Mylan cannot favorably assess the effectiveness of its ICFR, or if Mylan’s independent registered public accounting firm is unable to provide an audit report finding that Mylan’s ICFR is effective, there could be a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or share price.

While Mylan currently expects the Offer to be immediately accretive to its adjusted annual earnings per share following its completion, a decrease or delay in the expected accretive effect of the Offer to Mylan’s annual adjusted earnings per share may negatively affect the market price of Mylan Shares.

Mylan currently expects the Offer to be accretive to its adjusted annual earnings per share immediately upon the completion of the Offer. This is based on certain assumptions and may change materially. Mylan could also encounter additional costs or other factors such as the failure to realize some or all of the benefits anticipated in the Offer or the difficulty of managing a larger company. Any of these factors could cause dilution to the earnings per share of the combined business, decrease or delay any potential accretive effect of the Offer, and/or have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or share price.

Mylan will incur a substantial amount of indebtedness to acquire the Meda shares pursuant to the Offer and a compulsory acquisition.

In connection with the Offer, Mylan intends to use a portion of the proceeds from the offering of the New

 

 

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June 2016 Senior Notes to finance the cash portion of the consideration for the Offer and a compulsory acquisition, if applicable, and to pay costs associated with the Offer, including non-periodic fees, costs and expenses, stamp registration and other taxes. Mylan cannot guarantee that it will be able to generate sufficient cash flow to make all of the principal and interest payments under this indebtedness when such payments are due or that it will be able to refinance such indebtedness on favorable terms, or at all. The failure to so repay or refinance such indebtedness when due could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows and/or share price.

Mylan will have significant additional indebtedness which could adversely affect Mylan’s financial condition, prevent Mylan from fulfilling its obligations with respect to such indebtedness and impose other financial and operating restrictions on Mylan. Any refinancing of this debt could bear significantly higher interest rates.

Based upon the unaudited condensed combined pro forma balance sheet as of March 31, 2016, Mylan would have total indebtedness (defined as long-term debt plus the current portion of long-term debt and other long-term obligations), less cash, of approximately $14.8 billion following completion of the Offer. Mylan’s increased indebtedness following the completion of the Offer and, if applicable, a compulsory acquisition could have adverse consequences, including but not limited to:

 

  increasing Mylan’s vulnerability to general adverse economic and industry conditions;
  requiring Mylan to dedicate a substantial portion of its cash flow from operations to make debt service payments, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;
  limiting Mylan’s flexibility in planning for, or reacting to, challenges and opportunities, and changes in its businesses and the markets in which it operates;
  limiting Mylan’s ability to obtain additional financing to fund its working capital, capital expenditures, acquisitions and debt service requirements and other financing needs;
  increasing Mylan’s vulnerability to increases in interest rates in general because a substantial portion of its indebtedness bears interest at floating rates; and
  placing Mylan at a competitive disadvantage to its competitors that have less debt.

In addition, although the Combined Company is expected to maintain an investment grade credit rating,

Mylan’s increased indebtedness following the completion of the Offer and, if applicable, a compulsory acquisition could result in a downgrade in the credit rating of Mylan or any indebtedness of Mylan or its subsidiaries. A downgrade in the credit rating of Mylan or any indebtedness of Mylan or its subsidiaries could increase the cost of further borrowings or refinancings of such indebtedness, increase the price of loans outstanding under Mylan’s current credit facilities, limit access to sources of financing in the future or lead to other adverse consequences.

The terms of Mylan’s indebtedness today impose, and any additional indebtedness it incurs in the future, or may impose, significant operating and financial restrictions on Mylan. These restrictions limit Mylan’s ability to, among other things, incur additional indebtedness, make investments, pay certain dividends, prepay other indebtedness, sell assets, incur certain liens, enter into agreements with its affiliates and restrict its subsidiaries’ ability to pay dividends, merge or consolidate. In addition, certain of Mylan’s credit facilities and accounts receivable securitization facility, as well as certain agreements governing Meda’s indebtedness, require the respective company to maintain specified financial ratios. A breach of any of these covenants or Mylan’s inability to maintain the required financial ratios could result in a default under the related indebtedness. If a default occurs, the relevant lenders could elect to declare Mylan’s indebtedness, together with accrued interest and other fees, to be immediately due and payable. These factors could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or share price.

Loss of key personnel could lead to loss of customers, business disruption, and a decline in revenues, adversely affect the progress of pipeline products, or otherwise adversely affect the operations of Mylan.

Mylan’s success after the completion of the Offer will depend in part upon its ability to retain key employees of Mylan and Meda. Prior to and following the completion of the Offer, employees of Mylan and Meda might experience uncertainty about their future roles with Mylan following the completion of the Offer, which might adversely affect Mylan’s ability to retain key managers and other employees of both companies. Competition for qualified personnel in the pharmaceutical industry is very intense. Mylan may lose key personnel or may be unable to attract, retain, and motivate qualified individuals or the associated costs to Mylan may increase significantly, which could have a material adverse effect on the business, financial condition, results of operations, cash flows, and/or share price of Mylan.

 

 

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Risks related to Mylan’s business

Abbott’s subsidiaries that hold Mylan shares are collectively a significant beneficial shareholder of Mylan’s and the presence of a significant beneficial shareholder may affect the ability of Mylan’s other shareholders to exercise influence over Mylan, especially in light of certain voting obligations under the Abbott Shareholder Agreement.

Subsidiaries of Abbott Laboratories (“Abbott”) collectively own approximately 14.2 percent of Mylan’s outstanding voting securities as of December 31, 2015. The Mylan Shares owned by Abbott’s subsidiaries are subject to the terms of the shareholder agreement (the “Abbott Shareholder Agreement”), which requires the Abbott subsidiaries to vote in favor of the director nominees recommended by the Mylan Board and in accordance with the recommendation of the Mylan Board on all other matters, subject to certain exceptions for extraordinary transactions. This voting agreement is in force with respect to Mylan Shares owned by Abbott’s subsidiaries so long as they collectively beneficially own at least five percent of Mylan Shares issued and outstanding. Abbott’s subsidiaries that hold Mylan Shares are collectively a significant beneficial shareholder of Mylan. Having a significant beneficial shareholder that is required in many instances to vote with the recommendation of the Mylan Board may make it more difficult for Mylan’s other shareholders to exercise influence over most matters submitted to shareholders for approval, including the election of directors, issuances of securities for equity compensation plans, amendments to the Mylan Articles, and shareholder proposals submitted pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Additionally, such Abbott subsidiaries are obligated, pursuant to the Abbott Shareholder Agreement, not to tender any Mylan Shares in any tender or exchange offer that the Mylan Board recommends that the shareholders reject and, if the Mylan Board has recommended against a transaction, such Abbott subsidiaries are required to vote against such transaction, which may have the effect of making it more difficult for a third party to acquire, or discouraging a third party from seeking to acquire, a majority of outstanding Mylan Shares in a public takeover offer, or control of the Mylan Board through a proxy solicitation.

Provisions in Mylan’s governance arrangements or that are otherwise available under Dutch law could discourage, delay, or prevent a change in control of Mylan and may affect the market price of Mylan Shares.

Some provisions of Mylan’s governance arrangements that are available under Dutch law, such as Mylan’s grant

to a Dutch foundation (stichting) of a call option to acquire preferred shares to safeguard the interests of Mylan, its businesses and its stakeholders against threats to its strategy, mission, independence, continuity and/or identity, may discourage, delay, or prevent a change in control of Mylan, even if such a change in control is sought by its shareholders.

Mylan may be forced to delist, or otherwise choose to delist, from the TASE in the future and this could have a negative impact on Mylan’s ordinary share price and on the liquidity of Mylan Shares.

On October 29, 2015, the TASE approved the listing of Mylan Shares on the TASE, and Mylan Shares began trading on it on November 4, 2015. As a result, Mylan Shares are now listed on both NASDAQ and the TASE. In connection with Mylan’s offer to acquire Perrigo Company plc, Mylan has undertaken that Mylan Shares will be listed on the TASE for a period of not less than one year from the date they first started trading on it. Mylan has also undertaken with the TASE that for as long as the Mylan Shares are listed for trading on it, if new Mylan preferred shares are issued, in response to the Dutch foundation (stichting) described above exercising its call option to acquire preferred shares or otherwise, Mylan will take all necessary actions, as soon as practicable and no later than three Israeli business days following the issuance of such preferred shares, to notify the TASE that Mylan is delisting the Mylan Shares from it (with such delisting to take effect 90 days later). Accordingly, there can be no guarantee as to how long the Mylan Shares will continue to be listed on the TASE. If Mylan delists from the TASE, that could have a negative impact on the Mylan Share price and on the liquidity of the Mylan Shares for its shareholders, particularly in Israel.

Mylan does not anticipate paying dividends for the foreseeable future, and Mylan’s shareholders must rely on increases in the trading price of the Mylan Shares to obtain a return on their investment.

Mylan does not anticipate paying dividends in the immediate future. Mylan anticipates that it will retain all earnings, if any, to support its operations and to pursue additional transactions to deliver additional shareholder value. Any future determination as to the payment of dividends will, subject to Dutch law requirements, be at the sole discretion of the Mylan Board and will depend on Mylan’s financial condition, results of operations, capital requirements, and other factors the Mylan Board deems relevant at that time. Holders of the Mylan Shares

 

 

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must rely on increases in the trading price of their shares to obtain a return on their investment in the foreseeable future.

The market price of the Mylan Shares may be volatile, and the value of Mylan shareholders’ investments could materially decline.

Investors who hold the Mylan Shares may not be able to sell their shares at or above the price at which they purchased such shares. The share price of the Mylan Shares fluctuates materially from time to time, and Mylan cannot predict the price of the Mylan Shares at any given time. The risk factors described herein could cause the price of the Mylan Shares to fluctuate materially. In addition, the stock market in general, including the market for generic and specialty pharmaceutical companies, has experienced price and volume fluctuations. These broad market and industry factors may materially harm the market price of the Mylan Shares, regardless of Mylan’s operating performance. In addition, the price of the Mylan Shares may be affected by the valuations and recommendations of the analysts who cover Mylan, and if Mylan’s results do not meet the analysts’ forecasts and expectations, the price of the Mylan Shares could decline as a result of analysts lowering their valuations and recommendations or otherwise. In the past, following periods of volatility in the market and/or in the price of a company’s stock, securities class-action litigation has often been instituted against other companies. Such litigation, if instituted against Mylan, could result in substantial costs and diversion of management’s attention and resources, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price. Mylan may issue additional Mylan Shares upon the exercise of existing warrants, and Mylan or its shareholders also may offer or sell Mylan Shares or securities convertible into or exchangeable or exercisable for Mylan Shares. The resulting increase in the number of the Mylan Shares issued and outstanding and the possibility of sales of such Mylan Shares or such securities convertible into or exchangeable or exercisable for Mylan Shares after any such additional offerings may depress the future trading price of the Mylan Shares. In addition, if additional offerings occur, the voting power of Mylan’s then existing shareholders may be diluted.

The EPD Transaction may not achieve all intended benefits or may disrupt Mylan’s plans and operations.

There can be no assurance that Mylan will be able to successfully complete the integration of the non-U.S. developed markets specialty and branded generics business (the “EPD Business”) acquired from Abbott with

the business of Mylan Inc. or otherwise fully realize the expected benefits of Mylan’s acquisition of the EPD Business (together with Mylan’s acquisition of Mylan Inc., the “EPD Transaction”). Mylan’s ability to fully realize the anticipated benefits of the EPD Transaction will depend, to a large extent, on Mylan’s ability to integrate the EPD Business with the business of Mylan Inc. and realize the benefits of the combined business. The combination of two independent businesses is a complex, costly, and time-consuming process. Mylan’s business may be negatively impacted if it is unable to effectively manage its expanded operations. The integration is ongoing and continues to require significant time and focus from management and may divert attention from the day-to-day operations of Mylan’s business. Additionally, the integration of the businesses could disrupt Mylan’s plans and operations, which could delay the achievement of its strategic objectives.

The expected synergies and operating efficiencies of the EPD Transaction may not be fully realized, which could result in increased costs and have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price. In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of management’s attention, among other potential adverse consequences. The difficulties of combining the operations of the businesses include, among others:

 

  the diversion of management’s attention to integration matters;
  difficulties in achieving anticipated synergies, operating efficiencies, business opportunities, and growth prospects from combining the EPD Business with the business of Mylan Inc.;
  difficulties in the integration of operations and IT applications, including ERP systems;
  difficulties in the integration of employees;
  difficulties in managing the expanded operations of a significantly larger and more complex company;
  challenges in keeping existing customers and obtaining new customers;
  challenges in attracting and retaining key personnel; and
  the complexities of managing the ongoing relationship with Abbott, and certain of its business partners, which includes agreements providing for transition services, development and manufacturing relationships, and license arrangements.

Many of these factors are outside of Mylan’s control and any one of them could result in increased costs, decreases in the amount of expected revenues, and diversion of management’s time and energy, which

 

 

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could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price. Furthermore, even if the operations of Mylan Inc. and the EPD Business are integrated successfully, Mylan may not realize the full benefits of the EPD Transaction, including the synergies, operating efficiencies, or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame or at all. All of these factors could cause dilution to Mylan’s earnings per share, decrease or delay the expected accretive effect of the EPD Transaction, and/or negatively impact the price of the Mylan Shares.

Mylan expects to be treated as a non-U.S. corporation for U.S. federal income tax purposes. Any changes to the tax laws or changes in other laws (including under applicable income tax treaties), regulations, rules, or interpretations thereof applicable to inverted companies and their affiliates, whether enacted before or after the EPD Transaction, may materially adversely affect Mylan.

Under current U.S. law, Mylan believes that it should not be treated as a U.S. corporation for U.S. federal income tax purposes as a result of the EPD Transaction. Changes to Section 7874 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), or, to the U.S. Treasury Regulations promulgated thereunder, or interpretations thereof, or to other relevant tax laws (including applicable income tax treaties), could affect Mylan’s status as a non-U.S. corporation for U.S. federal income tax purposes and the tax consequences to Mylan and its affiliates. Any such changes could have prospective or retroactive application, and may apply even if enacted or promulgated now that the EPD Transaction has closed. If Mylan were to be treated as a U.S. corporation for U.S. federal income tax purposes, or if the relevant tax laws (including applicable income tax treaties) change, Mylan would likely be subject to significantly greater U.S. tax liability than currently contemplated as a non-U.S. corporation or if the relevant tax laws (including applicable income tax treaties) had not changed.

On August 5, 2014, the U.S. Treasury Department announced that it is reviewing a broad range of authorities for possible administrative actions that could limit the ability of a U.S. corporation to complete a transaction in which it becomes a subsidiary of a non-U.S. corporation (commonly known as an “inversion transaction”) or reduce certain tax benefits after an inversion transaction takes place. On September 22, 2014 and November 19, 2015, the U.S. Treasury Department issued notices (the “Notices”) announcing its intention to promulgate certain regulations that will apply to inversion transactions completed on or after

September 22, 2014. Those regulations were promulgated as temporary U.S. Treasury Regulations on April 4, 2016, and they do not affect Mylan’s belief that it expects to be treated as a non-U.S. corporation for U.S. federal income tax purposes.

In the Notices, the U.S. Treasury Department also announced that it expected to issue additional guidance to further limit and reduce the benefits of certain inversion transactions. In particular, it stated that it was considering regulations that may limit the ability of certain foreign-owned U.S. corporations to deduct certain interest payments (so-called “earnings stripping”). On April 4, 2016, the U.S. Treasury Department issued such regulations in the form of proposed U.S. Treasury Regulations. Proposed U.S. Treasury Regulations do not currently have the force of law, however, the rules described in the proposed U.S. Treasury Regulations will apply to certain intercompany arrangements entered into on or after April 4, 2016 if and when the regulations are adopted in final form. The U.S. Treasury Department stated that it intends to finalize swiftly such proposed U.S. Treasury Regulations.

Additionally, there have been recent legislative proposals intended to limit or discourage inversion transactions and on May 20, 2015, the U.S. Treasury Department announced its intention to revise certain provisions of the model income tax treaties, which, if ultimately adopted by the U.S. and relevant jurisdictions, could reduce potential tax benefits for Mylan and its affiliates by imposing U.S. withholding taxes on particular payments from Mylan’s U.S. affiliates to related and unrelated foreign persons. Any such future regulatory or legislative actions regarding inversion transactions or any other changes in relevant tax laws (including under applicable income tax treaties), if taken, could apply to Mylan, could disadvantage it as compared to other corporations, including non-U.S. corporations that have completed inversion transactions prior to September 22, 2014, and could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

The IRS may not agree that Mylan should be treated as a non-U.S. corporation for U.S. federal income tax purposes.

The U.S. Internal Revenue Service (the “IRS”) may not agree that Mylan should be treated as a non-U.S. corporation for U.S. federal income tax purposes. Although Mylan is not incorporated in the U.S. and expects to be treated as a non-U.S. corporation for U.S. federal income tax purposes, the IRS may assert that Mylan should be treated as a U.S. corporation for U.S. federal income tax purposes. If Mylan were to be treated as a U.S. corporation for U.S. federal income tax

 

 

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purposes, it would likely be subject to significantly greater U.S. tax liability than currently contemplated as a non-U.S. corporation.

If the intercompany terms of cross border arrangements that Mylan has among its subsidiaries are determined to be inappropriate or ineffective, Mylan’s tax liability may increase.

Mylan has potential tax exposures resulting from the varying application of statutes, regulations, and interpretations which include exposures on intercompany terms of cross-border arrangements among its subsidiaries (including intercompany loans, sales, and services agreements) in relation to various aspects of Mylan’s business, including manufacturing, marketing, sales, and delivery functions. Although Mylan believes its cross-border arrangements among its subsidiaries are based upon internationally accepted standards and applicable law, tax authorities in various jurisdictions may disagree with and subsequently challenge the amount of profits taxed in their country, which may result in increased tax liability, including accrued interest and penalties, which would cause Mylan’s tax expense to increase and could have a material adverse effect on its business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan may not be able to maintain competitive financial flexibility and its corporate tax rate.

Mylan believes that its structure and operations will give it the ability to achieve competitive financial flexibility and a competitive worldwide effective corporate tax rate. The material assumptions underlying Mylan’s expected tax rates include the fact that it expects certain of its businesses will be operated outside of the U.S. and, as such, will be subject to a lower tax rate than operations in the U.S., which will result in a lower blended worldwide tax rate than Mylan was previously able to achieve. Mylan must also make assumptions regarding the effect of certain internal reorganization transactions, including various intercompany transactions. Mylan cannot give any assurance as to what its effective tax rate will be, however, because of, among other reasons, uncertainty regarding the tax policies of the jurisdictions where Mylan operates, potential changes of laws and interpretations thereof, and the potential for tax audits or challenges. Mylan’s actual effective tax rate may vary from its expectation and that variance may be material. Additionally, the tax laws of the U.K., the Netherlands and other jurisdictions could change in the future, and such changes could cause a material change in Mylan’s effective tax rate. Such a material change could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Unanticipated changes in Mylan’s tax provisions or exposure to additional income tax liabilities and changes in income tax laws and tax rulings may have a significant adverse impact on its effective tax rate and income tax expense.

Mylan is subject to income taxes in many jurisdictions. Significant analysis and judgment are required in determining Mylan’s worldwide provision for income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The final determination of any tax audits or related litigation could be materially different from Mylan’s income tax provisions and accruals.

Additionally, changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in Mylan’s overall profitability, changes in the valuation of deferred tax assets and liabilities, the results of audits and the examination of previously filed tax returns by taxing authorities, and continuing assessments of Mylan’s tax exposures could impact its tax liabilities and affect its income tax expense, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Finally, potential changes to income tax laws in the U.S. include measures which would defer the deduction of interest expense related to deferred income; determine the foreign tax credit on a pooling basis; tax currently excess returns associated with transfers of intangibles offshore; and limit earnings stripping by expatriated entities. In addition, proposals have been made to encourage manufacturing in the U.S., including reduced rates of tax and increased deductions related to manufacturing. Mylan cannot determine whether these proposals will be modified or enacted, whether other proposals unknown at this time will be made, or the extent to which the corporate tax rate might be reduced and lessen the adverse impact of some of these proposals. If enacted, and depending on its precise terms, such legislation could materially increase Mylan’s overall effective income tax rate and income tax expense and could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan may become taxable in a jurisdiction other than the United Kingdom and this may increase the aggregate tax burden on Mylan.

Based on Mylan’s current management structure and current tax laws of the United States, the United Kingdom, and the Netherlands, as well as applicable income tax treaties, and current interpretations thereof, the United Kingdom and the Netherlands competent

 

 

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authorities have determined that Mylan is tax resident solely in the United Kingdom for the purposes of the Netherlands-U.K. tax treaty. Mylan has received a binding ruling from the competent authorities in the United Kingdom and in the Netherlands confirming this treatment. Mylan will therefore be tax resident solely in the United Kingdom so long as the facts and circumstances set forth in the relevant application letters sent to those authorities remain accurate. Even though Mylan received a binding ruling, the applicable tax laws or interpretations thereof may change, or the assumptions on which such rulings were based may differ from the facts. As a consequence, Mylan may become a tax resident of a jurisdiction other than the U.K. As a consequence, Mylan’s overall effective income tax rate and income tax expense could materially increase, which could have a material adverse effect on its business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan has and will incur direct and indirect costs as a result of its corporate structure.

Mylan has incurred costs and expenses in connection with, and will incur further costs and expenses as a result of, becoming a Dutch company that is a tax resident of the United Kingdom. Certain costs are not readily ascertainable and are difficult to quantify and determine. These costs and expenses include professional fees associated with complying with Dutch corporate law and financial reporting requirements, professional fees associated with complying with the tax laws of the United Kingdom, and costs and expenses incurred in connection with holding a majority of the meetings of the Mylan Board and certain executive management meetings in the U.K., as well as any additional costs Mylan may incur going forward as a result of its new corporate structure. These costs may materially exceed the costs historically borne by Mylan, which could have a material adverse effect on its business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan has grown at a very rapid pace and expects to aggressively pursue additional acquisition opportunities that make financial and strategic sense for Mylan. Mylan’s inability to effectively manage or support this growth may have a material adverse effect on its business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan has grown very rapidly over the past several years as a result of increasing sales and several acquisitions and other transactions, and expects to aggressively pursue additional acquisition opportunities that make

financial and strategic sense for Mylan. Mylan evaluates various strategic transactions and business arrangements, including acquisitions, asset purchases, partnerships, joint ventures, restructurings, divestitures and investments, on an ongoing basis. These transactions and arrangements may be material both from a strategic and financial perspective.

Mylan is currently in the process of evaluating certain potential strategic transactions, including acquisitions, and it may choose to aggressively pursue one or more of these opportunities at any time. Some of these opportunities would be material if pursued and consummated. Mylan’s growth has, and will continue to, put significant demands on its processes, systems, and employees. Mylan has made and expects to make further investments in additional personnel, systems, and internal control processes to help manage its growth. Attracting, retaining and motivating key employees in various departments and locations to support Mylan’s growth are critical to its business, and competition for these people can be significant. If Mylan is unable to hire and/or retain qualified employees and/or if it does not effectively invest in systems and processes to manage and support its rapid growth and the challenges and difficulties associated with managing a larger, more complex business, and/or if Mylan cannot effectively manage and integrate its increasingly diverse and global platform, there could be a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Current and changing economic conditions may adversely affect Mylan’s industry, business, customers, partners and suppliers, financial condition, results of operations, cash flows, and/or ordinary share price.

The global economy continues to experience significant volatility, and the economic environment may continue to be, or become, less favorable than that of past years. Among other matters, the continued risk of a default on sovereign debt by one or more European countries, related financial restructuring efforts in Europe, and/or evolving deficit and spending reduction programs instituted by the U.S. and other governments could negatively impact the global economy and/or the pharmaceutical industry. This has led, and/or could lead, to reduced consumer and customer spending and/or reduced or eliminated governmental or third party payor coverage or reimbursement in the foreseeable future, and this may include reduced spending on healthcare, including but not limited to pharmaceutical products. While generic drugs present an alternative to higher-priced branded products, Mylan’s sales could be negatively impacted if patients forego obtaining healthcare, patients and customers reduce spending or

 

 

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purchases, and/or if governments and/or third-party payors reduce or eliminate coverage or reimbursement amounts for pharmaceuticals and/or impose price or other controls adversely impacting the price or availability of pharmaceuticals. In addition, reduced consumer and customer spending, and/or reduced government and/or third-party payor coverage or reimbursement, and/or new government controls, may drive Mylan and its competitors to decrease prices and/or may reduce the ability of customers to pay and/or may result in reduced demand for its products. The occurrence of any of these risks could have a material adverse effect on Mylan’s industry, business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan’s business, financial condition, and results of operations are subject to risks arising from the international scope of its operations.

Mylan’s operations extend to numerous countries outside the U.S. and are subject to the risks inherent in conducting business globally and under the laws, regulations, and customs of various jurisdictions. These risks include, but are not limited to:

 

  compliance with a variety of national and local laws of countries in which Mylan does business, including, but not limited to, data privacy and security and restrictions on the import and export of certain intermediates, drugs, and technologies;
  compliance with a variety of U.S. laws including, but not limited to, the Iran Threat Reduction and Syria Human Rights Act of 2012; and rules relating to the use of certain “conflict minerals” under Section 1502 of the Dodd-Frank Wall Street Reform and the Consumer Protection Act;
  changes in laws, regulations, and practices affecting the pharmaceutical industry and the healthcare system, including but not limited to imports, exports, manufacturing, quality, cost, pricing, reimbursement, approval, inspection, and delivery of healthcare;
  fluctuations in exchange rates for transactions conducted in currencies other than the functional currency;
  differing local product preferences and product requirements;
  adverse changes in the economies in which Mylan or its partners and suppliers operate as a result of a slowdown in overall growth, a change in government or economic policies, or financial, political, or social change or instability in such countries that affects the markets in which Mylan operates, particularly emerging markets;
  changes in employment laws, wage increases, or rising inflation in the countries in which Mylan or its partners and suppliers operate;
  supply disruptions, and increases in energy and transportation costs;
  natural disasters, including droughts, floods, and earthquakes in the countries in which Mylan operates;
  local disturbances, terrorist attacks, riots, social disruption, or regional hostilities in the countries in which Mylan or its partners and suppliers operate; and
  government uncertainty, including as a result of new or changed laws and regulations.

Mylan also faces the risk that some of its competitors have more experience with operations in such countries or with international operations generally and may be able to manage unexpected crises more easily. Furthermore, whether due to language, cultural or other differences, public and other statements that Mylan makes may be misinterpreted, misconstrued, or taken out of context in different jurisdictions. Moreover, the internal political stability of, or the relationship between, any country or countries where Mylan conducts business operations may deteriorate. Changes in a country’s political stability or the state of relations between any such countries are difficult to predict and could adversely affect Mylan’s operations. Any such changes could lead to a decline in Mylan’s profitability and/or adversely impact its ability to do business. Any meaningful deterioration of the political or social stability in and/or diplomatic relations between any countries in which Mylan or its partners and suppliers do business could have a material adverse effect on Mylan’s operations. The occurrence of any of the above risks could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan is subject to the U.S. Foreign Corrupt Practices Act, U.K. Bribery Act, and similar worldwide anti-corruption laws, which impose restrictions on certain conduct and may carry substantial fines and penalties.

Mylan is subject to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-corruption laws in other jurisdictions. These laws generally prohibit companies and their intermediaries from engaging in bribery or making other prohibited payments to government officials for the purpose of obtaining or retaining business, and some have record keeping requirements. The failure to comply with these laws could result in substantial criminal and/or monetary penalties. Mylan operates in jurisdictions that have experienced corruption, bribery, pay-offs and other similar practices from time-to-time and, in certain circumstances, such practices may be local custom. Mylan has implemented internal control policies and procedures that mandate compliance with these anti-

 

 

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corruption laws. However, Mylan cannot be certain that these policies and procedures will protect it against liability. There can be no assurance that Mylan’s employees or other agents will not engage in such conduct for which Mylan might be held responsible. If Mylan’s employees or agents are found to have engaged in such practices, Mylan could suffer severe criminal or civil penalties and other consequences that could have a material adverse effect on its business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan’s failure to comply with applicable environmental and occupational health and safety laws and regulations worldwide could adversely impact its business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan is subject to various U.S. federal, state, and local and non-U.S. laws and regulations concerning, among other things, the environment, climate change, regulation of chemicals, employee safety and product safety. These requirements include regulation of the handling, manufacture, transportation, storage, use and disposal of materials, including the discharge of hazardous materials and pollutants into the environment. In the normal course of Mylan’s business, it is exposed to risks relating to possible releases of hazardous substances into the environment, which could cause environmental or property damage or personal injuries, and which could result in (i) Mylan’s noncompliance with such environmental and occupational health and safety laws and regulations and (ii) regulatory enforcement actions or claims for personal injury and property damage against Mylan. If an unapproved or illegal environmental discharge occurs, or if Mylan discovers contamination caused by prior operations, including by prior owners and operators of properties Mylan acquires, it could be liable for cleanup obligations, damages and fines. The substantial unexpected costs Mylan may incur could have a material and adverse effect on its business, financial condition, results of operations, cash flows, and/or ordinary share price. In addition, Mylan’s environmental capital expenditures and costs for environmental compliance may increase substantially in the future as a result of changes in environmental laws and regulations, the development and manufacturing of a new product or increased development or manufacturing activities at any of its facilities. Mylan may be required to expend significant funds and its manufacturing activities could be delayed or suspended, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Currency fluctuations and changes in exchange rates could adversely affect Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Although Mylan reports its financial results in U.S. Dollars, a significant portion of its revenues, indebtedness and other liabilities and its costs are denominated in non-U.S. currencies, including among others the Euro, Indian Rupee, British Pound, Canadian Dollar, Japanese Yen, Australian Dollar and Brazilian Real. Mylan’s results of operations and, in some cases, cash flows, have in the past been and may in the future be adversely affected by certain movements in currency exchange rates. In particular, the risk of a debt default by one or more European countries and related European or national financial restructuring efforts may cause volatility in the value of the Euro. Defaults or restructurings in other countries could have a similar adverse impact. From time to time, Mylan may implement currency hedges intended to reduce its exposure to changes in foreign currency exchange rates. However, Mylan’s hedging strategies may not be successful, and any of its unhedged foreign exchange exposures will continue to be subject to market fluctuations. The occurrence of any of the above risks could cause a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan’s significant operations in India may be adversely affected by regulatory, economic, social, and political uncertainties or change, major hostilities, military activity, and/or acts of terrorism in southern Asia.

In recent years, Mylan’s Indian subsidiaries have benefited from many policies of the Government of India and the Indian state governments in which they operate, which are designed to promote foreign investment generally, including significant tax incentives, liberalized import and export duties, and preferential rules on foreign investment and repatriation. There is no assurance that such policies will continue. Various factors, such as changes in the current federal government, could trigger significant changes in India’s economic liberalization and deregulation policies and disrupt business and economic conditions in India generally and Mylan’s business in particular.

In addition, Mylan’s financial performance may be adversely affected by general economic conditions; economic, fiscal and social policy in India, including changes in exchange rates and controls, interest rates and taxation policies; and social instability and political, economic, or diplomatic developments affecting India in the future. In particular, India has experienced significant economic growth over the last several years, but faces

 

 

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major challenges in sustaining that growth in the years ahead. These challenges include the need for substantial infrastructure development and improving access to healthcare and education. Mylan’s ability to recruit, train, and retain qualified employees and develop and operate its manufacturing facilities in India could be adversely affected if India does not successfully meet these challenges.

Southern Asia has, from time to time, experienced instances of civil unrest and hostilities among neighboring countries, including India and Pakistan, and within the countries themselves. Terrorist attacks, military activity, rioting, or civil or political unrest in the future could influence the Indian economy and Mylan’s operations and employees by disrupting operations and communications and making travel and the conduct of its business more difficult. Resulting political or social tensions could create a greater perception that investments in companies with Indian operations involve a high degree of risk, and that there is a risk of disruption of services provided by companies with Indian operations, which could impact Mylan’s customers’ willingness to do business with it and have a material adverse effect on the market for Mylan’s products. Furthermore, if India were to become engaged in armed hostilities, including but not limited to hostilities that were protracted or involved the threat or use of nuclear or other weapons of mass destruction, Mylan’s India operations might not be able to continue. Mylan generally does not have insurance for losses and interruptions caused by terrorist attacks, military conflicts and wars. The occurrence of any of these risks could cause a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan may decide to sell assets, which could adversely affect its prospects and opportunities for growth.

Mylan may from time to time consider selling certain assets if (i) it determines that such assets are not critical to its strategy or (ii) it believes the opportunity to monetize the asset is attractive or for various other reasons, including for the reduction of indebtedness. Mylan has explored and will continue to explore the sale of certain non-core assets. Although Mylan’s expectation is to engage in asset sales only if they advance or otherwise support its overall strategy, any such sale could reduce the size or scope of Mylan’s business, its market share in particular markets or its opportunities with respect to certain markets, products or therapeutic categories. As a result, any such sale could have an adverse effect on Mylan’s business, prospects and opportunities for growth, financial condition, results of operations, cash flows, and/or ordinary share price.

Charges to earnings resulting from acquisitions could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows and/or ordinary share price.

Under U.S. GAAP business acquisition accounting standards, Mylan recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in acquired companies generally at their acquisition date fair values and, in each case, separately from goodwill. Goodwill as of the acquisition date is measured as the excess amount of consideration transferred, which is also generally measured at fair value, and the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. Mylan’s estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain. After Mylan completes an acquisition, the following factors could result in material charges and adversely affect its operating results and may adversely affect its cash flows:

 

  costs incurred to combine the operations of companies Mylan acquires, such as transitional employee expenses and employee retention, redeployment or relocation expenses;
  impairment of goodwill or intangible assets, including acquired in-process research and development;
  amortization of intangible assets acquired;
  a reduction in the useful lives of intangible assets acquired;
  identification of or changes to assumed contingent liabilities, including, but not limited to, contingent purchase price consideration, income tax contingencies and other non-income tax contingencies, after Mylan’s final determination of the amounts for these contingencies or the conclusion of the measurement period (generally up to one year from the acquisition date), whichever comes first;
  charges to Mylan’s operating results to eliminate certain duplicative pre-acquisition activities, to restructure its operations or to reduce its cost structure;
  charges to Mylan’s operating results resulting from expenses incurred to effect the acquisition; and
  changes to contingent consideration liabilities, including accretion and fair value adjustments.

A significant portion of these adjustments could be accounted for as expenses that will decrease Mylan’s net income and earnings per share for the periods in which those costs are incurred. Such charges could cause a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

 

 

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The significant and increasing amount of intangible assets and goodwill recorded on Mylan’s balance sheet, mainly related to acquisitions, may lead to significant impairment charges in the future which could lead Mylan to have to take significant charges against earnings.

Mylan regularly reviews its long-lived assets, including identifiable intangible assets and goodwill, for impairment. Goodwill and indefinite-lived intangible assets are subject to impairment assessment at least annually. Other long-lived assets are reviewed when there is an indication that an impairment may have occurred. The amount of goodwill and identifiable intangible assets on Mylan’s consolidated balance sheet has increased significantly as a result of Mylan’s acquisitions and other transactions and may increase further following future potential acquisitions. In addition, Mylan may from time to time sell assets that it determines are not critical to its strategy or execution. Future events or decisions may lead to asset impairments and/or related charges. Certain non-cash impairments may result from a change in Mylan’s strategic goals, business direction or other factors relating to the overall business environment. Any impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, shareholder’s equity, and/or ordinary share price.

The pharmaceutical industry is heavily regulated and Mylan faces significant costs and uncertainties associated with its efforts to comply with applicable laws and regulations.

The pharmaceutical industry is subject to regulation by various governmental authorities. For instance, Mylan must comply with applicable laws and requirements of the U.S. Food and Drug Administration (“FDA”) and comparable regulatory agencies, including foreign authorities, in its other markets with respect to the research, development, manufacture, quality, safety, effectiveness, approval, labeling, storage, record-keeping, reporting, pharmacovigilance, sale, distribution, import, export, marketing, advertising, and promotion of pharmaceutical products. Failure to comply with regulations of the FDA and other foreign regulators could result in a range of consequences, including, but not limited to, fines, penalties, disgorgement, unanticipated compliance expenditures, suspension of review of applications or other submissions, rejection or delay in approval of applications, recall or seizure of products, total or partial suspension of production and/or distribution, Mylan’s inability to sell products, the return by customers of Mylan’s products, injunctions,

and/or criminal prosecution. Under certain circumstances, a regulator may also have the authority to revoke or vary previously granted drug approvals.

The safety profile of any product will continue to be closely monitored by the FDA and comparable foreign regulatory authorities after approval. If the FDA or comparable foreign regulatory authorities become aware of new safety information about any of Mylan’s marketed or investigational products, those authorities may require labeling changes, establishment of a risk evaluation and mitigation strategy or similar strategy, restrictions on a product’s indicated uses or marketing, or post-approval studies or post-market surveillance.

The FDA and comparable regulatory authorities also regulate the facilities and operational procedures that Mylan uses to manufacture its products. Mylan must register its facilities with the FDA and similar regulators in other countries. Products must be manufactured in Mylan’s facilities in accordance with current good manufacturing practices (“cGMP”) or similar standards in each territory in which Mylan manufactures. Compliance with such regulations requires substantial expenditures of time, money, and effort in multiple areas, including training of personnel, record-keeping, production, and quality control and quality assurance. The FDA and other regulatory authorities, including foreign authorities, periodically inspect Mylan’s manufacturing facilities for compliance with cGMP or similar standards in the applicable territory. Regulatory approval to manufacture a drug is granted on a site-specific basis. Failure to comply with cGMP and other regulatory standards at one of Mylan’s or its partners’ or suppliers’ manufacturing facilities could result in an adverse action brought by the FDA or other regulatory authorities, which could result in a receipt of an untitled or warning letter, fines, penalties, disgorgement, unanticipated compliance expenditures, rejection or delay in approval of applications, suspension of review of applications or other submissions, suspension of ongoing clinical trials, recall or seizure of products, total or partial suspension of production and/or distribution, Mylan’s inability to sell products, the return by customers of Mylan’s products, orders to suspend, vary, or withdraw marketing authorizations, injunctions, consent decrees, requirements to modify promotional materials or issue corrective information to healthcare practitioners, refusal to permit import or export, criminal prosecution and/or other adverse actions.

If any regulatory body were to delay, withhold, or withdraw approval of an application; require a recall or other adverse product action; require one of Mylan’s manufacturing facilities to cease or limit production; or suspend, vary, or withdraw related marketing authorization, Mylan’s business could be adversely affected. Delay and cost in obtaining FDA or other

 

 

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regulatory approval to manufacture at a different facility also could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Although Mylan has established internal regulatory compliance programs and policies, there is no guarantee that these programs and policies, as currently designed, will meet regulatory agency standards in the future or will prevent instances of non-compliance with applicable laws and regulations. Additionally, despite Mylan’s efforts at compliance, from time to time it receives notices of manufacturing and quality-related observations following inspections by regulatory authorities around the world, as well as official agency correspondence regarding compliance. Mylan may receive similar observations and correspondence in the future. If Mylan is unable to resolve these observations and address regulator’s concerns in a timely fashion, its business, financial condition, results of operations, cash flows, and/or ordinary share price could be materially affected.

On September 9, 2013, prior to Mylan’s completion of the Agila Specialties (“Agila”) acquisition, the FDA issued a warning letter to Strides Arcolab for its Agila Sterile Manufacturing Facility 2 in Bangalore, India. On August 6, 2015, the FDA issued a second warning letter regarding this facility, the Agila Onco Therapies Limited facility and the Agila Sterile Product Division facility. Mylan is working to resolve this matter expeditiously and it continues to work closely with the FDA and other regulatory entities to address its improvements at all Agila facilities. No assurances can be provided that the resolution of the issues identified in the FDA’s letters will not have a material adverse effect on Mylan’s global injectables business. Failing to resolve the issues identified in the FDA’s letter could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan is subject to various federal, state and local laws regulating working conditions, as well as environmental protection laws and regulations, including those governing the discharge of materials into the environment and those related to climate change. If changes to such environmental laws and regulations are made in the future that require significant changes in Mylan’s operations, or if Mylan engages in the development and manufacturing of new products requiring new or different environmental or other controls, or if Mylan is found to have violated any applicable rules, it may be required to expend significant funds. Such changes, delays, and/or suspensions of activities or the occurrence of any of the above risks, could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

The use of legal, regulatory, and legislative strategies by both brand and generic competitors, including but not limited to “authorized generics” and regulatory petitions, as well as the potential impact of proposed and newly enacted legislation, may increase costs associated with the introduction or marketing of Mylan’s generic products, could delay or prevent such introduction, and could significantly reduce its revenue and profit.

Mylan’s competitors, both branded and generic, often pursue strategies to prevent, delay, or eliminate competition from generic alternatives to branded products. These strategies include, but are not limited to:

 

  entering into agreements whereby other generic companies will begin to market an authorized generic, a generic equivalent of a branded product, at the same time or after generic competition initially enters the market;
  launching a generic version of their own branded product prior to or at the same time or after generic competition initially enters the market;
  filing petitions with the FDA or other regulatory bodies seeking to prevent or delay approvals, including timing the filings so as to thwart generic competition by causing delays of Mylan’s product approvals;
  seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate bioequivalence or to meet other requirements for approval, and/or to prevent regulatory agency review of applications, such as through the establishment of patent linkage (laws and regulations barring the issuance of regulatory approvals prior to patent expiration);
  initiating legislative or other efforts to limit the substitution of generic versions of brand pharmaceuticals;
  filing suits for patent infringement and other claims that may delay or prevent regulatory approval, manufacture, and/or scale of generic products;
  introducing “next-generation” products prior to the expiration of market exclusivity for the reference product, which often materially reduces the demand for the generic or the reference product for which Mylan seeks regulatory approval;
  persuading regulatory bodies to withdraw the approval of brand name drugs for which the patents are about to expire and converting the market to another product of the brand company on which longer patent protection exists;
  obtaining extensions of market exclusivity by conducting clinical trials of brand drugs in pediatric populations or by other methods; and
 

 

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  seeking to obtain new patents on drugs for which patent protection is about to expire.

In the U.S., some companies have lobbied Congress for amendments to the Hatch-Waxman Act that would give them additional advantages over generic competitors. For example, although the term of a company’s drug patent can be extended to reflect a portion of the time a New Drug Application (“NDA”) is under regulatory review, some companies have proposed extending the patent term by a full year for each year spent in clinical trials rather than the one-half year that is currently permitted.

If proposals like these in the U.S., Europe, or in other countries where Mylan or its partners and suppliers operate were to become effective, or if any other actions by Mylan’s competitors and other third parties to prevent or delay activities necessary to the approval, manufacture, or distribution of Mylan’s products are successful, its entry into the market and its ability to generate revenues associated with new products may be delayed, reduced, or eliminated, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

If Mylan is unable to successfully introduce new products in a timely manner, its future revenue and profit may be adversely affected.

Mylan’s future revenues and profitability will depend, in part, upon its ability to successfully and timely develop, license, or otherwise acquire and commercialize new generic products as well as branded pharmaceutical products protected by patent or statutory authority. Product development is inherently risky, especially for new drugs for which safety and efficacy have not been established and/or the market is not yet proven as well as for complex generic drugs and biosimilars. Likewise, product licensing involves inherent risks, including among others uncertainties due to matters that may affect the achievement of milestones, as well as the possibility of contractual disagreements with regard to whether the supply of product meets certain specifications or terms such as license scope or termination rights. The development and commercialization process, particularly with regard to new and complex drugs, also requires substantial time, effort and financial resources. Mylan, or a partner, may not be successful in commercializing any of such products on a timely basis, if at all, which could adversely affect Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Before any prescription drug product, including generic drug products, can be marketed, marketing authorization approval is required by the relevant

regulatory authorities and/or national regulatory agencies (for example the FDA in the U.S. and the European Medicines Agency (“EMA”) in the European Union (the “EU”)). The process of obtaining regulatory approval to manufacture and market new branded and generic pharmaceutical products is rigorous, time consuming, costly, and inherently unpredictable.

Outside the U.S., the approval process may be more or less rigorous, depending on the country, and the time required for approval may be longer or shorter than that required in the U.S. Bioequivalence, clinical, or other studies conducted in one country may not be accepted in other countries, the requirements for approval may differ among countries, and the approval of a pharmaceutical product in one country does not necessarily mean that the product will be approved in another country. Mylan, or a partner or supplier, may be unable to obtain requisite approvals on a timely basis, or at all, for new generic or branded products that Mylan may develop, license or otherwise acquire. Moreover, if Mylan obtains regulatory approval for a drug, it may be limited, for example, with respect to the indicated uses and delivery methods for which the drug may be marketed, or may include warnings, precautions or contraindications in the labeling-which could restrict Mylan’s potential market for the drug. A regulatory approval may also include post-approval study or risk management requirements that may substantially increase the resources required to market the drug. Also, for products pending approval, Mylan may obtain raw materials or produce batches of inventory to be used in efficacy and bioequivalence testing, as well as in anticipation of the product’s launch. In the event that regulatory approval is denied or delayed, Mylan could be exposed to the risk of this inventory becoming obsolete.

The approval process for generic pharmaceutical products often results in the relevant regulatory agency granting final approval to a number of generic pharmaceutical products at the time a patent claim for a corresponding branded product or other market exclusivity expires. This often forces Mylan to face immediate competition when it introduces a generic product into the market. Additionally, further generic approvals often continue to be granted for a given product subsequent to the initial launch of the generic product. These circumstances generally result in significantly lower prices, as well as reduced margins, for generic products compared to branded products. New generic market entrants generally cause continued price, margin, and sales erosion over the generic product life cycle.

In the U.S., the Hatch-Waxman Act provides for a period of 180 days of generic marketing exclusivity for a “first applicant,” that is the first submitted Abbreviated

 

 

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New Drug Application (“ANDA”) containing a certification of invalidity, non-infringement or unenforceability related to a patent listed with the ANDA’s reference drug product, commonly referred to as a Paragraph IV certification. During this exclusivity period, which under certain circumstances may be shared with other ANDAs filed on the same day, the FDA cannot grant final approval to later-submitted ANDAs for the same generic equivalent. If an ANDA is awarded 180-day exclusivity, the applicant generally enjoys higher market share, net revenues, and gross margin for that generic product. However, Mylan’s ability to obtain 180 days of generic marketing exclusivity may be dependent upon its ability to obtain FDA approval or tentative approval within an applicable time period of the FDA’s acceptance of Mylan’s ANDA. If Mylan is unable to obtain approval or tentative approval within that time period, it may risk forfeiture of such marketing exclusivity. By contrast, if Mylan is not a “first applicant” to challenge a listed patent for such a product, it may lose significant advantages to a competitor with 180-day exclusivity, even if it obtains FDA approval for its generic drug product. The same would be true in situations where Mylan is required to share its exclusivity period with other ANDA sponsors with Paragraph IV certifications.

In the E.U. and other countries and regions, there is no exclusivity period for the first generic product. The European Commission or national regulatory agencies may grant marketing authorizations to any number of generics.

If Mylan is unable to navigate its products through the approval process in a timely manner, there could be an adverse effect on its product introduction plans, business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan expends a significant amount of resources on research and development efforts that may not lead to successful product introductions.

Much of Mylan’s development efforts are focused on technically difficult-to-formulate products and/or products that require advanced manufacturing technology, including its generic biologics program and respiratory platform. Mylan conducts research and development (“R&D”) primarily to enable it to gain approval for, manufacture, and market pharmaceuticals in accordance with applicable laws and regulations. Mylan also partners with third parties to develop products. Typically, research expenses related to the development of innovative or complex compounds and the filing of marketing authorization applications for innovative and complex compounds (such as NDAs and biosimilar applications in the U.S.) are significantly

greater than those expenses associated with the development of and filing of marketing authorization applications for most generic products (such as ANDAs in the U.S. and abridged applications in Europe). As Mylan and its partners continue to develop new and/or complex products, their research expenses will likely increase. Because of the inherent risk associated with R&D efforts in Mylan’s industry, including the high cost and uncertainty of conducting clinical trials (where required) particularly with respect to new and/or complex drugs, Mylan’s, or a partner’s, research and development expenditures may not result in the successful introduction of new pharmaceutical products approved by the relevant regulatory bodies. Also, after Mylan submits a marketing authorization application for a new compound or generic product, the relevant regulatory authority may change standards and/or request that Mylan conduct additional studies or evaluations and, as a result, Mylan may incur approval delays as well as R&D costs in excess of what Mylan anticipated.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Mylan or its partners may experience delays in its ongoing or future clinical trials, and Mylan does not know whether planned clinical trials will begin or enroll subjects on time, need to be redesigned, or be completed on schedule, if at all.

Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons. If Mylan experiences delays in the completion of, or the termination of, any clinical trial of its product candidates, the commercial prospects of its product candidates will be harmed, and its ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing its clinical trials will increase its costs, slow down its product candidate development and approval process, and jeopardize its ability to commence product sales and generate revenues. Any of these occurrences may harm Mylan’s business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of Mylan’s product candidates.

Finally, Mylan cannot be certain that any investment made in developing products will be recovered, even if Mylan is successful in commercialization. To the extent that Mylan expends significant resources on R&D efforts and is not able, ultimately, to introduce successful new and/or complex products as a result of those efforts, there could be a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

 

 

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Even if Mylan’s products in development receive regulatory approval, such products may not achieve expected levels of market acceptance.

Even if Mylan is able to obtain regulatory approvals for its new generic or branded pharmaceutical products, the success of those products is dependent upon market acceptance. Levels of market acceptance for Mylan’s products could be impacted by several factors, including but not limited to:

 

  the availability, perceived advantages, and relative safety and efficacy of alternative products from Mylan’s competitors;
  the degree to which the approved labeling supports promotional initiatives for commercial success;
  the prices of Mylan’s products relative to those of Mylan’s competitors;
  the timing of Mylan’s market entry;
  the effectiveness of Mylan’s marketing, sales, and distribution strategy and operations;
  other competitor actions; and
  the continued acceptance of and/or reimbursement for Mylan’s products by government and private formularies and/or third party payors, as well as the willingness and ability of patients to pay for Mylan’s products.

Additionally, studies of the proper utilization, safety, and efficacy of pharmaceutical products are being conducted by the industry, government agencies, and others. Such studies, which increasingly employ sophisticated methods and techniques, can call into question the utilization, safety, and efficacy of previously marketed as well as future products. In some cases, such studies have resulted, and may in the future result, in the discontinuation or variation of product marketing authorizations or requirements for risk management programs, such as a patient registry. Any of these events could adversely affect Mylan’s profitability, business, financial condition, results of operations, cash flows, and/or ordinary share price.

The development, approval process, manufacture and commercialization of biosimilar products involve unique challenges and uncertainties, and Mylan’s failure to successfully introduce biosimilar products could have a negative impact on Mylan’s business and future operating results.

Mylan and its partners and suppliers are actively working to develop and commercialize biosimilar products–that is, a biological product that is highly similar to an already approved, reference biological product, and for which there are no clinically meaningful differences between the biosimilar and the reference biological product in terms of safety, purity and potency. Although the

Biologics Price Competition and Innovation Act of 2009 established a framework for the review and approval of biosimilar products and the FDA has begun to review and approve biosimilar product applications, there continues to be significant uncertainty regarding the regulatory pathway in the U.S. and in other countries to obtain approval for biosimilar products. There is also uncertainty regarding the commercial pathway to successfully market and sell such products.

Moreover, biosimilar products will likely be subject to extensive patent clearances and patent infringement litigation, which could delay or prevent the commercial launch of a biosimilar product for many years. If Mylan is unable to obtain FDA or other non-U.S. regulatory authority approval for its products, Mylan will be unable to market them. Even if Mylan’s biosimilar products are approved for marketing, the products may not be commercially successful and may not generate profits in amounts that are sufficient to offset the amount invested to obtain such approvals. Market success of biosimilar products will depend on demonstrating to regulators, patients, physicians and payors (such as insurance companies) that such products are safe and effective yet offer a more competitive price or other benefit over existing therapies. In addition, the development and manufacture of biosimilars pose unique challenges related to the supply of the materials needed to manufacture biosimilars. Access to and the supply of necessary biological materials may be limited, and government regulations restrict access to and regulate the transport and use of such materials. Mylan may not be able to generate future sales of biosimilar products in certain jurisdictions and may not realize the anticipated benefits of its investments in the development, manufacture and sale of such products. If Mylan’s development efforts do not result in the development and timely approval of biosimilar products or if such products, once developed and approved, are not commercially successful, or upon the occurrence of any of the above risks, Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price could be materially adversely affected.

Mylan’s business is highly dependent upon market perceptions of Mylan, its brands, and the safety and quality of its products, and may be adversely impacted by negative publicity or findings.

Market perceptions of Mylan are very important to its business, especially market perceptions of its company and brands and the safety and quality of its products. If Mylan, its partners and suppliers, or its brands suffer from negative publicity, or if any of its products or similar products which other companies distribute are subject to market withdrawal or recall or are proven to be, or are

 

 

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claimed to be, ineffective or harmful to consumers, then this could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price. Also, because Mylan is dependent on market perceptions, negative publicity associated with product quality, patient illness, or other adverse effects resulting from, or perceived to be resulting from, Mylan’s products, or its partners’ and suppliers’ manufacturing facilities, could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

The illegal distribution and sale by third parties of counterfeit versions of Mylan’s products or of diverted or stolen products could have a negative impact on its reputation and its business.

The pharmaceutical drug supply has been increasingly challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet.

Third parties may illegally distribute and sell counterfeit versions of Mylan’s products that do not meet the rigorous manufacturing and testing standards that its products undergo. Counterfeit products are frequently unsafe or ineffective, and can be potentially life-threatening. Counterfeit medicines may contain harmful substances, the wrong dose of active pharmaceutical ingredient (“API”) or no API at all. However, to distributors and users, counterfeit products may be visually indistinguishable from the authentic version.

Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product. It is possible that adverse events caused by unsafe counterfeit products will mistakenly be attributed to the authentic product. In addition, unauthorized diversions of products or thefts of inventory at warehouses, plants, or while in-transit, which are not properly stored and which are sold through unauthorized channels, could adversely impact patient safety, Mylan’s reputation, and its business.

Public loss of confidence in the integrity of pharmaceutical products as a result of counterfeiting, diversion, or theft could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan’s competitors, including branded pharmaceutical companies, and/or other third parties, may allege that Mylan and/or its suppliers are infringing upon their intellectual property, including in an “at risk launch”

situation, impacting Mylan’s ability to launch a product, and/or its ability to continue marketing a product, and/or forcing Mylan to expend substantial resources in resulting litigation, the outcome of which is uncertain.

Companies that produce branded pharmaceutical products and other patent holders routinely bring litigation against entities selling or seeking regulatory approval to manufacture and market generic forms of their branded products, as well as other entities involved in the manufacture, supply, testing, marketing, and other aspects relating to active pharmaceutical ingredients and finished pharmaceutical products. These companies and other patent holders allege patent infringement or other violations of intellectual property rights as the basis for filing suit against an applicant for a generic product license as well as others who may be involved in some aspect of the research, production, distribution, or testing process. Litigation often involves significant expense and can delay or prevent introduction or sale of Mylan’s generic products. If patents are held valid and infringed by Mylan’s products in a particular jurisdiction, Mylan and/or its supplier(s) or partner(s) would, unless Mylan or the supplier(s) or partner(s) could obtain a license from the patent holder, need to cease manufacturing and other activities, including but not limited to selling in that jurisdiction, and may need to surrender or withdraw the product, or destroy existing stock in that jurisdiction.

There also may be situations where Mylan uses its business judgment and decides to manufacture, market, and/or sell products, directly or through third parties, notwithstanding the fact that allegations of patent infringement(s) have not been finally resolved by the courts (i.e., an “at-risk launch”). The risk involved in doing so can be substantial because the remedies available to the owner of a patent for infringement may include, among other things, damages measured by the profits lost by the patent holder and not necessarily by the profits earned by the infringer. In the case of a finding by a court of willful infringement, the definition of which is subjective, such damages may be increased by an additional 200 percent in certain jurisdictions, including the U.S. Moreover, because of the discount pricing typically involved with bioequivalent (generic) products, patented branded products generally realize a substantially higher profit margin than bioequivalent products. An adverse decision in a case such as this or in other similar litigation, or a judicial order preventing Mylan or its suppliers and partners from manufacturing, marketing, selling, and/or other activities necessary to the manufacture and distribution of Mylan’s products, could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

 

 

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If Mylan or any partner or supplier fails to obtain or adequately protect or enforce their intellectual property rights, then Mylan could lose revenue under its licensing agreements or lose sales to generic copies of its branded products.

Mylan’s success, particularly in its specialty and branded businesses, depends in part on its or any partner’s or supplier’s ability to obtain, maintain and enforce patents, and protect trademarks, trade secrets, know-how, and other intellectual property and proprietary information. Mylan’s ability to commercialize any branded product successfully will largely depend upon Mylan’s or any partner’s or supplier’s ability to obtain and maintain patents and trademarks of sufficient scope to lawfully prevent third-parties from developing and/or marketing infringing products. In the absence of intellectual property or other protection, competitors may adversely affect Mylan’s branded products business by independently developing and/or marketing substantially equivalent products. It is also possible that Mylan could incur substantial costs if it is required to initiate litigation against others to protect or enforce its intellectual property rights.

Mylan has filed patent applications covering the composition of, methods of making, and/or methods of using, its branded products and branded product candidates. Mylan may not be issued patents based on patent applications already filed or that it files in the future. Further, due to other factors that affect patentability, and if patents are issued, they may be insufficient in scope to cover or otherwise protect Mylan’s branded products. Patents are national in scope and therefore the issuance of a patent in one country does not ensure the issuance of a patent in any other country. Furthermore, the patent position of companies in the pharmaceutical industry generally involves complex legal and factual questions and has been and remains the subject of significant litigation. Legal standards relating to scope and validity of patent claims are evolving and may differ in various countries. Any patents Mylan has obtained, or obtains in the future, may be challenged, invalidated or circumvented. Moreover, the U.S. Patent and Trademark Office or any other governmental agency may commence opposition or interference proceedings involving, or consider other challenges to, Mylan’s patents or patent applications. In addition, branded products often have market viability based upon the goodwill of the product name, which typically benefits from trademark protection. Mylan’s branded products may therefore also be subject to risks related to the loss of trademark or patent protection or to competition from generic or other branded products. Challenges can come from other businesses or

governments, and governments could require compulsory licensing of this intellectual property.

Any challenge to, or invalidation or circumvention of, Mylan’s intellectual property (including patents or patent applications and trademark protection) would be costly, would require significant time and attention of Mylan’s management, and could cause a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Both Mylan’s generics and specialty businesses develop, formulate, manufacture, or in-license and market products that are subject to economic risks relating to intellectual property rights, competition, and market unpredictability.

Mylan’s products may be subject to the following risks, among others:

 

  limited patent life, or the loss of patent protection;
  competition from generic or other branded products;
  reductions in reimbursement rates by government and other third-party payors;
  importation by consumers;
  product liability;
  drug research and development risks; and
  unpredictability with regard to establishing a market.

In addition, developing and commercializing branded products is generally more costly than generic products. If such business expenditures do not ultimately result in the launch of commercially successful brand products, or if any of the risks above were to occur, there could be a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan faces vigorous competition from other pharmaceutical manufacturers that threatens the commercial acceptance and pricing of its products.

The pharmaceutical industry is highly competitive. Mylan faces competition from many U.S. and non-U.S. manufacturers, some of whom are significantly larger than Mylan. Mylan’s competitors may be able to develop products and processes competitive with or superior to Mylan’s own for many reasons, including but not limited to the possibility that they may have:

 

  proprietary processes or delivery systems;
  larger or more productive research and development and marketing staffs;
  larger or more efficient production capabilities in a particular therapeutic area;
  more experience in preclinical testing and human clinical trials;
 

 

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  more products; or
  more experience in developing new drugs and greater financial resources, particularly with regard to manufacturers of branded products.

The occurrence of any of the above risks could have an adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan also faces increasing competition from lower-cost generic products and other branded products. Certain of Mylan’s products are not protected by patent rights or have limited patent life and will soon lose patent protection. Loss of patent protection for a product typically is followed promptly by generic substitutes. As a result, sales of many of these products may decline or stop growing over time. Various factors may result in the sales of certain of Mylan’s products, particularly those acquired in the EPD Transaction, declining faster than has been projected, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price. In addition, legislative proposals emerge from time to time in various jurisdictions to further encourage the early and rapid approval of generic drugs. Any such proposal that is enacted into law could increase competition and worsen this negative effect on Mylan’s sales and, potentially, its business, financial condition, results of operations, cash flows and/or ordinary share price.

Competitors’ products may also be safer, more effective, more effectively marketed or sold, or have lower prices or better performance features than Mylan’s. Mylan cannot predict with certainty the timing or impact of competitors’ products. In addition, Mylan’s sales may suffer as a result of changes in consumer demand for its products, including those related to fluctuations in consumer buying patterns tied to seasonality or the introduction of new products by competitors, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

A relatively small group of products may represent a significant portion of Mylan’s revenues, gross profit, or net earnings from time to time.

Sales of a limited number of Mylan’s products from time to time represent a significant portion of its revenues, gross profit, and net earnings. For the years ended December 31, 2015 and 2014, Mylan’s top ten products in terms of sales, in the aggregate, represented approximately 29 percent and 33 percent, respectively, of its consolidated total revenues. If the volume or pricing of Mylan’s largest selling products declines in the

future, its business, financial condition, results of operations, cash flows, and/or ordinary share price could be materially adversely affected.

A significant portion of Mylan’s revenues is derived from sales to a limited number of customers.

A significant portion of Mylan’s revenues are derived from sales to a limited number of customers. If Mylan were to experience a significant reduction in or loss of business with one or more such customers, or if one or more such customers were to experience difficulty in paying Mylan on a timely basis, Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price could be materially adversely affected.

During the years ended December 31, 2015, 2014 and 2013, Mylan’s consolidated third party net sales to Cardinal Health, Inc. were approximately 12 percent, 12 percent and 15 percent, respectively; Mylan’s consolidated third party net sales to McKesson Corporation were approximately 15 percent, 19 percent and 14 percent, respectively; and Mylan’s consolidated third party net sales to AmeriSourceBergen Corporation were approximately 16 percent, 13 percent and 10 percent, respectively, of consolidated third party net sales.

Mylan’s business could be negatively affected by the performance of its collaboration partners and suppliers.

Mylan has entered into strategic alliances with partners and suppliers to develop, manufacture, market and/or distribute certain products, and/or certain components of its products, in various markets. Mylan commits substantial effort, funds and other resources to these various collaborations. There is a risk that the investments made by Mylan in these collaborative arrangements will not generate financial returns. While Mylan believes its relationships with its partners and suppliers generally are successful, disputes or conflicting priorities and regulatory or legal intervention could be a source of delay or uncertainty as to the expected benefits of the collaboration. A failure or inability of Mylan’s partners or suppliers to fulfill their collaboration obligations, or the occurrence of any of the risks above, could have an adverse effect on its business, financial condition, results of operations, cash flows, and/or ordinary share price.

 

 

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Mylan may experience declines in the sales volume and prices of its products as the result of the continuing trend toward consolidation of certain customer groups, such as the wholesale drug distribution and retail pharmacy industries, as well as the emergence of large buying groups.

A significant amount of Mylan’s sales are to a relatively small number of drug wholesalers and retail drug chains. These customers represent an essential part of the distribution chain of generic pharmaceutical products. Drug wholesalers and retail drug chains have undergone, and are continuing to undergo, significant consolidation. This consolidation may result in these groups gaining additional purchasing leverage and, consequently, increasing the product pricing pressures facing Mylan’s business. Additionally, the emergence of large buying groups representing independent retail pharmacies and the prevalence and influence of managed care organizations and similar institutions increases the negotiating power of these groups, potentially enabling them to attempt to extract price discounts, rebates, and other restrictive pricing terms on Mylan’s products. The occurrence of any of the above risks could have a material adverse affect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan depends to a large extent on third-party suppliers and distributors for raw materials, particularly the chemical compound(s) that constitute the active pharmaceutical ingredients that it uses to manufacture its products, as well as certain finished goods, including certain controlled substances. These third-party suppliers and distributors may experience delays in or inability to supply Mylan with raw materials necessary to the development and/or manufacture of its products.

Mylan purchases certain API (i.e., the chemical compounds that produce the desired therapeutic effect in its products) and other materials and supplies that it uses in its manufacturing operations, as well as certain finished products, from many different foreign and domestic suppliers.

In certain cases, Mylan has listed only one supplier in its applications with regulatory agencies, and there is no guarantee that Mylan will always have timely and sufficient access to a critical raw material or finished product supplied by third parties, even when Mylan has more than one supplier. An interruption in the supply of a single-sourced or any other raw material, including the relevant API, or in the supply of finished product, could cause Mylan’s business, financial condition, results of

operations, cash flows, and/or ordinary share price to be materially adversely affected. In addition, Mylan’s manufacturing and supply capabilities could be adversely impacted by quality deficiencies in the products which Mylan’s suppliers provide, or at their manufacturing facilities, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan utilizes controlled substances in certain of its current products and products in development, and therefore must meet the requirements of the Controlled Substances Act of 1970 and the related regulations administered by the Drug Enforcement Administration (“DEA”) in the U.S., as well as similar laws in other countries where Mylan operates. These laws relate to the manufacture, shipment, storage, sale, and use of controlled substances. The DEA and other regulatory agencies limit the availability of the controlled substances used in certain of Mylan’s current products and products in development and, as a result, Mylan’s procurement quota of these active ingredients may not be sufficient to meet commercial demand or complete clinical trials. Mylan must annually apply to the DEA and similar regulatory agencies for procurement quotas in order to obtain these substances. Any delay or refusal by the DEA or such similar agencies in establishing Mylan’s procurement quota for controlled substances could delay or stop its clinical trials or product launches, or could cause trade inventory disruptions for those products that have already been launched, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

The supply of API into Europe may be negatively affected by recent regulations promulgated by the European Union.

All API imported into the EU has needed to be certified as complying with the good manufacturing practice standards established by EU laws and guidance, as stipulated by the International Conference for Harmonization. These regulations place the certification requirement on the regulatory bodies of the exporting countries. Accordingly, the national regulatory authorities of each exporting country must: (i) ensure that all manufacturing plants within their borders that export API into the EU comply with EU manufacturing standards and (ii) for each API exported, present a written document confirming that the exporting plant conforms to EU manufacturing standards. The imposition of this responsibility on the governments of the nations exporting an API may cause delays in delivery or shortages of an API necessary to manufacture Mylan’s products, as certain governments may not be willing or

 

 

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able to comply with the regulation in a timely fashion, or at all. A shortage in API may prevent Mylan from manufacturing, or cause it to have to cease manufacture of, certain products, or to incur costs and delays to qualify other suppliers to substitute for those API manufacturers unable to export. The occurrence of any of the above risks could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan has a limited number of manufacturing facilities and certain third party suppliers producing a substantial portion of its products, some of which require a highly exacting and complex manufacturing process.

A substantial portion of Mylan’s capacity, as well as its current production, is attributable to a limited number of manufacturing facilities and certain third party suppliers. A significant disruption at any one of such facilities within Mylan’s internal or third party supply chain, even on a short-term basis, whether due to a labor strike, failure to reach acceptable agreement with labor and unions, adverse quality or compliance observation, other regulatory action, infringement of intellectual property rights, act of God, civil or political unrest, export or import restrictions, or other events could impair Mylan’s ability to produce and ship products to the market on a timely basis and could, among other consequences, subject Mylan to exposure to claims from customers. Any of these events could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

In addition, the manufacture of some of Mylan’s products is a highly exacting and complex process, due in part to strict regulatory requirements. Problems may arise during manufacturing for a variety of reasons, including among others equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials, natural disasters, power outages, labor unrest, and environmental factors. If problems arise during the production of a batch of product, that batch of product may have to be discarded. This could, among other things, lead to increased costs, lost revenue, damage to customer relations, time and expense spent investigating the cause, and, depending on the cause, similar losses with respect to other batches or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred. If Mylan or one of its suppliers experiences significant manufacturing problems, such problems could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan’s reporting and payment obligations related to its participation in U.S. federal healthcare programs, including Medicare and Medicaid, are complex and often involve subjective decisions that could change as a result of new business circumstances, new regulations or agency guidance, or advice of legal counsel. Any failure to comply with those obligations could subject Mylan to investigation, penalties, and sanctions.

U.S. federal laws regarding reporting and payment obligations with respect to a pharmaceutical company’s participation in federal healthcare programs, including Medicare and Medicaid, are complex. Because Mylan’s processes for calculating applicable government prices and the judgments involved in making these calculations involve subjective decisions and complex methodologies, these calculations are subject to risk of errors and differing interpretations. In addition, they are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could result in changes that may have material adverse legal, regulatory, or economic consequences.

Pharmaceutical manufacturers that participate in the Medicaid Drug Rebate Program in the U.S., such as Mylan, are required to report certain pricing data to the Centers for Medicare & Medicaid Services (“CMS”), the federal agency that administers the Medicare and Medicaid programs. This data includes the Average Manufacturer Price (“AMP”) for each of the manufacturer’s covered outpatient drugs. CMS calculates a type of U.S. federal ceiling on reimbursement rates to pharmacies for multiple source drugs under the Medicaid program, known as the federal upper limit (“FUL”). The U.S. Patient Protection and Affordable Care Act (“PPACA”) includes a provision requiring CMS to use the weighted average AMP for pharmaceutically and therapeutically equivalent multiple source drugs to calculate FULs, instead of the other pricing data CMS previously used. The provision was effective October 1, 2010; however, AMP-based FULs have not yet been implemented to set the federal ceiling on reimbursement rates for multiple source drugs. On January 21, 2016, CMS issued final regulations to implement the changes to the Medicaid Drug Rebate program under the Health Reform Laws, including AMP-based FULs. These regulations generally become effective April 1, 2016. Although weighted average AMP-based FULs would not reveal Mylan’s individual AMP, publishing a weighted average AMP available to customers and the public at large could negatively affect Mylan’s commercial price negotiations.

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Average Wholesale Prices (“AWP”). The government has alleged that reporting of inflated AWP has led to excessive payments for prescription drugs, and Mylan may be named as a defendant in actions relating to pharmaceutical pricing issues and whether allegedly improper actions by pharmaceutical manufacturers led to excessive payments by Medicare and/or Medicaid.

Any governmental agencies or authorities that have commenced, or may commence, an investigation of Mylan relating to the sales, marketing, pricing, quality, or manufacturing of pharmaceutical products could seek to impose, based on a claim of violation of anti-fraud and false claims laws or otherwise, civil and/or criminal sanctions, including fines, penalties, and possible exclusion from federal healthcare programs, including Medicare and Medicaid. Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with regard to how to properly calculate and report payments–and even in the absence of any such ambiguity–a governmental authority may take a position contrary to a position Mylan has taken, and may impose or pursue civil and/or criminal sanctions. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. Mylan cannot assure you that its submissions will not be found by CMS or the U.S. Department of Veterans Affairs to be incomplete or incorrect. Any failure to comply with the above laws and regulations, and any such penalties or sanctions could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan may experience reductions in the levels of reimbursement for pharmaceutical products by governmental authorities, HMOs, or other third-party payors. In addition, the use of tender systems and other forms of price control could reduce prices for Mylan’s products or reduce its market opportunities.

Various governmental authorities (including, among others, the U.K. National Health Service and the German statutory health insurance scheme) and private health insurers and other organizations, such as health maintenance organizations (“HMOs”) in the U.S., provide reimbursements or subsidies to consumers for the cost of certain pharmaceutical products. Demand for Mylan’s products depends in part on the extent to which such reimbursement is available. In the U.S., third-party payors increasingly challenge the pricing of pharmaceutical products. This trend and other trends toward the growth of HMOs, managed healthcare, and legislative healthcare reform create significant

uncertainties regarding the future levels of reimbursement for pharmaceutical products. Further, any reimbursement may be reduced in the future to the point that market demand for Mylan’s products and/or Mylan’s profitability declines. Such a decline could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

In addition, a number of markets in which Mylan operates have implemented or may implement tender systems or other forms of price controls for generic pharmaceuticals in an effort to lower prices. Under such tender systems, manufacturers submit bids which establish prices for generic pharmaceutical products. Upon winning the tender, the winning company will receive a preferential reimbursement for a period of time. The tender system often results in companies underbidding one another by proposing low pricing in order to win the tender.

Certain other countries may consider the implementation of a tender system or other forms of price controls. Even if a tender system is ultimately not implemented, the anticipation of such could result in price reductions. Failing to win tenders, or the implementation of similar systems or other forms of price controls in other markets leading to further price declines, could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Legislative or regulatory programs that may influence prices of pharmaceutical products could have a material adverse effect on Mylan’s business.

Current or future U.S. federal, U.S. state or other countries’ laws and regulations may influence the prices of drugs and, therefore, could adversely affect the payment that Mylan receives for its products. For example, programs in existence in certain states in the U.S. seek to broadly set prices, within those states, through the regulation and administration of the sale of prescription drugs. Expansion of these programs, in particular state Medicare and/or Medicaid programs, or changes required in the way in which Medicare payment rates are set and/or the way Medicaid rebates are calculated, could adversely affect the payment Mylan receives for its products and could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

In order to control expenditure on pharmaceuticals, most member states in the EU regulate the pricing of products and, in some cases, limit the range of different forms of pharmaceuticals available for prescription by

 

 

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national health services. These controls can result in considerable price differences between member states.

Several countries in which Mylan operates have implemented, or plan to or may implement, government mandated price reductions and/or other controls. When such price cuts occur, pharmaceutical companies have generally experienced significant declines in revenues and profitability and uncertainties continue to exist within the market after the price decrease. Such price reductions or controls could have an adverse effect on Mylan’s business, and as uncertainties are resolved or if other countries in which Mylan operates enact similar measures, they could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Healthcare reform legislation could have a material adverse effect on Mylan’s business.

In recent years, there have been numerous initiatives on the federal and state levels for comprehensive reforms affecting the payment for, the availability of and reimbursement for, healthcare services in the U.S., and it is likely that Congress and state legislatures and health agencies will continue to focus on healthcare reform in the future. The PPACA and The Health Care and Education and Reconciliation Act of 2010 (H.R. 4872), which amends the PPACA (collectively, the “Health Reform Laws”), were signed into law in March 2010. While the Health Reform Laws may increase the number of patients who have insurance coverage for Mylan’s products, they also include provisions such as the assessment of a pharmaceutical manufacturer fee and an increase in the amount of rebates that manufacturers pay for coverage of their drugs by Medicaid programs.

Mylan is unable to predict the future course of federal or state healthcare legislation. The Health Reform Laws and further changes in the law or regulatory framework that reduce Mylan’s revenues or increase its costs could have a material adverse effect on its business, financial condition, results of operations, cash flows, and/or ordinary share price.

Additionally, Mylan encounters similar regulatory and legislative issues in most other countries. In the EU and some other international markets, the government provides healthcare at low cost to consumers and regulates pharmaceutical prices, patient eligibility and/or reimbursement levels to control costs for the government-sponsored healthcare system. These systems of price regulations may lead to inconsistent and lower prices. Within the EU and in other countries, the availability of Mylan’s products in some markets at lower prices undermines its sales in other markets with higher prices. Additionally, certain countries set prices by reference to the prices in other countries where Mylan’s products are marketed. Thus, Mylan’s inability to secure

adequate prices in a particular country may also impair its ability to obtain acceptable prices in existing and potential new markets, and may create the opportunity for third party cross border trade.

If significant additional reforms are made to the U.S. healthcare system, or to the healthcare systems of other markets in which Mylan operates, those reforms could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan is involved in various legal proceedings and certain government inquiries and may experience unfavorable outcomes of such proceedings or inquiries.

Mylan is or may be involved in various legal proceedings and certain government inquiries or investigations, including, but not limited to, patent infringement, product liability, antitrust matters, breach of contract, and claims involving Medicare and/or Medicaid reimbursements, or laws relating to sales, marketing, and pricing practices, which, if material, are described in Mylan’s periodic reports, that involve claims for, or the possibility of, fines and penalties involving substantial amounts of money or other relief, including but not limited to civil or criminal fines and penalties and exclusion from participation in various government health-care-related programs. With respect to government antitrust enforcement and private plaintiff litigation of so-called “pay for delay” patent settlements, large verdicts, settlements or government fines are possible, especially in the U.S. and EU. Mylan’s material litigation and legal proceedings consist of: the lorazepam clorazepate litigation, the mondafinil antitrust litigation, the pioglitazone litigation, certain shareholder class actions relating to the EPD Transaction, drug pricing matters related to the marketing pricing and sale of Mylan’s Doxycycline and Digoxin products, certain European Commission (the “Commission”) proceedings, the citalopram litigation and the paroxetine litigation. If any of these legal proceedings or inquiries were to result in an adverse outcome, the impact could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

With respect to product liability, Mylan maintains a combination of self-insurance (including through its wholly owned captive insurance subsidiary) and commercial insurance to protect against and manage a portion of the risks involved in conducting its business. Although Mylan carries insurance, Mylan believes that no reasonable amount of insurance can fully protect against all such risks because of the potential liability inherent in the business of producing pharmaceuticals for human consumption. Emerging developments in

 

 

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the U.S. legal landscape relative to the liability of generic pharmaceutical manufacturers for certain product liabilities claims could increase Mylan’s exposure to litigation costs and damages. While none of Mylan’s ongoing product liability lawsuits, which primarily consist of claims related to its Fentanyl Transdermal System, Phenytoin, Propoxyphene and Alendronate, are individually material to Mylan, such lawsuits could in the aggregate be material to Mylan. To the extent that a loss occurs, depending on the nature of the loss and the level of insurance coverage maintained, it could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

In addition, in limited circumstances, entities that Mylan acquired are party to litigation in matters under which Mylan is, or may be, entitled to indemnification by the previous owners. Even in the case of indemnification, there are risks inherent in such indemnities and, accordingly, there can be no assurance that Mylan will receive the full benefits of such indemnification, or that Mylan will not experience an adverse result in a matter that is not indemnified, which could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan has a number of clean energy investments which are subject to various risks and uncertainties.

Mylan has invested in clean energy operations capable of producing refined coal that it believes qualify for tax credits under Section 45 of the Code. Mylan’s ability to claim tax credits under Section 45 of the Code depends upon the operations in which Mylan has invested satisfying certain ongoing conditions set forth in Section 45 of the Code. These include, among others, the emissions reduction, “qualifying technology,” and “placed-in-service” requirements of Section 45 of the Code, as well as the requirement that at least one of the operations’ owners qualifies as a “producer” of refined coal. While Mylan has received some degree of confirmation from the IRS relating to Mylan’s ability to claim these tax credits, the IRS could ultimately determine that the operations have not satisfied, or have not continued to satisfy, the conditions set forth in Section 45 of the Code. Additionally, Congress could modify or repeal Section 45 of the Code and remove the tax credits retroactively.

In addition, Section 45 of the Code contains phase out provisions based upon the market price of coal, such that, if the price of coal rises to specified levels, Mylan could lose some or all of the tax credits it expects to receive from these investments.

Finally, when the price of natural gas or oil declines relative to that of coal, some utilities may choose to burn

natural gas or oil instead of coal. Market demand for coal may also decline as a result of an economic slowdown and a corresponding decline in the use of electricity. If utilities burn less coal, eliminate coal in the production of electricity or are otherwise unable to operate for an extended period of time, the availability of the tax credits would also be reduced. The occurrence of any of the above risks could adversely affect Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan has significant indebtedness which could adversely affect Mylan’s financial condition and prevent Mylan from fulfilling its obligations under such indebtedness. Any refinancing of this debt could be at significantly higher interest rates. Mylan’s substantial indebtedness could lead to adverse consequences.

Mylan’s level of indebtedness could have important consequences, including but not limited to:

 

  increasing Mylan’s vulnerability to general adverse economic and industry conditions;
  requiring Mylan to dedicate a substantial portion of its cash flow from operations to make debt service payments, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;
  limiting Mylan’s flexibility in planning for, or reacting to, challenges and opportunities, and changes in its businesses and the markets in which Mylan operates;
  limiting Mylan’s ability to obtain additional financing to fund its working capital, capital expenditures, acquisitions and debt service requirements and other financing needs;
  increasing Mylan’s vulnerability to increases in interest rates in general because a substantial portion of its indebtedness bears interest at floating rates; and
  placing Mylan at a competitive disadvantage to its competitors that have less debt.

Mylan’s ability to service its indebtedness will depend on its future operating performance and financial results, which will be subject, in part, to factors beyond its control, including interest rates and general economic, financial and business conditions. If Mylan does not have sufficient cash flow to service its indebtedness, it may need to refinance all or part of its existing indebtedness, borrow more money or sell securities or assets, some or all of which may not be available to Mylan at acceptable terms or at all. In addition, Mylan may need to incur additional indebtedness in the future in the ordinary course of business. Although the terms of Mylan’s senior credit agreement and its bond indentures allow Mylan to

 

 

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incur additional debt, this is subject to certain limitations which may preclude it from incurring the amount of indebtedness it otherwise desires.

In addition, if Mylan incurs additional debt, the risks described above could intensify. If global credit markets return to their recent levels of contraction, future debt financing may not be available to Mylan when required or may not be available on acceptable terms, and as a result Mylan may be unable to grow its business, take advantage of business opportunities, respond to competitive pressures or satisfy its obligations under its indebtedness. Any of the foregoing could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan’s credit facilities, senior unsecured notes, accounts receivable securitization facility, other outstanding indebtedness and any additional indebtedness Mylan incurs in the future impose, or may impose, significant operating and financial restrictions on Mylan. These restrictions limit Mylan’s ability to, among other things, incur additional indebtedness, make investments, pay certain dividends, prepay other indebtedness, sell assets, incur certain liens, enter into agreements with Mylan’s affiliates or restricting its subsidiaries’ ability to pay dividends, merge or consolidate. In addition, Mylan’s Revolving Credit Agreement, 2014 Term Loan, 2015 Term Loans, and accounts receivable securitization facility require Mylan to maintain specified financial ratios. A breach of any of these covenants or Mylan’s inability to maintain the required financial ratios could result in a default under the related indebtedness. If a default occurs, the relevant lenders could elect to declare Mylan’s indebtedness, together with accrued interest and other fees, to be immediately due and payable. These factors could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan enters into various agreements in the normal course of business which periodically incorporate provisions whereby Mylan indemnifies the other party to the agreement.

In the normal course of business, Mylan periodically enters into commercial, employment, legal settlement, and other agreements which incorporate indemnification provisions. In some but not all cases, Mylan maintains insurance coverage which it believes will effectively mitigate its obligations under certain of these indemnification provisions. However, should Mylan’s obligation under an indemnification provision exceed any applicable coverage or should coverage be denied,

Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price could be materially adversely affected.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any future changes in estimates, judgments and assumptions used or necessary revisions to prior estimates, judgments or assumptions or changes in accounting standards could lead to a restatement or revision to previously issued financial statements.

The consolidated and condensed consolidated financial statements included in the periodic reports Mylan files with the SEC are prepared in accordance with U.S. GAAP. The preparation of financial statements in accordance with U.S. GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and income. Estimates, judgments and assumptions are inherently subject to change in the future and any necessary revisions to prior estimates, judgments or assumptions could lead to a restatement. Furthermore, although Mylan has recorded reserves for litigation related contingencies based on estimates of probable future costs, such litigation related contingencies could result in substantial further costs. Also, any new or revised accounting standards may require adjustments to previously issued financial statements. Any such changes could result in corresponding changes to the amounts of liabilities, revenues, expenses and income. Any such changes could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan must maintain adequate internal controls and be able on an annual basis, to provide an assertion as to the effectiveness of such controls.

Effective internal controls are necessary for Mylan to provide reasonable assurance with respect to Mylan’s financial reports. Mylan spends a substantial amount of management and other employee time and resources to comply with laws, regulations and standards relating to corporate governance and public disclosure. In the U.S., such regulations include the Sarbanes-Oxley Act of 2002, SEC regulations and the NASDAQ listing standards. In particular, Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) requires management’s annual review and evaluation of Mylan’s internal control over financial reporting and attestation as to the effectiveness of these controls by its independent registered public accounting

 

 

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firm. If Mylan fails to maintain the adequacy of its internal controls, Mylan may not be able to ensure that it can conclude on an ongoing basis that it has effective internal control over financial reporting. Additionally, internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that the control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. If Mylan fails to maintain the adequacy of its internal controls, including any failure to implement required new or improved controls, this could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan’s future success is highly dependent on its continued ability to attract and retain key personnel. Loss of key personnel could lead to loss of customers, business disruption, and a decline in revenues, adversely affect the progress of pipeline products, or otherwise adversely affect Mylan’s operations.

It is important that Mylan attract and retain qualified personnel in order to develop and commercialize new products, manage its business, and compete effectively. Competition for qualified personnel in the pharmaceutical industry is very intense. If Mylan fails to attract and retain key scientific, technical, commercial, or management personnel, Mylan’s business could be affected adversely. Additionally, while Mylan has employment agreements with certain key employees in place, their employment for the duration of the agreement is not guaranteed. Current and prospective employees might also experience uncertainty about their future roles with Mylan following the consummation of the EPD Transaction, which might adversely affect its ability to retain key managers and other employees. If Mylan is unsuccessful in retaining its key employees or enforcing certain post-employment contractual provisions such as confidentiality or non-competition, it could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

The EPD Business has a limited history in the structure in which it currently operates.

Prior to the consummation of the EPD Transaction, the EPD Business had been operated by Abbott as part of its broader corporate organization. As a result of the EPD Business’s separation from Abbott, the EPD Business may encounter operational or financial difficulties that would not have occurred if the EPD Business continued operating in its former structure. For example, the EPD Business’s working capital and capital for general corporate purposes have historically been provided as part of the corporate-wide cash management policies of Abbott. Mylan may need to obtain additional financing for the EPD Business from lenders, public offerings or private placements of debt or equity securities, strategic relationships, or other arrangements. Similarly, the EPD Business’s combined financial statements reflect allocations of expenses from Abbott for corporate functions and may differ from the expenses the EPD Business would have incurred had the EPD Business been operated by Mylan, and the EPD Business will need to make significant investments to replicate or outsource from other providers certain facilities, systems, infrastructure, and personnel to which it will no longer have access after closing and, for certain services to be provided pursuant to a transition services agreement entered into in connection with the consummation of the EPD Transaction (the “Transition Services Agreement”), the expiration of the Transition Services Agreement. In addition, as a result of the separation of the EPD Business from Abbott, other significant changes may occur in the EPD Business’s cost structure, management, financing, and business operations as a result of operating separately from Abbott that could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

The EPD Business and Abbott are interdependent with respect to certain transition services and manufacturing and supply of certain products and share certain intellectual property.

Prior to the EPD Transaction, Abbott or one of its affiliates performed various corporate functions for the EPD Business, such as accounting, information technology, and finance, among others. Abbott is required to provide some of these functions to the EPD Business for a period of time pursuant to the Transition Services Agreement. The EPD Business may incur temporary interruptions in business operations if it cannot complete the transition effectively from Abbott’s existing operational systems and the transition services that support these functions as the EPD Business replaces these systems or integrates them with Mylan’s

 

 

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systems. The EPD Business is dependent on Abbott providing certain transition services, and Mylan could be negatively impacted if Abbott fails to perform under the Transition Services Agreement. In addition, Abbott or one of its affiliates is required to manufacture products for the EPD Business, pursuant to certain agreements providing for, among other things, manufacturing and supply services. Disruptions or disagreements related to the third-party manufacturing relationship with Abbott could impair Mylan’s ability to ship products to the market on a timely basis and could, among other consequences, subject Mylan to exposure to claims from customers.

Mylan has certain obligations to provide transition services to Abbott and to manufacture for and supply products to Abbott. Accordingly, Mylan may need to allocate resources to provide transition services or manufacturing capacity to Abbott in lieu of supplying products for the EPD Business, which could have a negative impact on Mylan.

In addition, Abbott or one of its affiliates owns registrations, including marketing authorizations, for certain products of the EPD Business in certain jurisdictions, and disagreements could arise regarding Abbott’s or Mylan’s use of such registrations in the territory allocated to each party.

The risks related to the foregoing relationships between Mylan and Abbott could be exacerbated if Abbott fails to perform under the agreements between Mylan and Abbott or the EPD Business fails to have necessary systems and services in place when the obligations under the agreements between Mylan and Abbott expire, and such risks could have a negative impact on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan’s business relationships, including customer relationships, may be subject to disruption due to the EPD Transaction.

Parties with which Mylan currently does business or may do business in the future, including customers and suppliers, may experience ongoing uncertainty associated with the EPD Transaction, including with respect to current or future business relationships with Mylan. As a result, Mylan’s business relationships may be subject to disruptions if customers, suppliers, and others attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than Mylan. For example, certain customers and collaborators have contractual consent rights or termination rights that may have been triggered by a change of control or assignment of the rights and obligations of contracts that were transferred in the EPD Transaction. In addition, Mylan’s contract manufacturing business could be impaired if existing or

potential customers determine not to continue or initiate contract manufacturing relationships with Mylan. These disruptions could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan is in the process of enhancing and further developing its global ERP systems and associated business applications, which could result in business interruptions if Mylan encounters difficulties.

Mylan is enhancing and further developing its global ERP and other business critical information technology (“IT”) infrastructure systems and associated applications to provide more operating efficiencies and effective management of Mylan’s business and financial operations. Such changes to ERP systems and related software, and other IT infrastructure carry risks such as cost overruns, project delays and business interruptions and delays. If Mylan experiences a material business interruption as a result of its ERP enhancements, it could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

Mylan is increasingly dependent on information technology and its systems and infrastructure face certain risks, including cybersecurity and data leakage risks.

Significant disruptions to Mylan’s information technology systems or breaches of information security could adversely affect Mylan’s business. Mylan is increasingly dependent on sophisticated information technology systems and infrastructure to operate its business. In the ordinary course of business, Mylan collects, stores and transmits large amounts of confidential information (including trade secrets or other intellectual property, proprietary business information and personal information), and it is critical that Mylan do so in a secure manner to maintain the confidentiality and integrity of such confidential information. Mylan also has outsourced significant elements of its operations to third parties, some of which are outside the U.S., including significant elements of Mylan’s information technology infrastructure, and as a result Mylan is managing many independent vendor relationships with third parties who may or could have access to its confidential information. The size and complexity of Mylan’s information technology systems, and those of Mylan’s third party vendors with whom Mylan contracts, make such systems potentially vulnerable to service interruptions. The size and complexity of Mylan’s and Mylan’s vendors’ systems and the large amounts of confidential information that is present on them also makes them potentially vulnerable to security breaches from inadvertent or intentional

 

 

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actions by Mylan’s employees, partners or vendors, or from attacks by malicious third parties. Mylan and its vendors could be susceptible to third party attacks on its information technology systems, which attacks are of ever increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including state and quasi-state actors, criminal groups, “hackers” and others. Maintaining the security, confidentiality and integrity of this confidential information (including trade secrets or other intellectual property, proprietary, business information and personal information) is important to Mylan’s competitive business position. However, such information can be difficult to protect. While Mylan has taken steps to protect such information and invested heavily in information technology, there can be no assurance that its efforts will prevent service interruptions or security breaches in its systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information that could adversely affect Mylan’s business operations or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information. A breach of Mylan’s security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use Mylan’s proprietary technology or information, and/or adversely affect Mylan’s business

position. Further, any such interruption, security breach, or loss, misappropriation, and/or unauthorized access, use or disclosure of confidential information, including personal information regarding Mylan’s patients and employees, could result in financial, legal, business, and reputational harm to Mylan and could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

The expansion of social media platforms presents new risks and challenges.

The inappropriate use of certain social media vehicles could cause brand damage or information leakage or could lead to legal implications from the improper collection and/or dissemination of personally identifiable information or the improper dissemination of material non-public information. In addition, negative posts or comments about Mylan on any social networking web site could seriously damage Mylan’s reputation. Further, the disclosure of non-public company sensitive information through external media channels could lead to information loss as there might not be structured processes in place to secure and protect information. If Mylan’s non-public sensitive information is disclosed or if its reputation is seriously damaged through social media, it could have a material adverse effect on Mylan’s business, financial condition, results of operations, cash flows, and/or ordinary share price.

 

 

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Risk factors related to Meda

In deciding whether to accept the Offer, Meda shareholders should consider carefully the following risk factors and the risk factors set forth under the caption “Risk factors related to Mylan and the Offer,” in addition to the other information contained in or incorporated by reference into this Offer Document, including the matters addressed under the caption “Forward-looking information.” The following risk factors related to Meda’s business reflect Meda’s views.

Meda operates in a highly competitive industry.

The pharmaceutical industry is highly competitive, and Meda faces competition in all the regions and product categories in which it is active. Meda’s competitors may be able to develop products and processes competitive with or superior to Meda’s own for many reasons, such as more experience in developing new drugs or greater financial resources. There is accordingly a risk that Meda’s product candidates or products developed by Meda’s partners will not be preferred over existing or newly developed products, which may negatively affect Meda’s operations and financial position. Future products in development by other pharmaceutical companies may result in increased competition and lower sales of Meda’s products.

Sales of Meda products that are protected by patents may be negatively impacted by expiry, challenge or infringement.

Meda’s prescription drugs face competition from generic products. Generic products are generally cheaper than branded versions and, in certain markets where they are available, may be required or encouraged in place of branded versions under third-party reimbursement programs or as a result of legal or other efforts to control healthcare spending.

The extent of Meda’s patent protection from generic products varies on a product by product basis, and from market to market. For example, for Elidel, there are several patent families claiming different aspects of the product (e.g. in respect of substance, crystalline form, formulation and production matters), with the main patent family covering the crystalline form used in the product beginning to expire from 2018 in certain markets; while for Dymista, there are relevant patent families expiring in Europe in 2028 and in the United States in 2023 and 2026. Moreover, the pharmaceutical industry historically has generated substantial litigation concerning the manufacture, use and sale of products, with patents routinely challenged (or alleged to have been infringed).

If Meda is not successful in defending its patents and maintaining exclusive rights to market its products still under patent protection, its sales of the relevant products could decline sharply in a very short period and be subject to considerable pricing pressure. Meda may also become subject to infringement claims by third parties and may have to defend against charges that it violated patents or the proprietary rights of third parties and, if infringement is found, could lose its right to develop, manufacture or sell certain products, or could be required to pay monetary damages or royalties to license proprietary rights from third parties.

Meda may be unable maintain its current margins on certain products due to pricing pressure, including social and political pressure.

Price pressure has been and can be expected to remain significant within certain of Meda’s business areas, and there is thus a risk that Meda will not be able to maintain its current margins on certain products.

Meda may experience downward pricing pressure on the prices of certain of its products due to social or political pressure to lower the cost of pharmaceutical products, which may reduce its revenue and future profitability. Recent events have resulted in increased public and governmental scrutiny of the cost of pharmaceutical products, especially in connection with price increases following other companies’ acquisitions of product rights, including from U.S. federal prosecutors and members of the U.S. Congress. Meda’s revenue and future profitability could be negatively affected if these or similar inquiries or regulatory steps were to result in legislative or regulatory proposals that limit Meda’s ability to maintain the prices of, and thus margins on, its products.

Some Meda products entitle the end customer to remuneration from paying third parties, such as private insurance companies and public authorities. Meda cannot be certain that, over time, third party reimbursements for its products will remain at the same levels or permit the same level of return on its

 

 

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investments. Changes among such bodies in terms of their scope, efforts, guidelines and ability to influence pricing of and demand for pharmaceuticals may result in negative commercial and financial effects for Meda. Other Meda products are not reimbursed by third parties, and in respect of these in particular, reduced purchasing power of the end consumer may lead to decrease in demand and/or the will to spend money on such products, which may result in lower sales of Meda’s products.

An economic downturn or other macroeconomic trends may cause a decrease in demand and may consequently have a negative impact on Meda’s earnings and financial position.

The global economy continues to experience significant volatility, and the economic environment may continue to be, or become, less favorable than that of past years. This has led, and/or could lead, to reduced consumer and customer spending and/or reduced or eliminated governmental or third party payor coverage or reimbursement in the foreseeable future, and this may include reduced spending on healthcare, including but not limited to pharmaceutical products. Meda’s sales could be negatively impacted if patients forego obtaining healthcare, patients and customers reduce spending or purchases, and/or if governments and/or third-party payors reduce or eliminate coverage or reimbursement amounts for pharmaceuticals and/or impose price or other controls adversely impacting the price or availability of pharmaceuticals. In addition, reduced consumer and customer spending, and/or reduced government and/or third-party payor coverage or reimbursement, and/or new government controls, may drive Meda and its competitors to decrease prices and/or may reduce the ability of customers to pay and/or may result in reduced demand for Meda’s products. Although Meda operates in a large number of geographical markets and its products may be vital for the patient irrespective of economic trends, there is a risk that a recession could lead to a decreased demand for Meda’s products and consequently have a negative impact on Meda’s earnings and financial position.

Meda’s products or operations may become subject to increased or changed requirements or restrictions from regulatory authorities, which could have negative commercial and financial effects for Meda.

Meda is dependent on and subject to the actions of public authorities. Governmental authorities such as the FDA impose substantial requirements on the development, manufacture, holding, labeling, marketing, advertising, promotion, distribution and sale of

therapeutic pharmaceutical products through lengthy and detailed laboratory and clinical testing and other costly and time-consuming procedures. Regulatory bodies may also introduce changes in regulations on pricing and discounting of drugs or changes in the conditions for prescribing a certain drug. If Meda’s products or operations become subject to further or changed requirements or restrictions from regulatory authorities, it could have negative commercial and financial effects for Meda.

Challenges inherent in developing business in emerging markets may impede the future growth of Meda’s product portfolio.

Meda has a diversified geographic footprint with approximately 62 percent of Meda’s sales generated in western Europe (the largest countries being Italy, Germany, France and Sweden), 19 percent in emerging markets (driven by China, Russia, the Middle East and Thailand) and 17 percent in the U.S. It operates in certain countries through its own sales organization and in others through distributors that manage the sales of Meda’s products.

Meda’s focus on continuing to develop business in emerging markets is a significant factor for Meda’s future growth prospects. In some of these countries, however, the financial, political and social situation may be unstable. Risks inherent in conducting business in emerging markets include:

 

  difficulties in coordinating and managing foreign operations, including ensuring that foreign operations comply with foreign laws, such as export laws and applicable worldwide anti-bribery laws;
  price and currency exchange controls;
  potential restrictions on the repatriation of funds and scarcity of hard currency;
  political and economic instability;
  compliance with multiple regulatory regimes;
  less established legal and regulatory regimes in certain jurisdictions, including as relates to enforcement of anti-bribery and anti-corruption laws and the reliability of the judicial systems;
  differing degrees of protection for intellectual property;
  unexpected changes in foreign regulatory requirements, including quality standards and other certification requirements;
  new export license requirements;
  adverse changes in tariff and trade protection measures;
  differing labor regulations;
  potentially negative consequences from changes in or interpretations of tax laws;
  restrictive governmental actions;
  possible nationalization or expropriation;
 

 

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  credit market uncertainty;
  differing local practices, customs and cultures, some of which may not align or comply with Meda’s practices and policies;
  difficulties with licensees, contract counterparties, or other commercial partners; and
  differing local product preferences and product requirements.

Any of these factors could have a material adverse effect on Meda’s business, earnings and financial position. More generally, any difficulties that Meda may face in adapting to emerging markets could impair Meda’s ability to take advantage of growth opportunities in these regions, and any decline in the growth of emerging markets could also negatively affect Meda’s business, results of operations or financial condition.

Sales of certain Meda products may be adversely affected by unanticipated seasonal variations outside Meda’s control.

A portion of Meda’s sales are dependent on seasonal variations that Meda cannot influence. For instance, a short pollen season or a season with low pollen counts may lead to reduced sales of certain of Meda’s products in the key respiratory area (asthma and allergy), resulting in a negative effect on Meda’s sales. Although seasonality of this sort presently only affects a limited portion of the product portfolio, the significance of seasonal variations may increase over time as the product portfolio evolves.

An increase in parallel trade may have negative commercial and financial effects for Meda.

Differences in the price of pharmaceuticals in markets where Meda operates may lead to an increase in parallel imports, with Meda’s products being purchased at a lower price in certain markets and then competing with Meda’s sales in other markets. For example, differences between national pricing regimes create price differentials within the European Union that can lead to significant parallel trade in pharmaceutical products. Movements of pharmaceutical products into North America, in particular the movement of products from Canada into the U.S., may also increase. Increased parallel trade could result in materially adverse commercial and financial effects for Meda.

There is a risk that new product launches or launches of existing products in new markets will not succeed, which could negatively impact Meda’s expected earnings and financial position.

Launching a new drug is time consuming and unpredictable, and involves considerable investments in

marketing, stocking of products before launch, as well as other types of costs. The success of new products is of particular importance for Meda because new product launches are intended to contribute to Meda’s organic growth. There is a risk that new product launches will not succeed for various reasons, including inability to demonstrate a differentiated profile for the product or the undermining of intellectual property rights. New products or product launches that are not successful might have a negative impact on Meda’s expected earnings and financial position. Success when establishing existing products in new markets is also of importance for Meda. There is a risk that the launch of existing products in new markets will not succeed for various reasons, including inability to correctly identify and utilize relevant sales and marketing opportunities for the product, inability to create a differentiated profile for the product and the undermining of intellectual property rights. Unsuccessful launches of existing products in new markets may have a negative impact on Meda’s expected earnings and financial position.

Meda’s sales and earnings may be negatively impacted if Meda’s business partners do not meet their obligations under their partnership and/or license agreements.

Meda actively collaborates in marketing, sales and development with other pharmaceutical companies. Meda uses other pharmaceutical companies as distributors in North America and also uses local distributors in countries where it does not have its own marketing and sales organization, including in parts of South America, Asia and Africa.

There is a risk that companies that Meda enters into partnership and/or license agreements with may not meet their obligations under such agreements, which could have a negative impact on Meda’s sales and earnings. There is also a risk that Meda will not be able to enter into partnership and/or license agreements on terms that are acceptable to Meda in the future, which could also have a negative impact on Meda’s sales and earnings.

There can be no guarantee that clinical trials will result in Meda receiving the requisite approval from authorities or lead to new products that can be sold on the market, either of which may negatively affect Meda’s expected sales, earnings and financial position.

Prior to the sale of certain new products, Meda or its partners may be required to demonstrate the potential product’s safety and efficacy for humans through clinical trials. There can be no guarantee that clinical trials or other studies conducted by Meda or its partners will demonstrate the level of safety and efficacy necessary to

 

 

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receive the requisite approval from the authorities, or that they will result in products that can be sold on the market, either of which may negatively affect Meda’s expected sales, earnings and financial position. Even promising results from preclinical and early clinical studies do not always accurately predict results in later, large scale trials. A failure to demonstrate safety and efficacy could or would result in Meda’s failure to obtain regulatory approvals.

Clinical trials can also be delayed for reasons outside of Meda’s control, which can lead to increased development costs and delays in regulatory approval. Meda also may experience delays in obtaining, or may not obtain, required initial and continuing approval of its clinical trials from institutional review boards.

To the extent that clinical trials are required prior to the sale of Meda’s new products, any failure to receive requisite approvals, or to receive requisite approvals in a timely manner, including for the reasons described above, could have a negative impact on Meda’s expected sales, earnings and financial position.

Disruptions in Meda’s manufacturing operations for its products may negatively impact earnings as Meda’s ability to manufacture sufficient volumes of products to meet demand may be impaired.

Meda’s manufacturing operations entail production of complex pharmaceutical products amidst strict quality controls and in a highly regulated environment. Production is generally characterized by a chain of processes, manufacturing complexity (including the need for sophisticated equipment that can take time to install) and extensive testing requirements and safety and security processes that combine to increase the overall difficulty of manufacturing and resolving manufacturing problems that Meda may encounter. Moreover, approximately 60 percent of Meda’s manufacturing is handled by externally contracted manufacturers, and Meda may not always be in a position to ensure that such third parties comply with current good manufacturing practices, quality system management requirements or similar standards, which further increases the potential for supply disruptions.

To the extent that Meda encounters supply disruptions in the future, including in respect of third party manufacturers, such disruptions could have a negative impact on Meda’s operations, financial position and earnings.

Competition for experienced employees can be intense, and an inability to attract and retain key employees may negatively impact Meda’s business, financial position and earnings.

Meda is highly dependent on scientific, technical, commercial and management personnel to develop and

commercialize new products, effectively market its product portfolio, manage its business, and, in general, compete effectively. Any failure to attract or retain key scientific, technical, commercial and management personnel could have negative financial and commercial implications for Meda. Meda’s ability to recruit and retain qualified employees is of utmost importance in order to secure the appropriate level of expertise within Meda. Given the intense competition for experienced employees among pharmaceutical companies, there is a risk of losing key employees, which could have a negative impact on Meda’s operations, financial position and earnings.

Product liability claims for damages brought against Meda may negatively affect Meda’s operations and profitability.

Product development, clinical trials, production, sales and marketing of Meda’s products are subject to product liability risk.

Plaintiffs have received substantial damage awards in some jurisdictions against pharmaceutical companies based upon claims for injuries allegedly caused by the use of their products. In addition to direct expenditures for damages, settlement and defense costs, there is a possibility of adverse publicity, loss of revenues and disruption of business as a result of product liability claims. Any such developments could negatively affect Meda’s operations and profitability.

Moreover, although Meda has product liability insurance protection, there is a risk that Meda’s insurance will not fully cover claims for liability for damages relating to the use of its products. This could negatively affect Meda’s operations and profitability.

Meda may be unsuccessful in preventing infringement of its intellectual property rights or may be held liable for infringement of others’ intellectual property rights, either of which could have a negative impact on Meda’s operations and profitability.

Meda invests significant sums in product development and acquires intellectual property developed by other companies. In order to support a return on these investments, Meda actively asserts its intellectual property rights and closely monitors the activities of its competitors, including competitors’ possession of intellectual property rights. However, there is a risk that Meda’s rights could be infringed upon. Should this occur, there is a risk that Meda would be unable to assert its rights to the extent expected in legal proceedings, because the scope of protection is considered to be too narrow, because Meda’s rights are considered invalid or for other reasons, which could have a negative impact on Meda’s operations and profitability.

 

 

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There is a risk that Meda’s products and/or trademarks will be alleged or deemed to infringe on the rights of others. Thus, Meda may be drawn into court proceedings for alleged infringement of the rights of others. If this happens, there is a risk that Meda may be liable to pay significant damages, which would have a negative impact on Meda’s operations and profitability.

Furthermore, Meda is dependent on know-how and it cannot be ruled out that competitors may develop similar know-how, or that Meda will be unable to protect its know-how effectively, which may negatively affect Meda’s operations and profitability.

Any possible violations of Meda’s internal compliance policies and guidelines or code of conduct for suppliers may have significant negative effects on Meda’s operations and brand.

Meda has adopted various internal compliance policies and guidelines as well as a code of conduct for suppliers, focusing inter alia on responsible business practices, environmental management and anti-corruption. Any possible violations of such policies and guidelines or applicable anti-corruption laws, anti-money laundering laws and/or similar laws applicable to Meda may have significant negative effects on Meda’s expected sales, earnings, financial position and brand.

Meda may be unable to continue to secure financing on agreeable terms and a sudden change in Meda’s liquidity could impede its ability to fulfill existing payment obligations as they become due.

The ability of Meda to meet future capital needs is to a large extent depending on the successful sale of Meda’s products. In order to finance acquisitions of companies, acquisitions of product rights or other measures undertaken to achieve strategic objectives, the future operations of Meda may need additional financial resources. There is a risk that Meda will not be able to secure necessary capital to be able to meet its payment obligations when due or to finance acquisitions of companies, acquisitions of product rights or other measures undertaken to achieve strategic objectives. In this respect, general developments in the capital and credit markets are also of significant importance and may adversely affect Meda.

Moreover, Meda may need to incur additional indebtedness in order to refinance existing indebtedness as it matures or comes due. As of March 31, 2016, Meda had SEK 23.9 billion of total borrowings outstanding, including SEK 2.6 billion of short-term borrowings. There is a risk that Meda will not be able to procure sufficient funds to refinance its indebtedness as it comes due or that financing will only be obtainable on undesirable

commercial terms. In addition, there is a risk that Meda may default on or otherwise breach the terms of its existing financial obligations due to, among other things, changes in the general economy or disruptions in the capital and credit markets. Such a default or breach could negatively affect Meda’s financial position and earnings.

Failure to negotiate adequate contractual protections in connection with acquisitions or failure to integrate acquired companies following an acquisition may negatively affect Meda’s sales, earnings and financial position.

In connection with acquisitions, all of the acquired company’s liabilities, as well as its assets may be transferred. There is a risk that not all actual or potential liabilities of the acquired company are identified prior to the acquisition and/or that no representations, warranties or indemnities covering such liabilities are obtained. If Meda is unable to obtain contractual protection regarding such liabilities, this could adversely affect Meda’s business and profitability.

Acquisitions generally involve risks related to integration. Apart from company specific risks, the acquired company’s relationships with key individuals, customers and suppliers may be negatively affected. There is also a risk of integration processes taking longer or being more costly than estimated. Similarly, there is a risk that expected synergies do not occur, either completely or in part. The integration of acquisitions may involve organizational changes which, in the short term, could cause delays of the implementation of plans and achievement of objectives. Pharmaceutical companies are knowledge-based companies, and accordingly, integration normally involves risks relating to the ability to retain expertise and to create a common culture, among other risks. If Meda does not succeed in integrating acquired businesses, or if these businesses, after integration, do not perform as expected, this may negatively affect Meda’s expected sales, earnings and financial position.

Meda may be unable to govern and control its expanded operations effectively, which may negatively affect Meda’s operations and earnings.

Acquisitions have historically been a primary driver of Meda’s expansion. Between 2000 and 2015, Meda made more than 30 major acquisitions of companies and product rights. Several strategic acquisitions have added important products to Meda’s portfolio. Meda’s largest acquisition to date was completed in 2014 when Italian specialty pharma company Rottapharm was acquired.

 

 

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With continued expansion comes the risk that Meda’s existing control, governance, accounting and information systems may prove to be inadequate for the planned growth, and additional investment in these systems may be necessary. The combination of two independent businesses is a complex, costly and time-consuming process. As a result, Meda may be required to devote significant management attention and resources to the integration of an acquired business into Meda’s practices and operations. Any integration process may be disruptive and, if implemented ineffectively, may restrict the realization of the full expected benefits. Meda’s potential inability to govern and control its expanded operations effectively could have negative commercial and financial consequences for Meda. In addition, any acquisition of assets and rights to products and compounds may fail to accomplish Meda’s strategic objective and may not perform as expected.

A significant reduction in Meda’s goodwill may negatively impact its financial position.

Meda reports substantial value for goodwill and product rights (SEK 47,393 million, or 78 percent of total assets, as of December 31, 2015). Goodwill is the only intangible asset that is reported based on indefinite useful life. Impairment testing is done on an ongoing basis. Significant reduction in value may arise in the future for a variety of reasons, such as unfavorable market conditions that either affect Meda specifically or the entire pharmaceutical industry more generally. This may result in negative effects on Meda’s earnings and financial position.

Meda engages in currency hedging to mitigate the risks of operating in many different currencies, but there can be no guarantee that these currency hedges will provide complete protection against exchange rate fluctuations, which may have a negative impact on Meda’s sales and operating profit.

A significant part of Meda’s purchasing and sales occurs in currencies other than SEK. Consequently, exchange rate fluctuations could affect Meda’s net profit and cash flow.

Sales to other countries occur as exports in both the customers’ local currency and other currencies such as EUR and USD. Purchases are mainly made in EUR, SEK, and USD. Meda is therefore continually exposed to transaction risk. In addition, a large part of Meda’s operations are conducted in subsidiaries outside of Sweden in accounting currencies other than SEK and translation exposure arises for net investments in foreign operations.

Although Meda has historically sought to manage its currency exposures in part through the use of hedging arrangements, there is a risk that Meda’s currency hedges (if any) will not provide complete protection against exchange rate fluctuations, which may have a negative impact on Meda’s sales and operating profit.

If Meda is unable to minimize interest rate risk using interest rate swaps or other means, changes in interest rates may have a negative effect on Meda’s financial position.

Interest risk refers to the risk that changes in general interest rates may have an adverse effect on Meda’s net income. Meda’s financing consists in large part of interest-bearing liabilities, which means that Meda’s net earnings are affected by changes in general interest rates. On December 31, 2015, group borrowings of SEK 24,862 million were mainly distributed as: EUR 1,614 million, $610 million and SEK 4,879 million. The average interest rate including credit margins on December 31, 2015 was 2.5 percent. Interest expense for 2016 for this loan portfolio at unchanged interest rates would thus amount to approximately SEK 600 million. How quickly a change in interest rates will have an impact on Meda’s net profits depends in part on the loan’s fixed interest rate period. On average, this period was 5.5 months on December 31, 2015.

To some extent, Meda uses interest rate swaps to extend or shorten the fixed interest rate period on underlying loans; however, if these or other actions to minimize interest rate risk are not effective, changes in interest rates may have a negative impact on Meda’s financial position.

Credit risks related to financial transactions may negatively impact Meda’s business.

Meda’s financial transactions may lead to credit risks in relation to financial counterparties. Credit risk exists in Meda’s cash and cash equivalents, derivatives, and cash balances with banks and financial institutions and in relation to distributors and wholesalers, including outstanding receivables and committed transactions. If Meda’s actions to minimize credit risks are not sufficient, it may have a negative impact on Meda’s financial position and earnings.

Meda’s previous or current tax position may change, which may negatively impact Meda’s operations, earnings and financial position.

Meda is subject to taxation in a large number of countries. Moreover, Meda is from time to time subject to tax investigation by tax authorities in different jurisdictions. Meda’s interpretation of tax regulations may be incorrect or legislations may be amended, potentially with retroactive effect. As a result of decisions

 

 

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from Swedish and foreign tax authorities, Meda’s previous or current tax position may change, which may negatively affect Meda’s operations, earnings and financial position. Such decisions include, among others, a proposal for the introduction of a new system of corporate taxation in Sweden intended to create a more neutral taxation of equity and borrowed capital that the so-called Corporate Tax Committee submitted to the Swedish government in June 2014, which is currently being reviewed by the Swedish government.

Meda may be involved in legal proceedings, the material costs of which could negatively impact Meda’s business.

As a part of the ordinary course of business, Meda may be involved in litigation and legal proceedings which may be time-consuming, disturb Meda’s day-to-day operations, involve significant expenses and financial claims against Meda and/or threaten important aspects of Meda’s operations. Any of these factors may result in material costs and negatively affect Meda’s operations, earnings and financial position.

 

 

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The Offer

 

The Offer

On February 10, 2016, Mylan announced a recommended public offer to acquire all shares in Meda for consideration consisting of a combination of cash and Mylan Shares. According to the terms of the Offer, each Meda shareholder who validly tenders and does not properly withdraw prior to the Offer being declared unconditional will receive:

 

  in respect of 80 percent of the number of Meda shares tendered by such shareholder, SEK 165 in cash per Meda share; and
  in respect of the remaining 20 percent of the number of Meda shares tendered by such shareholder,
    (i) if the Offeror Average Closing Price is greater than $50.74, a number of Mylan Shares per Meda share equal to SEK 165 divided by the Offeror Average Closing Price as converted from USD to SEK at the Announcement Exchange Rate;
    (ii) if the Offeror Average Closing Price is greater than $30.78 and less than or equal to $50.74, 0.386 Mylan Shares per Meda share; or
    (iii) if the Offeror Average Closing Price is less than or equal to $30.78, a number of Mylan Shares per Meda share equal to SEK 100 divided by the Offeror Average Closing Price as converted from USD to SEK at the Announcement Exchange Rate.

In short, each Meda shareholder will receive between SEK 152 and SEK 165 per Meda share in a combination of cash and Mylan Shares (based on the Announcement Exchange Rate).

If the aggregate number of Mylan Shares that otherwise would be required to be issued by Mylan as described above exceeds the Share Cap, then Mylan will have the option (in its sole discretion) to (a) issue Mylan Shares in connection with the Offer in excess of the Share Cap and thus pay the share portion of the Offer Consideration as described above (i.e. the 20 percent set out above), (b) increase the cash portion of the Offer Consideration (so that it becomes larger than the 80 percent set out above) and thus correspondingly decrease the share portion of the Offer Consideration (so that it becomes smaller than the 20 percent set out above) such that the aggregate number of Mylan Shares issuable by Mylan in connection with the Offer would equal the Share Cap or (c) execute a combination of the foregoing.

No commission will be charged by Mylan in the Offer. However, if a Meda shareholder’s shares are registered in the name of a nominee and the nominee charges a fee in connection with such Meda shareholder tendering such Meda shares, the shareholder will be responsible for the payment of any such fees.

The Offer does not include any share-based awards granted by Meda to its employees. Mylan intends to procure fair treatment in connection with the Transaction for holders of such share-based awards.

The Offer is subject to the terms and instructions, including the conditions for completion, of the Offer. For further information see “Terms, conditions and instructions.”

Dilution, etc.

Based on the assumptions described below, Mylan expects that approximately 28.2 million Mylan Shares will be issued in connection with the Offer and as a result Mylan shareholders will own, in the aggregate, approximately 95 percent of the outstanding Mylan Shares on a fully diluted basis immediately after completion of the Offer and former Meda shareholders will own, in the aggregate, approximately 5 percent of the outstanding Mylan Shares on a fully diluted basis immediately after completion of the Offer.

Mylan has assumed, solely for purposes of the calculations above, that:

 

  the number of Meda shares outstanding immediately prior to the completion of the Offer will be approximately 365.5 million;
  the number of Mylan Shares outstanding on a fully diluted basis immediately prior to the completion of the Offer will be approximately 515.3 million;
  Mylan will not adjust the Offer Consideration in the event the Share Cap is exceeded;
  the Offeror Average Closing Price will be between $30.78 and $50.74; and
  100 percent of the outstanding Meda shares will be tendered into the Offer.

The percentage of outstanding Mylan Shares former Meda shareholders would own following the completion of the Offer and a compulsory acquisition may be materially different from the percentages identified above if any of the assumptions set forth above change or prove to be incorrect.

If Mylan becomes the owner of more than 90 percent of the Meda shares, Mylan intends to initiate a compulsory

 

 

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acquisition procedure with respect to the remaining Meda shares in accordance with the Swedish Companies Act. Because shares acquired pursuant to compulsory acquisition procedure must be paid for in cash, holders of such Meda shares will not receive Mylan Shares as part of the consideration for their Meda shares, and former Meda shareholders will own in the aggregate a lower percentage of the outstanding Mylan Shares than they otherwise would have owned had all Meda shareholders tendered their shares into the Offer.

Similarly, if Mylan adjusts the Offer Consideration in the event the Share Cap is exceeded (by increasing the cash portion of the Offer Consideration and correspondingly decreasing the share portion of the Offer Consideration), former Meda shareholders will receive fewer Mylan Shares than they otherwise would have been delivered had Mylan not adjusted the Offer Consideration, and former Meda shareholders will own in the aggregate a lower percentage of the outstanding Mylan Shares than they otherwise would have owned had Mylan not adjusted the Offer Consideration.

Offer value and premium calculations

At announcement, the total enterprise value of the Offer for all Meda shares, including Meda net debt, was approximately SEK 83.6 billion or USD 9.9 billion, which represents a multiple of approximately 8.9x 2015 adjusted EBITDA with synergies.15 At announcement, the total equity value of the Offer was approximately SEK 60.3 billion or USD 7.2 billion.16

The Offer represented a premium at announcement of:

 

  approximately 9 percent compared to the 52-week intraday high of SEK 152.00 per Meda share on Nasdaq Stockholm on April 13, 2015 for the 52-week period up to and including February 10, 2016, the last trading day prior to the announcement of the Offer;
  approximately 68 percent compared to the 90 calendar day volume-weighted average share price of SEK 98.50 per Meda share on Nasdaq Stockholm, up to and including February 10, 2016, the last trading day prior to the announcement of the Offer; and
  approximately 92 percent compared to the closing share price of SEK 86.05 per Meda share on Nasdaq Stockholm on February 10, 2016, the last trading day prior to the announcement of the Offer.

Right to receive dividend

Mylan did not pay dividends in 2015, 2014 or 2013 and Mylan does not intend to pay dividends on the Mylan Shares in the near future. In the event that a dividend will be distributed, Mylan’s profits as they appear from the adopted annual accounts will be distributed as follows:

 

  first, if preferred shares in Mylan’s capital are outstanding, a dividend is distributed to those preferred shares in accordance with the Mylan Articles;
  second, the Mylan Board will determine which part of the profits remaining after such distribution on the preferred shares, if applicable, will be reserved; and
  third, to the extent not distributed as a dividend in respect of Mylan’s preferred shares and/or reserved as described above, the profits will be available for distribution to holders of Mylan Shares, provided that any such distribution must be authorized by the Mylan Board.

Interim dividends may be declared as provided in the Mylan Articles and may be distributed to the extent that the shareholders’ equity exceeds the amount of the paid-up and called-up part of the issued share capital and the required legal reserves as described above as apparent from interim financial statements prepared in accordance with Dutch law.

Should at some future date a dividend be paid, the Mylan Shares issued in connection with the Offer would be entitled to such dividend, provided that the record date for such dividend occurs after the settlement of the Offer.

Mylan’s shareholdings in Meda

As of the date of this Offer Document, Mylan does not hold any Meda shares or any financial instruments that give financial exposure to Meda shares, nor has Mylan acquired or agreed to acquire any Meda shares or any financial instruments that give financial exposure to Meda shares during the six months preceding the announcement of the Offer.

Acceptance period

The acceptance period for the Offer runs from and including June 17, 2016 up to and including July 29, 2016. Settlement will begin as soon as practicable after Mylan has announced that the terms of the Offer have been fulfilled, or otherwise decided to complete the

 

 

 

15 The total Offer enterprise value (including Meda net debt) of approximately SEK 83.6 billion or USD 9.9 billion is based on (1) a Mylan Share closing price of USD 50.74 as of February 9, 2016 (the latest practicable trading day for Mylan Shares prior to the announcement of the Offer), (2) the Announcement Exchange Rate, (3) 365,467,371 outstanding Meda shares (the number of outstanding Meda shares as of both the date of the announcement of the Offer and the most recent trading day prior to the date of this Offer Document) and (4) net debt of Meda of SEK 23.3 billion as of December 31, 2015.
16  The total Offer equity value of approximately SEK 60.3 billion or USD 7.2 billion is based on (1) a Mylan Share closing price of USD 50.74 as of February 9, 2016 (the latest practicable trading day for Mylan Shares prior to the announcement of the Offer), (2) the Announcement Exchange Rate and (3) 365,467,371 outstanding Meda shares (the number of outstanding Meda shares as of both the date of the announcement of the Offer and the most recent trading day prior to the date of this Offer Document).

 

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Offer. Provided that such announcement is made at the latest on August 3, 2016, settlement is expected to commence around August 10, 2016. Mylan reserves the right to extend the acceptance period and, to the extent necessary and permissible, will do so in order for the acceptance period to cover applicable decision-making procedures at relevant authorities. Mylan also reserves the right to postpone the settlement date.

Mylan will announce any extension of the acceptance period and/or postponement of the settlement date by a press release in accordance with applicable laws and regulations. For further information see “Terms, conditions and instructions.”

Board recommendation

On February 10, 2016, the Meda Board unanimously recommended that Meda shareholders accept the Offer.

Since each of Stena and Fidim has entered into an undertaking to tender its Meda shares in the Offer and a related shareholder agreement (see “–Undertakings to accept the Offer and shareholder agreements” below), Meda Board members Martin Svalstedt, Luca Rovati, Peter Claesson and Lars Westerberg did not participate in the Meda Board’s decision to recommend the Offer. The other Meda Board members who did participate in such decision unanimously recommended the Offer.

In connection with the Offer, Meda’s financial advisor, SEB Corporate Finance, Skandinaviska Enskilda Banken AB (“SEB Corporate Finance”), delivered a written opinion, dated February 10, 2016, to the Meda Board as to the fairness, from a financial point of view and as of such date, of the Offer Consideration to be received in the Offer by shareholders of Meda. The full text of SEB Corporate Finance’s written opinion, dated February 10, 2016, which describes the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, can be found on page 77 in this Offer Document and is incorporated herein by reference. The description of SEB Corporate Finance’s opinion is qualified in its entirety by reference to the full text of SEB Corporate Finance’s opinion.

The Meda Board’s recommendation announced on February 10, 2016 can be found on page 68 in this Offer Document.

Undertakings to accept the Offer and shareholder agreements

Undertakings to accept the Offer

Mylan has received irrevocable undertakings to accept the Offer from (1) Stena in respect of 75,652,948 Meda shares, representing approximately 21 percent of the

outstanding shares and votes of Meda, and (2) Fidim in respect of 33,016,286 Meda shares, representing approximately 9 percent of the outstanding shares and votes of Meda. The irrevocable undertakings given by Stena and Fidim relate to their entire respective holdings of Meda shares. Each of Stena and Fidim has undertaken to accept the Offer no later than five business days prior to the expiry of the initial acceptance period for the Offer. The irrevocable undertakings given by Stena and Fidim shall be terminated if (i) a third party, prior to the Offer having been declared unconditional, makes a public offer to acquire all outstanding Meda shares at an offer value exceeding the value of the Offer by more than SEK 15 per share of Meda, (ii) the Offer is withdrawn, (iii) the Offer is not declared unconditional on or before February 10, 2017 or (iv) Mylan commits a material breach of applicable laws and regulations relating to the Offer.

Shareholder agreements

Each of Stena and Fidim has entered into a shareholder agreement with Mylan. Each shareholder agreement imposes certain restrictions on Stena and Fidim, as applicable, including prohibiting transfers of Mylan Shares to competitors of Mylan and to activist investors (as defined in each such shareholder agreement), as well as certain customary standstill limitations. Each shareholder agreement also imposes non-competition, non-solicitation and non-hire restrictions on the applicable shareholder for a period of 24 months after the Offer is declared unconditional. Each of Stena and Fidim has agreed pursuant to its applicable shareholder agreement to vote its Mylan Shares in accordance with the recommendation of the Mylan Board in the period up to and including the 180th day following settlement of the Offer and not vote its Mylan Shares against the recommendation of the Mylan Board in the period after the 180th day following settlement of the Offer, in each case subject to certain exceptions relating to significant corporate transactions. Each of Stena and Fidim has also agreed not to dispose of any Mylan Shares that it owns to any third party during the period up to and including the 180th day following the settlement of the Offer.

Financing of the Offer

The aggregate cash consideration payable in the Offer for all Meda shares will be approximately SEK 48.2 billion (USD 5.7 billion).17 The cash portion of the Offer Consideration will be financed by a portion of the proceeds from the offering of the New June 2016 Senior Notes. The terms of the New June 2016 Senior Notes are described under “Information about Mylan—Liquidity and capital resources.”

 

 

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17  Based on (1) the Announcement Exchange Rate, (2) 365,467,371 outstanding Meda shares (the number of outstanding Meda shares as of both the date of the announcement of the Offer and the most recent trading day prior to the date of this Offer Document) and (3) 80 percent of the total Offer Consideration being paid in cash.


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Approvals from authorities

Mylan’s obligation to consummate the Offer is subject to the receipt of all necessary regulatory, governmental or similar clearances, approvals and decisions, including from competition authorities, in each case on terms which, in Mylan’s opinion, are acceptable. However, pursuant to the Takeover Rules, Mylan is only permitted to withdraw the Offer on the basis of actions required to be taken to obtain regulatory, governmental or similar clearances if such actions are of material importance to Mylan’s acquisition of Meda.

On February 29, 2016, Mylan filed the requisite notification and report form with the Federal Trade Commission and the Antitrust Division of the Department of Justice in the U.S. On March 1, 2016, Meda filed the requisite notification and report form with the Federal Trade Commission and the Antitrust Division of the Department of Justice in the U.S. On May 20, 2016, Mylan filed a formal antitrust notification with the Federal Antimonopoly Service in Russia. On May 23, 2016, Mylan filed a formal antitrust notification with the Turkish Competition Authority, and on June 9, 2016 the Turkish Competition Authority unconditionally approved Mylan’s acquisition of Meda. On June 1, 2016, Mylan filed a formal antitrust notification with the Commission in the EU.

Mylan will obtain the relevant approvals, or the applicable waiting periods will have expired, under the antitrust and competition laws of the countries where filings or approvals are required prior to the completion of the Offer. Mylan cannot assure you that a challenge to the completion of the Offer will not be made or that, if a challenge is made, it will not succeed.

Due diligence

Mylan has conducted a limited confirmatory due diligence review of certain business, financial and legal information relating to Meda in connection with the preparation of the Offer. Meda has advised Mylan that, other than (a) certain unaudited internal budget information prepared by Meda’s management that was included in the recommendation of the Offer by the Board of Directors of Meda published by Meda on February 10, 2016 and (b) the year-end 2015 results earnings release that also was published by Meda on February 10, 2016 in connection with the publication of the recommendation of the Offer by the Meda Board, Mylan has not received any information which has not been previously disclosed and which could reasonably be expected to affect the price of Meda shares in connection with the due diligence review.

Statement from the Swedish Securities Council

The Swedish Securities Council (Sw. Aktiemarknadsnämnden) (the Takeover Panel) has approved an extension of the period for preparing and filing this Offer Document with the SFSA from four weeks after the announcement of the Offer to eight weeks after such date. The reasons for the extension are the time- consuming process of preparing pro forma financial statements and that Mylan has certain filing requirements with the SEC (see ruling AMN 2016:02). Mylan may request an additional extension if necessary.

Proceeds and expenses

As the Mylan Shares to be issued in connection with the Offer (plus cash consideration) will be exchanged for the outstanding Meda shares, there will be no proceeds received by Mylan as a result of the Offer. The total estimated transaction costs expected to be incurred in connection with the Transaction are approximately $153.0 million. Of that total, approximately $119.7 million of transaction costs are expected to be incurred by Mylan and approximately $33.3 million are expected to be incurred by Meda. Transaction costs include investment banking, advisory, legal, valuation, Bridge Credit Facility fees and other professional fees necessary to complete the Transaction.

Applicable law and disputes

The Offer shall be governed by and construed in all respects in accordance with the substantive laws of Sweden, without regard to any conflict of law principles leading to the application of the laws of any other jurisdiction. Any dispute regarding the Offer, or which arises in connection therewith, shall be exclusively settled by Swedish courts, and the City Court of Stockholm (Sw. Stockholms tingsrätt) shall be the court of first instance.

The Takeover Rules and the Swedish Securities Council’s (Sw. Aktiemarknadsnämnden) rulings and statements on the interpretation and application of the Takeover Rules are applicable to the Offer. Furthermore, Mylan has, in accordance with the Swedish Takeover Act (Sw. lagen om offentliga uppköpserbjudanden på aktiemarknaden), on February 5, 2016, contractually undertaken towards Nasdaq Stockholm to comply with the Takeover Rules and to submit to any sanctions that can be imposed on Mylan by Nasdaq Stockholm in the event of a breach of the Takeover Rules. On February 10, 2016, Mylan informed the SFSA of the commitment to Nasdaq Stockholm. The AFM will be requested to provide the UK Financial Conduct Authority, the Danish Financial Supervision Authority and the Central Bank of Ireland with a certificate of approval attesting that the EU Prospectus has been drawn up in accordance with Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003, as amended.

 

 

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Background and reasons

Mylan believes the Transaction has a compelling strategic fit. In an environment where scale and reach are becoming increasingly important, a combination of Mylan and Meda will create a platform for sustainable, long-term growth:

 

  The Combined Company will be a global pharmaceutical leader that is even more diversified and has a stronger presence across geographies, therapeutic categories and channels and enhanced breadth, scale and diversity to drive durable growth for the long term.
  Following completion of the Transaction, the Combined Company will have an enhanced financial profile with approximately USD 11.8 billion in combined 2015 sales, approximately $1.2 billion in combined 2015 operating income and combined 2015 adjusted EBITDA of approximately USD 3.8 billion.18
  The Combined Company will have a balanced portfolio of more than 2,000 products across the branded/specialty, generics and OTC segments, sold in more than 165 markets around the world.
  The Transaction will build on Mylan’s recent acquisition of the EPD Business to create an unparalleled European platform for growth - one that is well-positioned to succeed in this dynamic and challenging region. The Transaction also consolidates EpiPen® Auto-Injector in Europe, providing greater opportunities to build the brand in this region.
  The Transaction delivers on Mylan’s long-stated commitment to develop a substantial presence in the OTC segment, by creating an approximately USD 1 billion global OTC business at close.
  Mylan’s and Meda’s complementary therapeutic presence will create a scale player in respiratory / allergy, dermatology and pain products, providing greater opportunities for growth in these areas and maximizing the potential of future product launches.
  By offering one of the industry’s broadest portfolios of products across all customer channels (e.g., specialty, generics and OTC), the Combined Company will be well-positioned to deliver greater value to customers,
   

which is increasingly important in light of the evolving payor and distributor environment. The combined portfolio will be supported by an expansive global commercial infrastructure, with sales representatives operating in 60 countries. The Combined Company will retain significant control over its supply chain, operating one of the industry’s most extensive and highest-quality manufacturing and research and development platforms with approximately 60 facilities.

  Substantial pre-tax annual operational synergies of approximately $350 million by year four after completion of the Offer are expected to be realized as a result of savings associated with integration and optimization across cost components and functions, and through leveraging opportunities of the combined commercial platform. Components of these synergies include: (1) optimization of the combined commercial platform, (2) optimization of cost of goods sold (“COGS”) through world-class supply chain, vertical integration and global sourcing excellence, (3) elimination of redundant general and administrative costs, including public company costs, and (4) cross-fertilization opportunities of the combined product portfolio.
  Although the Transaction is not expected to be immediately accretive on a U.S. GAAP basis, the Transaction is expected to be immediately accretive to Mylan adjusted earnings, with accretion to adjusted earnings increasing significantly after the first full year (2017) as synergies are realized. While Mylan has not forecasted the accretion/dilution opportunity for 2017 U.S. GAAP diluted EPS due primarily to the difficulty and uncertainty of making accurate and detailed forecasts for a financial period that has not yet commenced and projections of purchase accounting-related amounts and that the historical financial statements of Meda are not prepared on a U.S. GAAP basis, on an adjusted basis the transaction creates an opportunity to achieve $0.35 to $0.40 adjusted diluted EPS accretion in 2017 and to accelerate achievement of Mylan’s previously stated $6.00 in adjusted diluted EPS target in 2017 versus 2018.19
 

 

 

18  Combined company figures are unaudited and represent an aggregation of Mylan figures derived from financial information prepared in accordance with U.S. GAAP and Meda figures derived from financial information prepared in accordance with IFRS as adopted by the EU and do not reflect pro forma adjustments (including no elimination of transactions between Mylan and Meda). See Appendix I to this Offer Document for a quantitative reconciliation of the stated historical non-GAAP measure, combined 2015 adjusted EBITDA of approximately $3.8 billion, to the most directly comparable U.S. GAAP and IFRS measures, 2015 U.S. GAAP net earnings attributable to Mylan N.V. and Meda’s 2015 IFRS operating profit.
19  See Appendix I of this Offer Document for qualitative reconciliations of the stated forward-looking non-GAAP measures, pro forma adjusted earnings and 2017 adjusted diluted EPS accretion attributable to the Transaction, to their most directly comparable U.S. GAAP measures, U.S. GAAP net earnings attributable to Mylan N.V. and U.S. GAAP diluted earnings per share, respectively.

 

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  While Mylan has not forecasted a pro forma U.S. GAAP leverage ratio at closing due primarily to the difficulty of estimating debt levels for both Mylan and Meda at closing due to uncertainty regarding the impact of other potential acquisition activity and the timing of closing and that the historical financial statements of Meda are not prepared on a U.S. GAAP basis, on an adjusted basis, Mylan’s pro forma leverage at close is expected to be approximately 3.8x debt-to-adjusted EBITDA. Based upon historical levels of operating cash flow for Mylan and Meda, the Combined Company is expected to generate significant operating cash flow on a U.S. GAAP basis and the significant adjusted free cash flows generated by the Combined Company will allow for rapid deleveraging.20 As a result, Mylan will retain ample financial flexibility to pursue additional external opportunities.

Mylan believes that the Offer is compelling given that:

  the Offer Consideration represents a meaningful premium for Meda shareholders;
  at announcement, the total enterprise value of the Offer for all Meda shares, including Meda net debt,
   

was approximately SEK 83.6 billion or USD 9.9 billion, which represents a multiple of approximately 8.9x 2015 adjusted EBITDA with synergies;21

  if the Offer is completed, Meda shareholders will become shareholders of Mylan, which has a clear track record of creating shareholder value, with an annualized five year total shareholder return of approximately 20.7 percent,22 and
  the Offer is fully financed and not conditional on further due diligence.

In addition to the compelling value to shareholders, the acquisition of Meda by Mylan would offer substantial benefits to the other stakeholders of both companies. For example, the combination would provide a broader variety of opportunities to employees. The position of creditors, customers and suppliers would also be enhanced by the Combined Company’s scale and significant cash flows, and patients would receive improved access to high-quality medicine through increased scale across geographies and robust capabilities to drive innovation.

 

 

 

20  See Appendix I of this Offer Document for qualitative reconciliations of the stated forward-looking non-GAAP financial measures, pro forma leverage at close of 3.8x debt-to-adjusted EBITDA and pro forma adjusted free cash flow, to the most directly comparable U.S. GAAP measures, pro forma U.S. GAAP debt to pro forma last twelve months (“LTM”) U.S. GAAP net earnings attributable to Mylan N.V. at close and U.S. GAAP net cash provided by operating activities, respectively.
21  The total Offer enterprise value (including Meda net debt) of approximately SEK 83.6 billion or USD 9.9 billion is based on (1) a Mylan Share closing price of USD 50.74 as of February 9, 2016 (the latest practicable trading day for Mylan Shares prior to the announcement of the Offer), (2) the Announcement Exchange Rate, (3) 365,467,371 outstanding Meda shares (the number of outstanding Meda shares as of both the date of the announcement of the Offer and the most recent trading day prior to the date of this Offer Document) and (4) net debt of Meda of SEK 23.3 billion as of December 31, 2015.
22  Total shareholder return data is from Bloomberg and reflects total return (including price appreciation and reinvested dividends) as of December 31, 2015.

 

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Terms, conditions and instructions

The Offer

Each Meda shareholder who validly tenders and does not properly withdraw prior to the Offer being declared unconditional will receive:

 

  in respect of 80 percent of the number of Meda shares tendered by such shareholder, SEK 165 in cash per Meda share; and
  in respect of the remaining 20 percent of the number of Meda shares tendered by such shareholder,
    (i) if the Offeror Average Closing Price23 is greater than $50.74, a number of Mylan Shares per Meda share equal to SEK 165 divided by the Offeror Average Closing Price as converted from USD to SEK at the Announcement Exchange Rate;
    (ii) if the Offeror Average Closing Price is greater than $30.78 and less than or equal to $50.74, 0.386 Mylan Shares per Meda share; or
    (iii) if the Offeror Average Closing Price is less than or equal to $30.78, a number of Mylan Shares per Meda share equal to SEK 100 divided by the Offeror Average Closing Price as converted from USD to SEK at the Announcement Exchange Rate.

In short, each Meda shareholder will receive between SEK 152 and SEK 165 per Meda share (based on the Announcement Exchange Rate) in a combination of cash and Mylan Shares.

The table below sets forth illustrative examples of the Offer Consideration that Meda shareholders will receive in exchange for 100 Meda shares at different Offeror Average Closing Prices (subject to the treatment of fractional shares described in the section entitled “—Excess shares, etc.”):

 

 

Offeror Average Closing
Price (USD)

  

Cash Consideration
(SEK)(1)

  

Number of
Mylan Shares(2)

  

Equivalent Value of
Share
 Consideration 
(SEK)(3)

  

Total Consideration

(SEK)(4)

  

Average Total
Consideration Per
Meda

Share (SEK)(5)

60.00

   13,200.00    6.54    3,300.00    16,500.00    165.00

55.00

   13,200.00    7.13    3,300.00    16,500.00    165.00

50.00

   13,200.00    7.72    3,248.50    16,448.50    164.48

45.00

   13,200.00    7.72    2,923.65    16,123.65    161.24

40.00

   13,200.00    7.72    2,598.80    15,798.80    157.99

35.00

   13,200.00    7.72    2,273.95    15,473.95    154.74

30.00(6)

   13,200.00    7.92    2,000.00    15,200.00    152.00

25.00(6)

   13,200.00    9.51    2,000.00    15,200.00    152.00

 

(1) Calculated as the product of (i) 80 Meda shares and (ii) SEK 165.
(2) Calculated as the product of (i) 20 Meda shares and (ii) the applicable number of Mylan Shares per Meda share at the stated Offeror Average Closing Price.
(3) Calculated as the product of (i) the number of Mylan Shares, (ii) the Offeror Average Closing Price and (iii) the Announcement Exchange Rate.
(4) Calculated as the sum of (i) the Cash Consideration and (ii) the Equivalent Value of Share Consideration.
(5) Calculated as the quotient of (i) the Total Consideration and (ii) 100 Meda shares.
(6) Based on 365,467,371 outstanding Meda shares (the number of outstanding Meda shares as of the most recent trading day prior to the date of this Offer Document), the Share Cap would be exceeded at this Offeror Average Closing Price (assuming that 100 percent of the outstanding Meda shares will be tendered into the Offer). The figures shown assume that Mylan does not adjust the Offer Consideration.

 

Offer Consideration adjustments, etc.

Adjustments relating to the Share Cap

If the aggregate number of Mylan Shares that otherwise would be required to be issued by Mylan as described above exceeds the Share Cap, then Mylan will have the option (in its sole discretion) to (a) issue Mylan Shares in connection with the Offer in excess of the Share Cap and thus pay the share portion of the Offer Consideration as described above (i.e. the 20 percent set out above), (b)

increase the cash portion of the Offer Consideration (so that it becomes larger than the 80 percent set out above) and thus correspondingly decrease the share portion of the Offer Consideration (so that it becomes smaller than the 20 percent set out above) such that the aggregate number of Mylan Shares issuable by Mylan in connection with the Offer would equal the Share Cap or (c) execute a combination of the foregoing.

 

 

 

23  The volume-weighted average sale price per Mylan Share on NASDAQ for the 20 consecutive trading days ending on and including the second trading day prior to the Offer being declared unconditional.

 

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The table below sets forth illustrative examples of the Offer Consideration that Meda shareholders will receive in exchange for 100 Meda shares at different Offeror Average Closing Prices if Mylan elects to adjust the Offer

Consideration in the event the Share Cap is exceeded (subject to the treatment of fractional shares described below):

 

 

Offeror Average Closing
Price (USD)

  

Cash Consideration
(SEK)(1)

  

Number of
Mylan Shares

  

Equivalent Value of
Share
 Consideration 
(SEK)(2)

  

Total Consideration

(SEK)(3)

  

Average Total
Consideration Per
Meda Share (SEK)(4)

30.00(5)

   13,200.00    7.92(6)    2,000.00    15,200.00    152.00

30.00(5)

   13,250.90    7.72(7)    1,949.10    15,200.00    152.00

30.00(5)

   13,225.45    7.82(8)    1,974.55    15,200.00    152.00

25.00(5)

   13,200.00    9.51(6)    2,000.00    15,200.00    152.00

25.00(5)

   13,575.75    7.72(7)    1,624.25    15,200.00    152.00

25.00(5)

   13,387.88    8.61(8)    1,812.12    15,200.00    152.00

 

(1) Calculated as the difference between (i) the Total Consideration and (ii) the Equivalent Value of Share Consideration.
(2) Calculated as the product of (i) the number of Mylan Shares, (ii) the Offeror Average Closing Price and (iii) the Announcement Exchange Rate.
(3) Equals the applicable Total Consideration in the table of illustrative examples set forth immediately above.
(4) Calculated as the quotient of (i) the Total Consideration and (ii) 100 Meda shares.
(5) Based on 365,467,371 outstanding Meda shares (the number of outstanding Meda shares as of the most recent trading day prior to the date of this Offer Document), the Share Cap would be exceeded at this Offeror Average Closing Price (assuming that 100 percent of the outstanding Meda shares will be tendered into the Offer).
(6) Assumes that Mylan issues Mylan Shares in excess of the Share Cap and thus pays the share portion of the Offer Consideration as described above with no adjustments.
(7) Assumes that Mylan increases the cash portion of the Offer Consideration and thus correspondingly decreases the share portion of the Offer Consideration such that the aggregate number of Mylan Shares issuable by Mylan in connection with the Offer would equal the Share Cap.
(8) Assumes that Mylan increases the cash portion of the Offer Consideration and thus correspondingly decreases the share portion of the Offer Consideration such that 50 percent of the Mylan Shares that would otherwise be issuable by Mylan in excess of the Share Cap are paid in cash.

 

Adjustments relating to dividends

If Meda pays dividends or makes any other distributions to its shareholders with a record date occurring prior to the settlement of the Offer, or issues new shares (or takes any similar corporate action) resulting in a reduction of the value per share in Meda prior to the settlement of the Offer, the Offer Consideration will be reduced accordingly. The reduction shall first be made against the cash portion of the Offer Consideration. Mylan reserves the right to determine whether this price adjustment mechanism or the condition to the completion of the Offer requiring Meda to not take any action that is likely to impair the prerequisites for making or completing the Offer shall be invoked. Notwithstanding the foregoing in this paragraph, Meda will be permitted to pay in 2016 its regular annual cash dividend in respect of Meda shares not exceeding SEK 2.50 per Meda share, with declaration, record and payment dates consistent with past practice, and such regular annual cash dividend shall not reduce the Offer Consideration. Meda declared its regular annual dividend of SEK 2.50 per Meda share on April 14, 2016.

Conditions for completion of the Offer

The Offer is subject to the following conditions:

 

(i) the Offer being accepted to such an extent that Mylan becomes the owner of shares in Meda representing more than 90 percent of the total number of shares of Meda;
(ii) Mylan’s Registration Statement on Form S-4 in the United States, which will register the issuance of the Mylan Shares in the Offer, becoming effective
  under the Securities Act and not being the subject of any stop order or proceeding seeking a stop order by the SEC;
(iii) the Mylan Shares to be issued in connection with the Offer being approved for listing on NASDAQ in the United States and the TASE in Israel;
(iv) with respect to the Offer and the acquisition of Meda, receipt of all necessary regulatory, governmental or similar clearances, approvals and decisions, including from competition authorities, in each case on terms which, in Mylan’s opinion, are acceptable;
(v) no circumstances having occurred which could have a material adverse effect or could reasonably be expected to have a material adverse effect on Meda’s financial position or operation, including Meda’s sales, results, liquidity, equity ratio, equity or assets;
(vi) neither the Offer nor the acquisition of Meda being rendered wholly or partially impossible or significantly impeded as a result of legislation or other regulation, any decision of a court or public authority, or any similar circumstance;
(vii) Meda not taking any action that is likely to impair the prerequisites for making or completing the Offer;
(viii) no information made public by Meda or disclosed by Meda to Mylan being materially inaccurate, incomplete or misleading, and Meda having made public all information which should have been made public by it; and
(ix) no other party announcing an offer to acquire shares in Meda on terms more favorable to the shareholders of Meda than the Offer.
 

 

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Mylan reserves the right to withdraw the Offer in the event it becomes clear that any of the above conditions is not satisfied or cannot be satisfied. With regard to conditions (ii) – (ix), however, such withdrawal will only be made to the extent permitted by applicable law if the non-satisfaction is of material importance to Mylan’s acquisition of the shares in Meda.

Mylan reserves the right to waive, in whole or in part, one or more of the conditions above, including, with respect to condition (i) above, to complete the Offer at a lower level of acceptance.

Acceptance

Shareholders in Meda whose shares are directly registered with Euroclear and who wish to accept the Offer must, during the period from and including June 17, 2016 up to and including July 29, 2016, at 17.00 CET, sign and submit a duly completed acceptance form to:

Handelsbanken Capital Markets, Issue department (“Handelsbanken”), at the address stated on the acceptance form.

The acceptance form must be submitted to any Handelsbanken office or sent by mail to Handelsbanken, preferably using the enclosed pre-paid envelope, well in advance of the last day of the acceptance period so that it may be received, in original, by Handelsbanken no later than 17.00 CET on July 29, 2016. The acceptance form may also be handed in at bank offices or delivered to other securities institutions in Sweden to be forwarded to Handelsbanken, provided that the acceptance form is handed in or delivered well in advance of the last day of the acceptance period so that it may be received, in original, by Handelsbanken no later than 17.00 CET on July 29, 2016.

This Offer Document, the pre-printed acceptance form and a self-addressed envelope will be mailed to all directly registered holders of Meda shares. The securities account (Sw. VP-konto) and the current number of shares held in Meda will be pre-printed on the acceptance form. All shareholders should verify that the pre-printed information on the acceptance form is correct. Shareholders who are included on the list of pledges and trustees will not receive an acceptance form, but will be notified separately.

Please note that acceptance forms which are incomplete or incorrectly completed may be disregarded. No changes may be made to the text on the pre-printed acceptance form.

Shareholders of Meda accepting the Offer authorize and instruct Handelsbanken to subscribe for new Mylan Shares on their behalf and to deliver shares in Meda to Mylan in exchange for Mylan Shares and cash in accordance with the terms and conditions for the Offer.

Nominee registered holdings

Shareholders in Meda whose holdings are registered in the name of a nominee, i.e., a broker, dealer, bank, trust company or other nominee, will receive neither this Offer Document nor a pre-printed acceptance form from Mylan, although Mylan will make copies of the Offer Document available to the nominees of such shareholders to be made available upon request. Acceptances must be made in accordance with instructions received by such shareholder’s nominee.

Pledged shares

If shares in Meda are pledged in the Euroclear system, both the shareholder and the pledgee must sign the acceptance form and confirm that the pledge will cease to exist if the Offer is completed.

Offer Document and acceptance form

This Offer Document and the acceptance form will be available for download in electronic form on the following websites: the Transaction website (medatransaction.mylan.com), the Handelsbanken website (www.handelsbanken.se/investeringserbjudande) and the SFSA website (www.fi.se) (Offer Document only).

Confirmation regarding acceptance

After Handelsbanken has received and registered a duly completed and signed acceptance form, the shares in Meda to which such acceptance form relates will be transferred to a new blocked securities account which has been opened for each shareholder in Meda (Sw. Apportkonto). In connection therewith, Euroclear will send a statement (Sw. VP-avi) showing the withdrawal of shares in Meda from the original securities account and a statement showing the number of shares in Meda that have been entered in the newly opened blocked securities account.

Settlement

Settlement will begin as soon as practicable after Mylan has declared the Offer unconditional, or otherwise decided to complete the Offer. Provided that such announcement is made at the latest on August 3, 2016, settlement is expected to commence around August 10, 2016. Mylan reserves the right to extend the acceptance period and, to the extent necessary and permissible, will do so in order for the acceptance period to cover applicable decision-making procedures at relevant authorities. Mylan also reserves the right to postpone the settlement date. Mylan will announce any extension of the acceptance period and/or postponement of the settlement date by a press release in accordance with applicable laws and regulations.

 

 

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Settlement of consideration is performed by sending a contract note to the shareholders who have accepted the Offer. The cash settlement amount will be paid to the yield account that is connected to the shareholder’s securities account. Shareholders in Meda who do not have a yield account connected to their securities account or whose yield account is a “PlusGiro” account will receive the cash settlement amount in accordance with the instructions on the contract note. The newly issued Mylan Shares will be delivered to the securities account indicated on the acceptance form. In connection with this delivery, the shareholder will be sent a statement that reports the registration of the newly issued Mylan Shares on the securities account. No statement of the de-registration of the Meda shares from the blocked securities account will be sent. Please note that even if the shares in Meda are pledged, the payment of cash and the delivery of newly issued Mylan Shares will be made in accordance with the above.

For each Meda shareholder whose Meda shares are registered with a nominee, settlement will be made in accordance with the policies and practices of such nominee.

Right to extend the Offer

The acceptance period for the Offer runs from and including June 17, 2016 up to and including July 29, 2016.

Mylan reserves the right to extend the acceptance period and, to the extent necessary and permissible, will do so in order for the acceptance period to cover applicable decision-making procedures at relevant authorities. Mylan also reserves the right to postpone the settlement date. Mylan will announce any extension of the acceptance period and/or postponement of the settlement date by a press release in accordance with applicable laws and regulations.

Right to withdraw acceptance

Shareholders in Meda have the right to withdraw their acceptances of the Offer as described below. To be valid, such withdrawal must have been received in writing by Handelsbanken (address: Handelsbanken Capital Markets, HCXS-O/Issue Department, SE-106 70 Stockholm, Sweden) before Mylan has announced that the conditions for the completion of the Offer have been satisfied or, if such announcement has not been made during the acceptance period, by 17.00 (CET) on the last day of the acceptance period. If any conditions for the completion of the Offer, which Mylan has reserved the right to waive, continue to apply during an extension of the Offer, the right to withdraw an acceptance will apply in the same manner throughout any such extension of the Offer. Meda shareholders whose shares are nominee registered wishing to withdraw acceptance shall do so in accordance with instructions from the nominee.

Excess shares, etc.

For each directly registered Meda shareholder, the total number of Meda shares tendered by such shareholder will be multiplied by 0.20 (subject to adjustment in the event Mylan adjusts the Offer Consideration if the Share Cap is exceeded). The number of Meda shares resulting from the multiplication will be rounded up to the nearest whole Meda share and tendered in exchange for Mylan Shares. The remaining number of Meda shares that such shareholder tendered will be rounded down to the nearest whole Meda share and tendered in exchange for cash. The Offer can be accepted for each Meda shareholder’s entire holding of Meda shares, even if such Meda shares do not correspond to a whole number of Mylan Shares.

Only whole Mylan Shares will be delivered to Meda shareholders who accept the Offer. If a directly registered Meda shareholder would otherwise be entitled to a fraction of a Mylan Share, such fraction will be aggregated with the fractions of Mylan Shares to which other directly registered Meda shareholders would otherwise be entitled and sold by Handelsbanken on NASDAQ on behalf of such shareholders. The proceeds of such sales will be converted from USD to SEK, rounded to the nearest SEK 0.50, and distributed as promptly as practicable following settlement of the Offer to such shareholders based on the fraction of a Mylan Share to which each such shareholder would otherwise be entitled. There will be no commission fee for such sales. By accepting the Offer, each accepting Meda shareholder authorizes Handelsbanken to sell any such fraction on its behalf and convert the proceeds of such sale from USD to SEK. For each Meda shareholder whose Meda shares are registered with a nominee, any fraction of a Mylan Share to which such Meda shareholder would otherwise be entitled will be treated in accordance with the policies and practices of such nominee.

Listing of and trading in Mylan Shares

Mylan intends to apply to list the Mylan Shares to be issued in connection with the Offer on NASDAQ and on the TASE, in each case under the ticker symbol “MYL.” Mylan does not intend to apply to list the Mylan Shares to be issued in connection with the Offer on Nasdaq Stockholm. After the completion of the Offer, information regarding the Combined Company will primarily be disseminated in English. The CUSIP (Committee on Uniform Securities Identification Procedures) number for the Mylan Shares is N59465109. The ISIN code is NL0011031208.

The Mylan Shares to be issued in connection with the Offer will be registered with Euroclear, which means that Euroclear, not The Depository Trust Company (“DTC”) (the central securities depository for the other outstanding

 

 

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Mylan Shares), will be the central securities depository for such Mylan Shares. Shareholders in Meda receiving Mylan Shares in connection with the Offer will need to re-register their Euroclear-registered Mylan shares with DTC in order to trade such shares on NASDAQ in the United States or TASE in Israel. Meda shareholders should contact their banks or brokers for further information regarding re-registrations and how acquisitions or transfers of Mylan Shares registered by Euroclear are executed on NASDAQ in the United States and the TASE in Israel. For further information see also “Risk Factors Related to Mylan and the Offer—The primary listing of the Mylan Shares is in the U.S. which may expose non-U.S. shareholders to additional risks.

Mylan Shares delivered in connection with the Offer are expected to be eligible for trading on NASDAQ in the United States and the TASE in Israel on the first trading day after settlement of the Offer, which is expected to occur on or around August 10, 2016.

Compulsory acquisition of the shares in Meda and delisting

If Mylan becomes the owner of more than 90 percent of the Meda shares, Mylan intends to initiate a compulsory acquisition procedure with respect to the remaining Meda shares in accordance with the Swedish Companies Act. The purchase price for Meda shares acquired pursuant to the compulsory acquisition procedure will be determined by an arbitration tribunal. Such purchase price must be paid in cash and will include statutory interest accruing from the date the compulsory acquisition procedure is initiated. After initiating the compulsory acquisition procedure, Mylan will have the opportunity to obtain advance title to the minority Meda shares prior to the arbitration tribunal determining the purchase price for such Meda shares, which means that full ownership is obtained by Mylan with respect to the remaining Meda shares before the arbitration proceedings regarding the consideration have been completed. If advance title to the Meda shares is obtained by Mylan, the arbitration tribunal may issue a separate award with respect to that portion of the purchase price that is not disputed by Mylan. In that case, Mylan would be obliged to pay such portion prior to the final arbitration award.

If Mylan becomes the owner of more than 90 percent of the Meda shares, Mylan intends to promote the delisting of the Meda shares from Nasdaq Stockholm.

Other information

Handelsbanken acts as settlement agent in relation to the Offer, which means that it performs certain administrative services relating to the Offer. This does not mean that a person who accepts the Offer (a

Participant”) will be automatically regarded as a customer of Handelsbanken. A Participant will be regarded as a customer only if Handelsbanken has provided advice to the Participant or has otherwise contacted the Participant personally regarding the Offer. If a Participant is not regarded as a customer, the rules regarding the protection of investors pursuant to the Swedish Securities Market Act (Sw. lag (2007:528) om värdepappersmarknaden) will not be applicable to the acceptance. This means, among other things, that neither customer categorization nor the appropriateness test will be performed with respect to the Offer. Each Participant is therefore responsible for ensuring that it has sufficient experience and knowledge to understand the risks associated with the Offer.

Questions regarding the Offer

For questions regarding the Offer, please contact Mylan at +1 (724) 514-1813 or investor.relations@mylan.com or the Handelsbanken shareholder service at +46 (0) 480-404 110 or handelsbanken@answeronline.se. Information is also available on the Handelsbanken website at www.handelsbanken.se/investeringserbjudande and the Transaction website at medatransaction.mylan.com.

 

 

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Statement by the Meda Board

Press Release dated February 10, 2016

 

 

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Opinion of SEB Corporate Finance

 

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Information about the Combined Company

This section includes certain market and industry data provided by third parties. Where reference is made to Mylan’s competitive position, these statements are based upon Mylan’s internal analyses, as well as certain information derived from third parties. Where information has been sourced from a third party, this information has been accurately reproduced and, as far as Mylan is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. Mylan uses available information from IMS Health and its internal estimates in order to prepare certain information included or incorporated by reference into this Offer Document, including for purposes of calculation of market shares. The following is a brief description of the Combined Company. The name of the Combined Company will remain Mylan N.V., organized and existing under the laws of the Netherlands, with its corporate seat in Amsterdam, the Netherlands, its principal executive offices located in Hertfordshire, England and Mylan N.V. group’s global headquarters located in Canonsburg, Pennsylvania, U.S.A.

 

Mylan in brief

Mylan is a leading global pharmaceutical company, which develops, licenses, manufactures, markets and distributes generic, branded generic and specialty pharmaceuticals.24 Mylan is committed to setting new standards in healthcare by creating better health for a better world, and Mylan’s mission is to provide the world’s 7 billion people access to high quality medicine. To do so, Mylan innovates to satisfy unmet needs; makes reliability and service excellence a habit; does what’s right, not what’s easy; and impacts the future through passionate global leadership. Mylan offers one of the pharmaceutical industry’s broadest product portfolios, including more than 1,400 marketed products, to customers in approximately 165 countries and territories.

Mylan operates a global, high quality vertically-integrated manufacturing platform, which includes more than 50 manufacturing and research and development facilities around the world and one of the world’s largest active pharmaceutical ingredient operations. Mylan also operates a strong and innovative research and development network that has consistently delivered a robust product pipeline including a variety of dosage forms, therapeutic categories and biosimilars. Additionally, Mylan has a specialty pharmaceutical business that is focused on respiratory and allergy therapies.

Mylan is a public limited liability company (naamloze vennootschap) organized and existing under the laws of the Netherlands, with its corporate seat (statutaire zetel) in Amsterdam, the Netherlands, its principal executive offices located at Building 4, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL England and Mylan N.V. group’s global headquarters located at 1000 Mylan Blvd., Canonsburg, PA 15317, U.S.A. The telephone number of Mylan’s principal executive offices is +44 (0) 1707-853-000. The telephone number of the Mylan group’s global headquarters is +1 (724) 514-1800. The Mylan Shares are traded on NASDAQ and the TASE, in each case under the symbol “MYL.”

Meda in brief

Meda is a leading international specialty pharma company with a broad product portfolio sold in more than 150 countries and 2015 sales of approximately SEK 19.65 billion. Meda employs approximately 4,500 people, including a robust salesforce and marketing organization of more than 2,600. Approximately 60 percent of Meda’s product sales are in the prescription area (“Rx”) and approximately 40 percent are in OTC products. Approximately half of Meda’s revenues derive from products in three key therapeutic areas – respiratory, dermatology and pain. Some of Meda’s leading Rx products include Dymista® (allergic rhinitis) and Elidel® (atopic dermatitis); Meda also is Mylan’s commercial partner for EpiPen® Auto-Injector in Europe. Meda’s leading OTC products include Dona® (osteoarthritis), Saugella® (women’s intimate hygiene)

 

 

24  See, e.g., Global Data Industry Report, “Mylan N.V. (MYL) – Financial and Strategic SWOT Analysis Review,” May 2016.

 

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and CB12® (halitosis). Meda has a diversified geographic footprint with approximately 62 percent of Meda’s sales generated in Western Europe (the largest countries being Italy, Germany, France and Sweden), 19 percent in emerging markets (driven by China, Russia, the Middle East and Thailand) and 17 percent in the U.S. Meda has a network of seven manufacturing facilities in Europe, the U.S. and India. The Meda class A shares are listed under Large Cap on Nasdaq Stockholm. No Meda class B shares are outstanding.

The Combined Company

General

The combination of Mylan and Meda will create a global pharmaceutical leader that is even more diversified and has a more expansive portfolio of branded and generic medicines and a stronger and growing portfolio of OTC products. The Combined Company will have a balanced global footprint with significant scale in key geographic markets, particularly the U.S. and Europe. The acquisition of Meda also provides Mylan with entry into a number of new and attractive emerging markets, including China, Southeast Asia, Russia, the Middle East and Mexico, complemented by Mylan’s presence in India, Brazil and Africa. Mylan and Meda have a highly complementary therapeutic presence, which will create a leading global player in respiratory / allergy, and achieve critical mass in dermatology and pain, offering greater opportunities for growth in these categories.

For more information, see “Background and reasons.

Product strategy

For a description of Mylan’s product strategy for the Combined Company, see “Background and reasons.

Organization

Mylan recognizes the exceptional capabilities and skills of Meda’s dedicated management and employees and looks forward to welcoming these individuals to Mylan. Further, Meda has infrastructure in a number of markets where Mylan currently has limited resources, including Sweden. To realize the expected synergies for the Transaction, the integration of Mylan and Meda will likely entail some changes to the organization, operations and employees of the Combined Company. In the period following the completion of the Offer and following careful review of the needs of the combined business, Mylan will determine the optimal structure of the Combined Company to continue to deliver success in the future. Before completion of the Offer, however, it is too early to say which measures will be taken and the impact these would have. There are currently no decisions on any material changes to Mylan’s or Meda’s employees and management or to the existing

organization and operations, including the terms of employment and locations of the business.

Dividend policy

For a description of Mylan’s dividend policy, see “The Offer—Right to receive dividend.

Shareholder structure

Based on the persons and entities known to Mylan to beneficially own Mylan Shares and Meda shares as of June 9, 2016 (see “Information about MylanMajor Shareholders”) and on the assumptions described below, set forth below are the shareholders expected to hold at least five percent of the outstanding shares of and voting power in the Combined Company immediately after the completion of the Offer:

 

1. Subsidiaries of Abbott Laboratories (13.0 percent of the outstanding shares of and voting power in the Combined Company)
2. Wellington Management Company LLP and affiliates (8.3 percent of the outstanding shares of and voting power in the Combined Company)
3. BlackRock, Inc. (6.3 percent of the outstanding shares of and voting power in the Combined Company).

Mylan has assumed, soley for the purposes of this calculation, that (i) the number of Meda shares outstanding immediately prior to the completion of the Offer will be approximately 365.5 million, (ii) the number of Mylan Shares outstanding immediately prior to the completion of the Offer will be approximately 515.3 million, (iii) Mylan will not adjust the Offer Consideration in the event the Share Cap is exceeded, (iv) the Offeror Average Closing Price will be between $30.78 and $50.74 and (v) 100 percent of the outstanding Meda shares will be tendered into the Offer.

Legal structure

Immediately after completion of the Offer, Meda will be a subsidiary of Mylan and the subsidiaries of Meda will remain in their current structure vis-à-vis one another and vis-à-vis Meda, but with Mylan as the ultimate parent entity. Following completion of the Transaction, Mylan may engage in certain restructuring transactions to further integrate certain aspects of Meda’s business with Mylan’s business.

Synergies and financial implications of the Offer

For a discussion of the expected synergies and financial implications of the Offer, see “Background and reasons.

 

 

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Unaudited pro forma financial information

The following unaudited pro forma financial information gives effect to the acquisition of the EPD Business and the proposed acquisition of Meda pursuant to the Offer.

For purposes of preparing the unaudited pro forma condensed combined balance sheet at March 31, 2016, Mylan has utilized the following information:

 

  The unaudited Mylan condensed consolidated balance sheet as of March 31, 2016;
  The unaudited Meda consolidated balance sheet as of March 31, 2016, converted to U.S. GAAP and U.S. Dollars and conformed to Mylan’s presentation;
  Pro forma adjustments to reflect the proposed acquisition of Meda as if it had occurred on March 31, 2016; and
  Financing related adjustments to reflect the proposed acquisition of Meda as if it had occurred on March 31, 2016.

For purposes of preparing the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2016, Mylan has utilized the following information:

 

  The unaudited Mylan condensed consolidated statement of operations for the three months ended March 31, 2016;
  The unaudited Meda consolidated income statement for the three months ended March 31, 2016, converted to U.S. GAAP and U.S. Dollars and conformed to Mylan’s presentation;
  Pro forma adjustments to reflect the proposed acquisition of Meda as if it had occurred on January 1, 2015; and
  Financing related adjustments to reflect the proposed acquisition of Meda as if it had occurred on January 1, 2015.

For purposes of preparing the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015, Mylan has utilized the following information:

 

  The audited Mylan consolidated statement of operations for the year ended December 31, 2015;
  The audited Meda consolidated income statement for the year ended December 31, 2015, converted to U.S. GAAP and U.S. Dollars and conformed to Mylan’s presentation;
  The unaudited EPD Business combined results of operations for the period from January 1, 2015 to February 27, 2015, the acquisition date of the EPD Business;
  Pro forma adjustments to reflect the acquisition of the EPD Business as if it had occurred on January 1, 2015;
  Pro forma adjustments to reflect the proposed acquisition of Meda as if it had occurred on January 1, 2015; and
  Financing related adjustments to reflect the proposed acquisition of Meda as if it had occurred on January 1, 2015.

The consolidated financial statements of Mylan and the EPD Business are prepared in accordance with U.S. GAAP with all amounts stated in U.S Dollars. The consolidated financial statements of Meda are prepared in accordance with IFRS and interpretations issued by the IFRS Interpretations Committee (“IFRS IC”) as adopted by the EU, the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR 1 Supplementary Accounting Rules for Groups, with all amounts presented in Swedish kronor. The unaudited pro forma financial information has been prepared in accordance with U.S. GAAP.

The unaudited pro forma financial information gives effect to the acquisition of the EPD Business and the proposed acquisition of Meda, both of which are accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 805, Business Combinations. Under ASC 805, although other factors are also relevant, the acquirer is usually the combining entity whose owners as a group retain or receive the largest portion of the voting rights in the combined entity. As a result, Mylan is treated as the acquirer in both transactions. The unaudited pro forma financial information is in accordance with the rules specified in Annex II of Commission Regulation (EC) No 809/2004.

The historical consolidated financial information has been adjusted to give effect to pro forma events that are directly attributable to the aforementioned transactions, factually supportable and, with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the results of the Combined Company. The unaudited pro forma financial information should be read in conjunction with the accompanying notes to the unaudited pro forma financial information. In addition, the unaudited pro forma financial information was based on and should be read in conjunction with the consolidated financial statements of Mylan for the three months ended March 31, 2016 and for the year ended December 31, 2015 and the related notes thereto incorporated by reference into this Offer Document and the selected consolidated historical financial information of Meda for the three months ended March 31, 2016 and for the year ended December 31, 2015 included in this Offer Document.

 

 

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The acquisition method of accounting, including purchase price adjustments, is dependent upon certain valuations and other studies that must be prepared as of the completion date of the Transaction and is preliminary at this time. Until the Transaction is complete, Mylan will not have complete access to all the relevant information. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the unaudited pro forma financial information.

The unaudited pro forma financial information is for illustrative purposes only. It does not purport to indicate the results that would have actually been attained had the proposed acquisition of Meda or the acquisition of the EPD Business been completed on the assumed dates or for the periods presented, or which may be realized in the future. Due to its nature, the unaudited pro forma financial information addresses a hypothetical situation and does not therefore represent Mylan or the Combined Company’s actual financial position or results. To produce the unaudited pro forma financial

information, Mylan allocated the estimated purchase price for Meda using its best estimates of fair value. To the extent there are significant changes to the Meda business, the assumptions and estimates herein could change significantly. The allocation of the purchase price is dependent upon certain valuation and other studies that are not yet started. Accordingly, the pro forma purchase price adjustments are preliminary and subject to further adjustments as additional information becomes available, and as additional analysis is performed. There can be no assurances that the final valuation will not result in material changes to the purchase price allocation. Furthermore, Mylan could have reorganization and restructuring expenses as well as potential operating synergies as a result of the proposed combining of Mylan and Meda. The unaudited pro forma financial information does not reflect these potential expenses and synergies.

The unaudited pro forma financial information has been prepared assuming that 100 percent of the outstanding Meda shares will be tendered into the Offer.

 

 

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Mylan N.V.

Unaudited Pro Forma Condensed Combined Balance Sheet

as of March 31, 2016

(in millions)

 

    Historical     Historical     Pro Forma     Combined  
    Mylan     Meda     Meda     Mylan/Meda  
    USD     SEK     SEK           SEK     USD     USD           USD           USD  
    U.S. GAAP     IFRS     U.S. GAAP
Adjustments
    Note     U.S. GAAP     U.S. GAAP     Pro Forma
Adjustments
    Note     Financing
Adjustments
    Note     Pro Forma
Combined
 
    I     II     III           IV = II+III     V     VI           VII           VIII=I+V+VI+VII  

 

 

ASSETS

                     

Assets

                     

Current assets:

                     

Cash and cash equivalents

  $ 1,199.4        977.0                 977.0      $ 120.4      $ (5,900.3     4a      $ 6,500.0        7a      $ 1,757.4   
                (91.9     4c        (70.2     7a     

Accounts receivable, net

    2,587.4        4,551.0                 4,551.0        560.6                          3,148.0   

Inventories

    2,144.1        3,017.0                 3,017.0        371.7        112.2        4d                 2,628.0   

Prepaid expenses and other current assets

    696.7        831.0        169.2        8b        1,000.2        123.2                 (22.9     7b        797.0   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

    6,627.6        9,376.0        169.2          9,545.2        1,175.9        (5,880.0       6,406.9          8,330.4   

Property, plant and equipment, net

    1,998.8        1,557.0                 1,557.0        191.8               4e                 2,190.6   

Intangible assets, net

    7,278.4        21,122.0                 21,122.0        2,601.9        8,500.0        4f                 15,778.4   
                (2,601.9     4f         

Goodwill

    5,566.9        25,337.0                 25,337.0        3,121.2        2,909.0        4h                 8,475.9   
                (3,121.2     4h         

Deferred income tax benefit

    441.0        1,765.0        (178.0     8b        1,587.0        195.5                          636.5   

Other assets

    731.4        210.0                 210.0        25.9                          757.3   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

  $ 22,644.1        59,367.0        (8.8       59,358.2      $ 7,312.2      $ (194.1     $ 6,406.9        $ 36,169.1   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

LIABILITIES AND EQUITY

                     

Liabilities

                     

Current liabilities:

                     

Trade accounts payable

  $ 1,076.2        1,347.0                 1,347.0      $ 165.9      $        $  –        $ 1,242.1   

Short-term borrowings

    66.4        1,539.0                 1,539.0        189.6                          256.0   

Income taxes payable

    43.4                                                        43.4   

Current portion of long-term debt and other long-term obligations

    1,082.5        1,024.0                 1,024.0        126.1                          1,208.6   

Other current liabilities

    1,690.9        5,964.0                 5,964.0        734.7                          2,425.6   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    3,959.4        9,874.0                 9,874.0        1,216.3                          5,175.7   

Long-term debt

    6,325.7        21,359.0                 21,359.0        2,631.1        0.1        4i        6,500.0        7a        15,386.7   
                    (49.0     7a     
                    (21.2     7a     

Deferred income tax liability

    744.0        4,249.0                 4,249.0        523.4        1,202.0        4g                 2,469.4   

Other long-term obligations

    1,340.1        2,809.0                 2,809.0        346.0                          1,686.1   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities

    12,369.2        38,291.0                 38,291.0        4,716.8        1,202.1          6,429.8          24,717.9   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Equity

                     

Ordinary shares

    5.5        365.0                 365.0        45.0        0.3        4a                 5.8   
                (45.0     4b         

Additional paid-in capital

    7,149.9        13,788.0                 13,788.0        1,698.5        1,290.8        4a                 8,440.7   
                (1,698.5     4b         

Retained earnings

    4,476.0        6,739.0        (8.8     8b        6,730.2        829.1        (91.9     4c        (22.9     7b        4,361.2   
                (829.1     4b         

Accumulated other comprehensive (loss) income

    (1,290.5     187.0                 187.0        23.2        (23.2     4b                 (1,290.5
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 
    10,340.9        21,079.0        (8.8       21,070.2        2,595.8        (1,396.6       (22.9       11,517.2   

Noncontrolling interest

    1.5        (3.0              (3.0     (0.4     0.4        4b                 1.5   

Less: Treasury Stock

    67.5                                                        67.5   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total equity

    10,274.9        21,076.0        (8.8       21,067.2        2,595.4        (1,396.2       (22.9       11,451.2   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities and equity

  $ 22,644.1        59,367.0        (8.8       59,358.2      $ 7,312.2      $ (194.1     $ 6,406.9        $ 36,169.1   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

 

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Mylan N.V.

Unaudited Pro Forma Condensed Combined Statement of Operations

for the Three Months Ended March 31, 2016

(in millions, except per share amounts)

 

    Historical     Historical     Pro Forma     Combined  
    Mylan     Meda     Meda     Mylan/Meda  
    USD
U.S. GAAP
    SEK
IFRS
    SEK U.S.
GAAP
Adjustments
    Note   SEK
U.S. GAAP
    USD
U.S. GAAP
    USD
Pro Forma
Adjustments
    Note     USD
Financing
Adjustments
    Note     USD Pro
Forma
Combined
 
    I     II     III         IV = II+III     V     VI           VII           VIII=I+V+VI+VII  

 

 
Revenues:                                                                

Net sales

  $ 2,176.1        4,240.0                 4,240.0      $ 501.8      $ (14.3     6a      $        $ 2,663.6   

Other revenues

    15.2        75.0                 75.0        8.9                          24.1   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total revenues

    2,191.3        4,315.0                 4,315.0        510.7        (14.3                2,687.7   

Cost of sales

    1,284.3        2,359.0                 2,359.0        279.2        19.7        6b                 1,568.9   
                       6c              
                (14.3     6a              
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Gross profit

    907.0        1,956.0                 1,956.0        231.5        (19.7                1,118.8   

Operating expenses:

                     

Research and development

    253.6        50.0                 50.0        5.9                          259.5   

Selling, general, and administrative

    549.3        1,571.6        (1.7   8a     1,569.9        185.8        (24.3     6d                 710.8   

Litigation settlements, net

    (1.5     0.4                 0.4                                 (1.5
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total operating expenses

    801.4        1,622.0        (1.7       1,620.3        191.7        (24.3                968.8   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Earnings from operations

    105.6        334.0        1.7          335.7        39.8        4.6                   150.0   

Interest expense

    70.3        215.0                 215.0        25.4               6e        61.4        7a        152.8   
                (4.3     6d         

Other expense, net

    16.3        22.0                 22.0        2.6        (3.0     6d                 15.9   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Earnings before income taxes and
noncontrolling interest

    19.0        97.0        1.7      8a     98.7        11.8        11.9          (61.4       (18.7

Income tax (benefit) provision

    5.1        (194.0     9.1      8a,8b     (184.9     (21.9     2.4        6f        (12.3     7c        (26.7
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net earnings

    13.9        291.0        (7.4       283.6        33.7        9.5          (49.1       8.0   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net earnings attributable
to Mylan N.V. ordinary shareholders

  $ 13.9        291.0        (7.4       283.6      $ 33.7      $ 9.5        $ (49.1     $ 8.0   
 

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Earnings per ordinary
share attributable to Mylan ordinary shareholders:

                     

Basic

  $ 0.03                        $ 0.02